Millennium Post

PM plans direct transfer of cash to check graft

With an aim to check corruption and pilferage of subsidised items, Prime Minister Manmohan Singh has decided on an ambitious scheme of direct transfer of cash to intended beneficiaries that is expected to cover one quarter of households.

To give final shape to this programme, Singh has set up a architecture comprising a committee under him besides a few other panels which would ensure time-bound implementation of the project leveraging the Aadhar scheme.

Government spends a huge amount of Rs 3,25,000 crore annually on subsidies and the new scheme is intended to check corruption and pilferage of subsidised items like diesel, LPG and other benefits like pension and scholarships.

'In a move to cut down wastage, duplication and leakages and enhance efficiency, the Prime Minister has given a major push to transfer individual benefits from the government directly into the bank accounts of beneficiaries,' a PMO statement said.

‘This is to be done in fast-track, accelerated mode to be achieved in a time-bound manner,' it said about the scheme which is already being implemented on a pilot basis in states like Chhattisgarh, Andhra Pradesh, Karnataka, West Bengal, Punjab, Tamil Nadu, Rajasthan and Sikkim.

The amount of cash to be transfered is to be worked out.

The National Ministerial Committee, to be headed by the prime minister, will include ministers of Finance, IT, Social Justice, HRD, Minorities, Labour, Health, Food, Petroleum and Natural Gas, Fertilizers and deputy chairman of the Planning Commission.

Besides, there will be a National Executive Committee comprising secretaries of ministries concerned and it will ensure adherence to timelines and sort out any hitches in the roll-out of the programme.

There will also be sub-committees like Cash Transfer Mission to work out technological, financial and banking aspects. Another sub-committee Electronic Benefit Transfer [EBT] will work out data bases, transfer rules, controls and audits, etc.

The beneficiaries will include poor people. Of them, the Unique Identity [UID] Mission has already enlisted 200 million people and the number is expected to go up to 600 million in the next six months, an official in the PMO said.

The programme will initially cover scholarships, pensions and unemployment allowances and later MNREGA and Public Distribution Schemes.

The programme is inspired by such successful schemes existing in countries like Brazil and Mexico and cities like New York and Washington.

Such a scheme in Brazil covers 25 per cent of the population, involving 11 million households and 46 million people.

In Mexico, five million households are benefitting from such a scheme.

The Prime Minister has set up the architecture for cash transfers in order to speed up activity and ensure that the shift to cash transfers is rolled out rapidly, the statement said.

The committees and sub-committees will work on and finalise all operational and implementation details relating to the design and operation of the transfer system, it said.      


The Kelkar Committee has recommended sharp reduction in subsidies on petroleum, food and fertiliser, which the government said was contrary to its policy of protecting the poor.

'The government is of the view that in a developing country where a significant proportion of the population is poor, a certain level of subsidies is necessary and unavoidable, and measures must be taken to protect the poor and vulnerable sections of the society', Department of Economic Affairs [DEA] secretary Arvind Mayaram said on Friday. He further said Committee's recommendation of withdrawal of certain subsidies is in divergence with the stated policy of the government.

The government, he clarified, has not yet taken a view on the recommendations of the Kelkar Committee, which was set up by Finance Minister P Chidambaram to suggest a roadmap for fiscal consolidation. The government has invited comments of stakeholders on the Kelkar panel report. The Committee, headed by former Finance Commission Chairman Vijay Kelkar, has suggested phased elimination of subsidy on diesel and LPG in the next four years and reduction in kerosene subsidy by one-third by 2014-15. In case of food and fertiliser subsidies, the Committee wants the government to increase the urea price and raise issue price of foodgrains at ration shops.

It cautioned that in absence of these measures, the fiscal deficit of the government could shoot up to 6.1 per cent of the Gross Domestic Product [GDP] in the current financial year. It can be contained to 5.2 per cent with the proposed reforms.
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