Technology is changing the way FCI manages food supply chain. It can also pave way for direct benefit transfer of food grain to the poorest
Abhishek Singh | March 29, 2016
Technology and e-governance have a transformational potential of making public services accessible and efficient, and helps in making governments responsive and accountable. As part of Digital India initiative, e-governance has changed the way citizens interact with the government – it enables the government to reach out to the citizens rather than citizens struggling from pillar to post in the maze that we used to know as Sarkaar.
Across sectors – whether it is passports or driving licences, banking services or paying taxes – citizens have benefited immensely from e-services and it has helped cut down transaction times and transaction costs – and also reduced corruption in public services.
One of the key services which citizens access every month and is critical for a welfare state is public distribution system (PDS). The PDS covers not only the beneficiaries who get the monthly allocation of food grain through fair price shop (FPS), but it also directly affects the farmers who benefit through the procurement of food grain. It is vital for the economy and finances as the food subsidy is one of the biggest items on the government’s subsidy bill and any improvement in the efficiency in the procurement, storage and distribution operations can pay huge dividends to the public exchequer.
Managing supply chain complexity
Procurement of food grain and its distribution in India is a complex process as we have only three states – Punjab, Haryana and Madhya Pradesh – that have surplus wheat production and only four states that are surplus in rice (Punjab, Chhattisgarh, Haryana and Andhra Pradesh). For record, almost 300 lakh metric tonne (LMT) of wheat and rice is procured every year and sent for consumption in states across India.
This requires planning for optimal storage capacity in procuring areas as also the consuming areas along with ensuring the most efficient and cost effective means of transportation. Since food grain is a perishable commodity, it also requires timely preservation and quality control operations so that citizens can be supplied with good quality food grain. Technology can play a big role in these operations.
Food Corporation of India (FCI) is responsible for most of the backend operations of procurement, storage and movement across various states from where food grain is issued to state governments for distribution under PDS and the National Food Security Act to citizens. However, owing to its large network of operations and complexity of interactions with internal and external stakeholders, FCI has been facing multiple challenges in effective management of depot level operations and stock.
While there is a need for information support for making spot decisions to deal with the dynamic nature of operations, FCI is also faced with issues like shortage of storage facility during peak season and uncertainties in railway movement. It is also a daunting task to get timely and accurate data flow from district to depot level and vice-versa since there is lack of single source of validated information for depot level data. Besides, calculation of release order (RO) balance and reconciliation, as well as assignment of work to different groups simultaneously, are the other big challenges that the organisation faces.
To address these challenges, FCI has taken up depot online project with the objective of automating all operations at the depot and to bring in efficiency and accountability. The core objective of the project is to transform the food distribution supply chain through IT intervention by bringing in transparency, reliability and effectiveness of procurement, storage and distribution.
The project not only aims to design a new IT system to automate the end-to-end depot operations, it also intends to capture real time data to support decision making process. The major gaps highlighted by the stakeholders reveal that the depot officials do not have stock positions on a real time basis and the officials at senior management levels can’t derive meaningful conclusions to make decisions from the data available to them. To plug this gap, it was decided to incorporate key process level changes. This includes making all manual registers online by capturing data at source and on real time basis. The initiative will allow FCI to cut down on several manual efforts to record data in registers and correct and reconcile them at the end of the day to generate management information system (MIS) reports.
Another key business process improvement identified is that the truck data entry should happen online at the place of origination to ease the gate entry process and help reduce the long queue outside the gate during peak season. The gaps identified are categorised into four major heads: lack of availability of real time data to support decision making, freeing up of resources, data inconsistency and duplication, and process bottlenecks.
The project is already being implemented and pilot depots are operational under the system. By June 2016, all FCI depots would be covered by the project followed by the depots hired from Central Warehousing Corporation (CWC), state warehousing corporations and those of the private sector.
However in order to ensure end-to-end computerisation of the public distribution system, there is a need to get the second critical component or computerisation of ration cards and automation of the distribution networks in place. These are primarily the responsibility of state governments. States that have undertaken computerisation of ration cards along with Aadhaar seeding have been able to identify nearly 4.5 crore bogus ration cardholders so far. This has had a huge impact on the system since the leakages in PDS have been reduced greatly. With almost 90 percent of population already having Aadhaar numbers, identification of genuine beneficiaries and better targeting of PDS subsidy is now possible.
Direct benefit transfer in PDS
With the expansion of banking services to the unbanked with the Jan-Dhan programme, the direct benefits transfer (DBT) scheme of government of India has the potential of being a game changer. The DBT scheme enables efficient transfer of money – mainly scholarships, pensions and LPG subsidy directly to the bank accounts of beneficiaries by leveraging technology and authenticating the beneficiaries with Aadhaar numbers to prevent duplication and ensure better targeting. It also enables financial inclusion by creating a network of banking correspondents so that citizens can actually withdraw cash without having to travel far for the same. This simple initiative has the potential of transformational change in the rural areas.
