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Direct cash transfer of subsidies is poised to change the way welfare schemes are administered

January 04, 2015 12:12 am | Updated 12:12 am IST

Forget the debate on whether direct benefits transfer (DBT) is a reform or mere technology-driven procedural change, the fact is paying subsidies directly to beneficiaries is poised to change the way welfare schemes are administered.

A host of schemes have switched over to cash transfers, shows information available from the Central Plan Scheme Monitoring System (CPSMS). It ranges from scholarships and the National Rural Health Mission to stipends given by the Union Labour and Employment Ministry to students belonging to the Scheduled Castes and the Scheduled Tribes. But one that has been generating considerable heat for some months is that for liquefied petroleum gas.

As in other DBT programmes, the intention here is to ensure subsidies reach those for whom they are intended — but the scale is much larger. The Petroleum Ministry says the DBT scheme for LPG that was rolled out across the country on January 1 will cover 15.3 crore active LPG consumers. “It will be the biggest direct cash transfer scheme in the world,” the Ministry says.

But the question that cries for an answer is whether the DBT is aimed at eventually cutting subsidies.

ICSSR National Fellow and Professor with the Tata Institute of Social Sciences G. Haragopal said cash transfer instead of subsidy was the brainchild of international finance organisations. The whole argument, he said, is built on the premise that any welfare programme is communism and hence negates capitalist development. Capitalists, he said, favour direct cash transfers as the beneficiary will look at it as an income and tend to use it elsewhere. 

The subsidy reform is pertinent given the manner in which the Narendra Modi government not only pursued the DBT, ushered in by the previous dispensation, but also improvised it. So, when his government came up with the modified DBT, it caught many households unawares.

Those who expected the DBT to be given up and have the quota of 12 subsidised cylinders a year increased were particularly upset. Had the government wanted, it was within its reach with crude oil prices nose-diving by over $55 a barrel and falling further. But that would have meant undoing the gains achieved over the past two years, when changes such as a limit on the number of subsidised cylinders for households in a year and making Aadhaar mandatory for the subsidy credited to bank accounts of the user were introduced. Not having Aadhaar and requiring cylinders beyond the quota compelled consumers to purchase non-subsidised domestic cylinders, which cost almost twice as much. It also brought great pressure on a system that was struggling to issue Aadhaar cards, a mad rush for which stopped only when the courts intervened on the issue.

Learning from the experience, the government took a different course to achieve the same objective. Mr. Modi unveiled the Jan Dhan Yojana for financial inclusion by opening a bank account for every family. The scheme has received a good response with 10 crore accounts opened. It now serves as the foundation for DBT schemes.

Beyond efforts aimed at making those who can afford to voluntarily give up LPG subsidy, no attempt has been made to link the income level of the user and subsidised cooking gas eligibility, observers say.

Observers, however, say the DBT is just the beginning to address the issue of diversion of subsidised cylinders. Technically households with multiple connections could still continue to draw the subsidy, by seeding with different banks, but it is a matter of time before they are identified.  

Forum for Good Governance vice-president Rao Chelikani feels it is time politicians gave up powers to dish out doles and woo voters with populist measures. Subsidy is good as long as it does not breed corruption, delay and inefficiency.

The task on hand, however, seems far from easy as evident from the confusion surrounding the common man as he gets pushed around from the gas agency to banks.

What is disconcerting is the manner in which senior citizens, widows living alone, daily wage earners and slum dwellers are made to run around, making many wonder if these changes are to curb the diversion of the cylinders and if it could not be stemmed through better enforcement.

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