PLUGGING THE LEAKS

Improving reach and efficiency of the Public Distribution System

College: Institute of Technology,Nirma University

Prepared By:Apoorva Mishra Maulin Shukla Tarun Tiwari Trisha Jhaveri Varun Pradhan

Indian government pays a subsidy of 15.7 rupees per kg and yet only 10% of the poor are able to receive benefits offered by Public Distribution System
Problem Scope: It causes widespread malnutrition and starvation problems due to hunger. It leads to corruption to the tunes of 20,000 crore in the system. Subsidy provided by the government is being wasted as the beneficiaries are not able to receive any. With the implementation of food security bill the problems in the present system are bound to rise Causes : Leakage of goods during transportation and because of system failure. Impractical Fair Price Shop(FPS) causing failure in distribution system and also leading to squatting of goods by the owners. Lack of government vigilance and monitoring in the system. Improper identification of the beneficiaries leading to high inclusion and exclusion error of BPL people.

As a result, at present, a developing nation such as ours is facing malnutrition and death from starvation mainly because of insufficient PDS. Consequently, we have on one side grains rotting in godowns and on the other people dying of hunger. Clearly indicating that there is a dire need to evolve the present system and ensure that everyone gets what they are entitled to.

The current PDS corruption estimate is around Rs. 20,747 crore which calls for an immediate need to overhaul the whole PDS system...

Proposed Solution
Introducing government owned smart stores which will replace the traditional and not at all viable fair price shops. Counting of BPL people in census, reducing the exclusion and inclusion net, and at the same time bringing down fraudulent cases. Providing smart food cards instead of the old age ration cards to reduce the concept of ghost cards. Maintaining a vigilant monitoring system to ensure an efficient public distribution system

Advantages over current system

As the stores will be government owned, leakages from fair price shops and corruption will reduce to a great extent. Smart cards and smart stores will reduce malpractices and corruption, increasing the reach of supplies The system will be less costly and more efficient than the existing one. There will be less error in BPL and APL calculation as data from the census is used. This further will reduce fake entries and will ensure the usage of one card per family. Reducing number of store from 5 lakh to 30,000 by using technology and increasing efficiency.

The first step of leakage starts at transportation level, hence plugging it becomes a foremost priority...

Implementing :
STAGE 1:
FCI works as the central authority buying grains from the farmers and then distributing it throughout the country. Right now we face 20 % leakage during transportation and thus, to combat the same we introduce tagging of goods with barcodes. This makes it possible to keep track of the exact items dispatched before being loaded into trucks which will then be tallied when the stock is received. Plus, later when sold, they are entered in the data via barcode entries to keep a check over measuring leakages. Roughly a barcode system costs around 60,000 -90,000.

FCI [BUYS GOODS]

Tallying with master database of FCI

CVC and Monitoring authority

Goods coded with Barcode

Smart shops

Transportation

The Planning Commission deemed only 23% of the ration shops as viable. So, an alternative to them is presented as Smart Stores.
STAGE 2: [Smart Stores]
The stores will be owned by the Government having a linked warehouse for storing goods .They will be equipped with computers, barcode systems, CCTV monitoring etc. The store will have a total of 9 employees(3 computer operators and 6 helpers) and 3 counters. Handling capacity of the store: - It has been assumed that each person will take about 2 minutes to collect ration from the store. - The store will remain open for 10 hr each day. - Breaks and holidays will be given on rotation basis. Smart store Handling capacity per month=27000*

Counter 1 Handling capacity =30*60*10/2 =9000

Counter 2 Handling capacity =30*60*10/2 =9000

Counter 3 Handling capacity =30*60*10/2 =9000

*Maximum handling capacity comes out to be 27,000 per month but keeping in mind all the operating errors handling capacity roughly comes out to be 20 to 22,000.

10 crore ration cards exist for 6.5 crore BPL families; hence the problem of identification is leading to high errors. We need to ensure that supplies reach those is genuine need.

STAGE 3:

Allocation of stores
Stores are to be located all across the country on the basis of population density index of the area. So ideally the total number of stores required will roughly be = 40 crore(targeted population)/22,000 (maximum handling capacity) = 18,200

Identification of beneficiaries
To ensure no beneficiaries are excluded and no false beneficiaries are included we suggest adding house hold income as a stringent part of the census of India.

Problems Solved by using Census

Total stores allocated

There should be at least one store located in a radius of 7 km

Handling capacity of the store should be at least 15k.(minimum 70% efficiency)

The census volunteers will take the certified income of household and depending upon that will mark them down as APL or BPL.

If either of these criteria are not met the number of counter per store are reduced from 3 to suit the area population density. This reduces our inventory cost at the same time ensuring accessibility to all the beneficiaries

Instead of current system for deciding BPL we suggest keeping in mind the inflammation factor and area wise income distribution while making calculations. Thus keeping it as a dynamic factor rather than present static.

This will help in reducing the inclusion and exclusion net error which at present stands at 25% and 61% respectively.

Smart Cards
We suggest using smart ATM type food cards instead of the present old age ration cards. There will be a unique card for each household, containing all family data and income allocated through the census, and also biometric data such as iris or fingerprints for unique identification. This way there is no possibility of creating ghost cards

They will be used by the user at his or her allocated store to collect his quota of grains on a particular day of the month inscribed on the card (this way there is even distribution among shops and working days)
A backlog date will be provided to the users if the miss out on the original one due to some reason.

