[Planning] Public Distribution System - Objectives, Functioning, Limitations, Revamping

With a network of around 5 lakh fair price shops (FPS) distributing commodities worth more than Rs 30,000 crore annually to the PDS in India is perhaps the largest distribution network of its kind in the world. However, there are huge challenges faced by the PDS across the

In 2008, an study for TPDS was carried out by National Institute of Smart Government covered various aspects of the functional areas with the perspective of People, Process and Technology. Challenges in the following six key functional areas were studied: allocation, movement, storage, finance, licensing and regulation of FPSs, and grievance redressal.
The challenges noted were:

1.        Non – availability / delay of utilization information to the Centre from States
2.       Non - availability / delay of closing balance details and updated card status at State level from the districts, block and FPS levels.
3.       Inaccurate data reporting by FPS
4.      Longer time taken for allocation cycle

1.        Absence of truck tracking system leading to delayed delivery, diversions, siphoning etc.
2.       Non-standard transportation rates
3.       Cartel formation by transporters
4.      Late submission of demand drafts/cash by FPS for lifting leads to sub optimal route planning

Storage and Quality Control (QC)
1.        Non-availability of stock positions in few states leads to inappropriate allocation and excess stock build up at intermediary storage points
2.       Poor quality of packaging leads to loss of food grains
3.       Extensive use of hooks leads to spillage.
4.      Insufficient godown capacity of intermediate storage points result in multiple shipments
5.       Temperature fluctuations due to weather leads to variations in weight of food grains
6.      Loss of food grains due to infestation
7.       Manpower shortage leads to delay in dispatches and non compliance to policies.

1.        Poor financial condition of FPS.
2.       Cost and time incurred on preparation of multiple DDs by FPS results in increased financial burden on the FPS.

Licensing and Regulation
1.        Inadequate monitoring leading to diversion of stock
2.       Selection of inappropriate dealer leading to malpractices
3.       Lack of standard selection procedure and guidelines
4.      Difficulty in identification of elapsed licenses

Grievance Redressal
1.        Absence of response and monitoring mechanism because of which, higher authorities are unaware of number and status of grievances registered and thus grievances are not getting resolved on time
2.       The service level agreements for grievance redressal are not clearly defined
3.       Bogus complaints result in wastage of officials’ time
4.      Lack of integration between various complaint and registration channels leads to multiple actions at different levels
Based on the above study, a scheme for computerization of TPDS operations was taken up by the Department of Food and Public Distribution.
Apart from the challenges identified above, there remains the fundamental challenge of having an accurate database of eligible beneficiaries. The existing databases are plagued with inclusion and exclusion errors in identification of beneficiaries and fake ration cards.
Choice and convenience for the beneficiary has not been adequately addressed in the present enabled with closed circuit TV monitoring on a trial basis. An online application has been made available to consumers to register their complaints through a website.

Analysis of PDS System in present scenario

The Public Distribution System (PDS) provides subsidized food and fuel to a large number of people in India. Of all the social safety net programs of Government of India and various State Governments, the subsidies on food and fuel are perhaps the most important ones. Affordable food is a source of sustenance for a large segment of the population; affordable kerosene is extensively used for cooking and lighting by the poor.

Given the importance of food and kerosene for sustenance, it is not surprising that these subsidies account for a large fraction of the total subsidy expenditure of the Government of India. However, deficiencies in the implementation of PDS have plagued the system. In many cases, the true beneficiaries of these subsidies suffer due to wholesale problems such as large-scale pilferage and diversion, and retail level problems such as duplicates and ghost beneficiaries, wrongful exclusion and inclusion, availability and quality of the commodities, as well as Fair Price Shop level pilferage. While implementation varies from state to state, there are a number of areas in the PDS system which requires immediate attention.

A number of suggestions have been made over time to reform PDS. These reforms include:

1. Grassroots level transparency that include increased social audits, painting of PDS offtake on walls of the FPS shops, painting of trucks;

2. Beneficiary empowerment through the use of coupons, or technology such as smartcards, or even direct cash transfers;

3. Monitoring the movement of goods through the use of technology, such as GPS tracking of trucks; and

4. Increased monitoring, supervision, accountability, and transparency.

Along with the reforms suggested above, the following features also need to be accounted for in order to attempt a comprehensive solution for deficiencies in PDS:

1. A solution that is incentive-compatible for all stakeholders, so that they benefit by participating in the system, rather than trying to benefit through subverting the system. For example, commission rates for FPS owners should be set to ensure that they earn adequate returns on their investment;

2. Strengthening the public provision of the State with appropriate use of technology, to bring it on par with best practises in the field. Strategic control needs to be retained within Government at all times;

3. A token-agnostic technology solution that can accept physical coupons, smartcards, electronic coupons, and even facilitate direct cash transfers where different states may choose from different solutions based on their own requirements;

4. Provide beneficiaries maximum choice:
  1. choice of location;
  1. choice of the mix of commodities;
  1. choice  to  purchase  commodities  in  convenient  quantities,  and  in  any  number  of instalments; and
  1. choice to purchase commodities or receive a direct transfer of subsidy.

