1. Team:
PARIVARTANA
Mahabaleshwar
Bhat
|
Himanshu
Jangid
|
Sujay
Koparde
|
Neha
Sinha
|
Chandan
Kumar
Jha
Indian
School
Of
Business
Hyderabad
A Technology based Solution for
Plugging the Leaks:
Improving reach and efficiency of the
Public Distribution System
Inefficiency in distribution
Never ending queues..
Leakages in the system..
Isn’t there any solution for this problem.??
Food Adulteration..
YES!
There is…

2. Public Distribution System (PDS) : a real big problem
Losses and leakages in PDS
§ Around 43% of food grains are lost due to illegal diversion by people with vested interests.
§ Approximately 19% of food grains gets allocated to non-poor people due to improper identification mechanism.
§ Only 10% of food grains reaches poor people.
Disconcerting characteristics of Indian PDS
§ Illegal diversion of food grains due to absence of central monitoring mechanism. Futility of vigilance teams.
§ FPS make up for lost stock, due to diversion, with adulteration problem
§ Improper identification mechanisms gives opportunities to FPS to misuse the subsidized food grains.
So,
With
the
recent
passage
of
the
Food
Security
Ordinance,
a
biggest
welfare
programme
in
history,
the
role
of
PDS
will
expand.
Given
the
inefficiencies
and
leakages
in
the
current
distribuGon
system,
it
is,
therefore
crucial
to
strengthen
the
system
swiEly
and
comprehensively..
43%
illegal diversion &
adulteration
28%
Administrative
losses
19%
Reaches unentitled
households
Only 10%
Reaches the poor
beneficiaries
Can Direct Cash Transfer be an alternative solution? – NO! not completely
§ Major issues related to Direct cash transfer – Infrastructure issues, Targeting problems, difficulty in predicting
inflation, exclusion and inclusion errors
§ Moreover, Poor prefer FOOD to cash – Food policy research institute, Bangladesh 2009 , Slum women
overwhelmingly prefer food – Delhi 2011

3. What is the Solution? – snapshot of the solution proposed
(Un) Fare Price Shops
- Adulterations, Malpractices
Automated Vending Machine
- No Human Intervention
Replace
Farmers
Middle Man Warehouses Fair Price
Shops(FPS)
Entitled Households
ExisIng
PDS
system:
• Major source of problem - adulteration,
illegal diversion, not reaching targeted
households - in the complete chain
Due to Human intervention
• Over 0.5 million shops throughout the country
• Inefficient system due to Human
intervention
SoluIon
:
A
major
systemic
reforms
in
the
public
distribuGon
system
is
possible
by
Automated Centralized Monitoring:
§ Automation provides for better monitoring of goods flow.
§ Matching of goods leaving warehouse and goods sold to entitled households, and no human
intervention ensures no illegal diversion.
Automated Vending Machine:
§ Replacement of Fair Price Shops with a completely automated Vending Machines for disbursing
specified food articles (SFAs) to consumers
§ Adhaar card to be used for identification.
§ License holders or franchisees to bear the cost of installing & maintaining the vending machine.
§ This prevents both adulteration problem and selling subsidized goods to non-poor people.

4. What is it?
§ It is (Fare) replacement for an existing (Un)Fare
Price Shops
§ Completely automatic distribution system, which
could be managed by any common man
What it looks like?
How it Works?
§ Computer system detects the identity of the
beneficiary based on Adhar card detection method
§ After detecting and validating, machine confirms
the applicable quantity of SFAs for the beneficiary
§ Hold a bag/can at the window, where machine
automatically weighs the exact quantity and
pours, to get your share
Why is it Better?
§ No Human intervention (solves 60% of the
problem) in the distribution process, so problems
of adulteration, malpractices could be curbed
§ Fast and highly efficient, reduces long queues in
front of shops
Automated Vending Machine: replacement of FPS
Rice
Wheat
Kerosene
Front View: Automated Vending Machine
Side View: Automated Vending Machine
(With Storage at the back)

5. Implementation of the solution – Major steps
§ As per Justice Wadhawa committee recommendation implement the timely
delivery of food grains to FPS. States to strive to make doorstep delivery to FPS
§ Government should Partner with private technology firm to design the SFA
vending machines
• Given the possibility of the bulk order and simplicity of the system, initial R&D cost is not significant.
Manufacturing cost of each machine could be 1 lakh
§ Replace existing FPS with these vending machines
• Area required is same or smaller than existing. FPS owners to bear the cost of machine (to enhance
accountability from ownership)
§ Connect all the Automated Vending machine, and the warehouse to a central data
management centre through a network (internet) which would help in collecting
real time information from the vending machine
§ Set up a Common central data management centre to manage the data and to
control the flow
§ Out source the database management and analytical part to the technology
service provider
• This particular technology can help in tracking flow of SFAs, controlling the losses due to weight hedging at
FPS during distribution, controlling adulteration , and maintaining the quality

6. Proposed Distribution Model
FCI:
Warehouse
Vendor
Machine
Farm
+
Merchant
Farm
+
Merchant
Vendor
Machine
Vendor
Machine
Vendor
Machine
TransportaGon
agency
Weekly
cash
transfers
Payment
from
government
IT
enabled
monitoring
systems

