The Union government has launched a pilot project in Puducherry to distribute food subsidies using the Central Bank Digital Currency (CBDC) instead of direct transfers to bank accounts according to a press release by Press Information Bureau (PIB).
The pilot, rolled out under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), will credit food subsidy amounts directly into beneficiaries’ CBDC wallets in the form of programmable digital rupee.
Union Minister for Consumer Affairs, Food and Public Distribution Pralhad Joshi inaugurated the project on February 26, 2026, in the presence of Puducherry Lieutenant Governor K. Kailashnathan and the Union Territory’s Chief Minister N. Rangasamy.
Under the new system, the government will issue subsidy amounts as digital tokens through the Reserve Bank of India’s CBDC framework. Beneficiaries can redeem these tokens only to purchase their entitled foodgrains at Fair Price Shops (FPS) or authorised merchant outlets. The government says this will ensure beneficiaries use the subsidy strictly for food purchases and allow authorities to track transactions in real time.
To explain, Puducherry is currently implementing the Public Distribution System (PDS) through a Direct Benefit Transfer (DBT) model. With this pilot, beneficiaries will receive funds in CBDC wallets instead of conventional bank accounts.
Why the Government Is Testing Digital Food Coupons
This rollout follows reports last month that the Centre was planning to trial a ‘digital food currency’ in Chandigarh, Puducherry and parts of Gujarat. At the time, officials said the initiative aimed to address leakages in food subsidy delivery and reduce dependence on biometric authentication at ration shops.
Biometric failures have previously disrupted ration distribution in states such as Telangana and Delhi, where fingerprint or iris authentication errors led to delays and rule changes to allow proxy collection of rations. The digital coupon model is being positioned as an alternative to address such technical bottlenecks.
What Ministers Said and What Happens Next
At the launch event in Puducherry, Pralhad Joshi highlighted the vision of, “Every grain, Every rupee, Every entitlement”, and remarked that this reform will enable secure and real-time transactions, and further expand the Digital India initiative, among other things.
Joshi also said the government will soon extend the pilot to three to four more States and Union Territories. He added that the government will take a decision on a wider rollout after it evaluates the results.
Meanwhile, the Secretary of the Department of Food and Public Distribution said the CBDC rollout in Puducherry is aimed at ensuring “instant, transparent and efficient transfer of benefits directly to beneficiaries”. He added that the system has been designed to include feature phone users and allows beneficiaries to locate nearby authorised merchant establishments through an application. Notably, the pilot will expand across Puducherry and then to Chandigarh and Dadra and Nagar Haveli.
The CBDC-based model adds a programmable digital layer to the existing PDS infrastructure. Over the past few years, the food distribution system has undergone digitisation through Aadhaar-enabled e-POS authentication, portability under the One Nation One Ration Card (ONORC) framework, and digital supply-chain systems such as Ann Chakra. Also, grievance mechanisms like Ann Sahayata and monitoring tools such as the Rightful Targeting Dashboard are also part of the current system.
The government says it introduced the CBDC tokens to address operational issues such as e-POS disruptions, and to reduce intermediaries in the transfer process.
Also Read:
Support our journalism by subscribing
For YouSource link
