New Delhi, Sep 28: Prime Minister Manmohan Singh Friday set up a new system to ensure beneficiaries of government welfare schemes -- like old age pension, fuel subsidies and educational scholarships -- receive cash directly through bank transfer.
The new initiative, though under consideration for long, aims at routing all subsidies meant through an electronic cash transfer to bank accounts, leveraging the Aadhar cards.
The central government's annual bill on all social welfare schemes comes to around $65 billion (Rs.3.25 lakh crore).
"The idea is to move to a completely electronic cash transfer system for the entire population," an official from the Prime Minister's Office said, adding the move was aimed at "bringing down wastage, avoid duplication, prevent leakages and enhance efficiency" in the delivery of welfare schemes.
"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 move comes within weeks of the government initiating key economic reform measures such as allowing foreign investment in multi-brand retail, a Rs.5 hike in diesel prices and a cut in subsidised cooking gas cylinders to a household to just six a year.
"The cash transfer mechanism will ensure the benefits reach the intended targets, wastage is reduced and there is control on expenditure, apart from facilitating reforms," the official said.
In this regard, the prime minister has set up a national ministerial committee under him which will also have ministers of finance, HRD and other departments such as petroleum and natural gas, fertilisers that deal with social welfare measures as members.
The panel will now work out a road map to fast-track electronic cash transfer in the respective ministries in a time bound manner, the official said.
"The national ministerial committee would ensure coordination and decision-making at the highest level and impart the necessary urgency to the programme," he added.
The government, the official said, could immediately roll out the cash transfer scheme for certain welfare schemes such as the scholarships and pensions and unemployment allowance, as pilot projects had been executed in certain parts of the country including in East Delhi.
With the results of the pilot projects being encouraging, the prime minister has set up "the architecture for moving to electronic cash transfers, leveraging Aadhar," he said.
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 welfare schemes such as the public distribution system and fuel subsidies, the cash transfer scheme would take more time to implement.
To speed up implementation of cash transfers in all sectors, the prime minister also instituted a coordination mechanism under which a national executive committee too was formed with secretaries of all concerned ministries as members.
"The committee would meet frequently to coordinate action, ensure adherence to time lines and sort out hitches in the programme as it is rolled out," the official said.
"There is a lot of work needed to have a smooth roll-out and has to be done in a mission mode with multiple agencies acting in a coordinated manner," he said.
To work on the cash transfer mission, the prime minister also set up sub-committees, each of which will work on technology challenges in implementing the proposals, financial inclusion to ensure universal access to banking, and to work out details for electronic transfer of benefits.
"Cash transfer can be used for handing out benefits under the guaranteed rural employment scheme wages, income support of all types and health benefits.
"Electronic transfer of benefits is a simple change, as the transfers are already taking place and the only modification involved is a movement from paper-based, cash-driven system to an electronic direct transfer," the official added.
