Justice Wadhwa Committee on Public Distribution System

STATE OF BIHAR

Index

Chapters

Topics Page. No.

A Preliminary 1-7

B Broad overview i-x

1 Introduction 1-4

2 Legal Regime 5-18

3 Distribution of foodgrain 19-62

4 Transportation 63-68

5 Mode of Appointment of FPS Dealers

69-74

6 Viability 75-88

7 Identification of BPL 89-96

8 Food Coupon scheme 97-110

9 Vigilance and Enforcement 111-125

10 Computerisation 126-128

11 Recommendations 129-140

i

CENTRAL VIGILANCE COMMITTEE

ON

PUBLIC DISTRIBUTION SYSTEM

REPORT

ON

THE STATE OF BIHAR

BROAD OVERVIEW

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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.

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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

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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

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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 Rs.3/- per

Kg. 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 a 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

Government’s 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 the proposal that only families

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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 received are

examined. 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.

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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, and large scale

irregularities detected in the BPL list. 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.

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13. On 15.2.2007 State Government issued a notification under

the Public Distribution System (Control) Order 2001 after taking

prior concurrence of the Government of India. This

Notification/Order was issued by the State 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.

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(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 Class- 03 percent

Compliance of above 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.

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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

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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 appear that the State is

also encouraging corruption. 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

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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

xiii

separate 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 – People’s Union for Civil

Liberties V/S Union of India and Ors. Hon’ble 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

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“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. Hon’ble Court’s 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, Hon’ble 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 Hon’ble Court again and again. It

was only after a peremptory Order dated 25.8.2008 was passed by

the Hon’ble 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 Hon’ble 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 Hon’ble 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 lacks transparency, accountability,

monitoring and enforcing. 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

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Deptt., Mr. Suresh 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.

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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.

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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 1INTRODUCTION

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

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

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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

2 Indian Express dated 29th march 2008,

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

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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:

Before 2008

After 2008 Difference

BPL Rice 25 kg. 15 kg. (- 10)Wheat 10 kg. 10 kg.

AAY Rice 21 kg. 15 kg. (-6)Wheat 14 kg. 10 kg. (-4)

APL Distributed in Urban areas on occasions like festivals etc.

1.7 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 of foodgrain in the State,

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Transportation, Mode of appointment of FPS dealers, Viability of

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

Enforcement, Computerization and Recommendations of the

Committee.

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Chapter 2LEGAL 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

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godowns throughout the State. These godowns are managed by

Assistant Godown Managers (AGM).3

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.

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

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iv. Section 7 provides for penalties. Any person contravening the

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

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.

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

summarily (Section 12A).

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:

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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:

Chairman - The District MagistrateSecretary – 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

posted in District.(iii) The District Co-operative Officer

2. As per the 2007 Notification, the reservation in allotment of FPS shall be applicable as follows:

Scheduled Caste 16 %Scheduled Tribe 1 %Most Backward Class 18 %Backward Class 12 %Woman Backward Class 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:

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

joint family

(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

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authority and furnishing of such information as may be called for by the inspecting or licensing authority.

(7) 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

(8) 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

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sub-categorisation of the households into various Groups. The cut

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) 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.

(ii) 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.

(iii) 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.

(iv) 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.

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(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 a

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

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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. Sub Divisional Officer Chairmanii. District Supply Officer Member

Secretaryiii. All recognised representatives of

recognised political partiesMembers

iv. All Zila Parishad members under the Sub Division

Member

v. President of the Local Body Membervi. Representative nominated by the Local Member

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MLA and M.P.vii. Chief of Panchayat Samities of Blocks

under the Sub divisionviii. Representative of oil companies Memberix. 10 members nominated by the State

government including minorities, SC/ST, backward class and women. One representing each category.

Member

2.2.13 Letter No. 77/2001 dated nil is with regard to the constitution

of Panchayat Level Vigilance Committees as under :

Panchayat Level Vigilance Committeesi. Panchayat Mukhiya Co-ordinatorii. Panchayat Sarpanch Memberiii. Person defeated by closest

margin in the Mukhiya elections.

Member

iv. Person defeated by closest margin in the Sarpanch elections.

Member

v. Ward members of the area under which the concerned FPS is covered.

Member

vi. Representatives of recognised political parties nominated by Block/ District President/ Secretary

Member

vii. In the absence of the Mukhiya, the Sub Co-ordinator Mukhiya will head the Committee

2.2.14 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.

