Anajmitra: POS Device for blocking Pilferage in PDS

For requirements of the course

New Technology Applications Design and Business Models (2012)

Instructors Prof. Bhavin Kothari, NID Prof. DevalKartik, NID Prof. JigneshKhakhar, NID Prof. RakeshBasant, IIMA Presented by: Group 13 AnkitMadhogaria, IIMA Manbir Singh Gill, IIMA JagdishKolhe, NID Kavitha S Nathan, NID Date: 13th August 2012

Table of Contents
Design Why we need Anajmitra ? How Anajmitra Works ? Technology Business Model Market Attractiveness Value Proposition Target Segment Roll Out Plan Concerns Exhibits References 8 8 10 11 12 13 15 3 4 6

Design Why do we need Anajmitra?

Fair Price Shops (FPS) is an essential strategy for Government to accomplish Food Security by ensuring availability of food grains to people who cannot afford it at the market price. 57% of the FPS food grains currently dont reach the intended beneficiaries (UID and PDS, 2010). Integration through Information Technology currently has capability to track movement of grains from central warehouse of Food Corporation of India to regional warehouses, and then to FPS. The leakage in the system still exists because of the following issues: 1) Bogus Ration Cards 2) Shadow Ownership of Ration cards 3) Non availability of the service by rightful owners of ration card 4) Inability to track the amount of ration distributed to the beneficiary Government is also in the process of implementing the UID scheme that will enable identification of every citizen with a unique number and biometric information. Already 20 Cr people have been allocated Aadhar cards and the budget to allocate the same to additional 40 Cr people was allocated for the period 2012-13. Once UID is in place, it will be possible to classify citizens on the basis of income, location and other demographic parameters. Anajmitra will enable user to log in and conduct the transaction at FPS, enabling transfer of benefit to the genuine individual. By aggregating the transactions, it will be possible to monitor the amount of benefits reaching the beneficiaries and thus identify and plug leakages. The requirement of biometric identity will prevent bogus cards generation and prevent shadow ownership. As there is a need for individual to be present to authenticate biometrically, it will prevent other people from using the quota of rightful owners. Also link between the weighing machine and POS will enable appropriate weights being assigned to the transaction. As Anajmitra will be connected to server, it will be possible to track flow of rationed items in Public Distribution System on continuous basis. This can lead to better planning of stocks and ensure adequate storage and movement at various levels of the Distribution System. Currently there is a problem of inadequate allocation and off-take at the State government level. Presence of Anajmitra can help track genuine demand at each FPS and thus result is more effective allocation and distribution.

Under current scheme of distribution involving Targeted FPS, it becomes an issue of Policy interest to avail benefit to rightful people. Aadhar, with appropriate technology like Anajmitra is capable of doing that. Also, if Government passes the legislation related to Right to Food covering every citizen, it will lead to movement of more resources and therefore benefits of plugging the leakage will be higher. Also, as there will be cases of selfselection, where-in the richer individual will not avail the FPS facility, Anajmitra will results in savings for Government as it will not have to incur the cost of ration being picked by dubious people on behalf of richer individuals.

How Anajmitra Works ?

Figure 1: Anajmitraa POS Interface The sequence of steps to conduct transaction at FPS using Anajmitra is as follows: 1) Identification of benefactor through biometric identification of finger prints which logs the user to the system. 2) Device assigns a transaction number and User ID to the transaction. User is also able to see the stock available of various rationed items and also check the quota left for user for the month. 3) User selects the item she wishes to purchase which is then kept on the weighing machine. Weight is visible on the LED display of the weighing machine. 4) Once appropriate amount of item is placed on the weighing machine, User presses the button corresponding to item on Anajmitra. 5) Device records the item identity and the weight at the press of the button. It is ready now for the next item.

6) After all items are bought by the User, she presses Receipt. Detail of the complete transaction gets recorded in Anajmitra. It updates the value of stock of the items now available to the next User. A receipt corresponding to transaction is generated and handed over to the User. 7) The details of transaction are sent to a Server from device at the end of the day, where the details of transactions are used to update the User accounts and FPS account.

