Reining in subsidies PDF Print E-mail
Monday, 01 June 2015 00:00
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Getting the SECC data will be a big step forward

Petroleum minister Dharmendra Pradhan is right when he says that direct cash transfers in kerosene subsidies, the next item on his agenda, will not be as easy as in the case of LPG where the government was able to weed out 4 crore bogus customers once it linked LPG connections to Aadhaar-seeded and unseeded bank accounts. In the case of LPG, all supplies were made by 3 PSU oil companies, Aadhaar was centrally- run and you had PSU banks—in other words, all the possible levers were under the control of the central government. If direct benefit transfers didn’t work in the case of LPG, the government had only itself to blame. In the case of kerosene, which accounted for a third of the R72,000-crore under-recovery of oil PSUs in FY15—as Pradhan has pointed out in his FE interview— it is the state governments that have to identify the beneficiaries. To that extent, the Centre is dependent upon the progress made by the states in identifying beneficiaries. Indeed, that is the problem faced in moving to cash transfers in the case of food subsidies—the states have not come up with their lists of the beneficiaries, after which the latter have to be connected to bank accounts that are linked to their Aadhaar numbers.


Getting states to identify the poor has been an uphill task and the Socio Economic and Caste Census (SECC) has been going on since 2011—a total of 13 socio-economic parameters, like size of land-holding and type of house, were to be used to identify the poor. While a draft list is ready for 624 of the country’s 640 districts, a final list is available for only 200. A large part of the government’s effort over the past year has been to pressurise states to finalise the lists and, as FE has reported, at one stage, the prime minister’s office even directed that states which do not have a final list will be supplied grain at above-poverty-line prices under the National Food Security Act—rice at Rs 7.9 a kg and wheat at R6.1 per kg as compared to Rs 3 and Rs 2 per kg, respectively, for the poor. The final list is now likely to be available next week and this will be a big step forward in reducing subsidies. How much subsidy will be cut will depend upon how many poor people the SECC finally comes up with, but the subsidy outgo will be restricted to just this list. Over a period of time, and this is where the real benefits will come in, the government will have to link these names to Aadhaar numbers and to Aadhaar-seeded bank accounts—only when this is done can de-duplication be done, which is how 4 crore users were eliminated from the LPG subscriber list. Apart from the big benefits the government will get once bogus subscribers are weeded out, getting the list is very important since, based on NSS data, on average, around half the food subsidy does not reach the poor. Once the poor are identified, however, with well-designed programmes using mobile apps for instance—the poor can SMS how much grain they got to a pre-specified number—it will be possible to ensure that they get their full grain and other allotments.


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