The government is planning to roll out direct transfer of subsidies for foodgrains and kerosene, so as to eliminate fraud and save the exchequer an estimated Rs13,300 crore ($2.1 billion) annually.
Under the direct transfer programme, each family will be entitled to a monthly subsidy of about Rs500-700, which would be linked to a state-set procurement price of foodgrains.
The centre has set September as the roll-out date for the shift to direct transfer of PDS subsidies, which at present cause a 10-15 per cent wastage in the $21 billion annual outlay due to fraud.
Encouraged by the "successful" experiment with LPG where the subsidy is deposited in bank accounts of consumers, the government is planning to launch the scheme first in centrally administered union territories.
"Three so-called union territories, directly administered by the central government, would become a test bed for the measures," said Peeyush Kumar, senior finance ministry official in charge of the cash transfer scheme.
He said the programme is feasible since the database of beneficiaries of both schemes - public distribution (PDS) and kerosene - is the same.
Kumar was speaking at a discussion organised by the International Centre for Human Development, a collaboration between the UNDP, the Indian government and the Indian Institute of Advanced Studies.
He cited the example of Krishnanagar district in Andhra Pradesh where direct transfer of food subsidy has already started. Under DBT, the Aadhaar number of the beneficiary will be seeded with his PDS database and electronically converged.
Kumar said around 15 per cent of PDS beneficiaries had got their Aadhaar number seeded in the PDS database. "By September, we are trying to have Aadhaar linkage for all PDS beneficiaries," he said.
The government plans to reduce its annual subsidy bill by about 10 per cent to $38.4 billion this fiscal year - about 14 per cent of its spending on providing subsidised food, fertiliser and fuel – gaining from low oil prices and administrative reforms.