7. How does the system work?
Step
1:
Supply
to
FPSs
Step
2:
TransportaGon
and
filling
Step3
:
DistribuGon
to
beneficiaries
•
Government
should
take
care
of
the
supply
of
SFAs
to
FPSs
and
should
not
outsource
iniGally
Gll
the
pilot
is
run
•
Implement
the
automated
supply
chain
management
system
with
barcode
readers
to
track
the
out
flow
of
the
SFAs
•
GPS
enabled
trucks
take
the
SFAs
to
assigned
FPSs
as
per
the
order
•
Driver
and
helper
are
responsible
to
dump
the
SFAs
in
the
Vending
machine
containers
and
lock
the
system
• Franchise
owner
cannot
interfere
in
the
filling
of
system,
he/she
can
only
monitor
the
inventory
with
the
help
of
computer
system
aUached
•
Collect
the
money
from
beneficiary
and
assist
them
in
geVng
their
share
of
SFAs
•
Strict
supervision
over
transporters
and
truck
movements
•
SCM
soWware
helps
in
clear
tracking
of
goods
•
Drivers
and
helpers
are
held
accountable
for
the
exact
measure
and
quality
of
the
SFAs
dumped
into
the
vending
machine
containers
•
Human
intervenGon
at
this
level
is
controlled
by
the
technology
capability
of
the
machine.
•
No
access
to
the
actual
SFAs
so
adulteraGon
is
totally
controlled
at
FPA
end.
•
Beneficiaries
are
beUer
served
as
the
s/m
is
automated
•
Not
much
waiGng
as
the
throughput
of
machine
would
be
higher
than
human
run
s/m
ImplicaGons

8. Rice
Wheat
Kerosene
Impact of the solution
Scalability & Scope of the solution
§ The vending machine model is designed to substitute
current FPSs. The target is to automate the entire
distribution chain i.e. 4.99 lakh vending machines in
place of FPSs: expense to franchise : 4,990 crore
§ Vending machines could be mounted on trucks and
made as mobile shops at places where population is
less
§ Small size Vending Machines could be made available
– any interested shops can install it at their premises;
This increases the availability.
§ The vending machines may also be used to solve an
alternate issue: Facilitate Family planning. A
compartment may be implemented in the machine to
carry contraceptives. As the machine has multiple utility,
it may make the act of procuring a contraceptive less
conspicuous and reduce the perceived embarrassment
associated with the action.
Criteria to measure the impact of the solution:
§ Percentage improvement in fulfillment by the distribution system (currently 10%) -
Recovery of loss of 62% fulfillment capability (43% from leakages from
transportation and 19% from leakage to non-beneficiaries)
§ Leakages and mismatches between grain transported from the warehouse, grain received
at the vending machine and grain consumed by allotted consumers
Rice
Wheat
Kerosene

9. Sustainability of the solution
§ Franchise model: An initial investment would be
required from the owners. This can be procured as a
term loan of Rs 1 lakh.
§ The owners will be allowed a margin of Rs 0.40/kg
on SFAs sold to APL/BPL consumers and a
commission of Rs 0.40/kg for sale to AAY
beneficiaries. (Rs 0.05/kg more than existing
standards)
§ Volume based compensation to transportation
agents directly under contract guidelines through
government would reduce variations in supply.
§ Ceasing payments to distribution agents from
franchisee owner margins for APL consumers will
allow constancy of revenues, thereby reducing
incentive to hoard for alternative mode of payments
Appropriate monitoring mechanisms
§ Scanners and sensors at supply and receiving end i.e. outside the warehouse and at receipt of
grain at vending machine to match quantity delivered.
§ Quarterly audits at warehouses by CAG agents
§ Vigilance committee at district levels to monitor leakages at linkages between warehouse and
vending machines. Variable incentive for members mapped to efficiency of system
§ Surprise inspections at villages to check vending machines
*Based
Oriental
Bank
of
commerce
minority
loan
scheme
IniGal
Investment
(Loan
amount)
100000
Upfront
capital*(0.5%
of
loan
+500)
1000
Consumers
Served
/
machine/month
1000
Avg
monthly
alloUed
wheat
quanGty
(kg)
25
Avg
monthly
alloUed
rice
quanGty
(kg)
10
Margin
per
kg
0.4
Income
14000
Monthly
revenue
from
sale
of
gunny
bags
3500
Rental
&
Electricity
4000
Interest
rate
12.75%
EMI
(based
on
60
payments)
2262
Net
Income
11238

10. Challenges and Mitigation Factors
Challenges:
§ Since the solution addresses the issue where people with vested interests earlier
made personal profits, the idea could face opposition from some forces.
§ The vending machine and centralized monitoring solution would require new, but
feasible, technological innovations. This would involve high initial costs.
§ The people, especially in villages might take some time to adjust to this technology.
Mitigations:
§ Strong will on the part of government, will keep the forces in check and will help in
faster implementation of this idea.
§ Awareness programs need to be run to showcase the advantages and ease of
operation of the machines. Automatic centralized monitoring would require new
investments and trainings in IT.
§ The security guard guarding this machine needs to be trained to help people use the
machine

11. Conclusion
§ Automated Vending Machine Solution, if implemented besides justice Wadhawa
recommendations, can solve 90% of adulteration and 75% of the leakage
problem.
§ Greatly reduces the human intervention and increases the efficiency
§ Efficient implementation of Food Security bill, which entitles 67 % of our
population to subsidized grains under the Targeted Public Distribution System, is
possible.
§ The Objective of the NFSB - to eliminate hunger and malnutrition, to correct the
distribution system to efficiently and effectively deliver to the correctly identified
beneficiary – could be achieved at 80% success rate.
§ Could solve the problems such as - 4 Crores Indians sleep hungry in any given night,
About 7 million children died in 2012 because of hunger / malnutrition.

12. References
§ Justice Wadhwa Committee Report on PDS
§ planningcommission.nic.in/reports/peoreport/peo/peo_tpds.pdf
§ http://eac.gov.in/reports/rep_NFSB.pdf
§ Images - Google images