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LATEST NEWS UPDATES | Pilot schemes must stabilise to show the benefits of cash transfer system

Pilot schemes must stabilise to show the benefits of cash transfer system

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published Published on Jan 2, 2013   modified Modified on Jan 2, 2013
-The Economic Times

The government has done well to scale down the initial reach of the direct cash transfer system of handing out subsidies. Direct benefit transfer (DBT), as it is called now, will cover only 20 districts and seven scholarship schemes instead of 51 districts and 34 schemes planned earlier. Limiting coverage makes eminent sense. It is better to do a thorough job than to fumble at a mammoth task, as the infrastructure is simply not in place. Every beneficiary does not have an Aadhaar Unique Identification Number (UID) that should be used for opening a bank account where money will be directly transferred. However, the government will now open bank accounts and credit the money even if the beneficiary does not have a UID. That is not an ideal solution. The experiment in Rajasthan of transferring money to beneficiaries for buying kerosene clearly showed that cash transfers can be jinxed without UID. Therefore, Aadhaar enrolment should be expedited and the numbers must be seeded with the bank account at the earliest. This will ensure efficient, targeted delivery, and bring millions of people into the banking system. Responsibility must be fixed at various levels of the administration to make sure that every beneficiary has an Aadhaar and a bank account. The onus of proving eligibility cannot be on the citizen, as was the case when the government capped the number of subsidised cooking gas cylinders, letting LPG dealers play havoc.

The government has also ruled out immediate plans to bring food, fertiliser, diesel and kerosene subsidies under DBT. True, pilot schemes need to stabilise to demonstrate DBT's merits. However, keeping subsidies endlessly out of DBT will hurt poor families, farmers and the exchequer. Simultaneous work needs to be done to transit to cash transfers for subsidies. One, states should become serious about identifying beneficiaries. Two, Aadhaar coverage must become saturated, along with rapid spread of banking activities and financial literacy. Three, mobile banking should complement the banking correspondent model to achieve financial inclusion. All these are eminently doable. 

The Economic Times, 2 January, 2013, http://economictimes.indiatimes.com/opinion/editorial/pilot-schemes-must-stabilise-to-show-the-benefits-of-cash-transfer-system/articleshow/17850607.cms


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