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LATEST NEWS UPDATES | Hi-tech route to cut subsidy but long road ahead -B Dasarath Reddy

Hi-tech route to cut subsidy but long road ahead -B Dasarath Reddy

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published Published on Mar 26, 2016   modified Modified on Mar 26, 2016
-Business Standard

Digitisation of supply chain for BPL beneficiaries can save Rs 1,080 crore a year but much needs to be done to plug leakages

Hyderabad: In this state of information technology professionals, now even a village woman knows how the malfunctioning server in Hyderabad can affect the delivery of subsidised foodgrain to her.

Technical snags can make the queues longer at fair price shops in Andhra Pradesh, even a year after the government pushed for digitisation of the services.

Beneficiaries often find themselves waiting or are asked to return the next day, if the point of sale (POS) device in their neighbourhood fair price shop finds it difficult to access the central server at the Aadhaar database.

In the financial year 2013-14, or FY14, the data of below poverty line (BPL) households were digitised and linked to the Aadhar database. The purpose was to eliminate bogus beneficiaries - who had given a bad reputation to the popular subsidised rice distribution programme of undivided Andhra Pradesh.

From March 2015, in a number of phases, the Biometrically Authenticated Physical Uptake (BAPU) mode was introduced in the public distribution system (PDS) of the state.

Under this model, beneficiaries get themselves identified by scanning their thumbprint or iris on a POS machine while buying a subsidised product such as kerosene or, in this case, rice.

A number of teething problems, too, afflict the BAPU mode in Andhra Pradesh.

Tech boost

As the seeding of BPL cards with Aadhar data eliminated double entries (a family having multiple cards or the same individual getting different cards) just before the bifurcation, the Chief Minister Chandrababu Naidu-led government of Andhra Pradesh has quickly rolled out the end-to-end automation of the supply chain of PDS to plug leakage at other levels.

Now, foodgrain can be tracked extensively - right from when it is loaded into trucks at the Food Corporation of India warehouses to the fair price shops. The system also tracks the delivery to the BPL beneficiaries, ensuring that the weight of the product being supplied is accurate.

If a truck carrying PDS goods stops anywhere for more than five minutes, officials concerned will get a message through the global positioning system (GPS) tracker, said Karikal Valaven, the principal secretary of the state, who also holds the additional charge of commissioner, civil supplies department.

Automatic text alerts are sent to the cardholders as soon as the foodgrain stock lands at the fair price shop.

While presenting the Budget for the next financial year (2016-17) on February 29, Union Finance Minister Arun Jaitley announced the automation of 300,000 of the total 535,000 fair price shops in the country over the year. The model draws heavily from the system in Andhra Pradesh - which has demonstrated the possibility of a big saving in the subsidy bill.

At the ground level

The automation was first tried out in the Krishna district, about 280 km southeast of Hyderabad, the currently common capital of Telangana and Andhra Pradesh. It was then replicated all over the state.

District Collector Babu Ahmed had spearheaded the digitisation of the PDS in Krishna. He has done a cost benefit analysis, besides measuring the savings that have accrued from the reduced off-take of rice and other items each month.

The district administration, claims Ahmed, was able to save Rs 56.13 crore in the 10 months starting May 2015. Between March and May, all 2,162 fair price shops in the district were linked to the new system.

"We were able to save Rs 8.5 crore in the first month of automation, which translates into a 180-per cent return on the Rs 7-crore investment we made on the equipment and processes," Ahmed told Business Standard.

He added the rice bill in the Krishna district was down by 15 per cent.

"There were irregularities in the past. But we are cooperating with the officials in implementation of the ePoS system now," said V Niraja, the owner of a fair price shop at the Chittinagar area in Vijayawada.

Dealers have to complete the distribution of rice and other commodities within the first 10 days of a month. The online records of Niraja's shop showed a closing balance of 14.5 quintals of rice of 127 quintals allotted for March. So, there was an 11-per cent saving on account.

Until a year ago, there was no proper mechanism to keep track of the unsold stocks. This was believed to be the biggest source of corruption.

Now, the residual stock cannot be the dealers, who used to assume fictitious names to do so in the past.

However, there seem to be other types of leakages that go unnoticed right under the nose of the new system. Many BPL beneficiaries claim their quota of rice for Rs 1 a kg, but sell it to middlemen for Rs 10 a kg.

