Taking a cue from the UPA Government’s Direct Benefit Transfer initiative, the Economic Survey has advocated use of biometric identification and mobile phones for various subsidy payments.

“Not all the money put into subsidy scheme reaches the poor,” the Survey said, while listing subsidy under issues and priorities.

The Survey pointed out that it is increasingly feasible to identify households below the poverty line and give them cash. The previous Government had earmarked over ₹2.5 lakh crore under subsidy for food, fuel, fertiliser and others for 2014-15.

The Survey suggested use of new technologies of biometric identification and payment through mobile phones. These “have created a range of new possibilities for the design of programmes. These would lead to a reduction in poverty at a lower cost when compared with the present subsidy programmes.”

The Survey noted that subsidy programmes are particularly problematic when they affect price revisions and the consequent shifts in resource allocation which must take place.

“When the price of diesel rises, in the medium-term, the economy shifts away from diesel. But this adaptation is blocked if the price of diesel is not actually raised. When the purchase price for cereals is raised, cereal production becomes more attractive, even the consumer might want more non-cereals,” the Survey said.

The Survey suggested using vouchers for subsidy distribution. It said that vouchers for the poor, through which a certain fixed rupee payment is made to the household and household pays market price, are one step forward.

It also mentioned that rational analysis of subsidy programmes would be assisted if the accounting systems of Government and budget documents, classified all Government expenditure into public goods and subsidies.

“This would make it possible to obtain a full picture of subsidies and enable a more rational picture,” it said.

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