The document discusses improving the reach and efficiency of India's Public Distribution System (PDS). It outlines several key problems with the current system such as corruption, lack of transparency and accountability. It then proposes various solutions like standardized packaging of grains, biometric-enabled ration cards, e-governance systems for monitoring stock movement, and public display of FPS information. Cost analyses are provided for the IT infrastructure and standardized packaging. Detailed proposals describe centralized database architecture and increasing public awareness through NGO involvement, updated FPS displays, and grievance redressal mechanisms.

1. THEME 04
PLUGGING THE LEAKS - IMPROVING REACH AND EFFICIENCY
OF PUBLIC DISTRIBUTION SYSTEM
Participating Institution: NITIE, Mumbai
Team Name: AVARTAN
Participants
Aditya Garg
Anish Aggarwal
Anish Banerjee
Devesh Singh
Shreya Basu Roy

2. Planning
Commission: “For
every Rs. 4 spent on
PDS, only Re.1
reaches the poor”
57% of the PDS food
grain doesn’t reach
the intended people
Only 40% of food
grains reach Indian
homes at the end of
the supply chain
ADB study : “19%
subsidy goes to non
poor 43% goes into
illegal diversion”
Only 8.3% of FPS
have income
sufficient to run it
efficiently
PDS IN INDIA
Stage - I Stage - II Stage - III Stage - IV
4.99 Lakhs Fair Price Shops (FPS)
160 Million Families
Commodities worth Rs. 15000 crores distributed
Major commodities: Rice, wheat, sugar, kerosene
Largest retail system in the world
Catering to 33 crores poor people who are nutritionally at risk
Objectives of Public Distribution System (PDS):
•Providing food grains/ essentials to vulnerable
sections of society at reasonable prices
•To put an indirect check on the open market prices
of various items
•To attempt socialization in distribution of essentials
Responsible for procuring, storing,
transporting and allocating food grains to
State Governments
Responsible for identification of BPL,
allocation of ration, issuing ration cards and
supervising FPS functions
The Current Scenario….
Farmer Miller
District
FCI
District Manager
of Civil Supplies
Mandal Level
Stock Point
FPS Citizen
Central Government controlled State Government controlled

3. PROBLEMS FACED IN THE CURRENT SYSTEM
Accountability
&
Transparency
Distribution
Related Issues
Corruption
Information
Related Issues
Awareness
•Discrepancy in measurement at MLS point attributing to moisture content of grains
•FPS siphoning 100-200gms owing to shortage in supply
•Discrepancy in measurement at FPS using faulty measuring devices
•Many FPS open for irregular and erratic timings and not open for 18 days per month
•Charges/ bribes paid for regular functioning and stock movement
•Ration cards traded by citizens for money
•Corruption in appointment of dealers of FPS
•Illegal diversion of commodities (black marketing, pilferage)
•Tied in selling of non-PDS items
•Lack of info on total no. of cards per village and opening-closing stock
•Inability to gather all information related to demand and supply at district level
•Misinformation about stocks, entitlements by FPS agents to citizens
•Bogus Ration Cards
•Error in categorization: Inability to demarcate BPL, APL, AAY groups
•Lack of Awareness about PDS regulations among citizens
•Lack of information among citizens on entitlements and stock at an FPS
•No grievance redressal Mechanism
•Food Grains destroyed at warehouses/godowns due to rains
•Poor quality goods
•Irregular supply of goods
•FPS pay ‘hamaalis’ to load and unload grains

