A Look at Food Security in India through the Lens of the Direct Cash Transfer Scheme


 The State of Food Insecurity in the World 2001, published by the Food and Agriculture Organisation, defines food security as:

“Food security [is] a situation that exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life”.

In his Noble prize winning book ‘Poverty and Famines’, Amartya Sen draws emphasis towards consumption, the demand side and the issues of access by vulnerable people to food. Production does not automatically guarantee consumption. The mere presence of food in the economy, or in the market, does not entitle a person to consume. Even the ability to buy may not guarantee food security, unless there is an efficient distribution system.

The food situation in India is extremely abysmal. Data from the United Nations International Children Emergency Fund (UNICEF) reveals that one in every three malnourished children in the world is an Indian. Results from the Third National Family Health Survey show that almost half (48%) of Indian children are malnourished. Girls and women are systematically more undernourished than their male counterparts. This article seeks to review the efforts made by the Government of India in ensuring food security, with particular emphasis on the Direct Cash Transfer scheme.

Historical Evolution: The Public Distribution System

The earliest efforts at ensuring food security in India can be traced back to the introduction of the Public Distribution System (PDS) in 1939 in Bombay by the British Government as a measure to ensure equitable distribution of food grains to urban consumers in the face of rising prices. This system was continued even after India gained independence in 1947. Initially, each person was issued a ration card. But eventually, the huge amount of money required to subsidise food for such a large population led to a massive debt burden. Furthermore, due to the problem of excessive purchases by rich families, a need for targeting the benefits was felt. Hence, the Targeted Public Distribution System (TPDS) was introduced from 1 June 1997. A system of tri-coloured ration cards based on family income was instituted with benefits diminishing as household income rose.

Under the PDS, the families can go to the Fair Price Shop (FPS) in their locality and purchase grain at a subsidized rate. This system is jointly operated by the centre and the states. The central government, through the Food Corporation of India, handles procurement, storage, transportation, and bulk allocation of food grains. The state governments hold the responsibility for distributing the same to the consumers through the established network of FPSs. State governments are also responsible for operational responsibilities including allocation and identification of families below poverty line, issue of ration cards, supervision and monitoring the functioning of FPSs.

 The PDS is, however, plagued by corruption and inefficiencies at many levels. FPS dealers engage in black marketing and divert the food grains to the open market through the use of bogus ration cards. They charge more than the mandated rates and often under-weigh the commodities. Frequently, users do not get their rightful entitlement in terms of quantity. They are harassed and forced to make multiple visits. The process of issuing ration cards is also rife with corruption. People have to pay bribes for small things, such as getting a ration card in the first place, adding or deleting the name of a family member, or changing the address mentioned in it. Many below poverty line (BPL) families are not able to acquire ration cards, either because they are seasonal migrant workers or because they live in unauthorized colonies. Procedures are made to appear so complicated that people usually end up using middlemen for small tasks too. There is also no clarity as to which families should be included in the BPL list and which excluded. Further, the stock assigned to a single family cannot be bought in installments. Ration shops also do not open every day nor do they have regular timings. All these barriers make safe and nutritious food inaccessible and unaffordable to India’s poor, thus resulting in their food insecurity.

 The Direct Cash Transfers Scheme

In an attempt to overcome the disadvantages of the PDS, the Direct Cash Transfer (DCT) scheme was introduced in fifty one districts in India on 1 January 2013 and it aims to cover the entire country by 2015. Initially, the scheme covered only scholarships, pensions and wages under the Mahatama Gandhi National Rural Employment Guarantee Act. But starting from 15 November 2014, it is also going to be used for fuel subsidy, and will very soon cover food subsidy as well.

Under this scheme, the head of each family is required to open a bank account with the nearest bank branch. The government will transfer cash directly into the account of the citizens living below the poverty line. Verification is done on the basis of a Unique Identification (UID) or Aadhaar card, which is being issued to all citizens by the Unique Identification Authority of India (UIDAI). The UIDAI takes the fingerprints and retina scan of each individual.

Advantages of the DCT Scheme

The DCT scheme can lead to massive savings for the government by plugging the leakages of the PDS. Firstly, by transferring cash equal to the shortfall between the market price and the price at which food grains were sold to BPL families in ration shops, the DCT eliminates the incentive for FPS owners to divert grain to the open market as they receive the same price in both scenarios. It also leads to an efficiency gain in welfare schemes by eliminating price distortions. Secondly, the quality of services in PDS shops may also improve due to competition from private shops. Thirdly, the UIDAI can help in the proper identification of BPL families and eliminate duplicate cards and cards for non-existent persons or ghost beneficiaries. Fourthly, by transferring money directly to the poor, DCT also eradicates corruption caused due to the presence of middlemen.

