Transferring all subsidies into single account could reduce subsidy leakage
Jayshree P Upadhyay & Deepak Patel | New Delhi May 19, 2015 Last Updated at 00:30 IST
In a bid to plug subsidy leakage, the finance ministry is planning to link all Direct Benefits Transfer (DBT) schemes into one account.
According to sources, the Department of Economic Affairs has written to the Department of Financial Services seeking comments on ways to prevent subsidy leakage.
“Allowing all the subsidies an individual is entitled to should be transferred to only one account, as against multiple accounts that are linked to different schemes; this would reduce leakage of subsidy leakage,” said a senior official.
Leakages refer to the subsidised goods that do not reach the intended beneficiary. Leakages not only have the direct costs of wastage, but also the opportunity cost of how the government could otherwise have deployed its fiscal resources.
This move is part of the JAM (Jan Dhan, Aadhaar and Mobile) trinity, which was proposed in the economic survey for FY16 to prevent subsidy leakage. “If the JAM Number Trinity can be seamlessly linked, and all subsidies rolled into one or a few monthly transfers, real progress in terms of direct income support to the poor may finally be possible,” stated the Economic Survey for 2015-16.
The finance ministry believes that transferring all subsidies in one account will reduce the monthly transfer of subsidies substantially in some cases to as low as one monthly transfer.
According to sources, the Department of Economic Affairs has written to the Department of Financial Services seeking comments on ways to prevent subsidy leakage.
“Allowing all the subsidies an individual is entitled to should be transferred to only one account, as against multiple accounts that are linked to different schemes; this would reduce leakage of subsidy leakage,” said a senior official.
Leakages refer to the subsidised goods that do not reach the intended beneficiary. Leakages not only have the direct costs of wastage, but also the opportunity cost of how the government could otherwise have deployed its fiscal resources.
This move is part of the JAM (Jan Dhan, Aadhaar and Mobile) trinity, which was proposed in the economic survey for FY16 to prevent subsidy leakage. “If the JAM Number Trinity can be seamlessly linked, and all subsidies rolled into one or a few monthly transfers, real progress in terms of direct income support to the poor may finally be possible,” stated the Economic Survey for 2015-16.
The finance ministry believes that transferring all subsidies in one account will reduce the monthly transfer of subsidies substantially in some cases to as low as one monthly transfer.
“Our endeavour is to reduce any duplicity while transferring direct benefits to consumers and we are mulling on ways to reduce that. One such step is to transfer all the subsidies in one bank account. However, we want more accounts to be Aadhaar-seeded,” said another ministry official.
As of December 2014, about 720 million citizens had been allocated an Aadhaar card. These enrolments are increasing at 20 million a month. The government had seeded about 100 million bank accounts with registered Aadhaaar numbers by December 2014. The government currently transfers cooking gas subsidy to nearly 100 million consumers directly to their banks accounts.
Of the 120 million accounts opened under the Pradhan Mantri Jan Dhan Yojana, 40 per cent are linked to Aadhaar and according to officials, more accounts are being linked. Nearly 36 DBT schemes are linked to bank accounts and subsidy is directly transferred in these
According to the survey, 41 per cent of the subsidies transferred through kerosene sold in ration shops were lost due to leakage. The fiscal cost of excess transfer of subsidy on kerosene led to a loss of Rs 10,044 crore for 2011-12. “Value of the fiscal savings - due to lower leakages is eight times greater than the cost of implementing the programme,” stated the survey.
As of December 2014, about 720 million citizens had been allocated an Aadhaar card. These enrolments are increasing at 20 million a month. The government had seeded about 100 million bank accounts with registered Aadhaaar numbers by December 2014. The government currently transfers cooking gas subsidy to nearly 100 million consumers directly to their banks accounts.
Of the 120 million accounts opened under the Pradhan Mantri Jan Dhan Yojana, 40 per cent are linked to Aadhaar and according to officials, more accounts are being linked. Nearly 36 DBT schemes are linked to bank accounts and subsidy is directly transferred in these
According to the survey, 41 per cent of the subsidies transferred through kerosene sold in ration shops were lost due to leakage. The fiscal cost of excess transfer of subsidy on kerosene led to a loss of Rs 10,044 crore for 2011-12. “Value of the fiscal savings - due to lower leakages is eight times greater than the cost of implementing the programme,” stated the survey.
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