Nilekani codes to improve subsidy delivery for aam aadmi

Excerpts from After the Bell on CNBC-TV18 Watch the full show »

A task force headed by unique identification authority of India chairman - Nandan Nilekani, submitted an interim report to finance minister on direct transfer of cash subsidies for fertilizer, cooking gas, and kerosene. Nandan Nilekani hopes that the new regime will give millions of Indian living below poverty line, easier access to subsidies.
 
"The three products - LPG, kerosene and fertilizers have been put up on a phased approach. The report is all set to announce a common subsidy management platform that can be used for any kind of subsidies both for goods as well as for cash, essentially using technological based solutions to reach millions of Indians to help them get their subsidies on time." -- Nandan Nilekani

According to CNBC-TV18's Aakansha Sethi, in the first phase it recommends that there should be a cap on the number of subsidized LPG cylinders. In the second phase, there should be direct transfer to the customer's bank account and in the third phase, there should be segmentation and targeting of customers who use LPG and then there should be direct transferred to them.

For fertilizers in the first phase he recommends complete information visibility through the supply chain. In the second phase, direct subsidy transfer to the retailer and in the third phase, direct subsidy transfer to the farmer itself. For kerosene he suggests that reform and direct transfer of subsidy will have to be through the state governments, along with reform through the public distribution system (PDS).

He has also suggested the setting up of a core subsidy management platform, which will be an electronic system to track entitlements, subsidies and which will also be coupled with a grievance handling mechanism. All subsidies that will be given out will be tracked online. Any consumer will be able to check what their entitlement is.

This would be applicable not only kerosene, LPG and fertilizers, but for all welfare schemes. However, the key point to the implementation of this is, first the implementation of UID and also the financial inclusion of the government or the program of the government, which is less than 2% currently. Until all consumers who use subsidies have a bank account, it will not be possible to implement this.

Over the next six months, the government will carry out pilot projects and by the end of the year, they will come out with a final report, but it is still some way off before this huge subsidy reform is implemented because financial inclusion will be necessary for this. Over Rs 1,50,000 crore are given out as subsides every year, so clearly a very important reform.