Though Finance Minister P. Chidambaram has described the move as a "game changer", the real test would come in implementing the scheme.
The direct benefit transfer (DBT) scheme is aimed at cutting the bloated subsidy bill of Rs.1,64,000 crore.
It is high in the Congress' scheme of things with party general secretary Rahul Gandhi having told workers that if successfully implemented, it could help the party win the next two Lok Sabha polls, including the 2014 elections.
"Such a scheme is being implemented by any government for the first time in the country...Poor people will directly get cash they deserve and there will be no middlemen...The scheme would remove corruption to an extent," Congress spokesperson Rashid Alvi told IANS.
The programme covers schemes like educational scholarship for the Scheduled Castes and the Scheduled Tribes and pensions to widows. Food, fertilisers, diesel and kerosene have been kept out as these were complex issues, Chidambaram said.
Also Read
India's welfare spending is a major contributor to its fragile public finances. The programme can generate much-needed budget savings by eliminating corruption, the government says.
Chidambaram said that the party's slogan "aapka paisa aapke haath (your money in your hands)" was valid with the scheme.
"We have a chance to ensure that every rupee spent by the government is spent truly well and goes to those who truly deserve it," Prime Minister Manmohan Singh had said.
The seven schemes that will now employ direct cash transfers to beneficiaries' accounts are mostly related to student scholarships, stipends and the Indira Matrutva Yojna.
It is estimated that at least two lakh beneficiaries will receive cash benefits from Jan 1.
Cash benefits in the remaining 19 schemes will be available from February and March when the government will cover 23 other districts across the country.
"The purpose of direct benefits transfer is to ensure that benefits go to individuals bank accounts electronically, cutting down delays and diversions," said Information and Broadcasting Minister Manish Tewari.
Chidambaram said credit transfer will take place even if beneficiaries did not have Aadhaar card (bearing the Unique Identification Number) and efforts would be made to ensure that Aadhaar is seeded in every bank account in future.
The withdrawals could take place through saving accounts and ATMs.
The government had originally identified 51 districts across 16 states to be covered by the programme under which cash subsidy benefits will directly go to the bank accounts of beneficiaries with mandatory requirement of Aadhaar number.
Subsequently, four districts each of Himachal Pradesh and Gujarat were exempted from the roll-out because of the assembly elections.
The states being covered in the initial phase are Karnataka, Maharashtra, Delhi, Rajasthan, Madhya Pradesh and Punjab and UTs of Puducherry, Chandigarh and Daman and Diu.
This will be extended to 11 more districts from February 1 in states including Kerala, Haryana, Sikkim, Goa, Andhra Pradesh and Jharkhand and 12 more districts in states including Tripura from March 1.
Many also fear that the scheme too could throw up stories similar to the Nahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) which has failed to deliver in several places. For example, pilot programmes in Rajasthan and Jharkhand showed glitches with payments not reaching those these were meant for.
Critics say the government has been too quick in pushing forward the project and is bound to face enormous implementation problems because of the complex technology and public administration required.
They say the government's plan for accelerated mass conversion of welfare schemes to Aadhaar-based cash transfers could cause massive social exclusion. In which case it may not be the game-changer for the Congress-led UPA in the next general elections.