The Government of India has launched a pilot project to transfer food subsidies using Central Bank Digital Currency (CBDC) under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) in Puducherry.The initiative replaces conventional bank account transfers with direct credit of the subsidy into beneficiaries’ CBDC wallets, marking a shift in how the Public Distribution System (PDS) delivers food assistance in the Union Territory.
The pilot was inaugurated on February 26 by Union Minister for Consumer Affairs, Food and Public Distribution, Pralhad Joshi, in the presence of Puducherry Lieutenant Governor K. Kailashnathan and Chief Minister N. Rangasamy.
How does the digital subsidy model work?Under the new framework, the government will credit digital coupons generated by the Reserve Bank of India as programmable digital currency (e₹) directly into beneficiaries’ CBDC wallets. Eligible beneficiaries can redeem these digital tokens for the foodgrains they are entitled to at the Fair Price Shops and authorised merchant outlets.Transactions are designed to be secure, traceable and processed in real time.Officials said the system aims to address operational challenges related to biometric authentication and electronic point-of-sale (e-POS) devices, while enhancing transparency in subsidy distribution.ALSO READ | India weighs incentives for thermal plants to boost flexibility, ease renewable grid stressPart of broader digital reforms in PDSThe CBDC-based transfer builds on existing digital reforms in the food distribution system, including nationwide portability of ration cards under the One Nation One Ration Card (ONORC) framework, Aadhaar-enabled authentication, and data monitoring tools such as the Rightful Targeting Dashboard.The government said the new pilot integrates a sovereign digital payment layer into the Direct Benefit Transfer (DBT) mechanism. Puducherry is currently implementing PDS through a DBT model, making it the first location for the CBDC-based rollout.Scale of the food subsidy programmePMGKAY, described by the government as one of the world’s largest food security programmes, covers over 80 crore beneficiaries nationwide. The scheme provides free foodgrains, including rice, wheat, and, in some cases, millets, to eligible households.Union Minister Pralhad Joshi said the CBDC integration would enhance transparency and beneficiary awareness of entitlements. He added that around 20 lakh automated calls are made monthly using artificial intelligence tools to gather feedback on the quantity and quality of foodgrains distributed.Expansion plansThe Department of Food and Public Distribution said the pilot began with a limited number of beneficiaries in Puducherry and will be expanded across the Union Territory. It is also slated for rollout in Chandigarh and Dadra and Nagar Haveli, followed by further expansion based on an evaluation of outcomes.Officials acknowledged support from the Reserve Bank of India and Canara Bank in operationalising the pilot.The government said a broader decision on nationwide implementation will be taken after analysing the results of the pilot phase.
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