Govt direct benefit transfer scheme starts to bear fruit

The government's direct benefit transfer scheme is slowly cleaning up the system and plugging leakages and brokerages are warming up to the enormous possibilities that the DBT (Direct Benefit Transfer scheme) and Aadhaar throw up not only in reducing the subsidy burden, but also helping in e-governance initiatives, report CNBC-TV18's Sajeet Manghat and Latha Venkatesh.

As the government's DBT scheme gains traction, brokerages are making positive forecasts. The most visible element is the direct benefit transfer of LPG subsidy that is reflected in the government's subsidy bill.
Over just the last one month alone, nearly 10 lakh LPG consumers spread over 18 districts have already received Rs 41 crore in direct cash transfers and initial calculations show that this mechanism has already helped clean-up the LPG database.
LPG consumption has fallen 3 percent year-on-year over the last six months, against a growth of 7-to-8 percent seen over the same period over the last three years.
Brokerage CLSA says, "More fiscal savings will unfold as the DBT roll-out progresses. Interestingly, despite the rupee’s depreciation, LPG underrecoveries have come off 25 percent year-to-date thanks to lower LPG spreads.".
CLSA adds that once it is rolled out across India, more leakages in the system will be plugged and the government stands to save nearly USD 2 billion.
That's because CLSA estimates that of the existing 140 million LPG connections, 25 million could turn out to be duplicates or customers holding more than one connection at the same address. Of these, 6.3 million accounts have already been blocked thanks to the new KYC norms.
The Aadhar initiative will also help immensely, especially when it comes to governance at the state government level. The Aadhaar scheme is witnessing 15-20 million enrollments a month and now covers 367 million Indians.
And though seeding of Aadhaar cards with bank accounts continues to remain a challenge, state governments have begun using the platform to cut down on systemic inefficiencies in welfare programmes and to improve overall services.
The Maharashtra government, for instance, plans to link UIDAI data to property tax records — a move that will help eliminate ghost beneficiaries.  Jharkhand, meanwhile, has mandated Aadhaar date for registering land deals from January 2014.
And the central government plans to leverage Aadhaar numbers to cut down inefficiencies and delayed payments in its flagship MGNREGA programme.
The next step will be implementing the DBT scheme for paying kerosene, fertliser and food subsidies. Of these, while pilot programmes for kerosene are underway, the DBT of food subsidies is likely to begin in the Union territories in FY14, but the payment of the fertiliser subsidies will be the most difficult to implement.