Direct Subsidy

In a bid to check wasteful fuel and fertiliser subsidy and reach it to the intended beneficiaries, the government has set up a task force to suggest a suitable mechanism of direct transfer of subsidy to the consumers.The task force will be headed by Nandan Nilekani, Chairman, Unique Identification Authority of India (UIDAI) and has been asked to submit an interim report within four months. Based on the interim recommendations, a six month pilot scheme will be run and the learnings from that will be go into the final report. The task force will design IT systems, align it with the UID numbers, and also suggest changes in the administration and supply chain management. There is overwhelming evidence that the subsidised kerosene to poor families is resulting in waste, leakage, adulteration and inefficiency, finance ministry said in a release constituting the committee. “Therefore, it is imperative that the system of delivering the subsidized Kerosene be reformed urgently,” it said adding that similarly the delivery of subsidised cooking gas needs to be reformed. Chief economic advisor Kaushik Basu has called for direct transfer of subsidy to the intended beneficiaries, leaving market to decide the prices. The price of kerosene to below poverty line families has not been revised for a long time. The possibility of diversion of kerosene supplied through the public distribution system cannot be ruled out due to huge price difference with petrol /diesel, the government said in the winter session of parliament. Similarly, subsidised cooking gas is widely used for commercial purpose, especially in the food industry. As on December 1, 2010 the under recovery on kerosene supplied to the public distribution system was Rs 16.88 per litre and Rs 272.19 per cylinder on domestic cooking gas.

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