1. Plugging the Leaks of
Public Distribution System
IIM Lucknow – Team ChangeDgame
Gaurav Singh(PGP28099)|Mirza Intekhab Ali(PGP28098)|Raunak
Agrawal(PGP28063)|Amit Kumar(PGP28079)|Anurag Mohanty(PGP28109)

2. Public
Distribution
System
Indian PDS is world’s largest
food distribution system,
supplying essential
commodities to around 18
million families
Serves two fold goal of
guaranteeing a stable
selling price for the farmers
and providing essential
commodities to poor at
affordable prices
The state and central government
jointly are responsible for
functioning of PDS

3. Problems with existing PDS
Unfair identification of beneficiaries- exclusion of BPL and wrongful
inclusion of APL
Problem of leakage during transportation; existence of ghost cards
Issues regarding the viability of FPS due to higher costs, long
replenishment time, delays, losses, low commission
Solid PDS will be the
backbone of Food
Security. Reports
suggest PDS
corruption estimate
is around 20747
crores. Massive loss
to exchequer.
Most important
imperative for
Inclusive growth
Reason
for
selecting

4. Proposed Solution & Concept
 Broadly, we propose the following solutions to each of these three issues-
 Pre Allocation phase- Use Aadhar cards and latest census data to recognize BPL and APL
 Pre Allocation- Apply a strategy similar to rolling out of new Cooking Gas registration;
everyone has to renew their ration card- Introduce new ration card book with a unique
magnetic swipe card attached
 Allocation phase- Implementation of RFID tags;
 Allocation phase- Implementation of swipe card reader- EDC machines at each POS
 Allocation Phase- Collection of data at district, state and national level- cue can be taken
from prevailing primary healthcare system- even in Bihar daily data relayed to Centre
 Allocation- Use hub and spoke model for distribution- easy to monitor
 Allocation- Reduce intermediaries in distribution
 Allocation- Scope for PPP and outsourcing of electronics machine and data collection
 Post Allocation phase- Analysis based working capital management and order
replenishment
 Based on our research, there are three main pain points-
 Unfair allocation between BPL and APL- exclusion and inclusion issue; Possibility of exclusion
during allocation of disbursement card
 Leakage and pilferage problem- Supply chain flaw, Ghost ration cards
 Viability of Fair Price Shops

5. Proposed Solution- Concept & Merits over
prevailing systems, Stakeholders
 Lack of accountability is the key insight behind the failure of prevailing PDS as per our research
 We have developed our solutions around this issue
 We will tackle the problem phase wise; integrating the threads in the end
 Aadhar based BPL recognition will lead to more inclusion
 RFID tags will alert the leakage instantly- will be elaborated later
 Swipe card usage will lock in the sales and collection- will be used for analysis and book
balancing
 Outsourcing to private players will bring more discipline to the system
 Analysis based order replenishment will help in better availability of items
 The existing system offers none of these advantages
 Stakeholders involved at different stages would be-
 Central govt.- Analysis of data from all state centers; choosing private players for outsourcing-
technical and commercial bidding; post allocation replenishment strategy
 State govt.- Identification of BPL based on Aadhar; Planning PPP for FPS; Most
importantly implementing collection of POS data from district to State level; implementing
replenishment strategies
 Private IT/KPO/Data Support/Network Infrastructure provider- All stages
 Transporters
 Private public shop owners for more accountability
 Consumers largely BPL families

6. Implementation of the solution- Key Steps Inc.
Leveraging govt. infrastructure
 Pre Allocation Phase
 Increase awareness and importance of swipe card requirement for procurement by families
 Strict instructions regarding period after which items will not be provided to BPL after specific date
 2 month period deadline for availing the cards; Instill fear of getting caught among all stakeholders
 Make Aadhar mandatory for procuring card; Introduce PPP FPS for better accountability; Invite bids for
transport
 Develop bulk swipe card, EDC machines, RFID cards and sensory devices with Data partners
 Allocation Phase
 Start with Test-and-control marketing for one state say UP; Issue magnetic swipe card
 RFID tags can transmit weight data to sensors at different timestamps; automate programs to match the
weight shed given by RFID overtime to the data from POS swipe reader- Gap means leakage at that
point
 Integrate RFID with GPS if mass unloading in intermediate path to block leakage
 Collection of data on a daily basis
 Inclusion of professional private players in certain channels in supply chain
 Post Allocation Phase
 Time-Series Analysis of POS past data- considering cyclicity and seasonality; better replenishment
 Use transportation problem simulation for optimization- Optimal usage of govt. warehouses and transport
 Allocate as per prediction and storage capacity of target FPS
 Outsource data collection to a private player or govt. specialized agency

