January 23, 2013
Earlier this month, the Indian government rolled out its much-touted direct cash transfer plan (DCT). Formally named Direct Benefits Transfer, the effort aims to plug leaks in the current system, bring efficiencies and transparency to the delivery of social welfare benefits, and replace subsidies with a direct cash pay-out to beneficiaries.
According to a recent report in the business magazine Business India, “A confidential study conducted by the Prime Minister’s Office (PMO) in consultation with various ministries has revealed that, based on the actual money spent by the central government during 2010-2011 under various subsidies totaling Rs. 211,474 crore (approximately $38 billion), the scheme can result in a net saving of Rs. 33,000 crore ($6 billion) by way of plugging leakages.”
But despite the initial hype around the DCT, the actual roll-out itself has been scaled down substantially. Programs covered under the DCT as of now are minor in nature — scholarships and pension plans. The big-ticket items like food, fuel and fertilizer subsidies have been left for later. According to Finance Minister P. Chidambaram, the effort was being launched with “caution” to minimize errors. Talking to the media, Chidambaram said direct transfer of subsidies for food, fertilizer and kerosene “is not being contemplated at present. This will take more time as the issues of entitlement are more complex.”
Also, instead of the original plan of launching the DCT in 51 districts across the country, it has been launched only in 20. Under the new schedule, 43 districts are expected to be covered by March 1. The number of welfare programs expected to come under the DCT has also been reduced from 42 to 26, beginning with less than 10.
The DCT is expected to be fully rolled out by mid-2014. According to media reports, it is estimated that once that happens, cash transfers of around Rs. 300,000 crore (around $55 billion) will happen annually.