Friday, September 28, 2012

Prime Minister leads initiative for direct cash transfer to subsidy beneficiaries.

The Prime Minister has begun the process of developing a system that will allow cash to be transferred directly to the bank accounts of those who qualify for government subsidies and schemes. A committee headed by him will supervise the plan and deadlines for the electronic cash transfer system that is intended to eventually cover a quarter of all households.


A statement from his office said the "Cash Transfer System would improve targeting, reduce corruption, eliminate waste, control expenditure and facilitate reforms." It stressed that the plans for this scheme will be fast-tracked.

The government spends a huge amount of Rs. 3,25,000 crores annually on subsidies and the new electronic scheme is intended to check corruption and pilferage of subsidised items like diesel, LPG. The programme will initially cover scholarships, pensions and unemployment allowances. Later, it will be used for Public Distribution Schemes which make subsidized grain, sugar and kerosene to poor families. Another big focus will be on using the electronic transfer system for the government's rural employment scheme or MNREGA - wages would be deposited in the bank account of the labourer, checking corruption by middlemen.

What makes the new electronic system possible is the national identification scheme - Aadhar -which provides a unique ID card for all Indians with the individual's biometrics. A national database -the largest in the world when complete - will store this information. Bank accounts will eventually be linked to Aadhar cards, making it possible for the government to pay pensions or health benefits directly to beneficiaries. The government expects all Indians to have their unique ID cards in another two years.


The committee that the Prime Minister heads will include ministers of Finance, Information Technology, Health, Food, Petroleum and Natural Gas and Montek Singh Ahluwalia, the Deputy Chairman of the Planning Commission.

Sub-committees will handle the technological, banking aspects as well as transfer rules, controls and audits. But cash transfer has been opposed by political parties like the Left. The move is sure to rake up yet another controversy.