Justice Wadhwa Committee on Public Distribution

System
STATE OF BIHAR
Index
Chapte
rs
A
B

Topics
Preliminary

Page. No.
1-7

Broad overview

i-x

Introduction

1-4

Legal Regime

Distribution of foodgrain

19-62

Transportation

63-68

Mode of Appointment of FPS

Dealers

69-74

Viability

75-88

Identification of BPL

89-96

Food Coupon scheme

Vigilance and Enforcement

111-125

10

Computerisation

126-128

11

Recommendations

129-140

5-18

97-110

CENTRAL VIGILANCE COMMITTEE

ON
PUBLIC DISTRIBUTION SYSTEM

REPORT
ON
THE STATE OF BIHAR

BROAD OVERVIEW

ii

1. Public Distribution System (PDS) is synonymous with corruption.

Bihar is no different. There are two corrupt sectors in PDS, one is
distribution of food grain and the other is distribution of Kerosene
Oil.

In PDS it is the Fair Price Shop (FPS) which is the breeding

ground of corruption. In one report we have said that there is a web

of

corruption

woven

around

FPS

by

its

owners,

politicians,

bureaucrats, officials of Food and Supplies Department, Civil

Supplies Corporation and the transporters. FPS is an important link
in the PDS but then it is the FPS which is the epicenter of corruption.
It is common knowledge to all, whether he be a politician,
bureaucrat or any other public servant that an honest FPS owner
cannot survive from the income earned from PDS and that he has to
indulge in diversion of food grain in black market.

PDS food is

meant for the poor. There being no sustainable income for the FPS
dealer, yet there is clamour for allotment of FPS. The answer is not
far to seek. All are involved in this crime whether be it a transporter
or an official or a bureaucrat or politician.
2. No doubt that FPS is not a profitable proposition. But then it is also
apparent that the FPS owners are not interested in selling other
grocery items from the shop. No amount of increase in commission
even by 100%, to an FPS owner will make his shop viable for him to
earn sufficient income.

An FPS owner can certainly add to his

income by selling grocery items from his shop but, it would appear,
greed overtakes to make a quick buck from the black-market and to
share his ill gotten income with corrupt officials, politicians and
transporters.

There is no prohibition from the State for the FPS

owner to sell other non-PDS items from his shop.

Diversion is

lucrative business considering the vast difference between the PDS

food-grain price and the market price.
iii

3. PDS is undoubtedly the largest food distribution network of the kind

in the world.

While procurement, storage in FCI godowns and

allocation of food grain to the states is in the hands of the Central

Government distribution is done through the Fair Price Shops
licensed by the State after identifying BPL and AAY population as
per the estimation

fixed by the Planning Commission and the

distribution is done.
4. Central Government has fixed total number of BPL families in Bihar
as 65.23 lakhs.

In 2007 Bihar State conducted survey of BPL

families which has thrown up a total number of 1.23 crores BPL

families in the State. There were inclusion and exclusion errors and
objections were invited. Nearly 57 lakhs such objections have been
received. It is stated that it would be reasonable to assume that
after disposal of these objections, at least 40% to 50% of these
families will be added in the existing BPL list thus increasing the
total number to 1.5 crore BPL families. One can judge the enormity
of the problem.
5. Central Government allots food grains for 65.23 lakhs families at the
rate of 35 Kg. (25 Kg. rice + 10 Kg. wheat) per family per month. In
order to meet the requirement of 1.23 crores BPL families, State
Government has reduced the allocation to 25 Kg. (15 Kg. rice + 10
Kg. wheat) per family per month primarily because under the new
BPL survey the average family size stood reduced from6.16 to 4.38
persons per family.
6. State Government is somewhat able to manage the quantity of rice
required for distribution because of scaling down the allotment of
rice from 25 Kg. to 15 Kg. but shortage for wheat remains. Though
iv

the State Government has made a provision of Rs. 868 crores

approximately to fulfill the entire requirement of food grains for
covering all the BPL families it has however, not made

any

purchases for arranging wheat from its own budget (For the present,
the State Government has allocated Rs. 60 crore for this purpose
Letter No. BPL 04/08 of Food Secretary, State of Bihar). It was
found that to meet the requirement of food grain the State
Government requires FCI to shift food grain from one godown to
another which entails delay and results in backlog. In some cases
there is insufficient food grain allocation for a particular month in a
given district, the food grain in that district is allowed to lapse
causing non-availability of food grains to beneficiaries. To fill up the
gap State has made no purchases of food grain so far resulting in
backlog and even lapsing of allocation, the ultimate sufferer being
the poor for whose benefit TPDS was evolved.
7. There are other factors leading to backlog and lapsing of PDS food
grain allocation. These factors are shortage of storage space in
BSFC godowns, non-availability of trucks to transport the food grain
and non payment of cost of PDS food grain within time allowed by
the FCI. Of course, the reason given by the BSFC for non-deposit is
the failure of FPS dealers deposit the amount within time. To meet
this difficulty, the State Government has allowed BSFC to spend
25% of the cost of foodgrain from its own sources to lift the
foodgrain timely from the FCI.
8. Central Government is proposing to introduce the National Food
Security Law which would provide statutory framework to ensure
food security to all.

But the law will be rendered futile like the PDS

system if it does not come up with an appropriate mechanism for its

implementation. During the meeting with the officials of the State
v

Government, the Chief Secretary Mr. R.J.M. Pilai informed the

Committee that State Government has given its response to the
proposed National Food Security Act. This enactment, which is yet
to come into force makes provision for the supply of 25 Kg/ of food
grain every month to a BPL family at the average rate of
Kg.

Rs.3/- per

Proposed comments on the Background Note by the State

Government and letter dated 30.6.2009 of the Chief Minister of

State of Bihar to the Central Government, were given to the
Committee for perusal. There are two basic issues presented by the
State Government. One, if the number of BPL families is fixed by the
Central Government in advance, then the task of identifying these
beneficiaries should also be carried by the Central Government only.
It is pointed out that the regime of identification of BPL families
restricted to the targets fixed is a dispensation which is not
acceptable to the State Government. The second proposition is that
objectives of proposed National Food Security Act can be met more
effectively

by

adopting

system

of

cash

transfer

to

the

beneficiaries instead of resorting to a complex delivery mechanism,

fraught with possibility of diversion as well as errors of inclusion and
exclusion under the TPDS.

State Govt. pointed out that it is not

prudent to link the procurement operations under the regime of MSP

to the requirements under TPDS since the objective of MSP
operations is to primarily ensure remunerative prices to the farmers
in the country and therefore, it should not be constrained by any
targets in this regard.

With reference to the suggestions in the

concept note of the Central Government about the need for a fresh
survey and

5-year validity of ration cards issued thereafter State

Governments view was that it felt strongly that the Central

Government should institute a regular Commission

for this task

and this Commission can undertake the task of review of BPL list.
State Government commended
vi

the proposal that only families

relatively lower level

within APL category will be allocated food

grains if at all some allocations are to be made to this category. (It

may be pointed out that this Committee in its report for Delhi had
made such a proposition. State Government also pointed out that it
had not so far been getting even 10 Kg. per APL family under TPDS.)
State Government also supported the proposition in the concept
note that individual may be made unit for entitlement instead of the
family.
9. State Government has not issued ration cards since January 2008
which is mandatory under the Public Distribution System (Control)
Order, 2001 issued by Central Government under Section 3 of the
Essential Commodities Act 1955.
10.

PDS food grain is being issued to the beneficiaries, whose

names exist in the survey list by means of coupons. Though the

ration cards are lying printed, but these could not be issued as the
software to print the ration card has provision to in clued the name
of only head of the family.

State Government took a decision to

incorporate the names of all the family members on the ration

cards. A fresh survey was ordered in February 2009 and directions
were to complete the survey within three months. Committee was
informed that survey has yet not been completed and it was not
certain as to when it would be completed. The State Government
informed the Committee that the examination of the objections to
the survey list was likely to be completed by August 2009. The BPL
list is thus not complete till all the objections
examined.

received are

In these circumstances, food coupon scheme was

introduced to keep the check on the distribution of PDS foodgrain to

the beneficiaries in the absence of ration cards.

vii

11.

Newspaper reports suggest that as far back as June 2007

Bihar launched a coupon system aimed at checking malpractice and

encouraging better service at ration shops distributing essential
commodities to poor families. It is a known fact that corruption and
malpractice is rampant in Bihar.

Ration card holders were often

turned away from the FPS and large quantity of food grain meant for
poor was sold in the open market.

As per the estimate of the

Planning Commission more than 50% of PDS food grain finds its way
to black-market. However, the coupon system so introduced could
not

succeed

because

of

these

problems,

irregularities detected in the BPL list.

and

large

scale

Newspapers reported that

many poor had been left out of the list while those above poverty
line including gazetted offers had made it to the BPL list.

State

Government therefore, proposed to rectify the BPL list.

12.

Present

coupon

system

was

introduced

in

June

2008.

Coupons are colour coded - yellow for AAY, red for BPL and blue for
kerosene oil. Committee has devoted a separate chapter on the
working of coupon system in the State. Committee has found
various draw-backs in the working of the coupon system and made
various recommendations to streamline its working and stamp out
the irregularities in the functioning of the coupon system. It appears
coupon system was introduced with all the good intentions but in
the absence of ration cards the system does not ensure that the
PDS food grain goes to the correct beneficiary. With huge backlog in
distribution; no check in collection of coupons by authorities;
allocation not being made on the basis of coupons collected and yet
full allocation being made to FPS every month based on number of
beneficiaries/coupons attached to that shop, the whole system has
fallen into shambles.

viii

13.

On 15.2.2007 State Government issued a notification under

the Public Distribution System (Control) Order 2001 after taking

prior

concurrence

Notification/Order

of
was

the
issued

Government
by

the

of

State

India.

This

Government

in

connection with Fair Price Shops as to issue of licence, suspension

and cancellation thereof, terms and conditions and regulate sale
and distribution of essential commodities.

Aforesaid State Order

prescribes procedure for issue of licenses, constitution of Selection

Committees for issue of license and factors to be taken into account
for appointment of FPSs. It is stated that for over the last five years
no new license has been issued for FPS only some have been issued
on compassionate grounds. The Selection Committee has to take
into consideration, the following factors for appointment of FPS:
2. Now, for new license approval of the Food Supply &
Commerce Department is not required.
2.1 The Selection Committee shall take following facts
into process in course of appointment of Fair Price
shops
(i)

According to 2001Census, 1350 population in Urban

areas and 1900 population in Rural areas have been
fixed as one of the criteria for appointment new shop
under Public Distribution System.

(ii)

There is a need to ensure that consumers need not

travel more than two kilometers for accessing Fair Price
Shops both inb Urban and Rural areas.

(iii)

For remote and inaccessible area especially areas

dominated by Scheduled Caste/Scheduled Tribe Fair
Price Shops may be appointed for a population of 1,000.
ix

(iv)

Reservation in allotment

of Fair Price Shops are as

follows:Scheduled Caste -

16 percent

Scheduled Tribe -

01 percent

Most Backward Class

Backward Class

12 percent

18 percent

Women Backward ClassCompliance

of

above

03 percent

mentioned

reservation

shall

be

applicable to future vacancy.

2.2

Reservation Criteria shall be applicable at Ssub

Divisional Level.
2.3

Following people and Institutions shall be given

priority in allotment of Fair Price Shops, excluding

compassionate cases.
2.4

Priority for issuance/New licence

shall be as

follows
(a)

Self help Group

(b)

Gram panchayat

(c)

Co-operative Society

(d)

Women/Co-operative Society run by women

(e)

Ex-Army co-operative Society

(f)

Handicapped

(g)

Educated unemployed

(h)

Preference should be given to the applicant who is

resident of concerned panchayat or ward.

2.5

Compassionate

Cases:-

On

priority

basis

wife/husband, son, unmarried daughter, daughter in law,

widow of deceased son would be allotted shops. Affidavit for
no objection shall be obtained from rest of dependent as
mentioned above. This application shall be accepted from the
dependent within the two years from the date of death of the
licensee.
14.

The notification/order also prescribes payment of licence fee,

duties and responsibilities of FPS dealer, working hours and

holidays, and also suspension and cancellation of licence and the
appeal thereafter. If orders given by any officers below the rank of
District Collector then aggrieved can file appeal to the District
Collector. If order is passed by District Collector then appeal shall
be filed before Divisional Commissioner. Appeal shall be filed within
30 days from the date of the order.
15.

Committee found that there has not been any criteria for

fixing of number of beneficiaries to each FPS. It could be from 125

to 1200. Committee examined the probable income that an FPS
could derive with 500 beneficiaries (red cards) attached to it. From
the Government records it would be Rs.3550/- per mo nth and if
kerosene oil is taken out, it would be Rs.2050/- per month.

Of

course, the calculation would show that proper expenses which an

FPS owner may have to incur, have been given correctly.

In any

case an FPS with 125 cards would certainly be incurring loss. For
one thing the cards for each FPS should have been rationalized and
it should be a condition that every FPS owner shall run a kirana
show for selling non-PDS items in the FPS.

With such a state of

affair that there can be no proper income from FPS for a family
having husband, wife and three children, it is specious to fix the
xi

categories of the persons to whom FPS can be allotted. It must be

known that FPS is meant for poor people and not for the benefit of
dealer. Allotment of FPS is not a largesse bestowed by the State for
giving

any benefit to a particular person by granting a licence of

FPS when there is no income. It would

also encouraging corruption.

appear that the State is

In various public meetings it was

openly admitted that FPS owner indulges in black-marketing PDS

food grain is diverted by the FPS owner in connivance with officials
whom he bribes. This was so stated in the very presence of the
officials.

In fact in the President of the FPS Dealers Federation

stated that their indulging in black-marketing may be said as Kaala

Bazari (kalaa) but in fact it is art i.e. Kala Bazari ( klaa ) by
which FPS owners are able to earn for their livelihood.

When an

official present in the meeting asked why do you give bribe?

Immediate retort was why do you accept? No one is in doubt that
diversion of PDS foodgrain is done with the connivance of the
officials. It was stated that in rural areas the minimum income of
FPS owner should be about 12 to 15 thousand per month and in
urban areas about Rs. 20 thousand per month.

The Committee,

therefore, could not suggest any increase in commissions payable

to FPS dealer.

The clamour for allotment of FPS shop cannot be

explained by any other way except that earning of fabulous income

from black-marketing and status that an FPS dealer gets in this
locality.

Against the price of 1 kg of wheat at the rate of about

Rs.4/- in the PDS in the market it is Rs13/- per Kg. which fetches
about Rs.9/- in the black-market.
16.

There have been many cases of diversion by transporters. It

appears that the transport contractors offer very low rates and they
make up their losses by diversion. A situation has come where the
transporters have been allowed to take the system to ransom. In
xii

Patna no transporter came forward to give the tender and now the
BSFC has to engage the same transporters at higher rates on daily
basis.
17.

Enforcement and vigilance in Public Distribution System are

non-existent. There is no complaint mechanism and an aggrieved

consumer has nowhere to go for redressal of his grievances. The
Police only investigates cases handed over to it by the department
and does nothing on its own to check the theft of valuable food
grain. The vigilance committees have either not been constituted
or are too unwieldely to act efficiently. The structure of constitution
of committees is such that at places it has as many as 72 members.
They are constituted of political persons from various recognized
parties who may instead bring political agenda to the meetings. The
State Govt. is now proposing to give Rs.100/- per sitting to each
non-official member for him to take part in the meetings.

For a

vigilance committee to function properly it has to be of small-scale

with a earmarked place to meet every one/two months on a fixed
day and time. Minutes of the vigilance committee have to be
scrutinized and action taken.
18.

Considering various features in the working of PDS during its

visit to Bihar the Committee has given its recommendations. Details

of distribution of food grain with all its implications have been given
in Chapter 3. To weed out corruption in PDS it is the information
technology which can help. Human intervention has to be minimal.
System has to be devised in such a way that issue of food grain
from FCI godown and that received by the beneficiary match.
Central

Govt.

has

already

embarked

upon

the

scheme

of

introduction of Smart Card in PDS in the site of Haryana and the U.T.
of Chandigarh.

This Committee has already submitted a separate

xiii

report on computerization.

While the Central Govern has fixed

number of BPL families in the State, this number increases manifold

by the State adopting its own criteria.

Centre and State should

have the same criteria for identifying BPL families.

PDS can

succeed only if it is implemented on the basis of zero tolerance in

every sphere.

PRELIMINARY
1.

In Writ Petition(C) No.196/2001 Peoples Union for Civil

Liberties V/S Union of India and Ors. Honble Supreme Court of
India by Order dated the 12.7.2006 constituted a Committee to be
headed by me to look into maladies affecting the proper functioning
of the Public Distribution System (PDS) and to suggest remedial
measures. The operative portion of the order reads as under
xiv

After having heard learned counsel for the parties, we find

that there is practically no monitoring over the sums allotted
for the Public Distribution System (in short PDS) by the Central
Government, and its utilization. The amount involved by the
Central Government and its utilization. The amount involved we
are told is in the neighborhood of Rupees Thirty Thousand
Crores annually. Certain suggestions have been given by Mr.
Colin Gonsalves, learned senior counsel as to the modalities to
be adopted in such cases. At the present stage we feel it would
be necessary to constitute a Central Vigilance Committee
headed by a retired Judge of the Court to be assisted by Dr.
M.C. Saxena, the Commissioner earlier appointed by this Court.
We requested Mr. Justice D.P. Wadhwa to head the Committee.
The Committee shall look into the maladies which are affecting
the proper functioning of the system and also suggest remedial
measures. For this purpose the Committee shall amongst other
things, focus on:a)

The mode of appointment of the dealers,

b)

The ideal commission or the rates payable to the

dealers, and

c)

Modalities as to how the Committees already in place,

can function better,

d)

Modes as to how there can be transparency in allotment

of the food stocks to be sold at the shops.

While dealing with the question of the mode of appointment,

the Committee shall also suggest as to a transparent mode in
the selection of the dealers. The Committee shall also indicate
as to how more effective action can be taken on the report of
xv

the Vigilance Committee already appointed.

It goes without

saying that the same shall be in addition to the legal remedies

available to any citizen in setting law into motion. We request
the Committee to give its report within period of four months
so that further instructions/directions can be given.
The Committee would invite suggestions from general public,
organizations and would consider the suggestions, if any
received in the proper perspective.
2.

Honble Courts direction was initially given for the Government of

Delhi to be followed on an all India basis.

3.

Committee submitted report on Delhi on 21.8.2007.

4.

By order dated 10.1.2008, Honble Court, while accepting the report,

directed the Committee to do the similar exercise in terms of earlier
for the entire country.

5.

Scope of the task assigned to the Committee thus having been

enlarged, the Committee projected to the Department of Food &
Public Distribution, additional requirements of staff, space and
delegation of financial powers for its smooth functioning. The
Department dilly dallied and did not meet the requirements. The
Committee had to approach the Honble Court again and again. It
was only after a peremptory Order dated 25.8.2008 was passed by
the Honble Court that the Department started taking steps for
creating necessary infrastructure.

It was only thereafter that the

Committee could start functioning in right earnest. The Honble Court

extended the time for submitting the report till April 2009.

xvi

6.

The Committee submitted its report for the States of Uttarakhand,

Jharkhand, Orissa and Karnataka. Thereafter, the Honble Court has
been pleased to extend the time further till December 2009.

The

Committee has since submitted the report on the State of Andhra

Pradesh. The Committee is presently submitting its report on the
State of Bihar
7.

The Committee has already submitted a separate comprehensive

report on Computerization of PDS.

8.

No one has doubted the utility of PDS being the need for supply of
food grains to the poor of the country at affordable rates.
Procurement and distribution of food grains is a huge and gigantic
task but then the whole system is built on corruption. There are more
leakages and maladministration and benefits to the poor are low.
Inefficiency and corruption has made PDS corrupt at several levels.
(during the course of the visit of the Committee to various places it
found that equally and perhaps more corrupt is the distribution of
kerosene

oil).

The

system

monitoring and enforcing.

lacks

transparency,

accountability,

Survey is not being conducted regularly

and properly with the result people Above Poverty Line (APL) have
been issued Below Poverty Line (BPL) cards and those eligible for BPL
cards have been ignored. There is menace of bogus cards and in the
absence of ration cards the whole PDS system on the basis of
coupons has fallen into disarray.

Bogus cards are in abundance.

Immediate measures are required to reduce the diversion of food

grains. Delivery systems under the PDS have to be improved so that
the real beneficiary gets its due entitlement at fixed price, fixed
quantity, fixed time and wholesome quality. Innovative methods are
required to improve the system. The whole system has to be totally

xvii

revamped and modern technology would appear to be the only

answer.
9.

Committee has suggested that in order to combat corruption and

strengthening PDS there has to be zero tolerance approach.
Everything appears to be fine on paper but its implementation is
faulty.

10. During its visit to State of Bihar, the Committee visited districts of
Patna, Jahanabad, Bihar Sharif, Begusarai, Samastipur, Muzaffarpur.
Apart from meeting officials of the State, BSFC, FCI, the Committee
met across section of people.

These included NGOs, FPS owners,

Transporters, Godown keepers and beneficiaries. The Committee also

inspected FPS, State Godowns and godowns of FCI. The Committee
also visited the offices of Food & Consumer Production Department of
BSFC.
11. During its visit the Committee held discussions with the officers of the
State Government, Bihar, State Civil Supplies Corporation (BSFC) and
FCI. Committee interacted with NGOs, FPS owners and beneficiaries
and held public meetings.

Committee also inspected the godowns

and the FPSs. Committee got full cooperation from the officials of the
State

Government,

BSFC

and

the

FCI.

Committee

records

appreciation of the assistance rendered to the Committee by various

officials of the State Government. In the first meeting the officers
who participated are Mr. R.J.M. Pilai. Chief Secreary, Mr. Deepak
Kumar, Principal Secretary, Urban Development Department, Mr.
Tripurari Sharan, Secretary, Food & Consumer Protection Department,
Mr. K.P. Singh, Joint Secretary, Rural Development Department, Mr.
R.K. Sinha, Special Officer Rationing Patna, Mr. Jai Shankar Prasad
Yadav, Dy. Secretary, Food & Consumer Protection Deptt., Mr. Suresh
xviii

Thakur, Dy. Secretary, Food & Consumer Protection Deptt., Mr. N.P
Mandal, Secretary to Food Commissioner, Mr. Sushil Nagpal, General
Manager, FCI Patna, Mr. S. K. Bhandari, DGM(FCI), Mr. P. Rohit,
Assistant General Manager(FCI), Mr. Pradip Kumar, Managing Director,
BSFC, Mr. R.N. Lal, Chief of Procurement, BSFC, Mr. D.N. Jha, Dy. Chief,
BSFC,
Participants of the meetings held at various places are as under:Patna
Mr. Trupurari Sharan, Secretary, Food & Consumer Protetion Deptt, Mr.
Jitender Kumar Sinha, Collector & Mr. R.K. Sinha , Special Officer,
Rationing
Jahanabad
Mr.Sanjay Kumar Aggarwal, Collector, Mr. Om Prakash Rai, Additional
Divisional Magistrate, Mr. Manu Maharaj, Superintendent of Police, Mr.
Ravi Kumar Sinha, Manager, FCI, Mr. Manoj Kumar, Area Manager, FCI,
Mr. Nirmal Kumar, Roy, District Manager BSFC.
Gaya
Mr. Sanjay Kumar Singh, Collector, Mr. Durgesh Nandan, ADM, Mr.
Akhilesh Kumar, DSO, & Mr. Nirmal Kumar Roy, Distt. Manager, FCI
Bihar Sharif
Mr. Anupam Kumar, Collector,

Mr. Jiut Singh, Sub Divisional

Magistrate, Mr. Radhe Shyam Sah, Sub Divisional

Magistrate, Mr.

Arun Kumar Prasad, ADM, Mr. Rakesh Ranjan, District Supply Officer,
Mr. Ram Roop Prasad, SDO, Mr. A Thakur, Area manager, FCI, Mr. R.K.
Sinha, Manager(QC),

Mr. K.B.P Srivastava, District Manager, BSFC,

Mr. Anil Kumar, Accounts Officer, BSFC.

xix

Begusarai
Mr. Jitender Srivastav, Collector & DM. Mr. Ashok Kumar Summan,
SDO, Mr. Suresh Thakur, Dy. Secy, Mr. Mohd. Hakizkhan, Addl.
Collector, Mr. Ramesh Mishra, DDC Mr. Anil Kumar Singh, Dy. Chief of
Audit. Mr. S.N.P Sinha, District Manager, BSFC, Mr. R.P. Mochi, Area
Manager, FCI & Mr. T.S.Hemlovenn, Manager, FCI.
Samastipur
Mr. Asangba Chuba Aao, Collector, Mr. Uday Kumar, Dustrict Supply
Officer, Mr. Subhas Chandra Jha, District Supply Officer, Mr. Suresh
Thakur, Dy. Secretary, Food & Consumer Protection, Mr. Ram Prit
Mochi, Area Manager, FCI, Mr. Ravi K. Sinha Manager, FCI Mr. Ajay
Kumar Mitra, Dy. Chief Computer State, FCI Mr. Ashutosh Kumar,
District Manager BSFC, Mr. Anil Kumar, Dy. Chief Officer, BSFC,
Muzaffarpur
Mr. Vipin Kumar, Collector, Dr. J.L. Sinha, Sub Divisional Magistrate,
Mr. K. Kapoor, Sub Divisional Magistrate, Mr. Harishankar Prasad,
District Supply Officer, Mr. Shanker Mehta, Additional District Supply
Officer, Mr. Suresh Thakur, Dy. Secretary, Food & Consumer Protection
Deptt , Mr. Jaiprakash Narayan, Block Supply Officer, Mr. Ajay Sharma,
Marketing Officer, Mr. Rakesh Ranjan, Marketing Officer, Mr. Narul
Hoda, Marketing Officer, Mr. Rambakil Pandy, District Manager, (FCI)
Mr. N.P. Singh , Manager, FCI, Mr. A.K. Paswan, Area Manager, FCI,
Mr. Ravi Kumar. Sinha, Manager (QC), FCI, Mr. Anil Kumar, Officer
(Audit) BSFC.
12. The Committee also got assistance from the lawyers recommended
by the Judges of the Patna High Court. The names of the lawyers are
Ms. Guriya Nisha and Mr. Rajiv Roy.

xx

13.

Members of the Committee who visited the State are Mr. Dinesh
Dayal,

Ms. Meenakshi Chauhan, Ms. Naomi Chandra and Mr. Shohit

Chaudhry (being members of Legal Team),

and Mr. J.K. Bhutani,

Section Officer. Mr. Dayan Krishnan though could not visit the State
collaborated in preparing the Final Report. Mr. S.C. Rawal, a former
Registrar of Delhi High Court and appointed as Secretary by the
Chairman, has been performing functions of the Secretary of the
Committee.
14. The Committee is submitting its report which has been divided into
various Chapters like Viability of FPS; Appointment of FPS dealers;
Vigilance

&

Enforcement;

mechanism,

Wholesale

and

retail

distribution of PDS food grains and Coupon system. Overview has

been given of the PDS in the State and recommendations made. An
attempt has been made to make each Chapter self-contained and
there is possibly a repetition at various places.

