Posts Tagged ‘expenditure’

Food Security in India

October 16th, 2017 No comments

The United Nations celebrates October 16 as the World Food Day every year, with an aim to spread awareness about eradicating hunger and ensuring food security for all.[1]  In this context, we examine the status of food and public distribution in India, and some challenges in ensuring food security for all.


In 2017-18, over Rs 1,50,000 crore, or 7.6% of the government’s total expenditure has been allocated for providing food subsidy under the Targeted Public Distribution System (TPDS).[2]  This allocation is made to the Department of Food and Public Distribution under the Ministry of Consumer Affairs.

Food subsidy has been the largest component of the Department’s expenditure (94% in 2017-18), and has increased six-fold over the past 10 years.  This subsidy is used for the implementation of the National Food Security Act, 2013 (NFSA), which provides subsidised food grains (wheat and rice) to 80 crore people in the country.[3]  The NFSA seeks to ensure improved nutritional intake for people in the country.3

One of the reasons for the six-fold increase in food subsidy is the non-revision of the price at which food grains are given to beneficiaries since 2002.[4]  For example, rice is given to families under the Antyodaya Anna Yojana at Rs 3/Kg since 2002, while the cost of providing this has increased from Rs 11/Kg in 2001-02 to Rs 33/Kg in 2017-18.

Provision of food subsidyTable 1

TPDS provides food security to people below the poverty line.  Over the years, the expenditure on food subsidy has increased, while the ratio of people below poverty line has reduced.  A similar trend can also be seen in the proportion of undernourished persons in India, which reduced from 24% in 1990 to 15% in 2014 (see Table 1).  These trends may indicate that the share of people needing subsidised food has declined.

Nutritional balance:  The NFSA guarantees food grains i.e. wheat and rice to beneficiaries, to ensure nutritious food intake.3  Over the last two decades, the share of cereals or food grains as a percentage of food consumption has reduced from 13% to 8% in the country, whereas that of milk, eggs, fish and meat has increased (see Figure 1).  This indicates a reduced preference for wheat and rice, and a rise in preference towards other protein rich food items. Figure 1

Methods of providing food subsidy

Food subsidy is provided majorly using two methods.  We discuss these in detail below.

TPDS assures beneficiaries that they will receive food grains, and insulates them against price volatility. Food grains are delivered through fair price shops in villages, which are easy to access.[5],[6]

However, high leakages have been observed in the system, both during transportation and distribution.  These include pilferage and errors of inclusion and exclusion from the beneficiary list.  In addition, it has also been argued that the distribution of wheat and rice may cause an imbalance in the nutritional intake as discussed earlier.7  Beneficiaries have also reported receiving poor quality food grains as part of the system.

Cash Transfers seek to increase the choices available with a beneficiary, and provide financial assistance. It has been argued that the costs of DBT may be lesser than TPDS, owing to lesser costs incurred on transport and storage.  These transfers may also be undertaken electronically.6,7

However, it has also been argued that cash received as part of DBT may be spent on non-food items.  Such a system may also expose beneficiaries to inflation.  In this regard, one may also consider the low penetration and access to banking in rural areas.[7]

Figure 2

In 2017-18, 52% of the centre’s total subsidy expenditure will be on providing food subsidy under TPDS (see Figure 2).  The NFSA states that the centre and states should introduce schemes for cash transfers to beneficiaries.  Other experts have also suggested replacing TPDS with a Direct Benefit Transfer (DBT) system.4,[8]

The central government introduced cash subsidy to TPDS beneficiaries in September 2015.[9]  As of March 2016, this was being implemented on a pilot basis in a few union territories.  In 2015, a Committee on Restructuring of Food Corporation of India had also recommended introducing Aadhaar to plug leakages in PDS, and indexing it to inflation.  The Committee estimated that a switch to DBT would reduce the food subsidy bill of the government by more than Rs 30,000 crore.[10]

