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LATEST NEWS UPDATES | Did govt jump gun on cash transfers?-Sidhartha

Did govt jump gun on cash transfers?-Sidhartha

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published Published on Nov 27, 2012   modified Modified on Nov 27, 2012
-The Economic Times

The government's ambitious plan for direct cash transfer of subsidies is facing implementation hurdles even as Prime Minister Manmohan Singh on Monday set a January 1 deadline to roll out the scheme in 51 districts.

While the PM's announcement was a formality, the petroleum ministry has pointed out that once the Cabinet approves the new mechanism on oil and LPG subsidies, it will take 11 months for a rollout.

This means that even if the scheme is approved now, it can be rolled out only around next October. Officials said the Cabinet note is yet to be circulated and on an average it takes around two months for the consultation process to be completed. Which means that the rollout could be as late as next December, which may be too close for comfort of the government that is hoping to use cash transfer as a key poll plank in the 2014 elections.

In fact, oil subsidies are the first among the major doles that would switch to cash transfer mode, which is seen to be more resistant to leakages and at the same time empower the beneficiaries with the option to choose between having less wheat and more vegetables or dal.

Singh told his colleagues on Monday evening that 51 districts would roll out cash transfer from January and in 18 states from April and the remaining part of the country would follow in 2013.

Similarly, in case of food subsidy , there are concerns over the ever-growing pile of grains that the Food Corporation of India has accumulated owing to high minimum support price. For instance, the stock of wheat is estimated at over 40 million tonnes, nearly three times the buffer norm.

Officials said the entire procurement system would have to be reworked given the dependence that farmers have on purchases by FCI. In the absence of government procurement, the fear is that farmers would be left at the mercy of market players. Besides , there is no clarity on what happens once the proposed Food Security Act is in place.

The fresh concerns came even as the two most critical links — Aadhaar numbers for all families and bank accounts — are not in place. The Unique Identification Authority of India has so far managed to meet the required criteria in 20 identified districts, while it has told the PMO that the remaining would be covered before January.

In fact, during a meeting with his Cabinet colleagues on Monday , even the PM identified the two areas as challenges. "I have also listened carefully about the challenges that lie in our way in moving to a system of direct cash transfers. In the coming days, we will need to make every possible effort to address these challenges," Singh said.

"If either of these pillars is weak, it would endanger the success of the initiative," he added.

The Economic Times, 27 November, 2012, http://economictimes.indiatimes.com/news/economy/policy/did-govt-jump-gun-on-cash-transfers/articleshow/17383980.cms


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