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Nov 26, 2012 at 10:34pm IST

UPA plays direct cash transfer card, PM asks ministries to work closely

New Delhi: It was the most ambitious policy initiatives of the UPA-II government and its biggest election card as Prime Minister Manmohan Singh on Monday convened the first meeting to decide on the rollout plan for direct transfers based on Aadhar rollout. According to the plan, as many as 51 districts to rollout direct cash transfer from January 1, 2013.

The direct cash transfer will replace the subsidies for BPL families, and a total of 18 states will be covered from April 2013 and 16 states from April 2014. Nearly all major central schemes to be covered by direct cash transfer, including NREGA, LPG, food, fertiliser, health and education subsidies.

The government aims to transfer Rs 3.2 lakh crore a year to 10 crore poor families through the scheme.

Speaking about the plan, the Prime Minister said, "All Central social welfare benefit details to be digitised and aligned with Aadhaar database for disbursal of cash transfers...post offices and cooperative banks to be integrated in Aadhaar based rollout of social benefits to reach rural areas."

The Prime Minister further said that 12 ministries would identify several welfare schemes to be covered under Direct Cash Transfers during the initial rollout. "I would urge the individual ministries to work in right earnest for implementation of the Direct Cash Transfers initiative," said the Prime Minister.

Singh said that he expected the Finance Ministry and Unique Identification Authority to work in close coordination to achieve a collective goal, adding that the government had a chance to ensure that every Rupee spent by it was spent truly well and went to those who truly deserved it.

What is cash transfer?

In lieu of subsidised food, fertilizer and fuel, BPL families would get 30,000-40,000 a year in their bank accounts. In all, Rs 4,00,000 crore will be disbursed. APL families too would get money for subsidised cooking gas.

How will it work?

Families with Aadhar card, entitled to subsidies, pension, scholarships etc, will get money directly in their bank accounts. For this, they need to give their Aadhar card number to service provider, say, gas agency and bank. Option will exist to claim the cash subsidy at designated bank branch, by using a cash card.

What will it cover?

To begin with, only subsidy transfer for cooking gas. Centre has asked states to launch pilots for food subsidy. Work on fertilizer subsidy has just begun and over time, it will cover all subsidies.

When will it start?

There's a pilot project for kerosene in Alwar district while a test is being run for cooking gas in Mysore. By January 1, 2013, 51 districts with high Aadhar penetration will be covered. By December 2013, the whole country will be covered.

Why is it being done?

It is being done to check leakages from the system and give power of choice to beneficiaries, especially BPL families. Ahead of the 2014 elections, it is seen as big political thrust.

Can it falter?

Yes. Only 21 crore of 120 crore people have Aadhar cards. Most BPL families don't have bank accounts and several villages don't even have bank branches.