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Report on the State of Karnataka Central Vigilance Committee

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Report on the State of Karnataka Central Vigilance Committee Powered By Docstoc
					                        JUSTICE WADHWA COMMITTEE

                                            ON

                   PUBLIC DISTRIBUTION SYSTEM (PDS)

                                         KARNATAKA

                                     INDEX


S. No.                            Particulars                     Page Nos.
  A      Preface                                                    1–4
  B      Broad Overview                                             i–x
  1.     Introduction                                               1–3
  2.     Legal Regime Governing the Public Distribution System     4 – 25
  3.     Wholesale Distribution                                    26 – 39
            A. Food Corporation of India                           26 – 27
            B. Karnataka Food Civil Supplies Corporation           28 – 29
            C. Taluk Agricultural Produce Cooperative Marketing
                Societies                                          29 - 30
            D. Wholesale Distribution Managed by both KFSCS
                and TAPCMS                                         30 – 33
            E. Findings of the committee                           32 - 34
            F. Computerization at wholesale godowns                34 – 38
            G. Suggestions/Inferences                              38 – 39
  4.     Retail Distribution                                       40 – 52
            A. Mode of appointment                                 40 – 44
            B. Suggestions/Inferences                              44 – 45
            C. Functioning of the Fair Price Shops                 45 - 52


  5.     Viability of fair price shops                             53 – 57
         A. Suggestions/Inferences                                 57 – 58
6.    Transportation                                             59 – 61
      A. Suggestions/Inferences                                  61 – 62
7.    Vigilance committees                                       63 – 67


8     Enforcement                                                68 – 71


9.    Computerization                                            72 - 81


10    Identification of BPL families                             82 – 84
      A. Suggestions/Inferences                                  85 – 87


11    Public hearing held by the committees                      88- 89
      A. suggestions received by the committee                   89 – 90


12.   Committees findings                                        91 - 93


13    Recommendations                                            94 – 99


14    Appendix A                                                100 - 114




                                       PREFACE




        In the matter:
                       Writ Petition (C) No. 196/2001 – People’s Union
                 for Civil
                       Liberties V/S Union of India and Ors.
1. Hon’ble Supreme Court of India by Order dated 12.7.2006 in the
   aforesaid Writ Petition constituted a Committee to be headed by
   me to look into the maladies affecting the proper functioning of
   the Public Distribution System (PDS) and to suggest remedial
   measures.


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 order 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.


6. The Committee is submitting report of the State of Karnataka.
7. The Committee is also submitting 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.         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.    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 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.


10. Based on the work done by the Committee and in compliance
   with the Hon’ble Court’s orders, a detailed report covering all
   issues tasked to the Committee is being submitted.    The first
   part of the report is a Broad Overview.    The report is then
   divided into 13 Chapters.          Last Chapter         contains the
   recommendations.


11. The task before the Committee has been quite stupendous
   considering the time schedule. In this task Legal Team headed
   by Mr. Dayan Krishnan and Mr. Dinesh Dayal, Advocates and
   assisted by Ms. Neeru Vaid, Mr. TVSR Shreyas, Ms. Meenakshi
   Chauhan, Mr. Anant Garg and Mr. Aman R. Nath advocates
   rendered invaluable assistance.


12. For the Committee to complete its task, it got full support and
   cooperation from the officers of the State of Karnataka.         Mr.
   Biraj Patnaik helped in organizing public meetings.


13. Committee thanks Mr. R.U.S. Prasad, Former Secretary to the
   Government of India and also Former member of TDSAT
   (Telecom Disputes Settlement and Appellate Tribunal) for his
   invaluable support for preparing this Report.          His experience
   has been extremely rewarding to the Committee. Mr. Prasad
   rendered his services to the Committee in an honorary capacity
   at the request of the Chairman.


14. Mr.   S.C.     Rawal,    former     Registrar    of    Delhi   High
   Court performed the functions of the Secretary to the
   Committee.        He handled all the correspondence of the
   Committee and looked after the requirements of the Legal
   Team attached to the Committee.


15. Mr. K.K. Mittal, Dy. Registrar (equivalent to Director in Central
   Government) helped the Committee in going through the draft
   reports.      He also looked after the administration and staff
     attached to the Committee and handled correspondence with
     the Department of Food & Public Distribution, Government of
     India.


  16. The Committee received valuable help from Mr. Sudhakar Rao,
     Chief Secretary; Mr. A.G. Risbud, Resident Commissioner; Mr.
     K.M. Shivakumar, Principal Secretary, Food & Civil Supplies; Mr.
     Shiva Ram, Commissioner, Food & Civil Supplies; Mr. A.F. Hafiz,
     Chief    information   Officer;   Ms.   M.V.   Jayanthi,   Regional
     Commissioner; Mr. Manivannan, Collector, Mysore; Mr. Darpan
     Jain, Collector, Dhadwad; Mr. Baldev Kishan, Dy. Commissioner,
     Coorg; Mr. Manoj Kumar Meena, Dy. Commissioner Chamraj
     Nagar and Mr. Hanumanthappa, Dy. Director, Food, Mysore.


  17. There may be some overlapping on various points in the report
     and that is so because an attempt was made to make each
     chapter self-contained. It is also possible that there might have
     been some inadvertent errors which crept up in the report but
     the whole report is an attempt to present the correct picture of
     the ground realities keeping in view the directions of the Hon’ble
     Court.


  18. The sum and substance of the recommendations are given in
     Chapter 13 of the report.




                                            (Justice D.P. Wadhwa)
                                                          Chairman
                                   Central Vigilance Committee on
                                        Public Distribution System
Delhi
Dated: 23.2.2009
              BROAD OVERVIEW

1.   The State of Karnataka is the 6th largest State in India.
     62% of income of the State is derived from Agriculture.
     Karnataka is the 9th largest State population-wise and
     comprises of 29 districts. Kannada is the official language
     of the State and is also the most widely spoken language.
2.   The Committee visited the State of Karnataka from
     22.10.2008 to 23.10.2008 and again from 25.12.2008 to
     30.12.2008.    The Committee visited 5 districts of the
     State. The Committee studied the PDS in the State by
     discussions with the concerned officials, visiting wholesale
     godowns and FPS in urban and rural areas.               The
     Committee also visited the rural areas / villages and
     sought the views of the general public in the informal
     public hearings. It was found that the State of Karnataka
     has tried to implement computerization model on pilot
     basis in different parts of the State to make PDS effective
     and transparent.   The state also started the unit system
     instead of family norms for distribution of specific food
     articles. The Committee has given its report on various
     aspects which is discussed in detail in the various
     chapters. The Committee has also given its observations
     / findings and recommendations for improvement of the
     system of PDS in the State. The following are some of
     features in brief of PDS in Karnataka.
     (i)    APL category:- No PDS food grains is given to
            the APL category in Karnataka.          As per the
            Government policy food grains will be distributed
        to the APL ration card holders after meeting the
        requirement of BPL and Extra BPL (EBPL).
(ii)    Extra BPL (EBPL):- EBPL is the category which as
        per norms laid by the Central Government is APL.
        However, they have been identified as EBPL by the
        state and are getting the same benefits as BPL
        beneficiaries. At present there are 78.37 lakh BPL
        card holders in the State, whereas as per Central
        Government figures the State of Karnataka should
        have 31.29 lakh BPL card holder. Therefore, the
        surplus card holders i.e. 47.08 lakhs fall under the
        Extra BPL category.
        In order to meet the needs of the increased
        number of families under BPL category, the state
        has introduced this new category namely EBPL and
        for catering the food grains to this category, the
        State Govt. has stopped the distribution of the
        food grains to APL ration card holders. The State
        utilizes the allocated APL quota to feed EBPL
        category. The State of Karnataka further buys the
        food grains from the Central Govt. at APL prices
        and then sell the same to the EBPL card holders at
        BPL rates.      The entire subsidy in this process is
        borne by the State of Karnataka.
        It is understood that the Central Government has
        taken    exception    to   this    scheme     and    infact
        threatened to reduce the allocation to the Sate.
(iii)   Unit System         :- Instead of the family norms
        system    for    distribution     of   the   food   grains,
        Karnataka Govt. has adopted the unit system for
        distribution of the food grains to the card holder.
       Member of the family above the age of 10 years is
       treated as one unit.     4 kg. of food grains is
       supplied per person (per unit). Monthly maximum
       food grains entitled for one family per month is
       pegged at 25 kg. There is strong demand that this
       restriction of allocation may be increased to 35 kg.
       It is as per the directions of the Central
       Government and also in accordance with the
       Hon’ble Supreme Court Orders.
(iv)   Rs.3/kg. scheme launched by the State
       Govt. :- The State Government launched the
       scheme that every BPL card holders will be given
       the rice @ Rs.3/kg. With the introduction of this
       scheme there is a mad rush for categorization by
       the people of the State in the BPL category. This
       is a political decision and must be implemented
       and monitored properly so that only the needy
       who are really in the BPL category should get the
       benefit of the scheme. It must be ensure that the
       scheme does not become a disincentive for hard
       work for the population of the State.
(v)    Computerization:-       Government of Karnataka
       has started a automated computerized system
       with biometric ration cards. The data mentioned
       in the biometric card are photographs of family
       members with names and other details. However,
       there is no biometric image in the card as the
       details are stored in the machine and installed at
       the FPSs. The success of the system will depend
       upon the number of factors. However, the system
       when     introduced    completely       will   ensure
       identification mechanism. Any member of the
       family can get the food grains as long as his / her
       biometric impression is stored.         This process of
       biometric cards helps the State Government in
       identifying the bogus cards and eliminating them.
       The    Committee       was     informed      that    this
       computerisation process at the level of FPS was
       carried through NEMMADI Centres. It was further
       submitted    that   through     these     centres    new
       applications for rations cards are also processed.
       The Committee also visited one NEMMADI Centre
       to have on the spot study of the system.             The
       Committee     found     that   the      experiment    of
       computerization in Karnataka is very positive. The
       system may be made full proof and free of political
       interference and must be independently monitored
       for the successful implementation.
(vi)   Temporary card scheme for BPL :- Under the
       scheme any person who applies for BPL card in a
       NEMMADI Centre will be given a temporary card
       without verification. The verification if at all will be
       done ex-post facto. The Committee felt that the
       scheme is intended to defeat the success of the
       computerization model and is at the behest of the
       vested interests. Therefore, this scheme must be
       stopped forthwith. The Committee also feels that
       if the system keeps going on, the whole process of
       computerization will be useless and the purpose
       will be defeated.
(vii) Commission of Retailers:- The Commission on
       sale of food grains to the retailers is Rs.29 per
         quintal for rice and Rs.23 per quintal for wheat. In
         the rural areas the transportation cost is not to be
         borne by the FPS dealers as the State Govt.
         provides food grains free of transportation charges
         to the FPS dealers. However, in urban areas the
         FPS owners has to bear the cost of transportation
         from wholesale point to their shops as they have
         to make their own arrangements of transportation
         of the food grains up to their shop.       Thus the
         transportation cost is to be borne by them. It was
         felt that this discrimination should not be there
         between    rural   and    urban     FPSs   and     the
         transportation cost in respect of urban areas FPS
         should also be borne by the State Govt. This is in
         consonance with the PDS Control Order that the
         State Government will ensure door step supply of
         food grains to the beneficiaries.
(viii)   Licence to the Retail distributors:-             Under
         Clause 3 of the Karnataka Essential Commodities
         (PDS) Control Order 1992, the authorized authority
         has the power to issue authorization to any person
         to be authorized dealer or to run FPS in specific
         areas.    The authorized authority shall call for
         applications by publication of Public Notice after
         giving a minimum period of 30 days and put the
         same on the notice board of the respective office.
         The application can be made in the prescribed
         form ‘A’ attach to the Control Order 1992. There
         are certain Rules and Regulations to be followed
         while granting licence by the authorized authority.
         The District Collector has been designated as the
       authorized authority for this purpose.                    The
       Karnataka Essential Commodities (PDS) Control
       Order, 1992 provides for the eligibility and the
       priorities etc. for granting the licence which are to
       be followed by the authority. The Committee felt
       that the applications are generally recommended
       either by the MP or MLA, District Collector does not
       record any reason while passing allotment order /
       granting the licence.       No reason is given by the
       District Collector while denying the licences to the
       applicant. It was also found that in many cases a
       candidate from a category which in priority list is
       ignored and other persons is granted licence on
       one excuse or the other. There is a provision for
       filing an appeal before the Appellate Authority if
       the application for allotment is rejected.                It is
       recommended       by       the    Committee        that    the
       allotment of the FPSs should be made as per Rules
       and Regulation in this regard without any political
       interference.
(ix)   Viability of FPSs:- FPSs are the final link in the
       sale   of   distribution     of   food    grains     to    the
       consumers. There are 20,372 FPSs out of which
       200 are managed by KFCSC, 8896 by Cooperatives
       and 11,276 are managed by the individual
       licencees. All these FPSs are bound to follow the
       PDS Control Order, 2001 as amended in 2004 and
       circulars issued by Department of Food & Public
       Distribution,   Government         of    India     and     the
       Karnataka Essential Commodities (PDS) Control
       Order, 1992 and the other circular etc. issued by
      the Government of Karnataka.             As per existing
      system the licence of the retail shop can be given
      with minimum 300 cards in rural areas and
      minimum 500 cards in urban areas.                       The
      Committee suggests that the minimum number of
      cards in rural and urban areas should be increased
      from 500 to a larger number which would be
      helpful for the FPS to be viable.
      The Committee also felt that the concept of stand
      alone FPS is inherently unviable and to make it
      viable it has to be multi purpose unit dealing with
      different     commodities       and    services.        The
      Committee after seeing the functioning of FPSs
      has come to the conclusion that the multi service
      co-peratives are most successful FPS dealers, as
      compared to the State owned agency and private
      licencees.
(x)   Wholesale Distribution:-               In the wholesale
      distribution of PDS food grains in the State of
      Karnataka, the following agencies are involved (1)
      Food Corporation of India, (2) Karnataka Food &
      Civil Supplies Corporation (KFCSC), (3) Taluk
      Agriculture     Produce        Co-operative     Marketing
      Society (TAPCMS). The KFCSC transacts 65% of
      business for lifting food grains from FCI, the rest is
      being shared by TAPCMS.                The whole sale
      godowns are managed by KFCSC and TAPCMS.
      There are 267 godowns which are known as
      wholesale     godowns     in     the   entire   State    of
      Karnataka out of which 165 wholesale godowns
      are under the KFCSC and 102 are under the
control of TAPCMS. The Committee felt that weigh
bridges are neither installed by the KFCSC nor by
the cooperatives in the respective godowns. The
Committee was informed that in almost all the
wholesale godowns when the food grains are
brought from FCI godowns, officials in the
wholesale godowns only check the number of the
bags by counting the number of the bags,         as
compared the same with the number mentioned
behind the weigh - memo issued by the FCI.       In
case of doubt only, the trucks carrying the food
grains is carried to a private weigh bridge to get
weighment done. The committee was informed by
the officials of the godown that they were not
getting samples from the FCI at the time of
collecting the food grains for the PDS distribution.
The FCI official present with the Committee stated
that the FCI issues samples to all the wholesale
dealers.     However, the godown officials despite
repeated requests could not produce any sample
to the Committee. The Committee found that the
TAPCMS godowns are a principal source of
diversion.    The   Committee    recommends      (a)
intermediary wholesale point, TAPCMS should not
be entrusted with the task of storage of food
grains (b) installing of weigh bridges in the
wholesale godowns to ensure the exact quantities
of food grains received from FCI, (c) electronic
weigh check memos be issued by the FCI . (d)
Strict action may be taken against the defaulters
and who are found involved in diversion.
(xi)    Transportation - Additional Commissioner to Govt.
        of Karnataka informed the Committee that the
        transportation of food grains for the FPS is done in
        two phases. The first phase relates to lifting of food
        grains from FCI godowns to Taluk godowns.          The
        expenditure on this phase is borne by the Government
        of Karnataka based on the fixed rates. The second
        phase relates to transportation of food grains from
        Taluk godowns to FPSs. There is a provision of door
        step delivery from wholesale godowns to the rural
        FPSs. The entire cost of transportation is borne by
        the State Govt.       For selection of transporters a
        uniform tendering procedure is adopted.           One
        transport contract is appointed for transportation of
        food grains from FCI godowns to Taluk wholesale
        godowns and another transporter is engaged for
        transporting food grains from whole sale godowns to
        rural FPS. It was observed by the Committee that in
        every district a cartel of transporters operates and
        they generally succeed in getting contract on regular
        basis. It is seen that diversion takes place during the
        transportation to a large extent, therefore, it is
        suggested by the Committee that there should be
        Zero tolerance in case breach of contract by the
        transporters. Deterrent major penalty should be
        imposed against the errant transporters, besides black
        listing them for further tendering.
(xii)   Vigilance Committees:- There is a provision of
        vigilance Committee in the PDS Control Order and the
        regulations of the State of Karnataka .        It was
        informed   that   Vigilance   Committees   have   been
         constituted for all FPSs to over- see the functioning of
         PDS. The meeting of these Vigilance Committee are
         conducted at least once in two months. It was also
         stated to the Committee that the Food security
         Committee have also been constituted in each Gram
         Panchayat to see over all functioning of the PDS. The
         said Committee sits on every first and third Saturday
         of the month to review all issues relating to the food
         security, especially PDS.    The Committee feels that
         however, the vigilance committees exist but only on
         paper. There is a need to restructure and re-enforce
         vigilance   mechanism       by   induction    of   modern
         technology. A complete mechanism (helpline) as well
         as independent regulator may be appointed to
         monitor the vigilance mechanism and enforcement.
(xiii)   Enforcement:- The Manglore Port Case studied by
         the Committee showed as to how there is total
         collusion between all vested interests and more so
         with the investigating agencies. The Committee
         recommends that the state would ensure that all
         investigations and prosecutions under the Essential
         Commodities Act including the Mangalore Port Case
         are done with sincerity and with a Zero Tolerance
         approach.


(xiv)    Identification of BPL beneficiaries:- In the State
         of   Karnataka   the   concept    of   EBPL    has   been
         introduced. It is essential that the income criteria for
         BPL families adopted may be reviewed as it seems to
         be unrealistic in its present form.      At present the
         family with the income of less than Rs.17,000/- in the
     urban areas and Rs.12,000/- in the rural areas per
     annum is the criteria of categorization as BPL family.
     It is suggested that the minimum wages for the
     unskilled workman in the urban areas could be the
     criteria for categorization as the BPL family, whereas
     the guidelines under the National Rural Employment
     Act, 2005 for wage rates could be the criteria for
     identification of BPL families in the Rural Areas. The
     Committee is also of the view that the APL may be
     abolished and the allocation meant for APL could be
     given to the BPL beneficiaries because it is felt that
     the APL quota is not taken by the beneficiaries of
     these categories and is a major source of diversion.
     The State of Karnataka adopted a good approach so
     far as the APL quota is concerned.      However, the
     Central Govt. has warned the State that it would cut
     rice supply under APL if the number of BPL
     beneficiaries is not brought down. Perhaps in view of
     this only that the new category i.e. EBPL has been
     recognized by the State.
(xv) Introduction of local food grains in PDS:- The
     issue of introduction of local food gains in PDS was
     raised in various meetings during the visit of the
     Committee to the State. In South Karnataka people
     mainly eat Ragi whereas in North Karnataka Jowar is
     the staple food.        The Central Government may
     consider this aspect.
                         CHAPTER 1
                GENERAL INTRODUCTION
I.       ABOUT THE STATE OF KARNATAKA


1.1   The State of Karnataka is situated on the western edge of
      the Deccan Plateau. The state is surrounded by State of
      Maharashtra on the northern side, State of Andhra Pradesh
      on the eastern side, State of Tamil Nadu on the southern
      side and the Arabian Sea on the western side.