Current challenges in PDS

Leakages in PDS:  Leakages refer to food grains not reaching intended beneficiaries.  According to 2011 data, leakages in PDS were estimated to be 46.7%.10,[11]  Leakages may be of three types: (i) pilferage during transportation of food grains, (ii) diversion at fair price shops to non-beneficiaries, and (iii) exclusion of entitled beneficiaries from the list.6,[12]

In 2016, the Comptroller and Auditor General (CAG) found that states had not completed the process of identifying beneficiaries, and 49% of the beneficiaries were yet to be identified.  It also noted that inclusion and exclusion errors had been reported in the beneficiary lists.[13]

In February 2017, the Ministry made it mandatory for beneficiaries under NFSA to use Aadhaar as proof of identification for receiving food grains.  Through this, the government aims to remove bogus ration cards, check leakages and ensure better delivery of food grains.10,[14]  As of January 2017, while 100% ration cards had been digitised, the seeding of these cards with Aadhaar was at 73%.14

Figure 3

Storage:  As of 2016-17, the total storage capacity in the country is 788 lakh tonnes, of which 354 lakh tonnes is with the Food Corporation of India and 424 lakh tonnes is with the state agencies.[15]

The CAG in its performance audit found that the available storage capacity in states was inadequate for the allocated quantity of food grains.13  For example, as of October 2015, of the 233 godowns sanctioned for construction in Maharashtra, only 93 had been completed.  It also noted that in four of the last five years, the stock of food grains with the centre had been higher than the storage capacity available with Food Corporation of India.

Quality of food grains:  A survey conducted in 2011 had noted that people complained about receiving poor quality food grain which had to be mixed with other grains to be edible.6  There have also been complaints about people receiving food grains containing alien substances such as pebbles.  Poor quality of food may impact the willingness of people to buy food from fair price shops, and may have an adverse impact on their health.[16]

The Ministry has stated that while regular surveillance, monitoring, inspection and random sampling of all food items is under-taken by State Food Safety Officers, separate data for food grains distributed under PDS is unavailable.[17]  In the absence of data with regard to quality testing results of food grains supplied under PDS, it may be difficult to ascertain whether these food items meet the prescribed quality and safety standards.

[1] About World Food Day,

[2] Expenditure Budget, Union Budget 2017-18,

[3] National Food Security Act, 2013,

[4] “Prices, Agriculture and Food Management”, Chapter 5, Economic Survey 2015-16,

[5] The Case for Direct Cash Transfers to the Poor, Economic and Political Weekly, April 2008,

[6] Revival of the Public Distribution System: Evidence and Explanations, The Economic and Political Weekly, November 5, 2011,

[7] ‘Report of the Internal Working Group on Branch Authorisation Policy’, Reserve Bank of India, September 2016,

[8] Working Paper 294, “Leakages from Public Distribution System”, January 2015, ICRIER,

[9] “The Cash Transfer of Food Subsidy Rules, 2015”, Ministry of Consumer Affairs, Food and Public Distribution, September 3, 2015,

[10] Report of the High Level Committee on Reorienting the Role and Restructuring of Food Corporation of India, January 2015,

[11] Third Report of the Standing Committee on Food, Consumer Affairs and Public Distribution: Demands for Grants 2015-16, Department of Food and Public Distribution,,%20Consumer%20Affairs%20&%20Public%20Distribution/16_Food_Consumer_Affairs_And_Public_Distribution_3.pdf.

[12] Performance Evaluation of Targeted Public Distribution System, Planning Commission of India, March 2005,

[13] Audit on the Preparedness for Implementation of National Food Security Act, 2013 for the year ended March, 2015, Report No. 54 of 2015, Comptroller and Auditor General of India,

[14] Unstarred Question No. 844, Lok Sabha, Ministry of Consumer Affairs, Food and Public Distribution, Answered on February 7, 2017,

[15] Annual Report 2016-17, Department of Food & Public Distribution, Ministry of Consumer Affairs, Food & Public Distribution,

