Plugging the Leaks


Scope of the Problem
The Government of India benefits nearly 6.5 Crore BPL families and 11.5 Crore APL households by providing them food grains at a subsidized cost through the PDS Scheme. (Ref. 1) However, the current Public Distribution System is marred by the problem of leakages at many level. The most recent study regarding leakages of PDS by Asian Development Bank in 2012, shows that deserving poor receive only 10% of the intended benefits. (Ref. 2) Another report by The Hindu claims that the diversion rate of PDS is as high as 85-90 % in states like U.P., Bihar, Rajasthan and Jharkhand. (Ref. 3) Due to such high leakages, the Bihar Government ended up spending Rs. 51 per Kg as unintended subsidy cost instead of their intended cost, which was Rs. 4.52 per Kg. (Ref. 4) Due to these leakages, India still ranks a poor 65th on the Global Hunger Index. (Ref. 5) With the passage of Food Security Bill in both the houses of Parliament, it has become very important to design an efficient system to reduce the leakages in PDS.

Cause of the Problem
In this regard, we did a study at the grass-root level and talked to people from Barpar, a remote village in Deoria District of Uttar Pradesh. From their responses, we realized that the discrepancy takes place at 3 levels:


Some bags of grain do not reach the village they were meant for, from the central warehouse. The transporters leak some bags of grain at the very starting level.


When the truck arrives from the Central Warehouse to the village, people do not come to know about it. Days of Opening are not fixed, and there is inadequate information regarding opening of FPS. Moreover, after opening of the shop, the near and dear ones get preference in getting the Ration. Some people do not get ration because it gets finished before their turn comes. (Similar concerns were reported by Ms. Reetika Khera in her Survey (Ref. 6))

Due to the villagers being illiterate, the shopkeeper deceives them in two ways –


i) Measurement Error ii) Forged Signing

Computerized ERP System - Our 3-Tier Strategy
The losses in PDS are attributed to two major factors. 1) Leakages due to ineffective delivery method, and 2) Inclusion Errors.
However, in this Presentation we only suggest methods to improve delivery mechanism, because the reducing inclusion errors is not only a politically contentious issue, but also, the findings by Asian Development Bank prove that pay-offs to a better delivery mechanism are much higher than dealing with inclusion errors. (Ref. 2) At the FCI Godown, every bag will be sealed with a barcode on it, which will be scanned while loading in the truck. As soon as the truck arrives at the Fair Price Shop, an SMS will be sent to all the beneficiaries informing them about the stock. The weighing machine at every shop will be connected a tablet, such that it will automatically enter the amount of grains taken by the user in the database. A database will be maintained at the FCI level, which will have details of amount of grains transported by them, and which bag is sent to which shop. While unloading from the truck, the shopkeeper will scan the barcode of the bag received, which will upload the database of the shopkeeper with the grains received. A receipt will be printed, which will be signed or thumb print authenticated by the user. In the future, UID number of every Ration Card holder can also be used to ensure that the entitled user is also the end user.

Godown level

Transportation level

Village level

Key Features of our Proposal
Bags will be sealed in such a way that they cannot be opened without breaking barcode tag. The database maintained at the FCI level, which will have details of how much amount of grains are transported by which trucks, and which bag is sent to which shop, will be matched with the database of shopkeeper. Transport corporations will be held responsible for any difference.

As soon as the supply of grains reaches the Fair Price Shop, an automated SMS will be sent to all the beneficiaries, informing them about the arrival of stock.
Electronic weighing machine attached with tablet (Aakash) will be installed at fair price shops, for auto updating of sold grains in target consumers account. This way the shopkeeper cannot enter a wrong weight in the database. A receipt will be printed, which will be signed or thumb print authenticated by the user, which will serve as a proof for the transaction. After every purchase, a server generated message will be sent to targeted consumer’s registered mobile number informing him about the purchase made and quota left. This will alert them in case anyone else takes their quota. Thus, with the help of an automated supply chain created, the inefficiencies of the system will be removed.