1.2   The State of Karnataka is the sixth largest state in India and
      even during feudal rule the State was a pioneer in
        agricultural and industrial development. It is pertinent to
        mention that about 62% of State’s income is derived from
        agriculture.


1.3     The State covers an area of 191,976 km which is 5.83% of
        the total geographical area of India and is the ninth largest
        by population and comprises 29 districts. Kannada is the
        official language of the State and is also most widely spoken
        language.


1.4     The Committee visited the State of Karnataka from
        22.10.2008 to 23.10.2008 and again from 25.12.2008 to
        30.12.2008. During the visits the committee visited the
        following districts:


1.4.1   Bangalore District
1.4.2   Mysore District
1.4.3   Dharwad District
1.4.4   Haveri District
1.4.5   Gadag District


1.5     The visit was interspersed between discussions with the
        State officials    at the secretariat level and officials
        concerned with the administration of PDS at the ground
        level. Visiting wholesale godown and fair price shops both
        in the urban and rural areas, visits to the villages and low
        income areas which are completely dependent on the PDS
        for food security to find out the leakages and various short
        comings and evaluate the status of the programme.
1.6   The Committee along with the Food Commissioner of the
      State of Karnataka held informal public hearings in the
      rural areas/ villages apart from visiting the fair price shops.


1.7   The State of Karnataka is the only state among the States
      that the committee visited which has tried to implement
      the computerisation models on pilot basis in different parts
      of the state to make the public distribution system effective
      and transparent. The Committee also observed that the
      State of Karnataka is the only state among the states that
      the Committee visited so far which is following the Unit
      System instead of the family norm for distribution of PDS
      goods.




                           *******
                                CHAPTER 2


      LEGAL REGIME GOVERNING THE PUBLIC DISTRIBUTION
                                  SYSTEM



I.      ENTITIES INVOLVED IN THE SUPPLY OF FOOD GRAINS
        TO CONSUMERS: Various entities are involved in the process
        of distribution of food grains. Their role and functions are set
        out in brief.


1.1     The Food Corporation of India (‘FCI’)- The FCI was set up
        under the Food Corporations 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.


1.2     The Karnataka Food and Civil Supplies Corporation
        Limited: The Karnataka Food and Civil Supplies Corporation is a
        government of Karnatka undertaking established under the
        companies Act on 7.9.1973 with the primary objective of
        procurement, lifting and distributing food grains under the
        Public   Distribution   System   and   also   implementing   other
        government schemes.


1.3     Taluk    Agricultural     Produce      Cooperative    Marketing
        Societies (TAPCMS):         The marketing sector is a two tier
        system. At the state level the Karnataka state cooperative
        marketing federation is functioning as the Apex Institution and
        Taluk Agricultural Produce Co-operative Marketing Societies
        (TAPCMS) at the Taluk levels are functioning as primary
        cooperatives. All the Taluks in the states are covered by these
       primary marketing cooperatives. The TAPCMS undertakes
       procurement of food grains on behalf of the Government and
       the Karnataka food and civil supplies corporation by opening
       purchase points at village level. They are also entrusted with the
       vital activity of rural distribution system.

1.4    Fair Price Shops(‘FPS’):The Fair Price Shops are the final link
       in the chain of distribution of food grains to the consumers. The
       State of Karnataka is divided into 26 districts and there are
       20372 fair price shops out of which 200 are managed by the
       KFSC, 8896 by the cooperatives and 11276 are managed by the
       individuals.


II.    The statutory framework governing and regulating the different
       aspects of the Public Distribution System is contained in the
       Essential Commodities Act 1955, Public Distribution System
       (Control) Order 2001 as amended in 2004 and Circulars issued
       by the Department of Food & Public Distribution in the Ministry
       of Consumer Affairs, Government of India and the Karnataka
       Essential Commodities (Public Distribution System) Control
       Order 1992 as well as various Circulars, Orders and Notifications
       issued by the Department of Food Supplies and Consumer
       Affairs., Government of the State of Karnatka


III.   BROAD OVERVIEW OF THE STATUTORY REGIME


3.1    ESSENTIAL COMMODITIES ACT, 1955: The Essential
       Commodities Act 1955 (Act) is an Act to provide, in the interest
       of general public, for the control of the production, supply and
       distribution of, and          trade and commerce, in certain
       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 7 provides for penalties. Any person contravening the
       Order is liable to be sentenced to imprisonment, which may
       extend upto 7 years and shall also be liable to fine. 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 a second
       time then imprisonment cannot be less than 6 months subject
       to, adequate and special reasons.


iv.    A   person    who   attempts    to   contravene    or   abets   any
       contravention of the Control Order is similarly liable (Section 8).


v.     Section 9 provides for punishment upto 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.


vi.    Section 10 deals with offences by Companies.
vii.   Section 10A has made any offence punishable under the Act
       cognizable.
viii.   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.


ix.     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.


x.      An offence for contravention of the Control Order is to be tried
        summarily (Section 12A).


xi.     If an accused is sentenced to imprisonment for a period not
        exceeding one month and of a fine not exceeding Rupees two
        thousand, no appeal can be filed.


xii.    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, license or other document, the burden of
        proving that he has such an authority, permit, license or other
        document, shall be on him.


3.2     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.
3.3   The       Karnataka     Essential    Commodities        (Public
      Distribution System ) Control Order 1992: The Karnataka
      Essential Commodities (Public Distribution System ) Control
      Order 1992 has been issued by the Government of Karnataka in
      exercise of the powers conferred by Section 5 of the Essential
      Commodities Act, 1955, for the purpose of maintaining supplies
      and securing equitable distribution of essential commodities in
      the State of Karnataka .


3.4   The Karnataka (Prevention of Unauthorised Possession
      of Ration Card) Order 1977: The Karnataka (Prevention of
      Unauthorised Possession of Ration Card) Order 1977 has been
      issued by the Government of Karnataka in exercise of the
      powers conferred by Section 3 of the Essential Commodities Act,
      1955 to regulate the distribution of the ration cards to ensure
      equitable distribution of the essential commodities under the
      public distribution system.


3.5   The Government of Karnataka in its reply to the Committee’s
      query stated that the State Government has issued under
      Section 3 of the essential Commodities Act, 1955 for regulating
      sale and distribution of the essential commodities the following
      orders:
      a)     Karnataka Essential Commodities (Public Distribution
      System)
             Control Order 1992
      b)     Karnataka Essential Commodities Licensing Order, 1986
      c)     Karnataka    Essential   Commodities   (Maintenance     of
      Accounts,
             Display of Prices and Stocks) Order 1981.
3.6   Distribution Machinery


A.    Allotment of licenses/authorizations to set up a Whole
      Sale Dealership.

i.    Clause 6(b) of the Karnataka Essential Commodities (Public
      Distribution System) Control Order 1992 provides the order of
      priority for granting authorisation of wholesale dealership which
      is as follows:

      a) Karnataka Food Civil Supply Corporation

      b) Cooperatives registered under the Karnataka Cooperative
      Societies Act and have been in existence for at least one year.

ii.   Clause 5(b) of the of the Karnataka Essential Commodities
      (Public Distribution System) Control Order 1992 requires as a
      condition precedent to be eligible to be a wholesale dealer
      which is that the Karnataka Food Civil Supply Corporation or the
      Cooperative should have a godown having sufficient space to
      store essential commodities.



B.    Allotment of licenses/authorizations to set up a Fair
      Price Shop.



i.    Under Clause 3 of the Karnataka Essential Commodities (Public
      Distribution System) Control Order 1992, the “Authorised
      Authority” has the power to issue authorisation to any person to
      be an authorised dealer or to run a fair price shop in a specified
      areas.
ii.    The term ‘Authorised’ Authority has been defined under Clause
       2(d) of the Karnataka Essential Commodities (Public Distribution
       System    )   Control   Order   1992   and   means    the   Deputy
       Commissioner of the District concerned in the rural, urban and
       for the Informal Rationing Areas in the district concerned
       (except Bangalore Informal Rationing Area) and the Joint
       Director (P.D.S.) for the area comprised in Bangalore Informal
       Rationing Area.

iii.   As per Clause 4(1) of the Karnataka Essential Commodities
       (Public Distribution System) Control Order 1992, the authorised
       authority shall call for applications by publication of notice after
       giving a minimum period of thirty days and publishing the same
       on the notice board of his office. Clause 4 (2) of the same
       control order further provides that any such application which is
       being made under clause 4(1) would be made in the format
       given and prescribed in “Form A” attached to the Control Order,
       1992.

iv.    As per Clause 5 of the Karnataka Essential Commodities (Public
       Distribution System) Control Order 1992 any person or
       institution can get an authorisation under Clause 3 upon
       satisfying the following conditions:

       a) He should not have been convicted for an offence under the
          Essential Commodities Act, 1955. : (Clause 5(a) of the
          Karnataka Control Order 1992)
       b) He should not have a wholesale dealers or retail dealers
          license under the Essential Commodities Act, 1955: (Clause
          5(a) of the Karnataka Control Order 1992)
       c) In case if an authorisation has been given to him before for
          running a fair price shop then the same should not have
             been cancelled. (Clause 5(a) of the Karnataka Control Order
             1992)
      d) He should be in possession of suitable business premises:
             (Clause 5(b) of the Karnataka Control Order 1992)
      e) He should have sufficient funds in the bank account to
             purchase one month’s stock requirement: (Clause 5(c) of the
             Karnataka Control Order 1992)

v.    Clause 6(b) of the Karnataka Essential Commodities (Public
      Distribution System) Control Order 1992 provides the order of
      priority for granting authorisation of running a fair price shop
      under Clause 3.

      a)        Karnataka Food and Civil Supplies Corporation
      b)        Consumer Cooperative Societies
      c)        Other Cooperative Societies
      d)        A Society or Association not being a youth club or youth
                association, registered under the Karnataka Societies
                Registration Act, 1960
      e)        If the eligible candidates in the above priority are not
                available then the authorised authority is open to give
                authorisation to run the fair price shop to an individual
                who is above 18 years and passed 7th standard in the
                following priority:
      i.        Persons belonging to Schedule Castes
      ii.       Persons belonging to Schedule Tribes
      iii.      Unemployed Graduates
      iv.       Physically Handicap Persons
      v.        Ex-Servicemen
      vi.       Others
vi.   Proviso to Clause 6 of the Karnataka Essential Commodities
      (Public Distribution System) Control Order 1992 states that in a
        year 15 percent of the total authorisation should go to the
        Schedule Castes and minimum 5 percent to Schedule Tribes.
        The proviso further states that the cooperative society as
        mentioned n Clause 6(b) of the Karnataka Control Order, 1992
        would   mean     a     society   registered   under   the   Karnataka
        Cooperative Societies Act, 1959 and that the society also needs
        to be financially sound and the same should be running for at
        least three years before the date of consideration.


vii.    Under Clause 7 of the Karnataka Essential Commodities (Public
        Distribution System) Control Order 1992 a licence issued under
        section 3 of the Karnataka Control Order, 1992 to run a fair
        price shop would be for a period of three years from the date of
        issue. The clause further empowers the ‘authorised authority’ to
        renew the license for another period of three years provided the
        licensee has not committed any irregularities in the previous
        years. The said clause also prescribes the fees chargeable for
        issuance of license.


viii.   Clause 8 of the Karnataka Essential Commodities (Public
        Distribution   System)     Control   Order    1992    empowers    the
        ‘authorised authority’ to issue duplicate authorisation in case the
        authorisation license issued under Clause 3 of the is defaced,
        lost or destroyed. Whereas Clause 9 of the Karnataka Essential
        Commodities (Public Distribution System) Control Order 1992
        deals with the depositing of the Security by the licensee.


ix.     Clause 10 of the Karnataka Essential Commodities (Public
        Distribution   System)     Control   Order    1992    empowers    the
        ‘authorised authority’ to refuse the grant of a license or to
        refuse a renewal of a license after giving adequate opportunity
        to the person who is getting affected and recording the reasons
     for the said decision. Clause 10(2) and 10(3) provide the
     grounds on which the ‘authorised authority’ can refuse to either
     grant a license or renew an authorisation. These grounds are:-
     a)      if the applicant is minor, lunatic or of unsound mind
     b)      the applicant is the un discharged insolvent
     c)      the applicant is not eligible under Clause 5 of the
             Karnataka Essential Commodities (Public Distribution
             System) Control Order 1992
     d)      the applicant has already been deprived of authorisation
             due to cancellation of the same on the previous occasion
     e)      an applicant has applied for both whole sale and retail
             outlet except in case the applicant is a cooperative
             society.


x.   Clause 11(2) of the Karnataka Essential Commodities (Public
     Distribution System) Control Order 1992 provides the minimum
     number of cards that is required to be attached to a fair price
     shop Shall not be less than 300 for a fair price depot in a rural
     area and not less than 500 for a fair price depot in an urban
     area.

C.   Duties and Obligations of a Fair Price Shop Licensee:

i.   The PDS Order, 2001, under Clause 7 read with paragraph 5 of
     the Annexure to the Order lays down the procedure for issue of
     licenses or authorization to the fair price shops for the
     distribution of essential commodities under Public Distribution
     System. The duties and responsibilities of the fair price shop
     owners are also provided in the PDS Control Order, 2001.
a.   Para 5(i) provides that the essential commodities must be sold
     as per the entitlement of ration card holders and at the retail
     issue prices fixed by the concerned State Government.
b.   Para 5(ii) of the Annexure provides that each FPS will 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:-

     (i)      List of BPL and Antyodaya beneficiaries,

     (ii)     Entitlement of essential commodities,

     (iii)    Scale of issue,

     (iv)     Retail issue prices,

     (v)      Timings of opening and closing of the fair price shop,

     (vi)     Stock of essential commodities received during the
month,

     (vii)    Opening and closing stock of essential commodities and

     (viii)   The   authority    for   redressal   of   grievances/lodging
              complaints with respect to quality and quantity of
              essential commodities under the Public Distribution
              System.

c.   Under Para 5(iii) of the Annexure, a FPS owner is required to
     maintain records of ration card holders (APL, BPL and
     Antyodaya), stock register, issue or sale register.


d.   Para 5 (iv) requires the FPS owner to furnish copies of specified
     documents such as the ration card register, stock register, sale
     register to the office of the Gram Panchayat or Nagar Palika or
     Vigilance Committee or any other body authorized by State
     Governments for the purpose.
e.   In terms of Para 5 (v) the FPS owner is obliged to display
     samples of foodgrains being supplied through the fair price
     shop.


f.   Para 5(vi) provides for the production of books and records
     relating   to   the   allotment   and   distribution   of   essential
     commodities to the inspecting agency and furnishing of such
     information as may be called for by the designated authority.
g.   Para 5(vi) deals with the accounting of the actual distribution of
     essential commodities and the balance stock at the end of the
     month to the designated authority of the concerned State
     Government with a copy to the Gram Panchayat.
h.   Para 5(vii) requires the Fair Price Shop to be opened and closed
     as per the prescribed timings displayed on the notice board.

i.   Clause 7(2) lays down that fair price shop owner shall not refuse
     to supply the essential commodities, lying in stock, to the ration
     card holders, as per their entitlement. Clause 7(3) provided that
     the fair price shop owner shall not retain ration cards after the
     supply of the essential commodities.

D.   Ration Cards

i.   The Government has for the purpose of issuing ration cards
     divided the target population into 3 broad categories, Above
     Poverty Line (‘APL’), Below Poverty Line (‘BPL’) and Antodaya
     Anna Yojana (‘AAY). Clause 2(d) of the Public Distribution
     System Order, 2001 defines 'Above Poverty Line Families' as
     those families which have been issued Above Poverty Line (APL)
     ration cards by the State Governments for issue of foodgrains
     under the Public Distribution System, Clause 2(g) defines 'Below
     Poverty Line families' as those families which have been
     identified by the State Government for issue of foodgrains at
       specially subsidized rates adopting the estimates of poverty
       given by the Central Government Clause 2(e) defines 'Antyodaya
       families' as the poorest families from amongst the Below
       Poverty Line (BPL) families identified by the State Governments.
       Such families are entitled to receive foodgrains under the
       Antyodaya Anna Yojana.

ii.    Clause 3 of the PDS Order states that State Governments shall
       identify families living Below Poverty Line as per paragraph 1 of
       the Order. Para 1(1) requires State Governments to formulate
       suitable guidelines for the purpose of identification of families
       living Below the Poverty Line (BPL), including the Antyodaya
       families, as per the estimates adopted by the Central
       Government. It is further provided that care be taken to ensure
       that the families so identified are really the poorest. Para 1(2)
       requires the State Governments to get the lists of BPL and
       Antyodaya families reviewed every year for the purpose of
       deletion of ineligible families and inclusion of eligible families.

iii.   Clause 4 of the Public Distribution Order 2001 requires the State
       Governments to issue distinctive ration cards to Above Poverty
       Line, Below Poverty Line and Antyodaya families and further
       mandate that a periodical review and checking of the ration
       cards be conducted as per paragraph 2 of the Annexure to the
       Order. Para 2(3) provides that State Government shall issue
       distinctive ration cards to APL, BPL and Antyodaya families.

iv.    Para 2(4) of the Annexe to the Control Order provides that the
       designated authority shall issue a ration card within one month
       of the date of receipt of the application after necessary checks
       and verification.
v.         Para 2(6) of the Annexe to the Control Order requires the State
           Government to conduct periodical checking of ration cards to
           weed out ineligible and bogus ration cards and bogus units in
           ration cards.

vi.        Para 2(8) lays down that elimination of bogus ration cards as
           well as bogus units in the ration cards shall be a continuous
           exercise by the State Governments to check diversion of
           essential commodities.

vii.       Clause 11 (2) of the PDS Order 2001 provides that any person
           aggrieved by an order of the designated authority denying the
           issue or renewal of a ration card or cancellation of the ration
           card may appeal to the Appellate Authority within thirty days of
           the date of receipt of the order.

viii.      Clause 2(2) of the Karnataka (Prevention of Unauthorised
           Possession Ration Card) Order 1977 defines the term “Bogus
           Cards” as a ration card issued in the name of the fictitious
           person and includes the ration card issued in the name of any
           persons whose name is already entered in any other ration card
           or also a ration card where an entry in respect of a person is
           believed to be incorrect and false.


ix.        Clause 3 of the Karnataka (Prevention of Unauthorised
           Possession Ration Card) Order 1977 lays down the following
           restrictions in respect of the possession of ration card:
        a) No person should dishonestly apply for receiving or use a ration
           card where there is no provision made for such a person in such
           ration card.
        b) No person shall apply for a ration card giving incorrect details.
      c) No person shall wilfully alter or destroy or deface or allow any
         other person to alter, destroy or deface any of the entries made
         in the ration card.
      d) No person is allowed to transfer the ration card to any other
         person or should use someone else’s ration card for obtaining
         food under the public distribution system. (See Clause 3(3) of
         the Karnataka (Prevention of Unauthorised Possession Ration
         Card) Order 1977)


x.       Clause 3(2) of the Karnataka (Prevention of Unauthorised
         Possession Ration Card) Order 1977 lays down an obligation on
         the ration card holder that in case if there is any increase in the
         number of family members then such an increase must be
         intimated to the authorities within a period of thirty days.


xi.      As per the prevailing norms in the State of Karnataka, a family
         having annual income upto 12,000/- in rural area and Rs.
         17,000/- in urban areas will be given BPL cards.


