Hi Manoj,
Nice question. But you have to run MPS (NOT MRP) in both the plants once you are putting M1 for both. Its better to have PD in any mufacturing plant as it has to flow the requirement in below levels (in component) which MPS can not do. MPS is planning on header level.
Its true both will generate the requirement. But MRP for all material (header and component) and MPS for header material.
That's the reason in distribution plant it's MPS (MRP type: M1)
Hence current setting is fine as per my understanding 
.
Regards,
Krishnendu.