1. Critically Evaluate the Proposed State Strategy of Replacing Public Subsidies with Direct Cash Transfers?

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Topics: Poverty
Critically evaluate the proposed State strategy of replacing public subsidies with Direct Cash Transfers?

There are many schemes and programmes of the Government of India under which many benefits are provided to the people such as subsidies, scholarships to students, benefits for feeding and pregnant mothers, and micro credit to poor women. Till now the beneficiaries were not getting this amount directly in their bank accounts. Also, there were cases where the intermediary officers would ask for a ‘cut’ or ‘commission’, and there were leakages in the benefits reaching the true beneficiaries.

The Government of India has now started the Direct Benefits Transfer scheme. With this scheme, the beneficiaries get the amount directly in their bank accounts. This is presently being done in 25 schemes which include much scholarship Schemes where the money is deposited directly in the account of the student, and housing subsidy for Beedi workers, stipend for SC/ST for coaching, guidance and vocational training, and micro credit to women.

The government provides subsidies, notably on fuel and food grains, to enable the common man to have access to these basic necessities at affordable prices. A significant proportion of subsidised fuel does not reach the targeted beneficiaries and there is large scale diversion of subsidised kerosene oil ... To ensure greater efficiency, cost effectiveness and better delivery for both kerosene and fertilizers, the government has moved toward direct transfer of cash subsidy to people living below poverty line in a phased manner.
There are two immediate problems that are evident in this approach. First, what ensures that the amount of the transfer will be sufficient to fully compensate for any price increases in the newly deregulated markets of these goods? Second, how will the government ensure that the cash transfer actually goes to those who were intended to be the beneficiaries of the subsidised kerosene and fertilizer?
The

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