New Delhi, Sept. 16: The Planning Commission has proposed a slash in fuel and fertiliser subsidies, and subsidy delivery through cash transfer to the beneficiaries’ bank accounts rather than by providing cheaper goods.
Commission’s deputy chairperson Montek Singh Ahluwalia said providing food, fuel and fertiliser subsidies through cash transfer would help check leaks — that is, illegal sale of the subsidised goods in the market.
Sources suggested that cash transfer was being considered mainly for food and fertilisers and not fuel.
India now spends about 2.5 per cent of its gross domestic product (GDP) on food, fuel and fertiliser subsidies. Planning Commission member Abhijit Sen said the 12th Plan (2012-17) would aim at reducing the subsidies by half, to around 1.2 per cent of the GDP. The reduction will mainly happen on fertilisers and fuel.
Food subsidy is now delivered by providing grains at a low price through the public distribution system (PDS), which continues to absorb almost one per cent of the GDP. Fertiliser and fuel subsidies are provided by lowering prices.
“Cash can be transferred to the bank accounts of the beneficiaries. Another way is to issue UIDAI-linked smart cards to beneficiaries who can use those cards to get the goods from any retail shop. Pilot studies are going on in different states,” Ahluwalia said after a meeting of the full commission yesterday.
The Sonia Gandhi-led National Advisory Council had earlier opposed replacing the PDS by cash transfer on the ground that members of beneficiary families may use the money to buy not food but, say, liquor.
Council member N.C. Saxena said the Planning Commission proposal merely indicated the government’s intent and not a final decision.
“This proposal will go to the cabinet and the National Development Council before being finalised,” he said.
The plan panel’s views assume significance in the backdrop of the food security bill, sent to a parliamentary standing committee after its introduction in Parliament.
The bill seeks to provide subsidised food grains to up to three-fourths of the rural population and up to half the urban population through the PDS. It also provides for disbursement of cash among beneficiaries in areas where grains cannot be distributed because of a natural calamity or adverse geographical conditions.
Union food minister K.V. Thomas has been saying there is no plan to replace the PDS by cash transfer. However, the World Bank and Bihar chief minister Nitish Kumar have advocated cash transfer to check PDS corruption.
Nearly 40 per cent of the population is now provided grains at subsidised prices. However, the National Sample Survey has found that only 41 per cent of the grain released by the government reaches the target households.