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GS Paper: GS3-08.Issues related to direct and indirect farm subsidies and MSP; PDS

  • What are the salient features of the National Food Security Act, 2013? How has the Food Security Bill helped in eliminating hunger and malnutrition in India?

    NFSA marks a paradigm shift in the approach to food security from welfare to rights based approach. It is the world’s largest food transfer programme and social safety net, accounting for around 50% of India’s overall social assistance budget.

    Salient Features of the National Food Security Act (NFSA), 2013

    Legal entitlement to food for 75% of rural and 50% of urban population81 crore people).

    Targeted Public Distribution System (TPDS) supplies 5 kg of foodgrains per person per month at highly subsidized prices:

    Antyodaya Anna Yojana (AAY) households receive 35 kg per family per month.

    Life-cycle approach:

    Pregnant & lactating women: Free meals + (PMMVY).

    Children: ICDS & Mid-Day Meal/PM-POSHAN.

    State-wise coverage is determined by the NITI Aayog by using the NSS Household Consumption Survey data.

    Identification of eligible households is done by States/UTs

    Food security allowance: If foodgrains are not supplied, beneficiaries receive compensation.

    Grievance redressal mechanisms at state and district levels including State Food Commissions.

    Role of NFSA in eliminating hunger and malnutrition in India

    Reduced out-of-pocket spending on staple foods has improved dietary diversity by ‘crowding in’ the consumption of nutrient-dense foods

    Fortified rice under NFSA covers 291 districts (Phase II) and over 65% of NFSA households

    Malnourishment in children under 5 years has reduced (NHFS-5)

    Stunting – from 38.4% to 35.5%,

    Wasting – 21.0% to 19.3% and

    Underweight – 35.8% to 32.1% .

    Malnutrition among women aged 15-49 years has also reduced from 22.9% to 18.7%.

    Food Security during COVID under Pradhan Mantri Garib Kalyan Anna Yojana

    Regular PDS supply has reduced seasonal hunger in tribal belts of Jharkhand, Odisha, Chhattisgarh

    ICDS covers an 90 million children, 11 million pregnant women, and 2 million adolescent girls

    However, despite these steps there are few challenges

    As per study by Crisil using a ‘thali index’, up to 50% of rural and 20% of urban Indians cannot afford two balanced meals a day

    Fiscal Burden – Food subsidy budget @ 2.1 lakh cr in 2025-26

    Even with PDS support, food deprivation remained 40% in rural and 10% in urban areas

    Diversion – Eg- 28% of allocated foodgrains fail to reach beneficiaries as per HCES 2022-23.

    Inclusion and exclusion errors due to faulty beneficiary identification.

    Corruption at Fair Price Shops (FPS) – Issues of under-weighing, overcharging etc

    Persistent triple burden of malnutrition

    Way Forward

    Shanta Kumar Committee Recommendations on Revamping of PDS

    Direct Procurement by States

    Private Sector Involvement in procurement, storage, and distribution

    Diversify the food basket – Include millets, pulses, edible oil and iodised salt

    Nutrition Education and Behavior Change through nudge theory. Eg- POSHAN Abhiyaan’s Jan Andolan people’s movement approach

    Involvement of Civil Society – Eg- Akshaya Patra Foundation’s centralized kitchens model

    Strengthening Life-cycle Approach to Nutrition– Eg- Karnataka’s “Mathrupoorna” scheme provides one full meal to pregnant women.

    To realise SDG 1,2,3,and 12, the focus needs to shift from Food Security to Nutritional Security

  • What are the major challenges of Public Distribution System (PDS) in India? How can it be made effective and transparent ?

    The PDS (started in 1960s) is a government-run food security mechanism that provides subsidised foodgrains to eligible households through a network of Fair Price Shops.

    Major challenges of the PDS

    Weak supply chain management – Storage Losses due to poor warehousing and handling. Eg- 40% of the food wasted (1.5 lakh crore or 1% of the GDP)

    Open ended procurement leads to overflowing of FCI godowns

    Diversion – Eg- 28% of allocated foodgrains fail to reach beneficiaries as per HCES 2022-23.

    Inclusion and exclusion errors due to faulty beneficiary identification.

    Corruption and ghost beneficiaries – Over 47 million bogus ration cards cancelled between 2013-2021

    Corruption at Fair Price Shops (FPS) – Issues of under-weighing, overcharging etc

    Fiscal Burden – Food subsidy budget @ 2.1 lakh cr in 2025-26

    PDS is cereal-centric, ignoring dietary diversity. Leads to triple burden of malnutritionundernutrition, obesity, micronutrient deficiency.

    Technology issues – Internet failure, biometric mismatch and device malfunction under e-PoS / Aadhaar authentication.

    Way Forward

    Shanta Kumar Committee Recommendations on Revamping of PDS

    Direct Procurement by States

    Private Sector Involvement in procurement, storage, and distribution

    Diversify the food basket – Include millets, pulses, edible oil and iodised salt for nutritional security.

    Strengthen grievance redressal – Set up toll-free helplines, social audits and citizen charters at FPS level.

    Community monitoring – Involve self-help groups, local bodies and civil society in supervision.

    Periodic updating and verification of ration cards.

    Universal PDS similar to Tamil Nadu’s model.

    Optimise buffer stock norms to reduce food grain wastage.

    The PDS remains a vital tool for India’s food security and realise SDG 1,2,3,and 12

  • What are the direct and indirect subsidies provided to farm sector in India? Discuss the issues raised by the World Trade Organization(WTO) in relation to agricultural subsidies.