Database Interface for Different Stakeholders
User Front
The user can view his monthly quota, quota used, quota remaining and last transaction.
Sr. No. Commodity Quantity (Current Transaction) (in Kg)

Monthly Quota (in Kg)

Date of Transaction

Last Transaction Date

Quota Used Quota for the remaining month (in Kg) (in Kg)
20 10




Shop Front
Every Shop owner can view the amount of grains received, grains distributed, supplies left, total number of customers served, order placed and date of next expected arrival.
Sr. No. Commodity Maximum Monthly Quota. (in Kg) 700 Order Placed (in Kg) 500 Quantity Received (in Kg) 500 Date of receipt Quantity Remaining (in Kg) Number of customers served. 100 Next expected arrival. 1/4/2013



2/3/2013 200

Database Interface for Different Stakeholders
FCI Front
Officers at the FCI will be able to see the areas that are covered by them, list of shopkeepers under them, each shopkeepers quota – the amount ordered by them and the amount sent to them, stock in Godown, ID no of bags dispatched (destination of each bag) and total number of consumers served by them.
Sr. Commodity Maximum Total No. Monthly Stock Quota 1. Wheat 1000 1000 Quantity Distributed 900 No. Of Shops. 9 ID No. of bags dispatched 234, 456… Id no. of commodity Name Quantity (in kg) Shop #





Government Front
The government can very easily keep track of total number of shops under system and the number of people being benefitted by this scheme. A Heat map will also be available for them to assess, which areas are being served well, and which need more attention.
Sr. No. 1. Commodity Wheat Grain Supplied 10000 People Benefitted 600 Shops Covered 50 FCI Godowns Covered 1 Villages benefitted 35

Cost of Implementation
Sr. Item No. 1. Digital Weighing Machine 2. 3. Bar Code Tag Generator + Printer Bar Code Reader Place of Installation Quantity Single Piece Required Market Cost Godowns + Shops 73,200 2,000 Only Godowns Godowns + Shops 200 73,200 11,000 1,000 Cost if Procured Total Cost Cost per Fair in Bulk Price Shop 1,500 10,98,00,000 1,500 10,000 750 20,00,000 5,49,00,000 30 750

5. 6.

    

Tablet (Aakash 2)
Server Space (1MB per Shop)

Godowns + Shops

70 TB

50,000/TB/Year 2,00,000

50,000 2,00,000

35,00,000 1,50,00,000

50 200

Trainers & Repairers (Annual Salary) 1 Person per District 75

We have calculated this cost, taking figures for Uttar Pradesh, which has 73,004 Fair Price Shops and 200 FCI Godowns (Ref. 7)
Total Cost per Shop = Rs. 1500+30+750+1000+50+200 = Rs. 3,530 For 5,05,879 shops across India (Ref. 7) => Total Cost = Rs. 180 Crore Approximately. This cost is mainly one time setup cost to provide basic equipment at every Fair Price Shop and FCI Godown. The Recurring cost of Server Space and Repair etc. will cost only Rs. 250 per FPS, i.e. 13 Crore Annually for all the Shops across India. The Central Government spends nearly 60,000 Crore rupees annually on Food Subsidy. (Ref. 8) With the Food Security Bill, this expenditure is expected to be manifold. Thus, the Cost of Implementing our solution is even less than 0.3% of the amount spent by Government on the Food Subsidy, which can easily be funded by the Central Government.

Impact and Future Scope
Our Government nearly loses Rs. 24,000 Crore annually, considering the leakage of 40% (Ref. 3, based on NSSO Survey)).

If our Solution is implemented, the Government will save nearly 23,000 Crore Rupees every year, which is equal to the annual budget allocation for Sarva Shiksha Abhiyan (RTE) (Ref. 9 – Lok Sabha Question)

Our Scheme goes hand-in-hand with the existing Government schemes regarding UID and Aakash.

The Extremely poor people, who cannot afford two square meals a day, and were earlier exploited will now get the grains, meant for them. This will lead to their social and financial inclusion in the mainstream.

In the time to come, the same system can also be used for efficient disbursal of low cost and high quality seeds, fertilizers & insecticides to the farmers, without any further investment.

1. Press Information Bureau - 2. Asia Development Bank - 3. 4. Planning Commission -

6. A survey by Prof. Reetika Khera pdf 7. Press Information Bureau - 8. Budget Brief - 9. Lok Sabha Questions - 10. Images obtained from Google Search.

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