With a view to reduce the burden of food subsidy and targeting it better to the really needy people, the Government of India adopted the Targeted Public Distribution System (TPDS) from June 1, 1997. TPDS aims at providing food grains to people below the poverty line at highly subsidised prices from the PDS and food grains to people above the poverty line at much higher prices than the poverty line Thus, the TPDS adopted by the Government of India maintains the universal character of the PDS but adds a special focus on the people below the poverty line (known as BPL).

The key features of TPDS as adopted by the Government of India are as follows:

1. Targeting. The most distinctive feature of the TPDS in relation to the previous policy is the introduction of targeting by dividing the entire population into Below Poverty Line (BPL) and Above Poverty Line (APL) categories, based on the poverty line defined by the Planning Commission. The maximum income level for the population to be covered under BPL was kept at Rs. 15,000 per annum. The TDPS provides wheat at Rs. 2/kg., rice Rs. 3/kg and millets at the Rs. 1/kg to the BPL families.

2.Dual (multiple) prices. The second distinguishing feature is that the PDS now has dual central issue prices: (i) Prices for BPL consumers and (ii) Prices for APL consumers. A third price, introduced in 2001, is for beneficiaries of the Antyodaya Anna Yojana (AAY).

3. Centre-State Control. A third important feature of the TPDS is that it has changed Centre-State responsibilities with respect to entitlements and allocations to the PDS. PDS was and is designed and managed by State governments, and State governments differ with respect to entitlements, the commodities offered, the retail price (State issue price) and so on. In the past, the State governments demanded a certain allocation from the Central pool and based on certain factors, most importantly, past utilisation and the requirements of statutory rationing, the Central government allocated grain and other commodities to States for their public distribution systems.