IV.      MONITORING            THE   FUNCTIONING       OF   THE    PUBLIC
         DISTRIBUTION           SYSTEM   AND     OTHER      PROCEDURAL
         ASPECTS


4.1      Public Audit


i.       Para 6(9) of the PDS Order, 2001 states that the designated
         authority shall direct the concerned fair price shop owner to
         provide relevant extracts of the documents maintained by him
         on an application made by a beneficiary, on payment of a
         prescribed fee.

ii.      It is pertinent to note that Clause 7(4) of the PDS Order, 2001,
         confers on any ration card holder desirous of obtaining extracts
            from the records of a fair price shop owner, the right to obtain
            the same by making a written request to such owner along with
            deposit of the fee specified by the State Government. Clause
            7(4A) imposes an obligation upon the fair price shop owner to
            provide extracts of records to the ration card holder within
            fourteen days from the date of receipt of a request and the
            specified fee under sub-clause (4).

iii.        Para 6 (7) of the Order requires State Governments to educate
            the ration card holders regarding their rights and privileges
            under the Public Distribution System by use of electronic and
            print media as well as display boards outside fair price shops.

4.2         Inspections


i.          The Office of the Commissioner of Food and Civil Supplies by its
            order dated 1.4.1998       issues job charts to Deputy Director/
            Assistant Directors and other Officials of the department of food
            and civil supplies for conducting     inspections at the fair price
            shops and then submitting the report as per the format given
            under the job chart itself.


ii.         Some of the broad duties that have been specified under the job
            chart to various officers are as follows;
       a)      Issuance and Renewal of Ration Cards and other related
               activities.
       b)      Overlooking the allotment and delivery of the food grains to
               the fair price shops.
       c)      Inspecting fair price shops:
               a. Cursory Inspections: 30-50 per month
               b. Detailed inspections: 05 per month
       d)      Inspecting the Wholesale Depots
               a. Cursory Inspections: 5 to 8 per month
               b. Detailed inspections: 1 to 2 per month
       e)      To ensure disposal of cases booked under the Essential
               Commodities Act, 1955 either in the court of Deputy
               Commissioner and other judicial courts.
       f)      To ensure that fair price shops display and exhibit      proper
               boards with division number, shop      number and rates of
               commodities etc.
       g)      To visit the FCI Godown once in a month to verify the quality
               of the food grains.
iii.        The state of Karnataka in its reply stated that the food
            department has been given monthly targets for inspection of the
            fair price shops and wholesale godowns as per the job charts.
            The department further has constituted Vigilance squads and
            teams to conduct surprise inspections.


V.          Computerisation


i.          Para 6(6) of the PDS Control Order, 2001         requires State
            Governments to ensure monitoring of the functioning of the
            Public Distribution System at the fair price shop level through
            the computer network of the NIC installed in the District NIC
            centres and to issue for this purpose computerized codes to
            each FPS in the district.


VI.         Vigilance Framework


a.          Clause 8 of the PDS Order 2001 provides that the procedure for
            monitoring of the Public Distribution System including the
            functioning of the fair price shops by the State Governments
            shall be as per paragraph 6 of the Annexure to the Order.

b.          Para 6 (1) of the Annexure to the PDS Order requires State
            Governments to ensure a proper system of monitoring of fair
        price shops and prescribes model sale register, stock register
        and ration card register. Para 6(2) requires State Governments
        to ensure regular inspections of fair price shops, not less than
        once in six months by the designated authority. State
        Governments may issue orders specifying the inspection
        schedule, list of check points and the authority responsible for
        ensuring compliance with the said orders. Para 6 (3) provides
        that meetings of the Vigilance Committees on the Public
        Distribution System at the State, District, Block and FPS level
        shall be held on a regular basis at such dates and periodicity as
        notified by State Governments. However, it is stated that the
        periodicity shall not be less than one meeting a quarter at all
        levels. Para 6(4) imposes upon State Governments the duty to
        ensure a periodic system of reporting and it further lays down
        that the complete information in this regard is be sent in the
        prescribed form as follows:

(i)     By fair price shops to the District Authorities by the 7th of the
        month following the month for which allocation is made in Form
        ‘A’.

(ii)    By the District Authorities to State Government by the 15th of
        the month following the month for which allocation is made in
        Form ‘B’.

(iii)   By the State Government to the Central Government by the end
        of the month following the month for which allocation is made in
        Form ‘C’.

 c.     Clause 6(8) lays down that State Governments shall issue and
        adopt the Citizen’s Charter based on the model Citizens Charter
        issued by the Central Government.
d.     The State of Karnataka in its reply stated that the Vigilance
       Committees have been constituted for all fair price shops to
       oversee the functioning of the Public Distribution System. It was
       further stated in the reply that meetings of these vigilance
       committees are conducted at least once in a two months. The
       copies of the minutes of these meetings are randomly collected
       in the Commissionerate for scrutiny. It was also stated that
       these proceedings are reviewed at the district level each month.


e.     It was stated that the Food Security committee have been
       constituted in each Gram Panchayat to oversee the overall
       functioning of the public distribution system in the State of
       Karnataka.    It was stated that there is a Food security
       Committee at the District Level comprising of the District In-
       charge Secretary, the Deputy Commissioner of the district and
       the Chief Executive Officer of the Zila Panchayat. It was further
       stated that the said committee sits on every first and third
       Saturday of the month to review all issues relating to the Food
       Security especially the Public Distribution System.


VII.   Search And Seizure


i.     The Essential Commodities Act, 1955 provides that any essential
       commodity and any package, covering or receptacle in which
       the essential commodity is stored and any animal, vehicle,
       vessel or conveyance used for transporting the essential
       commodity may be seized and confiscated under Section 6A
       pursuant to an order passed under Section 3. However, prior to
       confiscating any essential commodity, package or vehicle,
       Section 6B requires that a show cause notice be issued to the
       person from whom it is seized.
ii.    The PDS Order 2001, under Clause 10 (1) empowers the
       authority authorised by State Government, to inspect or
       summon such records or documents as may be considered
       necessary for examination and take extracts or copies of any
       records or documents produced before it. Clause 10(2) lays
       down that if the authority has reasons to believe, on receipt of a
       complaint or otherwise that there has been any contravention of
       the provisions of the Order or with a view to securing
       compliance with the Order, it may enter, inspect or search the
       fair price shop or any premises relevant to transactions of
       business of the fair price shop. Clause 10(3) empowers the said
       authority to search, seize or remove such books of accounts or
       stocks of essential commodities where such authority has reason
       to believe that these have been used or will be used in
       contravention of the provisions of this order. Clause 10(3A) lays
       down that the authority conducting search and seizure under
       sub-clause (3) shall inform the State Government or an officer
       authorised by it in this behalf, about the details of the search
       conducted and the stocks of essential commodities so seized
       under that clause. Clause 10(4) lays down that the provisions of
       Section 100 of the Code of Criminal Procedure 1973, relating to
       search and seizure shall so far as may, apply to search and
       seizure under the Order.

iii.   Clause 19(1) of the Karnataka Essential Commodities (Public
       Distribution System ) Control Order 1992 empowers the Director
       of Food and Civil Supplies, the Joint Directors of the Food and
       Civil Supplies or the Tahilsdar of a Taluk, the authorised
       authority under the control order not below the rank of the Food
       Inspector to do any of the following:
a.     Ask owner, occupier or any other person incharge of a place,
       premises, vehicle or vessel to produce any books or other
      documents showing the transactions of the contravention. {See
      Clause 19(a)}
b.    Enter inspect, or break open and search any place or premises,
      vehicle or vessel in which the office has reason to believe that
      any contravention has taken place or about to take place. {See
      Clause 19(b)}
c.    Take or cause to be taken extracts from or copies of any
      documents showing transactions. {See Clause 19(c)}
d.    Search, seize and remove books, accounts or any other
      documents and stock of essential commodity and the animals
      vehicles, vessels or other conveyance used in carrying the said
      essential commodity in contravention to the provisions of the
      Control Order 1992. {See Clause 19(d)}
iv.   Clause 19(2) of the Karnataka Essential Commodities (Public
      Distribution System ) Control Order 1992 states that the
      provisions of the Code of Criminal procedure, 1973 shall be
      applicable as far as possible on all the acts of search and seizure
      exercised under Clause 19(1) of the Control Order 1992 .



IX.   APPEAL

i.    The Essential Commodities Act, 1955 under Section 6C provides
      that a person who is aggrieved by the confiscation of any
      essential commodity, package or vessel may file an appeal to
      any judicial authority appointed by the State Government
      concerned and the judicial authority shall, after giving an
      opportunity to the appellant to be heard, pass such order as it
      may think fit, confirming, modifying or annulling the order
      appealed against.

ii.   The PDS Order 2001, under Clause 11(1) provides that appeals
      (arising out of the denial of issue/renewal of ration cards, denial
       of issue/renewal of license to run a FPS) may be filed before the
       Appellate Authority appointed under Para 7 of the Annexure to
       the Order. Clause 11(4) provides that the appeal shall not be
       disposed off    without providing the      person aggrieved a
       reasonable opportunity of being heard. Clause 11(5) provides
       that the Appellate Authority may stay the operation of the order
       appealed against pending disposal of the appeal or till such time
       as the person aggrieved is given a hearing as provided under
       Clause 11(4). Para 7 of the Annexure to the Order lays down
       that the State Governments shall appoint an officer of that
       Government not below the rank of Additional District Magistrate
       of a District as “Appellate Authority” for exercising the powers
       conferred upon and discharging the functions assigned under
       the PDS Order, 2001.

iii.   Clause 17 of the Karnataka Essential Commodities (Public
       Distribution System) Control Order 1992 allows any person who
       is aggrieved by the order of the Authorised Authority under the
       Control Order 1992 whereby the authorised authority has
       refused to issue or renew authorisation or has cancelled or
       suspended the license or forfeiture of the security deposit to
       prefer an appeal before the Appellate Authority within a period
       of 30 days. The term “Appellate Authority” has been defined in
       Clause 2(b) of the Control Order 1992 and is any officer
       appointed by the State Government to exercise the powers
       conferred upon the Appellate Authority under the said Control
       Order 1992.


X.     Other Provisions
i.     Clause 20 of the Karnataka Essential Commodities (Public
       Distribution   System)   Control   Order   1992   empowers   the
       Government to suo motto or on any application made by any
       person call and examine the record of any enquiry or
       proceedings of the officer exercising or failing to exercise the
       powers under the Control Order 1992 to suspend or cancel any
       authorisation issued for the purpose of satisfying itself to verify
       the correctness and legality of the orders passed by such officer.


XI.    IMPORTANT         ORDERS      PASSED       BY    THE     HON’BLE
       SUPREME COURT IN W.P. (C) NO. 196/2001.


11.1   The Hon’ble Supreme Court by the order dated 02.05.2003
       directed as follows,

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

ii.    The Government of India was directed to place the under
       mentioned classes of persons in the AAY category,

a.     Aged, infirm, disabled, destitute men and women, pregnant and
       lactating women,
b.     Widows and other single women with no regular support,
c.     Old persons (aged 60 years above) with no regular support and
       no assured means of support,
d.     Households with a disabled adult and no assured means of
       subsistence,
e.     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.
f.     Primitive tribes

11.2   By the order dated 08.05.2002 the Hon’ble Supreme Court has
       directed that Shops will remain open during fixed hours and also
       has   fixed   the   responsibility   of   the   CEO/Collector   for
       implementation of the orders of this Court and further directed
       that the Chief Secretary will ensure compliance of the order of
       this court.



                                *******
                           CHAPTER 3


                  WHOLESALE DISTRIBUTION


I.    This Chapter deals with the process of the whole sale
      distribution of the public distribution system in the state of
      Karnataka and the inference the Committee has drawn from
      its field visits to various godowns in the State. The whole
      sale distribution could be understood by looking at the
      functioning of the various entities that exist in the State of
      Karnataka:
         Food Corporation of India
         Karnataka Food Civil Supplies Corporation (KFCSC)
         Taluk    Agricultural   Produce   Cooperative   Marketing
          Societies (TAPCMS)


II.   Food Corporation of India


2.1   Unlike in Delhi, the role of the Food Corporation of India
      (FCI) is very restricted. Recently the Central Government had
      issued a notification vide its D.O. Letter dated 24-10-07 that
      a system of regular inspection be put up in place not only for
      FCI godowns but also for state government/authorized
      wholesale godowns. In reference to that FCI issued
      instructions to all regional general managers vide Letter
      dated 31-10-07 to conduct inspections of FCI godowns and
      other wholesale godowns.


2.2   However during the visit of the Committee to Gadag district
      in the State of Karnataka the Committee came to know that
      certain godowns supplying PDS grain to the State on behalf
      of the Central Government were being primarily managed by
      the Central Warehousing Corporation.
2.3   During the visits of the Committee to the CWC godown at
      Gadag, it was found that the weight check memo was not
      only handwritten but was also issued by the CWC and not by
      FCI.


2.4   During the visit to the said godown the committee observed
      that the CWC Godown had an electronic weigh bridge. The
      software used by the CWC was the “Industrial Weigh Bridge
      Software”. The system was generating a computerized
      weight check memo, however for the reasons best known to
      them; the weight check memo which accompanied the truck
      was handwritten whereas it was much simpler and more
      authentic to give a printout.


2.5   The Committee was informed by the FCI official that they
      had signed a contract with CWC whereby only at the time of
      delivering the grains to the CWC from the rail head, the FCI
      officials keep a check. The FCI officials further stated that
      during the aforesaid unloading of the food grains, there are
      three FCI officials who are involved in the entire process.
      Two officials are at the rail head to look after the loading of
      the grains into the truck and the third official is present at
      the CWC Godown who confirms the receiving of the grains
      from the rail head to the other two FCI officials present
      there. The FCI officials further stated that in the said process
      the quality check is also maintained and that apart from this
      there are surprise inspections conducted by the FCI to check
      the functioning of the Godown. It is further relevant to state
      that when the CWC issues food grains to the wholesale
       godowns no FCI official remains present and no samples are
       given.




III.   Karnataka Food Civil Supplies Corporation


3.1    As stated in the Legal regime Chapter, as per the Karnataka
       Essential Commodities (Public Distribution System) Control
       Order 1992 the order of priority for granting authorisation of
       wholesale dealership is as under:-


a)     Karnataka Food Civil Supply Corporation

b)     Cooperatives registered under the Karnataka Cooperative
       Societies Act and have been in existence for at least an year.

3.2    As   stated   above   the   Karnataka   Food   Civil   Supplies
       Corporation is a Government of Karnataka undertaking with
       the primary objective of procurement, lifting and distributing
       food grains under the Public Distribution System and also
       implementing      other     government      schemes.        The
       Administrative setup of the Corporation is given below :-
3.3    The KFCSC transacts 65 percent of the business of lifting food
grains from the Food Corporation of India, the rest is being shared by
TAPCMS. The             KFCSC is also the main agency for lifting food
grains under the special      programmes like food for work, SGRY and
mid day meals scheme for school children.


3.4     The KFCSC plays its role as a market stabilizer by purchasing
paddy and       other coarse grains from the growers under the Minimum
Support Price           Operation (MSP), to provide Common Man’s need
at affordable prices.



IV.       Taluk Agricultural Produce Cooperative Marketing
          Societies (TAPCMS):


4.1       At the state level the Karnataka state cooperative marketing
          federation is functioning as the Apex Institution and Taluk
          Agricultural     Produce   Co-operative    Marketing     Societies
          (TAPCMS) at the Taluk levels are functioning as primaries. All
          the Taluks in the states are covered by these primary
          marketing        cooperatives.   The      TAPCMS       undertakes
           procurement of food grains on behalf of the Government and
           the Karnataka food and civil supplies corporation by opening
           purchase points at the village level. They are also entrusted
           with the vital activity of rural distribution.


4.2        The Constitution of the Elective Board of the TAPCMS is as
follows:


              i.      Deputy Commissioner from the Cooperative Bank
                      or its representative.
             ii.      MD from a financial institution.
             iii.     2 persons from the Primary Cooperative
             iv.      5 persons from the General cooperative
             v.       2 from Women cooperative.
             vi.      1 from the Taluk Level Marketing cooperative



V.         WHOLE SALE DISTRIBUTION MANAGED BY BOTH
           KFCSC AND TAPCMS


5.1        The whole sale godowns are managed by the above two
           entities. There are 267 godowns which are known as
           wholesale godowns in the entire state of Karnataka. Out of
           the aforesaid godowns, 165 wholesale godowns under the
           KFCSC, whereas there 102 wholesale godowns under the
           control of the TAPCMS. (ratio 60 :40)


5.2        During the meetings with officials the Committee was
           informed that the state godowns or the whole sale godowns
           are controlled by both the governmental and quasi
           governmental organizations. Since TAPCMS is a cooperative
           society with elected members, it was found that the entire
           operation was controlled by its Board, who are elected from
      the members of the co-operative and there is little or no
      governmental control over its functioning. The day to day
      management is done by a paid secretary under the control of
      the Board and the TAPCMS therefore has a free run in the
      management of the godown and therefore also for diversion.


5.3   The officials during the visit of the Committee could not
      answer the query raised as to whether the State of
      Karnataka was in a position to run all the state godowns on
      its own. However it was stated by the Food Secretary that
      the Cooperatives i.e. TAPCMS was functioning properly and
      that there is a strong cooperative movement in the State of
      Karnataka. Independent inquiries by the committee however
      revealed that all is not well with such co-operatives as
      evident from the cases and instances which are discussed
      below.


5.4   During the meeting with the officials of the KFCSC and the
      Cooperatives i.e. TAPCMS, the Committee was informed that
      the food grains are weighed at the Food Corporation of India
      (FCI) before they are loaded in the trucks while being
      transported to the whole sale godowns. However the
      quantity is checked at the whole sale godowns only by
      counting the number of bags and not by weighing the same.
      The FCI while issuing the food grains to the state issues a
      weight check memo on which the weight of the food grains
      along with the number of bags is also mentioned. The
      committee was further informed that there are no electronic
      weigh bridges in most of the wholesale godowns and that
      the officials take the truck to a private weighbridge in case of
      any doubt. The Food Commissioner further stated that there
        is one official of the Food Department to check the quality of
        the food grains at the time of loading at the FCI godown.


5.5     The Committee was further informed that the at all the
        whole sale godowns the food grains are properly weighed
        and checked when the food grains are loaded for the fair
        price   shop.    The   Commissioner     further   informed    the
        Committee that under the rules and regulations the Food
        Inspector of the department has to travel with the truck till
        the food grains are to be delivered at the fair price shop. The
        Commissioner Food in a meeting however fairly stated that
        the above system of vigilance was impractical and incapable
        of implementation.


5.6     The Committee visited many whole sale godowns which
        were maintained by both KFCSC and the TAPCMS. The
        details of the wholesale godowns are as follows:


5.6.1   Wholesale Godown maintained by the Karnataka Food Civil
        Supplies Corporation in Mysore District
5.6.2   Wholesale Godown maintained by the Mysore District Central
        Consumer        Cooperative   Store    (PDCCW        Stores   New
        Sandheepet Mysore 570021
5.6.3   Wholesale       Godown    maintained      by   the     DPPPVSSN
        Cooperative Society- Hubli, Haveri District
5.6.4   Wholesale       Godown    maintained      by   the     DPPPVSSN
        Cooperative Society: Sadha ShivPeth Narainpur Village
5.6.5   Wholesale Godown maintained by TAPCMS: Gadag Village


VI.     FINDINGS OF THE COMMITTEE DURING THE VISITS:
6       The following are some of the findings/observations of the
        Committee during the visits to the aforesaid wholesale
        godowns:


6.1.1   There was no electronic weigh bridge: It was observed that
        although the wholesale godowns in the most of the places
        were spread on a huge area, yet the weigh bridges were not
        installed either by the KFCSC or by the Cooperatives in their
        respective godowns. The Committee was explained in almost
        all the wholesale godowns that when the food grains are
        brought from the FCI godowns, the officials in the wholesale
        godowns only check the quantity of the bags by counting the
        number of bags and comparing the same with the number
        mentioned behind the Weight Check Memo issued by the
        Food Corporation of India.


