• UGI USER
  • Nov 07, 2023
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In what way could replacement of price subsidy with Direct Benefit Transfer (DBT) change the scenario of subsidies in India? Discuss

Structure of Answer

Introduction

  • Briefly define Direct Benefit Transfer (DBT), when it was launched, its aim and objectives.

Body

  • Mention how Direct Benefit Transfer (DBT) transformed traditional subsidy method in India.
  • Mention government initiatives and schemes which helped DBT to reach its intended beneficiaries.

Conclusion

  • Mention replacement of price subsidies with Direct Benefit Transfer ensures a more transparent and efficient system, reducing leakages and corruption.

Direct Benefit Transfer (DBT) was launched on January 1, 2013, as a transformative approach to subsidy delivery in India. It aimed to provide subsidies and social welfare benefits directly to the beneficiaries’ bank accounts, eliminating intermediaries and ensuring the efficient transfer of funds.

Direct Benefit Transfer (DBT) transformed traditional subsidy method in India

Enhanced Targeting

  • DBT enables precise targeting of beneficiaries by linking subsidy schemes to Aadhaar, ensuring that subsidies reach those who are eligible.
  • For example, the “Jan Dhan Yojana” has facilitated the opening of bank accounts for millions of unbanked citizens, making them beneficiaries of various schemes.

Reduced Leakages

  • By eliminating middlemen and direct crediting of subsidies into bank accounts, DBT significantly reduces leakages.
  • Under MNREGA, wages are directly transferred to workers, reducing corruption and ensuring full payment.

Fiscal Discipline

  • Replacing price subsidies with DBT contributes to fiscal discipline.
  • It allows the government to allocate subsidies based on budgetary constraints, enhancing economic stability.

Empowerment of Beneficiaries

  • DBT empowers beneficiaries by providing them with the flexibility to choose how to utilize their subsidies.
  • For example, scholarships through DBT allow students to select educational institutions that best suit their needs, enhancing their decision-making and agency.

Reduced Overhead Costs

  • The digitization of subsidy disbursement processes reduces overhead costs associated with paper-based systems, making it more cost-effective.

Elimination of Ghost Beneficiaries

  • DBT ensures that subsidies reach genuine beneficiaries.
  • For example, under the PDS system, Aadhaar linking has helped in eliminating ghost beneficiaries and reducing excess food grain allocation.

Role in the COVID-19 Pandemic

  • The government used DBT to provide relief to vulnerable populations by directly transferring funds to their bank accounts.
  • Under the Pradhan Mantri Garib Kalyan Yojana, millions of beneficiaries received financial assistance, alleviating economic hardships.

The replacement of price subsidies with Direct Benefit Transfer ensures a more transparent and efficient system, reducing leakages and corruption. While DBT is not about eliminating subsidies but ensuring their effective targeting, it has played a critical role in streamlining benefit delivery and enhancing the government’s efforts to reach the intended beneficiaries directly. The DBT model stands as a significant step towards the government’s commitment to ‘Minimum Government, Maximum Governance.’