In Kotkasim village in Alwar, Rajasthan, where a pilot project for cash transfer was launched in last December, residents often ask that the scheme be extended to all parts of the state so that everyone suffers like they do. Had finance minister P. Chidambaram not cancelled his trip to Kotkasim planned for December 15, he would have received several such “requests”.

Under the direct cash transfer scheme, beneficiaries receive the subsidy amount in cash into their bank accounts and use that to purchase kerosene from the Fair Price Shops at the regular market price.

“I have not received any cash at all ever since last December, neither has my brother” says Rajendra Kumar (41) of Tiganwa village.

His friend Hariprasad, who has a tailoring shop in Bibirani, received his first cash transfer only last week.

“Earlier, we tried purchasing kerosene with our own money, but could not afford it beyond a point. So we started purchasing on borrowed ration cards from other blocks which still have the old system,” says Hariprasad.

“The rations shops are stocked up with months of kerosene supply, but people are not buying any as those who really need it have not received the cash and most of those who did receive it are not even regular buyers. They are using it for other purposes,” he says.

The major problem with the pilot scheme, therefore, is the delay in transfers.

Under the previous system, in case the head of the household was sick, or disabled or unable to move due to old age or otherwise, he/she could send someone else to buy rations.

However, to withdraw the cash subsidy, the account holder is required to be physically present at the bank, which has made it useless for old-age card holders as several bank branches are located 8-15 km from their villages.

Officials admit it as a limitation of “brick-and-mortar-banks” but hope it would be resolved once the Business Correspondent (BC) system is in place.

The official response focuses on proving the scheme a grand success.

“Yes, there were a few hiccups during the first eight months but since the last three months everything is online and the scheme has proved to be a success. Earlier, the off take was 84 kilolitres of kerosene a month but now it is barely a 100 kilolitres for nine months leading to savings worth over Rs. 2 crore,” says Supply Inspector Banwari Lal Sharma.

On their part, the officials blame the FPS dealers for advertising the pilot as a failure. The new arrangements have drastically reduced hoarding and black marketing of kerosene, so naturally the dealers are complaining, they say.

“Kerosene sales have dropped drastically while the commission has remained unchanged. Our main demand is a hike in commission,” says Suraj Bhan, president of the FPS association of Kotkasim.

An insider’s critique

A report prepared by the District Supply Officer (DSO), Alwar, highlights several areas where the pilot scheme falls short.

There are 25,843 ration card holders in Kotkasim district. However, bank accounts for the cash transfer have been opened only for 13,458 card holders – a little over 50%. Villagers asked to use their post office accounts, which were rejected as these accounts do not have online services.

Other reasons for the less-than-enthusiastic response of people towards the pilot, as pointed out in the report, were: distance of banks from the villages, opening of accounts only in the name of head of the household among others. In the latter case, if the head of the household was infirm or was no more, accounts could not be opened.

Ever since the pilot took off, barring January this year, there has been a continuous decline of sale of kerosene.

A major cause of this was erratic transfer patterns. Several consumers, despite not buying kerosene, received double subsidy while there were others who in spite of buying kerosene for more than six months were deprived of the subsidy amount.

Further, since there was no increase in the commission of FPS owners, they lost interest in selling kerosene and even ended up preventing sale of kerosene.

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