Figure 2: Anajmitra connected to Weighing Machine

Figure 3: Shows use of thumb reading

Figure 4: selection of appropriate item

Figure 5: Selection of Cancel option

Figure 6: Shows use of receipt button

Technology
Anajmitra is fitted with finger print sensor to log in the User. Aadhar ID will be used to assign individuals to relevant FPS shops. Each FPS will have a unique identification and Anajmitra will be coded to work at a particular FPS. The biometric information of the assigned users will be downloaded to Anajmitra which will be stored in the local hard-drive of Anajmitra. The device will be capable of storing over a thousand transactions in local hard drive. The device will connect to the server through an Ethernet port or mobile 2G technology and the server will be updated at the end of the day. The device will work on wall power with a built in battery to work during the period of no electricity. It will have an LCD display (similar to mobile phone) to output image, name and id number of the logged in User. It will have additional LED displays to output available quantities at FPS of rationed items in the shop and quota available to the user. The image of the rationed items will be on LCD display and will be downloaded from server to Anajmitra based on items rationed at the FPS shop. Anajmitra will contain a module capable of reading the output from balance of the weighing machine sent to LED display of weighing machine. It will be fitted with a roller printer to output the receipt on completion of transaction. Weighing will be done by a standard electrical weighing machine available in the market, fitted with LED display. Server will use SQL based database and communicate with Anajmitra using TCP/IP protocol. Server database will contain an SQL table containing information captured in the Aadhar ID. It will also contain a table with information about the FPSs and with a unique FPS ID as the primary key of the table. Each User will be assigned to a unique FPS shop and server will download Aadhar details to corresponding Anajmitra. Server will record transactions against each user and FPS. Therefore, reports can be generated about the performance of each FPS. Query can be used to check matching of supplied grains to distributed amount at FPS and cases of mishandling highlighted for investigation. Precedence Study a. Idea related to use of POS that is equipped with fingerprint reader to identify beneficiary and do book keeping is discussed under the following link: http://uidai.gov.in/images/FrontPageUpdates/uid_and_pds.pdf (Pg -9, para 1)

b. Aadhar Number based Smart Distribution System by SreevenInfocom Limited http://ewf.eletsonline.com/2012/05/aadhaar-no-based-smart-public-distributionsystem-sreeven-infocom-ltd-2/ The previous precedents do not have weighing balance in conjunction with POS. They solve the problem of ensuring that bogus cards are not used but dont check on the amount of supply actually taken by the beneficiary who may not understand the weights implied in receipt. Using in conjunction with weighing balance ensures that right weight is reaching to the right individual.

Business Model Market Attractiveness

Government invests close to Rs 40000 Cr as direct subsidy to Food Corporation of India to procure grains and other items that are to be distributed through the Fair Price shops. The estimated pilferage rate in the system currently is 57%.
Title Government Expenditure on FPS Number of FPS in India Average Govt Expenditure per FPS Pilferage Rate Average Loss per FPS Amount Units

40,000 Rs Cr pa 500,000 shops 800,000 Rs pa 57% 456,000 Rs pa

Table 1: Computation of Average Pilferage Cost at each FPS Therefore, there is potential to provide added benefit to vulnerable Users of Rs 456,000 p.a per FPS through savings on pilferage cost. Government has also budgeted for endeavors to roll-out and scale up Aadhar enabled payment systems for various Government schemes. Therefore Anajmitra, which utilizes the information captured in UID can serve as an effective solution to plug leakages in FPS.

Value Proposition
Cost Estimation of Using Anajmitra Breaking down into parts that will be required to build the Anajmitra and taking a rough estimate of the components, cost of a unit of Anajmitra is estimated to be Rs 23,500. When building of system will happen in bulk, there is an expectation of reduction in the cost of each unit of Anajmitra.