5. Aadhaar can be used in PDS to simplify a number of processes:
  1. Simplification of Ration Card registration, so that beneficiaries can apply for a Ration Card conveniently;
  1. Cleaning up the beneficiary database;
  1. Use of Aadhaar authentication as appropriate; and
  1. State Governments can use Aadhaar Payments Bridge and Aadhaar Enabled Payments Systems to channel subsidy funds for approved commodities to Aadhaar-enabled Bank Accounts.

Keeping in view the proposed National Food Security Bill it is imperative to undertake these reforms at the earliest.

Best practices from States using IT in PDS

A summary of the best practices in TPDS implementation as reported by some States is as follows:

  1. Creation of central beneficiary database – Chhattisgarh, Gujarat, Tamil Nadu, etc.
  1. Cleaning up of databases through use of biometrics – Andhra Pradesh, Madhya Pradesh, etc.
  1. Maintenance of Ration Card database using web based application software – Chhattisgarh, Gujarat, Tamil Nadu, etc
  1. Issuance of TPDS commodities through:
  1. Bar-coded Ration card – Chhattisgarh, Gujarat, etc.
  1. Smart Card based ration cards – Andhra Pradesh, Chandigarh, Haryana, Orissa, etc.
  1. Food Coupons – Bihar, Gujarat, Madhya Pradesh, Orissa, etc.
  1. Online biometric verification before transaction – Gujarat.
  1. Automated allocation every month using web-based application– Chhattisgarh, Tamil Nadu, Gujarat etc.
  1. Generation of delivery order, truck challans, receipts and movement of commodities between Distribution Centers are being carried out through an application software – Chhattisgarh.
  1. Automated assessment of transportation requirements and optimum utilization of trucks – Chhattisgarh.
  1. Use of GPS for tracking movement of trucks – Tamil Nadu.
  1. Availability of PDS related information on website such as list of Ration Card holders, FPS list, allocation, month-wise lifting and sales by FPS etc. – Chhattisgarh, Tamil Nadu. 
  1. SMS alerts sent to registered beneficiaries / citizens, vigilance committees for a designated FPS whenever PDS commodities are dispatched from a godown – Chhattisgarh, etc. 
  1. Grievance redressal system and availability of information regarding F&CS department through toll-free numbers, website – Chhattisgarh, Tamil Nadu, etc.

Lessons from use of IT in PDS in states

After various deliberations and discussions, the Task Force observed the following:

  1. There is wide variance between states in terms of the extent of computerization undertaken in PDS. Each state has approached computerisation in a different way and has achieved different degrees of success based on a variety of factors;
  1. Even in states that have undertaken computerization efforts, wide variation in their strategy, focus and intent exists. Many efforts have been piecemeal and on a pilot basis and their scalability is yet to be tested;
  1. A few states have computerized the supply chain (from Godown to Fair Price Shop) while others have used technology to address last mile delivery issues (delivery to the PDS beneficiary). Hence both upstream and downstream computerization efforts in the PDS chain have been undertaken;
  1. NIC has played a major role in computerization of PDS efforts in various states. They are in the process of combining their software developed for various states into a common software platform for PDS;
  1. There is a need to make a comprehensive “As-Is” study in all the States to access the level of computerization across the country in order to have a complete view of the extent of leverage of technology in the PDS delivery mechanism;
  1. An IT strategy is much more than just developing common software. It requires an institutional mechanism to undertake the complex task of conceptualizing, developing and maintaining the IT systems on a continuous basis.
 Technology, while not a panacea for solving the problems of PDS, is crucial in improving the efficiency of PDS and bringing it to the levels of optimum productivity. Targeting, as is done today, requires accurate identification of beneficiaries, accountability and transparency in the movement of goods, and full reconciliation. Some States such as Chhattisgarh are at an advanced stage, and have a software platform that is already in use. Other States such as Gujarat are at the stage of advanced pilots. Most States are yet to start implementing comprehensive technology solutions in PDS. Given the importance of States having the flexibility in choosing their partners and implementation, and to ensure that the new design does not create roadblocks for those who are already on the path of computerization, partnering with PDSN will be strictly voluntary for States.

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