Direct cash transfer may remain elusive for UPA-II

Dec 13 2012, 22:47 IST
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SummaryThe UPA government may have to put on hold its ambitious plan of rolling out cash transfer schemes for delivery of all major subsidies to the needy before the next general elections.

From low Aadhaar penetration & technical glitches to administrative bottlenecks, govt staring at hurdles galore

The UPA government may have to put on hold its ambitious plan of rolling out cash transfer schemes for delivery of all major subsidies to the needy before the next general elections. With infrastructure and logistical arrangements being far from ready, not just independent observers, but even the government's own wings have expressed their inability to match the pace desired by the government, which wants to use direct cash transfer as a key electoral plank.

Major subsidies ó in oil, fertiliser and food ó account for about 95% of the country's total subsidy bill and about 15% of the total Central budget. Budget 2012-13 had estimated that the subsidy bill has to be pared to 1.9% of the country's GDP and, taking this further, the Planning Commission has projected that subsidies would be 1.2% of GDP in 2016-17. The proposed reduction in subsidies as percentage of GDP is an integral element of a new five-year fiscal consolidation plan in the works. Since the three major subsidies would be among the last to be fully shifted to the cash transfer scheme, this seems like a tall order.

Consider the odds stacked against the government's plan: The petroleum ministry has admitted that rolling out direct cash transfers in districts with Aadhaar penetration of less than 80% will be difficult. And even among the 51 districts identified for the first phase of the rollout from January 2013, only 20 have more than 80% Aadhaar penetration. The food ministry has acknowledged that transfers in lieu of subsidised food would be possible only in union territories in the first phase.

On Wednesday, food minister KV Thomas said: ďThere is a large number of poor families who do not have savings bank accounts. So, launching direct cash transfer across the country would be difficult.Ē As a result, the second phase of direct cash transfer for kerosene, fertiliser and food using the Aadhaar platform is likely to get delayed beyond the government's current tenure.

Banks have said their IT systems are not fully geared yet to implement cash transfers into bank accounts. Another problem is that they are yet to link existing bank accounts to the Aadhaar numbers. (The RBI recognised Aadhaar for both identity and address proof only on Tuesday.) Sources said that opening new bank accounts for Aadhaar-holders in the targeted 51 districts

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