Capital Expenditure
Parts of Anajmitra Display Chasis Electronic Weighning Machine Hard drive (100 GB) Communication Module Printer Battery Power Circuit Interface Hardware Total Cost Cost 5,000 1,500 10,000 1,500 1,000 2,000 1,500 500 500 23,500 Units Rs Rs Rs Rs Rs Rs Rs Rs Rs Rs

Table 2: Computation of Capital Expenditure on Anajmitra As Anajmitra will require electricity and internet connection, expected cost of operating it per annum is expected to be Rs 12,300 Operation Cost
Title Wattage of Machine Cost per Unit of Electricity Number of Hours per day Number of days FPS open Net Power Charges Internet Charges Net Operation Cost Amount 250 7 12 300 6,300 6,000 12,300 Units Watt per kWhr hrs pa Rs pa Rs pa Rs pa

Table 3: Computation of Operating Cost of Anajmitra

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Assuming life of Anajmitra to be 3 years, cost to FPS is Rs 20,133 per annum for installation of Anajmitra, without accounting for overhead costs like salary to operate the system, maintenance and repair cost, etc. Allocating Management cost of providing server facility and necessary infrastructure to run the Anajmitra system is estimated to result in additional cost of Rs 2,627 per FPS (refer to Exhibit 1), resulting in a net cost of Rs 22,760 per FPS.

Target Segment
Off-take of grains granted under FPS and distribution to beneficiary falls in the domain of State Government. The state government is allowed to add to the Central Issue Price, the transaction cost of keeping stock and delivering the rationed item to beneficiary.

Therefore, there is a potential to avail the resources from Central Government towards transaction cost incurred through use of Anajmitra. There is also the potential of passing on the additional cost to user as by using Anajmitra, User can avail more rationed items. Any FPS with pilferage greater than Rs 22,760 is a potential target as the Anajmitra will enable benefit to reach the beneficiary. Location of There are reasons beyond transfer of benefits to User for setting up the Anajmitra system as it enables the vulnerable mass to get access to Food which otherwise gets leaked in the system. Therefore, there is a case for Government to set up Anajmitra in each and every FPS across India. Assuming a charge of hardware installation and operation on the cost basis and per user charge of Rs 5 pa for providing the service, net cost to Government is Rs 1,157 Cr pa (assuming all charges are being paid by the Government) over and above Rs 40000 Cr it already spends. This additional expense of about 3% to prevent 57% pilferage is minimal and the additional benefits to Users also imply that this cost can be passed on the User by minimal price increase in items of FPS. Therefore, there is a strong case for installation of Anajmitra in every FPS. Thus, through cross subsidization, benefits will reach every vulnerable User if Anajmitra is installed, without much cost to either Government or User.

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Roll Out Plan

The pilot is to be run in area where UIDs have already been given. 20 FPS will be selected across 2 areas in Bihar and Andhra Pradesh for initial implementation for a period of 1 year. As officers at district level are responsible for allocating licenses for FPS and distribution system is controlled by State Government, initial pitching will be done to relevant officers in Bihar and Andhra Pradesh. As Andhra was progressive in acceptance of pilot as described in the precedence study, there is expectation of lower resistance. Also, AP is the most e-savvy government and therefore potential benefit due to bridging of last mile gap is expected to be high in AP. The implementation of UID is progressing fast in Bihar and under NitishKumar, there is a drive for change. As the percentage of people below poverty line is high in Bihar, therefore potential of impact of Anajmitra because of potential benefit is also high. Expected capital expenditure for the rolling out 20Anajmitra is Rs 470,000 (Table 2) and payment to FPS for operating it would be 2,46,000 (Table 3). One server will be required at the cost of Rs 100,000 and 2 resources will be hired for field work at 72,000pa for each personnel. Therefore, net cost of running the pilot will be Rs 960,000. Additional 25% or Rs 240,000 is estimated to be required to cover for miscellaneous expenses like travel, food, etc. Thus, pilot can be implemented for the first year for a net cost of Rs 1,200,000 which will be raised from personal savings, family and friends. None of the team members will draw any salary for the first year. Government will be asked to cover User charge which is Rs 60000 (Rs 5/User*20 FPS*600 User/FPS), hardware cost of Rs 470,000 and operating cost of machines by FPS which is Rs 246,000 in the Pilot phase. The expected benefits of Rs 9,072,000 to Users (through savings in Pilferage costs, Table 1) against a cost of Rs 776,000 to Government will be used to drive the acceptance of Pilot plan. Option of increasing the cost of rationed items to cover this expense will also be suggested. The impact analysis from the pilot will be used to convince Government for further business with the target to add 10,000 FPS in each subsequent years to reach 100,000 FPS in 10 years (corresponding to 20% market share) and catching up with the roll out plan of UID. Capital to setup Anajmitra will be invested by FPS owners because of licensing requirement from Government to continue running FPS and will be adjusted against payment to FCI. Capital expenditure in servers will be through accruals from business. Government will pay FPS for operating Anajmitra, again by adjusting in the bills to be paid to FCI. The detailed financials for 10 years is provided in Exhibit 2, suggesting it to be sound financial investment.

