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twitter-logo Shweta Punj        Print Edition: Dec 11, 2011

What's proposed: The task force on direct transfer of subsidies, led by Unique Identification Authority of India, Chairman Nandan Nilekani, recently submitted its report on an information technology, or IT, strategy for India's mammoth Public Distribution System, or PDS, to Finance Minister Pranab Mukherjee. The task force has suggested creating a Public Distribution System Network, or PDSN - after computerising the PDS chain - which will run the IT infrastructure as an independent, not-forprofit entity. PDSN will be responsible for tracking movement of goods, registering beneficiaries, facilitating the issuing of ration cards, running a call centre to handle complaints, and checking frauds. The task force has proposed a December 2012 rollout of a pilot project in select states.


It might be a challenge to roll out such a tech-based solution in rural areas.

What it will achieve: According to the strategy paper, PDSN will make the existing system more efficient, accountable and transparent by simplifying the process of registration of ration cards, cleaning up the beneficiary database, and preventing duplication and pilferage. It will also provide beneficiaries with more choices - choice of commodities, quantitites, location to collect the rations, and above all, the choice to receive a direct cash transfer of subsidy, instead of buying subsidised items. Moreover, it will be linked to Aadhaar, which could be utilised for identity authentication as well as for channelling subsidy funds to Aadhaarenabled bank accounts using the Aadhaar Payments Bridge and Aadhaar-enabled payments systems. The proposed technology will be able to accept physical coupons, smart cards and electronic coupons and will also enable states to choose their own solutions based on their requirements. But agriculture economist Devinder Sharma is not sure if the technology will be able to stem pilferage. He cites the example of digitisation of land records in Karnataka. "No denying that records are now easily available but it has not made a dent on corruption," he says.

Challenges: The funding of a project of this scale, however, remains unclear. The task force merely says: "Funding for the initial set up and operations and the revenue model for self-sustainability are critical for the start-up and operational phase of PDSN…in the long run, PDSN should have a self-financing and independent financial role model." It says initial costs can be met through share issues, government grants, loans from both the government and the private sector, and advance transaction charges from "service receivers". But getting government grants and loans might prove challenging in the current economic conditions. Besides, implementation may not be easy in rural areas. "It might be a challenge to implement such a technology-based solution in rural areas where there is very little or no banking infrastructure," says Deep Joshi, a member of the National Advisory Committee.

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