4. OVERVIEW OF PROPOSED SOLUTIONS
IMPROVING REACH
AND EFFICIENCY OF
PUBLIC
DISTRIBUTION
SYSTEM
Delivery of grains from MLSP to
FPS in standardized SKU size
•Elimination of measurement
discrepancy at MLSP
•Tamper-Proof Packaging
•Polyethylene packaging prevents
damage of PDS commodities
•Prevents pilferage
•Improves Transparency
Biometric-enabled Ration Card
•Pre loading of family ration quota
in their pre-existing AADHAAR Cards
•Cross-verified citizen information
•Eliminates bogus ration cards
•Improves accountability
•Prevents ration card trading
E-Governance and Centralized
Stock Movement Information
•Quick Access to Information
•Enhances efficiency
•ImprovesTransparency
•Accountable information for
better planning
•Faster Communication
•Accurate Demand Forecasting
FPS Information Public Displays
•Key register info displayed publically
•Card holders’ info and
opening/closing stock of FPS displayed
•Citizens can check their names
•Cross verify names from other
villages
•Identify APL citizens holding BPLcards
•Match total no. of cards with stock
position
Grievance Redressal
Mechanisms
•24 hours toll free line and
SMS facilities for registering
grievances
•Dedicated grievance
redressal portal for citizens
•Avenues to discuss
grievances with the
Sarpanch/Panchayat
•All grievances to be
monitored by the Lokayukta
POS Device at FPS for electronically
capturing sales data
• Increased Accountability
• Reliable electronically captured
data
•Synchronizes FPS sales with the
central database
•Improves demand forecasting
•Elimination of malpractices
Audits
•Panchayats/Gram Sabhas/Other
Vigilance committees to monitor
effective implementation
•Eliminates corruption
•Elimination of Malpractices
Awareness Programs
•Involvement of NGOs, college students
to educate citizens about PDS
•Information printed on SKU covers
•Improves reach of PDS program
•Spreads information about
entitlements and benefits
•Better awareness about PDS
regulations
•Prevents exploitation of citizens at FPS

5. DETAILED PROPOSAL FOR E-GOVERNANCE
District
FCI
District Manager
of Civil Supplies
Mandal Level
Stock Point FPS
Master Server
& Database of
all MLSP, POS
and customers
MLSP Server
with
database of
all MLSPs
POINT
OF SALES
(POS)
NETWORK (ELECTRONIC DATA INTERCHANGE)
IT-ENABLED COMMODITIES PURCHASE PROCESS (LINKAGE OF UID-PDS)
Aadhaar provides the
demographic and
biometric (retina scan
and finger print) data
of the citizens
FPS
Family
UID
Cards
4 kgs
ordered
10kgs (allocated)
6 kgs (remaining)
100kgs (allocated)
96 kgs (remaining)
N
E
T
W
O
R
K
UID
Server
N
E
T
W
O
R
K District
FCI
INFORMATION
Timestamp
Aadhaar User ID
Transaction Date
Quantity Bought
MLSP
CENTRALIZED DATABASE ARCHITECTURE

6. COST ANALYSIS FOR IT INFRASTRUCTURE
Reference
• http://pib.nic.in/newsite/erelease.aspx?relid=74180
• http://www.apscsc.gov.in/pds.php
• http://www.alibaba.com/product-
gs/766180075/GS90_gprs_pos_terminal_device.html
FCI MLSP FPS
Assuming 1 in one state Assuming 200 under one MLSP
Device
Price/
piece
Total Cost
Server 2,50,000 2,50,000
Computer 25,000 25,000
e-PDS
suite
(ERP
license)
10,500
10500 * 200
=
21,00,000
TOTAL 23,75,000
Device
Price/
piece
(A)
Total Cost
(A) * 100
Computer 25,000 25,00,000
Internet
(40 Mbps,
125 GB)
3199 * 12 38,40,000
TOTAL 63,40,000
Device
Price/
piece
(A)
Total Cost
(A) * 100 *
200
Computer 25,000 50,00,00,000
GPRS POS
terminal/
device
20,000 40,00,00,000
Electronic
Display
Board
5,000 10,00,00,000
Smart
Card
(1 per
family)
20
(assumi
ng 1000
families
per FPS)
20* 1000 *
100 * 200 =
40,00,00,000
TOTAL 140 Crore
Assuming one FPS per Panchayat
Total Cost = 141 Crore (approx)
Assuming 100 under one FCI
Since every Panchayat is already
provided with a Computer and
Internet connection, we only need to
issue them a user login
Panchayat
Earlier, “For every Rs 4 spent on the PDS,
only Rs 1 reaches the poor”
We aim at increasing the
efficiency by 70% & provide
atleast Rs 3.75 to poor
Since our govt spends Rs 700 Crore per
state on PDS annually
Hence, the entire project
BREAKS EVEN IN LESS
THAN SIX MONTHS

