Centre floats concept note on digital vouchers for PDS to check leakages

The food ministry has proposed pilot projects using e-RUPI digital vouchers in the public distribution system to reduce leakages and diversion of grains, a move strongly opposed by ration shop dealers

In a significant development, the Union food ministry, with the objective of checking leakages, has floated a concept note on conducting pilots for using digital e-RUPI vouchers in the Public Distribution System (PDS), a proposal that has been bitterly opposed by ration shop owners.

 

The pilots on e-vouchers have been proposed in collaboration with State Bank of India (SBI) as the issuer bank and the National Informatics Centre (NIC) as the technical partner.

 

According to the note, these itemised vouchers will function as purpose-specific, non-monetary digital instruments, representing food entitlements under the National Food Security Act, now called the Pradhan Mantri Gareeb Kalyan Ann Yojana (PMGKAY).

 

 

The vouchers will act as digital currency equivalents, without any cash movement or legal tender properties, redeemable only for specified food commodities (for example, 10 kg of wheat or 10 kg of rice). They will be Aadhaar-linked, non-transferable, and valid only for a specific month.

 

Such a voucher will ensure that beneficiaries have direct control of their entitlements and that transactions are traceable, verified, and tamper-proof.

 

Though the concept note does not mention this, a section of experts has been advocating the use of e-vouchers in the PDS in place of physical grain distribution through ration shops as an option to check the burgeoning food subsidy and rein in open-ended procurement of grains.

 

The concept note, meanwhile, said that despite multiple reforms in the PDS such as Aadhaar authentication, electronic point-of-sale (ePoS) devices, and the One Nation One Ration Card (ONORC) framework, operational challenges persist at the last mile. Beneficiaries face issues of under-weighing and poor-quality grains, dealer monopoly that limits beneficiary choice, and manual reporting that allows delayed or inflated dealer claims.

 

There is also limited transparency in real-time beneficiary acknowledgement. “To address these issues, the Department of Food and Public Distribution proposes the integration of NPCI’s e-RUPI platform into the PDS ecosystem, in collaboration with SBI as the issuer bank and NIC as the technical partner,” the note said.

 

As per the process, first the NIC will compile the NFSA entitlement data monthly, which is then sent to SBI through secure APIs for voucher creation through NPCI’s e-RUPI platform. Once NPCI generates the unique voucher IDs, it returns them to NIC for delivery to beneficiaries.

 

Thereafter, beneficiaries receive e-RUPI vouchers via SMS or QR code (through the Mera Ration app), which are then stored securely within the NIC system and linked to beneficiary Aadhaar tokens. Once this process is complete, the beneficiary presents the same to a fair price shop (SMS/QR). The dealer then scans or enters the voucher ID on the ePoS device, which validates the voucher via NIC → NPCI → SBI. Finally, after biometric or OTP authentication and beneficiary approval, the ration is issued.

 

To settle accounts, SBI settles the transaction digitally with the acquirer bank and records the corresponding dealer commission as per Department of Food and Public Distribution policy. All this is reflected in NIC and DFPD dashboards in real time.

 

The concept note calls for launching pilots in one urban and one rural district in the first phase, which would then be gradually scaled up depending upon the results.  Reports said the food ministry has already planned pilots from next month in Anand, Sabarmati and Dahod districts of Gujarat along with the Union Territory of Chandigarh. It has also conducted a mini pilot to test the concept some weeks back in a limited area.

 

Meanwhile, explaining the benefits of such a system, the concept note said that for the beneficiaries, e-vouchers will ensure direct control over ration redemption, no manipulation by intermediaries and improved trust and transparency and convenience by application or SMS.

 

For the government, the voucher system ensures tamper-proof and auditable transactions, automated reconciliation and settlement, real-time visibility through dashboards, and reduced leakages and grievances.

 

The system will have multiple benefits for partner banks as well, including strengthened presence in the government digital payments ecosystem, alignment with RBI digital governance initiatives, enhanced partnership and visibility with the central government, and the ability to act as a pilot for future welfare disbursement models.

 

“This collaboration aims to digitally transform the Public Distribution System through a secure, accountable, and beneficiary-centric model, leveraging India’s own fintech infrastructure,” the concept note said.

 

Ration shop dealers, meanwhile, have bitterly opposed the proposal and, in a statement issued a few days ago, said the move is shocking and would sound the ‘death knell’ for the existing structure of food distribution, which has a long, traditional, and acceptable status. India has close to 500,000 ration shops across the country that distribute millions of tonnes of grains every month to almost 80 million beneficiaries.