The subsidies for 2011-12 were around `2,16,297 crore, or 2.41 per cent of GDP, and 58 per cent of this did not reach the target group
The government is on the threshold of implementing one of the most revolutionary schemes and ideas since Independence, after the National Rural Employment Guarantee Scheme and the Right to Information Act, namely, giving subsidies for food, fuel and fertiliser in the form of direct cash payments through Aadhaar (or Unique Identity Number) and National Population Register-linked bank accounts.
According to some reports it would be the largest cash transfer scheme in the world. Direct cash transfers of subsidies exist in Brazil, Mexico and Chile with various degrees of success in eliminating poverty and furthering equality.
Aadhaar currently covers 200 million people and is expected to go up to 600 million. It is not known whether between the Aadhaar and the National Population Register the number of people below the poverty line are adequately covered, but a beginning has to be made soonest because it is a well-known fact that the present system of distributing subsidies is woefully corrupt and barely reaches target groups besides adding to the fiscal deficit.
According to Planning Commission studies, the subsidies for 2011-12 were around `2,16,297 crore, or 2.41 per cent of GDP, and 58 per cent of this did not reach the target group; and one-third of grain in the public distribution system is siphoned out. Finance minister P. Chidambaram has said government spends `3.65 on transferring `1 to the poor.
In this scenario, the direct cash transfers to farmers and other beneficiaries would seem ideal. Pilot projects in states like Andhra Pradesh, Chhattisgarh, Puducherry, Tamil Nadu and Karnataka have shown encouraging results. Reports indicate that in the pilot project in Alwar, where kerosene was subsidised through direct cash transfers, the number of consumers dropped by 80 per cent, from 80 kilolitres per month to around 14 kilolitres, as the ghost consumers evaporated.
There is some concern and scepticism about the efficacy of the direct cash transfer system. The CPI(M), for instance, says cash transfers will further fuel food inflation besides possible diversion of the money by beneficiaries for more pressing needs. They also see it as an encroachment on the rights of the states. While their concerns and those of others may be looked into, every effort should be made to see that the scheme is monitored closely and that a foolproof system is put in place. Perhaps the bank account should be in the name of the woman of the house. There should also be accountability of persons in charge of implementation at various levels and any corruption encountered should be dealt with severely and immediately.
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In latin american nations
Sumit Chaudhary
18 Oct 2012 - 12:34
In latin american nations Conditional Cash Transfer has shown encouraging results primarily in Social welfare schemes and Child education/health. However Direct Subsidy Transfer where product based transaction is involved has its own challenges. Beneficiaries have to pay full amount upfront from pocket and it all depends on efficacy of Govt system to transfer the amount in beneficiary account. Will have different experience for different products (Kerosene, Fertilizer and LPG have different full market price and subsidy amounts). Looks promising if we plug the gaps and tweak in well for various schemes. UID can prove to be a great enabler for Direct transfer.
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