There is both good and bad news on the DBT (direct benefits transfer) front. If one simply considers the volumes being transferred relative to the total subsidy bill, the progress isn’t anything to write home about. Compared with the annual subsidies and welfare payments of around Rs 3 lakh crore, the Rs 74,550 crore channelled via DBT into the bank accounts of beneficiaries in FY17 doesn’t seem significant. However, one could argue a fair bit of ground has been covered because this is ten times the amount transferred three years back in FY14. Moreover, the number of beneficiaries has trebled since then to around 350 million.
Also, the initiative has been successful to the extent that some 240 schemes are now in the ambit of DBT. More than two-thirds of the transfers are accounted for by payments for MGNREGS and for LPG subsidies. In fact, LPG subsidies are now transferred almost entirely via DBT to around 180 million beneficiaries.
If the LPG piece has been a stunning success, there has been virtually no progress on the Rs 70,000 crore worth of fertiliser subsidies or Rs 145,000 crore of food subsidies. By all accounts, leakages in these two segments are high so it is important to get going. According to media reports, the government is planning a big drive this Kharif season and has put in place some two lakh PoS machines across the country to help facilitate the process of ensuring only genuine beneficiaries avail of the subsidy. While this will reduce part of the theft, it doesn’t really reduce the extent of the subsidy—if, however, prices were freed up and farmers given a direct subsidy, they would automatically start consuming less urea which is also hurting the soil’s fertility.
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In addition to transferring fertiliser subsidies, the government could also increase the coverage to more of the 500 schemes identified. One good move has been to allow the various government ministries and departments to upgrade their technological capabilities by outsourcing manpower if they need to. The reported target for the current year is Rs 1 lakh crore, implying a fairly big jump of 30% plus over FY17. While the quantum of transfers is one way to gauge the success of DBT, the other important metric is savings—the government claims it has saved more than Rs 50,000 crore since the DBT was launched in January 2013 even as it has transferred a cumulative Rs 2 lakh crore.
Increasing coverage of DBT to PDS and kerosene subsidies would lead to further savings because there is evidence to show a 30-40% leakage in grain transfers through PDS. Also, once food subsidies are given in cash, the government’s need to hold food stocks reduces dramatically and that, in turn, can unleash other farm reforms.