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LATEST NEWS UPDATES | Government plans to introduce direct cash transfer for food subsidy in 6 UTs and ‘willing states’-Urmi A Goswami

Government plans to introduce direct cash transfer for food subsidy in 6 UTs and ‘willing states’-Urmi A Goswami

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published Published on Jan 15, 2013   modified Modified on Jan 15, 2013
-The Economic Times

The government plans to introduce direct cash transfer for food subsidy in six Union Territories and 'willing states' for PDS scheme, taking a key step to plug leakages in welfare schemes. In the pilot project, expected to be rolled out from April, beneficiaries will receive the subsidy amount in their bank accounts, and will buy rice and wheat from the fair price shops.

The fair price shops will sell rice and wheat at a price, which is the 'economic cost', determined by the Food Corporation of India, plus handling and transportation and a commission for the fair price shop dealer. The food and civil supplies ministry has asked the UT administrations to ensure that all beneficiaries have a bank account, which will be linked with the ration card number in the database.

While the food and civil supplies ministry's direct cash transfer pilot is linked to the ration card number, the Andhra Pradesh government has begun a pilot in the East Godavari district of using the Aadhar or unique identification number enabled direct cash transfer for the public distribution system. Food subsidy has not been included in the national roll out for the Aadhar-enabled direct benefit transfer in 20 districts across the country.

A senior official at the food and civil supplies ministry said, "as and when the Aadhar number is given to all beneficiaries in the Union Territories and participating states, the system of cash transfer will be suitable integrated to the Aadhar platform."

The government hopes to plug the leakages in the food grain distribution scheme, particularly the diversion of rice and wheat from the fair price shops to the open market. States will analyse customer behaviour and those that do not buy for two months will stop getting subsidy.

The FCI will continue with its practice of releasing quarterly advance subsidy. The central government's share of the food subsidy will be restricted to the difference between the economic cost and the central issue price for each category of ration card, and the Union Territories will provide the cost of handling and transport.

The food subsidy amount will be credited to the beneficiaries bank account a month in advance.

The local administration will send out SMS to the beneficiaries to alert them of the cash transfer. The purchasing behaviour of the beneficiaries will be studied to determine whether beneficiaries are accessing their entitlements from the fair price shops. Those who do not purchase their entitlement for two months in a quarter will cease to receive the cash transfer. A system of exemption from this requirement for elderly and ailing beneficiaries will be worked out.

For restoration of benefits, the ration card holder will have to write to the district supply officer explaining the reason for failing to buy their quota of entitlement. To ensure that the system is not misused, a fresh instalment of cash transfer will be made only after the beneficiary uses the previously unused amount.

For the pilot to be effective, the supply chain will have to be computerised, including the transactions at the fair price shop.

The Economic Times, 15 January, 2013, http://economictimes.indiatimes.com/news/economy/policy/government-plans-to-introduce-direct-cash-transfer-for-food-subsidy-in-6-uts-and-willing-states/articlesho


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