Direct Cash Transfer

  • The Union Government has saved around Rs 57,000 crore in 2016-17 through Direct Benefit Transfer (DBT) scheme under which subsidies are given directly to beneficiaries.
  • In 2017-18, the beneficiary base rose from 10.71 crore in 2013-14 to 35.62 crore. A total of 485 schemes have been identified from 60 ministries for the DBT.
  • Savings:
    • PAHAL: Rs 30,000 crore
    • PDS: Rs 14,000 crore
    • MGNREGA: Rs 12,000 crore
    • National Social Assistance Program: Rs 400 crore.
Basics about DBT:
  • The DBT Scheme, a major reform initiative to check graft in welfare funds was launched by then UPA Government on 1 January 2013.
  • It aims at transferring benefits of various central government-run social welfare schemes directly to the bank accounts of beneficiaries.
  • Its objective is to reform Government delivery system by re-engineering the existing process in welfare schemes for simpler and faster flow of funds/information and ensure accurate targeting of the beneficiaries, reduce duplication and fraud.
  • DBT functions under the Cabinet Secretariat and its implementation is directly monitored by the Prime Minister’s Office (PMO).
  • JAM Trinity i.e. Jan Dhan, Aadhaar and Mobile are DBT enablers.
  • However, Aadhaar is not mandatory in DBT schemes.
  • DBT scheme has been high priority and focus area of the government to bring efficiency, effectiveness, transparency and accountability in the Government system and infuse confidence of citizen in the governance.
Can DBT Work?
Yes, Example: Centre saved over Rs.21,000 crore in LPG subisdy in the last two financial years as paying the dole directly into bank accounts of actual users helped eliminate duplicate connections as well as diversions.
  • How? As on April 1, 2015, there were 18.19 crore registered LPG consumers and 14.85 crore active consumers implying a gap of 3.34 crore consumers which were duplicate, fake or inactive. Eliminating such 3.34 crore consumers helped save Rs.14,672 crore in 2014-15 fiscal
Be cautious in shifting to DBT : RBI
  • Acknowledging that problems have been experienced by three Union Territories (UTs) in the implementation of direct benefit transfer (DBT) for food subsidy, the Reserve Bank of India (RBI) has advised States that are planning to shift to cash transfer to be cautious while effecting the migration.
  • At present, three UTs — Puducherry, Chandigarh and urban areas of the Dadra and Nagar Haveli — are implementing the mode of cash transfer
  • The Puducherry government had approached the Centre to permit it to revert to the old system of supplying rice.
  • RBI referred to problems such as inadequacy of transfers to maintain pre-DBT consumption levels, insufficiency of last-mile delivery mechanisms and a weak grievance redressal system.
“Direct cash transfers have the potential to improve the economic lives of the poor by transferring benefits to households quickly and directly. Achieving these benefits requires thoughtful design of schemes, and careful, rigorous analysis of ongoing programmes is an important input to the design process.” With suitable examples, illustrate. (200 Words)
Many welfare schemes in India that are envisaged suffer through many leakages when benefits are transmitted downward. In this context Direct Cash Transfer (DCT) offers a promising solution. Shanta Kumar committee , RBI, and many experts have favoured DCT over other means. But the Thoughtful design of Scheme and careful, rigorous analysis of ongoing programmes is the key to success.
It’s success hinges on JAM trinity. Following cautions can be implemented for greater success of the program :-
  1. Customization of Scheme as per need & demand :- Few states like Chhattisgarh , Kerala has done very good job in public distribution System(PDS). Govt. should go fast where PDS is not working well while gradual implementation to be done where PDS is already working well. DCT in LPG have shown promising results & stopping subsidy for those having 10 lakh plus taxable income is a positive step in right direction. Similar approach to be adopted for other subsidised items also.
  2. Promotion of digital literacy & banking awareness is must to reap benefit of DCS. Failure of any one of these will be a big setback. Illegal enrolment in Aadhar like reported in border states can in danger very purpose of this scheme.
  3. Stepping up financial inclusion in north-eastern, eastern and other backward states, more ATMsin the rural areas & last mile connectivity. Promotion of White label ATM in these areas.
  4. In DBT, the cash transferred may not be used for the purpose it was intended. Usually males in the family decide. So food benefits transferred may be diverted to liquor, so we made eldest female as beneficiary under Food Security Act. Hence we need a comprehensive social audit and expenditure assessment of the market across different geographies and social segments to ascertain whether the intended benefits have indeed been achieved or not.
The whole idea of DCT  is revolutionary and have potential to curb the corruption and malware practices. But it will succeed only with a lot of homework , efficient planning & implementation.

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