6.1.2   No adequate Check of weight for the grains brought from
        the FCI godown: Since the godown does not have weigh
        bridge therefore there is no mechanism excepting for
        counting of bags to determine as to whether the correct
        quantity of the food grains have been delivered at the
        godown or not. The committee was informed that it was only
        when the officials have any doubt, then the truck would be
        carried to a private weigh bridge to get the weighment done.
        The Committee was however informed that the Corporation
        Officials are deputed at the FCI Godown, who supervise the
        loading of the food grains into the trucks. Therefore there is
        no guarantee of the weighment of food grains and also exact
        quantity of the food grains cannot be determined easily.


6.1.3   To cite an example to support the above findings, the
        Committee visited a whole sale godown in Mysore, where the
        godown was divided into two large buildings.                The
        Committee observed that one building was completely filled
        with the food grains and the other had few bags. However
        the most interesting finding was that the building which had
        the maximum grains had a manual weighing scale and no
        electronic weighing machine. In fact the building which had
        few bags had an electronic weighing machine.


6.1.4   Another important aspect that the Committee observed was
        that the weight Check Memo which was issued by the FCI to
        the wholesale godowns was handwritten.


6.1.5   The Committee upon enquiry was informed by the officials of
        the godown that they were not getting any samples from the
        FCI at the time of collecting the food grains under the PDS
        system. The FCI official present with the Committee stated
        that the FCI was issuing samples to the wholesale dealers.
        However the godown officials despite repeated request could
        not produce any sample.




        Computerisation at the Wholesale Godown

6.2     The Committee was informed during its visit that that the
        godowns    in   the   Mysore   District   maintained   by   the
        Corporation were being computerised. It was informed that
        under the current database in the godown the data was
        being uploaded at the distribution point itself and the same
        was uploaded a day after on the internet for the higher
        officials to access the same. Since the internet connectivity
        was slow, there was some delay in uploading the data. The
        Committee was informed that in other godowns due to the
        availability of the internet connection the data is reflected or
        uploaded on the internet the moment the entry is made
        which is done at the time of the transaction itself.


6.2.1   The database is a simple programming concept in which
        eight types of data is entered and the operator could take
        out different types of report based on the data entered.
        Some of the types report that could be generated are
        indicated below:


6.2.2   Commodity Wise Report: This report would have all the
        commodities in which the corporation is dealing or in other
        words is distributing under the different schemes. The report
        would indicate the complete details of the transaction of a
        particular commodity under a particular scheme for the days
        the information is sought for.
        i.     Stock Transfer Out:
        ii.    Stock Issue In:
        iii.   Stock Invoice to the Fair Price Shop
        iv.    Allotment Details
        v.     Costing Sheet


6.2.3   The Committee further observed that when the godown
        issues the food grains to the fair price shops, an electronic
        generated receipt is issued in which the following details are
        issued:
        i.     Name and Code of the Fair Price Shop
        ii.    Quantity issued to the Fair Price Shop: The data is
               entered manually and not by any automated system
        iii.   Date of Issue
        iv.    Monetary transaction details
        v.     Balance if any
6.2.4 The Committee was informed that the department was working
      on other kinds of report like FPS wise stock issued details etc.


6.2.5 Although automation of the godown is a positive step, it really
      does not help ensure transparency as there is no method of
      ensuring that the exact quantity of grain leaves the FCI and
      reaches the said wholesale godown.



6.3   The following instances are in respect of the action taken
      against some of the wholesale godowns of the TAPCMS:


6.3.1 Wholesale Godown at K.R.Nagar Taluk, Mysore District: In this
      case the Deputy Director, Food visited the wholesale godown
      managed by the TAPCMS Godown, K.R.Nagar on 2-8-2007.
      During the course of inspection he found that TAPCMS has lifted
      4696.04 quintals of rice for the FPS’s and therefore should have
      a stock of 1597.02 quintals. However on physical verification of
      the stock it was found that it was 1143.95 quintals of rice,
      thereby there was shortage of 453.07 quintals of rice. Similarly,
      instead of 365.98 quintals of wheat, there was stock of 378.54
      quintals of wheat, thereby there was an excess stock of 12.51
      quintals of wheat. It is further relevant to note that Deputy
      Commissioner in his inspection also found that the accounts
      were not properly maintained and prima facie found that the
      TAPCMS had misused the food grains meant for PDS and
      violated the provisions of the Karnataka Essential Commodities
      (PDS) Control Order, 1992. The Deputy Commissioner by his
      order dated 3.8.2007 suspended the authorization granted to
      the TAPCMS, pending enquiry.         However the same Deputy
      Commissioner on a representation of the TAPCMS by an order
      dated 19.2.2008 revoked the suspension order passed by him
      on 3.8.2007 by merely giving a warning to the TAPCMS
      concerned. The order is also bereft of any reasoning.


6.3.2 Although the Committee has been repeatedly emphasising the
      need for “Zero tolerance”, the instance of the K.R. Nagar
      (TAPCMS) shows the fact that the authorities are allowing the
      TAPCMS to get away with very minor censures even after large
      scale detection of diversion. It is relevant to point out that the
      Deputy Commissioner, Mysore District originally passed an order
      of suspension based on the clear finding of the Deputy
      Commissioner Food that there was a diversion of PDS
      commodities. In spite of this and without giving any detailed
      reasons the Deputy Commissioner revokes the order by merely
      giving a warning.


6.3.3 Wholesale Godown of TAPMCS Magadi, Ramanagara District. In
      the instant case the Tehsildar on 1.10.2008 inspected the
      TAPCMS food-grain wholesale point of Magadi and submitted a
      report, whereby he stated that the TAPCMS had stored food-
      grains in the additional godown without the permission of the
      authorized authority.    The report further stated that 1200
      quintals of EBPL Rice was not lifted from the FCI and that 58
      quintals of Rice and 40 quintals of Wheat was found short
      during the physical verification. The Deputy Commissioner,
      Ramanagara District by order suspended the authorization
      issued in favour of TAPCMS, Magadi, pending enquiry and
      issued a show-cause notice on 5.11.2008. The TAPCMS through
      its secretary filed its reply 13.11.2008. TAPCMS, Magadi filed an
      appeal before the Commissioner, Food & Civil Supplies, the
      appellant authority, on 8.12.2008. The Tahsildar, Magadi
      submitted inspection report and on the basis of the said findings
      the appellate authority on 15.11.2008 directed the authorities to
      seize the food-grains stored in TAPCMS godown with the help of
      Police and to transfer the entire stock to the custody of KFCSC.
      The irregularities which were noticed are as follows:


              PDS items are stored in an unauthorized place.
              Daily Sales cum stock register and stock books were
               not submitted.
              Stock board and details of stock of food-grains were
               not displayed.
              Tahsildar vide his report dated 7.11.2008 asked the
               Police Inspector to book a Criminal case against the
               TAPCMS, Magadi under Section 3 & 7 of E.C.Act 1955.


6.3.4 Unlike in the K.R. Nagar case in the present matter the
      authorities did not revoke the suspension and the appellate
      authority confirmed the same and directed that the goods be
      seized from the TAPCMS. This incident clearly confirmed the
      suspicion of the Committee about the involvement of the
      TAPCMS in diversion of food grains.


6.3.5 Wholesale Godown managed by TAPCMS at Kanakapura Taluk,
      Ramanagara District: In the present case a report dated
      23.9.2008 was submitted whereby 28.56 quintals of rice and
      49.61 quintals of wheat was found in excess in the physical
      verification. The authorization granted to the TAPCMS was kept
      under suspension pending enquiry by order dated 28.10.2008.
      On 11.11.2008 the TAPCMS through its secretary submitted
      written explanation. The authorities on 23.12.2008 cancelled the
      authorization granted in favour of TAPCMS, Kanakapura.


6.3.6 The above case reconfirmed the Committee’s view as stated in
      case of Magadi.
SUGGESTIONS/INFERENCES


6.4   TAPCMS should not manage Wholesale Godowns:                 The
      Committee recommends that at the intermediary wholesale
      point, the TAPCMS should not be entrusted with the task of the
      storing of the food grains i.e. management of wholesale
      godowns. However, this is not to suggest that co-operatives
      should not be involved in retail distribution as in this area it
      appeared that co-operatives were performing useful task.
6.5   Installing of Weigh Bridges in the Wholesale Godown: The
      Committee recommends that every wholesale godown should
      have electronic weighing system linked to the suggested
      automated system. This will result in greater transparency and
      further ensure that the exact quantities of food grain reaches
      the ultimate beneficiary and all the food grains which come from
      the FCI godowns are duly checked before unloading to verify
      that the exact quantity has been delivered.
6.6   Electronic Weight Check Memo to be issued by FCI: The
      Committee recommends that all the FCI godowns feeding the
      wholesale godowns in the State of Karnataka should issue
      electronically/ printed weight check memo along with the truck
      which is carrying the food grains for the State wholesale
      godowns. The Committee during the visits observed that all the
      weight check memos which were issued by the FCI in respect of
      the food grains sent to the wholesale godowns were manually
      written. It is further relevant to point out that in most of the
      cases the entries in the weight check memo were not clear and
      that it was difficult to find out as to how many bags of food
      grains came from the FCI and their respective weights. The
      Committee visited the CWC godown storing goods on the behalf
      of FCI during its visit and found that although there was
      electronic weighbridge at the godown but for the reasons best
      known to them (FCI/CWC officials) hand written weight check
      memo was issued to the State wholesale godowns.
6.7   Adoption of Zero Tolerance while taking action against the
      Defaulters: The Committee in the present chapter has given
      instances and reproduced some of the orders which were given
      by the district administration against the defaulters. However it
      has been observed that even after recording a clear finding of
      diversion of food grains the district administration has spared
      the defaulter by merely issuing them a warning. This Committee
      has repeatedly emphasised that the need for “Zero Tolerance”
      for all the defaulters and the same should be followed without
      exception.



                              *******
                           CHAPTER 4
                       Retail Distribution


I.    In the following Chapter the Committee would study the
      following aspects in respect of the fair price shops.
      i) Mode of appointment of fair price shops
      ii) Viability of fair price shops
      iii) Functioning of fair price shops


II.   Mode of appointment of fair price shops


2.1   Under Clause 3 of the Karnataka Essential Commodities
      (Public Distribution System) Control Order 1992,           the
      “Authorized Authority” under the Control Order, 1992 has the
      power to issue authorization to any person to be an
      authorized dealer or to run a fair price shop in specified
      areas.


2.2   As per Clause 4(1) of the Karnataka Essential Commodities
      (Public Distribution System) Control Order 1992, the
      authorized authority shall call for applications by publication
      of notice after giving a minimum period of thirty days and
      publishing the same on the notice board of the respective
      office. Clause 4 (2) of the same control order further
      provides that any such application which is being made
      under clause 4(1) would be made in the format given and
      prescribed in “Form A” attached to the Control Order, 1992.


2.3   As per Clause 5 of the Karnataka Essential Commodities
      (Public Distribution System) Control Order 1992 any person
      or institution can get an authorization under Clause 3 of the
      same control order upon satisfying the following conditions:
2.3.1        He should not have been convicted for an offence under the
             Essential Commodities Act, 1955. : See (Clause 5(a) of the
             Karnataka Essential Commodities (Public Distribution System
             ) Control Order 1992)


2.3.2        He should not have an existing wholesale dealers or retail
             dealers license under the Essential Commodities Act, 1955:
             See (Clause 5(a) of the Karnataka Essential Commodities
             (Public Distribution System ) Control Order 1992)


2.3.3        In case an authorization has been given to him before for
             running a fair price shop then the same should not have
             been cancelled. See (Clause 5(a) of the Karnataka Essential
             Commodities (Public Distribution System ) Control Order
             1992)


2.3.4        He should be in possession of suitable business premises:
             See (Clause 5(b) of the Karnataka Essential Commodities
             (Public Distribution System) Control Order 1992)


2.3.5        He should have sufficient funds in the bank account to
             purchase one month’s stock requirement: See (Clause 5(c)
             of the Karnataka Essential Commodities (Public Distribution
             System ) Control Order 1992)


2.4          Clause 6(b) of the Karnataka Essential Commodities (Public
             Distribution System) Control Order 1992 provides the order
             of priority for granting authorization of running a fair price
             shop under Clause 3 of the same control order.

        a)      Karnataka Food and Civil Supplies Corporation
        b)      Consumer Cooperative Societies
        c)      Other Cooperative Societies
        d)      A Society or Association not being a youth club or youth
                  association, registered under the Karnataka Societies
                  Registration
                  Act, 1960
        e)        If the eligible candidates in the above priority are not
                  available then the authorised authority is open to give
                  authorisation to run the fair price shop to an individual
                  who is above 18 years and passed 7th standard in the
                  following priority:
        i.        Persons belonging to Schedule Castes
        ii.       Persons belonging to Schedule Tribes
        iii.      Unemployed Graduates
        iv.       Physically Handicapped Persons
        v.        Ex-Servicemen
        vii.      Others


 2.5           The State of Karnataka while giving their written reply to the
               questionnaire sent by the Committee (See Reply No. 5 of
               Part C) stated that recommendations are made by the
               elected representatives for fair price shops, however they are
               not taken into account during the allotment. This reply
               however appears strange in view of the various instances
               which came to the notice of the Committee.


2.5 (A)        It is submitted that while studying the files selected
               randomly in the office of the District Collector, Mysore the
               following was observed.


2.5.1          That every applicant is recommended either by a MP or a
               MLA of that area.
2.5.2   It is further relevant to point that the District Collector does
        not record any reason while passing the allotment order in
        favour of a particular candidate.


2.5.3   There have been instances where a candidate from a
        category which is high on the priority list is ignored and a
        candidate from general quota is given the FPS license,
        however the Deputy Director Mysore stated that such
        appointments are made keeping in mind the percentage of
        that community in the area, since a person belonging to a
        minority community or of the SC/ST community may not be
        allowed to run a fair price shop as nobody would visit such a
        shop.


2.5.4   It is further relevant to note that there is neither any rule nor
        any requirement for a candidate to get a letter of
        recommendation from either an MP or MLA. However it is an
        accepted practice that recommendation of some political
        figure is prerequisite for applying a licence.


2.5.5   The Deputy Director Mysore stated that a candidate whose
        application for the allotment is rejected can file an appeal
        before the Appellate Authority i.e. Commissioner challenging
        the order of allotment.


2.6     The Committee studied many allotment files and the details
        of the same are given under :


2.6.1   The allotment file of Shri Channbasappa of Village Chowki,
        Mysore District was inspected by the Committee which
        smacked of political interference and nepotism. The facts of
        this case are indicated below :
        1.   Advertisement for issuance of License for running Fair Price
             shop made in the local newspaper.
        2.   Various     applications    came    to      be    filed   after    the
             advertisement.
        3.   Shri Chanbasappa is one of the applicants recommended by
             Local MLA of the area named Mr. Mahesh.
        4.   There is one other applicant Smt Naggamma who got
             recommendation letter from Ms Shoba, Minister Incharge of
             District.
        5.   Shri   Chanbasappa         was   selected    on     the    basis    of
             recommendation from local MLA.


2.6.2        In the case of FPS allotment file of Smt. Jayshiela of Village
             Konsur, Mysore district also it was seen that she got the
             license because of political influence. In her case she had
             recommendations of two MLA’s one of whom was a former
             Deputy Chief Minister of the State.


2.6.3        In the case of yet another person Shri S.B. Halabhavi, he
             submitted his application for allotment of FPS license along
             with recommendation letter of Shri Basavraj Harathi, MLC.
             This OBC candidate was preferred to SC candidate who was
             also an applicant


 SUGGESTIONS/INFERENCES


 2.7         The Committee strongly recommends that there should not
             be any political interference in the appointment of the fair
             price shop dealers. The Committee during its visits and study
             of the files pertaining to allotment observed that although
             the Karnataka Essential Commodities (Public Distribution
      System) Control Order 1992 did not require a MP or MLA to
      give recommendations but as a matter of fact that all the
      candidates for the license get political recommendations. The
      State of Karnataka in its reply to the questionnaire sent by
      the Committee have admitted that they do receive political
      recommendations but the same are not considered, but the
      reality on the ground level is entirely different.


2.8   One of the aspects that the Committee observed during the
      study of the allotment files is that the District Collector does
      not record any reasons while appointing or issuing license of
      a fair price shop to a particular candidate. There were many
      cases where all the candidates had similar qualifications and
      eligibility but the Collector selected one of the candidates
      without recording any reason. The Committee would
      therefore recommend that the District Administration i.e. the
      authorizing authority should record reasons for appointing or
      rejecting   a    candidate.    The      reason    for   the    said
      recommendation is that the reasoned order would not only
      bring   transparency     but   also     will   ensure   that   the
      administration would not be able to allot the fair price shop
      at the instance of political element.


2.9   There have been instances where a candidate from a
      category which is high on the priority list is ignored and a
      candidate from general quota is given the FPS license.
      However the Deputy Director Food stated that such
      appointments are made keeping in mind the percentage of
      that community in the area, since a person belonging to a
      minority community or of a SC/ST community may not be
      allowed to run a fair price shop as nobody would visit such a
      shop. The Committee suggests that such reasons for
          allotting fair price shop are not at all tenable and should not
          be followed at all.




