Direct benefit transfer: Fertilisers, food account for more than half of payouts this fiscal

The Direct Benefit Transfer mechanism was launched in 2013

Fertilisers and food accounted for about 65 percent of all direct benefit transfers (DBT) of Rs 4.35 lakh crore in 2023-24 so far.

Subsidies on fertiliser handed out through DBT stood at the top of the pack with Rs 1.68 lakh crore this year, followed by food at Rs 1.19 lakh crore, government data showed.

In 2023-24 so far, the government has released Rs 28,223 crore for Pradhan Mantri Awaas Yojana-Gramin (PMAYG), a scheme offering pucca houses to all houseless or kutcha/dilapidated households in rural areas. Another Rs 6,630 crore was provided for the scholarship programme that largely gives financial assistance to meritorious students from poor families.

During 2022-23, Rs 7.16 lakh crore was released by the government under DBT, which was 13.6 percent higher than the transfer made in 2021-22 at Rs 6.30 lakh crore.

The DBT system, where the beneficiaries receive welfare payouts directly in their bank accounts, has saved the central government an estimated Rs 2.7 lakh crore by reducing leakages, curbing corruption, eliminating 'ghost’ accounts and providing a tool to effectively reach households to increase coverage.

Currently, Aadhaar-based DBT is linked to 314 central schemes from 54 ministries. So far, Rs 34 lakh crore of cumulative DBT transfers of central schemes have been made through Aadhar-linked programmes.

Digital Public Infrastructure
The edifice of this change has been Digital Public Infrastructure (DPI), a super-structure on which welfare schemes, services, payments and products are delivered seamlessly in real-time.

India’s DPI, a vast digital ecosystem powered by a super-efficient network of devices, servers, data centres, routers, and apps is now a globally acclaimed success story, setting the benchmarks for the rest of the world to emulate. DPI refers to a set of shared digital building blocks, such as applications, systems, and platforms, powered by interoperable open standards or specifications.

As the Economic Survey 2016-17 pointed out, “Beneficiary databases have existed for long before Aadhaar, but their accuracy and legitimacy have been hampered by the administrative and political discretion involved in granting identity proofs like BPL cards, driving licences and voter IDs. Ghost and duplicate names crept into beneficiary lists, leading to leakage”.

The DPI-based DBT system enabled three things: Identification of actual beneficiaries; transfer of money to actual beneficiaries; and enabling access to their money. More importantly, it paved the way for effective targeting of beneficiaries scaled through linked bank accounts.

Earlier, the lack of a unique identification infrastructure made it difficult to establish eligibility. This led to complicated procedures, limited trust of people in processes, inaccurate targeting of beneficiaries and duplication of IDs, inability to transfer directly due to low bank account penetration, pilferage due to multiple layers of middlemen, and delayed payments.

The savings
The biggest savings have come about in food subsidies. Till March 2022, DBT has resulted in a total savings of Rs 1.35 lakh crore in food, which led to 42 million duplicate, fake or non-existent ration cards since 2013.

In petroleum subsidies, the government has so far saved Rs 72,909 crore through DBT eliminating 41 million duplicate, fake or non-existent inactive LPG connections. Besides, there are now as many as 17.9 million non-subsidised LPG subscribers, including 10.8 million families who have opted to ‘give up’ LPG subsidies.

In MNREGA, arguably the world’s largest job guarantee scheme, the government has saved Rs 40,986 crore as field studies resulted in 10 percent on wage savings following the deletion of duplicate, fake/ non-existent and ineligible beneficiaries due to DBT.

The government has also saved Rs 18,699 crore in fertiliser subsidies until March 2022 after the DBT system enabled the reduction of 158 lakh metric tonnes of fertiliser sales to retailers.

The International Monetary Fund has pointed out that India’s DPI, on which the DBT is built, has been used as a platform to foster innovation and competition; expand markets; close gaps in financial inclusion; boost government revenue collection; and improve public expenditure efficiency.