Few Important Points regarding Direct Cash Transfer Scheme of India

Direct Cash Transfer Scheme using UID Card is the next generation of subsidy in India, where instead of selling goods at Subsidised prices, common people would be paid the difference of Subsidized price and market price as decided by the Government.

It is expected to enable delivery of the government’s subsidies and welfare measures to the intended targets without pilferage.

Launch of Scheme

The subsidies and schemes are worth Rs.3.23 lakh crore ($65 billion) and the DCT is scheduled for launch Jan 1 2013. The project will be launched about 15 months ahead of the 2014 general elections.

Manmohan Singh heads the national committee on DCT, set up in September, with 11 cabinet ministers, two ministers of state and others. The will coordinate action for the introduction of DCT to individuals.

The national committee’s meeting comes 17 days after the executive committee for DCT — headed by the prime minister’s principal secretary Pulok Chatterji — met Nov 9 and set the Jan 1 deadline for launching the project in 51 districts of the country.

States where DCT would be launched

The scheme will cover 18 states and union territories by April 2013 and it will be extended to 16 more states and union territories by April 2014, according to sources in the prime minister’s office (PMO).

The DCT architecture, being anchored by the planning commission, involves departments of financial services, unique identity authority (Aadhaar), information technology, expenditure, posts, rural development, social justice and empowerment, tribal affairs, minority affairs, higher education, school education, health and family welfare, women and child development, labour and employment, petroleum and natural gas, fertilizers, and food and public distribution.

The executive committee, in its meeting Nov 9, had asked all the departments to send a list of schemes, road maps, and time lines for the DCT project to the planning commission and the PMO by Nov 20.

The ultimate aim of this move is “a completely electronic cash transfer system for the entire population”, an official in the PMO said.

It was aimed to “cut down wastage, duplication and leakages and enhance efficiency” in the delivery of welfare schemes, as also to “improve targetting, reduce corruption, eliminate wastage, control expenditure and facilitate reforms”.

“The new system is expected to benefit a quarter of India’s households. It could mean several millions of people will be beneficiaries,” the official said.

The government, the official said, could immediately roll out the cash transfer scheme for certain welfare schemes such as scholarships and pensions and unemployment allowance, as pilot projects had been executed in certain parts of the country, including in East Delhi.

The Unique Identity Authority of India (UIDAI), which is implementing the Aadhar scheme, has already enumerated around 200 million people from 2006 to now and has a target of reaching 600 million people within the next 18 months.

However, with regard to public distribution system and fuel subsidies, the cash transfer scheme would take more time to implement.