While the PAHAL scheme appears to be successful, Direct Benefit Transfer in food is much more complex and appears to be in doldrums. Discuss critically.
Published: August 29, 2017
Direct benefit transfer(DBT) is a mechanism of transferring subsidies directly to the people through bank accounts. This will reduce leakages and delays. While PAHAL scheme for delivery of LPG subsidy to beneficiary bank accounts was a remarkable success, food subsidy through DBT has hardly progressed & it is still in nascent stage. Food subsidy through DBT is being implemented fully in Chandigarh and Puducherry and in some areas of Dadra and Nagar Haveli. However, the response from other states has been timid.
The direct transfer of subsidy would enable beneficiaries to purchase foodgrain from the market as per the choice and this will also reduce subsidy bill as there will be a reduction in the cost of transportation and handling of foodgrains. Also, this will resolve the complaint of poor quality food grains. However, the issue is much more complicated than it appears. The first issue is that people may spend subsidy money somewhere else. Also, direct money may result in inflation. On the other hand, counter-argument is that cash has a larger multiplier effect which will provide a boost to the economy. Another issue is that due to inflation prices fluctuate, so it will be very difficult to transfer money on the basis of recent prices. Another major issue is lack of political will as ration shops act as a tool for political mobilization. Also, DBT in food will have procurement by government & MSP provisions. Distribution of grains through the public delivery system is closely associated with procurement operations by the government. In case of cash transfers, the procurement done by the government needs to be reduced.
The emphasis should be on streamlining PDS and encouraging investments for expanding financial infrastructure. States should take steps for PDS reforms through technology and grievance redressal mechanisms so that leakages can be minimised.
Model Questions Category: 058 - Indian Economy Issues Relating to Planning