Prime Minister Directs Cash Transfers For Welfare Schemes

New Delhi - To ensure that the government's $65-billion worth subsidies and welfare measures reach intended targets without pilferage, Prime Minister Manmohan Singh has put in place a new system to ensure the beneficiaries receive cash directly through banks.

The move comes on a day when a committee under former finance secretary Vijay Kelkar, formed to prepare a fiscal consolidation plan for the government, recommended withdrawal of all subsidies, saying the Indian economy is poised on the edge of a "fiscal precipice".

Though under consideration for long, Singh gave an impetus to the ambitious electronic cash transfer project, hoping to route all subsidies, including for food and fuel, and welfare measures like old age pension and educational scholarships directly through electronic transfer to bank accounts using the Aadhar unique identity card database.

But the ultimate aim of this move is "a completely electronic cash transfer system for the entire population", an official in the Prime Minister's Office said.

It was aimed to "cut down wastage, duplication and leakages and enhance efficiency" in the delivery of welfare schemes, as also to "improve targeting, reduce corruption, eliminate wastage, control expenditure and facilitate reforms".

The central government's annual bill on all social welfare schemes comes to around $65 billion (Rs.3.25 lakh crore).

"The new system is expected to benefit a quarter of India's households. It could mean several millions of people will be beneficiaries," the official said.

The move comes within weeks of the government initiating key economic reform measures such as allowing foreign investment in multi-brand retail, a Rs.5 hike in diesel prices and a cap of six a year on supply of subsidised cooking gas cylinders to a household.

In this regard, the prime minister has set up a national ministerial committee under him which will have as members the ministers of finance, HRD and other departments such as petroleum and natural gas, fertilisers and minorities that deal with social welfare measures.

The panel will now work out a roadmap to fast-track electronic cash transfer in the ministries in a time bound manner, the official said.

"The national ministerial committee would ensure coordination and decision-making at the highest level and impart the necessary urgency to the programme," he added.

The government, the official said, could immediately roll out the cash transfer scheme for certain welfare schemes such as the scholarships and pensions and unemployment allowance, as pilot projects had been executed in certain parts of the country, including in East Delhi.

With the results of the pilot projects being encouraging, the prime minister has set up "the architecture for moving to electronic cash transfers, leveraging Aadhar," he said.

The Unique Identity Authority of India (UIDAI), which is implementing the Aadhar scheme, has already enumerated around 200 million people from 2006 to now and has a target of reaching 600 million people within the next 18 months.

However, with regard to public distribution system and fuel subsidies, the cash transfer scheme would take more time to implement.

To speed up implementation of cash transfers in all sectors, the prime minister also instituted a coordination mechanism under which a national executive committee too was formed with secretaries of all concerned ministries as members.

"The committee would meet frequently to coordinate action, ensure adherence to time lines and sort out hitches in the programme as it is rolled out," the official said.

"There is a lot of work needed to have a smooth roll-out and has to be done in a mission mode with multiple agencies acting in a coordinated manner," he said.

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