India to roll out cashless food subsidies system

By on 19/01/2017 | Updated on 04/02/2022
Fruit and Vegetable vendors using AadhaarPay in Krishna District of Andhra Pradesh (Image courtesy @babuahamed)

A new cashless benefits distribution system is set to be rolled out across India, after a scheme introduced by a civil servant in a single district caught the eye of national policymakers.

Ahmed Babu, an Indian Administrative Service officer serving as the District Magistrate of Krishna district in the southern state of Andhra Pradesh, designed a new system for distributing food subsidies to benefits recipients. Using Aadhar, a vast identity database being introduced by the national government, and electronic-Point of Sale (e-PoS) systems installed in all the ‘Fair Price Shops’ (FPS) supplying subsidised food, Babu linked the shops to claimants’ bank accounts – allowing the government to make ‘Public Distribution System’ (PDS) benefits payments directly to the retailers.

The new system supports the government’s goals of cutting benefits fraud, addressing financial exclusion and moving towards a cashless economy. The Indian government introduced a demonetisation scheme last year, devaluing currency notes of higher denomination. Now Krishna has become the first district to provide cashless distribution of subsidised food – a system accessed by some 90% of the district’s 4.5m people.

Babu told Global Government Forum that his system is to be replicated all over the country to distribute PDS subsidies, mandated through a central government directive. As well as supporting the government’s policy goal of developing a cashless economy, he added, it also helps eliminate fraud. On 19 January Babu was to explain his approach to a national gathering of ministers and officials charged with delivering PDS subsidies. One of his messages will concern power supplies: Krishna’s reliable, 24-hour electricity supply network was important in making the scheme a success, he told Global Government Forum.

“Several different stakeholders are involved in the process: the beneficiaries, the government, the FPS, the Unique Identification Authority of India, bankers, and the National Payment Corporation,” Babu said. The system is also being used to pay workers under the National Rural Employment Generation Scheme.

Babu began developing his system during his previous posting in East Godavari district, winning the National Aadhar Governance Award from the previous administration in 2012. He has now been handed the National Award for e-Governance 2016-17.

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About Abhimanyu Kumar

Abhimanyu Kumar is a journalist based in New Delhi, India. He writes on issues related to politics and governance for Indian and foreign media. He was previously with The Hindu and The Sunday Guardian.

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