JUSTICE WADHWA COMMITTEE ON PUBLIC DISTRIBUTION SYSTEM (PDS) KARNATAKA

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Nov 30, 2013 (3 years and 17 days ago)

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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.

Whole
sale Distribution

A.

Food Corporation of India

B.

Karnataka Food Civil Supplies Corporation

C.

Taluk Agricultural Produce Cooperative Marketing
Societies

D.

Wholesale Distribution Managed by both KFSCS
and TAPCMS

E.

Findings of the committee

F.

Computerization at wholesal
e godowns

G.

Suggestions/Inferences

26



39

26


27

28


29


29
-

30


3
0



3
3

32
-

34

3
4



3
8

38



39

4.

Retail Distribution

A.

Mode of appointment

B.

Suggestions/Inferences

C.

Functioning of the Fair Price Shops

4
0



52

4
0



4
4

4
4



4
5

4
5

-

52


5.

Viability of fa
ir price shops

A.

Suggestions/Inferences

5
3



57

57



5
8




PREFACE



In the matter:




Writ Petition (C) No. 196/2001


People’s Union
for Civil



Liberties V/S

Union of India and Ors.



6.

Transportation

A. Suggestions/Inferences

59




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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 l
ook 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 th
us 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 re
quirements.
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 onl
y
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 s
eparate 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, mon
itoring 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. Innovativ
e
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 tole
rance 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 i
s 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 a
nd
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 Sta
te 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
inval
uable 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 Dire
ctor 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
I
ndia.


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 & Civi
l Supplies; Mr.
Shiva Ram, Commissioner, Food & Civil Supplies; Mr. A.F. Hafi
z,
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. Han
umanthappa, 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 error
s 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 repor
t
.




(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 6
th

largest State in India.
62% of income of the State is derived from Agriculture.

Karnataka is the 9
th

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 aga
in 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 vis
ited 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 ef
fective
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 Committe
e 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 Karnatak
a. 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 a
nd
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 schem
e 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.
Memb
er 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 B
PL 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 t
hat 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 star
ted 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 ma
chine 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
b
iometric 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 Ce
ntres. 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
computeri
zation 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 behes
t 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 transportat
ion 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 authori
ty
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 o
n 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 author
ity. 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 denyin
g 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 Appe
llate 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 Contr
ol 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
C
ommittee 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 who
lesale
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 (TAPC
MS). 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
Karn
ataka 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 t
hat 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 w
eigh
-

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 F
CI 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 o
f 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 ru
ral
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
go
downs 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
im
posed 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 Vigi
lance 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 be
en 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 ensu
re 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 EB
PL 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 ben
eficiaries 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:
-


T
he
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
c
onsider 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 Andhr
a 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 st
ate 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 wit
h the
State officials at the secretariat level and officials
concerned with the administrati
on

of PDS at the ground
level
.

V
isiting wholesale godown and fair price shops both
in the urban and rural areas, visits to the villages and low
income areas which a
re 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 th
e
rural areas/ villages apart from visiting the fair price shops
.



1.7

T
he State of Karnataka is the only state among the States
that the committee visited which has tried to implement
the computeris
ation

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. The
ir

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 Sy
stem. 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 Corpor
ation 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 scheme
s.



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 a
s

the Apex Institution and
Taluk Agricult
ural 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 fi
nal link
in the chain of distribution of food grains to the consumers. The
State of Karnataka is divided into 26 districts and the
re 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 Circular
s 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 e
tc. 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 cann
ot 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.

Se
ction 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
o
rganization.


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 burde
n 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’) ha
s 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.
T
he 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 Ka
rnataka 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 Commodi
ties 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 St
ate 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 1
992


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 Wh
ole
Sale
Dealer
ship
.