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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. Ward Member Co-ordinatorii. Ward members of the area

under which the concerned FPS is covered.

Member

iii. One representative each of all recognised political parties who have been nominated by the President / Secretary of the district/block/urban local body

Member

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 Hon’ble Supreme Court in W.P. (C) NO.

196/2001.

2.3.1 The Hon’ble 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

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open market and hand over such ration shops to other person/organizations, will be liable to be cancelled.

B. 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 Hon’ble 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 3DISTRIBUTION 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

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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 involved1. 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.

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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)

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Supply Inspector (Supply Inspector)

B. Role and responsibilities

1. 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 MO’s

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

of CVC on 30th July 09.5 Meeting with DSO, Gaya

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4. The officers of the Department complained that in absence of

proper staff they could not perform their functions properly. They

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 StateThe 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 BSFC3.4.1 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

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Release Order and gives a copy to BSFC. Movement form is duly signed by BSFC official who supervise the lifting of stock at FCI.

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

SIO’s all SIO’s must be checked by an assistant or assistant

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accountant or accountant whosoever is available. DM (BSFC) or in

his absence Accounts officer signs the SIO’s. This authority can not

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 Manager’s

(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 State’s 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

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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 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 Officer’s 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.

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3.6.2.Weighment of foodgrains at Godowns:

a. The FCI godown at Dighaghat, Patna has a computerized

weighbridge having a capacity of 20 MT. The Committee studied

the functioning of computerized 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

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that there was 100% weighment at the godown. The Committee did

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

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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 SIO’s 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. List of Fair Price Shops attached to the Godowns.

3.6.4.2 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.

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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 couldn’t 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.

l

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

li

meet the requirement of wheat the State Government requires

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 non-

availability 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 AGM’s 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

lii

FCI in Muzzafarpur which distribute grains to other districts which 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.

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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 Committee’s 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

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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 DD submitted or not

Issuance

August 2008 Submitted Allotted in NovemberSeptember

2008Not submitted -

October 2008 Submitted AllottedNovember 2008 Submitted AllottedDecember 2008 Submitted Allotted

January 2009 Not submitted -February 2009 Submitted Allotted only wheat

March 2009 Not submitted -April 2009 Submitted AllottedMay 2009 Not submitted -June 2009 Submitted No allotmentJuly 2009 Submitted No allotment,

(Coupons also not distributed to beneficiaries)

3.6.9.5 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

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stated that despite depositing the Bank Draft by 25th of the

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

lvi

that there was no similarity in the number of coupons mentioned in the certificate and the number of coupons 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 Committee’s 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

lvii

and it was made March by hand. When the Committee asked as to how the MO accepted such coupons, he had no explanation 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 Committee’s 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 Total Card

BPL AAY

Kothia Ganesh Chaudhary

893 147 36

Ramapur Urmila 353 200 91Shahpur Bhagauni

Shaukat Ali 1312 432 200

Bharokhada Gunar Mahto 480 +1127

623 405

Aadharpur Phuleshwari Devi

927 289 158

3.6.10.7 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

AAY wheat(in Q)

AAY rice( in Q)

BPL rice BPL wheat

February 13.80 20.70 No record

No record

June 13.80 20.70 No record

No record

July 3.60 5.40 14.70 22.5

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2. Urmila DeviMonthly allocation,

2009AAY wheat AAY rice BPL rice BPL

wheatFebruary 9.10 13.65 No

recordNo

recordMay, April & March No record No

recordNo

recordNo

recordJuly 13.65 19.10 No

recordNo

recordJune 13.65 19.10 No

recordNo

record

3.6.10.8 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.

3.6.11 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

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remitted correspond to the allocation of Fair Price Shops. For

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

6 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

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

lxi

not 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 Hon’ble 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.

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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 20th 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.

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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 can’t 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 Committee’s 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 dealers1. 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

lxv

tolerance for any kind of irregularity or illegality in the Public

Distribution System.

2. At the shop run by Shamim Ahmed Ansari, situated at ward

no. 9 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 Counselor’s 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.

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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

Committee’s 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.

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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 dealer’s 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 dealer’s

own stock. The bags were clearly the ones which come from

the PDS godowns. When the Committee enquired about the

same, the dealer’s 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 priceFPS 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

lxviii

beneficiary takes 15 kg rice he has to pay Rs. 97.8/- however

dealer charge Rs 105/- from beneficiaries.

