Panel favours cash transfer for kerosene, food subsidy

A government-appointed panel to suggest ways to prune subsidies is in favour of extending the cash transfer scheme to kerosene and food in three years for directly helping beneficiaries.

“We are trying to see what way we can use DBT (direct benefit transfer) and apply it to other entitlements and other things. I won’t name the products because what we will do will take some more time. The whole idea is to make it easy because it saves expenditure,” Expenditure Management Commission Chairman Bimal Jalan told reporters here after meeting Finance Minister Arun Jaitley. According to sources, the Commission is making a case for including food and kerosene in the DBT scheme over the next three years.

DBT is being used to transfer subsidy on LPG cylinders and other welfare schemes into bank accounts of beneficiaries.

Jalan said the fiscal deficit target set in Fiscal Responsibility and Budget Management (FRBM) Act is substantive and to achieve that subsidy transfer should be management-oriented with an aim to reduce the cost of transfer.

The former RBI Governor, who is in favour of linking the Payments banks outreach in transferring DBT, said that long-term initiatives were needed to ensure smooth transfer of subsidies into bank accounts. “Long-term initiatives (are needed) to bring large number of States (for) transfer major subsidies and we have made tremendous progress in spreading banking network,” Jalan said, adding achieving the fiscal deficit target of three per cent is “challenging”.

He further said the comprehensive report of the Commission was likely to be submitted to the government by the end of the year. The government had set up the Commission under the former RBI Governor in August last year to suggest steps to reduce subsidies on food, fertiliser and oil and narrow the fiscal deficit.

The Commission had submitted its interim report in January and is mandated to submit the final one before Budget 2016-17.

Former finance secretary Sumit Bose and former RBI deputy governor Subir Gokarn are members of the Commission.

Subsidy rationalisation is high on economic agenda of the government and it plans to cut the fiscal deficit to 3.9 per cent of the GDP in the current year and further to 3 per cent by 2017-18. It was 4 per cent in the last fiscal.