Section 10 (1a and 1b) of the National Food Security Act requires states governments to identify households to be covered under priority and AAY categories within a year from the commencement of NFSA and place the list of identified eligible households in the public domain After the enactment of NFSA, all state governments developed a set of eligibility criteria to identify households for issuing ration cards. Based on this eligibility criteria, new ration cards were issued. In some states (such as Bihar and Madhya Pradesh), the state governments used existing data (such as the Socio-Economic Caste Census) to identify households and issue new ration cards. In other states (such as Chhattisgarh and Odisha), eligible households had to apply for new ration cards through a self-declaration process
Many problems with the PDS ration system exist. There are millions of ineligible and fraudulent ration cards; at the same time, millions of poor families have no ration card. PDS shop owners in collusion with government officials divert the subsidized food supply and petroleum to the black market. Card numbers are inflated by those held under false or duplicate names, in the names of dead people, or by real but ineligible people.
The bank accounts and ration cards of eligible beneficiaries are linked to their Aadhaar numbers. A bank account can be enabled as AeBA by seeding (linking) it with an Aadhaar number. Seeding makes mapping information stored on the NPCI payment gateway that facilitates the subsidy payment. Seeding helps identify genuine and eligible beneficiaries and prevents duplicate and non-existent persons from registering. Users can link a bank account as self-service option through ATM kiosks, the Internet, bank websites, telephone, or by providing a copy of the Aadhaar letter to a bank.
Prior to Aadhaar, the issues plaguing and derailing social security programs in India were caused by corrupt officials and middlemen manipulating paper records and stand-alone databases of social security services. Due to lack of a unique identifier like Aadhaar, stand-alone databases cannot detect and eliminate duplicate or fraudulent beneficiaries. The most common modus operandi adopted to inflate the beneficiary list is by inserting duplicate entries, non-existent names, and the names of dead and non-eligible people. Attempts are then made to steal the social security benefits money, depriving genuine claimants.