Thanks to automation, the closing stock makes up for the savings in the subsidy bill.

But, it is not all hunky-dory.

People claim that new corrupt practices are taking root. Shopkeepers can put weights in packets of rice and evade detection. They also use pre-packaged rice bags to generate bills, but later use manual weighing machines to deliver the goods to the beneficiaries.

Dealers have a few complaints of their own. They claim that the commission they get at present is not enough to run their shops.

Simple savings math

A look at the monthly cost benefit of about 30,000 fair price shops across the 13 districts of the state will tell us how much Andhra Pradesh can save in its subsidy bill.

The digitised system generates data of real-time stock positions in each shop. According to the data available, about 2,951 tonnes of rice was saved in April last year - just a month after the Krishna district stated rolling out the automation.

The figure rose to 5,582.43 tonnes in May, when the entire district had been covered.

In October, the amount of rice saved had jumped to 20,575 tonnes. And, in February this year, it peaked to 29,593 tonnes.

"Of the fixed monthly requirement of 221,000 tonnes of rice, we were able to save 30,000 tonnes in February. If this remains constant the total saving a year would be over 13 per cent of the total rice subsidy," an official of the civil supplies department told Business Standard.

Based on the closing balance of stocks, the civil supplies department calculated a savings of Rs 100.42 crore for the state and Rs 370.21 crore for the Centre in the 11 months starting April last year.

If the quantum of the savings in February can be maintained, the combined savings of the state and the Centre would be about Rs 90 crore a month, and a whopping Rs 1,080 crore for the year. The Centre and the state together spend Rs 30,000 on every tonne of rice, including the cost of storage and transportation.

More can be done

The savings could be even bigger if the state followed the Union government's footsteps to determine the percentage of poor people in the total population, as was calculated for the implementation of the National Food Security Act, claim analysts.

When Y S Rajasekhara Reddy was the chief minister (2004-2009), the number of BPL cards in the state touched 22.9 million - more than the total number of households in Andhra Pradesh.

After the bifurcation, the number of cards in the truncated Andhra Pradesh was 13.7 million, or 67.15 per cent of the total number of cards in the combined state.

This number came down to 12.9 million after 800,000 cards were deleted from the list during the Aadhar seeding in 2013-14 and then rose beyond the level of pre-Aadhar period to 14 million as the new government issued 1.14 million fresh BPL cards in January this year.

This number remains unchanged except the removal of about 400,000 individuals from the existing list very recently. Each individual is entitled to 5 kg of rice a month.

Now, about 43 million of the 49.38 million people in the state (according to Census 2011) - about 87 per cent - are covered by the 14 million BPL cards.

Based on the perception that 60 per cent of the rural and 40 per cent of the urban population deserve to be covered under the National Food Security Act, the Centre has taken the responsibility of providing subsidised rice to 26.8 million people (54 per cent of the state's population) in Andhra Pradesh. It will bear the cost of 144,000 tonnes of rice at the rate of Rs 23,600 per tonne per month. The Andhra Pradesh government is adding Rs 6,400 per tonne - and providing rice at Rs 1 per kg to BPL families.

The cost of supplying subsidised rice to the remaining people in the BPL list is being borne by the state government.

For the full year, the total subsidy bill on rice alone works out to about Rs 7,956 crore. The Centre's contribution to it is Rs 4,078 crore; the balance Rs 3,878 crore comes from the state exchequer.

The volume of rice being pumped into the PDS over and above the Centre's quota costs Rs 2,772 crore to the state government.

Asked why the administration has not broadened its ongoing drive to give subsidised rice or BPL cards to genuinely deserving families, a senior officer said that it was a political call.

Even after the hi-tech boost, the road to full and just delivery remains a long one.

WELFARE BILL

A year after the Andhra Pradesh government pushed for digitisation of the public distribution system, the disbursal of subsidised rations is far from smooth:

14 million
Total number of BPL cards

43 million
People covered

2.65 million tonnes
Total rice allocation per year

Rs 7,690 crore
Total annual subsidy bill for rice (at the rate of Rs 29,000 per tonne)

Note: Approximately another Rs 700 crore subsidy is required on sugar, wheat and kerosene

Business Standard, 26 March, 2016, http://www.business-standard.com/article/economy-policy/hi-tech-route-to-cut-subsidy-but-long-road-ahead-116032600002_1.html


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