[16] 30 Food Subsidy, The Economic and Political Weekly, December 27, 2014,

[17] Unstarred Question No. 2124, Lok Sabha, Ministry of Consumer Affairs, Food and Public Distribution, Answered on November 29, 2016,

Modernisation of Police Forces

October 3rd, 2017 No comments

In India, police and law and order come under the purview of state governments.[1]  Accordingly, each state has its own police force for maintaining law and order and investigating crimes.  However, due to financial and other constraints, states have critical gaps in their policing infrastructure.2  Figure 1 shows the expenditure by states on police, as a percentage of their total budget.  In 2015-16, Manipur spent the highest proportion of its state budget on police, followed by Punjab and Jammu and Kashmir.

Figure 1: Police Expenditure as a proportion of total state budget

Fig 1

Note: Figure does not include data for union territories.
Sources: Data on Police Organisations, Bureau of Police Research and Development, 2016; PRS.


The Ministry of Home Affairs has been supplementing resources of states under the Modernisation of Police Forces (MPF) scheme.[2]  The Union Cabinet last week approved the implementation of an umbrella scheme of MPF and has allocated funding of Rs 25,060 crore for the 2017-18 to 2019-20 period.[3]  In light of this decision, we present the key features of the scheme and examine other issues related to the police forces.

Modernisation of Police Forces scheme

The MPF scheme was initiated in 1969-70 and has undergone several revisions over the years.2  It was allocated Rs 11,946 crore for the period between 2012-13 to 2016-17, which has now been doubled after last week’s Cabinet approval.[4]  Funds from the MPF scheme are typically used for improving police infrastructure through construction of police stations and provision of modern weaponry, surveillance and communication equipment.  Upgradation of training infrastructure, police housing and computerisation are also important objectives funded through the scheme.

Following the recommendations of the Fourteenth Finance Commission, to increase the share  of central taxes to states, it was decided that the MPF scheme would be delinked from central funding from 2015-16 onwards.[5]  States were expected to finance the scheme using their own resources.  However, of the recent allocation made by the Cabinet, Rs 18,636 crore will come from the central government and Rs 6,424 crore will come from the states.3  This implies that the centre will fund almost 75% of the scheme.

Underutilisation of Funds

Data from the Bureau of Police Research and Development (BPR&D) shows that funds have not been fully utilised under the MPF scheme.  In the year 2015-16, out of a total grant of Rs 9,203 crore that was made available for modernisation, states utilised only Rs 1330 crore (14%).[6]

Figure 2 shows the trend in underutilisation of modernisation funds from 2009-10 to 2015-16.  Over this period, there has been a consistent underutilisation of funds by states.  On average, states spent 55% of the funds allocated to them, with the highest being 86% utilisation in 2013-14.

Figure 2: Utilisation of funds for modernisation by states (%)

Fig 2

Sources: Data on Police Organisations, Bureau of Police Research and Development, 2016; PRS.


Issues related to police forces

While the MPF scheme seeks to improve police infrastructure, there are a number of structural issues that have been raised by experts over the years related to police forces.  We discuss a few of these below.

(i) Overburdened police force

Apart from the core function of maintaining law and order, police personnel carry out various other functions such as traffic management, disaster rescue and removal of encroachments.  The Second Administrative Reforms Commission (2007) has noted that these extra obligations lead to overburdening of the police force.  It recommended that these functions should be carried out by other government departments or private agencies.[7]  Note that as of January 2016, 24 per cent of sanctioned police posts in India were vacant.6   This indicates that police personnel may be overburdened, which may have negative consequences on their efficiency and performance.