III.   Functioning of the Fair Price Shops


3.1    One of the fair price shop owner stated that although he was
       allowed under rules to sell the non-PDS commodities, he could
       not do so, since the consumers are only interested to buy the
       Non-PDS items provided the same is sold under the controlled
       rate.     On the other hand one fair price shop informed the
       committee that he was not aware of the fact that he was
       allowed to sell Non-PDS commodities under the government
       orders.
3.2    During the visit to fair price shop managed by the DPPPVSSN
       Cooperative Society, in Haveri District, the Committee found
       that the society comprised of around 500 members, 9 directors
       and one chairman. It is relevant to note that the Committee was
       informed that most of the members were politically affiliated. It
       is submitted that the Chairman of the Society is affiliated to a
       political party as well.
3.3    In the aforesaid fair price shop it is further relevant to mention
       that when the committee enquired as to whether the local area
       food inspector visited the fair price shop, it was informed to the
       committee that the Tahsildar was regularly visiting the fair price
       shop (once in a month) and the committee saw the signatures
       of the said official in the books.
3.4    It is relevant to mention that the aforesaid fair price shops was
       wholesale godown cum fair price shop and was earning a gross
       profit of Rs. 6000/- to Rs. 7000/- per month. As a wholesale
       godown it was feeding 5 fair price shops. The Committee after
       the enquiry and inspecting the records found that the
      cooperative was running the fair price shop and the wholesale
      godown well.
3.5   The Committee visited the society’s office which was located in
      the centre of the village surrounded by the beneficiaries. When
      the committee interviewed three of the women, they told the
      committee that whenever ration was available in the shop,
      information regarding the same was made available at the office
      as well, which was close to their houses. The committee was
      further informed that by and large all they were receiving their
      ration. It is however interesting to note on being questioned
      they were able to give the exact entitlements and the amounts
      they were paying for the same.
3.6   The committee visited Binakatti village in order to assess the
      impact of the PDS on such a rural area. The PDS Shop at the
      village was closed in spite of the fact that the committee visited
      the shop around 6.30 PM when the timing according to the
      notification is 8 to 12 in the morning and 4 to 7.30 in the
      evening. The Committee however made inquires from different
      villagers about the distribution of PDS grain. The Villagers were
      of the opinion that they were getting PDS commodities on time.
      However some villagers stated that the PDS goods were short
      supplied.   The   Commissioner     Food,    Mr.   Shivram    who
      accompanied the Committee organized an impromptu public
      hearing in the village where the villagers said that they had
      never heard of a vigilance committee but by and large getting
      their PDS Commodities. There were however complaints of
      lesser quantities and overcharging by the PDS Shop. The PDS
      shop owner also emerged in this meeting along with a group of
      supporters who described themselves as vigilance committee
      members. On being questioned, the Vigilance Committee
      members said that they hold meetings every 2 months but there
      is nothing to discuss as there are no problems in the PDS
      system of the Village. There were some issues of lesser
      quantities being supplied and overcharging but no complaint of
      the grain not reaching the beneficiaries.
3.7   The Committee visited a fair price shop owned and managed by
      the KFCSC in the University Area in Dharwad. The shop has 350
      APL cards, 161 BPL cards and 5 AAY cards. The following are
      the findings which would reveal that even a fair price shop
      managed by KFCSC is not functioning properly.


         i.     There was no notice board outside the fair price shop
                which had the following details:
                   Card position
                   Timings
                   Details of the complaint mechanism/appeal
                   Stock position (however there was one board
                    which was kept inside the shop which had the
                    stock position)


         ii.    The shop’s day-day affairs were being managed by
                Junior Assistant who has been in the locality for 4-5
                years handling different KFCSC shops but has never
                been transferred outside the area.


         iii.   The Shop was opened on a Tuesday which is a weekly
                off, and from the cleanliness maintained in the shop it
                was clear that the same was done since they had the
                information in respect of the committee’s visit.


         iv.    The Shop had the stock register which was signed by
                the Food Inspector. The shop also had sale register
                and sale receipt book. The Food Commissioner who
      was accompanying the committee showed the various
      signatures which were purportedly of BPL card holders
      but as pointed out by the Food Commissioner himself,
      the style of the signatures in the receipt book clearly
      indicated that the same were done by a confident
      literate man who cannot be BPL or an AAY cardholder.
      It was after this observation the committee visited the
      low income group serviced by the shop to find out as
      to whether the ration card holders were getting the
      ration.


v.    The committee identified one BPL card (Number 920)
      from the sale receipt and asked the Junior Assistant to
      show the details from the master ration card register.
      The Assistant informed that he did not have a proper
      ration card register since the same was taken by the
      department for the issuance of new biometric ration
      card.     However,   the   Deputy   Director   who   was
      accompanying the committee informed that the fair
      price shops were provided with the list having the
      details of the ration card holders. It is submitted that
      after intense cross examination by the committee the
      Assistant incharge of the fair price shop who initially
      refused to have a ration card register produced the
      list of the details of the ration card holders which was
      given by the department.


vi.   The Committee was informed that a fair price shop
      which is managed by the KFCSC normally gets its
      monthly allocation from the wholesale godowns which
      were also managed by the corporation, however in
      the areas where the corporation godown is not there,
                 the fair price shop is fed by the TAPCMS godown/ the
                 cooperative godown.


         vii.    There were no sealed samples with the fair price shop
                 and he stated that he was not receiving any sample
                 from the wholesale godown as well. On studying the
                 inspection book the committee observed that no
                 inspection was conducted either by the food inspector
                 or by an superior official since 2006.


         viii.   The proceedings of the vigilance committee conducted
                 at the fair price shop level showed that in all the
                 meeting the general observation was that there was
                 no fault in the functioning of the fair price shop.
                 Although there was a complaint box in the fair price
                 shop, the same was hanged inside the premises at a
                 height where no one could reach. It also seemed that
                 the said box was never opened at all.


3.8   The inference which the committee can draw from the above is
      that the fair price shops managed by the KFCSC are worse than
      the ones owned by multi service cooperatives.          That the
      contention of the Principal Secretary that the KFCSC fair price
      shops are managed very well does not have any substance in
      the light of the above observation. It is further submitted that
      the main reason for the mismanagement of KFCSC fair price
      shops is that the same is run by the government employees who
      have no fear of action at all and have vested interest as they
      continue for several years in the same shop and local area.
3.9   The Committee visited two low income areas in the city of
      Dharwad -Nehru Nagar and Ganesh Nagar, interacted with
      beneficiaries and also visited the fair price shops with whom the
       residents of the said areas were attached. It is relevant to point
       out that some of the cards of Ganesh Nagar were attached with
       the fair price shop in University Area.


3.10   Some of the common findings in both areas are:


              a. One of the residents in Ganesh Nagar whom the
                 committee met      was not only aware of rights and
                 entitlements but also stated that she was getting her
                 allocated ration every month from the ration shop and
                 that she was satisfied with the functioning of the
                 ration shop.


              b. Another resident of the Ganesh Nagar stated that
                 although she was getting her ration but she was not
                 given any sale receipt. She further stated that she
                 was getting 15 Kg of Rice against the actual allocation
                 of 20 Kgs, however in the ration card 20 Kgs was
                 written by the fair price shop. She further said that
                 whenever she enquires from the fair price shop
                 regarding the less ration, the shop owner replies that
                 he is also getting less allocation from the wholesale
                 godown.


              c. The Committee found some residents in Nehru Nagar
                 who stated that they were getting their ration on time
                 and they had no complaint against the fair price shop.
                 The FPS servicing this area was run by one Shri B.S
                 Kusagal.


              d. The Committee visited the above mentioned fair price
                 shop, however the shop was closed since, Tuesday
   (i.e. the day the committee visited) is the weekly off
   for all the fair price shops in the State of Karnataka.
   However the committee observed that the fair price
   shop had a notice board displayed outside the shop
   premises with all the relevant information like stock
   position, appellate authority, timings etc. except for
   the card position. This was a positive development as
   the committee was not scheduled to visit the shop.
   This was in total contrast to the visit to the KFCSC
   shop which did not conform to any of the statutory
   requirements.


e. The Committee found that those who did have cards
   under the PDS were infact getting their grain with the
   exception of those serviced by the KFCSC run shop.
   However what was apparent on the visit of the
   committee to the low income areas mentioned above
   was level of inclusion and exclusion errors inasmuch
   as the poorest family in the locality did not have any
   card and on being asked the reply was that it was too
   cumbersome to get one.


f. The Committee also found that the multi service Co-
   operative shops were functioning well in the rural
   areas. However the general opinion gathered in
   respect of WSHG (Women Self Help Groups) was that
   they were highly politicized.
                            Chapter 5
                   Viability of Fair Price Shops


1.   Para 3(1) of the Annexure to the PDS Control Order, 2001 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 –time.
2.   The state government adds its administrative charges on the
     central issue price and then allocates these food grains to the
     fair price shop at the prescribed rates. The fair price shop then
     sells the food grains at the rate prescribed by the State
     government. The table below 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 is expected to sell the food grains to the
     consumers.


3.   The following are the points that have to be considered while
     analyzing the table given below:
        a. In respect of AAY category the State Subsidy is the sum
           total of the Wholesale Sale Margin and Retail Margin
           (Row 2 + Row 5)
        b. In respect of BPL and EBPL category the State Subsidy is
           the sum total of the Wholesale Sale Margin and Retail
           Margin and the difference between the Central Issue
           Price and the Retail Issue Price {Row 2 + Row 5+ (Row 1
           – Row 6)}
        c. The Extra BPL (EBPL) is the category which as per the
           norms laid by the Central Government is APL, however
           they have been identified as EBPL and are getting the
           same benefits.
                                       AAY                  BPL                 EBPL
Sl. No   PARTICULARS ( Rs
           per quintal )       RICE        WHEAT     RICE    WHEAT       RICE     WHEAT
         CENTRAL ISSUE
    1    PRICE                     300        200     565         415     830          610

    2    STATE SUBSIDY           48.00       38.00    314         158     579          353
         WHOLESALE
    3    MARGIN                       19       15      20          20      20           20

         WHOLESALE ISSUE
    4    PRICE                  271.00        177     271         277     271          277

    5    RETAIL MARGIN           29.00         23      29          23      29           23

         RETAIL ISSUE
    6    PRICE per Qtl             300        200     300         300     300          300

         RETAIL ISSUE
    7    PRICE per Kg             3.00        2.00   3.00         3.00   3.00          3.00


         4.    The State of Karnataka has 20,372 fair price shops. On an
               average, each fair price shop has around 352 BPL and AAY
               cards in the ratio of 85:15 respectively, accordingly they need
               to lift an average of 93.86 Qtl of food grains per month and
               need to invest an average of Rs.272.45 per Qtl for their
               business. By taking all the above factors under consideration
               the fair price shop owners association has been requesting for
               enhancement of their commission for the past 8 years.
               Considering their request, the Department has recommended
               that a viability evaluation study be done through the
               Karnataka Food & Civil Supplies Corporation and a report in
               this regard is expected shortly. Pending the evaluation study,
               the rates were increased in August 2008.
         5.    The Fair price shop owners during the visit of the Committee
               made several representations indicating that the increase in
     commission first of all was very minimal and it had not
     increased there viability for two reasons :-
     (a) Firstly because of the introduction of unit system
     (b) Secondly owing to the disproportionate allocation of cards.


6.   The Committee on its visit however found that multi service co-
     operatives in the rural areas were doing well both in terms of
     viability as well as in terms of level of service being provided to
     the beneficiaries. The best example is of the village shop run by
     DPPPVSSN Cooperative Society, in Haveri District. The following
     are card position of the fair price shop:
            a. APL : Nil
            b. BPL: 561
            c. AAY: 101

     The Committee was informed that the gross profit of the shop
     is Rs. 6000/- to 7000/- and after payment of all the expenses
     including the salaries, the net profit they earned was Rs. 1000
     per month. This cooperative was not a stand alone fair price
     shop but was also dealing with the distribution and sale of
     seeds, fertilizers and agricultural credit. This therefore
     reinforces the view of the committee that the concept of stand
     alone fair price shop is inherently unviable and that to make it
     viable, it has to be multipurpose unit dealing with different
     commodities and services.
7.   During a visit to one of the fair price shop (Muslim Cooperative
     Society) in Mysore the committee was informed that the total
     number of cards were :-
     APL (Gas)             69
     APL (Non Gas)         104
     BPL (Gas)             53
     BPL (Non Gas)         152
     He also informed the Committee that the monthly income was
     about Rs. 1000/- out of which he was paying approximately
     Rs. 150/- towards the rent and electrical charges of the shop.
     The reason for such a low rent was that the shop premise was
     owned by a relative of the owner of the fair price shop. He
     further stated that he was paying approximately Rs. 550/-
     towards the transportation cost. The FPS owner further stated
     that he sells the empty gunny bags at the rate of Rs. 8/-per
     bag provided the same was in a good condition. The owner of
     the fair price shop suggested that the commission of the FPS
     should be increased by Rs. 5 per quintal from the existing rate
     of commission and the same after increase would be Rs. 34
     per quintal.
8.   A Fair price shop number 3802 run by a private individual in
     the Shukravar pet area of Hubli was an interesting example as
     the shop which had 370 BPL and 28 AAY was also selling
     kirana items, packed Atta and Ice creams among others. The
     shop keeper said that his enterprise was viable and this
     reinforced the findings of the Committee in other States that a
     multi service/Commodity operation in contra distinction with a
     stand alone shop was a viable proposition.     It was observed
     that the shop keeper run Rs 2000 from FPS and Rs 4000-5000
     from his kirana business.


9.   In meeting with the Committee the Food Commissioner as well
     as the Food Secretary agreed that the current/existing norm of
     the minimum ration cards per fair price shop was not sufficient
     for a fair price shop to get a viable income. They further
     informed that the fair price shops are allowed to sell other non
     PDS commodities to generate additional income. However, the
     Food Secretary stated that before considering to increase the
         minimum number of ration cards, it has to be seen that the
         PDS operation was for the consumer and not for the shop
         owner. Thus if the cards are clubbed together to increase the
         viability of one particular fair price shop then the consumer
         might have to travel a lot to get his ration.


10.      The Committee again reinforced its finding in other States that
         a stand alone fair price shop is an inherently unviable
         proposition. The mere increase of commission is not going to
         change the situation. The Committee, however found that
         multi service co-operative, running FPS in Karnataka, were
         infact doing a good job and were also viable.



B.       SUGGESTIONS/INFERENCES


1. Any suggestion to improve the viability of the of the fair price shop
      or increase in the commission rates has to take into account two
      factors namely, it should not place additional burden either on the
      Government requiring it to increase the subsidy or on the
      cardholders requiring them to pay higher prices.


2. The suggestions and recommendations given by the Committee in
      the report on the State of Orissa in respect of the viability of a fair
      price shop may be read as part and parcel of the present report.


3. Under the present norms the minimum card requirement is that a
      fair price shop in rural areas should have a minimum 300 cards and
      a fair price shop in urban area should have a minimum number of
      500 cards.   The Committee suggests that the minimum number of
      ration cards both in rural and urban areas should be increased from
      500 to a particular number which would be helpful for the fair price
   shop to be viable. Though the Committee is of the view that a
   stand alone FPS Shop can never be a viable proposition.


4. In the State of Karnataka the department ensures transportation of
   the food grains upto the retail point in rural areas. The statute and
   the control orders do not differentiate between rural and urban
   areas, therefore the State should also take up the responsibility of
   door step delivery in the urban regions as well, since the fair price
   shop in the urban regions have to take the additional expenditure
   of lifting food grains from the wholesale godowns.


5. The Committee strongly feels that the concept of stand alone fair
   price shop is inherently unviable and that to make it viable, it has to
   be multipurpose unit dealing with different commodities and
   services. Although in the State of Karnataka there is no restriction
   of selling non PDS items, but the committee observed in its visits
   that either the fair price shop dealer was not aware of such a rule
   or in some cases the fair price shop owner informed the committee
   that the people were not interested in buying the non PDS items
   from the fair price shop since they expect the same to be sold at
   the subsidized rates. The only shop visited by the Committee which
   was selling both PDS and non PDS items was found to be a viable.
   The Committee reiterates its recommendation in its report for the
   State of Orissa that the stand alone FPS must be given up as such a
   model is only meant for political patronage and diversion and
   cannot be made viable with any increase in the commission. In
   Karnataka however the government may give priority to village
   level multi service co-operatives. It is clarified that this does not
   derogate from our finding that such co-operatives must have no
   role in wholesale distribution.
*********
                                Chapter 6
                             Transportation



1.1     The Food Commissioner, Government of Karnataka informed
        the Committee that the transportation of food grains for the
        FPS is done in two phases. The first phase relates to lifting of
        food grains from FCI godowns to Taluk wholesale godowns.
        The expenditure of this phase is borne by Government of
        Karnataka based on fixed rates. The Government order dated
        FCS/107/FCS/99 dated 3/6/2002; sanctioned the following
        rates as per the tenders called:


  Distance         Per km/Qtl        Minimum           For the below
                   in paise          rate/Qtl in       distance
                                     Rs.               minimum
                                                       rate    should
                                                       be paid
0-80                   16.70                7.44           45 kms
81-500                 11.13               13.35          120 kms
500                    8.35                55.65          667 kms
and
above


1.2     The second phase relates to transportation of food grains from
        Taluk godowns to rural FPS. There is also a provision of door
        step delivery from wholesale godown to rural FPS. The entire
        cost of transportation is borne by the State Government. For
        selection of transporters, a uniform tendering procedure has
        been adopted since 1.4.2005.        One transport contractor is
        appointed for transportation of foodgrains from FCI godown to
        Taluk wholesale godown and another transporter is engaged for
        transporting foodgrains from wholesale godown to the rural FPS.
1.3   Mobile Vans are also pressed into service for transporting
      foodgrains. There are currently 9 mobile vans in 5 districts
      one each in Raichur and Dakshina Kannada, 2 each in Kodagu
      and Mysore and 3 in Chamarajnagar. One unique feature of
      tendering process is that the award of contract is not done on
      the basis of lowest bids but on the basis of certain prescribed
      bench marks. This methodology ensures proper selection of
      contractors, rather than to simply awarding the contract on
      the basis of lowest bids.     The rationale for doing so is to
      minimize the scope of improper selection and to eliminate the
      possibility of bids be made only for diversion of food grains.


1.4   The Committee also inspected transport files and observed
      that in every district a cartel of transporters operates and they
      generally succeed in getting contracts on regular basis.


1.5   Involvement of transporters in diversion became apparent
      when the Committee studied the file relating to one M/s
      Chamundi Transporters. In the above mentioned case, one
      Wholesale   transporter   named     M/s   Chamundi     Transport
      Contractor was caught diverting the food grain while
      transporting them from FCI Godown to Wholesale Godown
      (TAPCMS). The truck belonging to the transporter carrying the
      PDS food grain was found parked in the premises of Gangotri
      Flour Mill, Mysore. In this case, both the transporter and the
      TAPCMS were suspended by the District Collector, Mysore
      under the provision of Essential Commodities Act.


1.6   It further transpired that the tender rates in all the Taluk in
      Mysore District has been same for 4 years excepting for the
      year 2008-09. The committee was informed that the uniform
      rates was due to common benchmarks fixed by the
      Commissioner of that area for all Taluks and the reason for
      deviation from the uniform rate during the current year was
      increase in oil price.
1.7   The problems related to the faulty weighment system also give
      the transporters a free hand in diversion. The Food
      Commissioner also informed the Committee that foodgrains
      are weighed at the FCI godown before loading them in trucks
      for transportation to the wholesale godown. This weighment
      system, however, does not obtain at the wholesale godown
      where only counting the number of bags is done. The FCI
      while transporting the foodgrains also issues a weight check
      memo on which the weight of the foodgrains and the number
      of bags are noted. Even though there are no electronic weigh
      bridges in most of the wholesale godowns, the practice is to
      take the truck to a private weigh bridge in case of any doubt.
      This system is tailor-made for diversion.


1.8   One fair conclusion to draw from the existing transport
      arrangement is that there is no weighment at all at the point
      of receipt i.e. the wholesale depot, giving a free hand for
      diversion. Apart from this, the nexus between the flour mills,
      the transporter and the officials at wholesale point makes
      matter worse. This is evident from the instance of the case of
      suspension of the wholesale transporter in Mysore Taluk.




         Suggestions/Inferences


2.1   As repeatedly suggested the Committee is of the view that the
      Department should ensure that there is zero tolerance in cases
      where the transporters are caught diverting the food grains.
      Therefore it is suggested there should be “Zero tolerance” in
      cases of breach of contract committed by Transporters.
      Deterrent monetary penalty should be imposed against the
      errant Transporter. In the event of even a single breach
      resulting in diversion of PDS, not only should the Bank
      Guarantee be forfeited but also the Transporter 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 in the Department, in cases where a prima facie case of
      their involvement in an incident of diversion is made out.


2.2   Global Positioning System: A proper vigil has to be kept on
      transportation of the SFAs from the Godowns of FCI to the Fair
      Price Shops. GPS system can be used for tracking the movement
      of Trucks carrying PDS. For this, routes that have to be followed
      by Trucks carrying PDS have 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.
      It may not be out of place to mention that the said system is
      used in Chattisgarh and by the Indian Oil Corporation.


2.3   Though the task of monitoring the functioning of GPS should be
      with the Department and in addition like suggested in Delhi, the
      Ombudsman/Lokayukta will also have access to the system to
      ensure its proper implementation.
*********
                             CHAPTER 7


                   VIGILANCE COMMITTEES



1.    As stated in the Legal Regime Chapter, clause 8 of the PDS
      Order 2001 provides that the procedure for monitoring of the
      Public Distribution System including the functioning of the
      fair price shops by the State Governments shall be as per
      paragraph 6 of the Annexure to the Order.


1.1   Para 6 (1) of the Annexure to the PDS Order requires State
      Governments to ensure a proper system of monitoring of fair
      price shops and prescribes model sale register, stock register
      and    ration   card     register.   Para    6(2)    requires    State
      Governments to ensure regular inspections of fair price
      shops, not less than once in six months by the designated
      authority. State Governments may issue orders specifying
      the inspection schedule, list of check points and the authority
      responsible for ensuring compliance with the said orders.
      Para 6 (3) provides that meetings of the Vigilance
      Committees on the Public Distribution System at the State,
      District, Block and FPS level shall be held on a regular basis
      at    such   dates     and   periodicity    as   notified   by   State
      Governments. However, it is stated that the periodicity shall
      not be less than one meeting a quarter at all levels. Para
      6(4) imposes upon State Governments the duty to ensure a
      periodic system of reporting and it further lays down that the
      complete information in this regard is to be sent in the
      prescribed form as follows:
      (i) By fair price shops to the District Authorities by the 7th of
      the month following the month for which allocation is made
      in Form ‘A’.