An additional advantage is the building up of the state’s legitimacy as schemes are targeted at marginalised groups. Moreover, since DCTs only compensate for a finite amount of resources consumed, they encourage beneficiaries to eliminate wastage.

Limitations of the DCT Scheme

There has been a lot of opposition to the DCT scheme, mostly pivoting around its implementation. A vast majority of beneficiaries still do not have the requisite bank accounts mapped with 12-digit Aadhaar numbers. There are also not enough bank branches to open accounts. Banks have been reluctant to come to rural areas because no-frills accounts in these areas do not fit in with their business model. Only 40 per cent of India’s population has bank accounts. Additionally, not all account holders have got passbooks. The Pradhan Mantri Jan Dhan Yojana, launched on Independence Day this year, aims to enroll every Indian family in a zero balance account, but this scheme still has a long way to go. Several other technical and logistical difficulties have come to the fore in the various pilot projects launched. Banks are also unable to cope with the volume of transactions. They have to face other problems like poor internet connectivity and power cuts.

The poor are also struggling to cope with the problems in this transition. There is usually a time lag between opening an account in a bank and receiving the cash transfers. If, meanwhile, the subsidised food disappears, the poor who fail to open an account adequately fast will lose doubly through not having the cash yet, and through the fact that others will have the cash to buy food which would keep the prices high. Moreover, under the previous system, in case the head of the household was sick, disabled or unable to move due to old age or otherwise, he could send someone else to buy rations. Now however, to withdraw the cash subsidy, the account holder is required to be physically present at the bank, which has made it useless for old-age card holders as several bank branches are located 8-15 km from their villages.

In the Kotkasim district (Rajasthan) pilot project, conducted between 2011 and 2012, wherein the government tried to provide DCT to those eligible for subsidised kerosene, sales of kerosene fell by 80 per cent. But far from being a result of efficient design, this was due to people either not getting their bank accounts in place or not getting the subsidy amount in their existing accounts. As a result, people stopped buying costly kerosene with no assurance of support. Noted economist John Drèze and his fellow activists call it ‘denial by design’.

 The Food Security Act

The passage of the National Food Security Act on 12 September 2013 is a great step forward in ensuring food security to the poor. The act has guaranteed the provision of subsidized food grains to approximately two thirds of Indians. It categorises the population into an Antyodaya Anna Yojana (AAY) group, a priority group and an excluded category. The excluded category is retained at 25 per cent of the rural and 50 per cent of the urban population. The AAY category will be as per existing norms (about 10 per cent of all households). The poorest of the poor (the AAY group) will receive 35 kg of  foodgrain per family per month while others (the priority group) will receive 5 kg of foodgrain per family per month. Each beneficiary can purchase 5 kilograms of rice at Rs 3 per kg, wheat at Rs 2 per kg and coarse grains at Rs 1 per kg. These prices can be revised after the first three years, up to the level of the minimum support price (assured price paid by the Centre to farmers at the time it buys grains from them).


The Food Security act shall initially operate through PDS, but is poised to be extended to the DCT scheme. Hence, there is an even greater urgency to sort out the various kinks in this scheme. Bank coverage needs to be greatly expanded in rural areas. Orientation and acquaintance courses must be held to make the poorer masses more familiar with banking terms and formalities. The government should also ensure that subsidies on essential items such as food and fuel are corrected for inflation. Thus, though DCT schemes have been successful in past in countries like Brazil (where it operates as the Bolsa family program), its introduction in India has to be carefully monitored keeping in mind the unique conditions prevalent here, so that the poor gain rather than lose out from this scheme.


  1. www.thehindu.com
  2. http://www.business-standard.com/article/opinion/shubhashis-gangopadhyay-who-prefers-cash-transfers-113012600135_1.html
  3. http://indiatoday.intoday.in/story/what-is-direct-cash-transfer/1/235028.html
  4. http://www.rediff.com/news/special/all-you-wanted-to-know-about-the-food-security-bill/20130829.htm
  5. http://www.unicef.org/india/children_2356.htm
  6. http://mospi.nic.in/mospi_new/upload/Children_in_India_2012.pdf
  7. National Family Health Survey 3, Government of India
  8. FAO. 2002. The State of Food Insecurity in the World 2001.Rome.
  9. Sen, A. 1981.Poverty and Famines.Oxford: Clarendon Press.

Aditi Singh
M.A. (F) Economics


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