Govt launches Central Bank Digital Currency-based food subsidy pilot in Puducherry

The government on Friday launched a Central Bank Digital Currency-based Digital Food Currency pilot in Puducherry, marking the first use of the digital rupee for food subsidy transfers under the Pradhan Mantri Garib Kalyan Anna Yojana. 

Under the pilot, food subsidies will be credited directly into beneficiaries’ CBDC wallets as programmable e₹ tokens instead of conventional bank accounts. The initiative integrates the digital rupee issued by the Reserve Bank of India into the Direct Benefit Transfer framework of the Public Distribution System. 

Union Minister for Consumer Affairs, Food and Public Distribution Pralhad Joshi inaugurated the pilot in Puducherry. He said the move as a “transformative milestone” in India’s food security architecture, saying CBDC integration would enhance transparency, efficiency and beneficiary empowerment. 

How the CBDC model works 

The minister said digital coupons generated through the RBI system would be credited as programmable currency into beneficiaries’ wallets. These tokens can be redeemed for entitled foodgrains at Fair Price Shops and authorised merchant outlets using voucher codes. Since the tokens are purpose-bound, they can be used only for purchasing eligible foodgrains, ensuring targeted utilisation of subsidy funds. 

Officials said the CBDC model is expected to address operational challenges linked to biometric authentication and e-POS devices, while enabling secure, traceable and real-time transactions. The pilot begins with a limited number of beneficiaries and will be expanded across the Union Territories before being rolled out in Chandigarh and Dadra and Nagar Haveli. 

Building on digital PDS reforms 

The scheme is being implemented under PMGKAY, which covers over 80 crore beneficiaries nationwide. The minister noted that apart from wheat and rice, the programme also supplies millets to strengthen nutritional security. 

According to the Department of Food and Public Distribution, the initiative builds on earlier digital reforms such as Aadhaar-enabled authentication, end-to-end digitisation of ration cards and nationwide portability under the One Nation One Ration Card framework. The CBDC layer adds a programmable sovereign digital payment mechanism to the existing PDS architecture. 

Officials said provisions have been made to ensure inclusion of feature phone users and to enable beneficiaries to locate nearby authorised merchants through the application interface. 

The government plans to evaluate the outcomes of the pilot before taking a call on a broader national rollout. If scaled, the CBDC-based food subsidy model could mark a significant shift in how welfare payments are delivered, with a stronger focus on purpose-specific transfers and real-time monitoring.