      (ii)      By the District Authorities to State Government by
      the 15th of the month following the month for which
      allocation is made in Form ‘B’.

      (iii)     By    the   State   Government       to   the    Central
      Government by the end of the month following the month
      for which allocation is made in Form ‘C’.

1.2   Clause 6(8) lays down that State Governments shall issue
      and adopt the Citizen’s Charter based on the model Citizens
      Charter issued by the Central Government.

1.3   The State of Karnataka in its reply to the questionnaire
      stated that the Vigilance Committees have been constituted
      for all fair price shops to oversee the functioning of the
      Public Distribution System. It was further stated in the reply
      that meetings of these vigilance committees are conducted
      at least once in two months. The copies of the minutes of
      these    meetings     are     randomly      collected     in   the
      Commissionerate for scrutiny. It was also stated that these
      proceedings are reviewed at the district level every month.

1.4   It was stated that the Food Security committees have been
      constituted in each Gram Panchayat to oversee the overall
      functioning of the public distribution system in the State of
      Karnataka.     It was stated that there is a Food security
      Committee at the District Level comprising of the District In-
      charge Secretary, the Deputy Commissioner of the district
      and the Chief Executive Officer of the Zila Panchayat. It was
      further stated that the said committee sits on every first and
      third Saturday of the month to review all issues relating to
      the Food Security especially the Public Distribution System.

1.5   The Committee was informed by the Collector of the Mysore
      District that the vigilance committees at all levels particularly
      at the FPS level have been working well. It was further
      stated that the Food Secretary of the State of Karnataka had
      issued direction/instructions to the department that the
      Collector must reorganize the committees at the FPS level in
      case they were not functioning properly. The Committee had
      selected the proceedings of various Taluks randomly and
      noticed     certain aspects that were recorded in the
      proceedings of the meeting of the Vigilance Committee

1.6   The Committee also had occasion to inspect Vigilance
      Committee files at the District Collector Office, Mysore.
      These files were seen in respect of the meetings held by the
      Vigilance Committee on 30.8.2007, 7th January, 2008, 20th
      February, 2008 and 23rd December, 2008. The proceedings
      of these meetings show that there is evidence of some work
      being done by the Vigilance Committee in Mysore while the
      same cannot be stated about the functioning of such
      Committees in Bangaluru District. The Committee, however,
      during the course of its perusal of the proceedings of various
      committees noted that the following issues had been
      debated in the meetings of the Committee:-

      a.   Problems relating to the making of the new biometric
           ration card
      b.   Inadequate publicity by the department as to the dates
           for taking photographs in respect of the new biometric
           ration card.
          c.    Non display of samples outside the ration shop
          d.    Excessive prices charged by the ration shop
          e.    Improper behavior of the fair price shop owner with
                the ration card holders.
          f.    Irregular timings of the opening of the fair price shop
          g.    Increase in the allocation in APL and BPL quota.
          h.    Criticism of distribution of the food grains on the basis
                of Units in a particular ration card
          i.    Poor quality of the ration.


1.7    It is submitted that the study of the Vigilance files clearly show
that   although the minutes of the meetings of the vigilance
committees indicate         general awareness but the same seems too
good to be true or the same        were prepared for the purpose of this
committee. The reason for such an          observation is that there is
large scale of diversion and that the same is    happening despite the
alleged awareness. The Committee further         observes     that    the
composition of the vigilance committees would need some change to
improve its functioning.


1.8    District Collector Mysore stated that in order to improve
       enforcement he has established linkages with food inspectors by
       providing them two way radios (walkie talkie). It is submitted
       that the cost of the said device was approximately Rs. 9000/-
       each. He further said that he had disbanded about 500 of the
       1000 vigilance committees in the FPDs and he was in the
       process of reconstituting them.


1.9    The Committee was informed about the existence of various
       vigilance Committees to check malpractices in the operation of
       the PDS. The Committee, however, found that vigilance exists
       only on paper and there is a need to restructure and reinforce
       vigilance apparatus by induction of modern technology.


1.10   The Committee has made detailed recommendations in the
       Delhi report for setting up of a complaint mechanism (helpline)
       as   well     as   the   establishment   of   an   independent
       Ombudsman/Regulator to act as a watchdog body. It is
       recommended that these suggestions be read as a part of this
       Chapter also. The said chapter is annexed with this report as
       Appendix A.
                                *********
                             Chapter 8

                          ENFORCEMENT


1.1   Among the factors that are impeding effective functioning of
      Public Distribution System in Karnataka, one of the prime factors
      is the corruption, lethargy and disinclination on the part of the
      enforcement agencies to properly invoke and enforce the
      provisions of Essential Commodities Act, 1955 . This laxity and
      unholy nexus of the officers of the department with Fair Price
      Shop owners and transporters and investigation agencies has
      encouraged large-scale violations/malpractices in the Public
      Distribution System and led to failure of the enforcement
      machinery to contain the malaise in the Public Distribution
      System.


1.2   The   TDPS   is   governed   by    the   provisions   of   Essential
      Commodities Act 1955, the PDS Control Order 2001 and the
      control orders passed by the states under section 3 of the
      Essential Commodities Act, 1955.


1.3   No system can be implemented properly unless there is a proper
      system of enforcement of the rules and regulations. An effective
      system of enforcement of the punitive and penal procedures of
      the Essential Commodities Act and the control orders has to be
      set up by each state to ensure compliance with their provisions.
1.4   The PDS (Control) Order,2001 in its Clause 9 provides if any
      person contravenes any provisions of this Order under clauses
      3, 4, 6 and 7, he shall be liable to punishment under Section 7
      of the Essential Commodities Act. Clause 3 relates to
      Identification of families living below poverty line. Clause 4 deal
      with issuance of distinctive ration cards to APL, BPL and AAY
      and conduct of periodical review and checking of ration cards.
      Clause 6 deal with Distribution of foodgrains by FCI to State
      Governments or their nominated agencies and then from State
      Government or its nominated agencies to FPS. Clause 7 of the
      PDS (Control) Order 2001 deal with issue of License to FPS and
      duties and responsibilities of FPS which are provided in para 5 of
      Annexe to Order.


1.5   The punitive provisions relate to the conditions of license which
      in case of violation attract suspension or cancellation of the
      license as well.


1.6   During the visit to the state a glaring example of the nexus
      between    the     enforcement   agencies,   violaters   and   the
      investigation agencies which came to light. The case in question
      related to M/s Guru Binny Rice Mills and may be described in
      hereinafter as the Mangalore port case, the details of which are
      narrated hereunder.
         a) The file of the case revealed that on 21.5.2004 Smt. Vijay
             Kumari Shenoy, DD Food Mangalore lodged a written
             complaint before the Mangalore Rural Police that food
             grains obtained in the FCI and meant for drought relief
             and other schemes were being illegally stocked for export
             by M/s Guru Binny Rice Mill at 5 different godowns
   through M/s K.V.S Kamath in Mangalore to be exported
   to other countries and food bags having the seal of the
   FCI were being transferred to fresh polythene bags thus
   misappropriating and cheating the government for
   unlawful gain. The value of the goods were in several
   crores.

b) An FIR under Sec 406, 409, 420 read with 120 IPC was
   registered. The case was taken over by the COD (Corps
   of Detectives) on 27.5.2005. The COD submitted a B-
   Report under Section 173 of Cr.P.C stating that the case
   was a mistake of fact. The objections were filed by the
   Deputy Director Food and the said objections were
   accepted by the Chief Judicial Magistrate by an order
   dated 29.11.2007. The said order of the magistrate refers
   to material showing collusion between the COD i.e. the
   investigating agency and the culprits. Reference is made
   by the magistrate to certain emails in a report of the
   Centre    for   Development   of   Advanced    Computing
   Bangalore. The CJM further observes that several of the
   materials collected were not produced before the court.
   The CJM has further observed that even from the
   material produced before the court it was clearly
   established that the rice in question belonged to the FCI
   and was meant for beneficial schemes. The CJM observes
   that the COD cannot be trusted and it would require an
   independent agency to reinvestigate the case. The CJM
   thereafter ordered that the case be entrusted to the CBI
   for re-investigation.

c) The CBI thereafter filed a Revision Petition before the
   Session’s Court on the ground that the CJM had no
   jurisdiction to refer a case to CBI. The Sessions Court by
   its order dated 2.9.2008 allowed the said revision petition
   and remitted the matter to the CJM for reconsideration of
   the report after COD produces all materials collected
   during investigation.

d) Thought the above matter is still sub-judice it is a glaring
   example as to how there is total collusion between all
   vested interests and more so with the investigating
   agencies.

e) During the course of the meeting with the officials of the
   State, details were sought about the above mentioned
   case. The Principal Secretary however stated that the
   said goods were not PDS rice but was meant for other
   beneficial schemes.

f) The Committee hopes that this case would be vigorously
   prosecuted and the state would spare no effort to ensure
   that the culprits are brought to book.
                         CHAPTER 9
                      COMPUTERISATION


1.1   The issues relating to computerization and suggestions in
      this respect are being discussed in a separate report and the
      same should be read as part and parcel of the present
      chapter. In this chapter the observations of the Committee
      during its visit has been discussed. Karnataka is the only
      State in the country which has actually sought to implement
      in practice a system for computerising PDS operations. The
      results of such automation are for all to see, in as much as
      bogus cards in lakhs are being detected in every taluk.
      Unfortunately    however,    the    Government        instead   of
      benefiting from such technological innovations has sought to
      defeat the entire process by restoring the bogus cards
      through a back door mechanism called temporary ration
      cards which will be discussed later in this report.


1.2   The computerization in the State of Karnataka is the creation
      of a citizen data base by Capturing digital photographs and
      bio-metrics of the family members above the age of 12 years
      for issuing permanent computerized ration cards. The Food
      Secretary stated that the State was intending to computerize
      the whole process of Public Distribution System. According to
      the Department the following were the advantages of the
      computerization:
       Enabling tracking subsidy to individual beneficiary

       Better planning and forecasting

       Optimal inventory management

       Effective administration and reporting

       The beneficiary database with bio-metric finger print
           information has been created as part of Comprehensive
           Computerization Project (CCP). Though this process has
           significant   benefits      over     the    manual    systems,
           opportunities exist for the FPS owners to cheat by
           colluding with the beneficiary. The primary goal of
           deploying Point of Sale terminal (hereinafter referred as
           POS) is to ensure beneficiary off take is precisely tracked
           without providing any opportunity for FPS owner to
           indulge in mal-practices.

1.3   It    was      informed       that      the     POS   project   RFP
      (request for proposal) was prepared by calling expression of
      interest and that 22 companies had evinced their interest
      and participated in the pilot project. The department has
      collected Feed back from participated companies as well as
      department staff, who over saw the pilot project. It is
      submitted that there is a definite movement towards change
      in Karnataka and unlike other states where things are on the
      drawing board Karnataka has a data base of almost 90000
       families whose photos/details and biometric impression have
       been digitized.

1.4   The committee visited a fair price shop (Dhanlakshmi Stores.
      SKR Market, Chamrajpet) to see the POS project through
      biometric cards. The data mentioned in the biometric card are
      as follows:

               Photographs of the family members
               The name and details are also mentioned
               There is no biometric image in the card as the
                details are stored in the machine installed at the
                FPS.

1.5    The brief points given under would briefly show the stages
       involved in the working of the POS model:

             Then FPS enters the selection of either (APL/BPL/AAY)
             The Fair Price Shop enters the card number printed
              on the biometric card.
             Then the consumer has to place the finger (left
              thumb) on the machine reader which would then
              match the finger print/impression of the consumer
              with the already existing impression stored in the
              device.
             Once the machine matches the impressions, then the
              consumer has to ask for the desired quantity and the
              FPS owner enters the same.
             During     the   entire   transaction   there   is   audio
              announcement in local language of the above details
              for the consumers who cannot read and write.
             A receipt is printed by the machine in both English
              and local language and after which the consumer
              collects his/her food grain.
1.6    The Committee made the following observations after
       watching the entire aforesaid procedure:
          a. The finger impressions do not match due to dust, oil
             etc on the finger or on the reader
          b. The matching process takes a lot of time.
          c. The department stated that in case if the finger
             impression does not match then impression of the
             consumer is again taken on the machine installed at
             the FPS’s and the main database is updated in 3
             months
          d. The entire control of the machine is with the fair price
             shop owner.
          e. The audio voice is not very clear and loud.
          f. It was stated that 85% of the biometric images
             captured match whereas there is a chance of about
             15% where the data would not match.
          g. Privacy rights of individual citizens
          h. Requires constant upgradation/renewal of biometric
             impression which is not feasible


1.7    Some of the merits of the aforesaid system are as follows:


i.     The system ensures secure identification mechanism.
ii.    Any member of the family can get the grain as long as
       his/her biometric impression stored.
iii.   The process of making of the biometric cards has helped the
       department in not only identifying the bogus cards but also
       has eliminated them.
1.8   The Committee in order to understand the process of making
      of the biometric card system visited the photographic centre
      and observed the following:
         At the photography centre it was observed that there
          were lap tops installed by the Comat technologies
          through which the photographs and finger prints were
          captured.
         There was a long queue of people who were waiting for
          their turn and were standing with lot of enthusiasm.
         The Committee was informed that due to the process of
          making of biometric cards large number bogus/duplicate
          cards were identified. A copy of        a chart showing the
          various bogus cards detected by the company during the
          process of making of the new ration cards were given. In
          short large number of bogus cards is likely to be
          eliminated in the process.
         The Committee was further informed that the above
          computerisation     process   was     also   carried   through
          Nemmadi Centres.           It was further submitted that
          through these centres new applications are processed.
          The      whole   process   involved    issuing   applications,
          collecting applications with affidavit, verification and issue
          of ration cards. The Committee visited one Nemmadi
          Centre on 30.12.2008 the details of which are mentioned
          later.



1.9   The committee in order to understand the pros and cons of
      various models of technology for an effective functioning of
      the public distribution system met Shri Ravi Rangan, Vice
      President Comat Technologies in Mysore. Shri Rangan
      explained the functioning of the following technologies:
         a. Biometric System
         b. Smart Card System
         c. A combination of Bio metric and Smart Card
         d. Iris Technology
         e. Overall computerized setup.


1.10     Shri Rangan submitted that there are two potential solutions
         for an effective functioning of the Public Distribution System.
         One is the Biometric System and the other is the Smart Card
         System. However Shri Rangan further submitted that there
         could be alternative technology which would actually be a
         combination of the Biometric and the Smart Card system. He
         further submitted that in such a system the consumers
         instead of a ration card would be given a smart card which
         would have their photographs and also the biometric
         impression along with the other details. The device which is
         also known as POS device would not have any data i.e. the
         biometric (finger) impression. Following would be the
         procedure which has to be followed by a ration card holder
         to avail his ration of a particular month:
1.10.1   The consumer would have to carry his/her smart card (ration
         card) to the fair price shop and swipe the same on the
         device installed at the FPS.


1.10.2   After swiping the smart card the smart card holder has to
         place his finger (normally it’s the left thumb) on the machine
         reader for the authentication.


1.10.3    The device installed at the FPS would then take the finger
         impression of the ration cad holder and compare the same
         with the data/impression which is already stored in the smart
         card.
1.11   Once the matching would be done then the card holder could
       avail   his allocated ration for that particular month.


1.12   Shri Rangan further stated that a smart card technology alone
       would not be sufficient since a smart card technology alone
       would not ensure that only the family members would avail
       ration. The fair price shop can keep the smart card and actually
       use the same to show distribution of the food grains on the
       record whereas in actual he would be diverting all ration to the
       open market.


1.13   The following are the challenges for introducing the aforesaid
       technology:


         i.    He submitted that in biometric feature the finger
               impression of all the family members above 18 years are
               taken, therefore to store the biometric data on the smart
               card, the space required would be fairly large. Therefore
               a high end smart card would be required for the said
               purpose.
        ii.    The cost of such a high end smart card would be
               somewhere around Rs. 150/- per card. (The estimation
               was given by Shri Rangan in case there is voluminous
               production of the card.


1.14      However the major advantage of having such a system as
          per Shri Rangan was that such a system would ensure
          privacy of the biometric detail of an individual which would
          result that there would no misuse of the data. Another
          advantage of the Biometric Device is that a small device can
          store Biometric data upto 70 Kilo Bytes.
1.15   Iris Technology vs. Biometric Technology: To evaluate
       any technology two parameters are always considered which
       are “False Acceptance Rate” and “False Rejection Rate”. The
       Committee was informed that that the Iris technology is
       fairly superior to the Biometric Technology, however the
       Biometric is preferred since the same is far cheaper than the
       Iris technology. He stated that the following ratios of the
       aforesaid     parameters   determine   the   effectiveness    of
       technology
                        a) 1: 10,000
                        b) 1:25,000
                        c) 1:100,000

1.16   The Committee was informed by Shri Rangan whose
       company is implementing the computerization in the State
       stated that they took all the prescribed norms which were
       required, however it was observed that the ratio of the
       technology’s performance was 1:25000. Therefore they
       added   height    as   another   parameter     to   narrow   the
       comparison table of the biometric impression and therefore
       were able to bring the ratio below 1: 10000.


1.17   In respect of Iris technology it was stated that that there are
       two types of iris methods namely one eye and double eye.
       One eye technology costs around 25000/- to 40000/-
       whereas the Double eye technology costs around Rs.1 lakh.
       On the other hand a POS device of Biometric technology
       costs around Rs. 15,000/-. It was further stated that Iris
       technology consumes 3 times more the power which would
       be required to run a device (POS) under Biometric
       technology.     Shri Rangan further submitted that a POS
       device under the Biometric technology might run on 2 cell
        phone batteries for approximately 8 hours or on the other
        hand it can run on a battery used in a motor bike which
        costs approximately Rs. 700/-. However, he admitted that
        the project report has not dealt with scenarios where there
        would be no electricity at all.


1.18    The Committee was informed that that in India the patent
        rights of the Iris technology are only with two companies
        namely L1 company and IRI tech. they charge apparently 10
        cents per device with the additional cost of algorithm i.e.
        software.


1.19    The Committee found the experiment of Computerization in
        the Karnataka very positive. However to ensure its success it
        has to be kept immune from political interference and its
        implementation has to be independently monitored. One of
        the major concern in capturing the biometric data is the
        misuse of the data. Therefore a disclaimer may be given at
        the time of giving the biometric impression that the said data
        would not be used anywhere else without the prior consent
        of the cardholder/ or of the person whose biometric
        impression is in question.




Adverse effect on Computerisation with the introduction of the
        Temporary Cards Scheme for BPL families


2.1     The State of Karnataka can be given due credit for
        implementing a computerised model for the PDS distribution.
      The implementation through photograph and biometric
      verification has resulted in detection of large number of
      bogus cards. However, the entire attempt at making the PDS
      scheme corruption free, through computerisation has been
      defeated by one stroke of the pen by the government by the
      introduction of a scheme described as Temporary Ration
      Card Scheme.


2.2   Under this scheme any person who applies for a BPL card in a
      Nemmadi centre will be given a temporary card without
      verification. The verification if at all will be done ex-post
      facto. It is obvious that the scheme is intended to defeat the
      success of the computerisation model and is at the behest of
      vested interests. It is further shocking to know that
      subsidised food grain meant for the targeted poorest of the
      poor of the state is being distributed to persons without any
      verification/evaluation. The temporary card scheme which is
      meant either for political expediency or for diversion and
      possibly for both must be immediately stopped in order to
      prevent the vested interest from defeating the apparent
      success of the online model. The government has to
      recognise that TPDS is meant for food security and not for
      any other purpose.


