Direct Benefit Transfer

The Direct Benefit Transfer (DBT) also known as the Direct Cash Transfer Scheme (DCT) is the recent ambitious national level policy of the UPA government. The direct cash transfer is an anti poverty program launched by the central government on January 1 2013. This program transfers the subsidies directly to the people living below the poverty line. This is one of the landmark programs of the congress that has received warm welcome by the country.  Cash transfers or direct transfer payment of money to the eligible people is the primary objective of the newly launched scheme. The congress, caught in a web of scams and scandal, this one comes along the way as an opportunity to get away from political opposition and criticism. The scheme with a genuine and helpful objective is bound to serve the nation greatly. Let us now see the overall structure of the policy and how it has been functioning since its inception.

Generally, cash transfer programmes in developing countries like India are constrained by three factors viz. financial resources, institutional capacity and ideology. These factors affect in targeting the people who are entitled to the scheme. This is because governments in developing countries tend to have restricted financial resources and are therefore limited in the amount they can invest both directly in cash transfers and in measures to ensure that such programmes are effective. However, this is a notable initiative taken by the government to directly serve the people in a more efficient manner. In many countries it is considered as a poverty reduction measure because government subsidies and other benefits are given directly to the beneficiaries in the form cash rather than subsidies. Several countries like Jamaica, Turkey, Chile, Mexico, Indonesia, South Africa and Morocco have adopted this system earlier in the form Conditional Cash Transfer (CCT). Under such programs direct cash is provided to poor families on condition that it is used for proper investments or attaining basic nutritional health care. But so far this is unconditional in the Indian case.

The Direct Cash Transfer in India is implemented by Aadhar program launched a few months back. According to which the residents of our country are provided with aadhar card which is a unique identity card by which all the benefits and subsidies amount is directly credited to the beneficiaries bank account using the Aadhar numbers. Such a transaction would result in transparency, fewer leakages and less chance to corruption. It would also develop the financial infrastructure of the country. The DBT scheme was first rolled out in the capital city, Delhi and soon covered other districts. The Direct cash Transfer scheme was initially rolled out in 51 districts. It was then later extended to 18 districts. In December 2012 UPA Chairperson Sonia Gandhi launched a similar cash transfer scheme in Delhi for a beneficiary scheme which provides Rs.600 per month to around six lakh families from economically weaker sections of the society. The launch was later dropped for certain reasons. One serious concern is that how is the amount determined under the DCT. The difference between the market price and the subsidized price is calculated and transferred in proportion to the quantity uplifted from the market. Presently 34 schemes have been identified in 43 districts to implement the DCT scheme.

The DCT policy would help poor access basic goods by reducing demand constraints. The transaction is a carried out by the guidance of a task force and hence is reliable. The commodity purchase and then the transfer of the cash subsidy to the target account will be based on authentication of the beneficiary through aadhar at a point of sale.  Currently, the government subsidizes certain products and services like food grains, fertilizers, education and healthcare by providing them at below the market price.  The scheme though a significant and welcoming one has its own pros and cons. The aadhar enabled direct cash transfer is transacted to only those people who have an UID bank account. This makes the process easier and excludes people who don’t have aadhar numbers but claim to get the subsidies. An aadhar enabled bank account can be used by the beneficiary to receive multiple welfare payments. The scheme eliminates the chances of rent seeking middlemen and also fake identities. It will reduce leakages and diversion of the intended subsidies. This would reduce the burden on the government revenue and cost structure thereby reducing the high fiscal deficit. The cash transferred to the target account will make them buy the goods and services  directly in the open market. This would make people to buy the goods and services at the market price thereby creating a healthy competitive environment. The DCT scheme through the aadhar system will also transfer the cash immediately avoiding delays that is usually an issue in India.  The scheme overall is said to increase the efficiency of the welfare programs. On the other hand the few disadvantages are there is a lack of clarity on whether the aadhar is mandatory. Targeting and identification of the right beneficiaries for the right subsidies is also a problem. The scheme as meant to transfer cash is also likely to lack privacy. India consist a huge number of adult illiterates as a consequence of which many people are unaware about the scheme and how to access it. Most of the BPL families in India don’t even have a bank account and several villages in India presently don’t have any bank branches. Finally, unlike in other countries, India has rolled out the cash transfer scheme in an unconditional way which allows people to wean away from the intended purpose and spend lavishly in an unhealthy way.

                                                                                    

An analysis of the scheme since its first roll out suggests that the DCT has helped the people in more than one way. The congress has also stated an election slogan to the scheme with ‘ Aapka paise aapke haath’ (your money in your hand). People regard it as one of the landmark and prestigious schemes of the government recently. The scheme has said to promote savings habit of many wise consumers. The DCT has provided many benefits to students and children by providing vocational training and scholarships. It is said that those villages in the remote areas where there are no bank branches are likely to get the cash by business correspondents. The scheme is also intended to promote flexible pricing system in the market. As of now it is said that only some small subsidies such as scholarships and pension funds have been given as promised. Other big welfare subsidies such as LPG, fuel and others are likely to come later by this year. The government is still working on to make the DCT scheme a more reliable and efficient scheme to remove the constraints in the administrative side and is also planning to set an authority to overlook the distribution system. The scheme so far is only in the nascent stage and has been partially functioning only in certain districts. Access to aadhar card is still working in many states and the scheme is to serve fully on a large scale when the process of creating UID bank account in all the states is complete. Meanwhile, the central government which is backing on the DBT being a gamechanger with an eye on the upcoming general election is bent on rolling out the scheme all over the country as soon as possible. At the end of the day the political dividends of implementing the scheme are much less important than the real dividends.