Economic Survey suggests replacing PDS with food coupons

The Public Distribution System (PDS) of food grains in India is plagued by pilferage, black-marketing and diversion and inexcusable wastage. These supply side inefficiencies not only hurt the poor but also have cascading effects that impinge on the consumption choices of the common man as well. It is high time this regime of indirect subsidies is done away with and replaced by a more effective system of direct subsidies in the form of food coupons that can be used to buy food items from the open market by the BPL families. This will lead to a single market for food grains (vis-a-vis the two markets that exist today - the subsidised one for BPL families and the non-subsidised open market) and hence do away with the very concept of black-marketing. It will also get rid of the need for government owned-fair price shops which is important as the operators of these shops have little incentive to prevent wastage since their income is not dependent on how much they sell.

An article on InfoChange India on the Economic Survey recommendation:

India’s 2010 Economic Survey suggests doing away with food and fertiliser subsidies and providing the poor food coupons to exchange at market prices.