7. Cost Benefit Analysis
Items Units Cost
EDC machine 500000(@50$) 150cr
RFID tags(reusable) 300000(@25$) 45cr
Magnetic Cards 200million(@0.05$) 60cr
Items Expenditure
Existing Loss 20747cr
IT support Cost(@10% of Aadhar) 4500cr
Technology Cost 255cr
Net Savings 15992CR
 Assuming 1$ = INR 60
 We don’t require Aadhar like registration of 1.2 billion people

8. Financial and Human resources required
• Cost of installing RFID infrastructure, IT infrastructure, EDC
machines at each FPS and cost of making and distribution of
magnetic cards for BPL households
• Training for FPS shopkeepers on EDC
• Marketing cost for generating awareness
Pre allocation
• Cost of setting up of data centers and cost of optimizing the
procurement and distribution of food based on data analysis,
cost of movement of goods from one place to another
Allocation
• Incremental cost of using the technology
• Customer support cost for magnetic cards and EDC
• Cost of monitoring teamsPost Allocation
PPP model will be followed, bidding will be
done for choosing private partners,
performance will be given preference over
price
Involving government institutes like NIC,C-
DAC
Help of WHO will be garnered
Bulk deals will be signed with private
partners for RFIDs, Swipe machines,
network infrastructure
Proposed source of funding
Financial and Human resources Propose source of funding

9. Leakage and pilferage
reduction in the system
and compared between
different districts and states
Reduction in wastage of
food
Return on investment and
time taken to break even
Return on investment and
time taken to break even
% of time food is available
in shops on a monthly basis
Criteria For
measuring
Impact
Load is divided between
different centers working
independently to cover
their own set of districts
Data collected at different
center will help to optimize
the allocation of quantities
Viability of FPS can be
assessed and monitored
on growing basis
Easier to incorporate
changes without affecting
the overall setup
Scalability of
solution
Criteria For measuring Impact Scalability of solution Sustainability of solution
Appropriate Monitoring
Mechanism
Test run environment will
ensure better control
mechanism while testing the
viability and necessary
changes can be easily
accelerated within time
With each shop sharing its
data it will become easy to
accommodate APL families as
well
Targeted awareness
campaigns for BPL families
Improved coverage through
UID
Break even period and
continued improvement can
be realized early after few
months of disbursement of
cards
Sustainability of
solution
RFID data monitoring
Monitoring teams across states
Allocation and disbursement
data of each shop to monitor
the utilization of food available
at each shop
Positive net income for FPS
Number of BPL families
covered
Monitoring of requests made
by families during stock outs in
Appropriate
Monitoring
Mechanism
Impact of the solution

10. Challenges & Mitigation Factors
 Federal structure of government is a big impediment in flawless execution
of optimized plan implementation
 Bureaucratic interference at ground level
 Lack of single window clearance for bidding and project allotment
 Data collection issues in far flung areas owing to power crisis
 Resistance by existing FPS owners
 BPL people selling their swipe cards for small gains
Mitigation Factors
 Clear division of work between center and state
 Special cross functional committee for project implementation
 Looping local players

11. References
http://planningcommission.nic.in/reports/peoreport/peo/peo_tpds.pdf
http://socialism.in/index.php/aadhar-who-benefits/
http://www.myaadhaarcard.in
http://uidai.gov.in/index.php?option=com_content&view=article&id=141&Itemid=164
http://www.rfidjournal.com/
http://rfid.net/applications/foodsafety
http://www.alibaba.com
Ahluwalia, D (1993): Public Distribution of Food in India– Coverage, Targeting and Leakages,
Food Policy, Vol.18, No.1, (pages 33-54)

12. Thank You