SYLLABUS

GS-3: Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System- objectives, functioning, limitations, revamping; issues of buffer stocks and food security.

Context: The Government of India will launch the Central Bank Digital Currency (CBDC)-based Direct Benefit Transfer (DBT) for food subsidies under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) in Chandigarh and Dadra & Nagar Haveli on 14 August 2026.

More on the News

• Chandigarh and Dadra & Nagar Haveli will become the first Union Territories to fully digitise food subsidy delivery through programmable CBDC tokens.
• The rollout builds on earlier pilot implementations in Puducherry and Gujarat.

About the Central Bank Digital Currency (CBDC)-based Direct Benefit Transfer (DBT)

• Under the CBDC-based DBT model, eligible PMGKAY beneficiaries will receive food subsidy directly into their CBDC wallets instead of conventional bank account transfers.
• The subsidy can then be used to purchase foodgrains from empanelled merchants and Fair Price Shops.
• Under the pilot project, food subsidy will be credited to identified beneficiaries in the form of programmable Central Bank Digital Currency (CBDC) tokens directly into their CBDC wallets.
• The tokens shall be redeemable exclusively for purchase of entitled foodgrains at authorized merchants and Fair Price Shops (FPS), thereby ensuring purpose-bound usage of subsidy and enhanced transparency.
• The purpose-bound nature of the tokens ensures that the subsidy is utilized strictly for foodgrain procurement, enhancing transparency and accountability in the Public Distribution System (PDS).
• The pilot is being implemented in coordination with the Government of Puducherry, the Reserve Bank of India, Public Financial Management System (PFMS), and designated banking partner, Canara Bank.

About the Central Bank Digital Currency (CBDC)

• CBDC is a form of electronic currency which can be exchanged at par with similarly denominated cash and traditional deposit.
• It is another variant of fiat money which central banks traditionally issue.
• The Digital Rupee or e-rupee is a tokenised digital version of the Indian rupee, issued by the Reserve Bank of India as a Central Bank Digital Currency (CBDC).
• CBDC can take two forms broadly:
  • Wholesale CBDC, used for interbank payments and held by financial institutions; and
  • Retail CBDC, intended for the general public.
• Retail CBDC is a token which can exist alongside physical cash and commercial bank money.
• CBDC offers an opportunity to enhance the DBT ecosystem by providing a secure, instant, traceable, and programmable digital cash mechanism.

Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY)

• PMGKAY was announced on 26 March 2020 during the COVID-19 pandemic to ensure food security for poor and vulnerable sections of the country by providing free foodgrains.
• From 1 January 2023, foodgrains earlier given at highly subsidised rates are now provided free of cost.
• The Union Cabinet has extended the scheme from 1 January 2024, with a total financial outlay of ₹11.80 lakh crore, till 31 December 2028.
• The scheme provides free foodgrains to about 81.35 crore beneficiaries, comprising Antyodaya Anna Yojana (AAY) households and Priority Households (PHH) under the National Food Security Act, 2013.
• AAY households receive 35 kilograms of foodgrains per family per month, while PHH beneficiaries receive 5 kilograms per person per month.
• The scheme is implemented through the Targeted Public Distribution System (TPDS) by States and Union Territory Administrations.

Significance of this Initiative

• Transparency and Accountability: Ensures transparent and end-to-end traceable delivery of public funds, while reducing leakages and diversion.
• Faster and Secure Delivery: It will facilitate instant and secure transfer of benefits to beneficiaries and promote financial inclusion through simple wallet-based transactions.
• Real-time Monitoring: The initiative will strengthen accountability and real-time monitoring of subsidy utilization and demonstrate the potential of the Digital Rupee for future payment systems.
• Scalability: The rollout is envisaged as a proof of concept for the nation and a scalable template for adoption by other States and Union Territories.
• Digital Public Infrastructure: Supports the integration of CBDC with welfare schemes and strengthens Digital Public Infrastructure through technology-driven welfare delivery.