Delhi
August 2009
(Justice D.P Wadhwa)
Chairman
Central Vigilance committee
on Public Distribution System

xxi

FINAL REPORT

Chapter 1
INTRODUCTION
Public Distribution System in Bihar

1.1

Total population of Bihar State1 is 8,28,78,796. There are 38

Districts, 101 Subdivisions, 536 Blocks in State. State has 45,103
Revenue villages and 8471 Panchayats.

1.2

The Central Vigilance Committee on PDS visited the State of Bihar

and covered the areas of Patna, Jahanabad, Gaya, Begusarai,
Samastipur and Muzaffarpur districts of the State. As per the

http://gov.bih.nic.in/Profile/default.htm
xxii

Planning Commission 65 lakh (6.5 million) families in Bihar have

been declared Below Poverty Line. State Government has identified
1.23 crores BPL families. Thus, there is big difference in the data of
Planning Commission and that of the State Government with regard
to the number of people living below poverty line.
1.3

The Government of Bihar revised the constituents of food grain

under the Public Distribution System and slashed the quota of
foodgrain for BPL families from 35 kg. per family to 25 kg. per
family. The Bihar Government claims that the members per family in
the State are 4.38.2 The Government of India is allocating food
grains for the BPL families as per the Planning Commission data.
However the State has distributed the coupons as per its own 2007
survey of BPL which has resulted in an increased number of BPL
families. Hence it is difficult for the State to distribute the food
grains to all the BPL beneficiaries. As a result the government of
Bihar has reduced the entitlement per family from 35 kg. to 25 kg.
per month. This reduction has been justified by the State
Government in view of the fact that the average family size in the
State has also come down from 6.16 to 4.31.

1.4

In the beginning of 2007, all ration cards of the TPDS beneficiaries

were cancelled for the purpose of introducing new ration cards in
the State on the basis of a fresh survey. Thus presently there are no
ration cards in the State of Bihar and ration is distributed only on
the basis of coupons. The Committee was informed that the new list
as per 2007 survey, has name of the head of the family only. The
task of preparation of the new list is time consuming as the

Indian Express dated 29th march 2008,

http://www.indianexpress.com/story-print/289825/

xxiii

administration is incorporating the names of all the family members

in the data. It was further informed that there are 57 lakhs
objections against the 2007 survey list which are also being looked
into. Hence, the ration presently is distributed only on the basis of
coupons, i.e., the beneficiaries have to submit their coupons and
pay money to the FPS dealers to lift their ration.
1.5

In the State, wheat is being distributed at the rate of Rs.4.96 per kg.
and rice at the rate of Rs.6.52 per kg. to BPL beneficiaries who are
entitled to get 10 kg wheat and 15 kg rice per family. Similarly AAY
beneficiaries are entitled to get 10 Kg. wheat at the rate of Rs. 2 per
Kg. and 15 kg. rice at the rate of Rs.3 per Kg.

1.6

Prior to 2008 the entitlement of grain to the various categories of

beneficiaries was as under:

BPL
AAY
APL
1.7

Before
2008
Rice
25 kg.
Wheat
10 kg.
Rice
21 kg.
Wheat
14 kg.
Distributed in Urban areas
etc.

After 2008
15 kg.
10 kg.
15 kg.
10 kg.
on occasions

Difference
(- 10)
(-6)
(-4)
like festivals

The State has one more category of beneficiaries called Special

AAY. Ration entitlement of AAY beneficiaries was reduced from 35
kg to 25 kg and the balance stock is distributed to the Special AAY.
This category has been created out of the BPL category itself. Rice is
available for distribution to this category but there is shortage of
wheat as the distribution of allocation of wheat is same as earlier,
i.e. 10 kg.

1.8

The present Report looks into the PDS in Bihar with special focus on
the

Legal

Regime,

Distribution

xxiv

of

foodgrain

in

the

State,

Transportation, Mode of appointment of FPS dealers, Viability of FPS,

BPL identification, Coupon system in the State, Vigilance and
Enforcement,

Computerization

Committee.

xxv

and

Recommendations

of

the

Chapter 2
LEGAL REGIME
2.1 Entities involved in the Public Distribution System in Bihar
The various entities involved for distribution of PDS foodgrain to the
beneficiaries in Bihar are as follows:
2.1.1 Food Corporation of India (FCI): FCI was set up under the Food
Corporation Act, 1964, inter alia for the purpose of distribution of
food grains throughout the country under the Public Distribution
System. The FCI is responsible for making food grains available to
the State Governments in terms of the allocations fixed by the
Central Government. Presently there are 54 godowns of FCI in the
State of Bihar having total storage capacity of 575,006 MT. The food
grain is transported from FCI to the State godowns through
transport contractors engaged by BSFC.
2.1.2 Bihar State Food & Civil Supplies Corporation Ltd. (BSFC):
BSFC is a government undertaking responsible for procurement,
lifting and distribution of food grain under the Public Distribution
System and for implementing other schemes. The Corporation
operates through 25 field units in Bihar known as BSFC Districts.
The apex body of the Corporation is the Board of Directors. At
present the Corporation is headed by the Managing Director. The
Managing Director acts as the Chief Executive officer of the
Corporation and is assisted by various functional chiefs who are in
charge of particular sections such as Administration, Procurement &
Distribution, Finance and Accounts, Audit & Budget. There is also a
provision

for

Company

Secretary.

At

the

District

level,

the

organisation is headed by the District Manager. There are 351

godowns throughout the State. These godowns are managed by
Assistant Godown Managers (AGM).3
3

Material supplied by the BSFC at Patna on 14th July 2009, at pg.1.

xxvi

2.1.3 Fair Priced Shop (FPS):

Fair Price shops are the final link in the

chain of distribution of food grain to the beneficiaries. The State of

Bihar is divided into 38 districts and there are 44,480 FPSs in the
State. The FPS dealers have to lift the food grain from the BSFC
godowns by arranging their own transport for which the State
reimburses the dealers at the rate of Rs.4/-per quintal of grain.
2.2

Statutory Framework

2.2.1 Essential Commodities Act, 1955: The Essential Commodities

Act is an Act to control the production, supply and distribution of
certain commodities in the interest of general public. The Act also
regulates trade and commerce pertaining to such commodities.
i.

Section 3 of the Act confers powers on the Central Government

to control production, supply, and distribution etc. of essential
commodities. Central Government has issued an order called Public
Distribution System (Control) Order 2001 (Order), which was
amended in 2004.

ii.

Stringent provisions exist in the Act and the Control Order, to

deal with any infringement of the provisions of the Act or the Order.

iii.

Section 6A provides for confiscation of any essential commodity

in pursuance of Section 3 of the Order without unreasonable delay.
The section provides that if the Collector is of the opinion that it is
expedient to do so, he may direct the commodity to be seized and
be produced for inspection before him and if he is satisfied then he
may order the confiscation of the commodity so seized.

iv.

Section 7 provides for penalties. Any person contravening the

Order is liable to be sentenced to imprisonment, which may extend

xxvii

up to 7 years and shall also be liable to fine.

The sentence of

imprisonment cannot be less than 3 months unless there are

adequate and special reasons. The property in respect of which
contravention of the Order has taken place, is liable to be forfeited
to the Government and so also any vehicle used in carrying such
commodity. If a person commits offence for the second time, then
imprisonment cannot be for less than 6 months subject to adequate
and special reasons.
v.

A person who attempts to contravene or abets any contravention

of the Control Order is similarly liable (Section 8).

vi.

Section 9 provides for punishment up to 5 years or fine or both, if

the record is not maintained in terms of the Control Order or any
statement or information furnished, which is not true.

vii.

Section 10 deals with offences by Companies.

viii.

Section 10A has made any offence punishable under the Act

cognizable.
ix.

Section 10C provides that Court may presume the existence of

such mental state where an offence under the Act requires culpable
mental state on the part of the accused. Culpable mental state
includes intention, motive, knowledge or reason to believe a fact.

x.

Under Section 11, a Court can take cognizance of an offence

under the Act not only on a complaint made by a public servant but
also by any person aggrieved or any recognized consumer
organization.

xi.

An offence for contravention of the Control Order is to be tried

summarily (Section 12A).

xxviii

xii.

If an accused is sentenced to imprisonment for a period not

exceeding one month and

a fine not exceeding Rupees two

thousand, no appeal can be filed.

xiii.

Section 14 provides that when a person is prosecuted for

contravention of any order which prohibits him from doing any act
or being in possession of a thing without lawful authority or without
a permit,

or other document, the burden of proving that he has

such an authority, permit, licence or other document, shall be on

him.
2.2.2 The Public Distribution System (Control) Order, 2001: The
Public

Distribution

System (Control) Order, 2001

(hereinafter

referred to as the PDS Order 2001) has been issued by the Central
Government in exercise of powers conferred by Section 3 of the
Essential Commodities Act, 1955 for maintaining supplies and
securing availability and distribution of essential commodities under
the Public Distribution System. The said Order has been amended in
2004.
2.2.3 The Public Distribution System (Control) Order, Notification
dated 15.02.2007 (2007 Notification) :
The 2007 Notification has been issued by the government of Bihar
in pursuance of the PDS (Control) Order 2001 in exercise of the
powers conferred by Section 3 of the Essential Commodities Act,
1955, in connection with the functioning of the FPS as to issuance of
licence, suspension/cancellation, terms and conditions and
regulating the sale and distribution of the essential commodities.
Some of the important provisions of the Notification are as under:
1.

Clause 2 pertains to the constitution of a Selection Committee

for issuing licence to FPS dealers. As per the provision, the
constitution of the Selection Committee is as under:

xxix

Chairman - The District Magistrate

Secretary The Special Officer Rationing for Rationing Area, Patna,
ADM (Supply) Patna for Patna district and for the remaining districts,
the District Supply Officer/ In charge District Supply Officer (DSO)
Members (i)
The Sub Divisional Officer of Respective Sub
Division (SDO)
(ii)
Any schedule caste/ schedule tribe officer
(iii)
2.

posted in District.
The District Co-operative Officer

As per the 2007 Notification, the reservation in allotment of FPS

shall be applicable as follows:
Scheduled Caste
Scheduled Tribe
Most Backward Class
Backward Class
Woman Backward Class

16 %
1%
18 %
12 %
3%

The reservation criteria shall be applicable at the Sub Divisional Level

3.

The following people and institutions shall be given priority in

allotment of FPS, excluding compassionate cases:
(a)
Self Help Group
(b)

Gram Panchayat

(c)

Co-operative Society

(d)

Women/ Co-operative Society

(e)

Handicapped

(f)

Educated unemployed

(g)

Preference should be given to the applicant who is resident of

concerned Panchayat or ward.

4.

Compassionate Cases: On priority basis wife/husband, son,

unmarried daughter, daughter in law, widow of deceased son would
be allotted shops.
Exclusion Norms:
(i)
Shops shall not be allotted to more than one member of the
joint family

xxx

(ii)

Elected

Mukhiya,

M.L.A,

M.P.,

Member

of

Municipal

Corporation and Municipality till their tenure

(iii)

Flour Mill owners

(iv)

Minor, Lunatic or person of unsound mind and un-discharged

insolvent

(v)

Applicant shall not be given licence if he/she is finally

convicted under Essential Commodities Act, 1955

(vi)

If the applicant holds the post of profit in the Government.

5.

Renewal of Licence: Once allotted, the licence shall be renewed by

the Licensing Authority every 5 years on payment of Rs.400/- by the
dealer.

6.

Duties and Responsibilities of FPS dealer:

Clause 5 lays down the following duties of FPS dealers
(1)
Sale of essential commodities as per entitlement of
beneficiaries at the retail price fixed by the Food Supply &
Civil Supplies Department, Bihar under the PDS.
(2)
Display of information on a notice board at a prominent place
in the shop on daily basis regarding (a) List of BPL, Antyodaya
and Annapurna beneficiaries, (b) entitlement of essential
commodities, (c) scale of issue, (d) retail issue prices, (e)
timings of opening and closing of the FPS (f) stocks of
essential commodities received during the month (g) opening
and closing stock of essential commodities and (h) the
authority for redressal of grievance/lodging complaints with
respect to quality and quantity of essential commodities
under the PDS.
(3)
Maintenance of records of beneficiaries, stock register, issue
and sale register,
(4)
Furnishing of copies of specified documents, namely, ration
card register, stock register, sale register to the Inspecting
Authority Block Supply Officer or as directed by Licensing
Authority.
(5)
Display of samples of food grains being supplied through the
FPS.
(6)
Production of books and records relating to the allotment and
distribution of essential commodities to the inspecting
authority and furnishing of such information as may be called
for by the inspecting or licensing authority.

xxxi

(7)
(8)

Accounting of the actual distribution of essential commodities

and furnishing the balance stock at the end of the month to
the Block Supply Officer or as directed by Licensing Authority
Opening and closing of the FPS as per the prescribed timings
displayed on the notice board.

7.

Working Hours:
Clause 6 of the Notification lays down the working period and
holiday for FPS. The FPS dealers are allowed only gazetted holidays
and weekly holiday (Monday) to close their shops. The FPS shall
remain open between 7 am to 1 pm during the month of March to
August and from 8 am to 2 pm during September to February.

8.

Appeal:
Clause 15 provides for Appeal against the Order of the Licensing
Authority denying the issuance or renewal of licence or of
Cancellation of the licence. The Appellate authority is as notified
under the PDS (Control) Order 2001.

2.2.4 Vide letter dated 26.02.2001, instructions have been given with
regard to strict vigilance on the functioning of the FPS and the
inspection thereof. Instructions have been laid down with regard to
regular weekly inspection of the FPS. Specific period has been
prescribed within which the concerned official have to inspect the
FPS in the area under their jurisdiction. As per the said letter, at
least 10% of FPS in a particular area has to be test checked at least
once a month.
2.2.5 Vide Letter No. Q -16025/4/2002 AI (RD) dated 13.09.2002
Government of India directed the Government of Bihar to conduct a
fresh survey by adopting a normative approach for identification of
the rural poor by introducing a Score Based, Ranking based on
relative deprivations revealed by certain Socio-economic indicators
in contrast to the income and expenditure approach adopted in the
BPL Census 1992 and 1997 respectively. The State government was
given the flexibility to decide the cut-off scores for identifying and
sub-categorisation of the households into various Groups. The cut

xxxii

off scores may be uniform or could be varying within a State

depending on the ground realties of the State. Detailed guidelines
for conducting the BPL survey were also provided.
2.2.6 Vide Letter 22.10.2005 the government of Bihar laid down
guidelines for dealing with the problem of black marketing and
diversion of food grain. The concerned officials have been directed
initiate proceedings under the Prevention of Black marketing and
Maintenance of Supplies of Essential Commodities Act, 1980,
against those indulging in black marketing and diversion of grain.
2.2.7 Letter No.13/05-797 dated 04.03.2006 prescribes for a strict
implementation of all previous Orders with regard to black
marketing and diversion. Some important instructions as laid down
in the letter are as follows :
(i)

(ii)
(iii)

(iv)

The District Magistrate is responsible for ensuring proper

vigilance of the transportation and distribution of grain which
is to be done under the supervision of the concerned
supervising official who has to keep the DM informed of
details like the quantity of grain supplied, the truck number in
which the transportation takes place, the name of the
transporter /driver etc. These details have to be maintained in
a register. This register has to be jointly signed by the
supervising officer and the Lifting Incharge.
The above mentioned register has to be reviewed at least
once a month by the DSO. The DM has to review the same
once in every two months.
The abovementioned register has to be regularly compared
with the registers at BSFC. Legal action is to be initiated
against officials if the accounts/records at the FCI and BSFC do
not tally.
The unloading of grain at the BSFC will be done
only in the presence of the supervising officer.

(v)

After duly checking the quality of the grain, joint sampling of

the same will be done by the Assistant Godown Manager and
the FPS dealer, both of whom will sign the sample.

xxxiii

(vi)

Registers has to be maintained with regard to allocation and

distribution of grain by the FPS dealer. The dealer will be
prosecuted under the Essential Commodities Act if he is found
to be cheating in accounts/distribution.

(vii)

The DSO and the SDO are responsible for supervising the
distribution,

movement,

unloading

of

grain.

Under

no

circumstances will the grain be unloaded in the absence of

the supervising officer.
(viii) The unloading of grain at the FPS has to be certified by at
least 3 members of the Vigilance Committee. The Marketing
Officer is responsible for ensuring that this exercise is done
and also has to record the same in the Stock Register.
(ix)

The SDO is responsible for allocation of grain to the FPS

dealer. The same is supervised by the Marketing Officer who
allocates food grain on the basis of the coupons received by
the dealer in the previous month.

(x)

In case any instance of black marketing comes to light, the

concerned members of the Vigilance Committee, Marketing
Officer or other such officials will be prosecuted under the
Essential Commodities Act.

2.2.8 Vide letter dated 22.08.2006 the State proposed the introduction of
the coupon system for the distribution of foodgrains and kerosene in
the rural areas for BPL and AAY beneficiaries.
2.2.9 Letter No. 4025 dated 07.11.2007 provides for strict compliance
with

the

provision

of

Joint

Sampling

of

food

grain

by

representative of FCI, a representative of State and a representative

of District Administration. It was instructed that at the time of lifting
of grain from FCI the abovementioned representatives will ensure
that only if the quality of grain is good, is it lifted from the FCI. A

xxxiv

sample of the grain is to be kept by the District Administration and

one by the Sub Divisional Officer. The letter further provides that
the same exercise be done at the time of lifting of stock from the
BSFC.
2.2.10

Letter No. Misc.35/2008 -1882 dated 09.04.2008 makes the

SDO directly and personally responsible for the proper functioning of

the coupon system, distribution of grain and black marketing and
diversion of essential commodities.
2.2.11

Vide Letter No. Misc.-22/06 (Block) dated 28.04.2008, the

government of Bihar laid down that in view of the results of the BPL
survey conducted in the State, after which the number of BPL
families increased considerably, the total entitlement of grain for
such families was decreased from 35 kg. to 25 kg. per family. This
was in view of the facts that the government was not receiving
additional allotment of grain from the Centre, in accordance with
the new list of BPL families. The same letter also provided for the
category of Special Antyodaya Families.
2.2.12

Vide letter No.77/01-2261 dated 06.05.2008 the government

issued instructions with regard to re-constitution of Monitoring

Committees at the Sub Division level. As per this letter, the
Monitoring Committees at the Sub Division level are to consist of
the following members :
i.
ii.

Sub Divisional Officer

District Supply Officer

iii.

All
recognised
representatives
recognised political parties
All Zila Parishad members under the Sub Member
Division
President of the Local Body
Member
Representative nominated by the Local Member

iv.
v.
vi.

xxxv

Chairman
Member
Secretary
of Members

vii.
viii.
ix.

2.2.13

MLA and M.P.

Chief of Panchayat Samities of Blocks
under the Sub division
Representative of oil companies
Member
10 members nominated by the State Member
government including minorities, SC/ST,
backward class and women. One
representing each category.
Letter No. 77/2001 dated nil is with regard to the constitution

of Panchayat Level Vigilance Committees as under :

Panchayat Level Vigilance Committees
i.
Panchayat Mukhiya
ii.
Panchayat Sarpanch
iii.
Person defeated by closest
margin
in
the
Mukhiya
elections.
iv.
Person defeated by closest
margin
in
the
Sarpanch
elections.
v.
Ward members of the area
under which the concerned
FPS is covered.
vi.
Representatives of recognised
political parties nominated by
Block/
District
President/
Secretary
vii.
In the absence of the Mukhiya,
the Sub Co-ordinator Mukhiya
will head the Committee
2.2.14

Co-ordinator
Member
Member
Member
Member
Member

The abovementioned Letter No.77/2001 also lays down the

functions of the Panchayat Level Vigilance Committee which include

keeping a vigil on the lifting and distribution of food grain by the FPS
dealers, to ensure that the beneficiaries get the correct quantity of
food grain as per their entitlement, and to ensure that the FPS
dealers inform the coordinator of the Committee about the lifting
and distribution of grain.

xxxvi

2.2.15

Vide letter No. 13/05-3026 dated 05.06.2008 the government

of Bihar has provided for a Monthly Certification of lifting and

distribution of essential commodities by the FPS dealers. This step
has been taken to increase transparency in the process of lifting and
distribution of essential commodities. At the rural level the
Certification is to be done by the Panchayat Level Vigilance
Committees and at the urban level it is to be done by Urban local
bodies. It has been made mandatory for the FPS dealer to submit
the Certificate every month at the concerned office.
2.2.16

Letter No.77/2001 4400 dated 14.08.2008 provides for

constitution of Vigilance Committees at the Ward level as under:

i.
ii.
iii.

Ward Member
Co-ordinator
Ward members of the area Member
under which the concerned FPS
is covered.
One representative each of all Member
recognised political parties who
have been nominated by the
President / Secretary of the
district/block/urban local body

2.2.17
Letter No.BPL-03/08 4413 dated 19.08.2008 lays down that
the FPS dealers should deposit the Demand Drafts for lifting the
foodgrains by the 25th of the previous month. The bank Drafts have
to be deposited at the BSFC.
2.3

Orders Passed by the Honble Supreme Court in W.P. (C) NO.

196/2001.

2.3.1 The Honble Supreme Court by the Order dated 02.05.2003 directed
as follows:
A.

That the licences of those fair price shop owners who do not keep
their shops open throughout the month during the stipulated period,
fail to provide grain to BPL families strictly at BPL rates, keep the
cards of BPL households with them, make false entries in the BPL
cards, engage in black-marketing or siphoning away of grains to the

xxxvii

open market and hand over such ration shops

person/organizations, will be liable to be cancelled.
B.

to

other

The Government of India was directed to place the under mentioned

classes of persons in the AAY category:
i.

Aged, infirm, disabled, destitute men and women,

pregnant and lactating women,
ii.
Widows and other single women with no regular
support,
iii.
Old persons (aged 60 years above) with no regular
support and no assured means of support,
iv.
Households with a disabled adult and not assured
means
of subsistence,
v.
Households where due to old age, lack of physical or
mental fitness, social customs, need to care for a
disabled, or other
persons no adult member is
available to engage in gainful employment outside the
house.
vi.
Primitive tribes
2.3.2 The Honble Supreme Court by its order dated 8.5.2002 has fixed
the responsibility on the District Collector for implementation of the
orders of this Court and further directed that the Chief Secretary
will ensure compliance with the order of this Court.

Chapter 3
DISTRIBUTION OF FOODGRAIN
3.1

Introduction

Public Distribution System is operated under the joint responsibility of

the Central and the State Governments. The Central Government has
taken the responsibility for procurement, storage, transportation and

xxxviii

bulk allocation of foodgrains to State and Union Territories (UT) and

maintenance of buffer stock. State and UT Governments are responsible
for identification of AAY and BPL families; issuance of ration cards to
eligible families; storage in State/UT godowns; licensing and supervision
over Fair Price Shops; distribution of ration to ration card holders through
FPS and eliminating leakages/ghost cards etc. The Present chapter deals
with the distribution of foodgrains in the State of Bihar from the FCI
godowns to the State Godown, from State godowns to FPS and from FPS
to the beneficiaries of the scheme.
3.2 Entities involved
1. Food Corporation of India (FCI):

Presently there are 54 godowns of

FCI in the State of Bihar having total storage capacity of 575,006

MT. Acute storage crisis was being felt and the matter was
appraised to the FCI Head quarters and Ministry for augmenting
capacity. A High level Committee has now given approval for
Construction of 3 lakh MT covered capacity at different locations
through Public Private Partnership.

After Construction of the

additional storage capacity there will be no shortage of space with

the FCI for PDS as well as procurement purposes.

2.

Bihar State Food and Civil Supplies Corporation (BSFC):

Bihar State Food and Civil Supplies Corporation (BSFC), established
in 1973, acts as the agent of the State Government of Bihar in
matters of procurement, transportation and handling, storage and
distribution of food grains to FPS dealers and other Government
agencies.
The apex body of the Corporation is the Board of
Directors. The Corporation is at present headed by Managing
Director (MD). The MD acts as Chief Executive Officer of the
Corporation and is assisted by various functional chiefs who are
incharge of particular sections like Administration, Procurement and
Distribution, Finance and Accounts, Audit and Budget etc. The Chief
of Procurement is responsible to ensure procurement and
distribution of foodgrains under various schemes sponsored by
Central Government. He keeps liaisons with State Government and
Food Corporation of India to ensure availability of foodgrains against
allocation of the State under various welfare schemes. There are
351 BSFC godowns having a total capacity of 97241 MT catering to
the 536 blocks in Bihar.
xxxix

Hierarchy at District office of the BSFC

District Manager
Assistant Godown Manager (AGM)

Accounts Officer

3. Department of Food and Civil Supplies Bihar.

A.

Hierarchy of department

In Patna
District Magistrate / Collector
Special Officer rationing and ADM
ADM Supply & ADM Rationing
DRO (Departmental Rationing Officer)
ARO (Assistant Rationing Officer)
MO (Marketing Officer)
Supply Inspector (Supply Inspector)
In rest of the districts
Deputy Director Food, at Commissioner Level
District Supply Officer (DSO) at District Level
Additional District Supply Officer (ADSO) at Sub-divisional level
Marketing Officer (MO)/ Block Supply officer (BSO) (Ward Level/
Block Level)
Supply Inspector (Supply Inspector)
xl

B.
1.

Role and responsibilities

The Supply Inspector (SI) is the lowest level officer of the

Department. He has to inspect Fair Price Shops and has to monitor
distribution of ration by FPS dealers. SI is, therefore, supposed to be
aware of the ground realities pertaining to the functioning of Fair
Price shops.

2. Marketing Officer / BSO allocates ration to each FPS. He collects

Bank drafts from the FPS dealers for preparation of Store Issue
Order (SIO).

He has to monitor distribution of foodgrain by FPS

dealers. Either the MO or Supply Inspector has to be present at the

BSFC godown to monitor the lifting of grain by the FPS dealers. The
District Magistrate can depute any other officer at the godown for
this purpose. Thus, it is not necessary for every MO to be present at
the BSFC godown when an FPS dealer of his area goes to godown to
lift the foodgrain.4 It is pertinent to mention here that many MOs
took the plea of being present at BSFC godown during lifting of
grains, for the inefficiencies found in their work.
3. DSO has to supervise the distribution of PDS foodgrain in his district.
It was brought to the notice of this Committee that there is shortage
of staff in the Department of Food and Civil Supplies, Bihar. There
are 38 districts in the State and hence there should be 38 DSOs.
There are only 15-16 DSOs in the state.5
4. The officers of the Department complained that in absence of
proper staff they could not perform their functions properly. They
4

Meeting with Dy. Secretary Food, Mr. Jai Shankar Prasad Yadav at office

of CVC on 30th July 09.

