NEW DELHI: The Prime Minister is expected to formally kick off cash transfer of subsidies and entitlements, one of the most ambitious policy initiatives of UPA-2, on Monday. The scheme for cash transfers is visualized as a game-changer for UPA-2, like NREGA was for UPA-1, and is expected to give rich dividends at the elections.
Manmohan Singh is expected to set January 1, 2013 as the launch date for the rollout when he meets his ministerial colleagues on Monday. The plan to transfer cash directly into bank accounts of beneficiaries instead of handing over subsidised foodgrains, fertilizer or fuel is aimed to not only check leakages from the system, but also empower consumers with the choices and ensure big savings for the cash-strapped government.
Compared to NREGA, the size and scale of the cash-transfer programme is several times the rural job guarantee scheme, with the government planning to transfer over Rs 4 lakh crore annually to the public, with each BPL (below poverty line) family getting over Rs 3,000 a month.
Sources said the PM is also planning to address the nation on the scheme in the coming days, explaining the ambitious plan that would be bigger than similar programmes around the world. The government, which accords high importance to the scheme, proposes to appoint a national coordinator to oversee the programme. It will also ensure its rapid scalability.
Singh on Monday will address a meeting of ministers in-charge of subsidies, pension and scholarships and there he will disclose the government intent to formally launch the programme on January 1. The programme would begin by covering 51 districts where the Aadhar card has a high penetration. By April 1 next year, 18 states will be covered.
A senior official said the Planning Commission has identified seven flagship programmes, including pensions and 22 scholarship schemes given by nine central ministries, for cash transfers, excluding those related to subsidies on food, fertilizer and fuel.
Ministries are being asked to digitize their databases of beneficiaries and link them with Aadhar, so that Aadhar-enabled bank accounts and Aadhar-enabled payment systems can function through what's being called the Aadhar Payment Bridge - essentially, a mechanism for giving cash cards to beneficiaries who don't have bank accounts.
According to latest estimates provided by the Department of Financial Services, by March 31, 2012 all banks will migrate to the core banking platform which will facilitate direct cash transfers. The plan is to cover all villages with a population of more than 5,000 with branches, and those with population of more than 2,000 with business correspondents. Seven states have committed to make electronic payments.
Times View
The government clearly believes that cash transfers can be a game-changer. In theory, they would indeed appear to be justified in this view. However, whether the practice lives up to the theory is what will ultimately determine how much of a game-changer this move is and whether the change is for the better or for worse. That is why it is important that the government acts as soon as possible to even out the more obvious glitches to smooth implementation of cash transfers, like a large proportion of the population having neither identification documents nor bank accounts. This is particularly true of the poorest sections, who really ought to be the main beneficiaries of the government's welfare programmes.
Cash transfer: PM to play UPA-2's trump card on Monday
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Cash transfer: PM to play UPA-2's trump card on Monday
