Plugging the Leaks : Improving reach and efficiency of the Public Distribution System

Team DAKSH Randheer Singh Prashanna Kumar Jha Vedik Bobba R.Karthik Prakhar Jha

Problem Definition
Improper Storage, handling and shortage of covered warehouse
Rs 58000 Cr Loss due to improper storage in 2011-12 * Rs 85000 Cr Loss due to improper storage in 2012-13 *

Middle men and lack of information in procurement of food grains from farmers
39% of farmers unaware of minimum support price * Nexus between officials and middlemen causing significant losses in the supply chain

Intended Benefits not reaching below poverty line families(BPL)

Rs 8.5 spent to transfer Rs 1 to the poor * 58% subsidized food grains doesn't reach BPL families *

Lack of transparency and accountability

Lack of awareness on quality requirement of food grains Information asymmetry in the supply chain

Fare price shop are barely profitable

Cronyism and nepotism in license distribution to FPS Rs 8 commission per quintal of food grain *

* References in last slide

Proposed Solution

Increasing accountability of procurement process through closed loop verification system

Flexible storage systems and mechanized handling in warehouse

Information and communication technology integration across the supply chain

Standardized packaging solution for Fair Price Shop

Increasing accountability of procurement process through closed loop verification system

Instant payment of MSP to farmers due to e-transfer. Better control over the process through ERP implementation.

Advantages

Pilferages on account of less quantity i.e. malpractice of less weighing can be controlled

Getting appointment in advance will reduce waiting time at DPC

Reduction of corruption and involvement of middleman from procurement process

State participation in training farmers will lead to Improvement of food grain quality

Implementation strategy

Mobile number and past supply record of farmers to be integrated with their UID No. in database

Farmers can get appointment at DPC by sending message from registered mobile number, mentioning type and amount of food grain.

At DPC rejected food sample has to be collected & sealed which will be tested at District agricultural testing facility. District testing facility will educate the farmers to improve quality

Electronic receipts will be given to farmers at DPC and System generated message will be sent to warehouse

Resource required: ERP solutions with mobile applications and IVRS system. Recruit trained people to work on ERP and database management. Funding has to come from removal of subsidy from APL category

Proposed sources of funding : Initial funding can be arranged by Public Private partnerships, incubators like IITs & SMEs.

Impact of the solution

Criteria to measure the impact of the solution : Reduced length of queue at DPC. Increase in acceptance rate at DPC year on year. Scalability of the solution: Solution can be implemented at Mandi level. Sustainability of the solution : Increase in number of counters at DPC and better database management will provide sustainable solution. Appropriate monitoring mechanisms: Implementation of ICT and integration with IVRS and mobile applications.

Challenges and Mitigation Factors

Resource : recruitment of trained manpower and capacity expansion of DPC facilities. Organizational challenge : Procurement staffs and their union may oppose this solution

Economic Challenges: MSP is the best price that farmers can get. More and more farmers will come to sell at DPC and this will create overstocking problem for FCI.

Government has to procure whatever comes for sell at DPC and increase the capacity of warehouse to reduce wastage. Communication from top management will help in clearing the doubt / fear of rejecting a bad sample by Government employees.

Flexible storage systems and mechanized handling in warehouse

Problems
80% handling & warehousing facilities not mechanized

Implementation

Usage of public school playground in case of unavailability of warehouse space

70% grains stored at farm level

Conveyor systems for ease of handling

Increase steel silos storage space from the current 5 million tons

Lease/rent warehouse space for community activities when not in use

Significant wastage due to rodents, pests, birds

Hermetic storage

Cameras in warehouses connected to public domain for transparency

Uniforms and ID cards for workers for accountabili ty

Information and communication technology integration across the supply chain

ICT opportunities to improve accountability and effectiveness:

Scope of ICT
Food Grain Collection Food Grain collection at DPC
Inspection Procurement

Food Grain Transportation Transportation to warehouse and FPS

Packing and Labeling Vehicle Tracking

Food Grain Storage Storage at warehouse

Security Distribution Inventory Management

Distribution at FPS Distribution to intended customer

Information on availability Delivery Billing and collection

Cash Transfer

Security

Mobile grain testing equipment Direct cash transfer to farmers Recorded testing data for farmer support Bar-coding of packages for storage and retrieval

