The document discusses challenges with India's Public Distribution System (PDS) including corruption, lack of transparency, and inefficient distribution channels that result in only 57% of grains reaching the target population. It proposes replacing Fair Price Shops with a Food Stamp system, where beneficiaries receive coupons of a specified quantity of foods to purchase eligible items from private retailers. This could reduce costs from 28% to 0%, remove intermediaries and illegal diversions, give beneficiaries more flexibility in where they shop, and increase coverage. Concerns like stamp perishability and inflation could be addressed through techniques like laminating stamps, bank redemption, and basing quantities not values.

1. Plugging the Leaks: Improving
reach and efficiency of the
Public Distribution System
Team: MILKHAIITM

2. Challenges & Problems in current PDS
Not Benefitting the BPL family
Corruption in the distribution channel
Faulty mode of appointment of dealers
Lack of transparency in allotment of food stocks
Unequal distribution of ration cards
No proper check on quality

3. • GOI spends Rs 3.65 to transfer
Re1
Inefficiencies
of PDS
• 57% grain do not reach Target
• 36% is siphoned off in supply chainTarget group
• 23% of sample FPS are viable
• Rest survives on leakages & diversions
Limited
Viability of FPS
• Irregular quota to FPS
• In some states, door delivered
Defective
supply chain

4. BPL & APL beneficiary
collect coupon from bank
Product brought from any retail
store at market rate with the
allotted coupon
Coupon will
have the
quantity of
Commodities
that can be
purchased
Retailer goes to government
backed bank for
reimbursement of the margin
Retailer gets a
margin on quantity
sold
Vigilance done on
the retailer if the
quantity claimed is
huge

5. Recommended Solutions
Get rid of
Fair Price
Shops (FPS)
Implement
Food Stamp
System

6. Food Stamp System
• Logic behind removing the FPS from the chain is illustrated by the fragility
that it imparts to the system as explained in current status of the PDS.
• A solid way to counter the issue could be to use ‘Food Stamps’ which have
been proven to be quite successful in some countries.
• Food stamps are pieces of secure paper, issued for the purchase of a fairly
wide
range of specified foods.
• Consumers are usually free to use food stamps to buy
any quantity of foods they wish at market prices from any store that is
convenient to them.

7. Advantages of Food Stamp
1
• Reducing the operational cost from 28% to approximately 0%
2
• Removal of intermediaries from the supply chain which should
impact the illegal diversion of subsidized commodities ( currently it
is approximately 43%)
3
• Increased convenience for the BPL or APL beneficiary as now they
will have the option of purchasing from one of the many retail
stores rather than being dependent upon limited number of FPAs
4
• Increased penetration in the country

8. Concerns and Solutions
Perishability of stamps is also a huge concern, for that we can go for either
issuing a laminated card or linking the stamp with Aadhar UID
Redemption of food stamps should be carried out by the government-
backed banks as retailers should not be worried about their revenue
collection.
Concern regarding value being eroded in the times of inflation could be
tackled by taking quantity as the reference and not the value of money,
for e.g. 10 Kilos of Rice and not 300 Rs. of Rice
Some critics have also raised concern regarding the number of times food
stamps has to be issued and revalued. It could be addressed by using better
forecasting demand and analyzing consumption patterns.

9. References
 Planning commission report on study of PDS in Kerala
http://www.tncsc.tn.gov.in/html/pds.htm
 Justice Wadhwa report on PDS
www.graam.org