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 systemMost 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.

lxix

3. Dealer Shamim Ahmed Ansari , ward no. 9 Madipur,

Muzaffarpur (licence no 19/91) informed that he gets his

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

lxx

manipulated was proved by this incident. Further this

dealer was using two 5 kg weight. When the Committee

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 Nexus between officials and FPS 3.7.14.1 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 dealer’s son (Sonu) 20 minutes before the visit of the Committee. The dealer’s son’s name was present on the MO’s mobile and there was a call from the MO’s mobile to the dealer’s son 20 minutes before the Committee’s 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.

lxxi

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 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 Delay in allocation of foodgrain to Beneficiaries (Backlog)3.7.15.1 There is backlog in allocation of foodgrain to beneficiaries and

the beneficiaries get ration of a month after delay of about 3-4 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, it’s the beneficiary who suffers.

3.7.15.2 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 25th 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 don’t deposit money, lapses.

3.7.15.3 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.

3.7.15.4 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

lxxii

showed 7 unused coupons. He complained that the dealer

took extra money for the ration

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

dealer’s 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 dealer’s 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

Committee’s 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

8 Indian Express dated 29th march 2008,

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

lxxiii

family i.e. 25Kg rice and 10 Kg wheat. Now, the distribution per family is 25 Kg comprising 15Kg rice and 10 Kg wheat. 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 Conclusion1) 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 don’t deposit

money, lapse. Further, as FPS lift foodgrain for few

lxxiv

months only but same grain is not distributed 100% to

beneficiaries. It gets diverted to black market or is

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.

lxxv

8) Fair price shop dealers charge higher rates then the

actual price.

9) Fair Price Shops do not open daily.

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

lxxvi

there is delay in allocation of foodgrains. Thus, there is need

of augmentation of storage capacity of BSFC godowns.

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

lxxvii

system in the State has many loopholes it is easy for errant

FPS dealers or corrupt officials to develop nexus 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 so that there is

transparency in allocation process.

lxxviii

Chapter 4TRANSPORTATION

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.

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

lxxxiv

Chapter 5MODE 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 - The District Magistrate.Secretary - 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.

Members - (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.

3. 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 PercentScheduled Tribe - 01 PercentMost Backward Class - 18 PercentBackward Class - 12 PercentWomen Backward Class- 03 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. Compassionate Cases: - On priority basis wife/husband, son, unmarried daughter, daughter in law, widow of deceased son are allotted shops.

8. 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 difference in number. Thus,

rationalization of FPS is must.

lxxxix

Chapter 6VIABILITY

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

10 PEO, Performance Evaluation of Targeted Public Distribution System-2005, (at pg vi and 50).

xc

importance of keeping kerosene within the PDS retail trading to

improve their viability.

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 APLWheat

Rice Wheat

Rice (Ordinary)

Rice(Grade

A)Central Government issued price (FCI)

415.00 565.00

610.00

795.00 830.00

1% VAT 4.15 5.65 6.10 7.95 8.303% Other taxes 12.45 16.95 18.30 23.85 24.90

xci

BSFC Handling, Transportation Margin Money etc.

35.00 35.00 21.00 22.60 22.60

BSFC issue price 466.60

622.60

655.40

849.40 885.80

Commission of FPS Dealers

25.00 25.00 14.80 24.30 24.30

Reimbursement to FPS Dealers towards transportation expenses (till 15 kms)

4.00 4.00 3.50 3.50 3.50

Consumer End Price per quintal

495.60 or Rs.

4.96 per kg

651.60 or Rs.

6.52 per kg

673.70 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 per quintal and that of Kerosene is calculated per litre.Income Quantity Commissio

nIncome

Wheat 50 quintals Rs. 25/- 1250Rice 75 quintals Rs. 25/- 1875Kerosene 1500 litres Re. 1/- 1500Gunny 150 bags Rs.10 per

bag1500

Total 6125

xcii

Expenditure AmountRent 700Helper / Assistant (Temporary) 1500Electricity 100Stationery & Miscellaneous Charges

175

D/D 100Total 2575

Net Income (Income – Expenditure) 3550If 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 Commission