5

Meeting with DSO, Gaya

xli

also complained that they were not having required infrastructure

like telephone, computer and fund for running the office, vehicle or
conveyance allowance etc.
3.3 Process of Allocation and lifting in the State
The distribution system comprises three phases:
1. From FCI to BSFC
2. From BSFC to FPS dealers
3. From FPS Dealers to beneficiaries.
3.4 Distribution of foodgrain from FCI to BSFC
3.4.1 The Central Government allocates food-grain to the States which is
lifted from FCI. The Food Secretary of the State decides the district
wise allocation of food-grain, a copy of which is given to the FCI.
Thereafter, the district administration does the allocation block wise
and gives a copy to the BSFC. BSFC then lifts the authorised
allocation from the FCI. Depending upon the funds with the BSFC
the District Manager sends advance requisition to the FCI with Bank
Drafts. FCI then issues release orders and sends a copy to the BSFC.
District Manager, BSFC then decides godown wise allotment on the
basis of quantity mentioned in the Release Orders. The AGM of BSFC
is responsible to supervise the lifting of the stock from FCI. He is
responsible for loading the grain on the truck belonging to the
transporting contractor appointed by the BSFC. The question is if
the same quantity of foodgrain which is lifted from FCI by BSFC
reaches the godown of BSFC. The fact is that when requisition in a
duly filled form is sent by BSFC to FCI a Release Order is issued by
FCI. Relevant details are mentioned in the Release Order giving the
name of the godown, the commodity, the quantity, the amount, DD
number and the date, whereafter foodgrain is lifted by BSFC in the
presence of the FCI officials after duly weighing the quantity of
foodgrain in the truck. The food grain is transported in the truck
which is weighed twice, once when the empty truck enters the
godown of the FCI, and again after the foodgrain is loaded in the
truck. FCI official who is incharge of the shed from which foodgrain
is loaded on the truck issues a Gate Pass for the truck after loading
foodgrains in it. Once truck leaves the FCI godown, it is the
responsibility of the BSFC to transport the foodgrains to godown.
Committee observed that no BSFC official accompanies the truck
from FCI to BSFC godown. FCI also fills Movement Form for every
Release Order and gives a copy to BSFC. Movement form is duly
signed by BSFC official who supervise the lifting of stock at FCI.

xlii

3.4.2 The time period for lifting the foodgrain by BSFC from FCI is 50
days. The stock of a month can be lifted by the BSFC by the 20 th day
of the next month. Thus stock for the month of July can be lifted by
the BSFC by the 20th day of August. District manager shall ensure
timely deposit of Bank Drafts against allocations and has to take all
necessary steps to obtain Release Order (R.O) from FCI within
stipulated time so that foodgrain be lifted timely from FCI.
3.4.3 The representative of BSFC present at FCI godown should submit
the dispatch report regarding dispatch of foodgrain from FCI on
the same day to the District Manager. The District Manager has to
ensure the receipt of arrival report within 24 hours from the date
of dispatch. He is responsible to review the Central R.O register to
ensure that register remains updated. He is duty bound to be
vigilant on the functioning of the BSFC godowns and is responsible
for any lapses on the part of AGM. It is pertinent to mention that
transportation of foodgrain from FCI to BSFC is responsibility of the
BSFC. The trucks of transporters appointed through tenders or
otherwise hired by BSFC transport the foodgrain from FCI godown
to BSFC godowns.

3.5

Distribution of foodgrain from BSFC to FPS Dealers

3.5.1 The bank drafts for purchase of commodities by the FPS dealers
reach to District Manager (BSFC) through District Administration
(Food and Supply Department). District Manager, BSFC prepares
Store Issue Order (SIO). District Manager has to ensure that SIOs
are prepared within twenty four hours from the date of receipt of
bank drafts in the office except for holidays. Before signing the
SIOs all SIOs must be checked by an assistant or assistant
accountant or accountant whosoever is available. DM (BSFC) or in
his absence Accounts officer signs the SIOs. This authority can not

xliii

be delegated to others. Copy for FPS Dealers is sent to district

administration and godown copy is sent to the concerned
Godowns after obtaining proper receipt from AGM.
3.5.2 The FPS owner has to deposit the Bank draft at the office of
Marketing Officer / Block Supply Officer of the Department of Food
and Supplies by the 25th of the previous month.

The Marketing

Officer of the Department maintains records and is the custodian

of all records at the Block level pertaining to FPS, he allocates the
ration FPS wise, prepares a list of all the FPS dealers who
deposited bank drafts and sends it to the District Managers
(BSFC) office for issuance of Store Issue Order (SIO). He is also
duty bound to be present at the BSFC godown at the time of lifting
of the grain by FPS.
3.5.3 The grain is transported from BSFC godowns to FPS in the vehicle
hired by the FPS and it is the responsibility of the FPS dealer to
transport the same. Dealers in the State gets Rs.4/- per quintal as
the transportation commission. Delivery to door step of Fair Price
Shops will reduce the chances of diversion as well as increase the
viability of FPS. It is submitted that the committee in the Delhi
report has stated that, it is the States obligation under the PDS
Control Order, 2001 to ensure door step delivery. Clause 6(3) read
with para 4(6) of the Annexure to PDS (Control) order 2001, casts a
duty on the authorities to ensure physical deliveries of PDS
Commodity to the FPS. Further, in the 9-point action plan formulated
jointly by the Government of India and State/UT Governments, door
step delivery of PDS commodities to the FPS has been pointed as
one of the measures to prevent Diversion. In the light of this
obligation it would be appropriate for the State Government to
ensure delivery of PDS grain at the FPS Shop which would result in
xliv

reducing their expense on transportation and handling and help in

curbing diversion.
3.5.4 The Committee visited FCI godowns, BSFC godowns, Fair Price
shops in different districts of State, met beneficiaries in different
areas and also in public hearings conducted by the Committee.
Committee also visited offices of ADSOs, Marketing officer/ Block
Supply Officers office and found many irregularities in the process
of allocation and distribution of foodgrain to beneficiaries.
3.6

Irregularities found during allocation and lifting of foodgrain

from FCI to BSFC godown and from BSFC godown to FPS

3.6.1. Storage of foodgrains:

There is acute shortage of storage space with BSFC. There are 351
BSFC godowns having total capacity of 97,241 MT catering to the
536 blocks in the State of Bihar. Godowns are usually very small
having 100 MT capacity. However at some places godowns have
capacity of 500 MT, 1000 MT and 2000 MT. The BSFC is not
managing the godowns properly and is not following the standards
of storage system. The poor condition of BSFC godowns shows that
higher officials are not supervising the functioning of godowns
properly. The BSFC godowns have no electric connections. The
delayed allocation, improper maintenance of records, improper
storage and transportation system of BSFC clearly show
mismanagement and lack of Administration. For instance, the
Committee found that there was no electricity or phone line
available at the BSFC Godown, Rajbansi Nagar, Patna. The
surroundings of the Godown were unhygienic. There was a foul
smell emanating from both around and inside the godown. Upon
enquiry, it was stated by the Godown In charge that a tender had
been issued for the purposes of creating a sewage drain but no
progress had been made till date. Further, there were no stack
boards at the Godown and the gunnies were stacked right next to
the wall. It was observed that various parts of the wall were damp.
There were also various insects present on and around the grain
bags.
3.6.2. Weighment of foodgrains at Godowns:

xlv

a.

The

FCI

godown

at

Dighaghat,

Patna

weighbridge having a capacity of 20 MT.

the

functioning

of

computerized

has

computerized

The Committee studied

weighbridge.

Initially,

the

weighbridge is checked for accuracy, for which a zero weight memo

is printed. Then the empty truck is weighed at the weighbridge and
the first print out pertaining to the truck is taken. This print out
contains the truck number and the weight of the empty truck. A
serial number is also given to this first printout. Thereafter, the
truck goes for loading, which takes about one hour. The truck comes
back at the weigh bridge for final weighment. The operator refers to
the serial number of the first printout pertaining to the truck,
manually feeds the truck number and takes out the final print of the
Weight Check Memo (WCM). At the time of feeding the truck
number, the operator also looks at the Gate Pass on which the
number of bags being carried out by the truck is hand written. The
operator tallies the net weight of the truck, by subtracting the
weight of empty gunny bags. The operator informed the Committee
that only one print out of the WCM is taken out and the same is kept
at the FCI itself and no copy of the WCM is sent out to the BSFC
godown with the truck. The Weight Check Memo is also not signed
by the official of BSFC present at the FCI godown. The Committee
observed that only one copy of weight check memo is printed which
is kept at the FCI itself. Thus, no weight check memos were sent
along with the trucks transporting the grain to the BSFC. The hired
godowns of FCI do not have electronic weigh bridges. The FCI
godown at ARDC, Begusarai town is a hired Godown having two
sheds and storage capacity of 5000 M.T. It caters to the BSFC
godowns at Khagaria and Begusarai. There was no electronic
weighbridge at the godown and there was only a beam weight
which could weigh a maximum of 50 Kgs at one time. It was stated
that there was 100% weighment at the godown. The Committee did
xlvi

not find anything worth noticing about FCI except to say that FCI
should have electronic weigh bridge and give WCM to the official of
BSFC accompanying truck.
b.

None of the BSFC godowns in the State have electronic weighment

systems, and are using manual weighing balances. The godowns
store food grains for all the subsidized schemes for poverty
alleviation and receive huge quantity of food grains monthly from
the FCI.

The Weighing machines are not sufficient to weigh the

huge quantity of grains which reaches the godowns from the FCI
godown. As manual weighing of huge quantity is obviously not
possible in the absence of electronic weighing system clearly shows
that food grains are not weighed at all when it reaches the BSFC
godown or when it is supplied to the FPS dealers. The Absence of
weighbridges makes the scheme vulnerable to malpractices. Thus,
there should be electronic weighing systems at the BSFC godowns
and all records should be computerized. Weight check memos
should also be issued automatically through the computerized
system. At BSFC godown of Rajbansi Nagar, Patna the stock is
weighed on beam scale with wooden planks which can weigh up to
2 gunny bags at a time. There was no space to erect the weighing
scale and it was lying folded at one side. The AGM stated that when
stock is to be lifted by FPS, the AGM opens and arrange the
weighing system to weigh grain. The Committee is of the view that
there should be electronic weighment system in each godown and
weight check memo should be electronically generated and the
system of making manual weigh check memo should be done away
with at each godown of FCI and BSFC.
3.6.3. Sampling

xlvii

i.

The FCI godown provides samples while issuing foodgrain to

BSFC

against

Release

Order.

There

is

no

system

of

maintaining or issuing samples in the BSFC godowns. It is the

duty of the State to ensure that the stocks of food grain
issued from the FCI godowns are not replaced by stocks of
inferior quality during storage, transit or any other stage till
delivery to the ration card holder. For this purpose the FCI
issues stock wise sealed samples of stocks of food grain
supplied by them.

The BSFC should ensure that sealed

samples are obtained from the FCI at the time of taking

delivery of foodgrain.

The BSFC should ensure that the

samples are displayed in their godowns. They should also

issue stock wise sealed samples to the FPS dealers which
should be displayed at the FPS for inspection by enforcement
squads, Vigilance Committee or the consumers.
ii.

The committee found that sealed samples were issued by the

FCI godowns at Patna however, AGM of BSFC godown at
Rajbansi Nagar, Patna, stated that no samples are received
from the FCI. The Committee is of the view that the signature
of the BSFC officials should be taken by the FCI officials and
same should be put on record. Copy of same record should be
given to the District Manager BSFC so that there is no
confusion about the delivery of samples to BSFC. The report of
AGM of BSFC godown which he sends to the District Manager
should specifically mention whether he received samples or
not. In case of any lapse prompt action should be taken by the
concerned officials.

iii.

Similarly samples should be given to the FPS dealer at the

time of issuing stocks. A memo should be prepared and a

xlviii

copy signed by FPS owner should be kept at the BSFC godown

and one copy should be sent to the District Manager BSFC.
3.6.4 Record keeping at BSFC godowns:
3.6.4.1

Assistant Godown Manager has to maintain the following

registers at the godowns as per the norms.
i.

Inward/ Receipt Register: This Register maintains the stocks

arrived in the godown. It should be maintained scheme wise
and commodity wise. All receipts are to be confirmed and
report to this effect must be sent to district office within 24
hours of receipt.

ii.

Sales Register:

iii.

Stock Register: it is maintained on the basis of Inward (arrival)

and Sales Register.

iv.

Daily Issue Statement: The issue to dealers has to be made in

presence of representative of DSO to ensure transparency

v.

Monthly report: AGM has to submit monthly report to district

office along with served copies of SIOs summary statement of
receipt and issuance of all commodities.

It should also

contain the copies of R.T. Note.

vi.

Godown log book: This register will keep record of opening

and closing stocks of godown.

vii.
3.6.4.2

List of Fair Price Shops attached to the Godowns.

At BSFC godown, Rajbansi Nagar, Patna, the Committee found
that AGM was maintaining Inward/ Receipt Register, Sale Register
and the Stock Register. The Godown caters to 140 FPS; however,
the list of FPS was not available with the Godown In charge. On
being asked to show the list of FPSs, the AGM stated that he does
not have list of FPSs and he issues grain to FPSs on the basis of
SIO.

xlix

3.6.4.3 The AGM, BSFC godown, Bazaar Samiti, Begusarai maintained

Stock Register and Issue Register. The Registers were maintained
only from 31.05.2009. It was stated that the previous godown in
charge had not maintained any registers.

As per the Stock

Register, there was a stock of 37.72 quintals of APL wheat in the

godown.

The godown incharge stated that since there is no

lifting of APL grain, the grain is used only for the purposes of
relief and not for PDS. However, since there were no stack-wise
boards, the stock couldnt be checked.
3.6.5 Delayed lifting /Irregular Lifting of grain by BSFC from FCI:
3.6.5.1 The Committee was informed that prior to 2007 lifting of PDS
grains by BSFC from FCI was not even 50% of the allocation,
however, the lifting has somewhat increased thereafter as the
following figures would show.
1) During April 07 to December 07, BSFC lifted 61.02% BPL
wheat and 38.33% BPL rice. It lifted 92.42% AAY wheat and
80.58% AAY rice.
2) From January 08 to December 08, BSFC lifted 55.44% BPL
wheat and 34.50% BPL rice. It lifted 77.16% AAY wheat and
76.98% AAY rice.
3) From Jan 09 to June 09, BSFC lifted 77.34% BPL wheat and
46.61% BPL rice. It lifted 81.25 AAY wheat and 82.76% AAY
rice.
3.6.5.2

An instance of lapse on part of BSFC was found in the District of

Bihar Sharif, where the Committee was informed that the food
grain for the month of March 2009 was not lifted by the BSFC and
the quota of foodgrain lapsed inspite of the fact that the FPS
dealers had deposited the money for the said month. The FCI
officials stated that both wheat and rice were available in their
godown and though many extensions were given to BSFC for
lifting grain of March 2009 yet it was not lifted.

3.6.5.3

The Committee was informed by the officials of the FCI godown

at ARDC, Begusarai town that in case the allocation of food grain
for a particular month lapses due to the fault on the part of FCI,
an extension of time period is granted to the State by the FCI for
lifting the food grain. The AGM stated that the BSFC lacks storage
capacity and often requests the FCI godown to be open even on
a holiday so that they could lift the grain in order to prevent
lapse of allocation of grain. The FCI always heeds to such
requests in order to accommodate the BSFC to lift the stock.

3.6.5.4

The Committee was informed by the BSFC officials that there is

acute shortage of storage space with BSFC because of which
there is delay in lifting of foodgrain from FCI. Thus, there is need
for augmentation of storage capacity of BSFC godowns.

3.6.5.5

Further, it was stated by many BSFC officials that the delay on

part of BSFC to lift grain from the FCI is because of the fact that
FPS dealers deposit money very late. Recently, vide letter no.
10/07/2170 dated 22.6.09, the Secretary, Food and Civil Supplies
Department directed BSFC to deposit from its own resources 25%
of the cost of the foodgrains to lift the same timely from FCI.

3.6.5.6

Central Government allocates food stock for 65.23 lakh

families only which is a figure fixed by the Central
Government. However, State Government has identified 1.23
crores BPL families. There is thus bound to be shortage of food
grains for BPL families as much as food grains for 65.23
lakh families has made to meet the requirement of 1.23
crores. To meet this requirement State Government has
devised the following methods.

3.6.5.7

While the Central Government allocates food grains per family @

35 Kg (25Kg rice and 10 Kg. wheat) the State Government has
scaled down this to 25 Kg. per family (15 Kg. rice and 10 Kg.
wheat). State Government is able to manage the quantity of rice
required for distribution because of scaling down the allotment of
rice from 25 Kg. to 15 Kg. but shortage for wheat remains. State
Government

has

however, not

made any

arrangement

for

arranging wheat from its own budget or for seeking additional

allocation from the Central Government. It was found that to
meet the requirement of wheat the State Government requires

li

FCI to shift wheat from one godown to another which entails

delay and results in backlog. In some cases there is insufficient
food grain allocation for a particular month in a particular district,
the food grain in that district is allowed to lapse causing nonavailability of foodgrains to beneficiaries.
3.6.6 Transportation:
Transportation from FCI to BSFC godowns is done by the trucks of
transport contractors appointed by BSFC through tenders. The FPS
owner has to arrange for his own transport for transporting the
foodgrains from the BSFC godown to his FPS. The transportation
process has been dealt in detail under separate chapter.
3.6.7 Shortage of staff at BSFC: Mostly the AGMs are Incharge of more
than one godown as there is shortage of staff. So he opens one
godown for 2 days in a week and the other for 2 days. For 2 days,
he is at the FCI Godown or managing transportation. The BSFC does
not have transport contracts at many places like Patna town, Gaya
etc. The AGM, who is godown incharge, has to arrange for
transportation himself for lifting the grain from FCI godown each
time. The AGM has to open two different godowns, personally go to
FCI to lift food grain for them and get the same loaded on trucks
and then unload them at the BSFC godown. He also has to maintain
records, coordinate with officials like District Manager, BSFC. He is
the sole person who has to take care of foodgrains and supervise
loaders.

Further, he has to do the distribution of grains to FPS

dealers. As there is shortage of staff in the BSFC it directly affects

the lifting of foodgrain from the FCI, management of godowns, and
distribution to FPS.
3.6.8 Diversion of foodgrain during transit and allocation
During the Meeting with District Collector at Muzaffarpur on 18 July
2009, the Committee was informed that there are two godowns of
FCI in Muzzafarpur which distribute grains to other districts which

lii

already have godowns. The trucks going to other districts were thus
being diverted. A number of such cases have been registered in the
year 2008. This had been brought to the notice of the FCI also.
Grain for districts of Sitamarhi and Anantpur should not be lifted
from the godown of Muzaffarpur. FCI states that the godown in
Muzaffarpur has larger storage capacity and that is the reason that
nearby districts are being supplied grain from this godown. The
Collector stated that the BSFC should lift it from their respective
districts. Inter-district supply should be stopped. In the last 3 years,
the trucks seized while diverting grains were those going to other
districts. In the Public meeting the committee was informed that the
truck owners always take benefit of the situation in those areas
where the BSFC does not have transport Contractors, if the AGM has
less time to lift large quantity from FCI he has to usually pay extra
money to the transporter, which obviously he later recoups to
compensate himself by diverting some grain or using some other
unfair practice. It came to the notice of the Committee that at the
FCI godown at Mokama when PDS foodgrain is lifted by the
transporter of BSFC, the trucks are not allowed to proceed by
hoodlums unless they are paid by transporter. Question then arose
how the transporter would recover the amount. Immediate reply
was that transporters offload some bags and sell in market. When
this fact was told to the District Magistrate he said the action was
being taken against miscreants.
3.6.9 Delayed supply of foodgrain to FPS:
3.6.9.1

As there is shortage of staff in BSFC, one AGM is incharge of

two godowns. The Godowns are not opened daily and hence
the foodgrain is not issued to FPS daily. Thus, there are limited
days on which FPS dealers can lift the foodgrain. This hampers
the smooth functioning of the distribution system and is one
of the factors for the delay in supply of foodgrain to the FPS.
For instance the AGM, BSFC Godown, Rajbansi Nagar, Patna is
incharge of two godowns. The Rajbansi Nagar Godown is in
the urban area which he opens on Tuesday, Wednesday and
Thursday. He also manages another godown in the rural area
which he opens on Friday and Saturday.

liii

3.6.9.2

The AGM of Khodavanpur is incharge of 2 godowns, one in

Khodavanpur and the other in Chaurahi. The stock was lifted
by FPS dealers from the Khodavanpur Godown on Wednesday
and Thursday only. On perusing the records, the Committee
found that the last date on which stock was issued to FPS
Dealer was 28.06.2009. When the Committee asked as to why
the grain was not issued after 28.06.2009 till the date of visit
of the Committee, the AGM replied that in one week he had to
go to the FCI to supervise allotment and in the subsequent
week, lifting could not be done on Wednesday & Thursday
because of non-availability of tractors/trucks in the area. The
Committee

found

some

unofficial

parallel

registers

notebooks being maintained at the Godown. On going through

these parallel records, it was found that grain had in fact been
lifted on the previous day of the Committees visit i.e
15.07.2009.

This shows that no proper and dependable

record is maintained. The same was confirmed upon speaking

to some of the loaders at the Godown who stated that the
AGM had issued grain on the previous day. However, the
Committee found that the same was not put on record. The
AGM could not show gate passes of all allotments received
from FCI.
3.6.9.3

Another aspect is delayed issue of foodgrain by BSFC.

Committee met many FPS dealers who complained about the
delay on part of BSFC. The allocation of foodgrain to one of
the shop shows the lapses of BSFC

and the consequential

and deliberate lapses on part of FPS :

3.6.9.4

Md. Umar, FPS dealer of ward 10, Madipur, Muzaffarpur

(licence no-62/85) stated that he has never deposited the

liv

Coupons at the ADSO office since August 2008. Thus the

Committee found that ration was being allotted on a standard
basis by the MO/ADSO without referring to the coupons. The
Committee asked about the monthly allocation of grain from
BSFC to this FPS in the past one year. He gave the following
information:
Month
August 2008
September
2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
May 2009
June 2009
July 2009

3.6.9.5

DD submitted or
not
Submitted
Not submitted

Issuance

Submitted
Submitted
Submitted
Not submitted
Submitted
Not submitted
Submitted
Not submitted
Submitted
Submitted

Allotted
Allotted
Allotted
Allotted only wheat
Allotted
No allotment
No allotment,
(Coupons also not
distributed to
beneficiaries)

Allotted in November
-

The Committee observed that no food grain has been lifted by

the FPS for the month of January 2009 and March 2009. Only
wheat was lifted in February 2009. Food grain was lifted in
April also. However, as per the sales register no distribution
has been made of the wheat lifted in February 2009 and the
food grain (Rice and Wheat) lifted for the month of April.

3.6.9.6

The dealer stated that in the past one year, BSFC has issued
ration for 6 months only. A dealer has to submit Bank Draft by
25th of the previous month otherwise he is not allowed to
submit it later and the allotment lapses. The dealer further
stated that despite depositing the Bank Draft by 25 th of the
lv

previous month, he gets his SIO at the end of the month for
which DD is deposited. For instance, to obtain the food grain
for the month of April, he has to submit his DD by the 25 th of
March. However he gets the SIO by the end of April. However
he gets his allocation i.e. he can actually lift the food grain
only after 2-3 month from the date of SIO. For the month of
December he submitted Bank Draft in November and got SIO
at the end of December. Thereafter, he was able to lift grain
from the godown only in February March. The Committee
found that, Utilization Certificate, Form-20 and Coupons have not
been taken by Marketing Officer at Tajpur Block, Samastipur from
FPS dealers since 2008.

It appeared that the MO was not even

aware of Form- 20.

3.6.10 Irregularities in allocation of foodgrain to FPS

3.6.10.1

The Committee observed that there is no check on the

functioning of the MO and the PDS Dealer. The Committee
visited the office of the Marketing Officers to understand the
roles and responsibilities of the officer and also to assess the
process of allotment and distribution of grain at the level of
the M.O. The objective of the visit was to see as to how the
coupons were received from the dealers and the
corresponding allotment of grain to the dealers on the basis of
the coupons submitted. The Committee intended to peruse
records pertaining to monthly allotment of grain and in
particular, the records pertaining to Store Issue Order and
Utilization Certificate.

3.6.10.2

The dealer is required to deposit Form-20 along with coupons

and Utilization Certificate duly signed by any member of the
Vigilance Committee at BSO/ MO office. The BSO, Bodhgaya
was unable to show his record and stated that the same were
not available with him at that time.

3.6.10.3

The Committee inspected the Utilization Certificate, Form-20

and coupons at BSO office of Sherghati Block, Gaya and found
that there was no similarity in the number of coupons
mentioned in the certificate and the number of coupons
lvi

present in the office. The Committee observed that coupons

of both rice and wheat were taken by the FPS dealers from the
beneficiaries inspite of the fact that he had distributed only
one of the commodities to them.
The Committee also
inspected documents pertaining to various shops. When the
Committee examined the records of the FPS at village Cherki,
ward no, 3, (licence no, 377/07), it was found that the shop
had distributed only AAY grain; BPL grain was not distributed.
The Committee observed that number of coupons deposited
did not correspond with the number of coupons mentioned.
The Committee observed that the Utilization certificate was
signed by the Sarpanch, Mukhiya and one Ward member.
Ward Member Gulabi Devi had only put a thumb impression.
There was no mention of serial numbers of coupons on Form
20.
3.6.10.4

At the office of Marketing Officer, Chitwara, Samastipur, the

Committee was shown the list of FPSs under the jurisdiction of
the M.O. The Committee identified 4 FPSs on a random basis
and asked the M.O to show the documents of allocation
pertaining to the said FPS. However, to the surprise of the
Committee members, the M.O could not find any of the
documents at his office. The documents pertaining to
allotment of the previous month were also unavailable. The
M.O first stated that the documents could not be found
because the person who handles them is not around and if he
had prior knowledge of our visit, he would have ensured that
those documents were readily available at the office.
However, later the M.O stated that the documents were at his
home as he had taken them to discuss it with his seniors in
view of the Committees visit to the office.

