The Nandan Nilekani task force on direct cash transfer of subsidy on fuel and fertilisers has recommended a system of real-time transfer of cash to the buyer?s bank account, which could subsequently be finetuned to cover only poor families.
Finance minister Pranab Mukherjee had set up the task force led by Unique Identification Authority of India chairman Nilekani to recommend ways of directly transferring cash subsidy on kerosene, LPG and fertilisers to the intended beneficiaries. The panel, which submitted its draft recommendations on Tuesday, proposed an IT-enabled core subsidy management system (CSMS) to be implemented from March 2012.
As a preparatory step, the movement of subsidised fuel and fertiliser through the supply chain should be tracked up to the buyer and the customer electronically identified at the time of purchase, the task force noted. The basic premise is that if these commodities move through the supply chain only at their full price, chances of diversion will be minimal. Now, about a third of the subsidised kerosene sold through the public distribution system is believed to be diverted for adulterating costlier diesel.
?We are already doing a pilot project on direct cash transfer of subsidy in Hyderabad,? IOC chairman RS Butola said, adding that the actual rollout of the scheme would depend on the wealth of experience gained.
Fertiliser secretary Sutanu Behuria, a member of the panel, had told FE last week that if the government finds the final recommendations feasible, his department would implement them expeditiously.
According to the panel recommendations, there will be a transition stage in the case of LPG, during which the number of subsidised cylinders would be capped. The task force has left the decision on the number of subsidised cylinders to be given a year to the Union petroleum ministry. It also said that its recommendations are only a road map and policy decisions on subsidy administration have to be taken by the government.
In the case of kerosene, the task force proposed that subsidy should initially be administered by state governments before making shifting to direct transfer. The quantum of subsidy to be given to the state should depend on the actual consumption of kerosene the previous year. The Union government should hold wide consultations with states on how to improve their public distribution systems. Under the proposed system, beneficiaries will be able to report malpractices to the government directly, which will help it to respond in a timely manner, the report said.
In the case of fertilisers, cash subsidy should initially be transferred to the retailer and in the second phase, it could be directly transferred to the farmer. Identifying the real beneficiary in this case, however, is a challenging job. The task force will monitor various pilot projects by oil marketing companies and submit its final report in December. As per the road map, pilot projects for direct transfer would be launched in seven states ? Tamil Nadu, Assam, Maharashtra, Haryana, Delhi, Rajasthan and Orissa ? from October. The panel noted that for real-time cash transfer of subsidy, full financial inclusion is imperative.