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The government’s DBT plan involves transferring the subsidy amount directly to the beneficiaries’ bank accounts.

  • Here, the government does not have to fiddle around with differential pricing for the underprivileged.
  • This method can effectively address the issue of leakages and go a long way in solving the mis-targeting problem.

The government has also linked DBT to Aadhaar. Efficient targeting, using Aadhaar-linked data, ensures that the intended beneficiary receives the money in his account, thus helping him as well as reducing the government’s subsidy burden. This has resulted in effectively solving the leakage and mis-targeting problems in some schemes.


  • DBT in India
  • Pre requisite of successful DBT
  • Merits of DBT
  • Demerits of DBT
  • DBT in fertilizers
  • Is India ready to implement DBT in all programmes?
  • Suggestions for improvement
  • Conclusion

DBT in India

Direct Benefit Transfer is a mechanism to transfer the subsidy amount directly to the bank account of beneficiaries. Main agendas for DBT is to prevent and address following

  1. Leakages
  2. Delays
  3. Reducing structural expenses in distributing the subsidies in hand
  4. Encouraging everyone to have bank account and achieve financial inclusion.

Right now it is applied to only 4 areas that too in selected districts:

  1. LPG subsidies
  2. Jnani Suraksha Yojana
  3. Old age pension
  4. Scholarships

Pre requisite of successful DBT

source

Merits of DBT (Direct Benefit Transfer)

  • Leakage and delays are prevented.
  • Reduces Corruptions and black money issue.
  • Reduces economical inequalities in rural areas as everyone gets theire share rightfully.
  • Reducing the government expense on PDS, Cooperative society, bureaucracy to distribute scholarships etc.
  • Reduces time, energy and money of people to get their money/commodity.
  • Encourage free and fair market structure. Earlier subsidised grains entering market through backdoor used to distort the price in market.
  • More circulation of money in economy which will lead to at least 0.5% growth in GDP.
  • Government can better focus on other issues and not engaging in distribution.
  • Transportation charge for FCI and NABARD subsidies for warehouses will be reduced.
  • Slowly importance of MSP will reduce while price a farmer would fetch will increase which is win-win situation for farmers, also non-food crops will get importance which is issue right now in India.
  • Financial institutions will pay attention in rural area once people have cash in their hand.
  • Health facility will get better with private hospital giving facilities once people will have money to get treatment.

Demerits of DBT

  • Money in the hand of poor may get spent in something other than what is needed, a scholarship needed to be spent in education only, but how government can ensure that, once she has sent it to account
  • Most accounts holder are males who have accessibility to banks, hence it will lead to usage by them only. Females may not get their share if they are the intended beneficiaries
  • With lesser banks in rural parts of India, it will be another overhead for people to get their withdrawal
  • Delay in transfer may create more turbulence as many will flock to banks to check on their balances

DBT in fertilisers

Government is embarked on rationalizing subsidies as has been seen in LPG subsidy which saved thousands of crores of government exchequer. Now it has proposed for rolling out DBT for fertilizers as has been mentioned in recent economic survey.

Pros of DBT in fertilizer –

  • It would be beneficial for minimizing the use of fertilizer which would check degradation of soil nutrients and would prevent water contamination.
  • Farmers would be free from moneylender’s debt trap as now they would have secure money in their bank accounts. It would be helpful for inculcating saving habits also in farmers.
  • Released government control on the fertilization market would drive competition and would enhance productivity.
  • Enhanced financial inclusion and financial literacy will give boost to digital India and skill India.
  • No middlemen > no leakage > benefits to the needy > correct use of tax payer’s money (redistribution of wealth).
  • Less burden on government exchequer > fiscal consolidation target >money transferred in job creation and infrastructure development

However there are some cons which need to be factored – 

  • More money in hand may lead to misuse like in drug, alcohol, unnecessary shopping or gambling etc.
  • May further widen the gap between big farmers and small farmers.
  • Bio-identification can be detrimental for the personal information of farmers if not properly handled.

Operational challenges –

  • Management of data whether it may be of land, of status of farmer (landholder, tiller or tenant etc) or pertaining to agriculture practice is not up to the level in our country.
  • Though crores of accounts are opened but still there is a good number of people who are unbanked.
  • Some farmers have little knowledge about banking system so they can fall prey of undue interference.

Is India ready to implement DBT across all programmes?