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Assumptions used in the roll out plan are presented in the table below Assumptions Number of User Per FPS Revenue per User Adjustment for Inflation Number of FPS per field staff Number of field staff per supervisor Salary of field staff Salary of Supervisor Salary Cost of Manager Salary Cost of Software personnel Storage Space per FPS Storage Space per User Cost of server space per TB Rent cost per sq feet Miscellaneous Cost Factor Inflation Rate Tax Rate Profit Ratio withdrawn from Business Amount 600 5 6% 50 10 72,000 144,000 Units person Rs pa (first 5 years) beginning Year 4 person person Rs pa Rs pa

600,000 Rs pa 360,000 Rs pa 100 MB 10 10,000 125 25% 6% 33% 50% MB Rs pa pa pa (Beginning Year 5)

Concerns
1) Failure in roll-out of Aadhar ID Issues between Home ministry, Finance Ministry and UID team 2) Resistance from FPS owners to use Anajmitra FPS shops may not make business sense to many owners following plugging of leakage leading to reduction in their numbers 3) Competition as technology can easily be developed Necessity to succeed in Pilot and have a strong roll out plan to capture the market.

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Exhibits
Title Number of FPS covered Number of FPS covered by each staff Salary of Each Staff Number of Staff per Supervisor Salary of Supervisor Number of people in Software Team Salary of Software personnel Number of people in Mgt Salary of Mgt personnel Number of Beneficiaries Number of FPS in India Number of beneficiary per FPS Total Beneficiary Covered Data per beneficiary Storage Space Required Data per FPS Storage Space Required Cost of server per TB Area of Office Space Rent per sqft Overhead Cost Miscellaneous Expense Total Overhead Cost Overhead Cost per beneficiary Overhead Cost per FPS Amount 10,000 50 72,000 10 144,000 5 360,000 2 600,000 300,000,000 500,000 600 6,000,000 10 60 100 1 10,000 1,000 125 21,015,000 5,253,750 26,268,750 4.38 2,627 Rs pa person shops person person MB TB MB TB Rs per TB pa sqft Rs pa Rs pa Rs pa Rs pa Rs pa Rs pa Units shops shops pa staffs pa person Rs pa

Exhibit 1: Computation of Overheads assuming coverage of 10000 FPS Assumption:Number of beneficiaries is evenly distributed across all FPS

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Exhibit 2: Financials of the Roll Out Plan

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References
1. Public Distribution System Planning Commission http://planningcommission.nic.in/plans/planrel/fiveyr/9th/vol2/v2c2-3.htm 2. http://www.righttofoodindia.org/data/tritah2003pds-making-poor-count.pdf 3. SREEVEN Aadhar based Public Distribution System

http://ewf.eletsonline.com/2012/05/aadhaar-no-based-smart-public-distributionsystem-sreeven-infocom-ltd-2/ 4. UID and PDS System Objectives http://uidai.gov.in/images/FrontPageUpdates/uid_and_pds.pdf 5. Key Features of Budget 2012-13 http://indiabudget.nic.in/ub2012-13/bh/bh1.pdf

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