With leakage-proof delivery of subsidies being crucial for easing the government's funding burden, the Unique Identification Authority of India (UIDAI) is set to play an important role as the finance minister aims to bring the fiscal deficit below 5% by end of the next financial year.
Finance minister Pranab Mukherjee said recommendations of the UIDAI, headed by Nandan Nilekani, on Information Technology-based direct transfer of subsidy have been accepted. Pilot projects are being conducted to gauge the efficacy of the new regime.
In recent years, increasing subsidy burden was a cause of increasing fiscal deficit. "Our effort will be directed towards leakage-proof delivery of subsidies," Mukherjee said.
The government is using the Aadhaar platform to monitor the movement of fertilisers and subsidies from the manufacturing to the retail level. "This will be rolled out nationwide through 2012. This step will benefit 12 crore farmer families and reduce expenditure by curtailing misuse of fertilisers," the finance minister said. Also, the Aadhaar platform will be used to transfer fuel subsidies — kerosene and liquid petroleum gas (LPG) — to the consumers.
On Friday, the minister made it clear that subsidies would be funded to the extent that could be borne by the economy without adverse implications. In the next three years, the subsidy burden will be reduced to 1.75% of the gross domestic product (GDP).
The minister also announced that funds will not be a constraint for implementing the UIDAI project, which is expected to cost Rs 8,500 crore.