7. DETAILED PROPOSAL FOR STANDARDIZED SKUs
 Packaging of food grains & items in SKUs of 10 kg
 Packaging activity to be done at MLSP
 Automated machines to perform packaging
activity, hence bringing in faster & tamper proof
mechanism
 Awareness Initiative– Message at the back of
SKUs to be printed in Hindi and local language to
spread awareness
 Message will include number of packets per
family, weight per packet and price per packet,
hence making consumer aware of their
entitlements
 Packaging material to be used - Polyethylene
 Less expensive , High-density polyethylene is
stronger, thicker & higher softening temperature
(121° C)
 Sacks made from 0.03 - 0.15mm high-density
polyethylene have a high tear strength, penetration
resistance and seal strength
 Standardized packets through automated machines hence eliminating measurement discrepancies
 Tamper proof packaging ensures no stealing from packets
 Increasing transparency and social awareness through print messages – Consumers can themselves
keep a check on FPS
 Better quality of food grains as polyethylene will better conserve grains
Benefits
Sample photo Back Cover

8. COST ANALYSIS FOR STANDARDIZING SKUs
Price of Automated Pouch packing machine Rs 2,50,000
Cost of Polyethylene Rs 100 per Kg
Weight of polytethylene for packing 10 kg grains 25 gram per packet
Cost of packaging per 10 packet Rs 2.5
Cost of printing messages Rs 0.50
Total cost of packing 10Kg grains (A) Rs 3.00
Average theft per quintal (100 kg) 10 Kgs
Minimum support price of wheat per Kg Rs 13.50
Minimum support price of rice per Kg Rs 13.10
Minimum Total Cost saved from theft per quintal (B) Rs 130
Minimum Savings by preparing 10Kg packets (wheat) [B/10 – A] Rs 10
Break Even quantity for the Automated pouch packing machine 25,000 packets
Price of Automated Pouch packing machine Rs 2,50,000
Speed of packing 25 packets per minutes
Time taken for preparing 25,000 packets (BA quantity) 1000 minutes or 17 hours
Number of hours of working in MLSP 8 hours per shift
Machine
becomes
free after
3 days of
operation

9. DETAILED PROPOSAL TO ENHANCE AWARENESS
Involvement of NGOs/Women SHGs/College Students
• Collaborate with the NGOs and college going students around a particular region to
educate the citizens about the PDS regulations and the workings of Mandal Level Stock
Point (MLSP) and the FPS
• Also engage Women Self Help Groups (SHGs) running the FPS in few states in this process
Regular Updation of FPS Notice Boards
• Information about the stock position of different commodities, working hours of FPS,
stock entitlements should be updated regularly on the notice boards outside each FPS
• PDS Card Holder information displayed : Name, members, type of card (BPL/APL/AAY)
• Real Time Updation is possible by the use of Electronic Data Interchange (EDI)
technology (based on the POS data)
• Will keep the families in the region informed about the stock levels so that they can plan
their purchase
Grievance Redressal Mechanism
• Dedicated grievance redressal portal (http://pdsportal.nic.in/main.aspx) should be promoted
among the famillies to raise their concerns regarding food commodities distribution
• Panchayats/Gram Sabhas/Other Vigilance committees/Anti-Hoarding Cells should be set up
to educate and monitor the portal effective implementation
Social Audits
• Social Audits from the publically displayed information on notice boards helps cross verify
names from other villages, identify APL citizens holding BPL/AAY cards, match total no. of
cards with stock position

