Rationalising Welfare: DBT transfers should be prioritised over subsidies; here’s why

By: |
New Delhi | Published: November 5, 2018 2:08:50 AM

The direct benefit transfer (DBT) had raked in savings of over Rs 30,000 crore in 2017-18 and the target has been set for it to save over Rs 40,000 this fiscal year.

DBT transfers should be prioritised over subsidy payouts as they are more efficient and result in fewer leakages

The government is mulling a proposal to rationalise agricultural subsidies by paying a part of the power subsidy directly to them, instead of in the form of free or cheap electricity. Subsidies to the agriculture sector include power subsidy, fertiliser subsidy, agriculture loan at lower rate of interest, irrigation subsidy, and insurance cover for farmers at lower premium rates. The government has already rolled out fertiliser subsidy to companies under direct benefit transfer (DBT) and more should be considered to ensure that there is no over-utilisation or wastage of agricultural inputs. With resources like power not being charged to the farmer, there has been over-exploitation of water resources, leading to a drop in water table and creation of scarcity situation for water and power. The same goes for the fertiliser subsidy. Since the essential input like urea is inappropriately priced, farmers are not making rational use of them.

The direct benefit transfer (DBT) had raked in savings of over Rs 30,000 crore in 2017-18 and the target has been set for it to save over Rs 40,000 this fiscal year. 3 crore fake gas connections and 2.7 crore counterfeit ration cards have also been declared void as a result of aadhaar-enabled DBT. However, while the Centre has been doing well in this regard, given how spending by state governments is actually higher than that by the Central government, increased efficiency in this is critical. Indeed, one of the problems has been that, while the Centre has got stricter with its deficit, the states have got more profligate. The one state that really stands out is Rajasthan. Bhamashah was conceived as a one-stop solution for for getting the benefits of scholarships, pension and MGNREGA payments as well as Indira Awas Yojana amongst other cash and non-cash schemes of the state to the bank account of the lady of the family. Similarly, while DBT payments make up ~35% of the Centre’s expenditure on all welfare schemes, the goal should be to make all their welfare payouts DBT-based.

For latest coverage on Maharashtra Assembly Election 2019 and Haryana Assembly Election 2019, log on to financialexpress.com. We bring you full coverage of Assembly Election 2019 on Financial Express, stay tuned for latest election updates.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.