3.6.10.5

The Committee then perused some stacks of coupons that

were shown by the M.O. The Committee was informed that
these coupons are kept FPS wise and are tied in a bundle in a
month wise manner. However, on going through the bundles
of coupons, the Committee found that though the slips
attached with each bundle stated that the coupons were of a
particular month, it was clear that there was no system of
month wise stacking of coupons. Each bundle had coupons of
various months, though the number of coupons in a bundle
conveniently added up to the total number of beneficiaries in
each FPS. In fact there were numerous coupons, which were of
a particular month (April) but there was overwriting on it and
it was made March by hand. When the Committee asked as to
how the MO accepted such coupons, he had no explanation
lvii

other than stating his helplessness in going through hundreds

of coupons every month. The Committee specifically asked for
the ration coupons last collected by the MO, on the basis of
which fresh allotment was made, however the MO failed to
show even those.
3.6.10.6

On the Committees visit to the office of the Marketing Officer,

Tajpur Block, Samastipur, the M.O informed that there were 16
Panchayats in the block and 47 FPS (39 functional and 8 were
either suspended or on leave). The Committee perused files
pertaining to the monthly allocation of FPS. Documents
pertaining to the following FPS were specifically perused:
Panchayat

FPS dealer

Kothia

Ganesh
Chaudhary
Urmila
Shaukat Ali

Ramapur
Shahpur
Bhagauni
Bharokhada
Aadharpur
3.6.10.7

Gunar Mahto
Phuleshwari
Devi

Total
Card
893

BPL

AAY

147

36

353
1312

200
432

91
200

480
+1127
927

623

405

289

158

On examining the record of the aforesaid five FPSs, in the

office of Marketing Officer, the committee observed that the
allocation of foodgrain to FPS was not done every month;
secondly, allocation had not been made on the basis of
coupons collected by FPS; thirdly, allocation to FPS exceeded
the number of beneficiaries attached to that particular FPS.
For instance as per records of the department the allocation of
the following shops is -

1. Ganesh Chaudhary
Monthly allocation,
2009
February

AAY wheat
(in Q)
13.80

AAY rice
( in Q)
20.70

June

13.80

20.70

July

3.60

5.40

2. Urmila Devi
Monthly allocation,

AAY wheat
lviii

AAY rice

BPL rice
No
record
No
record
14.70

BPL
wheat
No
record
No
record
22.5

BPL rice

BPL

2009
February

9.10

May, April & March

No record

July

13.65

19.10

No record

June

13.65

19.10

No record

3.6.10.8

3.6.11

13.65

No record

No record No record

wheat
No
record
No
record
No
record
No
record

If we take the example of the first dealer, i.e., Ganesh

Chaudhary then as per the number of AAY cards, i.e., 36, the
allocation for a month should be 3.60 Q wheat, 5.40 Q Rice.
As per the number of BPL cards, i.e., 147, the allocation for a
month should be 14.70 Q. wheat and 22.05 Q. rice However,
13.80 Q wheat and 20.70 Q rice was issued to FPS in the
month of February and June for AAY category. No BPL
foodgrain was issued to the FPS except in the month of July.
Capital of FPS gets blocked
The capital of FPS owners gets blocked for three to four
months as foodgrains are not issued in time by BSFC. The FPS
owners pay money out of their own pockets to deposit Bank
draft by the 25th of the previous month (i.e. payment is made
in advance to the month for which grain is to be lifted). One of
the reasons for delay in issuance was that SIO are not sent
from BSFC Regional office to Godown. Thus, it is suggested
that they should be allowed to deposit money only when grain
is available for lifting at the BSFC godown. It is also suggested
that a system of e-banking should be adopted for depositing
the money by FPS Owners to avoid unnecessary expense on
part of FPS dealers in making payment by DD and to reduce
the number of visits to the concerned office. The amounts so
received through E-banking from the Fair Price Shops shall
also be verified and authenticated by Food and Civil Supply
Department and FCI online to ensure that the amounts
remitted correspond to the allocation of Fair Price Shops. For

lix

this purpose, a computerized system should be in place to

ensure connectivity between these three agencies so that
remittances can be properly monitored at all ends.
3.7

Distribution of foodgrain by FPS to the Beneficiaries

3.7.1 The Ration cards of the TPDS beneficiaries were cancelled in the
beginning of 2007 and presently there are no ration cards in the
State of Bihar. Presently ration is distributed only on the basis of
coupons. The Committee was informed that the new list as per 2007
survey has only name of the head of the family. As the department
is preparing data incorporating name of every family member, it is
taking time. It was further informed that there are 57 lakhs
objections against the 2007 survey list. Hence, presently the ration
is distributed only on the basis of coupons i.e. beneficiary has to
submit his coupon and pay money to the FPS dealer. Deputy
Secretary of Food informed that as per instructions issued in
February 2009 Rural Development Ministry had to complete the
survey within 3 months. The same has not yet been completed. It is
not certain as to when the same will be completed. Examination
report of the objections is likely to be completed by August 2009.6
3.7.2 As per Planning Commission 65 lakh (6.5 million) families in Bihar
have been declared Below Poverty Line. Total number of BPL
families in Bihar is 1,21,41,000 as per the 2007 BPL survey in the
State. Government of India is allocating foodgrains for the BPL
families as per Planning Commission data. State has distributed
coupons as per the new 2007 survey of BPL; hence it is difficult for
State to distribute the foodgrains to all the coupon holders. The
State Government in order to provide foodgrain to the increased
number of BPL persons, after the revised BPL survey in the State,
decided to purchase food grain at an economic rate from FCI and
to provide the same to BPL beneficiaries at BPL rate. The
difference between the economic rate and BPL issue price is borne

Meeting with Dy. Secretary Bihar on 30th July 2009 at CVC office.
lx

by the State Government. For this State Government permitted to

spend and release Rs 60 crore.7
3.7.3 The beneficiaries of the Public Distribution Scheme lift their ration
from the FPS with which they are attached generally to the nearest
FPS. There are 44,480 Fair Price Shops in the State of Bihar. The Fair
Price Shops in the State opens from 7 a.m. to 1 p.m. in summer and
8 a.m. to 2 p.m. in winters. The Committee observed that there is
always delay in distribution of food grain to beneficiaries. The most
disappointing fact is that food grain is not distributed every month.
The Committee visited many villages and towns and met lots of
beneficiaries. It was general complaint in villages that during last
year they got food grain only for 2-3 months. Beneficiaries showed
their coupons of past 8-10 months to the Committee which were
with them only as no ration was given to them.
3.7.4 As per the food bulletin issued by the Ministry the allocation of
foodgrains (rice and wheat) under the APL category was 218.330 MT
in the year 2008-2009. The offtake in this category was 17.729 MT
which is only 8.12 % of the allotment. The State Government in its
reply to Questionnaire sent by the Committee submitted that the
allotment of grain under the APL category was very small. The
allocation is received only on festivals, which is then distributed only
to the APL families in Urban areas. The committee observed at the,
BSFC godown, Bazaar Samiti, Begusarai that as per the Stock
Register, there was a stock of 37.72 quintals of APL wheat in the
godown. The godown incharge stated that since there is no lifting
of APL grain, the grain is used only for the purposes of relief and not
for PDS.

As there is no ration cards and food coupons are not

Letter no. BPL-04/08 of Food Secretary.

lxi

distributed to APL families it is not clear how the foodgrain is

distributed to the APL families residing in Urban areas.
3.7.5 That the Committee in its visit to one State after another has found
that the concept of APL is serving no useful purpose for food
security and is instead only a diversion tool.

The Committee is

aware of the fact that there is going to be a great deal of opposition

from the FPS dealers and other vested groups against the abolition
of the APL category. If the Honble Court is of the view that it may
not be possible or desirable to abolish the APL category altogether,
it may consider limiting the APL category to households whose
annual income is Rs. one Lakh. This category may be called
Marginally Above Poverty Line (MAPL). This limit may however, be
revised as and required on a rational basis by the government.

3.7.6 Duties of FPS dealers

As per PDS Control Order 2001 each FPS shall display the following
information on a notice board which is to be put up at a prominent
place in the Shop on a daily basis:1. List of BPL and Antodaya beneficiaries,
2. Entitlement of essential commodities,
3. Scale of issue,
4. Retail issue prices,
5. Timings of opening and closing of the fair price shop,
6. Stock of essential commodities received during the month,
7. Opening and closing stock of essential commodities and
8. The authority for redressal of grievances/lodging complaints
with respect to quality and quantity of essential commodities
under the Public Distribution System.

lxii

3.7.7 The FPS dealer in the State has to issue foodgrain to the
beneficiaries as per the entitlement printed on the coupon.
Presently wheat is distributed @ 4.96 per kg and Rice 6.52 per kg to
BPL beneficiaries who are entitled to get 10 kg wheat and 15 kg
Rice. Similarly AAY beneficiaries are entitled to get 10 Kg wheat @
Rs. 2 per Kg and 15 kg Rice @ Rs 3 per Kg. When a beneficiary
comes to the FPS dealer for taking his monthly entitled foodgrain
he has to pay the amount to FPS dealer as per the fixed rates
mentioned on the coupon and has to submit the coupon for the
month for which he is taking foodgrain from FPS. The Beneficiary
has to put thumb impression or signature on the coupon while
submitting his coupon. During its visit to various Fair Price shops
and villages where committee interacted with the beneficiaries,
Committee found many irregularities in the distribution system.
3.7.8 Many shops do not open and do not distribute foodgrains.
Committee visited many FPS shops in various districts of the State.
It was observed that many FPSs in the State do not open at all and
rest open irregularly. Most of the Shops which were found open by
the Committee were opened on the special instructions of the
officers of the area after informing them about the probability of FPS
being visited by this Committee. The Committee was surprised on
its first day of visit to the FPSs when all the shops were found
closed. It is learnt that most of the shops remain closed. Committee
on asking the residents of the place and neighborhood shopkeepers
came to know that these shops do not open. Few of such shops are
1

FPS at Fulwari Sharif of Sh. Om Prakash, Licence No. 60/87

was closed as the owner was on leave for long period and the
cards of his shop are tagged with the shop of one Mr. Vinod
Kumar.

2.

FPS owner Vinod Kumar, at Fulwari Sharif was found closed at

9:30am.

3.

FPS of Mithlesh Prakash located at Pethia Bazaar, Fulwari

Sharif, was found closed at 9:45am. One small notice was put
up outside the FPS stating that dealer has gone to lift
foodgrains. Neighboring shop owners stated that the FPS is
always closed and he only opens on the 20 th of the month.
They further informed that in the morning, before the visit of
the Committee members, the FPS owner had come to put up
the abovesaid notice.

lxiii

4.

FPS situated in Ward No.12, Barauni ,Licence No. of Shop is

1/2007 was found locked at 10.20 a.m.

5.

FPS at village Mehdoli Ward No. 3-6, Bhagwanpur block

allotted in the name of Jaymala Devi under licence number
3/90 was found locked on 16/7/09. On the display board
outside the shop it was written in hindi that the dealer had
gone to the doctor. The Committee asked the MO to submit a
report stating as to why the FPS was locked during the
working hours. Later in the day, the MO submitted a report
which stated that the FPS was locked and he could not meet
the dealer. However, with the report, the MO also attached a
medical certificate stating that the dealer had visited the
doctor with regard to some ENT problem. It is worth noting
that if M.O was unable to meet FPS dealer how he had
obtained that medical certificate. Medical certificates are
usually issued by Medical practitioners only on asking for it.
The incident shows the intention of FPS dealer to hide the
information which could have been observed by the
Committee if the shop would have been open.
6. FPS with Licence No. 51/85 at Village, Mehdoli Block,
Bhagwanpur was found locked.
7. FPS of Jagdish Singh at Village Mehdoli, Ward No. 5,6,10,11
(Licence No. 63/85) was found locked. The display board had a
handwritten note which stated that the dealer had gone to
Begusarai

for

some

work.

This

note

was

also

dated

16/07/2009. The Committee observed that the note at the FPS

having licence no. 3/90 and at the present FPS had been
written by the same person as the handwriting was the same.
3.7.9 The above examples clearly show that the abovesaid shops do not
distribute ration to the beneficiaries. Marketing officers and Supply
Inspectors are duty bound to inspect the shops regularly. The M.O
decides the allocation of each FPS; the Bank Draft is also submitted
by the FPS at the office of the Marketing Officer (in town area)/
Block Supply officer (at rural areas) hence it cant be ruled out that
there is strong nexus between MO / BSO and FPS dealers. Without
the connivance of the officers it is not possible for FPS dealers to

lxiv

open shop irregularly, and get allocation without showing coupons

or distributing grains.
3.7.10
Improper Record keeping at FPS and false entries in Registers:
The Committee observed that FPS dealers in the State do not
maintain the records of the stock received, sales done, and coupons
collected by them. The Committee also found parallel accounts at
many FPSs with a view to manipulate and adjust the official record
to keep it intact. Some of the findings are mentioned herein. The
Committee visited the shop of Gupta Prasad at village Sikaria,
Jahanabad in evening. His Licence No. is 18/2007. The dealer does
not maintain all registers. His Stock register showed irregular
supply of foodgrain. He does not maintain Sales register. He stated
that he collects coupon but has no record of previous months
coupons which had been submitted at M.O office. The Concerned
M.O was also present but showed ignorance. The Committee asked
the dealer for the details of the foodgrains distributed 2-3 days
earlier; but the dealer stated that he had submitted all the coupons
collected till the previous day of the Committees visit. At some
places the Committee observed that FPS dealers intentionally hide
the stock registers. For instance, Stock Register was not shown at
the FPS of Krishnanadan Rai having licence no. 7/2008 situated in
ward 10, Barauni, Begusarai. The Committee also found parallel
accounts at FPS shops. At Fair Price shop of Shamim Ahmed
Ansari, situated at ward no. 9 Madipur , Muzaffarpur having licence
no. 19/91 committee found some parallel accounts being
maintained in separate non-official note books. However, he has
made proper entries in the main Register which he maintains for
official record. The discrepancy in the two registers and the entries
in the Kachha / parallel Register showed that the entries in official
register were false. FPS dealer Gopal Pandit at Ward No.12,
Chitkora Bazaar, Patna (Licence No.78/2008) did not show the
Sales Register.
3.7.11

Diversion and Black marketing of foodgrain by FPS dealers

1. Diversion of foodgrain happens in many ways. FPS dealers are
diverting foodgrains to influential people or to the open
market. They often sell it to non-beneficiaries at higher price
and earn profit. Many FPS owners accepted diversion and tried
to justify this by saying that as they get less commission they
are diverting foodgrains to meet their household expenses. It
is emphasized that there should be Zero tolerance for any

lxv

kind of irregularity or illegality

in the Public Distribution

System.
2. At the shop run by Shamim Ahmed Ansari, situated at ward
no.

Madipur,

Muzaffarpur

having

licence

no.

19/91,

committee found some parallel accounts being maintained in

a separate non-official note books. On perusing the note
books it was found that a large quantity of grain was being
given to various persons including one Neta Ji and one
Railway Aurat. Infact on one occasion 10 kg. rice and 50 kg.
wheat had been given in the name of Neta ji. On further probe
the dealer admitted that he was indeed giving out ration to
non card holders. The Neta ji was actually the local Ward
Counselor,

who

pressurized

the

dealers

to

give

such

quantities of grain every few months. The dealer insisted that

he had to succumb to the Ward Counselors pressure. The
dealer however could not explain the regular distribution of
grain to the Railway aurat. The dealer also admitted that he
sells PDS ration to non cardholders to earn more profit.
3. The Stock Board at shop of Gupta Prasad at village Sikaria,
Jahanabad (Licence No. is 18/2007) showed Wheat - 4.90,
Rice - 7.09. However, the dealer stated that he has only 2 Q
stock. On checking the shop, 6 bags of wheat and 80 bags of
rice were found. Dealer did not show the sales register. If he
had 4.90 Q Wheat as per stock board, he should have 10 bags
of Wheat, however he only had 6 bags of wheat i.e. 3 Q
wheat. Similarly he should have 14 bags of rice. However, he
had 80 bags of Rice i.e. 40 Q rice. The FPS dealer had no
justification for the extra grain present in shop.

lxvi

4. The Fair Price Shop of Avinash Verma situated at Ward No.9

Madipur, Muzaffarpur having licence no. 25/92 admitted that
he diverts foodgrain to earn profit.
5. Distribution was not done regularly in the FPS run by Md.
Umar at Ward No. 10, Madipur, Muzaffarpur having Licence
No. (Old) 62/85. As per the Sales Register he distributed 10
Kg. wheat to 3 persons on 17.07.2009 .i.e. a day before the
Committees visit to the shop, on coupon number 5198, 5436
and 5389. Cross checking the coupons, it was found that on
the coupon number 5198 the dealer gave ration for the month
of December 2008, on 5436, he gave for November 2008 and
Coupon number 5389 was not found. It is pertinent to mention
that the said coupons were found in middle of the bunch of
the coupons. Even though the distribution was done a day
before. The Committee observed that since the whole booklet
of coupons issued to a particular beneficiary has the same
serial number on each months coupon, it is difficult to
determine as to when i.e. in which month the coupon is
actually given to the dealer. Neither there is any mention of
date of issuance of ration on the coupon nor there any entry
in the register stating for which month the allocation has been
made to the beneficiary. The Sales register of the dealer had
entry only with regard to the coupon number and quantity
issued. The Committee had no means to find out whether the
coupon showed by the dealer pertained to the entry made on
17.07.2009. Committee observed that it is not easy to cross
check

sales

register

and

coupon

and

this

gives

the

opportunity to the FPS dealers to manipulate records and

easily divert the foodgrain.

lxvii

6. FPS of Krishnanandan Rai situated at Ward No.10, Barauni,

Begusarai, (Licence No.7/2008) has 905 APL, 176 BPL, 70 AAY.
The Committee was told that the dealer had gone to the
hospital as his mother was on her death bed. The room which
was being used as the FPS was adjacent to another room
which also had stocks of grain. The two rooms were connected
by a common door. When the Committee asked about the
other room and the stock therein, the dealers son replied that
the other room had the stock from his own farming. It was
mainly wheat and sarso. Prima facie it was difficult to
distinguish between the stock in the two rooms. However, on
close scrutiny the Committee found about 5-6 machine
stitched bags in the room which had the dealers own stock.
The bags were clearly the ones which come from the PDS
godowns. When the Committee enquired about the same, the
dealers son admitted that those bags were not of his own
stock but could not give a cohesive answer. He ultimately
blamed it on the labourers and said that the bags must have
been dropped in the room by the labourers by mistake.
3.7.12 Fair price shop dealers charge higher rates then the actual price
FPS dealers charge around Rs. 15-20 extra per beneficiary for one
month. Many FPS owners justified this by stating that they charge it
because they get less commission and their transportation cost is
more than what is fixed by the Government. Few of such instances
are:
1. The villagers of Kanaudi village (Jahanabad) who are attached
to the shop of Gupta Prasad at Sikaria Block informed that the
dealer charges Rs.5/- per kg instead of Rs.4.96/- for wheat. For
rice he charges Rs.7/- instead of Rs.6.52/-. Thus if a
beneficiary takes 15 kg rice he has to pay Rs. 97.8/- however
dealer charge Rs 105/- from beneficiaries.

lxviii

2. Number of beneficiaries attached to FPS of Avinash Verma ,

Ward 9, Madipur, Muzaffarpur, stated that the dealer indeed
took extra money, (Rs.15-Rs.18 per kg., per person) for the
ration. He threatened the beneficiaries that if they do not give
extra money, they will not get their ration. The beneficiaries
informed that they had even complained to the officials about
this but no action was taken. Upon probing, the dealer
admitted that he takes extra money from the beneficiaries as
he had to pay bribe to the officials to get his allocation and
also had to pay for the transportation cost to bring the food
grain from the BSFC Godown. There was general grievance of
FPS dealers that they have to pay money to the officials of the
Department, they also have to pay money to the AGM at the
time of lifting. The dealers have to satisfy the Mukhiya and
other important members of the Vigilance Committee.
3.7.13 Improper Weighment system
Most of the FPS dealers do not use proper weighing system. Many
dealers use false and erroneous weights or even stones for
weighment.
1. FPS dealer Gupta Prasad of Sikaria was using stones
instead of iron weights even though Iron weights were lying
in one corner of the inner room of his shop.
2. Though the dealer Md. Umar of ward no. 10, Madipur,
Muzaffarpur readily showed the receipt of Rs. 125/- from
the W & M department as prima facie proof of having got
his weights and scale certified, upon enquiry it was found
that neither the weights nor the scale had been certified
since 2003. The same was evident from the old stamp on
the weighing scale.
3. Dealer Shamim Ahmed Ansari , ward no. 9 Madipur,
Muzaffarpur (licence no 19/91) informed that he gets his
lxix

scale and weights checked and certified from the Weights

& Measure Department regularly and keeps his certificate
updated. However, upon enquiry it was found that he had
not got his scale and weights certified since 2003.
4. Scale and weights of dealer Avinash Verma ,ward no.9,
Madipur Muzaffarpur (licence no. 25/92) were not certified
since 2003.
5. At shop of

Dealer Krishnanandan Rai at Ward No.10,

Barauni Begusarai (Licence No.7/2008) the Committee was

also shown the annual certificate from the Weights and
Measures Department for having certified the weights and
the scale of the shop to be aligned. However, upon enquiry
it was found that neither the weighing scale nor the
weights had been stamped since 2005.
6. At one of the FPS of Rajesh Kumar in Ward no. 12 (licence
no 65/08), Patna Committee found that FPS had hollow
weight of 5 Kg. which he was using for weighing grains for
beneficiaries thus, he was giving less grain to beneficiaries.
The committee found lots of extra bags full of foodgrains in
his shop. FPS dealer manipulated beam and used under
weigh for diversion.

As per the Stock register and the

Sales register (which were produced after almost 15

minutes) he had no wheat and rice stock in his shop.
However, the bags of both the wheat as well as rice were
available in the adjoining room. When the Committee
members wanted to inspect the same the dealer with the
help of his family members and in full view of the
Marketing officer of the area dragged the said bags in his
Kitchen. The fact that stock and the Sales Register were
manipulated was proved by this incident. Further this
dealer was using two 5 kg weight. When the Committee
lxx

tried to check same by putting both the weight separately

on the two sides of the balance, it was found uneven.
Infact one side of balance hardly showed any weight.
Committee realised that the said weight was hollow from
inside when picked it in hand. Immediately the father of
the dealer lifted the erroneous weight and took it inside the
room. Thus, committee realised that weights and beam are
easily manipulated by FPS dealers to provide lesser
quantity of foodgrains. The ADSO/MO stated that they do
not have power to take any action to initiate prosecution
in such cases as the same belongs to the weights and
measures department and they can only suspend shop.
However same is not true.
3.7.14
3.7.14.1

Nexus between officials and FPS

Corruption is present in the Public Distribution System of the
State. The cause not only lies in the lack of transparency or
accountability in the functions of the government but also in
the lack of awareness among the people. There is no
monitoring of FPS as there is strong nexus between officials of
the Department and FPS dealers. Senior officials of the
department do not inspect the shops though they are bound
to do so.

3.7.14.2

FPS run by Krishnanandan Rai is situated at Ward No.10,

Barauni, Begusarai. The shop is run under Licence No.7/2008
Later, on checking the mobile phone of the MO accompanying
the Committee, the Committee found that the MO had
already informed the said dealers son (Sonu) 20 minutes
before the visit of the Committee. The dealers sons name
was present on the MOs mobile and there was a call from the
MOs mobile to the dealers son 20 minutes before the
Committees visit. This is despite the fact that the Committee
had made it clear to the officers that it wanted the FPS
inspections/ visit to be surprise checks.

3.7.14.3

In another instance the Committee came to know that due to

backlog in lifting, the money of the dealers get blocked and in
many cases the dealers are not able to collect sufficient

lxxi

money Mafia groups operating in the area takes this

opportunity and deposit money in the name of such dealers.
When the allotment is received they sell the PDS Commodity
in the black market in connivance with the dealers. In case
the FPS dealers go to money lenders they have to pay interest
at exorbitant rates.
3.7.15
3.7.15.1

3.7.15.2

3.7.15.3

3.7.15.4

Delay in allocation of foodgrain to Beneficiaries (Backlog)

There is backlog in allocation of foodgrain to beneficiaries and
the beneficiaries get ration of a month after delay of about 34 months. As the quota of many months lapse due to various
reason like non lifting by BSFC or by FPS, the beneficiaries do
not get ration every month. In the year 2008 it was the
general complaint of the beneficiaries that they got ration
only for 2-4 months. The Fair price shops do not receive
foodgrain regularly and thus they do not submit money for
few months. Ultimately, its the beneficiary who suffers.
The Committee observed that from the FCI, foodgrain goes to
BSFC and from BSFC to FPS. FPS gets quota after 3-4 months
and they have to deposit demand draft by 25 th of the previous
month. They keep depositing money for successive months
without getting ration hence their capital gets blocked. The
consequence is that they skip depositing the Bank draft for
few months in between. Quota for those months, for which
they dont deposit money, lapses.
At village Kanaudi, Jahanabad the villagers complained that
Gupta Prasad, the FPS Dealer does not give ration to them.
Last year i.e. in 2008 they got ration only for 2 months. They
also showed unused coupon from October 2008 to May 2009.
The villagers also stated that at times they do not have the
money to purchase the entire quantity of rice in one go. So
they purchase it in two installments.
Committee met the beneficiaries attached to the FPS shop of
Avinash Verma situated at Ward No.9 Madipur, Muzaffarpur
having licence no. 25/92.
1. Aftab Alam, Coupon No.0414856, BPL Card holder. He
complained of short weighment and also the fact that he had
not received ration for 7 months since September 2008. He
showed 7 unused coupons. He complained that the dealer
took extra money for the ration

lxxii

2. Shabnam, Coupon

No.0134142,

AAY

card

holder.

She

complained that the dealer takes Rs.18 extra for the ration.
She had not received ration since October 2008. She had 5
unused coupons.
3. Many beneficiaries informed that though they had the
knowledge that allotment for February was lying at the
dealers shop, the dealer was not issuing it to them. The
Committee had also found that allotment of grain for
February was indeed lying at the dealers shop. On enquiring
as to why the dealer was not issuing ration to the
beneficiaries, he simply refuted the allegations of the
beneficiaries and stated that he was willing to give the
ration

but

they

themselves

were

not

taking.

The

beneficiaries refuted allegation. Thus it was only on the

Committees intervention that the dealer was compelled to
admit the presence of stock which the beneficiaries could
claim.
3.7.16 Beneficiaries get 25 kg foodgrain instead of 35 kg.
3.7.16.1
The number of BPL families in the State of Bihar is 65.23
Lakhs as per the estimates of the Central Government. The
Central Government is allocating food stock for 65.23 Lakh
families only. However, the State Government has identified
1.23 Crore BPL families. Thus, there is a shortage of food grain
unless the State makes up the deficiency by procuring/
purchasing more food grain.
3.7.16.2

The Government of Bihar revised Public Distribution System

and slashed quota of foodgrain for BPL families from 35-25 kg.
Bihar Government claims that the members per family in the
state are 4.38.8 Earlier, the State was distributing 35 Kg per
family i.e. 25Kg rice and 10 Kg wheat. Now, the distribution
per family is 25 Kg comprising 15Kg rice and 10 Kg wheat.

Indian Express dated 29th march 2008,

http://www.indianexpress.com/story-print/289825/

lxxiii

Thus the State is able to manage the quantity of rice required

for distribution because of scaling down the allotment of rice
from25 kg to 15 kg but there is shortage of wheat as State
Government has not made any arrangement for wheat from
its own budget or for seeking additional allocation from the
Central Government. It is pertinent to mention that by this
decision the Government of the State has violating the
directions of the Supreme Court dated 10th January 2008.
3.7.16.3

At Kako village in Jahanabad, the beneficiaries were aggrieved

by the fact that though the center was allotting 35 kg. grain,
the people were only getting 25 kg. allotment.

3.7.17
Sample of foodgrain at FPS
The Committee found that the FPS dealers do not keep samples of
foodgrains at shop. Most of them complained that they do not
receive samples from BSFC godown. At Fair Price shop run by
Shamim Ahmad Ansari, situated at Ward No.9, Madipur, Muzaffarpur
Licence No.19/91, The dealer eagerly showed grain samples packed
in normal polythene bags. He stated that the said bags were
samples he received from the BSFC. The packets did not have any
seal or signed slip. On persistent enquiry the dealer admitted that
he himself had made the packets to show it to the Committee. At
the shop of Avinash Verma (situated at Ward No.9 Madipur ,
Muzaffarpur having licence no. 25/92)dealer stated that he had
prepared samples as he was informed about the visit of the
Committee by department officials.
3.8

Conclusion
1)
The Committee observed that BSFC does not lift
foodgrain regularly and lifts foodgrain as per the
availability of money and storage space with them. The
FPS has to deposit Bank draft by 25th of the previous
month however they get foodgrain after 3-4 months
hence their capital gets blocked. Dealers often skip
depositing of Bank draft for few months in between.
Quota for those months, for which they dont deposit
money, lapse. Further, as FPS lift foodgrain for few
months only but same grain is not distributed 100% to
beneficiaries. It gets diverted to black market or is

lxxiv

supplied to politicians/ influential persons. Beneficiaries

gets ration for 2-3 months ration only. As no coupon,
utilization

certificate

is

cross

checked,

Utilization

certificates and Form-20 are hardly deposited. No record

is kept at M.O office regarding coupons serial no. or
utilization certificate and Form-20. FPS dealers do not
maintain Sales Registers and they weigh less.

