NDA to revive direct benefit transfer on LPG subsidy

The rethink has come about in the backdrop of the launch of the financial inclusion programme that seeks to create a bank account for every household


There are around 140 million cooking gas customers in the country. Photo: Priyanka Parashar/Mint
There are around 140 million cooking gas customers in the country. Photo: Priyanka Parashar/Mint

New Delhi: The National Democratic Alliance (NDA) government proposes to revive the direct benefit transfer scheme under which the subsidies on cooking gas and kerosene will be transferred to the bank account of beneficiaries, a top government official said.

The rethink has come about in the backdrop of the launch of the financial inclusion programme that seeks to create a bank account for every household.

“First, we are looking at transferring kerosene and LPG (liquefied petroleum gas) subsidies directly to beneficiaries through bank accounts. There are many states that are already making payments directly into the bank accounts of beneficiaries under various government programmes,” financial services secretary G.S. Sandhu said while addressing a seminar organized by Skoch group. “It will be a calibrated approach.”

There are around 140 million cooking gas customers in the country.

Transfer of subsidies directly into bank accounts of beneficiaries is expected to prevent leakages and ensure that the beneficiaries get the money they are entitled to.

The Congress-led United Progressive Alliance (UPA) had launched the direct benefits transfer programme last year for transferring benefits under various welfare schemes to beneficiary accounts, but with many beneficiaries not having bank accounts, its progress was limited.

It was forced to put on hold its scheme to directly transfer cooking gas subsidies after complaints arose of inadequate linkage of Aadhaar unique identity numbers with bank accounts.

Last year, the Supreme Court also ruled that the government could not make Aadhaar numbers mandatory for people to avail of the benefits of government services and subsidies, including the direct benefit transfer scheme for delivery of subsidized cooking gas.

But with the launch of Jan Dhan Yojana—the Bharatiya Janata Party-led NDA’s financial inclusion programme that aims to provide every household with at least one bank account, and which rides on Aadhaar numbers—the government is convinced it is now better equipped to deal with these issues.

Earlier this month, the cabinet approved the next phase of the Aadhaar project, involving the extension of the unique identity project to four more states—Uttar Pradesh, Bihar, Chhattisgarh and Uttarakhand—a move which will increase the number of people with these numbers to 1 billion by the end of 2015. The Unique Identification Authority of India has so far issued 678.6 million Aadhaar numbers.

The government has opened more than 40 million accounts under the Jan Dhan scheme since its launch on 28 August, though around 20-25% of these accounts may belong to multiple members of the same household, said Sandhu.

The government plans to seed these bank accounts with Aadhaar to weed out multiple bank accounts under the scheme. However, it is not clear how the government will work around the apex court ruling on Aadhaar.

Bank accounts opened under the Jan Dhan Yojana are entitled to an overdraft facility of Rs.5000, a RuPay debit card with a personal accident insurance cover of Rs.1 lakh and a life insurance cover of Rs.30,000.

“Banks are worried since once the no-frills accounts are opened, hardly any transaction happens in these accounts. But hopefully as more money comes into these accounts through cash transfers of subsidies, these accounts will see more activity,” said Robin Roy, associate director, financial services, PricewaterhouseCoopers India.

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