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Targeting benefits effectively

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  31 Dec 2015 12:00 AM GMT

The country’s politics may have become highly confrontatiol in the last few years, but an ambitious scheme started nearly three years ago by the UPA government and backed enthusiastically by the NDA government — has now set a Guinness world record. Launched on January 1, 2013, the Direct Benefit Transfer (DBT) scheme has been recognised as the largest scheme of its kind in the world. Announcing this in his December radio address to the tion, Prime Minister rendra Modi said that Rs 40,000 crore has already been paid directly into bank accounts of beneficiaries. Primarily targeted at citizens living below poverty line, the DBT scheme planned to use the Aadhaar platform for transferring funds into beneficiary bank accounts. A 12-digit unique identity ‘Aadhaar’ number is sought to be assigned to each resident (as opposed to citizen) of India by the Unique Identification Authority of India (UIDAI), a Central government agency presently attached to the NITI Aayog. This massive exercise to create a centralised database of biometric and demographic data of residents is also considered the world’s largest tiol identification number project. The Parliament is yet to pass the law to back UIDAI; meanwhile, there is an interim order by the Supreme Court that Aadhaar is voluntary and not mandatory. But the rendra Modi government is pushing ahead with Jan Dhan bank accounts for every resident and get these accounts seeded with Aadhaar card numbers. This is because successive Indian governments have long been battling with the problem of targeting subsidies and benefits to those who really need it. Thanks to Information Technology, the solution is emerging which can help deliver government cash help to beneficiaries directly and transparently into their bank accounts. The circuitous and leaking delivery mechanism which long made an utter mockery of various welfare schemes, may soon become a thing of the past.

As of now, 30 to 40 government schemes are said to be making use of DBT, ranging from LPG subsidies to student scholarships. Even as cash benefits are planned to be transferred seamlessly into beneficiary accounts, the huge challenge before the government is to restructure subsidies. For long, subsidies have missed those targeted, while allowing vested interests to grow and become entrenched. Governments in the past have shown little political will to restructure subsidies whenever these became skewed, like the subsidies for cooking gas, kerosene, diesel and fertiliser. The UPA government took the first step when it tried to limit the number of subsidised LPG cylinders per household to six (later raised to 12) every year. The Direct Benefit Transfer for LPG (DBTL or Pahal) scheme, launched in June 2013, is now proving to be the test case as the NDA government gears up to filly takes the subsidy bull by the horns. With subsidy on LPG cylinders already being credited directly to consumers’ bank accounts with SMS alerts, even while calling upon affluent consumers to voluntarily give up this benefit (GiveItUp campaign), the Centre has now taken a small but significant step. It has recently withdrawn the LPG subsidy for those with taxable annual income of more than Rs 10 lakh, a move that is estimated to deliver a saving of up to Rs 500 crore. This may seem a trifling against the total LPG subsidy bill of around Rs 18,000 crore likely this fincial year, but the message is clearly out. By removing about 18-19 lakh affluent consumers from the total 16.35 crore LPG consumers, it is only a matter of time before the government lowers the income threshold further in urban areas, so as to ultimately deliver the benefit primarily to poor, rural consumers. Slowly but surely, the government is beginning to move away from a wasteful, unjust subsidy regime — which in the years ahead, will surely contribute much to bring about fiscal discipline in the country’s economy.


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