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 Suppl
y 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 require
s 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/authoriza
tions 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 conce
rned 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

o
ffice. 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 Ka
rnataka 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 authorisa
tion 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 1
992 provides the order of
priority for gr
a
nting 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 Associatio
n 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 7
th

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.
T
he proviso further states that the cooperative society as
mentioned n Clause 6(b) of the
Karnataka

C
ontrol
O
rder
, 1992

would mean a society registered under the Karnataka
Cooperative Societies Act, 1959 and that the society also needs
to be financially sou
nd 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 licen
c
e issued under
section 3 of the
Karnataka

C
ont
rol
O
rder
, 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 depositi
ng 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
. Thes
e 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 appli
cant 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 Karnatak
a 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 t
he procedure for issue of
licenses or authorization to the fa
ir 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 commodit
ies 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 Ant
y
odaya beneficiaries,

(ii)

Entitlement of essential commodities,

(iii)

Scale of issue,

(iv)

Retail issue prices,

(v)

Timings of opening and closing of the fair p
rice 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
essenti
al 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
commoditi
es 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 th
e 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 Pu
blic 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) def
ines '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
f
amilies' 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 Gover
nments 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
An
tyodaya 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 Pover
ty
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 verific
ation.

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 b
ogus 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 Unauthori
sed
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)

N
o 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 inc
ome upto 12,000/
-

in rural area and Rs.
17,000/
-

in urban areas will be given BPL cards.



I
V.

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 t
he 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) o
f 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 Stat
e 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 issue
s

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
act
ivities.

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 prop
er
boards with division number
,

shop num
b
er 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 stat
ed 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 regis
ter. 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 a
uthority 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 an
d 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 Di
strict 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 o
f 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 P
anchayat 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 Sys
tem.



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 transp
orting 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
com
pliance 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) shal
l 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 Cod
e 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 Foo
d 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 per
son 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 of
fice 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, accou
nts 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) o
f 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 app
ointed 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 disposa
l 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 Addition
al 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) Con
trol 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 t
he 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 app
lication 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 itsel
f 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 gain
ful
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 Secret
ary will ensure compliance of
the order of
this court.



*******


CHAPTER 3


WHOLESALE DISTRIBUTION


I.

This
C
hapter deals with the process of the whole sale
distribution of the public dist
ribution 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 t
he State of
Karnataka:



Food Corporation of India



Karnataka Food Civil Supplies Corporation (KFCSC)



Ta
l
uk 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 th
e 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 furt
her 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 pre
sent 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 a
re 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 n
o samples are
given
.




III
.

Karnataka
Food Civil Supplies Corporation


3.1

As stated in the L
egal 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
G
overnment of Kar
nataka 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 li
fting 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
Su
pport Price

Operation (MSP), t
o provide Common Man’s need
at affordable prices.




IV.

Ta
l
uk Agricultural Produce Cooperative Marketing
Societies (TAPCMS):



4.1

At the state level the Karnataka state cooperative market
ing
federation is functioning as

t
he 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
pro
cureme
nt
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 El
ective Board of the TAPCMS is as
follow
s
:


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 Karn
ataka. 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 who
le sale godowns
are controlled by both the governmental and quasi
governmental organizations. Since TAPCMS is a cooperati
ve
society with elected members, i
t was found that the entire
operat
ion was controlled by its Board
, who are elected from
the members o
f 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
B
oard and the TAPCMS therefore has a free run in the
management of the godown and therefo
re also for diversion.



5.3

T
he 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 tr
ucks 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 mem
o 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 weig
hbridge 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 tr
avel 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 Sh
ivPeth 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 godown
s. 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 we
igh 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 gr
ains 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 obse
rved 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 th
e 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 no
t

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 t
he FCI was issuing samples to th
e wholesale

dealers.
However the godown officials despite repeated request could
not produce any sample.




Computerisation
a
t
t
he 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 t
he 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
inter
net connection the data is reflected or
uploaded on the internet the moment the entry is mad
e
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 obser
ved 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 m
anually 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 instanc
es are in respect of the action