The debate of implementing DBT in all subsidy programmes is discussed below. A proper implementation would helpful in following ways –

  • Filling leakages: DBT will help in reducing malpractices like leakages, ultimately giving the beneficiary what he is entitled. Example: LPG subsidy.
  • Increasing incomes: with large number of schemes which are implemented with an intention to increase incomes of the poor, but due to delay and other factors most of the time poor gets subsidy after a long time (like in wages of MNREGA). DBT can reduce these cases.
  • Financial inclusion: with the provision of DBT, poor will get themselves included in financial system of the country, which will help them to get other benefits and will boost their saving.

Some of the downsides of the implementation – 

  • People may use money for other purposes rather than using it for what it is meant for like in case of PDS.
  • Due to lack of education and financial literacy, poor will keep themselves outside the purview of banks.
  • Inadequate development of the banking channel in rural areas is also a challenge.
  • Lack of adequate documents also leads to exclusion of many poor from banking sector.

source

Conclusion

DBT revolutionized the banking sector by connecting low income segments of society with banks. There is no doubt that DBT has created a firm base for financial inclusion, which will include poor sections to the growth and development processes.

National Payment Corporation of India (NPCI) has successfully opened 150 million DBT accounts with Adhaar numbers and around 125 million accounts under Jan Dhan Yojana.

The government is fully relying on this scheme to plug leakages and save costs. It is estimated that over the time it could save up to 1.2% of GDP, which is currently lost in transit.


References:

Any doubts?


  1. Profile photo of Root Root

    Updated with Explainer + Questions

  2. Profile photo of Saiprasad Reddy Saiprasad Reddy

    What is DBT and what are the issues associated with this topic. please share the important information.

    1. Profile photo of Focus Ias Focus Ias
  3. Profile photo of praneetha vishnu praneetha vishnu

    Please explain about fertilizer subsidy scheme in relation to DBT

  4. Profile photo of Devesh Tiwari Devesh Tiwari

    no doubt DBT is bad idea in case of food,health and kerosene , DBT is against basic concept of “subsidy” . but it is must to stop heavy cash leakage happening bcz of clerical errors and corruption.
    can anyone suggest any other innovative alternate for DBT ? any idea ?

    1. Profile photo of Kiran Gundlapalli Kiran Gundlapalli

      DBT is still better approach for subsidy but the implementation is not technically sound as online banking system. Question is why DBT is not so efficient, is it because of technical/clerical errors or corruption/routing this pegs of amount to corrupted hands.
      Sincerely myself or none of my colleges has received LPG subsidy till now to our accounts even though we link AADHAR in bank and LPG Distributor. 🙂 🙂

    2. Profile photo of Ravi Mantwal Ravi Mantwal

      Hello, Devesh!
      Honestly, your views and knowledge spectrum are appreciable. Kudos!
      I am sure you will be one on them next year.
      “IAS Devesh Tiwari Ji” 😉
      Stay Blessed!

      1. Profile photo of Sumer Shah Sumer Shah

        +1

        1. Profile photo of Ravi Mantwal Ravi Mantwal

          Of course! Why not? 🙂

[op-ed snap] Getting the basics wrong

Context:

  1. The Economic Survey 2016-17 tabled in Parliament last month has proposed introducing a universal basic income in India
  2. It is a universal and unconditional income transfer to all citizens in order to address the twin problems of poverty and unemployment

The experiment in Europe:

  1. An example of universal basic income is the Finnish proposal to provide unemployed citizens between the ages of 25 and 58 a monthly income of €560
  2. Universal basic income, as proposed and discussed in Europe, is a substitute for means-tested income benefits, with certain work requirements (such as undergoing job training)
  3. Existing guaranteed incomes schemes are usually targeted or means-tested, that is, dependent on level of income and only available to those below a threshold level of income
  4. The core of the concept of basic income is the “absence of the means test and the absence of the work test”
  5. It separates the income benefit from eligibility based on current levels of income and from employment status

Alternative to UBI:

  1. The most commonly discussed alternative to universal basic income is a negative income tax
  2. This is a scheme in which, for individuals below a certain income threshold, not only is the income of a household not taxed, but the household receives a tax credit that is the difference between the basic income or guaranteed income and tax liability
  3. Scholars suggest that universal basic income may be cheaper to operate than a negative income tax
  4. The negative income tax, of course, assumes a country where all citizens file tax returns

Distortions in Indian proposal:

