The government announced a raft of measures on Thursday to promote cashless transactions as part of a campaign to encourage people to go digital, a month after the shock culling of high-value bank bills triggered a severe cash crunch.
Signalling that using cash is going to be costlier, finance minister Arun Jaitley came up with multiple incentives -- ranging from discounts on fuel, highway toll and railway tickets to cheaper insurance cover – for those using digital payment modes.
The government has come under opposition attack for its November 8 move to recall Rs 500 and Rs 1000 notes but it has repeatedly defended itself, saying the decision was necessary to stamp out black money and counterfeit currency.
In recent weeks, Prime Minister Narendra Modi also extolled the virtues of a cashless society, giving examples of beggars using ATM machines, and said any pain from a shortage of cash was temporary and that the move will benefit the country in the long run.
“Before November 8, we were using excessive amount of cash and very limited digital transaction... there is a cost of transacting in cash… excessive cash can lead to malpractices,” Jaitley said at a press conference.
Earlier in the day, Jaitley announced in Lok Sabha, a waiver of service tax on card payments of up to Rs 2,000.
Just two months ahead of the Union budget, the finance minister said petrol and diesel worth Rs 1800 crore was sold in a day, of which of about 20% is already being paid digitally.
“But in one month (since the demonetisation drive was announced) the figure went up to 40% and the cash transaction of Rs 360 crore per day has got shifted to cashless transaction methods,” Jaitley said.
The incentive scheme has the potential to shift at least 30% more customer into paying digitally, which would further reduce the cash requirement of nearly Rs 2 lakh crore per year at petrol pumps, he added.
From January 1, 2017, customers who pay digitally for their monthly or seasonal tickets on suburban trains will also pay less. Besides, free accidental insurance cover of upto Rs 10 lakh will be provided to all those railway passengers buying their tickets online.
That is not all. Customers will be offered a discount of 5% for payment of all paid services of the railways which include catering, accommodation, retiring rooms among other things if they pay digitally.
Jaitley said about 80 lakh passengers use seasonal or monthly ticket on suburban railways, largely in cash, spending worth nearly Rs2,000 crore a year. As more and more passengers will shift to digital means the cash requirement may get reduced by Rs1,000 crore per year in near future, Jaitley pointed out.
The other major announcements include two Point of Sale (PoS) machines each for one lakh villages with a population of less than 10,000. The exercise will be supported through financial inclusion fund. The government will also support regional rural banks and cooperative banks through NABARD to issue “Rupay Kisan Cards” to 4.32 crore Kisan Credit Card holders.
The central government departments and public sector undertakings will ensure transaction fee associated with digital payments is not passed on to customers. State governments are also being advised to consider absorption of transaction charges. The state-owned banks have been asked that merchants should not be required to pay more than Rs 100 per month as rental charges.