One result of the privatisation of Delhi's electricity distribution is that the itemised bill tells me how much of a subsidy the Delhi government is giving every month. Over the past year, I have got a total subsidy of about Rs 7,500. And since the subsidy element on cooking gas cylinders too is known, I can say that I received a cooking gas subsidy last year of about Rs 1,800. These sums are chicken-feed when compared with the huge subvention that I get on my provident fund balances, since the PF organisation pays 8.5 per cent interest, tax-free. That is a pre-tax return of 12.9 per cent, which you can’t get anywhere else on a risk-free deposit. At the very least, the tax component of 4.4 per cent is an annual gift from the government, which otherwise borrows 10-year money at about 7 per cent. So, quite a few lakhs of unearned rupees are coming to me in a year on this account. I don’t have a ration card, so I get no benefit from subsidised foodgrain and sugar, and I don’t buy fertiliser or any of the other goods and services that the government subsidises. But I am a massive beneficiary nevertheless, even though I can assume that I am among the 1 per cent of the people in this country who least need or deserve any kind of government subsidy.
Now compare this with what Nitish Kumar is promising as cash transfers into the bank accounts of the poor every month in Bihar, and what Chandrababu Naidu is offering as a variant, namely a credit balance that a poor person can draw from an ATM every month. If the annual benefit intended for a poor family under the rural employment guarantee programme is Rs 10,000 (100 days of work, at Rs 100 per day), then the subsidy on my electricity and gas bill alone is enough for government support to a poor family through the year. If the PF subsidy is also knocked off, then the government can use the money for cash transfers to support dozens of poor families. Extend the argument to the 1.4 million families whom the NCAER’s household centre classifies as the “rich” (those earning Rs 20 lakh or more a year), and the subsidies to these families could perhaps pay for cash pay-outs to three times as many poor families in the land. Taking care of 4 million or 5 million families is not such a big deal, when there are at least 50 million who need help with income support (out of a total of about 220 million families), but it goes to show how this is a very easy thing to manage. And if you add the Rs 31,000 crore that the government has earmarked for the rural employment programme, the money is there for the asking, especially if some of the other subsidies are scrapped too.
The danger with cash transfers is four-fold: the wrong people get the money (according to the government’s own officials, half the BPL cards issued in Delhi are bogus!); the poor don't manage to open bank accounts or can't operate them (60 per cent of Indians don't have bank accounts); husbands draw the cash and spend it on liquor, which is not a danger in food-for-work; and lastly, politicians will keep promising more pay-outs in successive election campaigns, so that the subsidy bill becomes unsustainable. But prior knowledge of dangers can be used to build safeguards. In other words, there is a strong case for reviewing all subsidies, dumping the employment guarantee programme with all its bureaucratic paraphernalia and leakages, and simply ensuring monthly cash transfers to the very poor. Some influential Congress ministers have been in favour, but won't say so because Sonia Gandhi has blessed the rural jobs programme.