The direct cash transfer scheme involves the direct transfer of commodity based subsidies to the accounts of the people eligible for the same. This obviates the requirement of ration shop owners to sell commodities at subsidized rates to eligible people. The subsidized commodities which the shop owners had obtained from the government were often diverted to the open market and not rightfully reserved for the poor people. So by the introduction of this scheme the government aims to put an end to this illegal diversion by the ration shop owners.
The government might have impressed many with the introduction of the direct cash transfer scheme, but a recent article in 'The Hindu' about a pilot project launched in the town of Kotkasim in the Alwar district of Rajasthan throws light on the difficulties involved in the efficient working of this scheme.
The government had implemented the direct cash transfer scheme for kerosene subsidies in Kotkasim. As expected, there was a decrease in the total sales of kerosene. But this was not due to the decrease of illegal diversion of kerosene to the open market. The irregular transfer of subsidies, the inability of the poor to open bank accounts and the hassle of going to the bank to check if their account had been credited with the money served as deterrents causing a decrease in the consumption of kerosene and thereby its sales.
This decrease in sales even affected the dealers, many of whom no longer found the business of selling kerosene profitable. But they were allegedly forced to maintain its supply by the government, with the intent of depicting the pilot as a success.
The government had implemented the direct cash transfer scheme for kerosene subsidies in Kotkasim. As expected, there was a decrease in the total sales of kerosene. But this was not due to the decrease of illegal diversion of kerosene to the open market. The irregular transfer of subsidies, the inability of the poor to open bank accounts and the hassle of going to the bank to check if their account had been credited with the money served as deterrents causing a decrease in the consumption of kerosene and thereby its sales.
This decrease in sales even affected the dealers, many of whom no longer found the business of selling kerosene profitable. But they were allegedly forced to maintain its supply by the government, with the intent of depicting the pilot as a success.
Please visit this link for a detailed account:
http://www.thehindu.com/opinion/lead/neither-effective-nor-quitable/article4161139.ece
http://www.thehindu.com/opinion/lead/neither-effective-nor-quitable/article4161139.ece