The pilot will be inaugurated by Union Minister for Consumer Affairs, Food and Public Distribution, Shri Pralhad Joshi. The event will be attended by Puducherry’s Lieutenant Governor Shri K. Kailashnathan and Chief Minister Shri N. Rangasamy, along with senior officials and stakeholders.
The initiative reflects the Centre’s broader push toward strengthening India’s digital public infrastructure and integrating innovative financial technologies into welfare schemes.
What is the CBDC-Based Food Subsidy Model?
The Digital Rupee, issued by the Reserve Bank of India (RBI), is a tokenised digital version of the Indian currency under the Central Bank Digital Currency (CBDC) framework. Unlike traditional electronic transfers, CBDC functions as programmable digital cash, enabling targeted and purpose-bound usage.
Under this pilot, food subsidy amounts will be credited directly into beneficiaries’ CBDC wallets in the form of programmable tokens. These tokens can be redeemed exclusively for purchasing entitled foodgrains at authorised Fair Price Shops (FPS) and designated merchants.
This ensures that subsidy funds are used only for their intended purpose, reducing misuse while improving transparency and efficiency in the Direct Benefit Transfer (DBT) ecosystem.
Strengthening Transparency in PDS
The integration of CBDC into PMGKAY represents a structural reform in India’s food security framework. By embedding Digital Rupee into subsidy disbursement, the government seeks to enable secure, instant, traceable and accountable fund transfers.
The programmable feature of CBDC ensures that beneficiaries receive entitlements seamlessly while authorities can monitor utilisation in real time. This is expected to reduce friction in subsidy delivery and minimise leakages in the system.
Collaborative Implementation Framework
The pilot is being implemented in coordination with the Government of Puducherry, the Reserve Bank of India, the Public Financial Management System (PFMS), and designated banking partner Canara Bank.
The collaboration among financial institutions, digital infrastructure platforms and state authorities is aimed at ensuring smooth execution and operational efficiency. Officials indicate that the pilot will help evaluate technical performance, beneficiary experience and scalability.
Next Phase of Digital Transformation
The CBDC-based Digital Food Currency initiative is being viewed as the next milestone in India’s digital governance journey. Over the past decade, India has strengthened DBT mechanisms, Aadhaar-linked identification and digitised financial inclusion.
By introducing Digital Rupee into welfare schemes, the government aims to further empower beneficiaries while enhancing accountability. The move aligns with broader Digital India and financial inclusion goals.
Phased Expansion Planned
Following its rollout in Puducherry, the CBDC-based pilot will be expanded in a phased manner to additional beneficiaries and other Union Territories. Authorities will assess operational outcomes before scaling the initiative nationwide.
Officials believe that successful implementation could redefine subsidy delivery models across sectors, including food, fertiliser and other welfare schemes.
As India experiments with Digital Rupee in public welfare, the Puducherry pilot marks a landmark step in merging financial innovation with social protection. If successful, it could pave the way for a more transparent and technology-driven food security system.