Cash Over Kind

Lessons From Direct

Benefi t Transfer Pilot
In PDS From
Chandigarh

Background
Nandan Nilekani report on Direct Transfer of

Subsidies on Kerosene, LPG Fertilizers

Nitish Kumar: cash instead of cycles
UPA initiatives:
- Kotkasim pilot on cash in lieu of kerosene
- Delhi government Annashree Yojana
- DBT in lieu of LPG
- Direct cash transfer in 51 districts from
1January 2013; confined to welfare payouts
Limited success: problems of targetting,
Aadhaar coverage, banking infrastructure

Modi Government Initiatives

Revived the DBT in LPG: Pahal
Initiated cash transfer in PDS
Pilot programmes in UTs: Chandigarh,

Puducherry ( September 2015), Dadra &

Nagar Haveli (January 2016)
Reason: highly urbanised; good coverage
of Aadhaar, banks, IT infrastructure
coverage; PDS fully computerised
But not working well

Chandigarh: Problem Starts with

NFSA
81,123 ration cards (families) under

TPDS.
NFSA from September 2013
Could enrol 4.96 individuals (1.24 lakh
families) under NFSA
Enrolment drive yielded only 56,689
applicants (families).
Of these, 772 rejected for duplication;
55,917 enrolled

Puzzle
Why 25,000 lesser number of applicants than

under old TPDS?

Administration not being too rigorous about
checking eligibility self certification. So
why?
Targetting under NFSA problem across the
country

NFSA Entitlement
Under NFSA, 5 kg wheat/rice per family

member at Rs 2/3 a kg
In addition, Chandigarh gave 10 kg of wheat
at Rs 7 a kg
TPDS beneficiaries not covered under NFSA
got their quota but at Rs 7/kg
So 25,000 missing beneficiaries did not lose
out

Design and Operational Glitches

Administration told about cash transfer in

February 2015; six months to prepare

Limited to NFSA beneficiaries
Of 55,917 NFSA card holders, only 41,167 had
Aadhaar-linked bank accounts (now 45,737)
From September 1, all 93 ration shops shut;
no rations or cash for rest and 25,000 nonNFSA people. So that many angry people

Money Flow

Each month, Chandigarh Administration sends demand t

Too Little. . .
Cash payout is Rs 95 per head; 1.25

times MSP minus subsidised price people

paid
Beneficiaries say inadequate; market
prices higher; spending extra out of own
pocket
Whole wheat difficult to get in open
market; flour inferior quality
Lose out on additional 10 kg of wheat
What makes macro
sense may not
make micro sense

. . .Too Late
Money not reaching. CES : 40%; JPAL: 45%
So even eligible and enrolled people

not getting cash or subsidised rations

Food department says at least 100 cases
of bounce back every month; blames
PFMS/NPCI, beneficiaries
Not everyone can check accounts/get sms
alerts; banks not close by
Grievance redressal mechanisms sub-par

Information Asymmetry
People not aware of enrolment drives
People not aware of categories they fall in
How the amount has been decided
When they will get their payments

Fallout
Huge resentment, nostalgia for ration shops
Ration shop owners furious; fuelling the

resentment
- first point of contact for troubled
beneficiaries
- price rise deliberate?
Ideological opponents get strengthened

Way Forward
Focus on beneficiary convenience, not just savings

for government. No one should be worse of

Uniform policy across country? Or state-specific?

- but can PDS and cash transfer co-exist?

- what about deliberate market distortion, supply
shocks?
Design change:

give choice e.g Dadra and Nagar Haveli

look at local conditions
compensate fair price shop dealers in some way?
increase cash component? factoring in inflation?

Continued
Operational changes:

- dont start without full preparation

- sort out issues with PFMS/NPCI, Aadhaar
seeding, BCs/micro ATMs
- grievance redressal mechanisms must be
efective
- handholding
- political management/efective
communication

Thank You