All this

leads to the fact that even though Central Government

allocates ration for a year, beneficiaries are getting only
for 2-3 months. All this adds up to the trauma of
beneficiaries.
2)

Corruption is present in the Public Distribution System.

The cause not only lies in the lack of transparency or
accountability in the functions of the government but
also in the lack of awareness among the people.

3)

There is no proper weighing system at all levels of

distribution i.e. at FCI, BSFC and FPS.

4)

The quality of foodgrain can not be checked as no

sample is issued to FPS dealers by BSFC nor do they
keep samples at their godowns.

5)

There is acute shortage of storage space with BSFC.

BSFC also do not have sufficient staff to ensure proper
functioning of Public Distribution System.

6)

The FPS shops do not keep list of BPL and Antodaya

beneficiaries.

7)

Records are not properly maintained by the FPS dealers.

At many places it was observed that the Sales Registers
were not at all maintained.

8)

Fair price shop dealers charge higher rates then the

actual price.

9)

Fair Price Shops do not open daily.

lxxv

10)

There is no monitoring of FPS as there is strong nexus

between officials of the Department and FPS. Senior
officials of the department do not inspect the shops
even they are bound to do so.

11)

FPS

dealers

charge

around

15-20

Rs.

extra

per

beneficiary for one month which many FPS owners

accepted and said they charge it because they get less
commission and less transportation charges and their
transportation cost is more than what is fixed by the
Government.
12)

The beneficiaries get ration of a month after delay of

about 3-4 months.

13)

As the quota of many months lapses due to various

reasons

like

non-lifting

by

BSFC

or

by

FPS

the

beneficiaries do not get ration every month. In the year

2008 it was general complaint of the beneficiaries that
they got ration only for 2-4 months.
14)

There is diversion of foodgrain by FPS dealers as they

often sell it to non- beneficiaries at higher rates to earn
profit.

15)

Dealers

are

diverting

foodgrain

meant

for

PDS

beneficiaries to influential persons.

3.9

Recommendations:
1. Committee was informed by the BSFC officials that there is
acute shortage of storage space with BSFC because of which
there is delay in allocation of foodgrains. Thus, there is need
of augmentation of storage capacity of BSFC godowns.

lxxvi

2. Committee is of the view that there should be electronic

weighment system in each godown and weighment check
Memo should be electronically generated and the system of
making manual weighment receipts should be done away with
at each godown of FCI and BSFC.
3. The signature of the BSFC officials acknowledging receipt of
samples should be taken by the FCI officials and same should
be put on record. Copy of same record should be given to the
District Manager BSFC so that there is no confusion about the
delivery of samples to BSFC. The receipt report of AGM of
BSFC godown which he sends to the District Manager should
specifically mention whether he received samples or not. In
case of any lapse prompt action should be taken by the
concerned officials. Procedure of sampling of foodgrains
received at BSFC godown should be strictly followed.
4. Weighment errors and quality of grain can be checked by
small packaging of the foodgrains. Thus, State can consider
the small tamper proof packaging of the foodgrains.
5. There is no ration card in the State. The State should take
prompt action and expedite the issuance of the Ration cards
to the deserving and eligible beneficiaries.
6. There should be proper monitoring of the records of FPS
dealer, and records maintained at the office of Marketing
officer/ BSO by the superior officers. Similarly records of BSFC
Godowns and condition of storage of foodgrain and regularity
of

lifting

of

foodgrain

by

AGM

of

BSFC

godown

are

continuously monitored by the Senior officials.

7. The distribution of FPS can only be monitored if there is
proper accounting of the food coupons. As food coupon
system in the State has many loopholes it is easy for errant
FPS dealers or corrupt officials to develop nexus
lxxvii

and divert

foodgrains.

Thus,

there

should

be

proper

and

regular

accounting of the food coupons by officials. It is pertinent to

mention that as the State has no ration cards, food coupons
are the only measure to distribute grain. However, same
should be treated as interim measure and not the permanent
system of distribution and State should take prompt action to
issue Ration Card.
8. A system of e-banking should be adopted for depositing the
money by FPS Owners to avoid unnecessary expense on part
of FPS dealers in making payment by DD and to reduce the
number of visits to the concerned office.
9. The records of BSFC regarding lifting of foodgrain from FCI,
receipt of same at BSFC godown and distribution to FPS shall
be

computerized

and

made

online

transparency in allocation process.

lxxviii

so

that

there

is

Chapter 4
TRANSPORTATION
4.1

The Bihar State Food & Civil Supplies Corporation Ltd. (BSFC) is the
agency responsible for lifting the food grain from the FCI godowns
and storing it for further distribution to the Fair Price Shops (FPS).
During the meetings with the officers of the BSFC it was stated that
there have been many cases of transport contractors indulging in
diversion of food grain. In such cases the transporter is immediately
suspended, a show cause notice is issued. Where the transporter is
found indulging in malpractices his security is to be forfeited,
penalty has to be imposed, F.I.R. is to be registered and agreement
is cancelled. The officials however, admitted that there have been
hardly any cases where action had been taken against the
transporter under the Essential Commodities Act, 1955.

4.2

An official also informed the Committee that rangdari was being

charged at the rate of Rs. 400-500/- per truck at various places by
hoodlums which had to be paid by the transporter. He specifically
mentioned that at the FCI godown at Mukama the trucks are not
allowed to proceed by hoodlums unless they are paid rangdari by
the transporter. The question is as to how the transporter would
recover the amount. The immediate reply was that the transporter
off loads some bags of food grain and sells them in the market.
When this fact was told to the District Magistrate, he stated that
action was being taken against the miscreants.

4.3

The District Magistrate Muzaffarpur informed the Committee that

there were many incidents of diversion when food grain is
transported from the FCI godown in one district to the BSFC godown
in another district. The Committee was informed that almost 30% of
the storage capacity of FCI in the State is concentrated in the

lxxix

districts of Patna, Gaya, Muzaffarpur and Buxar. The Assistant

General Manager (Storage) FCI informed the Committee that acute
storage crisis was being felt and as such the matter was reported
to FCI head quarters & the Ministry. A high level committee has now
given approval for construction of 2 Lakh MT covered capacity
godowns at different locations.
4.4

The BSFC hires transporters through tenders. Notice for inviting

tenders is published in the newspapers. The tenders received in the
office of the BSFC are sent to the District Transportation Committee.
The District Magistrate heads the committee. The District Manager
BSFC is the convener and the District Supply Officer and all SDOs of
the district are its members. The committee recommends the
names of 2-3 transporters. The Chief of Procurement then selects
one name and the Managing Director of the BSFC finally approves
the same. The contract with the transporter is for one year and can
be extended for another year if the performance of the contractor
has been good.

4.5

The Committee was informed that there is a constant problem in

hiring the transport contractors. In Patna tenders had been issued 4
times yet no person came forward to apply for the tender. The
reason given for this was that the rates at which the tenders were
issued were very low. In Muzaffarpur district there were only two
contractors and both had been blacklisted. In the districts where
there is no transport contractor the BSFC has to make its own
arrangements for transporting food grain from FCI godown to its
own godown. The Assistant Godown Manager (AGM) in-charge of the
BSFC godown hires trucks at the approved rates of BSFC whenever
required. These rates are obviously higher than the contract rates.

lxxx

4.6

No official of the BSFC accompanies the trucks carrying food grain

from the FCI godown to the BSFC godown. The Fair Price Shop owner
takes the delivery from the BSFC godown and it is his responsibility
to take the food grain to his shop.

4.7

The Committee found that there is an acute shortage of

AGMs.

Each AGM has more than one godown in his charge. He is also
required to be present at the time of lifting from the FCI godown. As
the AGM can not be present at the FCI godown and at the godowns
in his charge it causes delay in delivery of food grain to the FPS who
have to lift the food grain from his godown.
4.8

The FCI allows 50 days for lifting the allocation for any month. The
transporters however complained that the BSFC does not give them
more than 15 days. In some cases the quantity of grain exceeds
1,00,000 quintals and there is always a chance that some allocation
may lapse due to the inability of the transporter to lift the grain in
time on account of non-availability of sufficient number of trucks.

4.9

The BSFC is required to give lifting programme to the transporter at

least one day in advance so that he is able to arrange required
number of trucks commensurate with the quantity to be lifted. One
of the transporters pointed out in a public meeting that the lifting
programme is not given to them in advance. They are made to wait
till 4 pm. As a result the truck reaches BSFC godown late in the
evening and the stock can not be unloaded on the same day. The
truck is stranded at the godown till the next morning. If they have
50 trucks they are given lifting programme for 20 trucks and if they
bring 20 trucks the programme is given for 100 trucks. In short the
officials do not permit efficient working till nazarana ranging from
Rs.300-1000/- is paid. He also complained that the labour at the

lxxxi

godowns also blackmails the transporter and charges Rs. 500/- per
truck for properly loading the gunny bags in the trucks.
4.10 The President of the FPS Dealers Association, Bihar alleged that any
money paid by the transporter is taken by him forcibly from the
AGM who collects it from the FPS dealer. He also alleged that the
transporters have to pay extra money/ bribe to the loaders as the
loaders form unions and labourers from outside are not allowed to
work in FCI godowns. Moreover, bribes also have to be paid to the
weigh bridge operator at the FCI godown.
4.11 Recommendations
i)

A proper vigil has to be kept on transportation of the Specified Food

Articles (SFA) from the Godowns of FCI upto the Fair Price Shops.
GPS system can be used for tracking the movement of Trucks
carrying foodgrains. For this, routes that have to be followed by
Trucks carrying SFAs are to be prepared and specified. Devices
required for GPS should be installed on every such Truck and
movement of the Truck should be monitored. Attachment of device
of GPS in the Trucks engaged in Public Distribution System may be
made part of the tender conditions.

ii)

The State of Chattisgarh has successfully adopted the system of

GPS in the State. Similarly, Indian Oil Corporation is also using this
technology for the Trucks deployed by it. Similar system can be
adopted for Bihar. The system may be procured, installed, operated
and maintained by Department or these may be outsourced to an
outside private agency through an open tendering process.

iii)

There should be routine daily physical checking of the GPS Units to

detect any tampering etc. Any tampering with GPS system installed
on the Trucks carrying SFAs or any deviation of the Truck from the
lxxxii

route prescribed should be considered as violation of the Public

Distribution System (Control) Order, 2001.
iv)

The bags carrying wheat and rice should bear the name of the
scheme as Antyodaya, BPL, and Annapurna etc. before delivery
from FCI.

v)

The trucks carrying the food grains from BSFC godown to Fair Price
shop should have a banner having name of District, Block and
scheme for which food grains are meant for so that diversion could
be checked.

vi)

The tenders should be issued at realistic rates keeping in view the

actual cost of transportation. BSFC has to pay higher charges if
there is no transport contractor. In any case, if the contractor is paid
less he is likely to make up his loss by diversion.

vii)

Each godown must have a full time in-charge. A separate official

should be deputed for lifting the food grain from FCI godown. Lifting
programme should be provided to the transporter at least one day
in advance to enable him to arrange for the requisite number of
trucks.

viii)

There should be Zero tolerance in cases of breach of contract

committed by Transporters. Deterrent monetary penalty should be
imposed against the errant Transporters. In the event of even a
single breach resulting in diversion of SFAs, not only should the
Bank Guarantee be forfeited but also the Transporters should be
blacklisted for a specified number of years along with monetary
penalty. Apart from the errant Transport Contractor, immediate
stringent deterrent action should be taken against officials working

lxxxiii

in the Department, in cases where a prima facie case of their

involvement in an incident of diversion is made out.
ix)

It is relevant to point out here that the Planning Commission

provides funds under its plan programmes for strengthening the
operational machinery of Public Distribution System. 9 The funds are,
inter - alia, provided for schemes for purchasing mobile vans/Trucks
for distributing essential commodities, where static/regular Fair
Price Shops are not found viable/feasible. This facility of mobile Fair
Price Shop, the Committee feels, can be availed of for providing
SFAs in areas where the number of food cards/ration cards does not
justify opening of a Fair Price Shop as per the norms or where the
FPS has been suspended.

x)

Proper Distribution of PDS commodity needs timely issue and lifting

of foodgrain, monitored transportation, proper weighment and
packaging of foodgrains to ensure that issued quality and quantity
of foodgrain reach the beneficiary. The Committee suggests that
foodgrains can be issued in non-pilferable tamper proof bags and if
possible smaller packs of 5-10 Kg to minimize leakages and ensure
full supply to beneficiary.

xi)

As recommended, in all the other reports submitted by the

Committee, it is without exception that all godowns of the FCI and
the BSFC should have a electronic weighbridge, irrespective of
whether they are hired by the FCI or self-owned. Further, the FCI
Godowns should issue Weight Check Memos to all the trucks which
are lifting the stock from the FCI Godowns.

Extract of Report of the Working group on PDS and food security for the
10th Five Year plan (2002-2007)
9

lxxxiv

Chapter 5
MODE OF APPOINTMENT OF FAIR PRICE SHOP DEALERS
5.1 The Government of Bihar Government, under the Public Distribution
System (Control) Order, 2001 and other provisions of law, issued
notification dated 15.02.2007, with the prior concurrence of the
Central Government. The notification provides for issuance of licence
to FPS dealers, suspension and cancellation of licence, terms and
conditions regulating the sale and distribution of PDS commodities.
The procedure for appointment of FPS dealers as given in the said
notification is as under:1.

Every application for the grant of licence shall be made to the

respective licensing authority in the prescribed form. The
licensing authority shall ensure proper verification through Block
Supply Officer/ Supply Inspector and shall forward its report to
the District Level Selection Committee for consideration.

2.

The Selection Committee shall consist of the following officers

Chairman
Secretary

Members

3.

The District Magistrate.

The Special Officer Rationing for Rationing
Area Patna, ADM (Supply) Patna for Patna
district and for remaining districts, the
District Supply Officer/ Incharge District
Supply Officer.
(i) The Sub Divisional Officer of respective
Sub Division;
(ii) Any schedule caste/ schedule tribe officer
posted in the district.;
(iii) The District Co-Operative Officer.
-

The Licensing Authority shall issue the licence to Fair Price Shop
under

Public

Distribution

System

on

the

application

recommended by the above selection committee.

4.

The following facts are to be taken into consideration for

appointment of licences of the Fair Price Shops -

lxxxv

(i)

1350 population in Urban Areas and 1900 population in

Rural Areas have been fixed as one of the criteria for
appointing new licencees under the Public Distribution
System.

(ii)

The Consumer should not be made to travel more than two

kilometers for accessing the Fair Price Shop both in Urban
and Rural areas.

(iii)

For

remote

and

inaccessible

areas,

specially

those

dominated by Scheduled Caste/ Scheduled Tribe Fair Price

Shop may be appointed for a population of 1000.
(iv)

Reservation in allotment of Fair Price Shops are as follows

Scheduled Caste
16 Percent
Scheduled Tribe
01 Percent
Most Backward Class 18 Percent
Backward Class
12 Percent
Women Backward Class03 Percent
The above mentioned reservations are applicable only to future
vacancies and are applicable at the Sub Division level.
5.

Priority is to be given to the following category of people in

issuance of new licences
(a)

Self Help Groups

(b)

Gram Panchayats

(c)

Co-operative Societies

(d)

Women/ Co-operative societies run by women

(e)

Ex-Army Co-operative societies

(f)

Handicapped

(g)

Educated unemployed

(h)

Preference should be given to the applicant who

is resident of concerned Panchayat or Ward.

7.
8.

Compassionate Cases: - On priority basis wife/husband, son,

unmarried daughter, daughter in law, widow of deceased son are
allotted shops.
Restriction on allotment of shops

lxxxvi

(a) Shops shall not be allotted to more than one member of a

joint family. Mother, Father, Brother, Sister-in-law, Wife, son,
Daughter-in-law, Step Brother, shall be considered to be under
the definition of one family.
(b)Elected Mukhia, Sarpanch, Ward Member, Panchayat Samiti
member, Zila Parishad member, M.L.A., M.P., Member of
Municipal Corporation and Municipality till their tenure.
(c) Floor Mill owner.
(d) Minor, Lunatic, or is of unsound mind and undischarged
insolvent.
(e) Applicant shall not be given licence if he/she is finally
convicted under Essential Commodities Act, 1955.
(f) If applicant holds the post of profit in the Government.
9. The licence is issued for a period of five years on payment of a
licence fee of Rs 400/- and is renewed for five years at a time on
payment of similar fee.
5.2 Observations and Findings
1. The Committee perused some files pertaining to the grant of
licences in the various districts. Almost all of the cases related to
the grant of licences were on compassionate grounds.
2. The Committee is of the view that a dealer is merely a licencee for a
fixed period. The FPS owners claim that they are not earning
sufficiently from the FPS and sometimes they even incurr a loss. In
such circumstances, it is difficult to understand why licences should
be given to the family members of the deceased FPS owner on
compassionate grounds and pass on the loss. The FPS licence is not
a largesse. The reason for getting shops on compassionate grounds
are not far to seek. It is the earning from the black market which
attracts applications for FPS licence.
3. The Committee also finds that there is no provision in the
Notification to advertise the vacancies so that deserving persons
can apply for licences. There is no provision for informing the public
if any vacancy arises for an FPS in any area. In order to bring

lxxxvii

transparency in allotments of FPS it is necessary that provision

should be made to advertise the vacancies.
4. The Committee also noted that the appointing authority for an FPS
licence is the SDO. He is an officer of the rank of a Sub Divisional
Magistrate. He has to make the appointment on the basis of the
recommendations of the Selection Committee headed by the
District Magistrate and of which he himself is a member. Thus, the
appointing authority has no discretion in the matter of appointment
and merely acts as a post office to forward the applications to the
selection committee and issue the appointment order.
5. Any person aggrieved by an order of the Licensing Authority
denying the issue or renewal of licence to the Fair Price Shop owner
or cancellation of the licence can appeal to the Appellate Authority.
6. The Appellate Authority notified by the State Government is the
District Magistrate/Collector who is the Chairman of the Selection
Committee also. Thus the appeal goes to the same person who has
virtually made the appointment. This is against the principles of
natural justice. The Committee is of the view that the appeal
against the orders of the appointing authority should be heard by an
officer who is/ has been a District Judge/ Additional District Judge in
the State of Bihar.
7. It is no secret that an FPS dealer can not honestly earn enough to
sustain himself and his family. To avoid running into losses he
indulges in black marketing. Study of the Committee shows that
merely increasing the commission will not result in making the FPS
a profitable or viable proposition. The Committee is of the view that
the concept of stand alone FPS should be changed. It should be in
the condition of FPS licence that he runs a kirana/ grocery shop. He

lxxxviii

should be permitted to sell all items except non PDS rice and wheat.
This way the FPS owner can earn profit and the shop will remain
open through out the month. Moreover attached number of cards
means a set number of customers in any case and it will not be
necessary to put any condition in the licence to keep the shop open
during particular hours or to observe a particular day as a holiday.
8. It is a well documented fact that the FPS owner is in business for the
purpose of diversion or for political influence or other influence that
he can wield by being an FPS retailer. There is massive corruption
woven around it where the participants are the shop keeper,
officials of the Department / Corporation, transporters and last but
not the least the politicians. The Committee is of the view that the
reservation for various categories provided in the notification dated
15.2.2007 appears rather unnecessary. FPS licences should be
allotted to persons of the locality who are already running kirana/
grocery shop or have the capability to do so.
9. Though there is a clamour for allotment for FPS, the FPS does not
rehabilitate or support sustenance of any category or gender. It
rather breeds corruption.
10.

The Committee came to know that there is no system by

which ration cards are attached to a particular FPS. It ranges from

as low as 124 to as high as 1567. The Committee was not appraised
of

any

reason

for

such

big

rationalization of FPS is must.

lxxxix

difference

in

number.

Thus,

Chapter 6
VIABILITY
6.1 Introduction
6.1.1.

Viability of FPS is linked with the rate of commission to be paid to

FPS dealers. The Committee discussed the issue of viability with FPS
owners and their associations, government officials and also invited
written suggestions from the public.

6.1.2.

Viability of Fair Price Shop is critical to sustenance of Public

Distribution System and to minimize leakages of PDS grains. The
number of ration cards attached to FPS in each category, offtake of
grains, margin on commodities, cost incurred on transport and
handling, rents etc. are the determinants of viability of Fair Price
Shops.

6.1.3.

Programme Evaluation Organisation under Planning Commission in

its evaluation Report on TPDS defined Viability of FPS to mean an
annual return of 12% or more on the working capital.10

6.1.4.

Average gross income of an FPS is calculated as an average of the

total margins generated from the sale of sugar, kerosene, rice and
wheat (APL, BPL, AAY) and other receipts out to the sale of gunny
bag in which PDS grains are packed and sent in to the FPS.

6.1.5.

The PEO report, 2005 brings out the importance of kerosene in the
income composition of the FPS. The Report states that the income
from kerosene almost equals the combined share of income
generated from sale of BPL rice and wheat and thus speaks of the
importance of keeping kerosene within the PDS retail trading to
improve their viability.

PEO, Performance Evaluation of Targeted Public Distribution System2005, (at pg vi and 50).
10

xc

6.1.6.

The Committee has observed that many factors affect the viability of
FPS. Some of these are i. Severe delay in supply of the Essential Commodities
ii. Losses suffered by FPS dealers due to blockage of working
capital invested for the stock for long periods.
iii. Losses suffered on account of short supply of goods.
iv. Unequal distribution of ration cards.
v. Various recurring costs like transport, rent, electricity, loading
charges etc.

6.2

Existing System

6.2.1 Para 3(1) of the Annexure read with clause 5 of the PDS Control
Order, 2001 states that the Central Government is to make food
grains available to the State Government at a particular price that is
specified from time to time.
6.2.2 The State Government adds its administrative charges on the
central issue price and allocates these food grains to the fair price
shop at the prescribed rates. The fair price shop dealer sells the
food grains at the rate prescribed by the State Government. The
Government of Bihar vide its order dated 03.10.2007 has fixed the
sale price for rice and wheat for BPL and APL families. The table
underneath would give a general view on the prices at which the
State buys from the Centre and the price at which a fair price shop
dealer is bound to sell the food grains to the consumers BPL
Whea Rice
t
Central
Government
issued price (FCI)
1% VAT
3% Other taxes
BSFC Handling,
Transportation
Margin Money

APL
Rice
(Ordinary)

415.00

565.0
0

610.0
0

795.00

Rice
(Grade
A)
830.00

4.15
12.45

5.65
16.95

6.10
18.30

7.95
23.85

8.30
24.90

35.00

21.00

22.60

22.60

35.00

Whea
t

xci

etc.
BSFC issue price
Commission of
FPS Dealers
Reimbursement
to FPS Dealers
towards
transportation
expenses (till 15
kms)
Consumer End
Price per quintal

466.6
0
25.00

622.6
0
25.00

655.4
0
14.80

849.40

885.80

24.30

24.30

4.00

4.00

3.50

3.50

3.50

495.6
0 or
Rs.
4.96
per
kg

651.6
0 or
Rs.
6.52
per
kg

673.7
0 or
Rs.
6.74
per kg

877.20 or
Rs. 8.78
per kg

913.60 or
Rs. 9.14
per kg

Note: - Transportation rates for distance of more than 15 Kms will be

fixed by District Supply Officer.
6.2.3 The Bihar State Food & Civil Supplies Corporation (BSFC) is being
paid transportation charges for BPL foodgrain @ Rs. 35/- per quintal
and for AAY Rs.37/-. For APL it is Rs. 21/- for wheat and Rs.20.60 for
rice per quintal.
6.2.4 In a meeting with Shri Jai Shankar Prasad Yadav, Deputy Secretary,
Shri Narendra Prasad Mandal, Secretary to Food Commissioner and
Satish Narayan Singh following details emerged regarding the
earning of a FPS owner holding 500 cards (all BPL):
Note The Commission for wheat and rice is calculated
that of Kerosene is calculated per litre.
Income
Quantity
Commissio Income
n
Wheat
50 quintals
Rs. 25/Rice
75 quintals
Rs. 25/Kerosene
1500 litres
Re. 1/Gunny
150 bags
Rs.10
per
bag
Total
Expenditure
Rent
Helper / Assistant (Temporary)

per quintal and

1250
1875
1500
1500
6125

Amount
700
1500

xcii

Electricity
Stationery
Charges
D/D
Total

&

100
175

Miscellaneous

100
2575

Net Income (Income Expenditure)

3550
If income of sale of Kerosene Oil is taken out, income from foodgrains
would be Rs.2,050/- only.
6.2.5 The FPS Dealers submitted the average estimated earnings of an
FPS owner at the existing rate of commission on foodgrains &
Kerosene Oil. It was stated that on an average, one FPS Dealer has
500 cards attached with it, out of which 300 are BPL & 200 APL
cards.
Income

Quantity

Wheat
Rice
Kerosene
Gunny

30 quintals
45 quintals
1500 litres
150 bags

Commissio Income
n
Rs. 25/Rs. 25/Re. 1/Rs. 6 per
bag

Total

750
1125
1500
900
4275

Expenditure
Rent
Helper / Assistant (Temporary)
Miscellaneous Charges
Conveyance Charges
Transportation
D/D
Total

Amount (In Rs.)

700
1500
100
200
80
175
2755

Net Income (Income Expenditure)

1520
Note APL card holders are not provided with food grain under PDS
except on special occasions like festivals etc.
6.2.6 They also proposed that the commission should be increased to Rs.
40/- per quintal. Even an increase in commission will not make the
FPS viable as the following calculation would show.
Income

Quantity

Wheat

30 quintals

Commissio
n
Rs. 40/xciii

Income
1200

Rice
Kerosene
Gunny

45 quintals
1500 litres
150 bags

Rs. 40/Re. 1/Rs. 6 per

bag

1800
1500
900

Total

5400

Expenditure
Rent
Helper / Assistant (Temporary)
Miscellaneous Charges
Conveyance Charges
Transportation
D/D
Total

Amount (In Rs.)

700
1500
100
200
80
175
2755

Net Income (Income Expenditure)

2645

6.2.7 The FPS dealers have failed to mention the fact that they are
entitled to receive Rs. 4/- per quintal of foodgrain as transportation
cost up to a distance of 15 kms. as prescribed by the State
Government. If the same is also taken into account then the Net
Income of the FPS dealer shall increase by Rs. 300/- per month.
Thus, the above mentioned figures would read as Rs. 1820/- & Rs.
2945/- respectively.
6.2.8 The following is the viability of few FPSs visited by the Committee in
the State of Bihar
1. Licence No. 78/2008, Ward No. 12, Patna, Dealer Gopal Pandit. He
was running the shop since 1967. He also sells diesel engine parts at the
Station Road. He had 550 cards with him (400 APL, 100 BPL, 50 AAY)
Commodity

Quantity

Wheat
Rice

15 quintals
22.5
quintals
1375 litres
75 bags

Kerosene
Gunny
Transportation

37.5
quintals

Commissio
n
Rs. 25/Rs. 25/Re. 1/Rs.10
bag
Rs. 4/-

Total

per

Income
375
562.50
1375
750
150
3212.5

xciv

Expenditure
Rent
Helper / Assistant (Temporary)
Electricity
Labour
Transportation
D/D
Total

Amount (In Rs.)

