Govt to Launch CBDC-Based Food Subsidy Pilot in Puducherry

The digital rupee (e-rupee), issued by the Reserve Bank of India (RBI), is a tokenised form of India’s sovereign currency under the Central Bank Digital Currency (CBDC) framework.

In a landmark move to modernise subsidy delivery and strengthen India’s digital public infrastructure, the Government of India will launch a Central Bank Digital Currency (CBDC)-based Food Subsidy Distribution Pilot under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) in Puducherry on February 26, 2026.

The pilot will be inaugurated by Union Minister for Consumer Affairs, Food and Public Distribution Shri Pralhad Joshi, in the presence of Puducherry Lieutenant Governor Shri K. Kailashnathan and Chief Minister Shri N. Rangasamy.

Digital Rupee for Food Subsidy

The digital rupee (e-rupee), issued by the Reserve Bank of India (RBI), is a tokenised form of India’s sovereign currency under the Central Bank Digital Currency (CBDC) framework.

Under the pilot, eligible PMGKAY beneficiaries will receive food subsidy in the form of programmable CBDC tokens credited directly to their CBDC wallets.

These tokens will be:

• Redeemable exclusively for entitled foodgrains

• Usable only at authorised Fair Price Shops (FPS) and designated merchants

• Purpose-bound to prevent misuse or diversion

The approach ensures that subsidy funds are spent strictly for foodgrain purchases, enhancing accountability and reducing leakages.

Strengthening the DBT Ecosystem

The initiative integrates the RBI-issued Digital Rupee into the Direct Benefit Transfer (DBT) framework, aiming to create a more secure, instant, traceable and programmable mechanism for subsidy distribution.

Key expected benefits include:

• Faster and smoother fund flow

• Reduced transaction friction

• Enhanced transparency

• Real-time traceability

• Improved targeting of beneficiaries

The reform represents a significant shift in the Public Distribution System (PDS), combining financial technology with welfare delivery.

Multi-Agency Coordination

The pilot is being implemented in collaboration with:

• Government of Puducherry

• Reserve Bank of India (RBI)

• Public Financial Management System (PFMS)

• Canara Bank (designated banking partner)

This coordinated framework aims to ensure secure integration between financial systems and the food subsidy infrastructure.

A New Phase in Food Security Delivery

The CBDC-based Digital Food Currency initiative marks the next stage in India’s digital transformation of welfare schemes. By leveraging programmable digital cash, the government seeks to strengthen efficiency, transparency and beneficiary empowerment in food subsidy delivery.

Following its rollout in Puducherry, the pilot will be expanded in a phased manner to additional beneficiaries and other Union Territories, depending on performance and outcomes.

The initiative positions India at the forefront of integrating central bank digital currency into large-scale public welfare systems, potentially setting a global benchmark for technology-driven subsidy reform.