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

PDS IN INDIA
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

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
Responsible for identification of BPL, allocation of ration, issuing ration cards and supervising FPS functions

Central Government controlled

State Government controlled

Mandal Level Stock Point

Farmer

Miller

District FCI

District Manager of Civil Supplies

FPS

Citizen

Stage - I

Stage - II

Stage - III

Stage - IV

The Current Scenario.

Planning Commission: For every Rs. 4 spent on PDS, only Re.1 reaches the poor 57% of the PDS food grain doesnt 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

PROBLEMS FACED IN THE CURRENT SYSTEM

Accountability & Transparency
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

Food Grains destroyed at warehouses/godowns due to rains Poor quality goods Irregular supply of goods FPS pay hamaalis to load and unload grains

Distribution Related Issues

Corruption

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 Awareness about PDS regulations among citizens Lack of information among citizens on entitlements and stock at an FPS No grievance redressal Mechanism

Awareness

Information Related Issues

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

OVERVIEW OF PROPOSED SOLUTIONS

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 Audits Panchayats/Gram Sabhas/Other Vigilance committees to monitor effective implementation Eliminates corruption Elimination of Malpractices 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 E-Governance and Centralized Stock Movement Information Quick Access to Information Enhances efficiency ImprovesTransparency Accountable information for better planning Faster Communication Accurate Demand Forecasting
IMPROVING REACH AND EFFICIENCY OF PUBLIC DISTRIBUTION SYSTEM

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
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 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

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

DETAILED PROPOSAL FOR E-GOVERNANCE

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

UID Server N E T W O R K

10kgs (allocated) 6 kgs (remaining)

MLSP

N E T W O R K

INFORMATION Timestamp Aadhaar User ID Transaction Date Quantity Bought

100kgs (allocated) 96 kgs (remaining)

District FCI

CENTRALIZED DATABASE ARCHITECTURE

District FCI
Master Server & Database of all MLSP, POS and customers District Manager of Civil Supplies Mandal Level Stock Point MLSP Server with database of all MLSPs

FPS

POINT OF SALES (POS)

NETWORK (ELECTRONIC DATA INTERCHANGE)

COST ANALYSIS FOR IT INFRASTRUCTURE

FCI
Assuming 1 in one state
Device Server Computer Price/ piece 2,50,000 25,000 Total Cost 2,50,000 25,000 10500 * 200 = 21,00,000 23,75,000 Computer Internet (40 Mbps, 125 GB)

MLSP
Assuming 100 under one FCI
Device Price/ piece (A) 25,000 3199 * 12 Total Cost (A) * 100 25,00,000 38,40,000 63,40,000

FPS
Assuming 200 under one MLSP
Device Computer GPRS POS terminal/ device Electronic Display Board Smart Card (1 per family) Price/ piece (A) 25,000 20,000 Total Cost (A) * 100 * 200 50,00,00,000 40,00,00,000

e-PDS suite (ERP license)

TOTAL

10,500

TOTAL

5,000

10,00,00,000

Earlier, For every Rs 4 spent on the PDS, only Rs 1 reaches the poor

Total Cost = 141 Crore (approx)

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

Panchayat
Assuming one FPS per Panchayat
Since every Panchayat is already provided with a Computer and Internet connection, we only need to issue them a user login

20 (assumi ng 1000 families per FPS)

20* 1000 * 100 * 200 = 40,00,00,000 140 Crore

TOTAL
Reference

Hence, the entire project

BREAKS EVEN IN LESS THAN SIX MONTHS

http://pib.nic.in/newsite/erelease.aspx?relid=74180 http://www.apscsc.gov.in/pds.php http://www.alibaba.com/productgs/766180075/GS90_gprs_pos_terminal_device.html

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

Sample photo

Back Cover

Benefits
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

COST ANALYSIS FOR STANDARDIZING SKUs

Price of Automated Pouch packing machine Cost of Polyethylene Rs 2,50,000 Rs 100 per Kg

Weight of polytethylene for packing 10 kg grains

Cost of packaging per 10 packet Cost of printing messages Total cost of packing 10Kg grains (A) Average theft per quintal (100 kg) Minimum support price of wheat per Kg Minimum support price of rice per Kg

25 gram per packet

Rs 2.5 Rs 0.50 Rs 3.00 10 Kgs Rs 13.50 Rs 13.10

Minimum Total Cost saved from theft per quintal (B)

Minimum Savings by preparing 10Kg packets (wheat) [B/10 A] Break Even quantity for the Automated pouch packing machine Price of Automated Pouch packing machine Speed of packing Time taken for preparing 25,000 packets (BA quantity) Number of hours of working in MLSP

Rs 130
Rs 10 25,000 packets

Machine becomes free after 3 days of operation

Rs 2,50,000 25 packets per minutes 1000 minutes or 17 hours 8 hours per shift

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

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

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

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 Sarpanchs 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

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 worlds best practices

SHARE HOLDERS Central Government | State Government | Village Panchayats | Sarpanch | NGOs | College Students | Women SHGs |

SOURCE OF FUNDING State Government & Central Government

CHALLENGES & MITIGATION FACTORS

CHALLENGES IN PROPOSED SOLUTIONS
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

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

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

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

Appendix: FPSs VIABILITY ACROSS INDIAN STATES

WIDE INTER-STATE FPS EFFICIENCY VARIATIONS
140 120 100 80 60 40 20 0

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

% with positive net income % running FPS efficiently Source: Performance evaluation organization. (2005). Performance evaluation of targeted public distribution system. New Delhi: Planning Commission