0
750
100
0
250
60
1160

Net Income (Income Expenditure)

2052.5

2. Licence No. 65/2008, Ward No. 12, Patna, Dealer Rajesh Kumar. He
was running the shop since 1990. He had 500 cards with him (400 APL,
100 BPL)
Income

Quantity

Wheat
Rice
Kerosene
Gunny

10 quintals
15 quintals
1250 litres
50 bags

Commissio Income
n
Rs. 25/Rs. 25/Re. 1/Rs.10
per
bag

Total

250
375
1250
500
2375

Expenditure
Rent
Helper / Assistant (Temporary)
Electricity
Labour
Transportation
D/D
Total

Amount (In Rs.)

0
0
250
0
350
120
720

Net Income (Income Expenditure)

1655

3. Licence No. 60/07, Kako Paschimi, Jahanabad, Dealer Rajendra

Prasad
He had 314 cards (262 APL, 37 BPL, 15 AAY) Income

Quantity

Wheat
Rice
Kerosene

5.2 quintals
7.8 quintals
942 litres

Commissio
n
Rs. 25/Rs. 25/Re. 1/xcv

Income
130
195
942

Gunny

26 bags

Transportation
Total

13 quintals

Expenditure
Rent
Helper / Assistant (Temporary)
Electricity
Labour
Transportation
D/D
Total

Rs.10
bag
Rs. 4/-

per

260
52
1579

Amount (In Rs.)

0
750
115
0
60
100
1025

Net Income (Income Expenditure)

554

4. Licence No. 1/2001, Bitho Sharif Village, Kandi Panchayat, Gaya, Dealer
Dileep Kumar He had 297 cards (111 APL, 113 BPL, 73 AAY) Income

Quantity

Wheat
Rice

11.3 quintals
16.95
quintals
891 litres
57 bags

Kerosene
Gunny
Transportation
Total

56.5 quintals

Expenditure
Rent
Helper / Assistant (Temporary)
Electricity
Labour
Transportation
D/D
Total

Commissio
n
Rs. 25/Rs. 25/Re. 1/Rs.10
bag
Rs. 4/-

Income

per

465
423.75
891
570
226
2575.75

Amount (In Rs.)

0
750
100
620
500
100
2070

Net Income (Income Expenditure)

505.75

6.2.9 There is a huge difference in the number of cards attached to each

FPS. The following is the viability of FPS on the basis of data
collected by the Committee on its visit to the Marketing Office at
Chitwarpur District, Samastipur
xcvi

1. FPS Dealer Mr. Raja Ranjeet Singh. He had 1567 cards (792 APL, 405
BPL, 370 AAY) -

Income
Wheat
Rice
Kerosene
Gunny
Transportatio
n
Total

Quantity
77.5 quintals
116.25
quintals
4701 litres
388 bags
193.75
quintals

Commission
Rs. 25/Rs. 25/-

Income
1937.5
2906.25

Re. 1/Rs.10 per bag

Rs. 4/-

4701
3880
775
14199.75

Expenditure
Rent
Helper / Assistant (Temporary)
Electricity
Labour
Transportation
D/D
Total

Amount (In Rs.)

0
750
100
620
800
100
2370

Net Income (Income Expenditure)

11829.75

2. FPS Dealer Mr. Rana Pratap Singh. He had 1400 cards (576 APL, 430
BPL, 394 AAY)
Income
Wheat
Rice
Kerosene
Gunny
Transportatio
n
Total

Quantity
82.4 quintals
123.6 quintals
4200 litres
412 bags
206 quintals

Expenditure
Rent
Helper / Assistant (Temporary)
Electricity
Labour
Transportation

Commission
Rs. 25/Rs. 25/Re. 1/Rs.10 per bag
Rs. 4/-

Income
2060
3090
4200
4120
824
14294

Amount (In Rs.)

0
750
100
620
800
xcvii

D/D
Total

100
2370

Net Income (Income Expenditure)

11924

6.2.10
In Begusarai, the Committee visited the FPS of Mr. Krishna
Nandan Rai, who had 1151 cards (905 APL, 176 BPL, 70 AAY) Income
Wheat
Rice
Kerosene
Gunny
Transportatio
n
Total

Quantity
24.6 quintals
36.9 quintals
1151 litres
123 bags
61.5 quintals

Commission
Rs. 25/Rs. 25/Re. 1/Rs.10 per bag
Rs. 4/-

Income
615
922.5
1151
1230
246
4164.5

Expenditure
Rent
Helper / Assistant (Temporary)
Electricity
Labour
Transportation
D/D
Total

Amount (In Rs.)

0
750
100
620
500
100
2070

Net Income (Income Expenditure)

2094.5

6.2.11
The Committee also visited the shop of Mr. Anwar Hussain, in
Muzaffarpur. He had 124 cards (46 APL, 78 BPL, 0 AAY)
Income
Wheat
Rice
Kerosene
Gunny
Transportatio
n
Total

Quantity
7.8 quintals
11.7 quintals
46 litres
39 bags
19.5 quintals

Expenditure
Rent
Helper / Assistant (Temporary)
Electricity

Commission
Rs. 25/Rs. 25/Re. 1/Rs.10 per bag
Rs. 4/-

Income
195
292.5
46
390
78
1001.5

Amount (In Rs.)

0
750
100

xcviii

Labour
Transportation
D/D
Total

620
500
100
2070

Net Income (Income Expenditure)

-1068.5

Thus, equitable distribution of cards i.e. rationalization of FPS is imperative

for viability of FPS.
6.2.12

It is noted that even after increasing the rate of commission as

demanded by the FPS Dealers Association, the income is not

sufficient to sustain a family of 4/5 persons. During the Committees
field visit, it was stated that the minimum income in urban areas
should not be less than Rs. 20,000/- and in rural areas Rs. 17,500/per month.
6.2.13

Vide order dated 12.04.2007, the commission for FPS Dealers

with respect to AAY grain was increased both for foodgrains and
kerosene. The commission on wheat and rice to FPS dealers for AAY
category has been increased from Rs. 13 per quintal to Rs. 25 per
quintal.

It was stated before the Committee that an increase of

commission for BPL foodgrain was also being considered. The

Committee conducted various meetings with various officials and in
the initial meeting at Patna was informed that in case of AAY (as was
in 2007), if the commission was increased then the state will have to
bear the expenditure. However, in case of BPL, the increase in
commission can be loaded on the issue price to the consumer. Apart
from this the FPS dealer has to deposit the bank draft @ Rs. 175 per
quintal for wheat and @ Rs. 274 for rice for AAY category allocation.
6.2.14

Further, it was stated that there is a presumption while

appointing an FPS Dealer that the FPS alone cannot be his source of
livelihood. In fact, running a FPS is a considered as a matter of
prestige for most Dealers.
xcix

6.2.15

In the State of Bihar, there is no bar on the FPS from selling

other grocery items. In fact, the State Government has issued a

letter dated 17.01.2008 stating that the FPS should be run as a Micro
Economic Enterprise wherein it should be allowed to sell various
items such as mobile recharge cards, milk and milk products,
cosmetics etc. The said letter enumerates 12 items in particular and
states that the FPS may sell such items other than PDS Commodities
(being wheat and rice in any form). There is also another letter by
the Department of Food & Public Distribution, Ministry of Consumer
Affairs, Government of India stating that postal items can be sold at
FPS Counters.
6.2.16

A number of FPS dealers stated that the Commission should

be increased and openly admitted to the fact that unless the same is
done the dealers shall continue the practice of manipulation and
diversion. Apart from this, other problems faced by the FPS Dealers
with regard to viability are as under (i)

Mr. Srikant Labh Pradhan, Secretary, FPS Dealers Association at the

public meeting at Patna stated that the FCI often overcharged the
transporters who in turn used to obtain that charge from the FPS
Dealers.

(ii)

Mr. Dinesh Singh, Adhyaksh, Bihar Pradesh FPS Dealers Association

at the public meeting at Patna also stated that in order to make the
FPS more viable, door step delivery should be made.

(iii)

There is also a severe backlog in supply of grain and thus, large

amounts of working capital of the FPS is stuck as by the 20 th of the
every month they have to deposit their bank drafts irrespective of
the fact as to when there grain is allocated or if it may even lapse.

(iv)

Inequitable distribution of cards

(v)

Mr. Jitendra Srivastav, District Collector, Begusarai, stated that there

was also a problem of the credit extended to the FPS Dealer who
apply for loans from banks and financial institutions. Further, there
are poor FPS dealers who get their funding from money-lenders
where the rate of interest @ 60% p.a.

6.3 Conclusions / Recommendations

1. Increase in commission will put an unnecessary burden on the
State exchequer or on the consumer if it is passed on to the
consumers. It should rather be the condition of the licence that
FPS owner must run grocery / kirana shop. His inaction to do so
should entail cancellation of licence to run FPS. The authorization
of FPS should be given to grocery / kirana shop in that area itself
and it should also be seen that owner himself resides in that area.
The FPS dealers were also of the opinion that Sugar and other
commodities should be supplied and allowed to be sold in order to
increase the income. Though there are instructions from the State
Government to run the FPS like a Micro Economic Enterprise,
neither the dealers are interested in doing so nor there is active
enforcement by the authorities. A stand alone FPS should not be
allowed as it is an inherently unworkable model and leads to
malpractices. A system needs to be developed where general
stores are given licences to sell PDS grains. There can be a
restriction on sale of non PDS wheat and rice at such shops. For
this FPS can be made the supply units for goods produced and
marketed by public and cooperative agencies like Khaadi and
Village Industries, cooperative marketing federation and can also
be allowed to keep products by women self help groups like
pickles, jams dry masala etc.
2. There has been a general suggestion that the commission of the
fair price shops should be increased to approx 2.5% to 10%.
ci

However, the Committee reiterates its stand which it stated in its

Delhi report that in order to improve the viability of fair price
shop, the consumers should not be burdened and also no
additional burden should be there on the government.
3. Number of ration cards attached to shop has a direct bearing on
the income of FPS. There have been demands that each FPS
should have sufficient number of ration cards attached to it. Thus,
there should be rationalization of cards for each FPS. It was
observed by the Committee that some FPS dealers have very few
beneficiaries attached to their shops while other have a large
number of beneficiaries. In Chitwarpur Block of Samastipur
District the FPS of Raja Ranjit Singh had a total number of 1567
(792 APL, 405 BPL and 370 AAY) beneficiaries. The net income of
this FPS owner has been calculated at Rs. 11829.75 per month.
The FPS of Rana Pratap Singh had 1400 (576 APL, 430 BPL and
394 AAY) beneficiaries and his net income works out to Rs.
11924.00 per month. On the other hand, the FPS of Rajendra
Prasad in Kako Paschimi, Jahanabad, had 314 cards attached to
his shop (262 APL, 37 BPL, 15 AAY) and his net income calculated
is Rs. 554 per month. The FPS Anwar Hussain in Muzzafarpur had
only 124 beneficiaries (46 APL, 78 BPL) and calculation of his
income showed a loss of Rs.1068.50 per month. There is a need
for rationalization of the number of beneficiaries attached to the
FPS to make the shops financially viable.
4. Efficient retailing would require pre-conditions such as experience
and ability to undertake certain investment and sustain an
adequate return.

FPS licences should be granted to people/

groups who have adequate liquidity of fund. Integrity and rapport

of person in the local area are other aspects to be considered.

cii

Pattern of ownership of FPS can have important bearing on their

viability. Self help groups and Cooperatives can be given priority
for granting licences to rationalize the cost structure of FPS.
5. Mr. Jitendra Srivastav, District Collector, Begusarai stated that
they were planning a tie up with the Banks, wherein the bank
would be allowed to charge its normal rate of interest on the
loans given to the FPS dealers. The collector stated that banks do
not have any objections for grant of loan amount upto Rs.
50,000/-. For giving a loan of any amount above this the bank
would require a guarantee from the State. However, the Collector
stated that the banks do not need a guarantee as there is a fixed
turn over of a ration shop which has a fixed number of
consumers. The bank should treat the FPS dealer as a merchant.
This shall ensure that the FPS dealer will have some working
capital with himself.

ciii

Chapter 7
IDENTIFICATION OF BPL
7.1

Till 1992, the PDS was a general entitlement scheme for all
consumers, without specific targets.

The Revamped Public

Distributed System (RPDS) was launched in 1992 in 1775

blocks in tribal, hill and drought prone areas. PDS as it stood
earlier, had been widely criticized for its failure to serve the
population Below the Poverty Line (BPL), its urban bias,
limited coverage in the States with high concentration of the
rural

poor

and

lack

of

transparent

and

accountable

arrangements for delivery of ration.

7.2

In June 1997, the Government of India launched the Targeted

Public Distribution System (TPDS) with focus on the poor.
Under the TPDS, States are required to formulate and
implement foolproof arrangements for identification of the
poor for delivery of food grains and for its distribution in a
transparent and accountable manner at the FPS level.

7.3

The scheme, when introduced, was intended to benefit about

6 crore poor families for whom a quantity of about 72 lakh
tonnes

of

food

grains

was

earmarked

annually.

The

identification of the poor under the scheme is done by the

States as per State-wise poverty estimates of the Planning
Commission for 1993-94 based on the methodology of the
Expert Group on estimation of proportion and number of
poor chaired by Late Prof. Lakdawala. The allocation of food
grains to the States/UTs was made on the basis of average
consumption in the past i.e. average annual off-take of food
grains under the PDS during the past ten years at the time of
introduction of TPDS.

civ

7.4

The quantum of food grains in excess of the requirement of

BPL families was provided to the States as transitory
allocation for which a quantum of 103 lakh tonnes of food
grains was earmarked annually. Over and above the TPDS
allocation, additional allocation to States was also given. The
transitory allocation was intended for continuation of benefit
of subsidized food grains to the population Above the Poverty
Line (APL) as any sudden withdrawal of benefits existing
under PDS from them was not considered desirable. The
transitory allocation was

issued at prices, which were

subsidized but were higher than the prices for the BPL quota
of food grains.
7.5

Keeping in view the consensus on increasing the allocation of

food grains to BPL families, and to better target the food
subsidy, Government of India increased the allocation to BPL
families from 10 kg. to 20 kg of food grains per family per
month at 50% of the economic cost and allocation to APL
families at economic cost w.e.f. 01.04.2000. The allocation of
APL families was retained at the same level as at the time of
introduction of TPDS but the Central Issue Prices (CIP) for APL
were fixed at 100% of economic cost from that date so that
the entire consumer subsidy could be directed to the benefit
of the BPL population.

7.6

The number of BPL families has been increased w.e.f.

01.12.2000 by shifting the base to the population projections
of the Registrar General as on 1.3.2000 instead of the earlier
population projections of 1995. With this increase the total
number of BPL families is 652.03 lakh as against 596.23 lakh
families originally estimated when TPDS was introduced in
cv

June 1997. The number of BPL families as per the planning

Commission estimates for the State of Bihar has been fixed at
65.23 Lakhs.
7.7

Clause 3 of the Control Order 2001 provides that the State

Governments shall identify families living Below Poverty Line
as per paragraph 1 of the Annexe to this Order.

7.8

Para (1) of the Annexe to the Control Order, 2001 provides

Guidelines for the purpose of identification of families living
below the poverty line (BPL) including the Antyodaya families.
It provides that the State Government shall formulate
guidelines for the purposes of identification of families living
Below Poverty Line (BPL) including the Antyodaya families as
per the estimates adopted by the Central Government. Care
will be taken to ensure that the families so far identified are
really poor.

Exercise of identification of BPL and Antyodaya

families, wherever it has not been done already to be

completed within three months of the issue of the Control
Order, 2001.
7.9

The guidelines for implementing the TPDS issued by the

Central Government provide:Identification of beneficiaries of the Targeted Public
Distribution System (TPDS) namely the population Below
Poverty Line (BPL) and issue of food grains at specially
subsidized rates are the most important features of the TPDS.
To work out the population Below Poverty Line (BPL) it is
proposed to adopt the provisional estimates arrived at by the
Planning Commission for the year 1993-94 adopting the
methodology of constituted by the Planning Commission
under the Chairmanship of Late Prof. Lakdawala (Expert
Group). According to the official methodology, the number
and percentage of Below Poverty Line population for 1993-94
works out to 14.98 crores persons and 16.82% respectively.
As per the Expert Group methodology this works out to 32.03
cvi

crores and 35.97%. The Expert Group methodology according

to the Deputy Chairman, Planning Commission gives poverty
estimates closer to ground reality and as such it is proposed
to adopt them for the Targeted PDS.
7.10 While these estimates give the number of persons and
percentage of BPL population at State Level, identification at
the micro level of the population Below Poverty Line can be
done as indicated below :i)

The quinquennial surveys made by the Ministry of Rural

Areas and Employment for Implementation of IRDP, etc. on
household living Below Poverty Line can be a basis. However,
the overall number identified should be limited within the
population Below Poverty Line as fixed by the Union Planning
Commission adopting the methodology of the Expert Group by
Late Prof. Lakdawala.

ii)

Gram Panchayats and Gram Sabhas should be involved in

the initial identification of eligible families.

iii)

Final identification should be made after verification of

doubtful cases.

iv)

As regards urban population, slum dwellers will generally

qualify for the Below Poverty Line.

Applications, if any,

received from non-slum areas should be verified to identify

eligible beneficiaries.
v)

The thrust will be to include only the really poor and

vulnerable sections of the society such as landless agricultural
labourers, marginal farmers, rural artisans / craftsmen such as
potters, tappers, weavers, blacksmiths, carpenters, etc. in
rural areas and slum dwellers and persons earning their
livelihood on a daily basis in the informal sector like porters,

cvii

coolies, rickshaw pullers and hand-cart pullers, fruit and

flower sellers on the payment etc. in urban areas.
vi)

The above criterion is indicated only by way of illustration

and is not an exhaustive list of those who could be brought
within the ambit of the Below Poverty Line. The total number
identified, however, should be within the limits of Below
Poverty

Line

population

indicated

by

the

Planning

Commission.
7.11 The perusal of these guidelines would show that that the
Survey made by the Rural Development Department of the
State could be a basis but the overall number of BPL identified
by the States had to be limited within the limits prescribed for
BPL

by

the

Union

Planning

Commission

adopting

the

methodology of the Expert Group headed by Late Prof.

Lakdawala.
7.12 The failure of the State Government to provide guidelines to
work out the BPL population for TPDS has resulted in the
number of BPL ration cards exceeding the estimates of the
Planning Commission.
7.13 To work out the population below the poverty line under the
TPDS, there was a general consensus at the Food Ministers
conference

held

in

August

1996,

for

adopting

the

methodology used by the expert groups set up by the

Planning Commission under the Chairmanship of Late Prof.
Lakadawala.
basis of

The BPL households were determined on the

population projections of the Registrar General of

India for 1995 and the State wise poverty estimates of the
Planning Commission for 1993-94. The total number of BPL

cviii

households so determined was 596.23 lakh. Guidelines for

implementing the TPDS were issued in which the State
Governments had been advised to identify the BPL families by
involving the Gram Panchayats and Nagar Palikas.

While

doing so the thrust should be to include the really poor and

vulnerable sections of the society such as landless agricultural
labourers, marginal farmers, rural artisans/craftsmen such as
potters, tappers, weavers, black-smith, carpenters etc. in the
rural areas and slum dwellers and persons earning their
livelihood on daily basis in the informal sector like potters,
rickshaw-pullers, cart-pullers, fruit and flower sellers on the
pavement etc. in urban areas. The Gram Panchayats and
Gram-Sabhas should also be involved in the identification of
eligible families.
7.14 The number of BPL families has been increased w.e.f.
1.12.2000 by shifting the base to the population projections of
the Registrar General as on 1.3.2000 instead of the earlier
population projections of 1995.

With this increase the total

number of BPL families is 652.03 lakhs as against 596.23

lakhs families originally estimated when TPDS was introduced
in June 1997.
7.15 The food allocation to the State is made by the Centre
according to the numbers of BPL estimated on the basis of the
finance of the Expert Group headed by Late Prof. Lakdawala.
The number of BPL families in Bihar according to the Central
government figures should be 65.23 Lakhs, whereas according
to the survey carried out by the State the number of BPL
families is 1.23 crores. There are about 57 lakh objections. On
finalization of these objections the number of BPL families is

cix

likely to go up to 1.5 crores. The examination of the

abovementioned objections is likely to be completed by
August 2009. As a result, each BPL family in the State which is
entitled to 35 Kg of grain per month is getting only a reduced
quantity of 25 Kg of grain per month. The reduction in
quantity of food grain supplied to each family is sought to be
justified by the State Government on the ground that the
family size has reduced from 6.16 to 4.38.
7.16 The state has one more category of beneficiaries called
Special AAY.

Ration entitlement of AAY beneficiaries was

reduced from 35 kg to 25 kg and the balance stock is

distributed to the Special AAY created out out the BPL only.
The rice is available for distribution to this category but there
is shortage of wheat as the quota of wheat is same as earlier
i.e 10 kg.
7.17 The Committee was informed that the State Government has
a taken a conscious decision to give subsidized ration to all
BPL families identified in the survey conducted by the Rural
and Urban departments. The State Government in the letter of
the Chief Minister dated 30th June 2009, written to Shri Sharad
Pawar,

Minister

of

Consumer

Affairs,

Food

and

Public

Distribution, Government of India with respect to the concept

note on the proposed Food Security Act questioned the very
basis of poverty estimates posited by the Union Food Ministry
as follows : We believe that any proposal to impose ceiling
on the number of BPL families for implementing
the Act would be fundamentally flawed since it is
not prudent to assume that the numbers arrived
at through any survey, irrespective of the

cx

methodology
adopted,
will
necessarily
approximate to the numbers fixed by the ceiling.
Our own experience in this regard is highly
illustrative of such gaps that result between
actual numbers found on ground in a survey and
ceiling fixed by GoI on the basis of poverty and
population estimates. Against a total number of
65.23 lakhs BPL families fixed by GoI for Bihar, our
most recent survey has thrown up a total number
of nearly 1.5 crore families, after correcting all
errors of exclusion and inclusion. We, therefore,
strongly believe that TPDS can be operated under
a system of joint responsibility between Centre
and the States only if GoI also takes the
responsibility for identification of beneficiaries.
7.18 This Committee does not wish to comment on the issue which
is primarily a question of policy to be sorted out between the
Central and the State Government. It would suffice to say that
so long there is gap between the Central allocation and State
allocation

for

the

BPL

the

State

will

have

to

make

arrangements to fill the gap. The State started distributing

grain to the increased number of BPL (including Antyaodaya)
since June 2008. No purchases of grain to fill up the gap have
been made by the State so far. This has resulted in backlog
and even lapsing of allocation in certain districts. The ultimate
sufferer is the poor for whose benefit TPDS was evolved.

cxi

Chapter 8
FOOD COUPON SCHEME
8.1

As per newspaper reports, in June 2007 Bihar launched a coupon

system aimed at checking malpractices and encouraging better
service at ration shops distributing essentials to the BPL families. It
was a known fact that corruption and malpractice were rampant in
PDS in Bihar. Ration cardholders were often turned away from FPS
and large quantities of food grain meant for the poor were sold in
the open market. The scheme envisaged that i) coupons would be
distributed for every month to BPL families through elected
Panchayats/ Gram Sabha. ii) Each BPL family would be given a
bunch of coupons for the entire year and coupons then could be
exchanged for the food grain at subsidized rates from the FPS.

8.2

PDS dealers were to be given allotment of food grain every month

only against the coupons they submit. It was thus a bar put on the
FPS dealer that he would not be able to corner excess stocks, deny
that to the poor and then sell it in the open market. However,
problems were faced and large-scale irregularities were detected in
the BPL list.

8.3

A survey was proposed to rectify the list. It was reported that many
poor had been left out of the list while those above poverty line,
including gazetted officers had made it to the BPL list. Thus the
coupon scheme, it would appear, was not acted upon and the
coupons already distributed to the undeserving families were
sought to be cancelled. A second exercise by the State Government
was undertaken to rectify the BPL list.

8.4

The present coupon scheme was introduced in June 2008. The

Committee has found various drawbacks in the working of the
cxii

coupon system. These coupons were distributed in the State in the

month of June 2008. Coupons for June 2008 to May 2009 were
distributed in one bunch on the basis of the BPL survey list of 2007.
In the State of Bihar no one has any Ration Card. In fact no ration
card has been issued to any one since January 2008. It was stated
before the Committee that the ration cards have been printed but
these could not be issued as the software to print the ration cards
had provision to include the name of only the head of the family. A
conscious decision was taken by the Government to have the
names of all the family members on the ration card. A fresh survey
was ordered and the Rural Development department was asked to
complete the survey in three months. This has not been done so far
and it is not certain when the survey will be completed and ration
cards will be issued.
8.5

Even the BPL list is not complete. About 57 Lakh objections have
been received and are pending consideration. The Committee was
told that these would perhaps be decided by August 2009.

8.6

The food coupon scheme was introduced in the State to keep check
on the distribution of food grain to the beneficiaries. It was
introduced for distribution of ration, i.e., rice and wheat and for
kerosene. The procedure of distribution of food coupon, allocation of
foodgrain to FPS and distribution of foodgrain to beneficiaries,
Collection of coupons by FPS and then submission of the same to
the officers of the department was designed to ensure that
beneficiaries get foodgrain supplied by the Government. However,
Committee observed that each step designed in the food coupon
system has failed.

8.7

The scheme is to be carried out under the supervision and control of

the District Collector. The District Supply Officer (DSO) / Rationing
cxiii

Officer are responsible for the implementation of the scheme at the

District level. At the Sub-Division level, the scheme is implemented
under the supervision and control of the Sub-Division Officer(SDO).
At Block level under the supervision and control of the Block
Development

Officer

(BDO).