  1. The first wrong committed by the Economic Survey is that its proposal constitutes an attack on welfare schemes
  2. The Economic Survey wants universal basic income not to supplement, but to replace, all existing anti-poverty and social welfare programmes
  3. In its original conception, universal basic income was meant to replace only income guarantee programmes
  4. It is technically and ethically wrong to compare the costs and benefits of universal basic income with those from a range of subsidies relating to food and nutrition (public distribution, school meals, Integrated Child Development Services), education, and sanitation, as is done in the Economic Survey
  5. The second wrong is thus the argument that the universal basic income should replace all current in-kind and cash transfers
  6. The third wrong, and one that goes against the core philosophy of universal basic income, is the Economic Survey’s assertion that “universal basic income is not framed as a transfer payment from the rich to the poor”

Fund raising:

  1. There are different ways that funds for the universal basic income could be raised, such as through progressive taxation or a specific earmarked tax, or even a consumption tax
  2. The bottom line, whichever way, is that the rich have to pay for this universal provision
  3. In terms of the level of basic income, the higher it is, the higher the average rate of income tax, and, therefore the greater the redistribution from the comparatively rich to the comparatively poor
  4. While the basic income is given to all, the manner in which the basic income is funded has to ensure that society transfers resources from the rich to the poor
  5. The philosophy behind universal basic income is clearly one of redistribution
  6. It is not one of taking existing benefits, whether in the form of in-kind (such as food subsidies) or in cash transfers (such as maternity benefit), and dividing it up among all individuals as cash

No resource road map:

  1. The Economic Survey does not propose any new resource mobilisation or taxation to meet the goal of universal basic income
  2. On the contrary, it talks of universal basic income replacing other schemes at various places
  3. There is no intention of making the rich pay for the basic income

Main features of the UBI:

  1. The main features of universal basic income are that it should be universal and not targeted
  2. It should be unconditional and not tied to work or employment, and it should be in cash
  3. Universal basic income has been proposed internationally in lieu of employment or income guarantee schemes
  4. It is envisaged as a method of redistribution of resources from the rich to the poor
  5. It is envisaged as providing all persons (the poor, in particular) with an income to lead a dignified life, after basic needs such as education, health, and basic food consumption are taken care of
  6. The universal basic income proposed in the Economic Survey is hostile to each of these objectives

Challenges ahead:

  1. India has one of the lowest tax-to-GDP ratios in the world
  2. Unless the government seriously increases tax resources, the proposal for a universal basic income is at best a diversion from our current economic and social problems
  3. At worst it will be a means of reducing and ending funding for a host of welfare programmes

Note4Students:

The UBI is an important topic for Prelims as well as Mains. The op-ed gives analysis on its feasibility in India.

[op-ed snap] The hidden agenda of benevolence

Context:

  1. The idea of a universal basic income (UBI) has been gaining ground globally
  2. In the West, the UBI is being discussed as a solution to two problems: unemployment due to automation; and growing social unrest caused by extreme inequality and precarity
  3. It is expected to solve the unemployment problem by decoupling subsistence from jobs, freeing human beings to realise their true potential, preferably through entrepreneurship
  4. It would address the second by supplying monetary resources to access the necessities of life
  5. This, in a nutshell, is the popular understanding of the UBI

UBI debate in India:

  1. The UBI debate in India has been a narrow one — restricted, for the most part, to financial viability
  2. Its advocates argue that it is a more efficient way of delivering welfare, while its opponents hold that the fiscal burden would be too much

The UBI evangelists:

  1. The most eloquent advocates of UBI today are free-market enthusiasts — the same lot branded as neo-liberals for their advocacy of deregulation, privatisation, and cuts in welfare spending
  2. Outside the academic realm, the biggest champion of UBI is the global tech sector
  3. They all present the same conclusion: giving cash to the poor is better than traditional welfare

Not an add-on benefit:

  1. The biggest myth about the UBI is that it is a redistributive policy that would reduce inequality
  2. It is indeed possible to have a redistributive UBI
  3. But it would need to fulfil two conditions: it must be funded by taxing the wealthy; and the existing entitlements to the poor must not be taken away
  4. Such a UBI would actually be a socialist measure that would increase the bargaining power of the working classes by giving them an income cushion

Current UBI:

  1. It is restricted to the unemployed. It does not cover all working individuals
  2. It only replaces the already existing basic unemployment allowance and labour market subsidy — it is not an add-on benefit

Indian scenario:

