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Government to roll out cash transfer of food subsidy from September

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  • Crisil, the Indian arm of Standard & Poor's, estimates that the federal subsidy bill could fall by 20%, or Rs 250 billion ($3.94 billion) a year, if the direct benefit transfer scheme is fully implemented.
  • India plans to phase in cash transfers of food and kerosene subsidies from September, saving 10-15% of the $21 billion in annual outlays on the benefits by eliminating fraud, a senior finance ministry official said on Thursday.
  • Three so-called union territories, directly administered by the central government, would become a testbed for the measures, said Peeyush Kumar, the senior finance ministry official in charge of the cash transferscheme.
  • Under the programme, each family will get a monthly subsidy of about Rs 500-700 ($19), which would be linked to a state-set procurement price of grains.
  • Prime Minister Narendra Modi, who has completed one year in power, wants to improve targeting of food and fuel subsidies to reach the poor - monetising benefits previously paid in kind that often went to waste or were stolen.
  • He launched a 'Digital India' drive on Wednesday to offer public services by linking bank accounts, identity cards and mobile phones in a national database.
  • Indian plans to reduce its subsidy bill by about 10 percent to $38.4 billion this fiscal year, about 14% of federal spending on programmes offering subsidised food, fertiliser and fuel, helped by reforms and lower crude oil prices.
  • The federal government has set a deadline of December for states to computerise all data on households now receiving subsidised food and fuel - to remove 'ghost', or fake, beneficiaries, Kumar told a seminar on benefit reforms.
  • Direct payments for cooking gas into people's bank accounts, launched earlier this year, have reduced sales of subsidised fuel by about one-fourth, mainly by eliminating ghost beneficiaries, said finance ministry adviser Arvind Subramanian.
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