The

Block

Supply

officer/Supply

Inspector are responsible for implementation of the scheme in Rural

areas. In Urban areas the Marketing Officer (MO)/ Supply Inspector
(SI) are responsible for the implementation of the scheme.
8.8

The coupons are colour coded; white colour coupon for Annapurna
beneficiaries, yellow for AAY and red for BPL beneficiaries. All
kerosene coupons are of blue colour. Colour coding makes it easy to
distinguish and identify the category of beneficiary.

cxiv

8.9 The procedure of distribution of food coupon to beneficiaries

8.9.1 The coupons are distributed by District Magistrate through the Block
development Officer / Panchayats in the villages. In the urban areas
coupons are distributed after identification of beneficiaries by Ward
Councillor and tax collector. Coupons are to be distributed annually
to the beneficiaries of Annapurna scheme, Antyodaya scheme and
BPL scheme in a camp organized at a public place of the Panchayat
or the Ward free of cost in the first week of April every year. An
Annapurna beneficiary receives a booklet of 4 coupons at a time.
Each coupon entitles him to draw 30 kg. of food grain in 3 months
free of cost. (10 kg. per month). An Annapurna beneficiary is eligible
to draw ration every 3 months. AAY and BPL beneficiaries get a
booklet of 24 coupons at a time. (12 months coupons for rice and 12
months coupons for wheat). AAY and BPL beneficiaries also get a
booklet comprising 12 coupons for Kerosene.
8.9.2 In the event of loss of ration coupons, the beneficiary has to apply
to the Block Supply Officer in Form 24. After making necessary
enquiries, the Block Supply Officer has to make his
recommendations to the DSO. The DSO/ Rationing Officer would
pass Orders in Form 25 for issuance of duplicate coupons. The
beneficiary would be required to pay Rs.10 for the duplicate

cxv

coupons. The accounts for this fees would be kept in the office of
the DSO.
8.9.3 The Committee observed that though at the time the beneficiary
collects the coupons at the Panchayat or the Ward level, he is
supposed to carry an Identity card and his identity is supposed to be
verified by certain designated persons, on inspections at various
offices at the Districts visited by the Committee, the Committee did
not find any documents pertaining to this exercise being actually
done by the officers. For instance, during the visit to Jahanabad, the
Committee inspected the coupon distribution registers and found
that there were no signatures of the person identifying the
beneficiaries and there was no mention of the identity proof being
checked. Thus, there is no means to ensure that the coupons go to
the actual beneficiary. The registers did not show where the
coupons were distributed and who were the persons present at the
time of distribution. Even the date of receipt of coupon did not find
mention in the register.
8.9.4 The Committee received various complaints throughout the areas
visited by it where a large number of beneficiaries alleged that
coupons are often distributed incorrectly, that is, to wrong persons.
The Committee was also informed that at many Panchayats, the
number of coupons were much more than the actual number of
families. This was because of the incorrect preparation of list which
is alleged to have been manipulated at the behest of the Mukhiya
and the officials. It is emphasized that there is no ration card in the
State and PDS in the State is presently running only on the basis of
coupons. It is difficult to know whether the holder of the coupon is
actual beneficiary or not. The only way to check this is by cross
referring his name in Register of distribution of coupons. Committee
found that the Register of distribution of coupon do not have

cxvi

photographs of beneficiaries and signature of identifying authority.

Thus, if a person wrongly obtains the coupon there is no way to find
that he is illegal holder of coupon. For instance at the Kako village
at

Jahanabad,

beneficiary

showed

the

latest

list

of

BPL

beneficiaries as prepared for their village on recommendation of the

Mukhiya. At serial number 212 of the list, one Krishna Saav was
listed as a BPL beneficiary, though both Krishna Saav and his son
had long been dead. The Mukhiya was aware of this fact and yet
allowed grain to be lifted in the name of the dead beneficiary, every
month from the FPS. The coupons in the name of the said deceased
were obviously being misused.
8.10 Delay in distribution of coupons
8.10.1 Coupons of June 2008 to May 2009 had been distributed last year.
At the time of visit of the Committee in July 2009, the coupons for
June 2009 to May 2010 were being distributed. The coupons for the
period of June 2009 to May 2010 could not be distributed in April as
the Government received the coupon from printing press which is in
Kolkata in the end of June 2009. It is strange that coupon which is
an important document was not printed in time even though state
had one year for getting the same printed. The Government
launched the scheme without any prior preparations. In 2009,
though the coupons were supposed to be distributed to the
beneficiaries by the 1st week of April, distribution of same started by
the end of June 2009. As distribution of coupon to each beneficiary
is lengthy and time consuming process, Government does it in
phases organizing camps in one area at a time. Thus, the
distribution of coupons is delayed beyond the prescribed period.
8.10.2
At the public hearing held 16th July 2009 at Begusarai, a
beneficiary pointed out that the coupons are distributed only once a
year. There are many errors of inclusion and exclusion in the BPL list
and several objections are pending before the authorities. When
these objections are decided and mistakes rectified, a beneficiary
who had been wrongly excluded from the BPL list will have to wait
for one whole year to get his ration as he would get his ration
coupons only when they are distributed in the next year.
8.11 Requirement of coupon for allocation of foodgrain to FPS

cxvii

8.11.1
As per the coupon system FPS dealer has to collect coupons
from beneficiaries to whom he sells foodgrain. All the collected
coupons are to be deposited by the FPS at the office of Block supply
officer/ Marketing officer while submitting Form-20 and Utilization
certificate. The Utilisation Certificate has to be duly signed by the
members of the Vigilance Committee. Utilisation Certificate certifies
the fact that the dealer has properly distributed the previous
allocation. Dealer has to mention quantity of foodgrain sold by him
and closing balance of stock along with the number of coupons
collected by him for rice and wheat. The MO/ BSO/SI is required to
make entries of the coupons submitted by the FPS dealers in Form
21, 22 and 23 and submit the same to the District authorities and
demand allocation for the next month. The Committee found that
the abovesaid procedure is not at all followed in the State. For
instance at Village Kanuadi, Sikaria in Jahanabad District the
villagers complained that the FPS dealer does not give ration to
them. In 2008 they got ration only for 2 months. They also showed
coupons from October 2008 to May 2009. However, upon inspecting
the registers and the stock at the shop, it was evident that the
dealer was getting regular allotment of grain even without
submitting the coupons. One of the glaring flaws in the working of
the coupon system in Bihar is the callous manner in which the
coupons are accounted for by the officials. Contrary to the claims of
the officials, the Committee found that there was no co-relation
between the coupons submitted by the FPS dealers and allocation of
ration to the FPS.
8.11.2

The Marketing Officer allocates ration as per the number of

beneficiaries attached to the FPS and the coupons are never cross
checked. At none of the BSO/MO offices visited by the Committee,
were the officials able to show any of these documents. At one
office where the Committee was shown the Utilization Certificate, it
turned out that the figures relating to distribution of foodgrain
mentioned in the Form 20 and the Utilization Certificate of the FPS
did not tally.
8.11.3

In order to check the distribution and utilization of coupons

the Committee visited some offices of the department. At three

offices of the BSO at Gaya, Bela Ganj (District Gaya) and Mohan Pur
(District Gaya) the records were not available for one reason or the

cxviii

other. However, at the BSO office at Sherghati block the Committee

inspected the Utilisation Certificate, Form-20 and coupons and
found that there was no similarity in number of coupons mentioned
in the certificate and number of coupons available in the office.
Committee observed that both coupons of rice and wheat were
taken by the FPS dealers from the beneficiaries even if he was
actually distributing only one of the commodities.

Committee

inspected documents pertaining to various shops and found that the

dealer only distributed AAY grain, BPL grain was not distributed. The
Committee noted that the Utilization Certificate was signed by the
Sarpanch, Mukhiya and one Ward member who had only put thumb
impression. There was no mention of serial numbers of coupons
submitted along with Form 20. The number of coupons deposited
did not correspond with number of coupons mentioned in F-20.
8.11.4

During the visit to the office of the Marketing Officer,

Chitwara, District Samastipur the M.O. failed to show documents

pertaining to receipt of coupons and the corresponding allotment of
grain. The Committee then perused some stacks of coupons that
were shown by the M.O. The Committee was informed that these
coupons are kept FPS wise and are tied in a bundle in a month wise
manner. However, on going through the bundles of coupons, the
Committee found that though the slips attached with each bundle
stated that the coupons were of a particular month, on going
through the coupons it was clear that there was no system of month
wise stacking of coupons. Each bundle had coupons of various
months and in many cases the month was changed by hand. When
the Committee asked as to how the MO accepted such coupons, he
did not have much to offer as an explanation other than stating his
helplessness in going through hundreds of coupons every month.
The Committee specifically asked for the ration coupons last

cxix

collected by the MO, on the basis of which fresh allotment was

made, however the MO failed to show even those.
8.11.5

The abovementioned facts makes it clear that there is no

proper accounting of coupons and allotment for next month is not

made on the basis of coupons collected by the FPS. Each month the
allotment for each FPS was for exactly the same quantity, i.e. for
the total number of beneficiaries attached to the FPS, indicating
complete lifting when in fact the allotment should have been made
on the basis of number of coupons collected by the FPS.
8.11.6

During the visit to the Office of the Marketing Officer, Tajpur

Block, Samastipur the Committee found that Utilisation Certificate,

Form 20 and Coupons were never collected by the MO from FPS
dealers. The MO was not even aware of Form 20. The Committee
checked the record of allocation of 5 FPS selected at random from 5
different Panchayats in the block, for the last 6 months and found
that full allocation was made for every month. The Committee then
asked M.O to produce the supporting coupons. The M.O accepted
that he never collected the coupons from FPS dealers. He called
some FPS dealers who brought the coupons with them. Thus
allocation to FPS was not on the basis of coupons.
8.11.7

The FPS dealer is required to deposit a bank draft by 25 th of

the month for getting allocation of the next month. The coupons for
the previous month are required to be submitted by the dealer by
5th day of the month. For instance for the allocation pertaining to
the month of July the draft is to be deposited by 25 th of June. The
coupons for the month of June are required to be deposited by FPS
dealer at MO office by 5th of July. Thus, it is practically not possible
to make the allocation on the basis of coupons collected pertaining
to the sale of previous month.
cxx

8.11.8

The matter of allocation of foodgrain is further complicated

due to the backlog in distribution. At the time of visit of the

committee in July 2009, distribution to BPL families was being done
with respect to allocation for the month of April 2009.
8.11.9

The FPS dealers had already deposited the drafts towards

allocation for the month of May, June and July. The coupons for the
month of April, May and June which would form the basis of
allocation had not yet been collected.
8.12 Use of coupon for distribution of foodgrain to beneficiaries
8.12.1
A ration coupon is valid till the last date of the next month.
Thus, a beneficiary is entitled to lift ration of a month from FPS by
the end of subsequent month. When a beneficiary comes to
purchase ration for a month, he/she is required to sign the coupon
and submit the same for obtaining the ration for a particular month.
The FPS dealer would make the entry of the grain supplied on the
ration card and return the same to the beneficiary. Dealer has to
retain the coupons which he has to submit along with utilization
certificate signed by him, the Mukhia / ward member/ and a
member of vigilance Committee and Form 20 to the Block Supply
Officer/ Marketing Officer. A kerosene coupon is valid only for the
month mentioned on the coupon.
8.12.2

During the course of its visit to Madipur, Muzaffarpur the

Committee visited an FPS in Ward No-10. It was found that in this

shop the distribution is not done regularly. Further as per the
register he distributed 10 Kg. wheat to 3 persons on 17.07.2009 i.e
a day before the Committees visit to the shop, on coupon number
5198, 5436 and 5389. Cross checking the coupons, it was found
that coupon number 5198 was for the month of December 2008,
coupon 5436 was for November 2008 and coupon number 5389 was
not found. It is pertinent to mention that the said coupons were
found in middle of the bunch of the coupons, even though the
distribution was done a day before. The Sales register of the dealer

cxxi

had entry only with regard to the coupon number and quantity
issued. The Committee had no means to find out whether the
coupon shown by the dealer pertained to the entry made on
17.07.2009. The dealer stated that he has never deposited the
Coupons at the ADSO office since August 2008. Thus the Committee
found that allocation of foodgrain to FPS had no connection with the
number of coupons to be deposited by him to MO/ADSO office and
he was always getting his allocation without depositing coupons.
8.12.3

One of the most common complaints received by the

Committee was that the beneficiaries were not getting ration

despite

possessing

coupons.

The

Committee

met

numerous

beneficiaries who had with them unused coupons going back to

September 2008. The Committee came across instances where the
FPS dealer took coupons from the beneficiaries on a monthly basis
but gave them grain only once in two months. Thus every alternate
month, the dealer made an illegal profit of the supply of one whole
months ration.
8.12.4

At several places the beneficiaries complained that at times

they do not have the money to purchase the entire entitlement at

one time because of paucity of money. The coupon system prevents
the beneficiary to get their entitlement in installments. This flaw
leads to diversion as even if the beneficiary takes only part of his
entitlement he has to surrender his coupon for that month and the
FPS dealer can divert the balance foodgrain without any check.
8.13 Measures designed by State Government to prevent misuse
of
coupon
8.13.1
Collection of coupons by FPS and submitting same to the
officers of the department is essential features of the coupon
system. State Government, in order to to prevent misuse of coupon
has made the coupons non transferable. Any person found in
unauthorised possession of these coupons is liable to action as per
cxxii

law. The beneficiary of AAY and BPL scheme has to lift their food
grain by the last date of the next month. However it is pertinent to
mention that the coupons are not bar coded. The coupons do not
contain the name of the beneficiary. The coupons can easily be
counterfeited.
8.13.2

When beneficiary goes to the FPS to purchase his ration, the

FPS dealer has no means to ensure that the beneficiary is entitled to

ration from his shop as it was observed, that most of the FPS
dealers did not even have the list of beneficiaries. On a visit to one
FPS, the Committee observed that the coupons collected by the
dealer did not have either the signatures or the thumb impression of
the beneficiary. Thus, in the absence of the ration cards there is no
way to ensure that the ration goes to the correct beneficiary.
8.13.3

The MO has to stamp the coupons received from the FPS

dealer as CANCELLED by the 5th of each month. The stamped

coupons have to be preserved for 3 months. Thereafter they have to
be destroyed in the presence of Block Officer in the rural area and in
the presence of the Mayor or his representative in the Urban area.
8.13.4

However, Committee found that officers find it a time

consuming process to check each coupon and cancel it and they

have invented a shortcut to it by instructing each FPS to keep
Cancellation stamp at their shop and put that on each coupon.
Further concerned officers do not collect coupons regularly. Ideally
there should be foolproof method for checking the coupons
submitted by the dealer in the office. The office should further
ensure that each and every coupon is not only checked but the
same is cancelled and sealed in a proper bag ensuring that it does
not go back to FPS dealers. As at many places it was found that
coupon of particular month has been made for different month by
writing another month by Hand.

cxxiii

8.14 Findings of the Committee

1.
In the absence of the ration cards there is no way to ensure that the
ration goes to the correct beneficiary.
2.

The coupons are easily transferable as the name of the beneficiary

is not mentioned on the coupon.

3.

Proper records of distribution of coupons are not being maintained.

The FPS has no record of the coupons attached to his shop.

4.

As there is backlog in distribution. Ration is being distributed for

coupons pertaining to previous months also and this creates
difficulty in accounting.

5.

The coupons are not being collected by the MO/BSO and full
allocation is made to the FPS every month.

6.

There is no accounting of coupons as the various forms prescribed

are not being filled and maintained.

7.

There is no system of auditing/ checking the coupons in the hands

of the MO/BSO.

8.

Allocation to the FPS is not made on the basis of coupons collected

by him.

9.

The FPS is required to deposit the draft by the 25 th of the month

before the month of allocation for his full entitlement but he is
required to deposit the coupons on by the 5 th of the next month.
Further due to backlog allocation can not be restricted to the
number of coupons collected.

10. The coupon system does not permit the beneficiary to draw ration
in installments as there is only one coupon for the entire monthly
entitlement of rice and another for wheat. If the beneficiary takes a
part of his entitlement he has to surrender his coupon to the FPS
owner and forego the rest of his entitlement which can be sold by
the FPS owner in black market.

cxxiv

CHAPTER 9
VIGILANCE AND ENFORCEMENT
9.1

The Statutory framework of the PDS Control Order, 2001 as well as

the 2007 Notification issued by the government of Bihar in
pursuance of the PDS (Control) Order 2001, in exercise of the
powers conferred by Section 3 of the Essential Commodities Act,
1955, provide a detailed layout for the vigilance, enforcement and
monitoring of the Public Distribution System in Bihar, particularly
with regard to the functioning of the Fair Priced Shops.

9.2

However, the Committee found the Vigilance mechanism of the

State to be defunct and the complaint mechanism to be non
existent. Since the vigilance mechanism is ineffective, there is
absence of efficient identification of malpractices. In such a
situation even the enforcement system remains largely inactive.

9.3

Composition and Functioning of Vigilance/ Monitoring

Committees

9.3.1 Composition
The Vigilance Committees in the State function at 3 levels which
are:
(i)

Sub Division Level

(ii)

Ward Level

(iii)

Panchayat Level

There are no Vigilance Committees at the district level.

At the Sub Division Level, the Committee is known as the Monitoring
Committee.
9.3.2 Vide letter No.77/01-2261 dated 06.05.2008 the government issued
instructions with regard to re-constitution of Monitoring Committees
at the Sub Division level. As per this letter, the constitution of
Monitoring Committees at the Sub Division level is as follows :
Sub Division Level Monitoring Committees
cxxv

i.
ii.

Sub Divisional Officer

Sub District Supply Officer

iii.

All
recognised
representatives
recognised political party
All Zila Parishad members under the Sub
Division
President of the Local Body
Representative nominated by the Local
MLA and M.P.
Chief of Panchayat Samities of Blocks
under the Sub Division
Representative of oil companies
10 members nominated by the State
government including minorities, SC/ST,
backward class and women. One
representing each category.

iv.
v.
vi.
vii.
viii.
ix.

Chairman
Member
Secretary
of Members
Member
Member
Member
Member
Member
Member

9.3.3 Letter No. 77/2001 provides for constitution of Panchayat Level

Vigilance Committees as under :
Panchayat Level Vigilance Committees
i.
Panchayat Mukhiya
Co-ordinator
ii.
Panchayat Sarpanch
Member
iii.
Person defeated by closest Member
margin
in
the
Mukhiya
elections.
iv.
Person defeated by closest Member
margin
in
the
Sarpanch
elections.
v.
Ward members of the area Member
under which the concerned
FPS is covered.
vi.
Representatives of recognised Member
political parties nominated by
Block/
District
President/
Secretary
vii.
In the absence of the Mukhiya,
the Sub Co-ordinator Mukhiya
will head the Committee
9.3.4 The Letter also lays down the functions of the Panchayat Level
Vigilance Committee which include keeping a vigil on the lifting and
distribution of food grain by the FPS dealers, to ensure that the
beneficiaries get the correct quantity of food grain as per their
cxxvi

entitlement, to ensure that the FPS dealers inform the coordinator of

the Committee about the lifting and distribution of grain.
9.3.5 Letter No.77/2001 4400 dated 14.08.2008 with regard to
constitution of Vigilance Committees at the Ward level as under:
Ward Level Vigilance Committees
i.
Ward Member
Co-ordinator
ii.
Ward members of the area Member
under which the concerned FPS
is covered.
iii.
One representative each of all Member
recognised political parties who
have been nominated by the
President / Secretary of the
district/block/urban local body
9.3.6 Letter No. 13/05-3026 dated 05.06.2008 of the government of Bihar
provides for a Monthly Certification of lifting and distribution of
essential commodities by the FPS dealers. This step has been taken
to increase transparency in the process of lifting and distribution of
essential commodities.
At the rural level the Certification is to be done by the Panchayat
Level Vigilance Committees and at the urban level it is to be done
by Urban local bodies. The letter makes it mandatory for the FPS
dealers to submit the Certificate every month at the concerned
office.
9.4

Functions

9.4.1 The main functions of the Vigilance/ Monitoring Committees

functioning at various levels are as follows:
(i)

To monitor and keep a vigil on the lifting and distribution of

ration by the FPS dealers of their respective area.

(ii)

To ensure that the beneficiaries get the PDS ration at the

correct rate and in the correct quantity.

cxxvii

(iii)

The FPS dealer will be responsible for ensuring that all

information with regard to the lifting and distribution of ration
is duly communicated and made available to the Coordinator
of Vigilance Committee.

(iv)

The Coordinator is responsible for ensuring that at least once

a month, the Vigilance Committee conducts its meeting in a
public place and reviews the allocation, lifting and distribution
of the PDS ration.

(v)

At the Panchayat level, every month, 3 members of the

Vigilance Committee including the President of the Committee
has to sign the Uitilisation Certificate certifying proper utility
of the stock. The Utilisation Certificate has to be submitted at
the office of the SDO through the Marketing Officer.

(vi)

Every month the distribution of stock starts in the presence of

and after endorsement from the President of the Committee.
This is done in the presence of the Marketing Officer who in
turn records the fact along with the opening of the sale for the
month. It is only after this exercise that the ration can be
distributed to the beneficiaries.

(vii)

At the Sub divisional level, the SDO who is the Chairman of

the

Committee,

is

responsible

for

conducting

monthly

meetings of the Committee.

(viii) Till such time the government selects 10 un-official members
(social activists) for the Committee, the functioning of the
Committee

will

take

place

with

the

official

members

themselves.
9.5

Vigilance and Monitoring by the Administration

9.5.1 The constitution of the Vigilance Committees is only an additional

check on the functioning of the PDS at the Panchayat, Ward and

cxxviii

Sub-division level. However, it is the administration which has been

assigned specific duties with respect to the monitoring of the
system.
9.5.2 The hierarchy of officers in the administration of PDS is as follows:
In Patna
District Magistrate / Collector
Special Officer rationing and ADM
2 types of ADM ADM Supply & ADM Rationing
DRO (Departmental Rationing Officer)
ARO (Assistant Rationing Officer)
MO (Marketing Officer)
Supply Inspector
In rest of the districts
District Magistrate / Collector
SDO (Sub-Divisional Officer)
DSO (District Supply Officer)
ADSO (Assistant District Supply Officer)
MO (Marketing Officer)
Supply Inspector
9.5.3 As per the hierarchy mentioned above, the Supply Inspector
supervised by the Marketing officer/ Block Supply Officer are the
direct link between the FPS dealers and the administration. They
are primarily responsible for:
(i) The inspection of FPS and
(ii) Monitoring distribution of ration by FPS dealers.
At the time of lifting of grain from the BSFC godown also it is the
duty of the Supply Inspector to remain present to monitor the
process of lifting. The Marketing Officer is responsible for ensuring
that this requirement is fulfilled.
9.5.4 As per Letter No. Misc. 04/2001-859 dated 26.02.2001 the duties of
the various officers with respect to inspection is as follows :

cxxix

i.

Supply Inspector to conduct weekly inspections of the FPS

in his jurisdiction. The report on inspection has to be duly
entered into the Inspection book and thereafter the Stock
register also has to be

signed. Besides this the SI has

to conduct formal inspection of each shop in his area

atleast once in two months. The inspection report has to be
submitted to his seniors within 3 days of the inspection.
ii.

The Marketing Officer/ Block Supply

Officer is responsible

for conducting inspection of the FPS in his area atleast

once a month. In the rural area, 10 % of the shops are to
be test checked once a month. 50 % of the FPS of the
entire area (both Urban and Rural) have to be formally
inspected atleast once in three months. The regional officer
who is the Supply Incharge at the Block level is responsible
for inspecting FPS in his area periodically in a manner that
20 % of the shops are inspected once a month. The
inspection report has to be submitted to the seniors within
3 days of the inspection.
iii.

ADSO has to inspect 3 % of the FPS in his area and the

Deputy Civil Supplies officer is responsible for inspecting
10 % of the shops atleast once a month. The inspection
report has to be submitted to the seniors within 3 days of
the inspection.

iv.

The SDO is to inspect 3 % of the FPS in his area at least

once a month.

v.

The DSO is responsible for inspecting 1 % of FPS of each

area in his district once a month.

vi.

The District Magistrate / Collector is responsible for

inspecting 2 % of the shops in the District either personally
or through officials appointed by him.

cxxx

Officers found not complying with the inspection duties assigned to

them will be held personally liable and departmental proceedings
will be initiated against them.
9.5.5 As per Letter No.13/05-797 dated 04.03.2006 some important
instructions with regard to vigilance and monitoring duties of
various officers in the administration are as under:
(i)

(ii)
(iii)

(iv)

The District Magistrate is responsible for ensuring proper vigilance

of the transportation and distribution of grain which is to be done
under the supervision of the concerned supervising official who has
to keep the DM informed of the details like the quantity of grain
supplied, the truck number in which the transportation takes place,
the name of the transporter /driver etc. These details have to be
maintained in a register. This register has to be jointly signed by the
supervising officer and the Lifting Incharge.
The above mentioned register has to be reviewed at least once a
month by the DSO. The DM has to review the same once in every
two months.
The abovementioned register has to be regularly compared
with the registers at BSFC. Legal action is to be initiated
against officials if the accounts/records at the FCI and BSFC do not
tally.
The unloading of grain at the BSFC will be done only in the
presence of the supervising officer.

(v)

After duly checking the quality of the grain, joint sampling of the
same will be done by the Assistant Godown Manager and the FPS
dealer, both of whom will sign the sample.

(vi)

Registers have to be maintained with regard to allocation and

distribution of grain by the FPS dealer. The dealer will be
prosecuted under the Essential Commodities Act if he is found to be
cheating in accounts/distribution.

(vii)

The DSO and the SDO are responsible for supervising the
distribution, movement, unloading of grain. Under no circumstances
will the grain be unloaded in the absence of the supervising officer.

(viii)

The unloading of grain at the FPS has to be certified by atleast 3

members of the Vigilance Committee. The Marketing Officer is

cxxxi

responsible for ensuring that this exercise is done and also has to
record the same in the Stock Register.
(ix)

The SDO is responsible for allocation of grain to the FPS dealer. The
same is supervised by the Marketing Officer who allocates food
grain on the basis of the coupons received by the dealer in the
previous month.

9.6

Enforcement

9.6.1 One of the prime factors impeding the effective functioning of the
PDS in the State of Bihar is that those who are responsible for
keeping a check on malpractices are often themselves. Either the
officials are corrupt or are disinclined to enforce the various
provisions made specifically to deal with such problems and initiate
proper proceedings against the guilty. In particular, at the level of
the FPS, there is a clear nexus between the FPS dealers and the
Marketing Officers who are the direct link between the dealers and
the administration. Similar problems were noticed at all levels of the
PDS machinery in the State.
9.6.2 As per Letter No.13/05-797 dated 04.03.2006 as mentioned above,
in case any instance of black marketing comes to light, then the
concerned members of the Vigilance Committee, the MO or other
such officials will be prosecuted under the Essential Commodities
Act.
9.6.3 As per the documents supplied by the officials, the Quarterly
Proforma on Action Taken under clause 8 & 9 of the PDS (Control)
Order 2001 is as follows :
No
.

Quarterl
y
endings

No.
of No. of
Inspectio raids
ns
conduc
ted

No.
of
persons
arrested/p
rosecuted/
convicted

cxxxii

No.
of
FPS
licences
suspende
d/
cancelled
show
cause
notice
issued
6

Type
&
Value of
goods
seized

1.

Oct. 08 to 13,115
Dec.08

2.