  1. In India, too, the UBI is not an add-on
  2. On the contrary, it is about giving in a different form (cash), and under one umbrella, what is already being given (in-kind and cash benefits) via different channels
  3. Back in 2008, Arvind Subramanian, the present Chief Economic Adviser of the government, arged that the ₹1,80,000 crore spent annually on centrally sponsored schemes and assorted subsidies should instead be distributed as cash directly to 70 million households below the poverty line
  4. The UBI in India is nothing but the old wine of direct cash transfer in a fancy new bottle
  5. Its objective remains the same: to eliminate the public distribution system (PDS) and with it, the food, fuel, and fertiliser subsidies
  6. The same old arguments for replacing the PDS with cash transfers are now being trotted out in favour of the UBI

Budgetary allocation:

  1. All the government’s subsidies put together account for only 4-4.5% of the GDP
  2. This presents three options:
  3. One, the government makes up the deficit through additional tax revenue;
  4. Two, it limits the fiscal burden by shrinking the UBI coverage from ‘universal’ to those below the poverty line;
  5. Three, it further shrinks the amount being doled out
  6. Given India’s narrow tax base, and a policy mindset hostile to the idea of extracting more tax revenue from the wealthy, we can rule out option one
  7. So the UBI we get, if we get one, would be derived from a combination of the second and third options: cash transfers
  8. Therefore, a basic income, however paltry, would help strengthen the case for the elimination or a significant roll-back of programmes such as the PDS, midday meal schemes, and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)

UBI infrastructure:

  1. The Jan-Dhan Yojana set out to make every Indian accessible to global finance
  2. The Aadhaar card set out to make every Indian identifiable and enumerable as data — the currency of global tech
  3. The high mobile penetration has connected every Indian to the global digital network
  4. An element that was missing was consumer behaviour, which the recent demonetisation sought to address, by force-feeding ‘cashless’ to a cash-dependent population
  5. The UBI fits perfectly in this JAM (Jan-Dhan, Aadhaar, Mobile) platform

Why a UBI now?

  1. Immense pressure on India in secretive free trade negotiations
  2. The developed nations have for long wanted India to wind up its food security-related provisions — both state procurement of foodgrains, and their subsidised distribution via PDS
  3. The Indian state is stuck with welfare commitments it cannot renege on without political and legal consequences
  4. Shifting the welfare paradigm to UBI would loosen the bonds of legal and social accountability
  5. Under the PDS, for instance, the state must provide a specified quantity of foodgrains to the poor no matter what
  6. With UBI, it has the option letting the payout slide behind inflation, as has already happened with the old age and widow pensions

Note4Students:

This op-ed is very important and informative. It is an in-depth analysis of UBI, measuring all the pros and cons. A question can be asked on it in both Prelims and Mains.

Budget 2017: Will Arun Jaitley opt for Universal Basic Income?

  1. Context: The Jammu and Kashmir (J&K) government became the first to commit to a Universal Basic Income
  2. How? It will be provided to all citizens living below the poverty line through direct benefit transfers
  3. Expected benefits: Not only will it eliminate all the leakages, the cost of delivery will also be reduced dramatically
  4. This has raised expectations that finance minister Arun Jaitley may follow suit

Note4students:

If it comes up in budget, it’ll be an important issue to follow up.

NITI Aayog on PDS

  1. NITI: The Public Distribution System suffers from substantial leakages and there is an urgent need to look into avenues to eliminate them
  2. Solution: Aadhaar platform is one such avenue which can eliminate multiple ration cards held by the same household and also weed out ghost ration cards
  3. Give choice: In the longer run, an even more effective instrument would be to give households the option to choose between subsidised purchases and equivalent cash
  4. Such an approach will give the beneficiaries the option to buy their grain from private shops, thereby putting competitive pressure on public distribution shops
  5. A key element in the success of this approach, however, is to ensure access to banking
  6. Beneficiaries receiving cash transfers into their bank accounts have to be able to withdraw that cash to effectively use it

Note4students:

An innovative solution for PDS leakage issue and enlarging the choice of the public.

