The Central Government is set to roll out its Central Bank Digital Currency (CBDC)-based food subsidy programme in Chandigarh on a pilot bases by June.
The move is being seen as a significant step to integrate digital currency with the Public Distribution System (PDS). Under the proposed system, beneficiaries will receive their PDS entitlements in the form of digital tokens through a wallet issued under the Reserve Bank of India’s CBDC framework. This will replace the conventional practice of collecting subsidised foodgrain from ration shops.
According to officials, the initiative would improve transparency, efficiency and targeted delivery, as it would plug gaps in the existing distribution system.
Currently, beneficiaries often face issues such as stock shortages or reduced entitlements, particularly if they visit fair price shops later in the monthly cycle. While direct benefit transfer (DBT) has been considered as an alternative, concerns remain that unrestricted cash transfers may be diverted towards non-food expenses, defeating the purpose of food security.
Issued by the RBI, the CBDC carries the same legal status as physical currency but can be programmed for specific usage. In this case, the digital tokens can only be used to purchase essential foodgrain such as wheat and rice.
The tokens will function like digital coupons, remaining under the beneficiary’s control and redeemable at authorised ration shops or designated outlets. Importantly, the system is designed to prevent usage beyond approved categories, thereby ensuring that the subsidy is utilised for its intended purpose.
Beneficiaries with smartphones can use a digital wallet, while those with feature phones can receive redemption codes. Individuals without access to any device will continue to receive benefits through the existing physical distribution channel.
In the current pilot phase, the validity of digital tokens is one month, although officials noted that this could be extended up to three months if required.
The officials clarified that the reform was aimed at improving subsidy delivery and did not impact procurement systems, minimum support price mechanisms or entitlements under the National Food Security Act. The physical ration distribution system would continue to operate alongside the digital model to ensure no beneficiary was excluded.
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