2. Overview of the problem:
The PDS System is one of the most ambitious and expansive social projects in the world but it hasn’t lived
up to its expectations. There have been a lot of management shortcomings and a lot of challenges that the
system has had to face in a huge country like India. Here we try to address the broad set of problems that
the system currently faces in India and form a base for the proposed solution.
PDS
Problems
Transportation Costs : Govt. incurs a huge cost on transporting from the FCI
procurement centres to the FPS shops which forms a large proportion of the PDS
budget.
Quality of the Food : The quality of food available at FPS shops is generally criticized
and found to be of unsatisfactory quality.
Only 35 kg. of food: People can only buy ration only once a month. Even if their offtake
is less than the permissible amount they are not able to utilise it.
The FCI procures materials from the famers and sends it to the state government for
the final delivery. There is lot of inefficiency and pilferage that creeps into the system.
FCI has stock of around 60.8 million tonnes in its warehouses whereas the buffer
requirement is 24.3 million tonnes. The problem is that despite so much excess food
the poor still have to buy food in open markets.
There are a lot of ghost buyers who are not s part of either APL,BPL or AAY but still
enjoy the benefits of FPS.
The FPS shop owners work on a very little profit margin which encourages siphoning of
food grains and other malpractices.
People can only buy what is stipulated in their ration cards and are devoid of
other nutritional food necessities. This also limits their consumer freedom.

3. Heads Proposed Solution
Procurement • Implementation of E-Procurement, Customer Relationship Management at
both state and centre level
Transportation • Maintaining optimum inventory level in the state itself
• Building capabilities of target areas towards self sufficiency
• Containerization
Storage • Warehousing through PPP model
• More Investment
• Storage in silos in ad-hoc storage facilities
Food Quality • Building cooperatives or communities within a rural area for conducting social
audits
• Use of Bar Codes and RFID tags to trace the food grains from FCI to the target
customer
• Ensuring consumer freedom
Preventing Leakages • Use of Freedom Cards which is an innovative solution known as “Direct
Cashless Transfer”
• Use of GPS systems on transportation vehicles to keep a check on any pilferage
Institutional
Involvement
• Making the “Rural Integration Program” a mandatory course in various
relevant curriculums .
IT Integration • Giving the end user prior information before the arrival of ration in Fair Price
Shops through mobile SMS or other mediums
• To get real time information at every stage of PDS
• To automatically generate digital audit trails

4. E-Procurement and Customer Relationship
Management(CRM): E-Procurement is aimed at
bringing transparency and plugging leakages
during the initial stage of procurement. In this the
farmer will submit his/her quotation at the
purchasing centre which will be picked up by FCI
from the Central Server.
CRM aims at smooth flow of information between
FCI and the state government when the latter
purchases the food grains from the FCI. This can
help in reducing the cost of the state government.
PROCUREMENT SOLUTIONS
TRANSPORTATION and STORAGE
 Transportation aims at maintaining optimum inventory levels and minimizing cost. Through IT integration with
FPS shops, the State Govt. will be able to get real time data about the stock level in these shops. The Govt. can
thus decide reorder point below which the quantity should be ordered from the FCI. This solves the problem
of non availability of food grains and at the same time reducing the inventory levels.
 FCI and State Govt. should ensure that the trucks should run at full load capacity to minimize the
transportation cost. This can be achieved by fixing a minimum order quantity (equivalent to truck capacity)
and its multiple for every order.
 Containerization reduces the expense of transportation and increases its
speed. It further lowers the labour involved in loading and unloading of
grains.

5. The diagram below shows transportation of
food grains from FCI godowns to the end
customer. This is a “Cross-Docking” model to
modify the existing system so that storage cost
can be minimised. There would be proper
coordination between the central and state
government transportation vehicles so that
storage time can be minimised, delays can be
reduced and warehousing cost can be
decreased. The state government can also
minimise the storage of food grains as it can
directly transport to the district’s FPS.
FOOD QUALITY
 FPS system in India is often criticised for not being able to meet the minimum nutritional requirements of the end
users. The PDS system has introduced a rice-rich diet in the community due to which the incentive of growing
alternate crops ( for eg. Millets which acts both as a human as well as cattle food and even grows in Fallow Lands) for
the village farmer has drastically gone down.
The solution aims at providing the poor with essential
nutritional requirements. It is understandable that these
requirements differ geographically. For this, we will develop
a self sufficiency system in the villages whereby the local
farmers will be encouraged to grow alternate crops like
Millets. A local grain bank will be maintained where all
farmers will deposit their grain and people could withdraw
their grains as per the requirements. All this will be done
under the purview of the existing PDS with farmers being
given the adequate prices for their produce. This will not
only ensure an adequate supply of food but also food
which is nutritional for the villagers and good in quality.

