S Murlidharan

Cash transfer any day is preferable

Updated on: Apr 20, 2011

This article makes a case for closing defence canteens with a switch to the allowance mode a la the proposed  cash transfer for the BPL segment. S.Murlidharan

Employers by and large prefer giving allowances rather than making reimbursement of expenses. Travel allowance a day of say Rs 3,000, Rs 2,500 and Rs 2,000 respectively for Class A, B and C types of cities for a middle level executive is infinitely easier to manage and administer. The recent resolve of the Central Government to plump for cash transfers in lieu of subsidised kerosene and gas is a straight lift from the corporate experience.

Just as verifying the genuineness of a medical bill is difficult, so is ensuring the delivery of kerosene to the poor. That subsidised kerosene instead of firing the stoves of poor households go to power diesel-run cars of the rich thanks to adulteration is the grim message the government has got at last. Just as a company can save a lot of time in processing medical bills by giving a medical allowance, the government can save a lot of money by dismantling the governmental infrastructure for public distribution of essential commodities if cash transfers are resorted to. Apart from the inherent difficulties in identifying the intended beneficiaries with people clamouring for the BPL status and the risk of BPL population diverting the cash for socially undesirable activities such as gambling, boozing etc, there seem to be no other demerit associated with cash transfers.

Defence mess

A practice of hoary antiquity is selling goods tax-free at considerable discount to the armed forces personnel through Defence canteens. Nobody cavils at concessions to them, but the issue is can't something be done to better target the subsidies involved here too.

The Public Accounts Committee of the Parliament is agitated about the matter, with the Defence establishment predictably claiming a holy-cow status and fobbing off queries on the ground that Defence matters are beyond the pale of normal investigations. But a moment's reflection would show that Defence canteens do not cater to national security, but to the households of the armed forces personnel. Why indeed should cars of all the items be sold through Defence canteens? Of course there is some rearguard action now after many horses have bolted — the cars thus bought finding their way into the civilian market, as it were — with there being prescribed a cooling off period of one year for placing a repeat order.

There is also a widespread misuse of liquor procured from Defence canteens with the scope for making money on the sly being enormous what with liquor being the most heavily taxed commodity in the country. This, however, is not to begrudge sale of essential commodities at a concessional price sans taxes to the Defence personnel. But the same results can be achieved more efficiently once again through cash transfers. Why not a National Service Allowance or a patriot allowance? Furthermore, identification of Defence personnel is almost fool proof which is not the case with the BPL segment.

Cash transfers are infinitely superior to distribution by the State. Why not implement it across the board, including for Defence personnel?

(The author is a Delhi-based chartered accountant.)

Published on May 02, 2011

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