[op-ed snap] Towards a kerosene-free India

  1. Theme: Launch of Direct Benefit Transfer (DBT) for kerosene (DBTK) on a pilot basis in Jharkhand.
  2. Hurdles in implementation: First, the lack of a streamlined and unified digital consumer database; the database of subsidised kerosene beneficiaries falls under the Public Distribution System (PDS), which is managed and maintained by each State government.
  3. While e-PDS is being implemented across India, a digital PDS beneficiary database is not yet available for all the States to enable implementation of DBTK.
  4. The second hurdle is the political economy associated with subsidised kerosene. Since the States determine who gets the subsidy and to what extent, it is an important political currency for the State governments.
  5. Third, DBTK has limited ability to reduce incentives for diversion.
  6. Currently, subsidised kerosene is mainly diverted as a substitute or as an adulterant to diesel. The price differential between unsubsidised kerosene and diesel is in the range between Rs.18 and Rs.32 per litre which is still significant for middlemen as well as end consumers to divert the fuel as diesel substitute.
  7. The third challenge is in ensuring that the subsidy is accessible to its major beneficiaries — poor households.
  8. Highlights from the recent analysis by the Council on Energy, Environment and Water (CEEW): Kerosene is predominantly used as a lighting fuel in rural India and for both lighting and cooking in urban-poor households.
  9. Shifting from kerosene to alternatives such as solar-assisted solutions for lighting and LPG for cooking could be economically beneficial for both the government as well as households and provide households a healthier alternative.
  10. Also, there is a bottom-up demand for such a change. According to the analysis, 78 per cent of rural households in six major States are willing to adopt solar-based lighting solution in lieu of a reduction in their kerosene subsidy.
  11. The way ahead: Moving away from subsidised kerosene, and envisioning a kerosene-free India would be a visionary step towards the goal of clean energy access.

Why to use Aadhar?

  1. The use of Aadhaar as identifier for delivery of services simplifies the Govt delivery processes
  2. Brings in transparency and efficiency, and enables beneficiaries to get their entitlements directly to them
  3. Aadhaar obviates the need for producing multiple documents to prove one’s identity
  4. Legal: The provisions of the Aadhaar Act and Regulations under the Act came into effect from September 14, 2016
  5. As LPG subsidy is an expenditure incurred from Consolidated Fund of India, Ministry has notified the use of Aadhaar as mandatory requirement for availing of the benefit

Aadhaar must for LPG subsidy after November

  1. Govt has made Aadhaar mandatory for availing cooking gas (LPG) subsidies
  2. It has given two months grace period for citizens to get the unique identification number
  3. Oil marketing companies have been asked to faciliate enrolments.
  4. Current system: Govt gives 12 cylinders of 14.2-kg each at subsidised rates per household in a year
  5. The subsidy on every cylinder is transfered in advance directly into bank accounts of individuals, who then buy the cooking fuel at market rates

Weeding out the ghost beneficiaries

  1. Petroleum Ministry: Due to the PAHAL scheme, 3.34 crore duplicate/fake/ghost/inactive domestic LPG connections were weeded out as of April 1, 2015
  2. This figure was 3.56 crore in 2015-16 & using these figures, the government estimated a savings of Rs. 21,261.4 crore over the two years
  3. CAG: The government still has a long way to go in fully eradicating duplicate/fake/ghost accounts
  4. There were several instances of intra-OMC duplication (where a single Aadhaar number or bank account number was used for multiple LPG connections)
  5. And also many instances of consumers receiving more than mandated 12 subsidised cylinders a year

LPG subsidy savings largely due to falling oil prices: CAG

  1. News: About 92% of the Rs. 23,300-crore savings in subsidy payouts by the Petroleum Ministry in 2015-16 was due to the sharp fall in oil prices, according to CAG
  2. Schemes: Implementation of PAHAL (DBTL) Scheme coupled with the ‘Give it Up’ campaign has resulted in the reduction of offtake of domestic subsidised LPG cylinders
  3. But the resultant subsidy savings was not as significant as that was generated through fall of subsidy rates
  4. Context: Centre had claimed that it has saved about Rs. 22,000 crore due to the ‘Give it Up’ campaign, coupled with the direct bank transfers of the subsidies
  5. The CAG’s figure of a saving of Rs. 1,764 crore due to a lower offtake of LPG cylinders was based on actual numbers while the government’s calculations were estimates

CAG audit nails Centre’s claim on LPG subsidy saving

  1. News: A CAG report could state the extent to which Centre over-claimed its LPG subsidy savings
  2. Claim: Saving of Rs 22,000 crore in FY 2015 and FY 2016 due to direct bank transfers of subsidy (DBTL) and asking better off consumers to voluntarily give up theirs (GiveItUp)
  3. Audit: Audit has found that the saving from people voluntarily giving up LPG subsidy and direct bank transfers adds up to less than Rs 2,000 crore
  4. The remaining (Rs 20,000 crore) saving is due to the dramatic fall in the prices of LPG that India annually imports
  5. Trivia: LPG is a mix of 60% Butane and 40% Propane

