Tuesday, January 1, 2013

Cash transfer of government subsidies starts; targets 20 districts across country

The government's ambitious direct cash transfer of subsidies scheme is operational today. But, the first phase of the roll-out - which was meant to cover 51 districts and 34 welfare schemes - is being scaled down to cover just 20 districts and seven schemes. 

Gaps in infrastructure, like bank accounts and beneficiary lists, has forced the government to pare down the project, which it has pitched as a 'game-changer'. 

"This is a game-changer for governance... this is a game-changer in how we account for money, it is game-changer in how the benefits reach the individual," Finance Minister P Chidambaram said on Monday.

Just how will this scheme play out? For example, scholarships for higher education for low-caste students, which were previously paid to a university, would instead be transferred directly to the individual who would then pay for his or her studies.


The seven schemes that will be now employ direct cash transfers to beneficiaries are mostly related to student scholarships and stipends and the Indira Matrutva Yojna and Dhanalakshmi schemes. It is estimated that at least two lakh beneficiaries will receive cash benefits starting January 1. 

Cash benefits in the remaining 19 schemes will be available from February and March when the government will cover 23 other districts across the country. 

Advocates of  the scheme say its advantage is that the government can confirm the welfare subsidy has reached the intended claimant, without them having to pay bribes to secure their due or officials diverting the funds for other purposes. The government has, however, said that there is no intention at this stage to start handing out cash in place of subsidised food, fuel and fertiliser -- three key benefits for the poor in the country.

But critics counter that the government has been too quick in pushing forward a pet project and is bound to face enormous implementation problems because of the complex technology and public administration required.

The scheme is linked to the government's Universal Identification Number (UID) or Aadhaar scheme, which provides a unique identification number to each citizen in the country. The mammoth exercise of making UID cards for the country's population has taken three 3 years. An estimated 280 million cards have been issued so far. 

Mexico and Brazil are considered the world leaders in cash welfare schemes, using their Progresa/Oportunidades and Bolsa Familia programmes respectively to target the poor.