Finance minister Pranab Mukherjee, as part of his budget proposals for 2011-12, on Monday announced introduction of a scheme for direct transfer of cash subsidy to people living Below Poverty Line (BPL).
The move is aimed at curbing diversion of subsidised items like kerosene, LPG and fertilisers and will be applicable from March next year.
"To ensure greater cost efficiency and better delivery for both kerosene and fertilizer, the government will move toward direct transfer of cash subsidy for people BPL in a phased manner," Mukherjee said during his presentation of the budget 2011-12.
The system will be in place by March, 2012, he said, adding that a task force headed by Nandan Nilekani is working out the modalities for the proposed system of direct transfer of subsidy for kerosene, LPG and fertilisers.
"The interim report of this task force is expected by June this year," he said.
Later, it was again clarified by finance secretary Sushma Nath that non BPL families will continue to get the supply of subsidised LPG, even as the government plans to give direct transfer of cash subsidy on LPG and kerosene to the BPL families.
At present, the government provides kerosene at subsidised rates to families living below the poverty line through the Public Distribution System (PDS). Furthermore, LPG is provided at a subsidised rate to households.
As regards fertilisers, the government provides subsidy to companies so that farm inputs, which include urea and imported fertilisers, can be provided to farmers at cheaper rates.
Earlier this month, the government set up a task force under the former chief of Infosys, Nilekani, who at present is Unique Identification Authority of India (UIDAI) Chairman. The panel also included secretaries from the ministries of finance, chemicals and fertilisers, agriculture, food, petroleum and rural development.
The need to set up the task force arose in view of "overwhelming evidence that this (current) policy is resulting in waste, leakage, adulteration and inefficiency. Therefore, it is imperative that the system of delivering the subsidised kerosene be reformed urgently," the government had said.
Besides designing an IT framework, the task force will align the systems with the issuance of the UID numbers and suggest changes in administration and supply chain management.
The recommendations of the task force will be implemented on a pilot basis by the concerned ministries and the final report would include the results of such projects.