Food Subsidy for Antyodaya Anna Yojana, BPL, and APL

The food subsidy system in India aims to ensure food security for all citizens, particularly the poor and vulnerable sections of society. The Government of India provides subsidised food grains under various welfare schemes through the Public Distribution System (PDS).
Among these, three major categories of beneficiaries traditionally covered under the Targeted Public Distribution System (TPDS) are:

1. Antyodaya Anna Yojana (AAY) – for the poorest of the poor.
2. Below Poverty Line (BPL) families – for those living below the poverty threshold.
3. Above Poverty Line (APL) families – for those above the poverty threshold but still eligible for limited benefits.

The food subsidy is borne primarily by the Central Government through the Food Corporation of India (FCI), which procures, stores, transports, and distributes food grains at prices much lower than the economic cost.

Objectives of the Food Subsidy System

1. Ensure Food Security: Provide affordable food grains to poor and vulnerable households.
2. Protect Against Malnutrition: Improve nutritional standards of economically weaker sections.
3. Stabilise Prices: Control fluctuations in food grain prices by maintaining buffer stocks.
4. Reduce Poverty and Hunger: Guarantee minimum food availability through subsidised rates.
5. Promote Social Equity: Target marginalised groups such as rural poor, landless labourers, and urban slum dwellers.

Categories of Beneficiaries

1. Antyodaya Anna Yojana (AAY)

• Launched: 25 December 2000 by the Government of India.
• Objective: To provide highly subsidised food grains to the poorest of the poor households.
• Target Group:
  • Families identified as the poorest among Below Poverty Line (BPL) families.
  • Typically includes landless agricultural labourers, marginal farmers, slum dwellers, aged and disabled persons, widows, and unemployed members of BPL families.
• Coverage: Initially 1 crore families, expanded to 2.5 crore households later.

Entitlements and Subsidy:

• Each AAY family is entitled to 35 kg of food grains per month.
• Subsidised rates fixed by the Central Government:
  • Rice: ₹3 per kg
  • Wheat: ₹2 per kg
  • Coarse grains: ₹1 per kg
• The difference between these issue prices and the economic cost to the FCI constitutes the food subsidy.

AAY represents the highest level of subsidy under the PDS framework.

2. Below Poverty Line (BPL) Families

• Introduced: Under the Targeted Public Distribution System (TPDS) in 1997.
• Objective: To provide food grains at subsidised rates to households living below the official poverty line.
• Identification: Based on poverty estimates and socio-economic surveys conducted by state governments.
• Coverage: Approximately 6.5 crore BPL families (before NFSA implementation).

Entitlements and Subsidy:

• Each BPL household was entitled to 35 kg of food grains per month.
• Subsidised rates (prior to NFSA):
  • Rice: ₹5.65 per kg
  • Wheat: ₹4.15 per kg
  • Coarse grains: ₹2 per kg

BPL families received a substantial subsidy, though slightly less than that under AAY.

3. Above Poverty Line (APL) Families

• Objective: To ensure food security for families above the poverty line but still needing support due to income vulnerability.
• Coverage: Households not classified as AAY or BPL.
• Entitlements:
  • Quantity: Up to 35 kg per family per month (subject to availability).
  • Prices: Close to economic cost but still subsidised, meaning a smaller subsidy component compared to BPL and AAY.
  • Rates varied across states, as some state governments provided additional subsidies.

APL families received minimal subsidy, aimed more at stabilising market prices and supporting middle-income households during food shortages.

Food Subsidy Mechanism

The food subsidy represents the difference between the economic cost of procuring, storing, and distributing food grains and the Central Issue Price (CIP) charged to beneficiaries under PDS.
Formula:

Food Subsidy = Economic Cost of FCI – Central Issue Price (CIP)

Components of Economic Cost:

• Procurement price: Paid to farmers at the Minimum Support Price (MSP).
• Handling and distribution costs: Storage, transportation, and administrative expenses.
• Carrying cost: Interest and maintenance of buffer stocks.

The Food Corporation of India (FCI), along with state agencies, implements these functions, and the subsidy is reimbursed by the Central Government.

Reforms and Transition under the National Food Security Act (NFSA), 2013

With the enactment of the National Food Security Act (NFSA) in 2013, the classification of APL and BPL categories was replaced by a more streamlined system.
Under NFSA:

• Coverage: 75% of the rural population and 50% of the urban population.
• Beneficiaries are divided into:
  • Priority Households (covering both former BPL and vulnerable APL families).
  • Antyodaya Anna Yojana (AAY) households (poorest segment).
• Entitlements:
  • AAY households: 35 kg of food grains per family per month (as before).
  • Priority households: 5 kg per person per month.
• Central Issue Prices under NFSA:
  • Rice: ₹3 per kg
  • Wheat: ₹2 per kg
  • Coarse grains: ₹1 per kg

This act effectively integrated the earlier schemes into a single, legally backed framework for food security.

Financial Implications

The food subsidy is one of the largest components of India’s fiscal expenditure.
Key Features:

• Annual expenditure on food subsidy exceeds ₹2 lakh crore (as of recent Union Budgets).
• The subsidy is primarily directed towards covering losses incurred by the FCI.
• States like Tamil Nadu, Kerala, and Chhattisgarh have introduced additional state subsidies to provide food grains either free or at lower prices.

Challenges in the Food Subsidy System

1. Leakages and Diversion:
   • Misidentification of beneficiaries and diversion of subsidised grains to the open market.
2. Rising Fiscal Burden:
   • Growing gap between procurement cost and issue prices has made the subsidy fiscally unsustainable.
3. Storage and Distribution Inefficiency:
   • Poor infrastructure leads to wastage and losses in the supply chain.
4. Targeting Errors:
   • Exclusion of genuine beneficiaries and inclusion of non-eligible households due to data inaccuracies.
5. Corruption and Middlemen:
   • Weak monitoring mechanisms in some states enable misuse of funds and grain diversion.
6. Dependence on Few Crops:
   • Focus on wheat and rice procurement discourages diversification towards pulses and coarse cereals.

Measures for Improvement

1. Digitisation of Ration Cards: To eliminate duplication and ghost beneficiaries.
2. End-to-End Computerisation: For better tracking of food grain movement through PDS.
3. Use of Aadhaar and DBT (Direct Benefit Transfer): To ensure transparency and efficient delivery.
4. Grievance Redressal Mechanisms: For addressing beneficiary complaints.
5. Improved Storage and Transportation: Modernisation of FCI warehouses and logistics.
6. Diversification of Food Basket: Inclusion of nutritious items like pulses and millets in PDS.