6.  There will be routine check ups by self help groups and other stakeholder communities to keep a check on the
ration being distributed.
 Monthly social audits by self help groups which will consist of 20-30 women per group. This will also help reduce
the marginalisation of women in the society
LEAKAGES
 Govt. has launched Direct Cash Transfer scheme to provide subsidy to the rural poor. However, various infrastructure
constraints are there which limits the viability of this program. These include opening bank accounts for every
individual, scale of Aadhaar coverage, etc. We provide a simplified solution for this:
The above flowchart shows how this framework could work. The main component of this whole solution is “freedom
cards” by Mastercard which is a prepaid card and doesn’t require any bank account. It provides a cashless
alternative. This freedom card with a unique no. linked to aadhar cards will be allotted to each eligible person in the
village.
• The person could only swipe the card in any government authorized ration stores on POS scaling system already
developed by Essae Teroka and used in Karnataka. This can be integrated with freedom cards and biometrics
provision. Thus, tracking the number of transactions will generate an automatic digital audit trail for tracing
quantities in ration stores.
• There will be one centralized account for every gram panchayat from which money will be transferred to these
freedom cards via wire transfer. This again keeps a track of the funds being allocated.
• A person can check his balance or can block his account if stolen or lost by just a single SMS from any featured
mobile phone.
In above stages no cash changed hands, thus decreasing the vulnerability of the direct cash transfer scheme. It will
also ensure the poor will use the money transferred for food only and not for other things.

7. INSTITUTIONAL INVOLVEMENT
 India’s biggest advantage is its demographic dividend. It is the direct involvement of the youth which can really give a
spur to the existing PDS and improve it.
 We have a plethora of Technical and Management Institutes in the country which produce millions of graduates
every year. The system aims at utilising their potential and knowledge base to develop infrastructure for our
proposed model. The same kind of social integration model has already been implemented in the MBBS courses
across the country.
 India has a huge number of colleges and universities. We propose that the HRD ministry will allocate one
village/block to institutes in the surrounding areas. It will be the responsibility of the institute to look after the
development of the infrastructure of the allotted area. The solution aims at streamlining the implementation of the
proposed model.
 MBA graduates: We propose a mandatory two-three week rural integration programme for MBA students whereby
they will be required to visit a village and work in unison with their engineer counterparts and work towards
achieving the desired output of development of infrastructure in the target community/village/block. This will serve
as a hands-on experience for the students before they step into the corporate world.
 Engineering Graduates: Engineering Graduates will get to employ their technical skills in rural and urban setups in
unison with management students. They will be required to be associated for a period of four weeks. They will get a
practical experience which is hard to find in engineering institutes these days.
IT SOLUTIONS : Easing, Streamlining and Facilitating
 For transportation we plan to employ GPS systems on vehicles transporting food grains from Central Hub to the FPS.
This will help the system track the movement of vehicles thereby filtering out any inherent pilferage in the system.
 Utilising the same GPS system we plan to build a system where the customer will receive prior information about
arrival of products at the FPS. Users can then make their buying decisions accordingly.
 IT can be effectively utilised for monitoring quality and leakages during transport. We plan to use RFID tags and
Barcodes to implement the same. The quality of food grains entered into the system at the dispatch should match
with the quality at the arrival of the grains otherwise the lot will be rejected. So a particular quality packed in a bag
with a specified barcode will match.

8. We shall be using the state-of-the-art POS scale devised by Essae
Teroka,Bangalore. The image shows the system currently under
manufacturing. However we shall be using a customised version of
the same which will have a Freedom Card Swipe machine, in built
printer(which prints in local language),in built modem along with
biometric verification. The machine will automatically verify whether
the card belongs to the customer or not. After verification the
amount of product weighed against the customer’s name will be
recorded on the central server. This will make the authorities know
about each and every transaction that occurs from the POS Scale.
Since there will be real-time updates of data there would be no
question of shopkeepers trying to swindle the customers.

10. 1) Digitization of already existing procurement centres
No. of procurement Centres in India 14000
Components of digitization PC system
Internet Connectivity
Training of officials
Cost of Digitization
Fixed cost
PC s (including Modems and other accessories) 20000 x 2 = 40000 per centre
= 56 Crores
Training (Centralised)
INR 5 Crore (considering 3 person per
procurement centre to be trained
Variable Cost
Internet connectivity (BSNL has high penetration in India) Rs. 150 per month per centre
= INR 21,00,000
2) POS system
Cost of POS system
500 Crore (Karnataka spent 20 Crores for 21000
FPS)
3) Silo Cost
Rs. 50000 per Silo of 15000 m3
= INR 12,50,00,000 (Approx 2500 silos for openly
stored grains)
COST CENTRES
Government loses out 4197 crores annually (PEO report on TPDS 2003 -04). This is the amount of subsidy which does
not reach the BPL people. This huge loss justifies the above investment to be made for improving PDS

12. REFERENCES
• DDS System
• PDS In India: A brief overview by APCR, Karnataka Chapter
• Performance Evaluation of Targeted Public Distribution System
(TPDS) by Programme Evaluation Organisation, Planning
Commission, Government of India, New Delhi, March 2005
• Frontline Article “Loud No To Cash” 31 Dec,2011-13 Jan,2012 Issue
• “Recipe for Change: Can We Feed the World ?”- AT Kearney Article
• Reforming The Public Distribution System : Lessons from Chattisgarh
by Raghav Puri
• Civil Society Engagement and India’s Public Distribution System:
Lessons from the Rationing Kruti Samiti in Mumbai by Rob Jenkins
Birkbeck College, University of London and Anne Marie Goetz,
Institute of Development Studies, University of Sussex,October 2002