1) The document discusses improving the reach and efficiency of India's Public Distribution System (PDS) by plugging leaks. Currently, only 10% of intended subsidies reach the poor, with 61% of households excluded and 25% unintended beneficiaries. 2) It proposes integrating Aadhar cards with ration cards, converting paper cards to smart cards, and installing smart card readers at PDS shops. Private companies investing in PDS through CSR could ensure standard processes for transport, storage, and supply of food grains. 3) Estimates show the proposed solutions could save the government approximately Rs. 15,888.64 crores annually by reducing costs and improving targeting of beneficiaries. Private investment and innovation could further boost

1. ImprovingreachandefficiencyofthePublic
DistributionSystem
Plugging the leaks:
Apurva Sood
Dhwani Mehta
Niloy Ghoshal
Saagar Chugh
Shubham Arora
Department of Management Studies.
IIT Roorkee.

2. ForeveryRs4spentonthePDS,onlyRs1reachesthepoor
• An ADB study suggests that only 10% of poor receive
intended benefits on the subsidies offered by the Public
Distribution System (PDS) in India.
• A Planning Commission estimate suggests that 61% of
households are excluded from the below Poverty Line
(BPL) net and 25% of households become unintended
beneficiaries.
• Around 23% of all Fair Price Shops (FPS) are not viable
and survive solely due to leakages and diversions.
•A report suggests that the PDS Corruption estimate is
around Rs. 20747 Crores.
On an average the central government spends Rs.
15.70 per kg of food grain as subsidy while the
intended cost is only Rs. 5.02 per kg.
According to the Government
of India only 37.5% of the
population in BPL but
independent sources differ
from the Government's…
Above
poverty line
Below
poverty line

3. Limitations of the current system
•Inefficiency in targeting the beneficiaries.
•Fake cards and theft of identity
•Substandard food grains
•Rotting of food grains due to Inefficient storage and transportation facilities
•On changing locations, new ration card has to be procured
•Diversion of food grains towards profitable markets.

4. Solution at a glance
• Integrate Aadhar card with Ration Card
• Convert paper cards to smart cards
• Install Smart card readers at Public distribution
shops
Multipurpose
Utility Card
• Encourage private companies to invest in the PDS
as a part of their CSR initiatives
• Allow private players to set up Fair price shops or
buy existing shops in rural as well as urban areas.
Corporate
Social
Responsibility
• Would ensure a standard process for
transporting, storing and supplying food grains
• Employment for people where shops are set up
• Plug leaks by weeding out bogus cards
Salient Merits

5. Multipurpose Utility Card and IT based
solution
Logic behind Opting for IT based solution
• Verification of identity can be done through any
photo ID or photo on the card itself.
• Smart cards can help in weeding out fake cards
• Can help in maintaining a consistent database about
the distribution of the food grains
• Any subsequent modification can be easily done
• Allows roaming
Smart card to be
activated after
the member has
crossed 18 years
of age.
Link all the cards
together on an
online system to
gauge the amount
consumed by each
family.
Why should there be just ONE
card?
Easier to update and maintain
data
Integration of Ration and Aadhar
cards ensures wider coverage of
the poppulation

6. Introducing Private players in the PDS
Possible Benefits for
companies:
• Interest free or lower rate of interest
on loans for setting up Public
distribution shops
• The shop and storage facility add to the
assets of the company
• Government can offer tax rebates on
the investment
• Cheap labour for the shop and facility
Benefits for the people:
• Food security
• Employment
• Training will help them in developing
particular skills
• Promote Education
• Push for the overall development of the
community
• Along with stores we shall also setup a branch
of a bank /assign a representative, who is
chosen from that area, who in turn will
provide financial assistance to residents.

7. 1
•Set up or buy property/storage facility/shops in both rural and urban areas as a CSR
initiative and procure food grains as per the norms of the FCI
•A mandi organized by the FCI where private players can purchase food grains from the
farmers at or above MSP (Minimum Selling Price)
•The cost of procurement, transportation and storage incurred by the company
•Provide food at market rates to all.
•The card will be recharged with credits which are scaled according to the economic
strata(BPL,APL) of society that the beneficiaries belong to.
2
•Train local residents for jobs
•Focus on the needs of the people in the area and offer diverse products matching the
need
•Invest in development of the community
3
•Diverse products will not only help satisfy the people but will be an additional source of
income
•It will be chance for the retailers to increase their markets and in turn result in
availability of various goods in rural areas
Steps to be followed by Private players

8. Regulation
• Process shall be
monitored by
government agencies like
FCI (Food Corporation of
India) and Supplies
department of the states
at the state and central
level through the
database on computer
network maintained by
NIC(National Informatics
Centre)
Reimbursement
• The consumers to pay
the rates after subsidy
• Companies to be
reimbursed the
remaining part of their
margin by the
government
• Tax benefits to those
retailers

9. As per FCI annual report 2011-2012.
Existing government costs in procuring
grains, foodstuff & gunnies etc
Distribution
Cost

10. EstimatedFinancials under proposedsolution
Wheat
(10kg)
Rice
(5kg)
Sugar
(5kg)
Kerosene
(5l)
(unsubsidize
d)
Miscellane
ous
(Pulses)
Total
(Yearly)
100 50 75 200 75 6000
Amount Estimation (per family, number of family members assumed to be 4)
According to 2010 census there are
roughly 10 Crore families are below
poverty line.
Thus the yearly expenditure of
government on each family below
poverty line is Rs 60,000 crore.
Under the current PDS system
BPL families spend an estimated
1800 Rs yearly and taking this
into effect the Government
expenditure comes down to Rs
42000 crore.
No of Cards needed
(BPL population in crores)
Price per smart card
(in RS)
Total Estimated Cost
(in Crores)
40 50 2000
This investment of Rs 2000 crores and Rs 500 crores is a one
time investment.
Additional expenditures Total Estimated Cost(in Crores)
Online Application and database
maintenance
500 ( as per market rates and previous
expenditures)
*The cost of the smart card readers will be borne by the private partners.

11. ExpenditureforSubsidiesprovidedtoAbovePovertyLine(APL)
No of Cards needed
(APL population in crores)
Price per smart card
(in RS)
Total Estimated Cost
(in Crores)
80 50 4000
Wheat
(10kg)
Rice
(5kg)
Sugar
(5kg)
Kerosene
(5l)
(unsubsidize
d)
Miscellane
ous
(Pulses)
Total
(Yearly)
25 12.5 18.25 50 18.25 1500
According to 2010 census there are
roughly 20 Crore families are above
poverty line.
Thus the yearly expenditure of
government on each family above
poverty line is Rs 30000 crore.
According to these
estimates the government
saves approximately Rs
15888.64 crores every year
Financials continued…

12. Appendix
References:
• Tenth Five Year Plan 2002-07, Planning Commission Government of India.
• Corporate Document Repository of Food and Agriculture Organization of the United
Nations.
• Report of the Task Force on IT Strategy for PDS, Planning Commission Of India.
• Issue Paper on Public Distribution System in India: Indian Institute Of Management,
Ahmedabad.
• National Food Security Bill,2013.
• PDS Portal of India, Ministry Of Consumer Affairs, Food and Public Distribution,
Government Of India.
• Report on UID and PDS System by Central Vigilance Committee, 2005.
• Annual Report 2012-13, Food Corporation Of India.