Income

Wheat 30 quintals Rs. 25/- 750Rice 45 quintals Rs. 25/- 1125Kerosene 1500 litres Re. 1/- 1500Gunny 150 bags Rs. 6 per

bag900

Total 4275

Expenditure Amount (In Rs.)Rent 700Helper / Assistant (Temporary) 1500Miscellaneous Charges 100Conveyance Charges 200Transportation 80D/D 175Total 2755

Net Income (Income – Expenditure) 1520Note – 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.

xciii

Income Quantity Commission

Income

Wheat 30 quintals Rs. 40/- 1200Rice 45 quintals Rs. 40/- 1800Kerosene 1500 litres Re. 1/- 1500Gunny 150 bags Rs. 6 per

bag900

Total 5400

Expenditure Amount (In Rs.)Rent 700Helper / Assistant (Temporary) 1500Miscellaneous Charges 100Conveyance Charges 200Transportation 80D/D 175Total 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 Commission

Income

Wheat 15 quintals Rs. 25/- 375Rice 22.5

quintalsRs. 25/- 562.50

Kerosene 1375 litres Re. 1/- 1375Gunny 75 bags Rs.10 per

bag750

Transportation 37.5 quintals

Rs. 4/- 150

xciv

Total 3212.5

Expenditure Amount (In Rs.)Rent 0Helper / Assistant (Temporary) 750Electricity 100Labour 0Transportation 250D/D 60Total 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 Commission

Income

Wheat 10 quintals Rs. 25/- 250Rice 15 quintals Rs. 25/- 375Kerosene 1250 litres Re. 1/- 1250Gunny 50 bags Rs.10 per

bag500

Total 2375

Expenditure Amount (In Rs.)Rent 0Helper / Assistant (Temporary) 0Electricity 250Labour 0Transportation 350D/D 120Total 720

Net Income (Income – Expenditure) 1655

3. Licence No. – 60/07, Kako Paschimi, Jahanabad, Dealer – Rajendra PrasadHe had 314 cards (262 APL, 37 BPL, 15 AAY) -

Income Quantity Commission

Income

xcv

Wheat 5.2 quintals Rs. 25/- 130Rice 7.8 quintals Rs. 25/- 195Kerosene 942 litres Re. 1/- 942Gunny 26 bags Rs.10 per

bag260

Transportation 13 quintals Rs. 4/- 52Total 1579

Expenditure Amount (In Rs.)Rent 0Helper / Assistant (Temporary) 750Electricity 115Labour 0Transportation 60D/D 100Total 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 Commission

Income

Wheat 11.3 quintals Rs. 25/- 465Rice 16.95

quintalsRs. 25/- 423.75

Kerosene 891 litres Re. 1/- 891Gunny 57 bags Rs.10 per

bag570

Transportation 56.5 quintals Rs. 4/- 226Total 2575.75

Expenditure Amount (In Rs.)Rent 0Helper / Assistant (Temporary) 750Electricity 100Labour 620Transportation 500D/D 100Total 2070

Net Income (Income – Expenditure) 505.75

xcvi

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 –

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

Income Quantity Commission Income Wheat 77.5 quintals Rs. 25/- 1937.5Rice 116.25

quintalsRs. 25/- 2906.25

Kerosene 4701 litres Re. 1/- 4701Gunny 388 bags Rs.10 per bag 3880Transportation

193.75 quintals

Rs. 4/- 775

Total 14199.75

Expenditure Amount (In Rs.)Rent 0Helper / Assistant (Temporary) 750Electricity 100Labour 620Transportation 800D/D 100Total 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 Quantity Commission Income Wheat 82.4 quintals Rs. 25/- 2060Rice 123.6 quintals Rs. 25/- 3090Kerosene 4200 litres Re. 1/- 4200Gunny 412 bags Rs.10 per bag 4120Transportation

206 quintals Rs. 4/- 824

Total 14294

Expenditure Amount (In Rs.)Rent 0

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Helper / Assistant (Temporary) 750Electricity 100Labour 620Transportation 800D/D 100Total 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 Quantity Commission Income Wheat 24.6 quintals Rs. 25/- 615Rice 36.9 quintals Rs. 25/- 922.5Kerosene 1151 litres Re. 1/- 1151Gunny 123 bags Rs.10 per bag 1230Transportation

61.5 quintals Rs. 4/- 246

Total 4164.5

Expenditure Amount (In Rs.)Rent 0Helper / Assistant (Temporary) 750Electricity 100Labour 620Transportation 500D/D 100Total 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 Quantity Commission Income Wheat 7.8 quintals Rs. 25/- 195Rice 11.7 quintals Rs. 25/- 292.5Kerosene 46 litres Re. 1/- 46Gunny 39 bags Rs.10 per bag 390Transportation

19.5 quintals Rs. 4/- 78

Total 1001.5

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Expenditure Amount (In Rs.)Rent 0Helper / Assistant (Temporary) 750Electricity 100Labour 620Transportation 500D/D 100Total 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 Committee’s

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.

