Issues in the Current System

The public distribution system in India is riddled with inefficiencies resulting from massive leakage of both money and goods. The money spent by the Governments do not effectively reach the poor either due to corrupt officials and middlemen or due to infiltrated documents.

This system faces many challenges like :

  1.  Cash Flow Issues for  the Beneficiaries:
    While DBT has reduced the need for intermediaries, it has added cash flow burden for the end beneficiary.
  1.  Reliance on the Banking Network
    Bill Gates famously said: “Banking is necessary. Banks are not.”
    The current DBT system has banks baked into its core as the system cannot work if the beneficiary does not have a bank account. Moreover, it adds onto the extra operational cost of the bank account.
  1.  Lack of Transparency
    Verification and transparency remains a challenge. From identifying the “students”, to ensuring the benefit transfer include many intermediaries.
  1.  Increased Operational costs of  Bank Account:
    The cost of operating a bank account is estimated to be $5 per annum. Hence, public lenders need to provide extra fund to balance the operational cost of the bank accounts.
  1.  Quality Compromised:
    The claimed quality of the distributed benefit and that of the one delivered varies to a great extent as observed in the case of laptops for students, water supply in a particular district and so on and so forth.
  1.  Time-taking Process:
    The whole process includes a value chain and is time taking, lengthening the over-all time process.

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