2.3   The Karnataka example shows that how an online system is
      in fact the best solution to stem the rot in the PDS but it
      further shows how the political process would make every
      effort to defeat the success of such a model.


2.4   The above mentioned scheme should be immediately
      stopped    and   the   computerisation   process   must    be
      implemented with independent monitoring.
*********
                          CHAPTER 10

MALADIES IN THE IDENTIFICATION OF BPL BENEFICIARIES


1.   A critical issue which has arisen in the course of the various
     visits by the Committee to different States pertains to proper
     identification of BPL beneficiaries. One of the critical factors
     which has resulted in the PDS not functioning properly is what
     can be termed as ‘exclusion and inclusion errors’. This issue is
     extremely pivotal in as much as till a rational criteria for the
     identification is put in place for the identification of true
     beneficiaries and an independent survey is conducted to ensure
     that the poorest of the poor are infact covered under the
     BPL/AAY categories as the case may be, all other measures
     being suggested by this Committee may be defeated as a faulty
     beneficiary list would continue to erode the effectiveness of the
     system.


2.   The subject of identification has been discussed in the State
     report on Orissa and since these recommendations are relevant
     for Karnataka also, the same may be read a part of this report
     as well.


3.   The State of Karnataka has however stated that it has
     introduced two innovative measures to ensure that the net of
     food security is widened. The most significant is the EBPL
     scheme the other is the unit system whereby the family
     entitlement is curtailed in accordance with the exact number of
     persons in the family. In the Unit System, every person in the
     family is the unit and is provided 4 kg food grains in a month.
     The Hon’ble Supreme Court has however laid down that the
     entitlement is 35 kgs whereas under the unit system it would be
     less as the maximum in the unit system is kept as 25 kgs. Both
     these schemes are intended to widen the BPL net. Although
     these schemes and more particularly the EBPL scheme helps in
     ensuring all persons in the need for food security are included in
     the PDS, the same must not be expanded to unrealistic levels to
     serve the needs of political expediency.


4.   Clause 5 of the PDS Order 2001 lays down that the Central
     Government shall make available to the State Governments
     foodgrains for distribution under the Public Distribution System
     at such scales and prices as may be specified from time to time
     provided in terms of paragraph 3 of the Annexure to the Order.


5.   By following the above criteria of identifying the BPL families,
     the total number of BPL families has exceeded the figure that
     has been prescribed by the Central Government. At present
     there are 78.37 lakh BPL card holders whereas as per the
     Central Government figures the State of Karnataka should have
     31.29 BPL card holders. Therefore the surplus card holders i.e.
     47.08 cardholders fall under the EBPL category.       In order to
     meet the increased number of families under the BPL category
     the State has introduced a new category, namely Extra BPL
     (EBPL) and for catering the food grains to this category the
     State Government has stopped the distribution of the food
     grains to the APL ration card holders. The State utilizes the
     allocated APL quota to feed the EBPL category. The State of
     Karnataka further buys the food grains from the Central
     Government at APL prices and then sells the same to the EBPL
     card holders at BPL rate. It is further relevant to note that the
     entire subsidy in this process is borne by the State of Karnataka.
6. Although the State of Karnataka gets allocation from the
   Government of India in respect of the APL category. However as
   mentioned above the State of Karnataka is not issuing any food
   grain to any of the APL Ration Card Holder.            It is further
   relevant to mention that as per the government policy the food
   grains would be distributed to the APL ration card holders after
   meeting the requirement of the BPL and EBPL ration card
   holders at the scale prescribed at that time. The APL ration card
   holders if given the food grains would be given at the rate of Rs.
   9/- per Kg in case of rice and Rs. 6.70 per Kg. in case of wheat.
7. The EBPL scheme of the Government of Karnataka although
   does not strictly fall within the TPDS as traditionally understood
   but is in sync with the recommendations made by this
   Committee in the Delhi Report that the APL category must be
   abolished and the BPL category must be increased to include
   therein those who are marginally above the poverty line. It has
   come to the notice pf the Committee that the Central
   Government has taken exception to this Scheme and is in fact
   threatening to reduce allocations.
8. Income criteria have been prescribed for determining eligibility
   for issue of ration cards, both for the urban and the rural areas.
   The income criteria for urban areas is fixed at Rs.17,000/- per
   annum whereas for rural areas it is fixed at Rs.12,000/- per
   annum. The Committee however feels that this criteria requires
   a re-visit as it is unrealistic in its present form.
9. The state has already introduced a scheme for the BPL
   population whereby food grain is given at Rs 3. This has led to a
   serious clamour for BPL cards. These schemes which seem to be
   driven by political motivation rather than any desire to ensure
   food security need to be carefully monitored. Increasing the BPL
   population to unrealistic levels is not only a drain on the
         resources of the State but may also act as a serious disincentive
         to hard work on part of the population of the State.
      10. The issue of identification in the State of Karnataka is extremely
         serious as evident from the fact that the Committee noticed that
         the poorest families in rural villages as well as low income
         localities in the cities had no cards or were in the wrong
         category.




SUGGESTIONS/INFERENCES


11.      The Committee recognizes the fact that it is not an expert body
         to prescribe identification guidelines and is therefore not
         venturing into any such task. However, the Committee
         recognizing the critical nature and importance of identification
         and the fact that exclusion and inclusion error are a very serious
         malady afflicting the PDS, recommends that the expert body
         constituted by the MORD in terms of the order of the Supreme
         Court dated 14 February 2006, give its recommendations in a
         time bound manner and each State within a time frame fixed by
         the Hon’ble Court prescribe transparent criteria of its own for
         identification keeping in mind local conditions.

12.      Once such guidelines are in place, as suggested in the Delhi
         report, a time-bound door-to-door drive to identify genuine
         beneficiaries and eliminate wrongful exclusions and bogus cards
         which is to be conducted by a reputed independent agency.
         The agency will also simultaneously conduct a consumer
         satisfaction survey, which will enable the department to bring in
         necessary improvements to the system.
13.      There would be an amnesty period of four weeks where persons
         holding bogus cards could surrender them without liability.
         However on the expiry of this period the above mentioned
         intensive door to door verification would be conducted and
         during that verification if any bogus card is detected both the
         holder as well as the officers who had recommended the bogus
         card would be prosecuted under Section 7 and other Sections of
         the Essential Commodities Act, 1955 without exception. The
         Officers can be proceeded against departmentally and severely
         punished. Widest possible publicity must be given to the
         amnesty scheme.

14.      There is a need to revisit income criterion prescribed for the BPL
         category. The Government/MORD Committee may also consider
         using consumption criteria that is to say calorie intake per
         person per day as an indicator of poverty as the minimal
         objective to be achieved by TPDS is to ensure that every poor
         person gets two square meals a day. This is recommended in as
         much as a purely income based criteria may in certain
         circumstances be misleading in terms of actual determination of
         persons below the poverty line. However the estimation of
         poverty should not be made on a criteria which is less than the
         minimum wage fixed by the state for agricultural labourers or
         the wage fixed by the Central Government under Section 6 of
         the NREG Act 20051. It may not be out of place to point out that


1
 Section 6 of the NREG reads : (1) Notwithstanding anything contained in the Minimum
Wages Act, 1948, the Central Government may, by notification, specify the wage rate for the
purposes of this Act ;

         Provided that different rates of wages may be specified for different areas:

          Provided further that the wage rate specified from time to time under any such
          notification shall not be at a rate less than sixty rupees per day.
    (2) Until such time as a wage rate is fixed by the Central Government in respect of any area
in a State, the minimum wage fixed by the State Government under section 3 of the Minimum
Wages Act, 1948 for agricultural, shall be considered as the wage rate applicable to that area.
           several states the minimum wage for agricultural labour is in the
           range of Rs 100 and even the NSSO in its estimate fixes the
           estimate of expenditure at Rs 20 per capita per day2 which
           works out to Rs 100 per day per family (a family is taken as 5
           members).

15.        The abovementioned Committee set up by the MORD is
           essentially     to   devise   criteria   for    identifying   the   correct
           beneficiary in a rural setting. For the urban scenario however a
           different criteria will have to be devised. The committee in its
           report on Delhi had suggested that the basis for determination
           as to whether a person is BPL or not should be based on the
           minimum wage payable to an unskilled workman in the area i.e
           to say if the person is earning below this amount he would be
           deemed to be below the poverty Line.


16.        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 the
           said report for a detailed analysis of the said recommendation
           and it may be added that the committee in its visit state after
           state has found that the concept of APL is serving no useful
           purpose for food security but is instead only a diversion tool.


17.        It is however relevant to point out that a State like Karnataka
           which has adopted a system like EBPL must ensure that the BPL
           Quota is not expanded to unrealistic levels for political
           considerations. In this context, it may be noticed that the
           Central Government has warned the State that it would cut Rice
           supply under APL if the number of BPL beneficiaries is not
           brought down.
2
    As per 2004 – 05 prices.
*********
                              Chapter 11
              Public hearings held by the Committee



The Committee also held public hearings on 26th and 27th December,
2008 at Bangalore and Mysore. These meetings were also attended by
a few NGOs and their representatives. The points that emerged at the
Bangalore meeting was as follows:-


      There was tremendous opposition to the unit system by the
       FPS owners
      Wrong timing of FPS shops:          it was observed by the
       Committee that a lot of people present at the meeting
       complained abut the timing of the Fair Price Shops.
      Poor quality of food grains supplied by the shop.
      Physically handicapped people allotted APL Cards:- A few
       handicapped people present in the public hearing submitted
       affidavits in support of handicapped status and questioned
       how they were given APL category ration cards.
      Transporters operating with different names;
      Irregular opening of FPS:- The shops open in the second half
       of the day.
      People also, submitted before the Committee that the income
       criteria should be revised.
      Subsidy given by the Govt. should be used in subsidizing local
       foodgrains    under   PDS.    Articles   should     include   local
       foodgrains.
      Public hearings should take place more often since it will
       increase public awareness;
      There should be general kirana shops distributing foodgrains
       under PDS.
      The FPS charge higher prices without giving any bills
The points emerging at Mysore meeting are as follows:


      Quantity of rice should be increased. Generally, the quantity of
       rice distributed to beneficiaries was less than entitlement.
      Children below the age of ten are not being included under the
       unit system for the purpose of allocation of foodgrains to the
       beneficiaries.
      One food inspector monitoring a population of 80000 on an
       average is not a happy situation.
      Availability of inadequate number of staff results in poor
       monitoring.
      No monetary support is provided to form Vigilance Committees
       at any level.
      Tribals are not being allotted proper ration because they keep
       on migrating from one place to another.
      There is a vast disparity between PDS rates and market rates.
      Contracts for transportation of foodgrains should be reviewed
       once in two years and not every year.
      Commission received by the FPS is very low and needs a review.
      Tenders for transportation of foodgrains are not properly
       advertised.



SUGGESTIONS RECEIVED BY THE COMMITTEE
      The scope for political intervention should be minimized in the
       functioning of public distribution system including Vigilance
       Committees.
      Involvement of public in the Vigilance Committees should be
       enhanced.
      The receipts should be computer generated.
      Unit system should be withdrawn
   Vigilance should be under the chief justice of the High Court
   Local food grains should be included in the PDS articles and
    could be provided to the beneficiaries depending on the eating
    habits.
   Lifting of entitlements in installments should be allowed.
   Members of political parties should not be allotted a FPS
   Voluntary   consumer      organizations   should    be       officially
    empowered to check godowns periodically.
   Each FPS should be given 500 BPL cards in rural areas and 700
    BPL cards in urban areas.
   Private parties should not be engaged to distribute food grains
    and encouragement should be given to cooperative societies.
   Some of the poor ladies with meager incomes said that there
    should be no ceiling on the quantity of ration.
                               Chapter 12
                        Committee’s Findings


(i)     Diversion of food grain takes place at every level of the system.
        The different ways in which diversion takes place would show
        that Government Officials, intermediate storage agencies such
        as TAPCMS, Transporters and retailers are all involved in the
        diversion of food grain in some manner or the other. The
        malady of diversion is prevalent in the system in such large
        scale that it has become a menace and threat to the system.


(ii)    The first and foremost reason for diversion is the difference in
        the price of TPDS grain and market rate. This serves as an
        incentive for the unscrupulous persons connected with the
        implementation of the system to connive with the traders to
        divert the TPDS food grain into open market. The difference in
        price is also an incentive for people who are not otherwise
        eligible under the scheme to get the benefit of the lesser rates
        of grain.


(iii)   The second reason for diversion is the lack of any system of
        accounting for the grain allocated under the system. 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.
        Thus    there   is   need   for   complete    automation      and
        computerization of the Public Distribution System.


(iv)    The third reason for is that the functions of implementation,
        enforcement and vigilance are not clearly demarcated and
        implemented.
(v)      There are deficiencies in the existing system for identification of
         beneficiaries under different categories.             This result in a
         mismatch between allocation of food grains vis-à-vis the number
         of   targeted     beneficiaries    and   gives   an    opportunity   to
         unscrupulous elements to indulge in malpractices.


(vi)     The vigilance committees which are supposed to play an
         oversight role and check malpractices are practically non-
         functional in the State.          The need for reconstituting these
         committees and continuous monitoring of their functioning
         cannot be overemphasized.


(vii)    The newly introduced scheme of issuing temporary cards
         without any prior recommendation is intended to defeat the
         success of the computerization model and is at the behest of
         vested interests. The temporary cards scheme is meant for
         political expediency and diversion. The scheme is meant to
         introduce through the back door the bogus cards detected and
         eliminated during the computerization of data.


(viii)   The unit system adopted in the State provides that a 4 Kg rice
         and one Kg wheat in a month is provided to each unit
         holder/member of family with a cap at 25 kgs. The view of the
         state of Karnataka is that it is an innovative scheme which has
         helped saving food grain and increasing the BPL Net. The
         Hon’ble Supreme Court has however laid down that the
         beneficiary must get full entitlement. According to the PDS
         control order the entitlement is 35 kgs whereas under the unit
         system it would be less as the maximum in the unit system is
         kept as 25 kgs.
(ix)     The inspection mechanism leaves much to be desired. There is
         an urgent need to completely overhaul inspection machinery
         and provide for monthly, quarterly, six monthly and annual
         inspections.
(x)      The multi service co-operatives at the retail level are working as
         viable proposition where as the shops run by the KFCSC and
         Private retailers are not only unviable but indulging in large
         scale diversion.
(xi)     For a FPS to earn a marginal profit there has to be minimum
         500 cards. Where the cards are less than that, FPS runs on loss.
         Study of the Committee shows that merely increasing the
         commission will not result in making the FPS a profitable
         proposition. 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 a FPS retailer. By
         being an FPS dealer he enjoys a sought of status in the locality.
         Any amount of increase in commission will not stem the rot. FPS
         owners are deliberately not ready to sell groceries other than
         PDS food grains. The reason is not far to seek. By opening
         shops for two or three days and selling PDS food grain in
         connivance with Government/Corporation officials is in itself a
         lucrative and effortless proposition for him. When there is no
         profit or there is loss as complained by FPS owner, the question
         that arises is then why is he sticking to the shop.
(xii)    There is no provision in respect of the meeting of the vigilance
         committees. No date, time or venue is fixed for holding such
         meetings.
(xiii)   The Enforcement in the State is lax and there is apparent
         collusion between the officials, Investigating agencies, Dealers,
Wholesalers and other vested interests. This is apparent from
the example of the Mangolre Port case.
                               Chapter 13
                    Committee’s Recommendations


(i)     The system of allowing TAPCMS to store PDS grain as an
        intermediary wholesaler must be done away with immediately as
        the Committee found large scale diversion from such godowns.


(ii)    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 Computerization is the need of hour.


(iii)   The Scheme of temporary ration cards which defeats the
        successes gained through the introduction of automation must
        be done away with immediately.


(iv)    The end to end automation being implemented in the State
        must be completed without political interference and monitored
        by an independent agency such as an ombudsman or the
        Lokayukta of the State.


(v)     Political influence should be done away with in the operation of
        PDS.     This includes appointment of FPS dealers, awarding of
        contracts for transportation of food grains.

(vi)    In view of the findings on viability of FPS, the Committee is of
        the view that the concept of a stand alone FPS should be
        changed. This way he can earn profits and        the   shop    will
        remain    open   throughout the     month.     Moreover   attached
        numbers       of cards mean a set number of customers in any
        case. In Karnataka the government must give priority to multi
         service co operatives as they are a viable proposition in the
         village level. However this does not derogate from the finding
         that cooperatives should have no role at the wholesale level.


(vii)    The Committee has found that one of the other reasons
         affecting the viability of FPS is the unequal distribution of the
         ration cards.    It is recommended that the authority should
         undertake an exercise to rationalize and bring some uniformity
         in the distribution of ration cards to respective FPS’s.


(viii)   FPS dealers found indulging in malpractices should be summarily
         dealt with, including cancellation of license. Similarly, contracts
         of transporters involved in diversion of food grains should be
         cancelled forthwith and such transporters or their agents should
         be   permanently     debarred    from   obtaining    contracts   for
         transportation of food grain items. Further, induction of Global
         Positioning System (GPS) technology is recommended for
         keeping a track on the movement of trucks carrying food grains
         from the FCI up to Fair Price Shops. This will also enable the
         authority to fix responsibility on the transporter if the stock does
         not reach the FPS at the scheduled time.


(ix)     Urgent action may be taken by the concerned State authorities
         to reconstitute FPS Vigilance Committees.           The process of
         selection and appointment of members of such committees
         should be transparent and should involve ration card holders,
         particularly, the household women in the area. The Vigilance
         Committee should meet at least once in two months at the
         Collectrate on a fixed day and time. The date of such meeting
         should be notified for information of general public.            The
         minutes of meeting of the committee should be prepared and a
         copy of the same along with the action taken report should be
         sent to the department. The ration card holders of the area
         may submit their complaints to the Vigilance Committee which
         should report to higher officers about the nature of action taken
         on the complaints received.


(x)      Every     godown should have      an   electronic weigh bridge
         connected and integrated with the automated system. This
         would ensure the integrity of the weight and content of the bags
         and reduce the possibility of tampering with the bags received
         from FCI godowns.


(xi)     The system of supply of sealed sample packets by FCI to the
         wholesale godowns and thereafter to the FPS should be
         rigorously followed to ensure sale of good quality of food grains
         to consumers.



(xii)    Monitoring assumes special importance in the case of people
         oriented scheme like TPDS. The Head of the Department should
         at prescribed intervals review the functioning of PDS with
         District Collectors and the latter with subordinate formations in
         the District to ensure that there is no let up of any kind in this
         regard.      A zero tolerance approach towards corruption and
         inefficiency can only remove the maladies afflicting the system
         presently.

(xiii)   Action should be taken to raise level of public awareness about
         PDS allocation, entitlement of food grains to different categories
         and mechanism available for reporting malpractices and
         redressal of their grievances.
(xiv)    A Complaint Redressal mechanism should be set up, with a
         twenty four hour Help line as suggested in report on Delhi. A
       post of Ombudsman/Regulator should also be created for the
       purpose of ensuring the transparent functioning of the system.
       The government may explore the possibility of entrusting this
       task to the Lokayukta of the State.


(xv)   PDS food-grains should be transported only in tamper-proof
       bags like HDEP bags and if feasible PDS commodities should be
       supplied to the beneficiary in small packages of 5 & 10 kgs.


(xvi). Since one of the reasons for the failure of the system has been
       wrong identification of beneficiaries, urgent steps need to be
       taken for proper identification so as to ensure there is no
       inclusion or exclusion errors.


