The approach paper to the 12th Five Year Plan (2012-17) is set to outline a comprehensive road map for cash transfer of food, fertiliser and fuel subsidies, using Aadhar-based identification and ‘smart’ cards, with recharging facilities.
Planning Commission member Saumitra Chaudhuri told Business Standard that the idea was to initially start the exercise with cash transfer of food subsidy through a smart card, which could be recharged every month, according to the entitlement of the beneficiary.
He said the subsidy to be passed on would be the difference between issue price of grain (at which the government sells grain under the targeted public distribution system) and the cost of procurement, barring expenses like storage and transportation charges.
“For calculating the money to be transferred to a particular beneficiary, this would be multiplied with the quantity of grain entitlement under PDS and the amount recharged monthly in the smart card by the government,” said Chaudhuri. “Through this card, the beneficiary can purchase any food product of his choice, either from a fair price shop or from a designated store, be it milk, eggs, fish, etc.”
The idea is to transfer the subsidy directly to the beneficiary instead of giving it to the Food Corporation of India (FCI) or any other agency.
At present, food subsidy is transferred to the FCI as the difference between the economic cost of foodgrains (minimum support price plus storage and transportation) and their issue prices (sale price) under the targeted public and other welfare schemes.
For some targeted beneficiaries like those covered under the Antyodaya Anna Yojana, the government bears a subsidy of almost 80 per cent. The government released a subsidy of Rs 43,668 crore in 2008-09, almost 40 per cent more than in the previous financial year. It then rose to Rs 58,242 crore in 2009-10, a rise of almost 33 per cent. In the 2011-2012 Budget estimates, India's food subsidy bill has been pegged at Rs 60,573 crore, marginally down from the 2010-2011 revised estimates of Rs 60,600 crore.
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“Pilot projects are already operational in some states such as Bihar. Even Goa has shown interest in starting a pilot project on cash transfer of food subsidy and we hope to incorporate the same,” Chaudhuri said.
The second stage will involve transfer of LPG and kerosene subsidies, for which a model similar to the one for food is being worked on. Chaudhuri said cash transfer of subsidy in case of fertiliser would take some time, as identification of the real beneficiary was a must. Transfer of fertiliser subsidy in cash is also slightly complicated as in many cases, land owners are not actual farmers. “We are working on models to make this more accurate and helpful for real beneficiaries,” he said.
The Commission hopes to give a final shape to the road map with inputs from the Nandan Nilekani committee set up to make suggestions on the issue.