New Delhi: The government has constituted a committee of cabinet ministers and top officials to design a system to transfer all subsidies directly to the bank accounts of beneficiaries.
The National Committee on Direct Cash Transfer is chaired by Prime Minister Manmohan Singh and has 13 ministers as well as the heads of the Planning Commission and the Unique Identification Authority of India (UIDAI), which is issuing the Aadhaar numbers instrumental to the programme.
The setting up of the panel shows the government is completely “aligned” to shifting to the new way of distributing subsidies, said a government official familiar with the developments, asking not to be identified.
The direct cash transfers are expected to create goodwill for the Congress-led United Progressive Alliance (UPA) government, which has been struggling to salvage its image after a series of corruption charges and a depressed economy.
Paying cash directly “will be more attractive to the beneficiaries as it would give them confidence that the money that the government is spending for them is reaching them,” a Congress minister said, requesting anonymity.
Schemes under India’s various welfare programmes are afflicted by middlemen and government officials because of whom beneficiaries often don’t get their due entitlements.
The government in September announced it would form a committee to expedite the movement towards electronic cash transfers.
The committee’s mandate includes identifying “government programmes and schemes for which direct cash transfers to individuals can be adopted” and specifying timelines for the roll-out, the Prime Minister’s Office (PMO) said in a statement on Thursday.
The panel also has to review the implementation of direct cash transfers and coordinate the activities of various government departments.
It will “provide an overarching vision and direction to enable direct cash transfers of benefits under various government schemes and programmes to individuals, leveraging the investments being made in the Aadhaar project, financial inclusion and other initiatives of the government, with the objective of enhancing efficiency, transparency and accountability,” the PMO said in its statement.
Singh and Congress chief Sonia Gandhi supported the government’s plan to move away from the existing regime of subsidies at UIDAI’s second anniversary celebration at Dudu, in Rajasthan on Saturday. Singh said at the event that direct transfers of subsidies for items such as cooking gas, kerosene and fertilizers will eliminate corruption from the public distribution system.
The government official quoted earlier said the programme is the government’s way of killing three birds with one stone.
“While this will lead to social inclusion by bringing in people without identities into the formal system, it will also lead to fiscal efficiency by making subsidies more effective,” he said. And “the biggest message the government is trying to convey is that it will fix corruption at the level where it impacts the common man the most.”
UIDAI has so far enrolled 230 million people and expects to issue Aadhaar numbers to 600 million people by 2014. Critics say it will be a while before the entire country is enrolled by the authority. Also, only 60% of the country’s population has bank accounts, key to the success of direct transfers of cash subsidies.
The government spends Rs.3 trillion every year on subsidies and other payouts such as pensions and scholarships.
The government official admitted that although the centre is serious about the regime change, it may take time to fully implement transfers at the ground level. “However, significant benefits can be achieved by 2014, before the government goes for election,” he said.