Jan.09 to 6,419
March 09

30
FIR 115/62
lodged,
1
person
arrested
4
FIR 15/96/320
LODGED

---

---

9.6.4 Thus as per the table above, from October 2008 to December 2008
only 13,115 inspections were conducted in the entire State. There
are 38 districts and 44,480 FPS in the State. This implies that on an
average there are about 1200 shops in each district. Thus on an
average about 345 out of 1200 FPS have been inspected in three
months (13,115 inspections divided by 38 districts). Thus on an
average about 28 % of FPS were inspected in each district in three
months.
9.6.5 In the period subsequent to the period discussed above, that is,
from January 2009 to March 2009, the percentage of inspections is
half of what it was in the previous period. Only about 16 % of FPSs
in each district have been inspected in three months.
9.6.6 Further, in the entire State, only 7 raids were conducted and only
one person arrested in the last quarter of the year 2008. In the first
quarter of 2009, no raids were conducted and no person was
arrested in the entire State.
9.6.7 The Committee has gone through the action taken reports of the
previous years as well and found the record of inspections and
enforcement to be equally abysmal.
9.6.8 It is pertinent to mention that the police investigates only those
cases which are handed over to it by the District Administration. The
administration does not follow up the cases after the filing of the
Charge Sheet and the cases remain unmonitored. Earlier there used
to be a post for DIG rank officer for the general vigilance in the
State however currently there is only one SP for the general
vigilance in the State.

cxxxiii

9.7

Complaint Mechanism

9.7.1 The Committee was informed that the complaints received against
the errant FPS dealers are enquired into by the Marketing Officer
and the Supply Inspectors. Accordingly the Licensing Authority
initiates proceedings against the errant dealers.
9.7.2 The complaints, pertaining to the working of the PDS, received at
the
Chief Ministers office and at the District Magistrates/ Collectors
officer are looked into immediately and proceedings are initiated
against those found guilty. Apart from this, flying squads are
constituted regularly and if any irregularity is found during the raids,
then immediate action is taken on the same.
9.7.3 The Committee was also informed that the District Magistrate/
Collector regularly holds a weekly Janata Darbar wherein people can
voice their general grievances including those pertaining to PDS.
9.8

Legal Metrology Department

9.8.1 Legal Metrology Department of the State is responsible for certifying

the weights and scales of all establishments. This includes the
entities involved in the PDS, i.e., the weights and scale at FCI
(Weight bridge), the BSFC godowns and the FPSs.
9.8.2 The FCI, BSFC and the FPS dealers are to take annual certification
from the Weights and Measures Department after getting their
weighment machine checked.
9.8.3 The FPS dealers pay Rs.125/- for the annual certification. They are
supposed to take their weighment instruments including the
weights and the scales to the office of the Legal Metrology
Department which stamps the instruments and gives receipt of the
amount paid by the dealer. Similarly the FCI pays Rs.1200/- for the
annual certification.
9.8.4 However there is no coordination between the Legal Metrology
Department and the PDS enforcement agencies. The Metrology
department does not conduct regular or random inspections of the
FPSs, the FCI and the BSFC godowns to ensure that the weights and

cxxxiv

scales used therein are correctly aligned. Since there are no

inspections, the question of initiating action against errant
establishments also does not arise. Thus the role of the Legal
Metrology department is limited to giving annual certification.
9.9

Findings and Recommendations

9.9.1 There is no separate system of implementation of enforcement and

vigilance in the PDS as currently there is no separate cell for the
purposes of monitoring PDS. It is recommended that a separate
division of enforcement and vigilance of PDS be started in the State
in order to deal with the specific problems of PDS.
9.9.2 There is no effective and systematic complaint redressal mechanism
for the common people. In the absence of a customized complaint
redressal system, most of the grievances of the common persons go
unheard and unattended, encouraging the corrupt practices by the
dealers and the officials. It is recommended that an effective
complaint redressal system for PDS related grievances be initiated
wherein the beneficiaries may register and also follow up their
complaints. Till such time a formal complaint mechanism is
established, it is recommended that the concerned officials be given
strict instructions with regard to responding to and acting upon the
complaints received from the beneficiaries.
9.9.3 The Legal Metrology Controller does not play an active role in the
monitoring and enforcement of the PDS. At all the FPSs visited by
the Committee, it was found that though the dealer possessed the
receipt

of

annual

certification

from

the

department,

actual

inspection of the weights and the scales showed that they had not
been stamped for the past 5 to 6 years. At several FPSs, the dealers
were found to have hollow / incorrect weights. Thus in practice, the
dealers do not take their weighing instruments to the Legal
Metrology department and manage to get receipts and certification
cxxxv

without actually getting the instruments certified. Thus it is

recommended

the

Legal

Metrology

Department

works

in

coordination with the PDS administration. The officials of the Legal

Metrology department should also be made accountable for any act
of omission or commission in fulfilling their duties.
9.9.4 During its visit to various rural and urban areas and the FPSs, the
Committee found that the Vigilance or the Monitoring Committees
were not functioning in most districts. During the meeting with the
District Magistrate at Samastipur, the District Magistrate admitted
that the concept of Vigilance Committees is new in the area and
currently very few of these are functioning properly. At places where
the Vigilance Committees were functioning, the Committee was
informed that the structure and constitution of the Committee was
such that in some areas the Committee had as many as 72
members. The Committee was informed that such constitution of
the Vigilance Committees was flawed as it becomes difficult for the
Vigilance Committees to reach consensus on any issue in the
presence of so many members.
9.9.5 The Committee visited offices of various offices of the Marketing
Officers / Block Supply Officers in some districts. The purpose of the
visit, amongst other things, was to see whether the allocation made
by the MO/BSO takes place in accordance with the coupons of the
previous month, the Form 20 and the Utilisation Certificate.
However at most of the offices it was found that the FPS dealers
were not submitting the Utilisation Certificates. At most of the
offices visited by the Committee, the MO/ BSO failed to show the
Uitilisation Certificates submitted by the dealers. Upon visiting the
various villages and Ward areas, the Committee was informed that
the Utilisation Certificate is either not being signed by the members

cxxxvi

of the Vigilance Committees as per the requirement or the same is

simply taken to the Mukhiyas house who affixes his / her thumb
impression on the said Certificate without verifying the actual
utilisation and allocation of stock. Thus the Vigilance Committees
are not fulfilling their basic functions of monitoring the allocation
and distribution of food grain in their area. There has been a
proposal to pay a token amount of Rs.100/- to the non official
members of the Vigilance Committees as honorarium, in order to
encourage them to attend to the affairs of the Committee and affix
greater accountability.
9.9.6 Upon its visit to the FPSs in the various Districts, the Committee
found that the inspection books of all the FPS dealers were either
blank or had only a few entries, mostly of inspections conducted a
few days before the Committees visit to the area.
9.9.7 Joint sampling of grain at the BSFC godowns is not taking place at
all. The Committee found that none of the FPSs, visited by it had
valid samples given by the BSFC. Thus, there is no check on the
quality of grain which is transported from the BSFC godowns to the
FPSs.
9.9.8 The rate, at which action is taken against the errant FPS dealers and
errant officials, is abysmally low. Thus there is no effective deterrent
to stop malpractice in PDS.
9.9.9 The Committee observed that though on paper there is an elaborate
system of monitoring and vigilance of the PDS in the State, most of
the rules laid down in this regard are not being implemented and
followed. This was particularly so with regard to inspections to be
conducted by various officials at different stages and also with
regard

to

the

functioning

of

cxxxvii

the

Vigilance

and

Monitoring

Committees. If all the procedures and rules with regard to the

monitoring and vigilance of PDS, as laid down through various
circulars and notifications of the State government, are duly
implemented, then a better check on the over all PDS in the State
would be ensured.
9.9.10

There should be a complaint mechanism and the State should

set up a 24 hours toll free helpline where a beneficiary can lodge his
complaint. The toll free number should be printed or stamped on
the Ration Card. There should be a system of the follow up of the
complaint. A post of Ombudsman/Regulator should be set up as
suggested

by

this

Committee

in

its

Delhi

Report.

The

Ombudsman/Regulator should look into the complaints received

through the helpline and take appropriate action against the
defaulting licencees and the officials concerned.
9.9.11

A Public hearing for PDS on the lines of the Lok Adalat

( Bijlee/ telephone/ water) must be convened at a designated place,

time and day every 2/3 months where general public can seek to
resolve outstanding issues pertaining to the PDS.

These may

include those relating to their category / entitlements, non-issuance

of the cards, bifurcation of cards, wrong inclusion of APL, complaints
regarding under-weighment etc.

PDS Lok Adalat so constituted

should be presided over by District Judge or a Judicial Officer

nominated by him not less than the rank of Additional Judge and
should include the Collector of the District and the District Supply
Officer. A system of accountability must be put in place to ensure
the implementation of decisions taken during these hearings.

cxxxviii

Chapter 10
COMPUTERIZATION
10.1 The Public Distribution System (Control) Order, 2001 provides that
the State Government shall ensure monitoring of the functions of
the Public Distribution System (PDS) at the Fair Price Shop (FPS)
level through the computer network of the National Informatics
Center (NIC) installed in the District NIC centers. For this purpose
computerized codes shall be issued to each FPS in the district.11
10.2 The Committee has already submitted a detailed report on
Computerisation of PDS which may be read as part of this report.
The present chapter deals specifically with problems relating to
computerisation of PDS in the State of Bihar.
10.3 The PDS in Bihar is not yet computerised. The data pertaining to
PDS, including information pertaining to allocation, distribution,
storage and transportation of grain, is not sent to or compiled on
the NIC network. Currently all records at the various offices
including the BSFC godowns are maintained manually.
10.4 The Committee was informed that the government is considering
computerisation of PDS.
10.5 The Committee visited the office of the BSFC in Patna and was
informed that the BSFC had signed a Service Level Agreement
(S.L.A.) with M/s Globrin Systems on 12th July 2007. Vide letter dated
13th March 2009, the Company was directed to implement the
project and live test the software in Patna Division by 31 st March

11

Para 6(6) of the Annex to the Public Distribution System (Control) Order,

2001
cxxxix

2009. The Company was also directed to install systems at the

godowns by 31st March 2009.
However, the Committee was not supplied with the details of the
said SLA. The exact purpose of the said agreement and the current
status of its implementation are also unclear. In any case, it appears
that the approach of the BSFC towards implementation of this
project is rather half hearted. Upon visit to the godowns of the
BSFC, the Committee found that there was no electricity or
telephone connection at any of the godowns. Introduction of any
kind of systematic monitoring, especially computerization, is not
possible in the absence of these basic facilities.
10.6 The Committee was informed that even the SLA was stalled and
could not be implemented within the stipulated time frame due to
the 2009 Parliamentary elections. Vide letter dated 22nd June 2009,
the Company was directed to implement the SLA in all 35 locations
by 6th July 2009. It was also directed to replace all the old machines
with new HCL P-IV machines with TFT monitors.
10.7 This Committee in its earlier reports has expressed the need for the
use electronic weighing systems and end to end computerisation of
the PDS to eliminate human intervention in maintaining the record
of transactions at various levels, to the extent possible, so as to
check the diversions and leakages which plague the system at
present. It is necessary that each BSFC godown and each FPS has
an electronic weighing system connected to an online computer and
information relating to allocation, receipt and distribution of grain is
available through computer network.
10.8 The

Committee

therefore

strongly

recommends

end

to

end

computerisation of the PDS in the State so that proper accounting of

the grain allotted to the State under the TPDS can be kept to curb
the menace of diversion. A computerised network would go a long
way to ensure that the food grain allotted to the State can be
equated to the food grain distributed to the beneficiaries.
cxl

Chapter 11
RECOMMENDATIONS
1.

There is no valid ration card in existence in the State of Bihar. The

Public Distribution System (Control) Order, 2001 requires every
State to issue distinctive ration cards to APL, BPL and Antyodaya
families. A ration card is a document issued under an order or
authority of the State Government for the purchase of essential
commodities under the Public Distribution System from the fair
price shop. The State should take urgent steps to do the following in
order to comply with this mandate.
i) Finalize the objections to the BPL list of 2007 survey
expeditiously.
ii) Complete the survey of families to include the names of all
family members in the ration cards.
iii) Issue distinctive ration cards to APL, BPL and Antyodaya
families.

2.

The State Government has reduced the entitlement under the Public
Distribution System from 35 Kg. to 25 Kg. per family even for BPL
and Antyodaya families. The justification given by the state is that
the family size in Bihar has reduced from 6.38 to 4.31 members per
family. The State Government should ensure that it does not violate
the orders of the Supreme Court dated 10th January, 2008 passed in
Writ

Petition

(Civil)

No.

196/2001

which

requires

that

the

beneficiaries must get their entitlement which is 35 Kg. per family.

3.

The Targeted Public Distribution System requires every State to fix

BPL criteria to limit the number of BPL according to the estimates of
the Planning Commission. The State Government has decided to
provide subsidized food grain to a larger number of families beyond

cxli

the estimates of the Planning Commission. The BSFC has 351

godowns with a total storage capacity of 97241 metric tons. The
minimum requirement of storage capacity is 2.63 Lakh metric tons.
BSFC must make arrangements for availability and storage of
requisite stocks of food grain. For this following steps are required to
be taken urgently.
i) Purchase additional stocks for supply to the additional BPL
and Antyodaya families.
ii) Increase storage capacity with the BSFC.
iii) Provide proper facilities for lifting and transportation.
4.

The total allocation for the State is 2.23 Lakh tons per month. FCI
has a storage capacity of 575,006 MT in its own godown and 1.21
Lakh tons in hired godowns. However, most of this is concentrated
in the districts of Patna, Gaya and Muzzaffarpur. The FCI should
increase storage capacity and ensure that it is evenly spread
throughout the State.

5.

The BSFC godowns must have electronic weighing systems and

100% weighment should be ensured at the time of receipt of grain
from FCI and also at the time of delivery to the FPS. The hired
godowns of FCI do not have electronic weigh bridges. They should
have electronic weigh bridges to ensure 100% weighment at the
time of delivery from the FCI. The weigh bridge should be linked to
the computer system to ensure that computerized delivery challans
and weight check memos are automatically issued.

6.

The State has introduced Ration coupon scheme since June 2008.
Coupons for the period June 2008 to May 2009 were distributed
earlier and have now been exhausted. Coupons for June 2009 to
May 2010 have not been distributed in the entire State. This has

cxlii

delayed the delivery of ration for the months of June and July. Timely
distribution of coupons must be ensured.
7.

There is no way to link the Ration Coupons with the beneficiary and
the coupons are easily transferable. The Ration Coupons should
have the name of the beneficiary and the serial number of his ration
card.

8.

In the absence of proper accounting and monitoring the Coupon

System introduced in the State appears to be failure. The State
must ensure proper distribution and accounting of the coupons.
Proper records of distribution of coupons and utilization of food
grain should be maintained. There should be a system of checking
and auditing.

9.

The FPS dealer is required to submit a monthly certificate of

utilization by the village panchayats/ Urban local bodies/ village
committees/ womens self help groups on delivery of TPDS
commodities (food grains, etc.) at Fair Price Shops and their
distribution to ration card holders during the allocation month. This
utilization certificate is required to be signed by the i) FPS dealer, ii)
Executive officer/ Secretary of Village Panchayat / Municipal Council/
iii) Head (or his nominee for this purpose) of the Village Panchayat/
Municipal Council/ Vigilance Committee/ Womens Self Help Group,
iv) one member of the Village Panchayat/ Municipal Council/
Vigilance Committee/ Womens Self Help Group, and v) Village
Panchayat/ Municipal Council/ Vigilance Committee/ Womens Self
Help Group. The Committee found that the certificates submitted by
the FPS dealers were signed only by the FPS dealer, the Head of the
Village Panchayat and at the most by one member of the Village
Panchayat. The Committee was informed that it is never possible for
the dealer to obtain the signatures of all the five persons. The
cxliii

Committee is of the view that this requirement of obtaining the

signatures of four persons other than the FPS owner should be
suitably modified and he should be required to obtain the signatures
of any two persons from the above categories.
10.

Allocation to the FPS should be strictly based on coupons submitted

as it was found that the FPS were getting full allocation in-spite of
the fact that they were not depositing the equivalent number of
coupons. This may be ensured by allocating food grain for the next
month based on coupon submitted for one earlier month. That is to
say that the allocation for the month of March can be based on
coupons submitted for the month of January, and so on.

11.

It was observed by the Committee that some FPS dealers have very
few beneficiaries attached to their shops while other have a large
number of beneficiaries. In Chitwarpur Block of Samastipur District
the FPS of Raja Ranjit Singh had a total number of 1567 (792 APL,
405 BPL and 370 AAY) beneficiaries. The net income of this FPS
owner has been calculated at Rs. 11829.75 per month. The FPS of
Rana Pratap Singh had 1400 (576 APL, 430 BPL and 394 AAY)
beneficiaries and his net income works out to Rs. 11924.00 per
month. On the other hand Krishna Nandan Rai in Begusarai had only
1151 beneficiaries attached to his shop (905 APL, 176 BPL and 70
AAY) and his income was only Rs. 2094.50 per month. Anwar
Hussain in Muzzafarpur had only 124 beneficiaries (46 APL, 78 BPL)
and calculation of his income showed a loss of Rs.1068.50 per
month. There is a need for rationalization of the number of
beneficiaries attached to the FPS to make the shops financially
viable.

12.

Money of the FPS dealers should not remain blocked for several
months. The FPS owner should not be required to deposit money for
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more than one months entitlement till he is given delivery of stocks

for that month. If the BSFC is not in a position to give delivery of
stocks to the dealer against allocation for a particular month, he
should not be asked to deposit money for the next month.
13.

Clause 7(v) of the (Bihar) Public Distribution System (Control) Order,

2001 provides that suspension of Licence shall be for a maximum
period of 90 days. The cases relating to suspension of Licence are
to be considered by the District Level Selection Committee and the
Licensing Authority then decides the case on the recommendation
of the Selection Committee. It was found that the deadline for
deciding cases of suspension is never observed and as a result the
FPS dealers are successful in getting relief from the Courts. The
Committee feels that the cases of suspension of Licences should be
decided within the time prescribed so that the FPS dealers are not
able to take advantage of delay.

14.

The Committee found that due to lack of proper arrangements for

lifting and storage with the BSFC the allocation had lapsed in some
districts. The BSFC should ensure full lifting of food grain and
availability of stocks on regular basis. In many Districts the
distribution for BPL was being made for April 2009 and distribution
for AAY was being made for May 2009. No allocation should be
allowed to lapse and there should be no backlog.

15.

There is an acute shortage of Assistant Godown Managers with the

BSFC. Each AGM has more than one godown in his charge. He is
supposed to be present at the time of lifting from FCI. BSFC must
make immediate arrangement for deploying more AGMs.

16.

The programme for lifting from the FCI godown must be given to the
transport contractor by the BSFC in consultation with the FCI

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godown in-charge at least 24 hours in advance so that he can

arrange for appropriate number of vehicles.
17.

An official of the State Government or BSFC must accompany the

truck carrying food grain from FCI to the State godown and this
should be documented.

18.

The State should ensure doorstep delivery of food grain to the FPS
and till such time there should be fixed dates for each FPS to lift
food grain from BSFC godowns.

19.

All fair price shops must remain open on all working days during the
specified hours. Failure to observe regular timings should be dealt
with strictly in accordance with the orders of the Honble Supreme
Court.

20.

Para 2(2) of the Annex to the Public Distribution System (Control)

Order, 2001 provides that the ration card holder is entitled to draw
essential commodities from a fair price shop on weekly basis. The
present coupon system does not permit the beneficiary to draw
ration on weekly basis as one coupon is given for every month for
wheat and another coupon for rice. The coupons should be on
weekly basis.

21.

The cases of over charging or short weighment by the FPS should be

dealt with strictly. The Committee recommends Zero Tolerance in
the enforcement of all matters relating to Public Distribution
System.

22.

Parallel account books found at the FPS shops show that inspection
of shops is not being done at all. Regular inspection of shops should
be ensured. Parallel accounts were also found at SFC godowns.
There should be regular checking of the SFC godowns.
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23.

The Vigilance Committees at sub division level have provision for

too many members. Unwieldy size of the committee does not
permit regular meetings. In case a meeting is held such committees
can not take proper decisions. The constitution of sub division level
committee should be rationalized. There is no provision in the State
for Vigilance Committees at State Level and District Level. Provision
for such committees should be immediately made and committees
should be constituted.

24.

The system of having the person who lost the election to the post of
Mukhiya by the minimum margin as a member of Panchayat level
vigilance committee is good. However to ensure regular meetings it
should be provided that in the absence of the Mukhiya the defeated
Mukhiya will preside over the meeting.

25.

The date, time and place should be fixed by rules, e.g. the rules
should provide that a Panchayat level Committee would meet on the
first Monday of every month in the office of the BDO at 11.00 a.m.
The convener of the committees should be a Government officer.

26.

The Committee found that most of the allotments of licences during

the last five years were on compassionate grounds. The (Bihar)
Public Distribution System (Control) Order, 2001 provides for grant
of licence for an FPS shop on compassionate grounds to one of the
heirs of the deceased licencee. On the one hand the dealers
complain that the FPS is not a viable proposition and on the other
hand it is passed on to the heirs. FPS is not a largesse. It is a licence
to run the shop for the benefit of the consumer. The heirs of the
deceased FPS owner must compete with others for an allotment.

cxlvii

27.

The licence for the FPS is granted by the Sub-Divisional Officer who
is the SDM. Selection is done by the District Level Selection
Committee headed by the District Magistrate. Thus the appointing
authority being a junior functionary has no discretion as licensing
authority. Further the appeal against an order of the appointing
authority is also to be decided by the same District Magistrate who
is the Chairman of the Selection Committee. These rules are
violative of the principles of natural justice. The Bihar Public
Distribution System (Control) Order, 2001 needs to be amended to
that extent. The appeal against the order of the licensing authority
should be heard by an authority manned by an officer who at least
is/has been an Additional District Judge.

28.

Mobile Vans can be used with great advantage in remote and

inaccessible areas and where the licence of an FPS has been
suspended or cancelled and new licence has not been granted.

29.

The absence of samples was found at every stage of distribution by

the Committee. The State should ensure that sealed samples are
obtained from the FCI at the time of taking delivery of food grain.
The samples are displayed at the BSFC godowns. Sealed samples
are issued by the BSFC godowns to the FPS dealers and the FPS
dealers display the samples at their shops so that the consumer can
be sure of the quality of food grain being supplied to him and there
is no diversion of food grain by substituting the grain supplied by
FCI with inferior quality of grain.

30.

The ration cards when issued are proposed to serve as identity

cards as a recognition for other facilities like Rashtriya Swasth
Beema Yojna, Aam Admi Beema Yojna, BPL family hand pumps,
Insurance etc. This is against the provisions

of the Public

Distribution System (Control) Order, 2001 issued by the Central

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Government. A system must be devised to de-link the entitlements

under the Public Distribution System from other benefits available
to BPL card holders.
31.

Ideally there should be a system by which the grain allocated to the

State can be equated with the grain distributed to the beneficiaries.
Since the scale of distribution and the number of beneficiaries is
very large this can not be achieved manually. Complete automation
and computerisation is the need of the hour. Consistent finding of
the Committee in this regard, stated in a separate report on
computerization,

is

reiterated

herein.

Carefully

planned,

implemented and monitored automation is imperative for the

successful implementation of the Public Distribution System.
32.

There should be a complaint mechanism and the State should set

up a 24 hours toll free helpline where a beneficiary can lodge his
complaint. The toll free number should be printed or stamped on
the Ration Card. There should be a system of the follow up of the
complaint. A post of Ombudsman/Regulator should be set up as
suggested

by

this

Committee

in

its

Delhi

Report.

The

Ombudsman/Regulator should look into the complaints received

through the helpline and take appropriate action against the
defaulting licencees and the officials concerned.
33.

The requirements of the Public Distribution System (Control) Order,

as reiterated by the Honble Supreme Court in its orders that the
FPS should strictly adhere to the prescribed timings, are not being
followed. Every effort must be made by the authorities to ensure
compliance with this requirement and all other requirements such
as display of samples, stock board, complaint box etc., on a zero
tolerance basis. The ration card must have information printed/

cxlix

stamped about timings of the shop and dates on which the shop
would remain closed.
34.

Considering that the viability of FPS cannot possibly be achieved by

increasing the commission payable to the FPS owners, the licencees
of FPS must have a kirana/ grocery shop running along with that.
This should be incorporated in the licence as a condition. District
Magistrate has, however to ensure that FPS owner running kirana/
grocery shop does not sell non PDS wheat or rice.

35.

The PDS is marred with corruption. The situation in Bihar is no

different. The corruption emanating from the inefficient functioning
of the various entities involved in the system has assumed alarming
proportions. It is a cancerous growth which needs to be eliminated
at the earliest by devising suitable regulatory mechanisms. The
Central Government provides subsidy to the extent of several crores
of rupees annually on the PDS food grain. The State also adds its
own subsidy. There can not be any complacency in the working of
PDS. There has to be zero tolerance approach. The mesh of
corruption is woven around FPS, State godowns, transporters and
officials. To untwine the mesh the State has to adopt zero tolerance
approach. No one should be spared if he is found to be indulging in
malpractices affecting PDS. Sale of one kg. of PDS rice/ wheat in
open market fetches much more to the FPS and his collaborators in
this black deal. But then the poor for whom food grain is meant is
deprived. Penal provisions like prosecution should be resorted to.
Fast track courts should be set up to try offences under the
Essential Commodities Act. Strict action including prosecution of
officials found involved must be adopted. A recent survey by the
Central Government itself says that Public Distribution System has
failed to deliver food grains to the poor. The Central Government

cl

spends a whopping amount as subsidy and to that the State

Government further adds huge amounts. It is, therefore, imperative
that benefits reach the needy and the poor are not deprived of the
food.

There is no proper monitoring and accountability and

leakages are there all around.

36.

A Public hearing for PDS on the lines of the Lok Adalat ( Bijlee/
telephone/ water) must be convened at a designated place, time
and day every 2/3 months where general public can seek to resolve
outstanding issues pertaining to the PDS. These may include those
relating to their category / entitlements, non-issuance of the cards,
bifurcation of cards, wrong inclusion of APL, complaints regarding
under-weighment etc.

PDS Lok Adalat so constituted should be

presided over by District Judge or a Judicial Officer nominated by

him not less than the rank of Additional Judge and should include
the Collector of the District and the District Supply Officer. A system
of accountability must be put in place to ensure the implementation
of decisions taken during these hearings.
37.

PDS food grains should be packed only in tamper-proof bags like

HDPE bags and if feasible PDS commodities should be supplied to
the beneficiary in small packages of appropriate sizes. Though it
may perhaps increase the cost a little bit but it will be advantageous
for the beneficiaries as there will be no complaint of short
weighment and bags would also be easier to handle. At the most, a
minimal charge of 50 paisa or Re.1/- can be recovered for the cost
of the bag.

38.

The State Government to ensure delivery of PDS grain at the FPS

Shop which would result in reducing their expense on transportation
and handling and help in curbing diversion.

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39.

The Committee is also reiterating its suggestion / recommendation

made in the Delhi report that the concept of APL be abolished.
Reference may be made to that report for a detailed analysis of the
said recommendations and it may be added that the Committee in
its visit to one State after another, has found that the concept of
APL is serving no useful purpose for food security and is instead
only a diversion tool. The Committee is aware of the fact that there
is going to be a great deal of opposition from the FPS dealers and
other vested groups against the abolition of the APL category. If the
Honble Court is of the view that it may not be possible or desirable
to abolish the APL category altogether, it may consider limiting the
APL category to households whose annual income is Rs. One Lakh.
This category may be called Marginally Above Poverty Line
(MAPL). This limit may however, be revised as and when required
on a rational basis by the government.

40.

There should be a separate Enforcement unit dedicated to oversee

of PDS operations. There should be special squads in every district
for the enforcement of PDS. The squad should be responsible for
conducting

raids,

checking

supplies,

conducting

prosecution,

recommending departmental action against the officials, taking

action against defaulting officials under the Essential Commodities
Act, 1955, Prevention of Corruption Act, 1988 and the Indian Penal
Code. The said unit shall ensure that the delivery system has to be
proper and timely. There has to be periodical physical verification of
the BSFC godowns and FPS and also the trucks transporting the PDS
grain. As a matter of fact, surprise and frequent checks be made
and the guilty brought to book.

Whenever any infraction of the

provisions of the PDS is found, wide publicity be given both in print

and electronic media.

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