Avartan

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

Planning Commission: “For

every Rs. 4 spent on PDS, only Re.1

reaches the poor”

57% of the PDS food grain doesn’t 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

PDS IN INDIA

Stage - I Stage - II Stage - III Stage - IV

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

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

Responsible for identification of BPL, allocation of ration, issuing ration cards and

supervising FPS functions

The Current Scenario….

Farmer Miller District

FCI District Manager of Civil Supplies

Mandal Level Stock Point

FPS Citizen

Central Government controlled State Government controlled

PROBLEMS FACED IN THE CURRENT SYSTEM

Accountability &

Transparency

Distribution Related Issues

Corruption

Information Related Issues

Awareness

•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

•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 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

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

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

OVERVIEW OF PROPOSED SOLUTIONS

IMPROVING REACH

AND EFFICIENCY OF

PUBLIC

DISTRIBUTION

SYSTEM

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

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

E-Governance and Centralized Stock Movement Information

•Quick Access to Information •Enhances efficiency •ImprovesTransparency •Accountable information for better planning •Faster Communication •Accurate Demand Forecasting

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

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

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

Audits •Panchayats/Gram Sabhas/Other Vigilance committees to monitor effective implementation •Eliminates corruption •Elimination of Malpractices

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

DETAILED PROPOSAL FOR E-GOVERNANCE

District FCI

District Manager of Civil Supplies

Mandal Level Stock Point FPS

Master Server & Database of all MLSP, POS

and customers

MLSP Server with

database of all MLSPs

POINT OF SALES

(POS)

NETWORK (ELECTRONIC DATA INTERCHANGE)

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

10kgs (allocated) 6 kgs (remaining)

100kgs (allocated) 96 kgs (remaining)

NETWORK

UID Server

NETWORK District

FCI

INFORMATION Timestamp

Aadhaar User ID Transaction Date Quantity Bought

MLSP

CENTRALIZED DATABASE ARCHITECTURE

COST ANALYSIS FOR IT INFRASTRUCTURE

Reference

• http://pib.nic.in/newsite/erelease.aspx?relid=74180

• http://www.apscsc.gov.in/pds.php

• http://www.alibaba.com/product-gs/766180075/GS90_gprs_pos_terminal_device.html

FCI MLSP FPS

Assuming 1 in one state Assuming 200 under one MLSP

Device Price/ piece

Total Cost

Server 2,50,000 2,50,000

Computer 25,000 25,000

e-PDS suite (ERP

license)

10,500 10500 * 200

= 21,00,000

TOTAL 23,75,000

Device Price/ piece

(A)

Total Cost (A) * 100

Computer 25,000 25,00,000

Internet (40 Mbps, 125 GB)

3199 * 12 38,40,000

TOTAL 63,40,000

Device Price/ piece

(A)

Total Cost (A) * 100 *

200

Computer 25,000 50,00,00,000

GPRS POS terminal/

device 20,000 40,00,00,000

Electronic Display Board

5,000 10,00,00,000

Smart Card

(1 per family)

20 (assuming 1000 families per FPS)

20* 1000 * 100 * 200 =

40,00,00,000

TOTAL 140 Crore Assuming one FPS per Panchayat

Total Cost = 141 Crore (approx)

Assuming 100 under one FCI

Since every Panchayat is already provided with a Computer and

Internet connection, we only need to issue them a user login

Panchayat

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

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

Hence, the entire project

BREAKS EVEN IN LESS THAN SIX MONTHS

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

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

Benefits

Sample photo Back Cover

COST ANALYSIS FOR STANDARDIZING SKUs

Price of Automated Pouch packing machine Rs 2,50,000

Cost of Polyethylene Rs 100 per Kg

Weight of polytethylene for packing 10 kg grains 25 gram per packet

Cost of packaging per 10 packet Rs 2.5

Cost of printing messages Rs 0.50

Total cost of packing 10Kg grains (A) Rs 3.00

Average theft per quintal (100 kg) 10 Kgs

Minimum support price of wheat per Kg Rs 13.50

Minimum support price of rice per Kg Rs 13.10

Minimum Total Cost saved from theft per quintal (B) Rs 130

Minimum Savings by preparing 10Kg packets (wheat) [B/10 – A] Rs 10

Break Even quantity for the Automated pouch packing machine 25,000 packets

Price of Automated Pouch packing machine Rs 2,50,000

Speed of packing 25 packets per minutes

Time taken for preparing 25,000 packets (BA quantity) 1000 minutes or 17 hours

Number of hours of working in MLSP 8 hours per shift

Machine becomes free after 3 days of operation

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

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

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

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 Sarpanch’s 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

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

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 world’s best practices

SOURCE OF FUNDING State Government & Central Government

CHALLENGES & MITIGATION FACTORS

• 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

CHALLENGES IN PROPOSED SOLUTIONS

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

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

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

- Mother Teresa

Appendix: FPS’s VIABILITY ACROSS INDIAN STATES

Source: Performance evaluation organization. (2005). Performance evaluation of targeted public distribution system. New Delhi: Planning Commission

0

20

40

60

80

100

120

140

% with positive net income % running FPS efficiently

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

‘WIDE’ INTER-STATE FPS EFFICIENCY VARIATIONS