Cash for kerosene; direct transfers for LPG,fertiliser

Nandan Nilekani suggests ways to plug leakages in subsidy framework for kerosene,LPG and fertiliser

Recipients of subsidised cooking gas and fertiliser will soon get direct cash transfers while state governments will work out a policy for providing cash subsidy for kerosene. These are the key recommendations of the task force chaired by UIDAI chairman Nandan Nilekani to suggest ways to plug leakages in the current subsidy framework for kerosene,LPG and fertiliser.

Listing out the benefits of a direct subsidy regime,the task force,which submitted its interim report to Finance Minister Pranab Mukherjee on Tuesday said,A direct subsidy transfer framework facilitates monitoring the subsidy transactions carried out at different levels … and provides a powerful reconciliation and social audit mechanism.

Mukherjee said,Pilot project will take approximately six months time and taking into account the experiences which they gather,they will submit the final report by the end of this year. The government spends over Rs 70,000 crore a year on providing kerosene,fertiliser and cooking gas at below market rates. The Finance Minister said that the government should consider distributing solar lanterns and cookers through LPG outlets and petrol pumps. Deputy chairman of Planning Commission Montek Singh Ahluwalia said the purpose of direct subsidy is to ensure that it reaches the targeted beneficiaries.

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The task force has charted out a three-step plan to switch to direct subsidies which can be transferred through banks,ATMs,post offices or mobile banking. An IT platform and the Aadhar or unique identity cards will form the backbone of the direct subsidy regime. It has suggested setting up an IT-driven Core Subsidy Management Platform that would automate all business processes and maintain bookkeeping information on entitlements and subsidies for all beneficiaries.

The UIDAI has provided an implementation plan to be operationalised by the respective ministries, Nilekani said after submitting the report.

In the first phase,the task force has suggested taking up the Petroleum Ministrys recommendation to limit the number of subsidised LPG cylinders that are given to beneficiaries. In the second phase,it has called for direct cash transfer of subsidies to a beneficiarys bank account,while in the final stage,it has suggested segmentation and targeting of intended beneficiaries.

Similarly,in the case of fertiliser,the panel has recommended improving transparency across the supply chain by providing information on the manufacturer,distributor and retailer. In the second phase,the government can directly transfer cash subsidy to the retailers bank account,and in the third phase it can transfer it to the farmers bank account.

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The task force said that the system of subsidies is more complicated in the case of kerosene due to its distribution channel,and called for wider consultation with states and reforms in the public distribution system. It has recommended direct transfer of subsidy through state in Phase I and to the beneficiarys account in Phase II. The task force has recommended pilot projects in seven states Tamil Nadu,Assam,Maharashtra,Haryana,Delhi,Rajasthan and Orissa that would be carried out over the next six months. Based on the results of pilots,the panel will submit its final report by December this year.