India Launches CBDC-Based Food Subsidy Pilot Under PMGKAY

The Government of India has launched a pilot initiative to transfer food subsidies through Central Bank Digital Currency under PMGKAY in Puducherry. The pilot was inaugurated on February 26, 2026, by Union Minister Pralhad Joshi in the presence of senior Puducherry officials.

It marks a significant shift from conventional bank transfers to CBDC-powered digital wallets for Public Distribution System benefits. The programme aims to deliver subsidies more securely, transparently and efficiently using programmable digital currency.

Launch Of The CBDC-Based Subsidy Framework

The pilot introduces CBDC as the medium for transferring food subsidies under PMGKAY in the Union Territory. Instead of routing benefits through standard bank accounts, the subsidy will be credited directly into beneficiaries’ CBDC wallets.

These wallets will receive digital coupons generated by the Reserve Bank of India, structured as programmable e₹ tokens. The initiative marks the first instance of integrating sovereign digital currency into a welfare subsidy framework.

Operational Structure and Beneficiary Access

Under the new system, beneficiaries will receive e₹ tokens representing their subsidy entitlement. These digital tokens can be redeemed at Fair Price Shops and authorised merchant outlets for the foodgrains allotted to them under PMGKAY.

The transaction model is designed to ensure real-time processing, traceability and enhanced security across all stages. This structure seeks to simplify operational workflows while ensuring that entitlements reach eligible households without delays.

Addressing Systemic Challenges Through Digital Integration

Officials stated that the pilot aims to resolve persistent challenges associated with biometric authentication and e-POS devices used in PDS. The CBDC-based approach reduces dependency on physical hardware, thereby minimising authentication failures and connectivity issues.

By enabling programmable transfers, the system also strengthens oversight of subsidy utilisation. These features collectively enhance transparency and reduce leakages within the distribution chain.

Linkages To Existing Digital Reforms in Food Distribution

The pilot builds upon broader reforms in the national food distribution ecosystem. It complements initiatives such as ONORC, which allows nationwide portability of ration cards for eligible beneficiaries.

The framework also aligns with Aadhaar-enabled authentication systems and data-driven monitoring platforms such as the Rightful Targeting Dashboard. By integrating CBDC into DBT mechanisms, the pilot introduces a new digital layer to Puducherry’s existing PDS delivery model.

Puducherry As the First Implementation Site

Puducherry has been utilising a DBT model for PDS distribution, making it an appropriate choice for the first CBDC-based rollout. The government noted that the region’s existing digital infrastructure and administrative readiness supported the transition.

The pilot represents a controlled environment for evaluating operational challenges and user response to CBDC-based subsidies. Insights gathered from this launch may inform considerations for potential expansion to other regions.

Read More: India, UN World Food Program to Sign MoU for 1 Lakh Tons Rice Supply.

Conclusion

The CBDC pilot in Puducherry marks a notable step in the evolution of digital welfare delivery under PMGKAY. The system introduces programmable digital tokens and real-time processing to streamline transfer and redemption of subsidies.

It also aims to resolve challenges linked to legacy authentication and distribution systems. The initiative extends digital reforms in India’s food security programmes by embedding sovereign digital currency into welfare operations.

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