Jalan Panel wants cash transfer extended to kerosene and food subsidies

14 August 2015

A committee headed by former Reserve Bank governor Bimal Jalan appointed by the government to suggest ways of pruning subsidies has suggested extension of the direct benefit transfer scheme for subsidies to kerosene and food over a three-year period.

Jalan who met finance minister Arun Jaitley on Thursday, is also reported to have argued that the extension of the DBT scheme will go a long way in helping the process of setting up payment banks.

''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,'' Jalan told reporters after meeting the finance minister.

''We already have a DBT system and can look for utilisation of payments banks in rural areas by tying it up with DBT,'' he said, adding that whenever action is taken to set up payment bank, it will increase the outreach of our financial system to the rural areas and we can implement it.

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

Subsidy rationalisation is part of the government's expenditure management programme, which is high on the government economic agenda.

The government has already introduced direct benefit transfer scheme to plug leaks in LPG subsidy and other welfare schemes to ensure the benefit reaches the poor directly.

The panel headed by Bimal Jalan was set up in August last year to suggest steps to reduce subsidies on food, fertiliser and oil and narrow the fiscal deficit. Former finance secretary Sumit Bose and former RBI deputy governor Subir Gokarn are members of the panel.

The panel had submitted its interim report in January and is expected to submit its final report to the government by the end of the financial year as mandated.

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 government aims to reduce its fiscal deficit to 3.9 per cent of GDP in the current year and further to 3 per cent by 2017-18. It was 4 per cent in the last fiscal.

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