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Direct Cash Transfer Scheme: Measure to plug the leakage

Direct Cash Transfer Scheme

General awareness on current topics is essential as not only you will be getting questions on GK in various MBA entrance exams but it will be useful for Essay writing test and WAT also.

Today, you will read General Awareness Topic: “Direct Cash Transfer Scheme: Measure to plug the leakage” 
Recently, Prime Minister formally announced the launch of much-awaited Direct Cash Transfer (DCT) Scheme. The scheme proposes to transfer subsidy amount that is given away by various departments of the government for the poor and the deserving, directly to the bank accounts of the beneficiaries.
 The scheme is aimed at eliminating fraud, middle-men, black-marketing, and bribery in dispersing of the subsidies. It will be implemented from January 1, 2013 covering 51 districts across 16 States. 
The scheme will allow the families with Aadhaar card entitled to subsidies, pension, scholarships etc so that money can directly be transferred in their bank accounts.
 Aadhaar card is an ID card with a 12-digit unique number issued to all the citizens of India (on voluntary basis). It will carry the demographics and biometric information of the holder. Direct cash transfer of subsidies would be done through Aadhaar-enabled bank accounts. Every person is expected to hold a bank account to enable such transfers. Initially, 29 welfare programmes will be covered. 
To begin with, people entitled to subsidized LPG cylinders will be given money to cover the difference from the market price. The scheme will consider the feasibility of cash instead of food (under the Public Distribution System) and fertilizers, at a later stage.  
In order to ensure the early implementation of the scheme, Prime Minister has directed all the ministries and departments engaged in transferring benefits to individual beneficiaries to quickly move to an electronic Direct Cash Transfer system, based on an Aadhaar Payment Bridge/ Platform. Government plans to initiate DCT in 51 districts from January 2013, in 18 states from April 2013 and by April 2014 in rest of the country. 
One of the two key pillars of the scheme is the Aadhaar programme, whose unique identification systems will be used to authenticate beneficiaries of the cash transfer. UIDAI will set up a dedicated cell of technical experts in UIDAI to facilitate Aadhaar enabled Direct Cash Transfers and help individual Ministries.
The other key pillar is the banking infrastructure needed to implement direct cash transfers. Department of Financial Services will go for universal Financial Inclusion through individual Bank Accounts for all. 
The Asian Development Bank has endorsed the scheme saying it helps to reduce poverty as in contrast the food and fuel subsidies, as provided by India, are prone to leakages. Moreover, the government distributes food, fuel, and fertilizer instead of cash, but these subsidies are vulnerable to misuse and leakage. In addition, such subsidies generally cost more, benefit the better-off relative to the poor and are politically difficult to unwind. 
However, many social activists and politicians criticize the programme on following grounds-
• Poor people will not be able to access their accounts in which the government will transfer the money
• When pension of the people does not reach on time, there is no guarantee that cash will transferred to their accounts on time
• The government wanted to end the public distribution system (PDS) which would benefit the corporations.
• With the dismantling of PDS, the poor will be left at the mercy of market forces.
• As inflation continues to grow, the value of cash subsidies keeps dropping.
• PDS is socialist and cash-transfer neo-liberal. While PDS tries to equitably distribute, the cash scheme seeks to bring the bottom of the pyramid into the market.
• It may result in a poor cash-transfer beneficiary clutching a few hundred rupees going hungry and under-fed.
• FDI in retail will certainly translate into more retail shops, which needs more customers. By converting 400 million poor into new retail customers, the government is doing a great favour to the retailers.
• It is also argued that DCT is not advisable as people will spend the cash in other ills like liquor and not in the food grains. 
In many countries around the world, cash subsidy is provided to the vulnerable and has yielded better results. Philippines has a conditional cash transfer programme for the very poor. 
The country spends less than 0.5 per cent of the country's gross domestic product on transfers to mothers, conditional on their children attending school and public health clinics, and it reaches 15 million people. Scheme is also successfully implemented in many Latin American countries. 
In India, it is too early to judge whether the scheme will help in pulling out the poor out of poverty or will befall further miseries on them. Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) which provides some cash benefit to the rural poor, is also severely marred by severe form of corruption. But this must not be used as impediment to new developments.
Though pushing cash to the desperately poor ahead of a general election might be a good political strategy, scheme may translate into a low subsidy bill along with a safety net to the poor.
 As PDS network is unlikely to be dismantled in a year or so, if the benefits of scheme are not as per the expectations, it can be roll backed. 
Update your GK and read General Awareness Topics at MBA Rendezvous