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  1. 1. Team:  PARIVARTANA   Mahabaleshwar  Bhat  |  Himanshu  Jangid  |  Sujay  Koparde  |  Neha  Sinha  |  Chandan  Kumar  Jha   Indian  School  Of  Business  Hyderabad     A Technology based Solution for Plugging the Leaks: Improving reach and efficiency of the Public Distribution System   Inefficiency in distribution Never ending queues.. Leakages in the system.. Isn’t there any solution for this problem.?? Food Adulteration.. YES! There is…
  2. 2. Public Distribution System (PDS) : a real big problem Losses and leakages in PDS §  Around 43% of food grains are lost due to illegal diversion by people with vested interests. §  Approximately 19% of food grains gets allocated to non-poor people due to improper identification mechanism. §  Only 10% of food grains reaches poor people. Disconcerting characteristics of Indian PDS §  Illegal diversion of food grains due to absence of central monitoring mechanism. Futility of vigilance teams. §  FPS make up for lost stock, due to diversion, with adulteration problem §  Improper identification mechanisms gives opportunities to FPS to misuse the subsidized food grains. So,  With  the  recent  passage  of  the  Food  Security  Ordinance,  a  biggest  welfare  programme  in  history,   the  role  of  PDS  will  expand.     Given  the  inefficiencies  and  leakages  in  the  current  distribuGon  system,  it  is,  therefore  crucial  to     strengthen  the  system  swiEly  and  comprehensively..   43% illegal diversion & adulteration 28% Administrative losses 19% Reaches unentitled households Only 10% Reaches the poor beneficiaries Can Direct Cash Transfer be an alternative solution? – NO! not completely §  Major issues related to Direct cash transfer – Infrastructure issues, Targeting problems, difficulty in predicting inflation, exclusion and inclusion errors §  Moreover, Poor prefer FOOD to cash – Food policy research institute, Bangladesh 2009 , Slum women overwhelmingly prefer food – Delhi 2011
  3. 3. What is the Solution? – snapshot of the solution proposed (Un) Fare Price Shops - Adulterations, Malpractices Automated Vending Machine - No Human Intervention Replace   Farmers Middle Man Warehouses Fair Price Shops(FPS) Entitled Households ExisIng  PDS  system:   •  Major source of problem - adulteration, illegal diversion, not reaching targeted households - in the complete chain Due to Human intervention •  Over 0.5 million shops throughout the country •  Inefficient system due to Human intervention SoluIon  :  A  major  systemic  reforms  in  the  public  distribuGon  system  is  possible  by     Automated Centralized Monitoring: §  Automation provides for better monitoring of goods flow. §  Matching of goods leaving warehouse and goods sold to entitled households, and no human intervention ensures no illegal diversion. Automated Vending Machine: §  Replacement of Fair Price Shops with a completely automated Vending Machines for disbursing specified food articles (SFAs) to consumers §  Adhaar card to be used for identification. §  License holders or franchisees to bear the cost of installing & maintaining the vending machine. §  This prevents both adulteration problem and selling subsidized goods to non-poor people.
  4. 4. What is it? §  It is (Fare) replacement for an existing (Un)Fare Price Shops §  Completely automatic distribution system, which could be managed by any common man What it looks like? How it Works? §  Computer system detects the identity of the beneficiary based on Adhar card detection method §  After detecting and validating, machine confirms the applicable quantity of SFAs for the beneficiary §  Hold a bag/can at the window, where machine automatically weighs the exact quantity and pours, to get your share Why is it Better? §  No Human intervention (solves 60% of the problem) in the distribution process, so problems of adulteration, malpractices could be curbed §  Fast and highly efficient, reduces long queues in front of shops Automated Vending Machine: replacement of FPS Rice   Wheat   Kerosene   Front View: Automated Vending Machine Side View: Automated Vending Machine (With Storage at the back)
  5. 5. Implementation of the solution – Major steps §  As per Justice Wadhawa committee recommendation implement the timely delivery of food grains to FPS. States to strive to make doorstep delivery to FPS §  Government should Partner with private technology firm to design the SFA vending machines •  Given the possibility of the bulk order and simplicity of the system, initial R&D cost is not significant. Manufacturing cost of each machine could be 1 lakh §  Replace existing FPS with these vending machines •  Area required is same or smaller than existing. FPS owners to bear the cost of machine (to enhance accountability from ownership) §  Connect all the Automated Vending machine, and the warehouse to a central data management centre through a network (internet) which would help in collecting real time information from the vending machine §  Set up a Common central data management centre to manage the data and to control the flow §  Out source the database management and analytical part to the technology service provider •  This particular technology can help in tracking flow of SFAs, controlling the losses due to weight hedging at FPS during distribution, controlling adulteration , and maintaining the quality
  6. 6. Proposed Distribution Model FCI:  Warehouse   Vendor   Machine   Farm  +   Merchant   Farm  +   Merchant   Vendor   Machine   Vendor   Machine   Vendor   Machine  TransportaGon   agency   Weekly  cash    transfers   Payment  from  government   IT  enabled  monitoring  systems  