GPS tracking of vehicles CCTV camera for accountability and security ERP for functional integration and effectiveness RFID for package tracking and accountability

Information and Communication Technology (ICT) driven supply chain

Information and Communication Technology (ICT) driven supply chain

Cash Transfer To farmers:
Unique identification and integration with Aadhaar Step 1 Collection of food grains based on unique identification Step 2 Direct cash transfer to farmers unique account number Step 3

Resource Needed:
Aadhaar is used as a source of unique identification Integration of computers at collection center to server through internet connectivity Application to connect the various functions, e.g.: ERP software like SAP Training of employees in collection center to use the application

Advantages:
Eliminates middlemen from the collection process Incentive for farmer to deliver food grains directly to government, due to higher price Automated process and hence operation cost is reduced

Information and Communication Technology (ICT) driven supply chain

Vehicle Tracking:

Information and Control

Resource Needed:
Transportation vehicle fitted with GPS and communication device Integration of GPS to control center Integration of control center to mobile phone of stake holders Physical IT infrastructure

Advantages:
Tracking and monitoring of vehicles for accountability and security Information transfer to stake holders (customer, officials, FPS) Two way communication with transportation vehicle

Standardized packaging solution for Fair Price Shop

Advantages

Pilferages on account of less quantity i.e. malpractice of less weighing can be controlled

Easy to transport, Controlled pricing and tracking through Reduced handling ICT and storage wastages as well as Faster delivery of time. can be ascertained as standard package delivery will reduce the Queues and time taken to weight, hence Queuing Infrastructure problem can also needed for this is be tackled.

Hermetic packing reduces wastage due to moisture and other factors.

Implementation strategy

Establishment of Packaging facility nearby Mandis or FCI, CWC, SWC storage houses before distributing to FPS

Packaging task can be outsourced to private parties/SMEs on tonnage basis or lumpsum basis under recorded supervision like video supervision

minimal and can be sourced easily , Further, Hermetic packing also ensures that usage of pesticides and other handling and tracking issues can be resolved.

Machines like Automatically powder weighing and packaging machines require just two persons per machine & Fixed cost shall be around 2.5 lacs Variable cost shall be of electricity and operator : 1.5 lacs per month

o/p shall be minimum 1000 fills/hr with least investment , hence reliable and fast.This can be increased multifold

Proposed sources of funding : Initial funding can be arranged Public Private partnerships and in fact with the help of incubators like IITs and other institutions SMEs and Entrepreneurs can be developed & encouraged.

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Impact of the solution

Criteria to measure the impact of the solution : Customer feedback, wastages measurements, reduction in handling expenses Scalability of the solution: Solution can be implemented at ware house level or at mandi level. Sustainability of the solution : Reusable bags can be used. Appropriate monitoring mechanisms : RFID tags/ bar codes ( refer ICT section of solution)

Challenges and Mitigation Factors

Political : FPS owners may not accept this as some of their unfair practices would be hindered.

Economic Challenge: Price will remain same for consumers but will result in increased price for government with the increased efficiency and effectiveness of the system.

Social challenge : People will doubt the packaging only if it is not visible to them. Better packaging will mitigate their doubts once they start using it.

Although, all the challenges can be mitigated with the participation of local public in this mission. Packaging being semi-skilled work can help in assembling ladies and we can build the network like Shakti Ammas ( ref. P&G model).

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References
Achieving food security in a cost effective way: Implications of domestic deregulation and reform under liberalized trade - Shikha Jha, P.V.Srinivasan, May 2004 How can food subsidies work better? Answers from India and the Philippines - Shikha Jha and Bharat Ramaswami, No.221, September 2010 Food prices and the efficiency of public intervention: the case of the public distribution system in India - B.Ramaswami, P.Balakrishnan Food subsidy, income transfer and the poor: A comparative analysis of the public distribution system in India's states - Raghbendra Jha, Raghav Gaiha, Manoj K.Pandey, Nidhi Kaicker Report of working group on warehousing development and regulation for the twelfth plan period (2012-17) - Planning commission Towards greater food security for India's poor: balancing government intervention and private competition - Dina L.Umali-Deininger, Klaus W.Deininger
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