Govt forms panel for direct transfer of subsidies

[ganeshran]

New Delhi: The government has constituted a committee of cabinet ministers and top officials to design a system to transfer all subsidies directly to the bank accounts of beneficiaries. The National Committee on Direct Cash Transfer is chaired by Prime Minister Manmohan Singh and has 13 ministers as well as the heads of the Planning Commission and the Unique Identification Authority of India (UIDAI), which is issuing the Aadhaar numbers instrumental to the programme. The setting up of the panel shows the government is completely ÅÂligned to shifting to the new way of distributing subsidies, said a government official familiar with the developments, asking not to be identified. The direct cash transfers are expected to create goodwill for the Congress-led United Progressive Alliance (UPA) government, which has been struggling to salvage its image after a series of corruption charges and a depressed economy. Paying cash directly ÅØill be more attractive to the beneficiaries as it would give them confidence that the money that the government is spending for them is reaching them, a Congress minister said, requesting anonymity. Schemes under IndiaÃÔ various welfare programmes are afflicted by middlemen and government officials because of whom beneficiaries often donÃÕ get their due entitlements. The government in September announced it would form a committee to expedite the movement towards electronic cash transfers. The committeeÃÔ mandate includes identifying ÅÈovernment programmes and schemes for which direct cash transfers to individuals can be adopted and specifying timelines for the roll-out, the Prime MinisterÃÔ Office (PMO) said in a statement on Thursday. The panel also has to review the implementation of direct cash transfers and coordinate the activities of various government departments. It will ÅÑrovide an overarching vision and direction to enable direct cash transfers of benefits under various government schemes and programmes to individuals, leveraging the investments being made in the Aadhaar project, financial inclusion and other initiatives of the government, with the objective of enhancing efficiency, transparency and accountability, the PMO said in its statement. Singh and Congress chief Sonia Gandhi supported the governmentÃÔ plan to move away from the existing regime of subsidies at UIDAIÃÔ second anniversary celebration at Dudu, in Rajasthan on Saturday. Singh said at the event that direct transfers of subsidies for items such as cooking gas, kerosene and fertilizers will eliminate corruption from the public distribution system. The government official quoted earlier said the programme is the governmentÃÔ way of killing three birds with one stone. Ÿhile this will lead to social inclusion by bringing in people without identities into the formal system, it will also lead to fiscal efficiency by making subsidies more effective, he said. And ÅÕhe biggest message the government is trying to convey is that it will fix corruption at the level where it impacts the common man the most. UIDAI has so far enrolled 230 million people and expects to issue Aadhaar numbers to 600 million people by 2014. Critics say it will be a while before the entire country is enrolled by the authority. Also, only 60% of the countryÃÔ population has bank accounts, key to the success of direct transfers of cash subsidies. The government spends Rs.3 trillion every year on subsidies and other payouts such as pensions and scholarships. The government official admitted that although the centre is serious about the regime change, it may take time to fully implement transfers at the ground level. Å©owever, significant benefits can be achieved by 2014, before the government goes for election, he said.

Theoretically its a good idea to transfer cash directly for subsidies where it can be controlled, rather than selling them cheaper in the market since it avoids misuse of goods for commercial use. But in a system like ours, how would seepage be controlled? The UID wont be available to everyone for quite some time, and a cash transfer scheme without it being tied to UID would be prone to abuse. Middlemen could easily create fake beneficiaries and mint money. IMO the government should wait for UID and maintain a sort of prepaid balance of subsidized goods which could be deducted on redemption. This avoids directly paying money and making sure the subsidies are indeed spent on buying the goods and not for some other purpose

[Raghav_12]

Under current infrastructure implementation would be very difficult. But definitely good idea. Whoever in government came up with this , should be given credit. If UID thing works out at satisfactory levels, this can be implemented.

[Crookbond]

Technology can suppress corruption but can't eliminate it. Soon, we will see smart ways to circumvent technology.

[BeautifulGame]

Already NRGEA payment is being implemented through banks successfully which is much harder so dont thing it will that hard to implement subsidy distribution if proper effort is made imo.

[CG]

India To Have Direct Cash Transfer To Aadhar Card Holders To reduce corruption.

The Unique Identification project has enrolled 270 million people in last three years and the data collected through it can be used to provide various benefits like direct cash transfer to cardholders, UID project chief Nandan Nilekani said today. Addressing a gathering here, Nilekani also expressed the need to make the project irreversible by providing "compelling services" to the people. "This is three years since we launched this project. We have enrolled 270 million people into the system and issued unique numbers to 220 million people. We enrol at the rate of over a million people a day. So lets say we can do Finland in a week and Australia in three weeks," he said. Replying to a question on the future of the project under a new government after the 2014 general election, Nilekani said, "What is required is to make it irreversible, that is the way to look at this problem." "In our view, if half a billion people in this country have this identity number and if they are getting a couple of very compelling services through this number then their voices will speak for it," he said. Nilekani described the UID project as a platform which can be used to provide various benefits to the people. "The first big application we are doing on this is direct cash transfer. Government spends billions of dollars in giving benefits to people like pensions, scholarships etc. We are building a system along the banking sector to electronically credit money into people's bank account," he said. (More)

http://www.business-standard.com/generalnews/news/direct-cash-transfer-facility-for-uid-cardholders-nilekani/84192/

[CG]

Great For poor people and it will reduce corruption if implemented rightly. What i have read it will work by transferring the subsidy to bank accounts per month. So people buy at market rates and get the diff in bank accounts.

[ganeshran]

Already posted

[ravishingravi]

Makes lot of sense. Kudos to govt.