  7. 7. How does the system work? Step  1:  Supply  to  FPSs   Step  2:  TransportaGon  and  filling   Step3  :  DistribuGon  to  beneficiaries   •   Government  should  take  care  of   the   supply   of   SFAs   to   FPSs   and   should   not   outsource   iniGally   Gll   the  pilot  is  run     •   Implement  the  automated  supply   chain   management   system   with   barcode   readers   to   track   the   out   flow  of  the  SFAs   •   GPS  enabled  trucks  take  the  SFAs   to  assigned  FPSs  as  per  the  order     •   Driver  and  helper  are  responsible   to   dump   the   SFAs   in   the   Vending   machine   containers   and   lock   the   system   • Franchise   owner   cannot   interfere   in  the  filling  of  system,  he/she  can   only  monitor  the  inventory  with  the   help  of  computer  system  aUached     •    Collect   the   money   from   beneficiary   and   assist   them   in   geVng  their  share  of  SFAs   •    Strict   supervision   over   transporters  and  truck  movements   •    SCM   soWware   helps   in   clear   tracking  of  goods   •      Drivers   and   helpers   are   held   accountable  for  the  exact  measure   and   quality   of   the   SFAs   dumped   into   the   vending   machine   containers     •   Human  intervenGon  at  this  level  is   controlled   by   the   technology   capability  of  the  machine.   •    No   access   to   the   actual   SFAs   so   adulteraGon  is  totally  controlled  at   FPA  end.   •     Beneficiaries  are  beUer  served  as   the  s/m  is  automated   •    Not   much   waiGng   as   the   throughput   of   machine   would   be   higher  than  human  run  s/m   ImplicaGons  
  8. 8. Rice   Wheat   Kerosene   Impact of the solution Scalability & Scope of the solution §  The vending machine model is designed to substitute current FPSs. The target is to automate the entire distribution chain i.e. 4.99 lakh vending machines in place of FPSs: expense to franchise : 4,990 crore §  Vending machines could be mounted on trucks and made as mobile shops at places where population is less §  Small size Vending Machines could be made available – any interested shops can install it at their premises; This increases the availability. §  The vending machines may also be used to solve an alternate issue: Facilitate Family planning. A compartment may be implemented in the machine to carry contraceptives. As the machine has multiple utility, it may make the act of procuring a contraceptive less conspicuous and reduce the perceived embarrassment associated with the action. Criteria to measure the impact of the solution: §  Percentage improvement in fulfillment by the distribution system (currently 10%) - Recovery of loss of 62% fulfillment capability (43% from leakages from transportation and 19% from leakage to non-beneficiaries) §  Leakages and mismatches between grain transported from the warehouse, grain received at the vending machine and grain consumed by allotted consumers Rice   Wheat   Kerosene  
  9. 9. Sustainability of the solution §  Franchise model: An initial investment would be required from the owners. This can be procured as a term loan of Rs 1 lakh. §  The owners will be allowed a margin of Rs 0.40/kg on SFAs sold to APL/BPL consumers and a commission of Rs 0.40/kg for sale to AAY beneficiaries. (Rs 0.05/kg more than existing standards) §  Volume based compensation to transportation agents directly under contract guidelines through government would reduce variations in supply. §  Ceasing payments to distribution agents from franchisee owner margins for APL consumers will allow constancy of revenues, thereby reducing incentive to hoard for alternative mode of payments Appropriate monitoring mechanisms §  Scanners and sensors at supply and receiving end i.e. outside the warehouse and at receipt of grain at vending machine to match quantity delivered. §  Quarterly audits at warehouses by CAG agents §  Vigilance committee at district levels to monitor leakages at linkages between warehouse and vending machines. Variable incentive for members mapped to efficiency of system §  Surprise inspections at villages to check vending machines *Based  Oriental  Bank  of  commerce     minority  loan  scheme     IniGal  Investment  (Loan  amount)   100000   Upfront  capital*(0.5%  of  loan  +500)   1000   Consumers  Served  /  machine/month   1000   Avg  monthly  alloUed    wheat  quanGty  (kg)   25   Avg  monthly  alloUed    rice  quanGty  (kg)   10   Margin  per  kg   0.4   Income   14000   Monthly  revenue  from  sale  of  gunny  bags   3500   Rental  &  Electricity   4000   Interest  rate   12.75%   EMI  (based  on  60  payments)   2262   Net  Income   11238  
  10. 10. Challenges and Mitigation Factors Challenges: §  Since the solution addresses the issue where people with vested interests earlier made personal profits, the idea could face opposition from some forces. §  The vending machine and centralized monitoring solution would require new, but feasible, technological innovations. This would involve high initial costs. §  The people, especially in villages might take some time to adjust to this technology. Mitigations: §  Strong will on the part of government, will keep the forces in check and will help in faster implementation of this idea. §  Awareness programs need to be run to showcase the advantages and ease of operation of the machines. Automatic centralized monitoring would require new investments and trainings in IT. §  The security guard guarding this machine needs to be trained to help people use the machine
  11. 11. Conclusion §  Automated Vending Machine Solution, if implemented besides justice Wadhawa recommendations, can solve 90% of adulteration and 75% of the leakage problem. §  Greatly reduces the human intervention and increases the efficiency §  Efficient implementation of Food Security bill, which entitles 67 % of our population to subsidized grains under the Targeted Public Distribution System, is possible. §  The Objective of the NFSB - to eliminate hunger and malnutrition, to correct the distribution system to efficiently and effectively deliver to the correctly identified beneficiary – could be achieved at 80% success rate. §  Could solve the problems such as - 4 Crores Indians sleep hungry in any given night, About 7 million children died in 2012 because of hunger / malnutrition.
  12. 12. References §  Justice Wadhwa Committee Report on PDS § § §  Images - Google images