This paper explores various efficiency aspects of the Rs 2 a kg rice scheme, which has been relaunched in Andhra Pradesh. The statistical analysis suggests a substitution of demand between the open market and public distribution system purchase in response to changes in the open market price of rice in the state. An examination of the consumer benefit and subsidy burden involved in the rice scheme during 1983-2007 indicates that the gap between the two typically remained small. In the light of the central government's pds reform package, the paper suggests strategies for a cost-effective pds management in Andhra Pradesh.
