The PDS provides subsidised food to more than 800 million Indians. Under the programme, eligible households are entitled to purchase 5 kilogrammes of rice, wheat, or coarse grains per person each month from fair-priced shops located throughout the country
In 2021–22, India spent $17.4 billion on the Public Distribution System, or PDS. For a programme that ensures food security for over 800 million people, that seems like a good bargain. However, new research on the hidden costs of the PDS from the Tata-Cornell Institute for Agriculture and Nutrition (TCI) reveals opportunities to lower the program’s environmental impact and make it more sustainable.
In a peer-reviewed study published in the journal Environmental Research Letters, TCI Research Associate Raghav Puri and Director Prabhu Pingali used a technique known as “true cost accounting” to calculate the total cost of the PDSin the 2021–22 fiscal year. They found that the true cost of the program was $45.3 billion when the economic and environmental impacts of rice and wheat production were considered, compared with $16.5 billion budgeted by the federal government and $900 million spent by PDS beneficiaries to buy subsidized grain. The single largest hidden cost was the use of scarce water for irrigation, followed by greenhouse gas emissions and fertiliser subsidies.
One way to reduce that cost, according to the researchers, is to substitute some of the rice provided through the PDS for millets, a nutritious grain that the Indian government has promoted in recent years. According to the TCI analysis, replacing 1 kilogramme of rice with millets for 200 million PDS beneficiaries would shrink the programme’s true cost by $1.37 billion each year.
“The PDS is a remarkable programme that helps keep hundreds of millions of Indians food secure, but this analysis shows that there are opportunities to reduce its total cost,” said Pingali, a professor in the Charles H. Dyson School of Applied Economics and Management with an appointment in the Department of Global Development in the College of Agriculture and Life Sciences (CALS). “Providing more millets through the PDS is an especially beneficial cost-reduction strategy, as millets provide key nutrients that rice does not and are more environmentally sustainable to produce.”
The PDS provides subsidised food to more than 800 million Indians. Under the programme, eligible households are entitled to purchase 5 kilogrammes of rice, wheat, or coarse grains per person each month from fair-priced shops located throughout the country. Grain distributed through the PDS is purchased by the government at a guaranteed minimum support price.
The TCI analysis focused on the hidden economic and environmental costs of the PDS that are not reflected in the government budget. Using publicly available data, researchers estimated that the cost of fertiliser subsidies for rice and wheat distributed through the PDS was $1.9 billion in 2021-22, while the cost of power subsidies came in at $1.4 billion.
To assess the environmental cost of the PDS, the researchers monetized the impacts of unsustainable water use and greenhouse gas emissions. Scarce water use was calculated at a cost of $18.6 billion. This is due to Indian farmers’ reliance on irrigation to grow wheat during the dry season as well as the common practice of flooding paddy fields to prevent the growth of weeds. Greenhouse gas emissions from rice and wheat production add another $6 billion to the true cost of the PDS. The flooding of paddy fields is primarily responsible, as it causes the decomposition of organic materials into methane gas.
The hidden costs of the PDS are not borne equally across India. The TCI study shows that the states from which the most grain is procured bear the brunt of the environmental effects, especially scarce water use and power subsidies. Punjab and Haryana, in particular, feel the impact of the environmental impact of the PDS. In Punjab, excessive water usage has caused a large decline in groundwater levels.
Despite lower minimum support prices for millets, the study shows that the true cost of rice and wheat is 2 and 1.8 times that of millets, respectively, yielding a $1.37 billion reduction in the true cost of the PDS through their inclusion in the programme. The lower true cost of millets is due to the significantly lower usage of scarce water involved in their production.
The introduction of millets could also help to correct the imbalance of procurement for the PDS among states. Because millet-producing states do not produce as much rice and wheat, adding millets would potentially promote local procurement and increase farmer incomes in states that do not currently benefit from PDS procurement.
However, millets have significantly lower yields than rice and wheat. The area of land under millet cultivation in India has declined in the past few decades, in large part because of the incentives to grow rice and wheat created by PDS procurement. According to the researchers, including millets in the PDS could help to reverse this decline but would require significant investments to improve yields, develop infrastructure, and promote millets to consumers. Under the scenario modelled by TCI, the national government would have to procure 2.6 million tonnes of millets each year for the PDS.
“If policymakers look only at their balance sheets, millets may seem like an expensive replacement, particularly for wheat,” Puri said. “But the true cost approach shows that the hidden benefits of including millets in the PDS are immense.”