    The total government subsidy for food and fertilizers for the fiscal year 2025-26 is budgeted at It constitutes around 2% of India’s GDP and 21% of farmer’s income.

    Direct subsidies –

    These involve direct budgetary support or cash transfers to farmers and agricultural institutions.

    Income support schemes –

    PM-KISAN

    Raythu bandhu Scheme of Telangana

    MSP For 23 crops to ensure Income Security

    Interest subvention through Kisan Credit Cards – KCC)

    Crop insurance premium subsidy under PMFBY (Pradhan Mantri Fasal Bima Yojana)

    Indirect subsidies to the farm sector

    These reduce production costs or guarantee revenue without direct cash payment:

    Fertiliser subsidy – Subsidised urea, DAP and other fertilisers under the Nutrient Based Subsidy

    Subsidy on agricultural infrastructure

    PM-KUSUM – Subsidy for Solar Pumps

    PMFBY – Subsidy for Micro Irrigation

    Agriculture Infrastructure Fund (AIF) – Credit-linked subsidy for cold storage

    Gramin Bhandaran Yojana – Support for rural godowns and storage

    Power & irrigation subsidy

    Free or highly subsidised electricity for irrigation pumps

    Subsidised canal and micro-irrigation schemes (Eg- PMKSY)

    Seed and mechanisation subsidy – Eg- Sub Mission on Agriculture Mechanisation

    Research & Extension services – Funding to ICAR, Krishi Vigyan Kendras (KVKs)

    Issues raised by WTO regarding India’s agricultural subsidies

    Subsidy Classification by WTO

    Green BoxAllowed (non-trade distorting). Eg- extension, infrastructure

    Blue Box – Production-limiting subsidies

    Amber BoxTrade-distorting subsidies. (10% of output) Eg- MSP, input subsidies

    Trade-distorting support – MSP, fertiliser, power & irrigation subsidies classified as Amber Box. May exceed 10% de-minimis limit for developing countries

    WTO decision (Nairobi, 2015) prohibits export subsidies. India’s sugar export incentives were challenged & ruled WTO-inconsistent

    Transparency issues – Allegations of under-reporting or delayed reporting of subsidies

    Environmental concerns – overuse of fertilisers and groundwater, causing Soil degradation, Groundwater depletion and Ecological stress

    The sustainable path for ensuring farmer welfare remains protected includes gradual shift towards Green-Box-compliant support such as direct income transfers, infrastructure creation, R&D, crop insurance and climate-resilient agriculture.

  • Elucidate the importance of buffer stocks for stabilizing agricultural prices in India. What are the challenges associated with the storage of buffer stock? Discuss.

    PDS is the world’s largest food transfer programme and social safety net, accounting for around 50% of India’s overall social assistance budget. Buffer Stock is the foundational pillar of this system.

    Buffer Stock Norms

    Introduced during the 4th Five Year Plan (1969-74).

    Fixed by cabinet committee on Economic Affairs on quarterly basis

    In 2025, rice and wheat stocks in Central Pool stands at 736 Lakh MT against buffer stock norm of 411 Lakh MT

    Importance of Buffer Stocks for Stabilising Agricultural Prices in India

    Supports farmers through MSP procurement: Prevents distress sales during bumper harvests.

    Controls consumer prices through Open Market Sale Scheme. Eg- In 2022-23, FCI released 34.82 lakh tonnes of wheat.

    Ensures food security: ensures uninterrupted supply for NFSA, ICDS, PM-POSHAN (Cover 81 crore people)

    Checks hoarding: Strategic release of stocks curbs artificial scarcity and black-marketing. Eg- Release of Pulses by NAFED

    Acts as a safety net during supply disruptions and emergencies. Eg- during COVID.

    Inter-state distribution stability: Ensures consistent supply to deficit states.

    Market confidence: Adequate stocks signal stability and prevent panic buying

    Export of extra produce: Eg- Surplus wheat from buffer stocks was exported to Africa in 2021

    Challenges Associated with the Storage of Buffer Stock

    Excessive stocking by FCI increases carrying costs. Eg- Central pool rice stocks 4 times the buffer

    Heavy reliance on CAP (cover-and-plinth) storage leads to high wastage. (40% of total food)

    High transport costs due to concentration of procurement in limited states. Eg- 60% godowns in 5 states.

    Overstocking results in rotting and quality deterioration. Over 6 lakh tonnes of foodgrains rotted in FCI godowns

    High Storage Cost – Eg- FCI’s annual storage cost for buffer stocks reached

    Pilferage and Theft due to poor security measures and leakages in the distribution network.

    Regional procurement imbalances: Eg- Eastern and NE states remain under-procured

    Lack of Modern Technology – lack silos, temperature control, and humidity monitoring. Only 20% of buffer stock stored in modern silos

    Environmental concerns: Excess procurement of rice strains groundwater, fertiliser use, and stubble burning.

    Way Forward

    Technological Integration: Eg- blockchain for transparent and secure buffer stock management.

    Expansion of modern silos equipped with temperature and humidity control. (Shanta Kumar Committee)

    Rural Agri-Logistics Nodes under Gati Shakti Framework to develop cold chains, aggregation centers

    Expanding FCI Private Entrepreneurs Guarantee (PEG) Scheme to involve the private sector in creating modern godowns.

    Revision of Buffer Stock Norms based on actual requirement and demand patterns. (Ashok Gulati Committee)

    Strengthening storage is essential for a more efficient, resilient grain management system.

    Agriculture Marketing and supply chains