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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.

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 20th of the

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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 / Recommendations1. 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

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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%.

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.

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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.

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.

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Chapter 7IDENTIFICATION 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.

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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

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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

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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,

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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 Minister’s

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. The BPL households were determined on the

basis of 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

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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

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BPL families is 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.

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Chapter 8FOOD 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

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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

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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.

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8.9 The procedure of distribution of food coupon to beneficiaries8.9.1 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, a 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 coupons8.10.1 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

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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

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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

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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 25th 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.

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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 beneficiaries8.12.1 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 Committee’s 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

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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

month’s 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 coupon8.13.1 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

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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

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coupon of particular month has been made for different month by

writing another month by Hand.

8.14 Findings of the Committee1. 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 25th of the month

before the month of allocation for his full entitlement but he is

required to deposit the coupons on by the 5th 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

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owner and forego the rest of his entitlement which can be sold by

the FPS owner in black market.

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CHAPTER 9VIGILANCE 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

9.3.1CompositionThe 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

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i. Sub Divisional Officer Chairmanii. Sub District Supply Officer Member

Secretaryiii. All recognised representatives of

recognised political partyMembers

iv. All Zila Parishad members under the Sub Division

Member

v. President of the Local Body Membervi. Representative nominated by the Local

MLA and M.P.Member

vii. Chief of Panchayat Samities of Blocks under the Sub Division

Member

viii. Representative of oil companies Memberix. 10 members nominated by the State

government including minorities, SC/ST, backward class and women. One representing each category.

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-ordinatorii. Panchayat Sarpanch Memberiii. Person defeated by closest

margin in the Mukhiya elections.

Member

iv. Person defeated by closest margin in the Sarpanch elections.

Member

v. Ward members of the area under which the concerned FPS is covered.

Member

vi. Representatives of recognised political parties nominated by Block/ District President/ Secretary

Member

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

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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 Committeesi. Ward Member Co-ordinatorii. Ward members of the area

under which the concerned FPS is covered.

Member

iii. One representative each of all recognised political parties who have been nominated by the President / Secretary of the district/block/urban local body

Member

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.

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(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

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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 / CollectorSpecial Officer rationing and ADM2 types of ADM – ADM Supply & ADM RationingDRO (Departmental Rationing Officer)ARO (Assistant Rationing Officer)MO (Marketing Officer)Supply Inspector

In rest of the districts

District Magistrate / CollectorSDO (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 :

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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.

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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) 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.

(ii) 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.

(iii) 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.

(iv) 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

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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.

Quarterly endings

No. of Inspections

No. of raids conducted

No. of persons arrested/prosecuted/convicted

No. of FPS licences suspended/ cancelled show cause notice issued

Type & Value of goods seized

1 2 3 4 5 6 71. Oct. 08 to

Dec.0813,115 7 30 FIR

lodged, 1 115/62 ---

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person arrested

2. Jan.09 to March 09

6,419 0 4 FIR LODGED

15/96/320 ---

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.

9.7 Complaint Mechanism

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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 Minister’s office and at the District Magistrate’s/ Collector’s 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 scales used therein are correctly aligned. Since there are no inspections, the question of initiating action against errant

cxxxv

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

without actually getting the instruments certified. Thus it is

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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

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

cxxxvii

simply taken to the Mukhiya’s 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 Committee’s 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 the Vigilance and Monitoring

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

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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.

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Chapter 10COMPUTERIZATION

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 31st March

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

Order, 2001

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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.

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Chapter 11RECOMMENDATIONS

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

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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

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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/ women’s 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/ Women’s Self Help Group,

iv) one member of the Village Panchayat/ Municipal Council/

Vigilance Committee/ Women’s Self Help Group, and v) Village

Panchayat/ Municipal Council/ Vigilance Committee/ Women’s 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

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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 Hon’ble 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.

cxlvii

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.

cxlviii

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

cxlix

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

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 Hon’ble 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/

cl

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

cli

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

Hon’ble 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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