Food and Consumer Affairs Minister Pralhad Joshi on Thursday launched a pilot project in Puducherry to provide food support through the Reserve Bank’s e-rupee, the country’s first case of programming the Reserve Bank’s digital currency to provide welfare benefits.
Under the pilot programme, the Union government will restrict food subsidy to eligible beneficiaries in the form of a programmable digital currency token, which can only be used to purchase or exchange grains under the Public Distribution System or Public Distribution System.
The Food Minister said the move aims to enhance transparency, efficiency and accountability in providing support, with the launch of the project to be managed by the Reserve Bank of India, the government’s Public Financial Management System and the designated banking partner, Canara Bank.
The Reserve Bank of India’s (RBI) fintech division is piloting retail and secondary market transactions in e-rupee, a legal tender and digital version of fiat currency, for faster inter-bank settlements and reduced settlement risks. The e-rupee is not a cryptocurrency but a virtual currency fully backed by a sovereign guarantee.
The e-rupee programming feature allows a sponsoring entity, such as a government, to ensure that funds in e-rupee wallets are used for a specific and defined purpose. In this case, the beneficiaries will receive monthly credits allocated to purchase food charity.
Public Distribution System (PDS) beneficiaries will be able to redeem their due quantity of food grains at fair prices or commercial outlets using e-rupee codes in their e-rupee wallets. “The system will address challenges related to biometric authentication and operational issues of electronic points of sale while ensuring secure, traceable and real-time transactions,” Joshi said.
The pilot project will soon be expanded to include at least three states, after analyzing the results, according to the minister. This will pave the way for a decision on further rollout of the CBDC initiative.
The system will also enable beneficiaries to identify nearby approved commercial establishments that provide grains through the application itself. The e-rupee-based PDS model is set to be expanded to Chandigarh, Dadra and Nagar Haveli, with plans for gradual expansion across the country, an official said separately.
