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Subsidy shakeup: Cash transfer soon

business Updated: Jul 05, 2011 22:31 IST
HT Correspondent
HT Correspondent
Hindustan Times
kerosene subsidy

Beneficiaries of kerosene, cooking gas (LPG) and fertiliser subsidies will soon be able to get direct cash transfers through banks, ATMs or even mobile banking, once the recommendations of the Unique Identification Authority of India (UIDAI) to plug leakages in the system are implemented.

UIDAI chairman Nandan Nilekani on Tuesday submitted a comprehensive 70-page interim report suggesting ways to plug leakages in the fuel and fertiliser, to finance minister Pranab Mukherjee.

Pilot projects for transfer of a direct cash subsidy will be launched in seven states.

"The pilot project will take approximately six months and taking into account the experiences which they will gather, they will submit the final report by the end of this year," Mukherjee later told reporters.

The task force will oversee the implementation of the pilot projects to come out with an "implementable solution" for direct transfer of subsidies in its final report by December 2011.

The constitution of the task force was announced by Mukherjee in his Budget speech this year.

Direct transfer of subsidy for kerosene, LPG and fertilisers was mooted as a significant portion of the Rs 73,637 crore outgo did not reach beneficiaries.

The task force has proposed a three-phased strategy for tackling subsidies on cooking gas. In the first phase, it has proposed a cap on the number of subsidised cylinders, to be implemented as a policy decision, with a robust authentication framework.

In the second phase, it has recommended direct transfer of subsidy to customers' bank accounts, and in the third phase, segmentation and targeting of customers and direct transfer to these customers.

Also recommended is a transparency portal for all customers of LPG of the three oil marketing companies, with details of their consumption.

Separate proposals have been made for fertiliser and kerosene subsidy as well.

The report suggested creation of an IT-driven core subsidy management system (CSMS), which will be able to detect fraud and diversions. The CSMS will also be used to transfer the cash component of the subsidy directly and in real-time into the bank account of the beneficiaries.

Mukherjee said direct transfer of subsidies on cooking gas, fertilisers and kerosene will help curb pilferage and leakages.