PM announces Direct Cash Transfer scheme for BPL Families in India

Prime Minister Manmohan Singh announced direct cash payout of subsidies to beneficiaries from Jan 1, 2013. The subsidy amount would be transferred to beneficiaries' bank accounts linked to Aadhaar cards.

What is direct cash transfer of subsidies?
#The Direct Cash Transfer, a new system under which the beneficiaries receive cash directly in their bank accounts, is expected to enable delivery of the government's subsidies and welfare measures to the intended targets without pilferage.

#To make things simpler, instead of fuel, fertiliser and food subsidies given to BPL families, the scheme will involve direct cash transfer to their bank account, that is Rs 32,000 per year.

#To avail the direct cash transfer of subsidies one must be registered under the Aadhar scheme.

#The DCT architecture, being anchored by the planning commission, involves departments of financial services, unique identity authority (Aadhaar), information technology, expenditure, posts, rural development, social justice and empowerment, tribal affairs, minority affairs, higher education, school education, health and family welfare, women and child development, labour and employment, petroleum and natural gas, fertilizers, and food and public distribution.

What is the amount of subsidy a household is offered?

#BPL families will get Rs 32,000 per year.

#The government has fixed the poverty line at Rs 66.10 per day for urban areas and Rs 35.10 for rural regions.

How will the cash be transferred?

#The government plans to conduct the transfer through the bank account that is link with the Aadhaar Unique Identification (UID) scheme.

# 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.

#Consumers will have to buy goods (food, kerosene, etc) at market price. The subsidy component in rupees will later be deposited in their bank accounts. To implement the project, banks will pitch in as part of their financial inclusion drive to help people open bank accounts.

When will the scheme be implemented?

#The government has already announced that transfer of subsidy directly into bank accounts of beneficiaries in 51 districts will start from January 2013 with a target to cover the entire nation by April 2014. To ensure this, the planning commission has decided that all new schemes will now be enabled by Aadhaar number.

#Initially, the government will implement the scheme for cash transfer to the beneficiaries' accounts in 51 districts from January 1, 2013. The scheme will be worked in 18 states from April and in the rest of the country later in 2013, Manmohan Singh said.

#The subsidies and schemes are worth Rs 3.23 lakh crore ($65 billion) and the DCT is scheduled for launch on January 1.

#The scheme will cover 18 states and union territories by April 2013 and it will be extended to 16 more states and union territories by April 2014, according to the prime minister's office.

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

What are the Benefits of direct cash transfer scheme?

#The scheme is expected to cut down waste and corruption in distribution of subsidised items, the prime minister said, chairing the first meeting of the National Committee on Direct Transfers.

#The ultimate aim of this move is "a completely electronic cash transfer system for the entire population", an official in the PMO said.

#The scheme is aimed to cut down wastage, duplication and leakages and enhance efficiency in the delivery of welfare schemes, as also to improve targetting, reduce corruption, eliminate wastage, control expenditure and facilitate reforms.

How will the direct cash transfer scheme benefit the economy?

# By putting money into the hands of the poor the government is empowering the poor who can buy things in the market. This sudden rise in the poor people's purchasing power will help boost the market and the economy.