Task force to work on direct subsidy transfer

Mumbai | Updated on March 01, 2011 Published on March 01, 2011

Direct transfer of subsidy to farmers and BPL families, with help of the unique identity number — as proposed in Budget 2011 — could plug about 60 per cent leakage from the Rs 1.43 lakh-crore fuel and fertiliser subsidy.

Dr Ajay Bhushan Pandey, Deputy Director General of Unique Identity Authority of India (UIDAI), told Business Line that a task force has been formed and it will soon start work. The process of providing direct subsidy will be set into motion with the help of the Unique Identity Number (UID).

The Centre spends a huge amount of money on subsidies on food, fuel and fertiliser. It incurs large administrative expenses in providing that subsidy; but money gets siphoned off due to malpractices in the delivery system, he said.

The task force, headed by Mr Nandan Nilekani, Chairman of UIDAI, will work out the modalities for direct transfer and its interim report is expected by June. The subsidy amount will get directly remitted to Aadhaar — the UID enabled bank account of the beneficiary.

Further, Dr Pandey said, “At beneficiary level there are a number of ghost accountholders who claim that entitlement. The legitimate accountholders also incur some expenses like travelling to the PDS shops for getting their entitlement of kerosene. The UID-enabled direct subsidy will remove all the intermediaries and the real accountholder will get all the benefits.”

Another senior UIDAI official said that it is not only fuel and fertiliser subsidy would soon be taken care of by a UID enabled system but also distribution of food subsidy. However, he cautions, there is no control on the money that is directly given to the individual by way of subsidy.

Mr Chandrashekar Murthy, Managing Director of Bangalore-based Samvith Infotech Private Ltd, agreed that the Finance Minister's efforts to provide cash in place of subsidy are fraught with uncertainties. “Whether cash will be utilised for subsistence or for social evils is a big question,” he said.

According to a senior official in Maharashtra Government, who had earlier worked on the subject, “The idea of direct subsidy is welcome but it needs to be applied to a number of other products, which the government provides to the poor. From kerosene to drip irrigation equipment, subsidy is present on all products. This direct subsidy method needs to move towards social security, where all subsidies are clubbed together in a nodal bank, which can transfer it to individual accountholders.”


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Published on March 01, 2011
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