However, when it comes to using cash transfers in PDS, the simple approach of replacing food with cash and getting rid of the leaky PDS is not likely to work as this would also mean doing away with the state procurement of food grain and the system of providing minimum support price to the farmers, which is practically not possible as MSP operations have been beneficial to farmers and has ensured food security for the nation.
The other option is to build an online Aadhaar-enabled PDS which is integrated with real time stock position provided by the depot online system. This has been successfully piloted in East Godavari district in Andhra Pradesh. Beneficiaries obtain their monthly rations from the fair price shops by authenticating themselves with their biometrics through a point of sale device that is connected to a stock management system for online verification and updation of the stocks.
This can be a system similar to the depot online system for the state government warehouses. An Aadhaar-enabled PDS will not only ensure that the right beneficiary gets the rations, it will also enable the beneficiary to get rations from a fair price shop of his choice or usher in an era of ration portability. It has the potential for enabling anywhere, anytime PDS and has the possibilities of ensuring that a migrant labourer from one state can get his rations in another state where the person is stationed or has migrated temporarily for work.
Another possibility can be to transfer the cash subsidy of the PDS – similar to PAHAL scheme for LPG – directly into the bank accounts of beneficiaries so that they can pay the full price of the subsidised food grain to the FPS owner. This has the potential of eliminating diversion and recirculation of food grain as there will be no price differential. Pilot projects on this model are being implemented in Chandigarh, Dadra & Nagar Haveli and Puducherry but the challenge has been to ensure that fair price shops have a point of scale device to actually verify that the cash subsidy given is spent on food grain and not diverted for other household expenses.
Electronic enablement of manual registers
- At source capturing and submission of data
- Automatic consolidation and rolling up of data for register/report
- Easy maintenance of data integrity and data quality
Offline mode of operation
- Offline transaction using mobile applications
- Local instance equipped with temporary data storage
- Synchronisation with central server when online
Integration with internal and external applications
- Complete visibility for end-to-end streamlined flow of operations
- Web services for real time point-to-point synchronous integration
- Messaging for real time asynchronous integration
Mobility solution for convenient data capture anytime, anywhere
- Convenience for data entry, submission, view and status check
- Function specific android apps for both tablets and smartphones
- Support for push notification and updates from central server
Efficient maintenance of all depot level operational data
- Real time data entry through a single application
- Minimisation of redundancy and improvement in data accuracy
- Phasing out of some current standalone MIS applications
Data analytics and management dashboard
- Enabling informed decision making for decision support
- Extraction of data from various external and internal systems
- Monitoring of key performance indicators
Over and above these models, there can be another transformational initiative of enabling direct delivery of food grain to home and this would mean eliminating the need of moving grains from FCI depots to the warehouse of the state agencies and thereafter to PDS shops. Under NFSA, per person allocation is 5 kg of grains per month and the cost of the same is Rs 10 for wheat and Rs 15 for rice. For a family of five, the allocation is 25 kg per month and costs are Rs 50 for wheat and Rs 75 for rice.
For an individual to come to the PDS shop, every month, with the uncertainty of the stock at the FPS is not economically viable as the cost of grains is less than a day’s wage under NREGA. Hence, it will help to give grains for four months or six months to a family at one go – direct to home. According to a back of the envelope calculation, six months’ supply of grains for a family will mean a 30 kg of bag for each person at a cost of Rs 60 for wheat and Rs 90 for rice. For a family of five, it will mean five 30 kg bags and the costs will be Rs 300 for wheat and Rs 450 for rice. This is actually affordable and since the idea is to deliver food grain, direct to home, once in six months, it is actually feasible as well.
What this means is that the handling and transport agencies will take the 30 kg bags on a designated route and deliver to home once a month. The authentication of actual delivery can be done through biometrics as almost all beneficiaries will be covered by Aadhaar. The specially-packed 30 kg bags will be numbered and barcoded, having information with regard to which bag has been delivered to which household and it can be made available in the public domain. The actual payments to the handling and transport agencies will be based on actual deliveries done. Thus it will be an accountable system with minimal leakage and loss.
The only question that some people may raise is whether all families will have provisions of storing almost 150 kg of grains given at one go. People living in flood prone areas and kutchha houses may face challenges, but this can be resolved by making a onetime provision of a 100 kg steel storage bin for each household. Delivering grains for six months at one go will also reduce the stock holdings of FCI and will bring down the storage losses and costs which will be sufficient to provide for the steel storage bins.
In all these models, technology has a great role to play and can really transform the food grain supply chain management.
(Singh is executive director with Food Corporation of India. The views expressed here are personal.)
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