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Monday, January 18, 2016

Direct Benefit Transfer (DBT) - Subsidy Issue

India has been plagued by the ever growing subsidy burden and the three major subsidies are - Food, Fuel and Fertilizers. The subsidy regime in India is necessary due to the mass poverty whereby it becomes obligatory for the State to look after the needs of the poorest of the poor. While the aim of the subsidy regime as practiced in India has been laudable, it is in the execution of the subsidy regime that questions have been raised. Two major problems being faced by the subsidy regime are - (1) Pilferage / Leakage of subsidy and (2) Mis-targeting of subsidy. The Direct Benefit Transfer (DBT) aims to solve both the issues of leakage and mis-targeting by making use of the JAM (Jan Dhan, Aadhaar and Mobile) trinity. Please find below consolidated information on DBT for better understanding and clarity.
 Direct Benefit Transfer (DBT)
1.     Two major issues w.r.t. subsidies in India
                                               i.     Targeting
                                              ii.     Leakages
2.     Both issues can be addressed by government’s ongoing DBT push
3.     Leakages occur when subsidies do not reach the recipients due to corruption, pilferage or other causes
4.     Mis-targeting benefits higher income groups that do not deserve the subsidies
5.     DBT simply involves transferring the subsidy amount directly to the beneficiaries’ bank account instead of having to fiddle around with differential pricing for the under-privileged
6.     Efficient targeting using Aadhaar-linked data ensures that the intended beneficiary receives the money in his/her account
7.     DBT Scheme for LPG subsidies named PAHAL (Pratyaksh Hastantrit Labh) utilizes linking of consumers Aadhaar number to their bank account where they can receive the subsidy amount for 12 cylinders in a year
8.     Govt. has recently decided to limit the LPG subsidy to people earning less than Rs.10 lakhs in a year
9.  DBT addresses the leakage issue while the income cap addresses the mistargeting problem

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