(xvii) There is a need to revisit income criterion prescribed for the BPL
       category. The government/MORD committee may also consider
       using consumption criteria that is to say calorie intake per
       person per day as an indicator of poverty as the minimal
       objective to be achieved by TPDS is to ensure that every poor
       person gets two square meals a day. This is recommended in as
       much as a purely income based criteria may in certain
       circumstances be misleading in terms of actual determination of
       persons below the poverty line. However the estimation of
       poverty should not be made on a criteria which is less than the
       minimum wage fixed by the state for agricultural labourers or
       the wage fixed by the Central Government under Section 6 of
       the NREG Act 2005. It may not be out of place to point out that
       several states the minimum wage for agricultural labour is in the
       range of Rs 100 and even the NSSO in its estimate fixes the
       estimate of expenditure at Rs 20 per capita per day which works
        out to Rs 100 per day per family (a family is taken as 5
        members).


(xviii) The abovementioned Committee set up by the MORD is
        essentially to devise a criterion for identifying the correct
        beneficiary in a rural setting. For the urban scenario however a
        different criteria will have to be devised. The committee in its
        report on Delhi had suggested that the basis for determination
        as to whether a person is BPL or not should be based on the
        minimum wage payable to an unskilled workman in the area i.e.
        to say if the person is earning below this amount he would be
        deemed to be below the poverty Line.


(xix)   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 the
        said report for a detailed analysis of the said recommendation
        and it may be added that the Committee in its visit to state after
        State has found that the concept of APL is serving no useful
        purpose for food security but 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 fair price shop dealers and
        other vested groups against the abolition of the APL category. If
        the 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 is based on the fact that a class IV employee of the
        Central Government in Delhi gets a consolidated salary of about
        Rs. 8000/- per making it Rs. 96,000/- annually. This category
        may be called “Marginally Above Poverty Line (MAPL)”. This limit
         may however be revised as when required on a rational basis by
         the government. The EBPL is certainly a step in this regard.


(xx)     The state has also introduced a Rs 3 Rice Scheme. Similar
         schemes have been introduced in other states as well. These
         schemes which seem to be driven by political motivation rather
         than any desire to ensure food security need to be carefully
         monitored. Increasing the BPL population to unrealistic levels is
         not only a drain on the resources of the State but may also act
         as a serious disincentive to hard work on part of the population
         of the State.
(xxi)    One issue which was echoed in all public meetings was a need
         for introducing local grains in PDS. For e.g., in the South of
         Karnataka, people mainly eat Ragi whereas in the north, Jowar
         is the staple grain. The Central Government may consider this
         aspect.


(xxii)    The state would ensure that all investigations and prosecutions
         under the Essential Commodities Act including the Mangalore
         Port Case are done with sincerity and with a Zero Tolerance
         approach.
(xxiii) The FCI will ensure that all weight check memos are printed
         from the automated system giving exact quantity and number of
         bags. The FCI will also ensure samples are sent with every
         consignment and all loading of goods of PDS commodities in
         CWC godowns for intermediary wholesale godowns of the State
         hired by them are carefully monitored.


                                 *******
                                                               Appendi
                                                        xA




 5.4     HELPLINE

 During the course of enquiries of the Central Vigilance Committee two
 different models of Helpline mechanism were noticed viz.:

(a)    National Consumer Helpline,

Here, all aspects relating to the Helpline including call centre are ‘in
       house’. The Helpline is connected with six workstations located
       in the premises of National Consumer Helpline. When a call is
       received on the Helpline, all the relevant details are collected by
       the personnel attending such call. Thereafter, the same is
       forwarded to the respective sector incharges for analysing the
       grievance and giving appropriate solution to the complainant. All
       conversations on the Helpline are recorded in a computer.
   (b)      Lieutenant Governor Helpline




         This is a toll free telephone Helpline that has been recently
         activated by the office of the Lieutenant Governor of Delhi. Here,
         the call centre has been outsourced. This Helpline caters to all the
         Departments of the Delhi Government. Public Distribution System in
         Delhi comprises of 70 Circles and 2772 FPSs and also the ever-
         increasing population of Delhi. Moreover, when the operation of the
         Helpline was demonstrated by the concerned authority before the
         Central Vigilance Committee, it was found that there was a great
         time lag in redressing the Public Distribution System related
         grievances. This also reinforces the view of the Central Vigilance
         Committee that a dedicated Helpline is required for Public
         Distribution System related grievances in Delhi.




5.4.1. Either model of Helpline may be adopted for setting up a dedicated
         Helpline for the Public Distribution System in Delhi. In order to
         ensure efficiency and optimise effectiveness of the Helpline
         services, the following recommendations are made:




(a).     The toll free telephone Helpline facility should preferably be
         operative twenty-four hours a day and seven days a week.



(b). It shall be the responsibility of Ombudsman/ Regulator to catalogue
         the complaints/grievances received on the Helpline and to
         continuously monitor these grievances/complaints to ensure their
         ultimate resolution.



(c).     The consumer/user interface aspect of the Helpline should broadly
         have the following basic features viz.:

                (i).       Providing information related services.

                (ii).      Registration of complaints.

                (iii).   Issuance of a unique identification/token number to
                the caller upon registration of complaints.

                (iv).    Mechanism to ascertain status of action taken on such
                registered complaints.

   (d)       The Department, the FCI and the DSCSC will be obliged to
             inform the Helpline as to when the particular FPS will get its
             stock. The DSCSC will also inform the Helpline about the
             movement of trucks to the particular shop so that any caller will
             be able to ascertain from the Helpline as to when stock would
             be available at the shop.




   5.4.2. In order to make the Helpline effective, it is necessary:

   (a).      To give adequate publicity of Public Distribution System service
            benchmarks.

   (b).     Adequate publicity should be given to this toll free Helpline and
            the category of services that would be available to the
            consumers on this Helpline.
(c).     Complaints received through the Helpline should be forwarded
         to the concerned officer in the Department not later than 24
         hours from the time of receipt of the complaint.

(d).     For the purposes of ensuring accountability of the official(s) who
         has/have been entrusted with a given complaint, it is necessary
         that a time bound complaint redressal mechanism is created and
         there should be an independent agency to periodically monitor
         the working of the system. This aspect has been dealt with in
         greater     detail    under     a   separate   heading    “Ombudsman/
         Regulator”.

(e).      In case of delay in redressal of complaints, the concerned
         official shall be liable for action in case of dereliction of duty,
         including penalty, for each day of such delay. This penalty
         would be paid by the State Government to the complainant at
         the first instance and thereafter, recovered from the concerned
         official.

5.5. OMBUDSMAN/ REGULATOR

5.5.1.      According         to   the       website    of   the     Department
         (http://delhigovt.nic.in/dept/food/fpds4.asp) as on 31/12/2006,
         there are 3,78,947 and 57,336 Ration Card Holders in BPL and
         AAY category, respectively and 22,85,513 Ration Card Holders in
         APL category, in the National Capital Territory of Delhi. The
         Ration Card Holders have been given certain entitlements under
         Public Distribution System. It is the responsibility of the state
         apparatus to ensure that these beneficiaries enjoy access to
         these entitlements smoothly, without let or hindrance. Public
         satisfaction in this field would strengthen the democratic system
         and reinforce public confidence. Widespread discontent will
         naturally provoke disruption and affect social stability adversely.
      Hence, it is imperative to take urgent action for suitably
      strengthening the vigilance and monitoring system in the
      existing Public Distribution System framework. This can be done
      by the appointment of an independent Ombudsman/Regulator


5.5.2. During the course of meetings held at the Central Vigilance
      Committee a suggestion had emerged that the existing
      problems in Public Distribution System could be taken care of to
      a large extent by making appropriate changes to the Delhi
      Lokayukta and Upalokayukta Act, 1995 (“Act of 1995”) and
      vesting the Lokayukta thereunder, with the role of a regulator in
      respect of Public Distribution System in Delhi.       Under the
      existing provisions of the Act of 1995, it would not be possible
      to invest the Lokayukta with the role of a Regulator as:
           Section 7 thereof confines the jurisdiction of Lokayukta and
         Upalokayukta to “Public Functionaries” as defined in Section
         2(m) thereof. Thereby excluding FPSs from the ambit of
         Lokayukta.
            Further, Section 17 (b) thereof excludes “any person who
         is a member of a Civil Service of the Union or an All India
         Service or Civil Service of a State or holds a Civil Post under
         the Union or a State in connection with the affairs of Delhi.”
         Thereby excluding officials of the Department.



5.5.3. While the Central Vigilance Committee is of the considered view
      that an independent monitoring mechanism for addressing
      consumer complaints along with a host of other related issues
      needs to be set up on priority. However, vesting the Lokayukta
      with the role of a Regulator in Public Distribution System in
      Delhi would entail an overhaul of the Act of 1995. A better
      alternative would be to provide alternate grievance redressal
      machinery. Such grievance redressal machinery would be in
      addition to the already existing legal remedies that may be
      available to an aggrieved person under Clause 11 of the Public
      Distribution System (Control) Order, 2001. This alternative
      mechanism may be in the form of “Ombudsman/ Regulator”
      that may be created under Para 6(1) of the Annexe to Clause 8
      of the Public Distribution System (Control) Order, 2001. Para
      6(1) of the Annexe to Clause 8 of the Public Distribution System
      (Control) Order, 2001 casts an obligation upon the State
      Government to provide a proper system of monitoring FPS. This
      clause   provides   the   statutory   basis   for   setting   up   an
      independent monitoring mechanism such as an “Ombudsman/
      Regulator”.




5.5.4. The objective of Ombudsman/ Regulator would be that he/she
      would act as ‘Watch Dog’ to ensure effective compliance of the
      PDS Control Order, 2001, The Delhi Specified Article (Regulation
      of Distribution) Order, 1981 and the Citizens Charter. The
      Ombudsman/ Regulator will also provide free, fair, independent
      mechanism for speedy resolution of complaints with reference to
      the benchmark set out in the governing statute, order and
      circulars by the authorities. Ombudsman/ Regulator should
      focus on investigating and resolving individual complaints and
      also address systemic issues. The Ombudsman/ Regulator
      provides consumers an easily accessible system, which would be
      just and speedy in redressal of their complaints and grievances.
      This should not become a procedure bound system or be driven
      by dilatory reports. Investigation will be resorted to wherever
      considered necessary by the Ombudsman/ Regulator. The
       Ombudsman/Regulator shall oversee the functioning of the
       Enforcement Branch including the Anti Hoarding Cell.




5.5.5. Ombudsman/ Regulator should be appointed by the Lieutenant
       Governor of Delhi in concurrence with the Chief Justice of Delhi
       High Court. He or she will not be eligible for re-appointment.




5.5.6. Eligibility conditions




(i).   The Ombudsman/Regulator should be a sitting/retired member
       of the Delhi Higher Judicial Services who is or has been in the
       super time scale i.e. of Rs. 22,850 - 500 - 24850;




5.5.7. If the Ombudsman/Regulator is a retired member of the Delhi
       Higher Judicial Services, he/she will remain in office for a term
       of three years or upon reaching the age of Sixty five, whichever
       is earlier.




5.5.8. Terms and conditions of service




       The salary and allowances payable to the Ombudsman/
       Regulator shall be the same as payable to a member of the
       Delhi Higher Judicial Service in the super time scale.
5.5.9. Removal and Resignation from office




     Whereas a sitting member of the Delhi Higher Judicial Services
     will be governed by the service rules applicable to him. In the
     case of a retired member of the Delhi Higher Judicial Services
     being appointed, the following will apply: -




     (a).     The Ombudsman/ Regulator may be removed from office
              by the Government any time after appointment if
              Ombudsman/ Regulator has:

     (i).     Been adjudged an insolvent; or

     (ii).    Been convicted of an offence involving moral turpitude;
or

     (iii).   Become physically or mentally incapable of acting as
              Ombudsman/ Regulator; or

     (iv).    Acquired such interest as is likely to prejudicially affect
              his functions as Ombudsman/ Regulator; or

     (v).      So abused his position as to render his or her
              continuance in office prejudicial to the public interest.




     (b).     However, the removal on the grounds specified in clauses
              (iv) and (v) can be done only in concurrence with the
               Chief Justice of Delhi High Court, after following the
               principles of natural justice.




5.5.10.       Functions and       Responsibilities of Ombudsman/
          Regulator




      Ombudsman/ Regulator would be that he/she would act as
      ‘Watch Dog’ to ensure effective compliance of the PDS Control
      Order, 2001, The Delhi Specified Article (Regulation of
      Distribution) Order, 1981 and the Citizens Charter. The
      Ombudsman/Regulator will constantly monitor each facet of the
      distribution process detailed in the governing control orders and
      circulars to ensure inter alia that the correct quantities of SFAs
      reach the intented beneficiaries.

      In addition the Ombusman/ Regulator will deal with Consumers’
      complaints and grievances which may broadly be classified into
      two groups:

               Basic

              Complex.




      Basic complaints would mainly relate to non-provision of Public
      Distribution System items benchmarked to quality/quantity,
      delays, harassment etc. Complex complaints would relate to
      matters      involving    laws,    enforcement   deficiencies   and
      widespread discontent. Basic complaints may require summary
        disposal   without   undertaking   any   detailed   investigation.
        Complex complaints may involve proper investigation.




        Having regard to the class of complaints, whether basic or
        complex, the functions and responsibilities of the Ombudsman/
        Regulator will be as follows:




(i).    To act as the repository of complaints/grievances received upon
        the Helpline. Ombudsman/ Regulator shall also monitor the
        functioning of GPS technology that may be used in the
        Transportation of Food grains and deal with all matters relating
        to consumer complaints arising from deficiencies in various
        stages of Public Distribution System operation;




(ii).   To act as the monitoring authority in respect of functioning of
        the Vigilance Committees and follow up action taken by the
        Department on the reports/recommendations of the Vigilance
        Committees.




(ii).    To investigate, where necessary in the judgment of the
        Ombudsman/ Regulator, complaints on case-by-case basis after
        seeking the perspectives of parties involved and making an
        independent assessment of complaints;
(iii).   To seek resolution of complaints through application of extant
         law, rules and orders in complex cases based on his or her
         personal assessment of what is reasonable and fair;




(iv).    The Ombudsman/ Regulator will have jurisdiction to address
         and investigate, where necessary, complaints about, inter-alia,
         the following matters:




(a)      non-observance of the PDS Control Order by FPS owner.

(b)       short   supply   of     Food    grains/sugar/kerosene   oil   below
         entitlement;

(c)      supply of poor quality Food grains not matching the sample on
         display; and

(d)      diversion of Food grains to shops other than FPS. .

(e)        the    manner   in     which   complaints   received   from    the
         consumers/complainants including those on the toll free
         Helpline, have been dealt with by the concerned officials of the
         Department.

(f)       Action taken by officials of the Department on reports of
         Vigilance Committees.




 (v)     It will be the responsibility of Ombudsman/ Regulator to devise
         and implement communication strategy to educate consumers
       as well as FPS owners about their rights and entitlements as
       well as various dos and don’ts of Public Distribution System.




(vi)      It is made clear that the remedy to approach the Ombudsman/
       Regulator would be in addition to and not in derogation of other
       remedies available in law.




5.5.11.        Powers of Ombudsman/ Regulator




The powers of the Ombudsman/ Regulator, inter-alia, would include:




(i)    Public functionaries in the Department/Delhi State Civil Supplies
       Corporation Limited/Food Corporation of India, in charge of, or
       dealing with Public Distribution System, must function with “due
       diligence”; that is, they must ensure that within the framework
       of the system, the consumers’ entitlements of Food grains etc.,
       are made available to them on time through the distribution
       network. Any deficiency or shortcoming on their part, with
       reference to the benchmarks, will render the functionary
       personally liable to action. The Ombudsman/Regulator will have
       the power to recommend and monitor departmental action in
       respect of errant officers keeping in mind the governing
       disciplinary rules.     In cases of violation of any laws in the
       matter    of   Public   Distribution   System,   the   Ombudsman/
       Regulator can direct the concerned authorities to take action
       against the person/party. There cannot be any corruption in
        Public Distribution System unless there is complicity between
        FPSs, Department Officials and the Transporter. While the FPS
        owner and the Transporter can be prosecuted under Section 7
        of the Essential Commodities Act, 1955 for violation of the
        provisions of law including the Public Distribution System
        (Control) Order, 2001, it is incongruous that the Department
        officials who are fully involved in the crime should be proceeded
        against only departmentally in the absence of sanction under
        Section 15A of the Essential Commodities Act, 1955. The
        Committee therefore recommends that Section 15A be suitably
        amended by deleting clause (b), which deals with public
        servants belonging to the State Governments. The Committee
        also recommends that till the legislature makes such an
        amendment as proposed, the State Government shall delegate
        the    power     of    sanction      for   prosecution   to   the
        Ombudsman/Regulator.




(ii)     The Ombudsman/ Regulator can recommend payment of
        compensation to a complainant upto a maximum amount of Rs.
        5,000/-, and/or supply of goods and services as required for
        resolving the complaint or/and issue cease and desist order. In
        case of complaints of a frivolous nature, the complainant will
        also be liable for similar action.   The amount mentioned above
        would be paid by the Department to the beneficiary at the first
        instance and would be recovered from the concerned officer.




(iii)   The complaints received by the Ombudsman/ Regulator may be
        referred by him for a report from the District Vigilance
        Committee or FPS Vigilance Committee, as the case may be. It
       is clarified that this power of the Ombudsman/ Regulator to
       make a reference shall be in addition to and not in derogation of
       the powers of the Ombudsman/ Regulator to conduct an
       independent enquiry into complaints. While, the reports so
       received, will assist the Ombudsman/ Regulator in providing
       solution,   these   reports    will   not   be     binding   upon    the
       Ombudsman/ Regulator.




(iv)   The Ombudsman/ Regulator also may not entertain a complaint
       if the complaint is more than 90 days old which can, however,
       be relaxed by Ombudsman/ Regulator in his discretion in
       deserving cases and final resolution of complaints will need to
       be prescribed for ensuring speedy and efficacious handling of
       complaints.




(v)    Time limits for addressing complaints, various stages involved in
       completion of investigation and final resolution of complaints will
       need to be prescribed by the Ombudsman/ Regulator for
       ensuring speedy and efficacious handling of complaints.




(vi)     The       Ombudsman/        Regulator     will    ensure    that   all
       codes/orders/regulations etc., are put on the website for the
       convenience of the consumers.
(vii)     The     Ombudsman/     Regulator     will   have    authority   to
        suggest/recommend      changes    in    operational    matters    to
        smoothen and simplify the operation of the system.




5.5.12.         Structure




        The Ombudsman/ Regulator would need to be given a nucleus
        of staff to examine issues from both reactive and pro-active
        approaches.




5.5.13.         Funding




        It will be the responsibility of the Government to provide funds
        for   implementation   of   the   aforegoing    recommendations
        including meeting administrative and operational expenses of
        the office of Ombudsman/ Regulator including the staff thereof.
        In this context it is relevant to point out that the Planning
        Commission provides funds under its plan programmes for
        monitoring and improvement in the management of supplies.



6       CONCLUSION


6.1             The Committee has observed that the Department has
        failed to fulfil all the obligations that are laid down by the PDS
        (Control) Order, 2001.The Committee has also found total non-
        compliance of the Citizens Charter issued by the Department
      2007 which is based on the Model Citizens Charter of the
      Government of India (it may be noted that the Government of
      India has issued a revised charter on 30th July, 2007). Detailed
      charts showing the violations and omissions by the Department
      have been enclosed in Part III of this report.
6.2         It is said that the consumer is the King. However this
      applies to a vigilant consumer. The need of the hour is an
      empowered consumer who is made aware of his rights through
      a sustained campaign creating awareness of his various
      entitlements. This should be done through electronic and print
      media, handbill, street and nukkad meetings, street plays
      organized by NGOs and other interest groups.

				
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