LPG subsidy savings

  1. The Centre saved over Rs.21,000 crore in LPG subisdy in the last two financial years
  2. Reason: Direct Benefit Transfer- paying subsidy directly into bank accounts of actual users
  3. This helped eliminate duplicate connections as well as diversions
  4. Data: DBT for LPG started in select districts from November 2014 and in the rest of the country from January 1, 2015
  5. As on April 1, 2015, there were 18.19 crore registered LPG consumers and 14.85 crore active consumers implying a gap of 3.34 crore consumers which were duplicate, fake or inactive
  6. Saving: Eliminating such fake consumers helped save Rs.14,672 crore in 2014-15 fiscal
  7. The saving in 2015-16 was about Rs.7,000 crore, lower than the previous fiscal because oil prices slumped, cutting the subsidy required

83 lakh people voluntarily gave up LPG subsidy

  1. News: The govt is committed towards reforming the subsidy structure by making it more targeted
  2. Background: In Mar 2015, PM had started the ‘Give it up’ campaign urging the affluent class to give up their LPG subsidy
  3. Achievement: 83 lakh people had voluntarily given up their LPG subsidy so far.
  4. Future: The govt will provide 5 crore LPG connections on concessional rates in the name of women from BPL families over 3 years till 2018-19

DBT regime may evolve into a social security platform

  1. The govt is planning to scale up the present regime for direct transfer of benefits to the poor under various welfare schemes
  2. Govt. will create a unified national database of beneficiaries that can be updated in real-time
  3. It can automatically trigger new benefits such as vaccine shots for a newborn baby
  4. A committee in the Cabinet Secretariat is also working with the Finance Ministry to create a network of 2 million cash points in 6 lakh villages by March 2017
  5. The cash points such as kirana stores, chemists and Grameen Dak Sewaks will ease the process of getting the cash in hand for the rural poor

Kerala to take DBT route for pension

  1. The Kerala govt is gearing up for an ambitious rollout of DBT of welfare pensions to some 12 lakh beneficiaries in Feb.
  2. Pension will be disbursed with the involvement of local bodies.
  3. The decision to switch over to the DBT system was taken following serious lapses in pension disbursement through the postal network.

Social sector asks Jaitley to review subsidy alternatives

  1. Social sector groups want Finance Minister to review the implementation of alternative subsidy systems before going ahead with DBT.
  2. There have been several instances of in-kind transfers being successfully implemented in various parts of the country.
  3. The demand comes at a time when the govt is keen to expand the ambit of its DBT scheme for subsidies.
  4. There was a unanimous appeal from all the different social sector groups for additional funds for the social sector.

Online initiative to engage LPG consumers and citizens

  1. The aim is to engage the LPG Consumers and Citizens of India in providing efficient and citizen friendly services in LPG distribution.
  2. Two online discussion forums have been launched on myGov.in and mylpg.in.
  3. Valuable suggestions or comments will be considered for improving the customer oriented services related to LPG Coverage & Delivery.
  4. It is one of the initiatives for observing 2016 as the “Year of LPG Consumers”.
PIB

Direct transfer of kerosene subsidy

The Centre has announced a scheme to implement direct benefit transfers for kerosene subsidies starting April 1.

  1. Under the scheme, the consumer would be required to pay the full unsubsidised price of kerosene at the time of purchase.
  2. The subsidy amount will then be directly transferred to their bank account.
  3. This will be done by incentivising States to make the transition.
  4. Few states have already agreed to initiate the scheme in a few of their districts.

Textiles Ministry plans direct benefit transfer to cotton farmers

  1. The Ministry of Textiles is planing to implement DBT to cotton farmers’ accounts, if the price of cotton drops below the MSP.
  2. The ministry will make available the funds to the state govt to be paid to the farmers.
  3. The Cotton Corporation of India will get into MSP operations as and when required in the cotton-growing states.
  4. China has a system for direct payment of benefits to farmers and the Chinese spinning mills have benefited from it.

DBT has helped remove ‘ghost beneficiaries’: CEA

  1. Before DBT, 1 in 4 subsidised LPG cylinders were going to “ghost beneficiaries.”
  2. This saved the government Rs. 12,700 crore on its subsidy bill in 2014-15 and is expected to save Rs. 6,500 crore during the current year.

Questions (attempt in the comments section)

1

What are the merits and demerits of direct benefits transfer (DBT) scheme in the Indian context? Enumerate.

2

Some argue that time is ripe for pushing Direct Benefits Transfer (DBT) for all subsidy programmes. Do you agree? Substantiate.

3

What measures should be taken to make JAM trinity to be an effective enabler of DBT (Direct Benefits Transfer)? Identify the problems and suggest solutions.







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