10. IMPLEMENTATION ROADMAP
2014
• Creation of
awareness by
spreading volunteer
bodies like the
NGOs, Women SHGs,
College Students
about the workings
of MLSP/FPS and
PDS regulations
• Introducing all the
stakeholders with
the newly proposed
IT implementation to
get familiar with it
• Educating families
about the grievance
redressal portal
(http://pdsportal.nic
.in)
2014-2016
• Launch of Pilot project in a district
having AADHAAR cards for all its
residents
• Setting up of IT infrastructure at
FCI/MLSP/FPS level
• Setting up of SKU packing units at
MLSP level
• Setting up of system at Sarpanch’s
house for random audits
• Assigning entities for physical surprise
audits at various check points
• Linkage of PDS with the UID
(AADHAAR Card) to access all the
identity information about the
individual
SHARE HOLDERS
Central Government | State Government | Village
Panchayats | Sarpanch | NGOs | College Students | Women
SHGs |
2016-2019
• Taking feedback about
the pilot project from all
the shareholders
• Cross verification of the
proposed cost benefit
analysis
• Once the existing system
is enhanced after
implementing feedbacks,
scale it up for entire state
• Constant addition of new
and improved IT
solutions to keep at par
with world’s best
practices
SOURCE OF FUNDING
State Government & Central Government

11. CHALLENGES & MITIGATION FACTORS
• Integration of UID and PDS which requires setting up of
POS terminals with card swipe technology at each of the
FPS, EDI technology as an interface
• Significant learning curve for the whole system (Central
& State Governments, Panchayats, MLSP, FPS, Citizens
etc) so there needs to be some cultural adjustments
such as educating about the social audits and grievance
portal to villagers, changes in the work practices,
training
• Smaller standardize SKUs require larger amount of space
and other storage issues, increase in the logistics cost
• Handling of Polythene bags should be careful as they can
get torn very easily
CHALLENGES IN PROPOSED SOLUTIONS
CHALLENGES (PROBLEMS NOT TACKLED)
• Error in categorization of APL, BPL and AAY groups
• Pre-FCI related issues regarding procurement from farmers/millers
• Storage Issues in FCI/MLSP godowns (prevention from rains etc.) which
leads to quality degradation
MITIGATION FACTORS
• Outsourcing to a trustworthy IT solution service
provider in the market (preferably the one who
handled the UID Implementation)
• Conduct awareness campaigns at different
check-points (Governments, Villages for FPS and
citizens) with hands-on experience with the
portal which may be installed finally at the
‘Sarpanch’ house
• To alleviate the effect of increase in logistics cost,
the logistic provider should provide faster,
reliable and efficient service
• The ‘hamaalis’ employed to load/unload the
trucks of polythene bags should be educated
about careful handling of the bags

12. If you can't feed a hundred people, then
feed just one.
- Mother Teresa

13. Appendix: FPS’s VIABILITY ACROSS INDIAN
STATES
Source: Performance evaluation organization. (2005). Performance
evaluation of targeted public distribution system. New Delhi: Planning
Commission
0
20
40
60
80
100
120
140
% with positive net income % running FPS efficiently
FACTORS AFFECTING VIABILITY
• Strength of ration cards attached to FPSs: In order to achieve
break-even turnover each FPS requires critical mass of cards who
also actively off take the food grains
• Door Delivery and rentals: Transportation and rental costs consist
about 44% of the operational costs of FPSs. Door delivery
mechanism and housing FPSs in public buildings shall help improve
the viability of FPSs to a significant amount
• High Wage Count: Wage costs consist of significant component in
most of the states
• Off-take in Instalments: BPL beneficiaries do not have significant
cash to off take their quota in a single instance
• Margins and turnover: Unless sufficient margin is allowed taking
into account the card holder strength and location of FPS the
retailers shall not have the incentive to ensure efficient operation
of FPS
POLICY RECOMMENDATIONS
• Door delivery and housing of FPS in public buildings is estimated to
save around Rs. 4197 crore annually by plugging in the leakages
• Give subsidy on km basis so that FPS owners themselves shall
mobilize the resources for logistics efficiently
• Loans should be granted under priority sector lending to FPS
owners so that they could renovate and stock additional consumer
items with high margins like mobile recharge coupons, toiletries etc
• Licensing of FPS to be rationalized. A minimum threshold of card
holders should be made mandatory to issue new licenses. In
remote areas (hilly terrains) if card holders are less additional
margin should be granted
‘WIDE’ INTER-STATE FPS EFFICIENCY VARIATIONS