Police arrested a food supply inspector and his aide for selling subsidised ration in the market instead of supplying it to ration depots on Thursday.
The accused have been identified as food and supply inspector Department Akashdeep and his aide Mohinderpal of Qila Mohalla.
Two other accused Sandy, who runs a depot in the Salem Tabri area, and Kishan Lal of Bhora village, are absconding.
The police also recovered 100 bags of rations from their possession.
Assistant sub-inspector Sohan Lal of the Focal Point police station said the accused were arrested following a tip-off.
A case under sections 409(criminal breach of trust by public servant), 420 (cheating) and 120B (punishment of criminal conspiracy) of the Indian Penal Code was registered against the accused.