The switch to a system of direct cash transfers for subsidies from the New Year could yield at least Rs20,000 crore in savings in 2013-14 and help better the finances of cash strapped government, which was also considering a 17 per cent cut in its non-plan expenditure in the next fiscal.
The Financial Express quoted an official familiar with the development as saying that there was no other option, and if the fiscal deficit was to be brought down expenditure had to be cut.
According to government sources, efforts were also on to shrink the subsidy bill by at least 5 per cent with the transition to direct cash transfers.
The Financial Express quoted sources as saying that though the exact savings were difficult to calculate, it might help to keep the subsidy bill for 2013-14 at around Rs1,78,000 crore as against the Rs1,90,000 crore budgeted for the current fiscal.
The government plans to roll out Aadhaar-enabled direct cash transfers across 29 subsidy items in 43 districts from 1 January 2013. Though payments would initially cover scholarships, pension, kerosene and LPG, the next fiscal, it would see inclusion of payments for food and fertiliser subsidies.
While direct cash transfers would start from 1 April 2013 in 18 states, the whole country would be covered by the end of the fiscal.