As catchy acronyms go, it lacks a certain something. But the JAM Trinity holds the key to one of the biggest pieces of reform ever attempted in India — direct subsidy transfers. The term has been the flavour of the season, finding mention both in the Economic Survey and the Budget.

What is it?

An abbreviation for Jan Dhan Yojana, Aadhaar and Mobile number. The government is pinning its hopes on these three modes of identification to deliver direct benefits to India’s poor. Until now, the government has operated a multitude of subsidy schemes to ensure a minimum standard of living for the poor. These take convoluted routes to deliver affordable products or services to them. So, we have the MGNREGA, operated through the panchayats, which pays minimum wages to rural workers. The Centre and States supply rice, wheat, pulses, cooking oil, sugar and kerosene at heavily subsidised prices through the PDS. Then, sectors such as power, fertilisers and oil sell their products to people below market prices.

Such subsidies cost the exchequer quite a bit. Yet, as they make their winding way through the hands of intermediaries, leakages, corruption and inefficiencies eat away large parts.

This is where the government hopes that the JAM trinity can help. With Aadhaar helping in direct biometric identification of disadvantaged citizens and Jan Dhan bank accounts and mobile phones allowing direct transfers of funds into their accounts, it may be possible to cut out all the intermediaries.

Why is it important?

Money wasted in inefficient distribution of subsidies is money that is not available for other developmental activities of the government. According to the Economic Survey, about ₹3.78 lakh crore or 4.2 per cent of GDP, is currently spent on key subsidies.

The Survey has some compelling numbers on why the current system of price subsidies is a leaky bucket. In some cases, by simply selling goods below cost, the government ends up delivering unintended benefits to the rich. Three-fourths of the subsidised LPG cylinders, for instance, are used by the richer half of the population. Corporation water is subsidised, but 60 per cent of the poor get their water from public taps. Over 15 per cent of PDS rice, 54 per cent of wheat and 48 per cent of the sugar is lost in leakages.

Still thanks to subsidies, the government runs up big deficits year after year, is perpetually short of cash to fund new projects and borrows big all the time. But the poor don’t see any material improvement in their quality of life.

Why should I care?

If you are among the privileged who can afford a good standard of living without government aid, the advent of the JAM Trinity will mean that you will have to pay full price for goods and services that were hitherto subsidised.

Petrol subsidies have already been done away with and prices at the bunk now fluctuate with market prices. Diesel subsidies are on their way out. And the Centre recently began identifying the recipients of the LPG subsidy by insisting that consumers map their gas connections and bank accounts to their Aadhaar.

But even if the JAM Trinity does make your goods and services dearer in the short-term, take heart. Over the long-term, the plugging of leakages and savings for the government will mean a lower burden on you, the taxpayer. Of course, lower subsidies and fiscal deficit will also mean a better credit standing for India.

The bottomline

If the JAM Trinity works as it should, subsidies will no longer mean money for jam. Either for the corrupt or for the wealthy.

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