(ii) Poor quality of investigation

In 2015, the conviction rate for crimes recorded under the Indian Penal Code, 1860 was only 47%.[9]  The Law Commission (2012) observed that one of the reasons for low conviction rates in India is poor quality of investigation by police.[8]  The police lack training and expertise required to conduct professional investigations.  They also have insufficient legal knowledge and inadequate forensic and cyber infrastructure.  In light of these deficiencies, the Second Administrative Reforms Commission (2007) recommended that states should have specialised investigation units within the police force for better investigation of crimes.7

(iii) Police accountability

In India, control over the police force vests with the political executive.[10]  The Second Administrative Reforms Commission (2007) noted that this has to led to abuse of police personnel and interference with their decision-making authority.7 To allow the police operational autonomy while maintaining accountability, the Supreme Court issued guidelines to the central government and state governments (and Union Territories) in the year 2006.[11]

The guidelines provided for the establishment of three institutions: (i) a State Security Commission, (ii) a Police Establishment Board, and (iii) a Police Complaints Authority.11  The Supreme Court also stated that the state Director General of Police (DGP) should be selected from three senior-most officers of the state empanelled by the Union Public Service Commission and must have a minimum two-year tenure.

In addition, the court recommended that officers in key positions in the field (Inspector General in charge of Range, Station House Officer) must be given a two-year tenure. Currently, DGPs and senior officers are selected by the political executive of the state and are not guaranteed security of tenure.[10]   In order to improve the quality of investigation, the Court recommended that investigating police must be separated from law and order police.11

These guidelines and recommendations of other expert bodies were used to create the draft Model Police Bill, 2015 by BPR&D, which states have been encouraged to adopt.  While states have partially implemented some of these guidelines, no state has adhered to them in full.[12]  In most states, the three institutions which the Supreme Court has directed states to create have not been given the authority they need to ensure accountability and insulate the police force from political misuse.12

[1]Entry 1 and 2, List II, Schedule 7, Constitution of India, 1950.

[2] Modernisation of Police Force Scheme Book, Ministry of Home Affairs, 2010

[3] “Cabinet approves umbrella scheme of Modernisation of Police Forces”, Press Information Bureau, 27th September 2017.

[4] Annual Report, Ministry of Home Affairs, 2015-16,

[5] “Major  Programmes Under Central Assistance for State Plans”, Union Budget, 2015-16

[6] “Data on Police Organisations”, Bureau of Police Research and Development, 2016,

[7] “Public Order”, Second Administrative Reforms Commission, 2007,

[8] “Report No. 239: Expeditious Investigation and Trial of Criminal Cases Against Influential Public Personalities”,  Law Commission of India, March 2012,

[9] “Crime in India”, National Crime Records Bureau, 2006-15

[10] Section 3, Police Act, 1861.

[11] Prakash Singh vs Union of India, Supreme Court, Writ Petition (Civil) No. 310 of 1996, November 8, 2010.

[12] “Building Smart Police in India: Background into the needed Police Force Reforms”, Niti Aayog, 2016,

Does the financing of “Rights” laws impinge on the rights of states

August 20th, 2013 2 comments

In the last decade, some schemes have been recast as statutory entitlements – right to employment, right to education and right to food.  Whereas schemes were dependent on annual budgetary allocations, there rights are now justiciable, and it would be obligatory for Parliament to allocate sufficient resources in the budget.  Some of these rights also entail expenditure by state governments, with the implication that state legislatures will have to provide sufficient funds in their budgets.  Importantly, the amounts required are a significant proportion of the total budget.

There has been little debate on the core constitutional issue of whether any Parliament can pre-empt the role of resource allocation by future Parliaments.  Whereas a future Parliament can address this issue by amending the Act, such power is not available to state legislatures.  Through these Acts, Parliament is effectively constraining the spending preferences of states as expressed through their budgets passed by their respective legislative assemblies.  I have discussed these issues in my column in Pragati published on August 16, 2013.

Special Category status and centre-state finances

April 12th, 2013 10 comments

“No one can ignore Odisha’s demand. It deserves special category status. It is a genuine right,” said Odisha Chief Minister, Naveen Patnaik, earlier this month. The Odisha State assembly has passed a resolution requesting special category status and their demands follow Bihar’s recent claim for special category status.

