E-Paper
Digital currency to now be used for food subsidy
India's food minister launched a pilot project in Puducherry using e-rupee for food subsidies, enhancing transparency and efficiency in welfare delivery.
Food and consumer affairs minister Pralhad Joshi on Thursday launched a pilot project in Puducherry to offer food subsidy through the Reserve Bank’s e-rupee, the country’s first instance of programming the Reserve Bank’s digital currency to deliver welfare benefits.
Under the pilot, food subsidy will be credited by the Union government to eligible beneficiaries in the form of a programmable digital tokenised currency, which can be used to only purchase or redeem against grains under the public distribution system or PDS.
The move aims to enhance transparency, efficiency and accountability in subsidy delivery, the food minister said, launching the project that will be run by the Reserve Bank of India, the government’s public financial management system and the designated banking partner, Canara Bank.
The RBI’s fintech division is carrying out trials for retail and secondary market transactions in e-rupee, which is a legal tender and a digital version of the paper currency, for faster interbank settlements and reducing settlement risks. The e-rupee is not a cryptocurrency but a virtual currency fully backed by sovereign guarantee.
The programmability feature of the e-rupee allows the sponsor entity, such as the government, to ensure that the funds in the e-rupee wallets are used for a specific, designated purpose. In this case, beneficiaries will receive a monthly credits customised for purchasing food handouts.
PDS beneficiaries will be able to redeem their entitled quantity of foodgrains at fair price whops or merchant outlets using e-rupee tokens in their e-rupee wallets. “The system will address challenges related to biometric authentication and e-point-of-sale operational issues while ensuring secure, traceable and real-time transactions,” Joshi said.
The pilot project will soon be expanded to at least three states States and after an analysis of outcomes, according to the minister. This will pave the way for a decision on further rollout of the CBDC initiative.
The system will also enable beneficiaries to locate nearby authorized merchant establishments offering grains through the application itself. The e-rupee-based PDS model is set to be expanded to Chandigarh and Dadra and Nagar Haveli, with plans for gradual expansion across the country, an official separately said.
