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LATEST NEWS UPDATES | UIDAI proposes directcash transfer of subsidies by Sujay Mehdudia

UIDAI proposes directcash transfer of subsidies by Sujay Mehdudia

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published Published on Jul 5, 2011   modified Modified on Jul 5, 2011

In a move that could revolutionise the subsidy payment mechanism for LPG cylinder and kerosene oil to the beneficiaries, especially the poor, and change the fertilizer subsidy payment mechanism for the farmers, the Unique Identification Authority of India (UIDAI) has suggested direct cash transfer through banks and ATMs to the targeted groups to ‘plug leakages' in the implementation of these schemes.

The move is also likely to revamp the working of the public distribution system (PDS), considered to be inefficient and ineffective.

According to the government, direct cash transfers would bring down the subsidy burden as the money would go directly to the “genuine” beneficiaries, including those below poverty line (BPL). It would also lead to a drastic fall in adulteration and diversion of diesel and kerosene to the black market.

UIDAI chairman Nandan Nilekani handed over a 70-page “Interim Report” on the issue to Finance Minister Pranab Mukherjee on Tuesday. Planning Commission's Deputy Chairman Montek Singh Ahluwalia was present on the occasion.

The government proposes to launch pilot projects for transfer of direct cash subsidy to the targeted groups in seven States – Tamil Nadu, Assam, Maharashtra, Delhi, Rajasthan and Orissa — within the next six months. The beneficiaries would be able to get cash through banks, ATMs and even mobile banking when the projects take off.

The pilot project would take about six months to take off and the final report submitted by the end of this year, Mr. Mukherjee said after the submission of the report.

According to the report, it has suggested the creation of an IT-drive ‘Core Subsidy Management System (CSMS),' which will be able to detect fraud and diversions.

“Beneficiaries can report malpractices to the government directly, making it possible for the government to react in a timely manner,” the report said. The government will transfer through the CSMS the cash component of the subsidy directly and in real-time into the bank account of the beneficiaries.

The government spends approximately Rs. 73,637 crore a year on fuel and fertilizer subsidies. Unfortunately, the major portion of the subsidies does not reach the beneficiaries.

Mr. Mukherjee said direct transfer of subsidies on LPG, fertilizer and kerosene would help in curbing pilferage and leakages. Stating that subsidy on kerosene should be linked to reforms in the Public Distribution System (PDS), he said the success of direct transfer of subsidy on the fuel would depend on State governments who distributed them. “I have also asked the UIDAI to look into the possibility of distribution of solar lanterns and cookers through the kerosene and LPG outlets,” Mr. Mukherjee said.

The Finance Ministry said in a statement that achieving full financial inclusion was crucial for implementation of direct transfer of subsidies. “The roll-out of Aadhaar (unique identity card), will provide a foundation for the implementation of direct transfer of subsidies,” it added.

Mr. Nilekani said that the UIDAI had provided guidelines to respective Ministries for implementation of the programme. The report has recommended a three-phase approach for subsidy transfer in the case of LPG and fertilizer. For kerosene, it suggested wider consultations with States.

The Hindu, 6 July, 2011, http://www.thehindu.com/todays-paper/tp-national/article2162951.ece


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