Cash Transfers

Prime Minister Manmohan Singh is expected to formally kick off cash transfer of subsidies and entitlements, one of the most ambitious policy initiatives of UPA-2. The scheme is visualized as a game-changer for UPA-2, like the NREGA was for UPA-1, and is expected to pay rich dividends during elections.
The plan to transfer cash directly into the bank accounts of the beneficiaries instead of handing over subsidized foodgrain, fertilizers or fuel is aimed at not only checking leakages in the system, but also empowering consumers with choices and ensuring big savings for the cash-strapped government.

WHAT IS CASH TRANSFER?
In lieu of subsidized food, fertilizer & fuel, BPL families would get between Rs.30,000- 40,000 a year in their bank accounts. In all, Rs.4,00,000 cr will be disbursed. APL families too would get money for subsidized cooking gas.

HOW WILL IT WORK?
Families with Aadhar card, entitled to subsidies, pension, scholarships, etc, will get money directly in their bank a/cs For this, they need to give their Aadhar card No. to service provider, say, gas agency & bank Option will be there to claim the cash subsidy at designated bank branch, by using a cash card

WHAT WILL IT COVER?
To begin with, only subsidy transfer for cooking gas Centre has asked states to launch pilots for food subsidy and work on fertilizer just begun Over time, it will cover all subsidies

WHEN WILL IT START?
By Jan 1, 2013, 51 districts with high Aadhar penetration will be covered. By Dec 2013, whole country will be covered

Through its cash transfer programme, the government is 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 PM Manmohan Singh is also planning to address the nation on the scheme in the coming days, explaining the ambitious plan that is expected to 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 will address a meeting of the ministers in charge of subsidies, pension and scholarships and disclose the government’s intent to formally launch the programme on January 1. The programme will 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 database of beneficiaries and link them with Aadhar so that UID-enabled bank accounts and payment systems can function through what’s being called the Aadhar Payment Bridge—a mechanism for giving cash cards to beneficiaries who don’t have bank accounts.
According to the 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.


Finance minister P Chidambaram and rural development minister Jairam Ramesh chose the Congress platform to announce the launch of the scheme on January 1, dropping more than hints that cash transfers would be among the party’s bragging points during the 2014 Lok Sabha contest. “Aapka paisa, aapke haath”, Jairam introduced the scheme—the punch line echoing the party’s winning “Congress ka haath, aam aadmi ke saath”, the battle theme for two consecutive polls.
The announcement at a press meet, where the line between the government and the party seemed to fade, came a day after PM Manmohan Singh decided to keep food and fertilizer subsidy out of the purview of the ambitious scheme.

The Congress’s cash transfers will cover 42 schemes in the first phase that include LPG, scholarships, old-age pension, and projects of the ministries of health and women and child.
At a meeting of senior ministers, the PM is learned to have spoken about the social costs of including food and fertilizer subsidies in the direct cash transfer scheme, expressing fear that diversion of the transferred money from the intended use to other expenditure would impact a household negatively. Sources said the PM also referred to diversion, putting womenfolk to disadvantage, and about the importance of food security and PDS.
The PM’s apprehensions mean a drastic reduction in the scope of the scheme and can, correspondingly, whittle down the political benefits the Congress hopes to derive from the scheme.
But that did not seem to take away much from the government’s satisfaction over preparing the platform for transfer of cash ahead of the 2014 polls. A beaming Chidambaram complimented the government for a job well done. He rebutted the opposition’s charge that cash transfers were akin to bribes for voters, saying the government was merely trying to ensure that the subsidies reached the beneficiaries in full, rather than launch any new scheme.
Ramesh struck a distinctly political note, saying the scheme was actually a political campaign which got underway 25 years ago with the recognition by then PM Rajiv Gandhi that 85% of the money released from Delhi never reached the beneficiaries. In the same vein, he stressed that the launch of the scheme could not have been possible without the IT revolution conceived and implemented by Rajiv. He also said the government’s endeavour was only to ensure that people got their “haq”, or entitlement, offering a peek into how the party might market the scheme in the leadup to the elections.