The NDA government’s initiatives on cash transfers are paving the way for a significant reduction in the Centre’s overall spending on subsidies and welfare benefits.

The pilot project for Direct Benefit Transfer of food subsidy in two Union Territories of Puducherry and Chandigarh has resulted in about ₹13 crore of savings.

As of now, government estimates reveal that the use of DBT in the two Union Territories has lowered the food subsidy bill by about 15 per cent to ₹71 crore from ₹84 crore.

The scheme was launched in Chandigarh and Puducherry in September 2015 wherein the amount to be given as food subsidy is directly transferred to the beneficiaries’ bank accounts.

It was also planned to be launched in Dadra and Nagar Haveli, but has only started partially in about 10 fair price shops, and so it will not be a part of the government’s evaluation.

“Efficiency gains are already visible in the pilot scheme of cash transfers for food subsidy. A formal evaluation of the scheme will be done by the Ministry of Consumer Affairs, Food and Public Distribution,” said an official familiar with the development, adding that a clearer picture will be available then.

“It was not started in the tribal and interior belts,” said the official, adding that a call on whether it should be rolled out more widely in other States will be taken after the study. “Moreover, the decision on whether to use automated fair price shops or cash transfers has to be taken by the States,” he added.

Savings in other schemes

Officials estimate that nearly 20 per cent to 22 per cent of the Centre’s ₹3-lakh-crore bill on subsidies and welfare schemes can be saved using DBT.

“The use of DBT can lead to savings of about ₹60,000 crore in the overall spending on food and petroleum subsidy,” said the official, adding that a pilot scheme on cash transfers in fertiliser subsidy will also be started soon.

“Talks are already on between the Fertiliser Ministry and the NITI Aayog. Since it is a producer subsidy, there are questions on how to automate it,” said the official.

Similarly, the use of DBT for cooking gas or PAHAL is estimated to have saved ₹14,600 crore in 2014-15 and another ₹7,000 crore last fiscal.

The Centre’s overall subsidy bill for 2016-17 is estimated at ₹2.57 lakh crore.

Finance Minister Arun Jaitley had in the Union Budget announced that DBT will be launched on a pilot basis for fertiliser in a few districts across the country. Further, automation facilities will be provided in three lakh fair price shops by March 2017.