Benefits All data stored digitally and record of sales kept and tallied to ensure that there is no foul play Only a family member can use the card and as routine will tally the data, thus not allowing card laundering and making sure that the goods reach the right hands. Since it can be used only once in a month, no one can take more than their share. Process will be smooth and easy to manage with all records kept online and cross checked from time to time. In case the beneficiaries change places a simple process by the present store operator will shift them to the other store database.
CITY OFFICER Two will be appointed for a district. Will verify the complains and then report them to state head of CVC for required action to be taken. Will be responsible for anything happening in stores under their area.

Monitoring System
STORE Will have CCTV manifested to maintain the security of goods and proper measurement standards to be followed HELPLINE NUMBER Will be set up on which a complain can be registered any time. It will be outsourced to an outstation BPO ensuring fair play and quick action SURPRISE RAIDS May be conducted by the FCI and CVC from time to time to keep a check on the proceedings and running of the stores.

Building our Food Army

Management of Transportation system:Privatizing the whole transport network outsourcing it to a recognized transportation company

Management of Stores:First tie up with a renowned consulting company to recruit store computer operator in define period of time. Arranging a workshop for all operator to accustom them with new system Employing helpers under MGNREGA to increase employment Operators to be transferred time to time to ensure transparency

Management of vigilance committee:FCI will setup a vigilance and monitoring committee in collaboration with CVC. This will include appointing a state and union territory head for the system reporting directly to the chief of CVC. Every state head will have under him a team of officials recruited by state government civil services especially for monitoring PDS. There will be 2 officials per district who will investigate and verify all the complaints made by the people against the store operating staff. .

Cost remaining an important factor, we aim to bring it down, simultaneously ensuring that the efficiency and the ability of our system is not compromised. Technology cost
Barcode ,smart card and CCTV implementation cost =30000*30000+50 Crore(smart card)=80 crore

Inventory cost

Store construction and renovation cost =5lakh*30,000(no. of stores)=1500 crore

Estimated Total Cost

Store management cost(employees salary and store resources) =(3*2 lpa+6*0.8lpa+1lakh)*30,000=3600 crore

5450 crore

Organizational cost

Vigilance and Monitoring System(officials salary and BPO) =35*8LPA+546*LPA*2+200 crore=250 crore

Currently 5 lakh fair price shops are working and as per the data of planning commission each shop owner is paid a subsidy of 5 Rs which generates an average income of Rs 3lpa per store. Thus, current working cost of the whole system roughly comes out to 15000 crore. We reduce it substantially by bringing down the number of stores to 30,000 ;simultaneously increasing their efficiency manifolds to maintain the balance.

We have one of the worlds largest distribution system affecting nearly 400 million people which is bound to be doubled to 800 million , therefore we require the most efficient system possible.

Impacts
The proposed solution will overhaul the present system and is bound to effect the reach of PDS nearly targeting 40 crore people. This will reduce the problems of hunger and malnutrition and will provide our people with the Right to Food. High and vigilant monitoring will ensure the right use of subsidy. It will reduce the number of stores by at least 5 times hence cutting down on Government expense by roughly 60% . Also it will create around a lakh or more new jobs for our youth. It can also be amended to implement the new food security bill easily.

Reach

It is expected to cover the entire BPL population ensuring a regular supply of ration. It will be rolled out in the entire nation taking over from the inefficient present fair price shops. These smart stores are quite sustainable as the technology used is quite cheap and easy to handle. The idea is to slowly integrate it into the mainstream adding privately owned stores in the loop for accepting the smart cards thus reducing governments burden and expense. They can be easily modified to implement food security bill.

HOW?
Increasing number of stores to cater to the increased beneficiaries. i.e. for 80 crore people the number of stores will have to be doubled from what we are using now. Modifying the smart food card to also contain the detail of the quota of subsidized commodities to be distributed The whole scheme can be implemented in the targeted fund of 125 thousand crore allocated by the government.

Challenges
CONCEPTUAL
Government may not readily take the entire responsibility of the system and setting up of new shops.

MITIGATION
Can make use of the already existing FPS . Centre should share the responsibilities with state governments.

IMPLEMENTATION
Quality of grains distributed may be inferior or there may be tampering with measurement instruments.

MITIGATION
Central vigilance committee will check from time to time to ensure that proper grains are transported and all the equipments are fair.

The identification of amend accordingly on a regular basis. beneficiaries may not turn out to be as accurate as Take aid of organizations like UNESCO to confirm the expected.
validity of data

Review the database and

FPS owners will protest as The government can buy government employees will their shop from them at a fair market price as work instead of having shop compensation. owners.

There may still remain some form of corruption prevailing in the system.

Using a vigilant and powerful monitoring system thus enabling strict and timely actions against such deception

Use of technology may be hard to implement in rural areas.

A workshop of 15 days will be conducted for all the employees to make them familiar with system and ensuring proper implementation.

References:
1. http://www.censusindia.gov.in/2011-common/census_data_2001.html 2. http://planningcommission.nic.in/ 3. http://planningcommission.nic.in/reports/genrep/rep_hasim1701.pdf 4. http://www.indiatogether.org/opinions/ps1.htm#sthash.YXJxaGRi.dpuf 5. http://www.indiatogether.org/opinions/ps2.htm#sthash.7UluBGAi.dpuf 6. http://www.fao.org/docrep/x0172e/x0172e01.htm#TopOfPage 7. Economic Survey of India 8. http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v2/11th_vol2.pdf