The concept of a special category state was first introduced in 1969 when the 5th Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks. Initially three states Assam, Nagaland and Jammu & Kashmir were granted special status but since then eight more have been included (Arunachal Pradesh,  Himachal Pradesh,  Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand). The rationale for special status is that certain states, because of inherent features, have a low resource base and cannot mobilize resources for development. Some of the features required for special status are: (i) hilly and difficult terrain; (ii) low population density or sizeable share of tribal population; (iii) strategic location along borders with neighbouring countries; (iv) economic and infrastructural backwardness; and (v) non-viable nature of state finances. 1 The decision to grant special category status lies with the National Development Council, composed of the Prime Minster, Union Ministers, Chief Ministers and members of the Planning Commission, who guide and review the work of the Planning Commission.

In India, resources can be transferred from the centre to states in many ways (see figure 1). The Finance Commission and the Planning Commission are the two institutions responsible for centre-state financial relations.

Figure 1: Centre-state transfers (Source: Finance Commission, Planning Commission, Budget documents, PRS)

Planning Commission and Special Category

The Planning Commission allocates funds to states through central assistance for state plans. Central assistance can be broadly split into three components: Normal Central Assistance (NCA), Additional Central Assistance (ACA) and Special Central Assistance. NCA, the main assistance for state plans, is split to favour special category states: the 11 states get 30% of the total assistance while the other states share the remaining 70%.  The nature of the assistance also varies for special category states; NCA is split into 90% grants and 10% loans for special category states, while the ratio between grants and loans is 30:70 for other states.

For allocation among special category states, there are no explicit criteria for distribution and funds are allocated on the basis of the state’s plan size and previous plan expenditures. Allocation between non special category states is determined by the Gadgil Mukherjee formula which gives weight to population (60%), per capita income (25%), fiscal performance (7.5%) and special problems (7.5%).  However, as a proportion of total centre-state transfers NCA typically accounts for a relatively small portion (around 5% of total transfers in 2011-12).

Special category states also receive specific assistance addressing features like hill areas, tribal sub-plans and border areas. Beyond additional plan resources, special category states can enjoy concessions in excise and customs duties, income tax rates and corporate tax rates as determined by the government.  The Planning Commission also allocates funds for ACA (assistance for externally aided projects and other specific project) and funds for Centrally Sponsored Schemes (CSS). State-wise allocation of both ACA and CSS funds are prescribed by the centre.

The Finance Commission

Planning Commission allocations can be important for states, especially for the functioning of certain schemes, but the most significant centre-state transfer is the distribution of central tax revenues among states. The Finance Commission decides the actual distribution and the current Finance Commission have set aside 32.5% of central tax revenue for states. In 2011-12, this amounted to Rs 2.5 lakh crore (57% of total transfers), making it the largest transfer from the centre to states. In addition, the Finance Commission recommends the principles governing non-plan grants and loans to states.  Examples of grants would include funds for disaster relief, maintenance of roads and other state-specific requests.  Among states, the distribution of tax revenue and grants is determined through a formula accounting for population (25%), area (10%), fiscal capacity (47.5%) and fiscal discipline (17.5%).  Unlike the Planning Commission, the Finance Commission does not distinguish between special and non special category states in its allocation.

Parliament: What happens during the recess

March 16th, 2010 1 comment

Parliament is set to go into recess this week and will convene again on April 12th.  Before going into recess, both houses will have completed general discussions on the budget.

Once the recess begins, it’s time to go beyond the big budget numbers and into greater detail.   The detailed estimates by various ministries (sometimes running into a few hundred pages), of their budgeted expenditures in the next financial year (April 2010-March 2011) will be examined by the various Parliamentary Standing Committees.

When Parliament reconvenes, the Committees will table their reports on these demands for grants and the Lok Sabha will then begin more detailed discussions.  Due to lack of time however, such detailed discussions take place only for 3-4 ministries – the rest are voted on without discussion.

For a more detailed overview of the entire budget process, see our document “The Union Budget – A Primer”

For an overview of the budget documents, as well as a guide to finding the information that you want, see “How to Read the Union Budget”