Fix the edifice!

The task force on Direct Transfer of Subsidies on Kerosene, LPG and Fertilisers headed by Nandan Nilekani, Chairman of the Unique Identification Authority of India ( UIDAI) has done a commendable job of spelling out the mechanics of the transition from today’s leaky subsidy regime to a system of direct cash subsidies . However, that does not really fix the problem.

It must be noted that the mandate of the task force, and what it has delivered, is only the design of the plumbing. The success or otherwise of direct cash transfers depends on much more. It depends critically on proper identification of the beneficiaries; an issue that is beyond the jurisdiction of the task force and falls squarely in the government’s domain.

The operationalisation of Aadhar, the Unique Identification Number, will make it possible to link entitlements to targeted beneficiaries. But it will not ensure beneficiaries have been correctly identified. Thus the old problem of proper identification that bedevils the present system will continue. If this is to be addressed state governments must get serious about identifying the needy, even if it means taking on vested interests that have undeservedly enjoyed taxpayer-financed state largesse.

In the case of kerosene, the original purpose of subsidy was to facilitate essential lighting in households beyond the physical or economic reach of electricity. Once total rural electrification is achieved, there would be no rationale whatsoever for subsidising kerosene, which is largely used to adulterate diesel. Solar lanterns are a more efficient lighting subsidy, even before rural electrification becomes total.

Cooking gas (LPG) is essentially consumed by middle and upper classes; very little by those below the poverty line. Hence, there is no justification for a tortuous three-stage process of de-subsidisation of the product. Why not hike the price, say, by . 50 every three months to bring LPG prices on par with the free market price? True, this will call for political will but no more than what is required to dismantle the present system that has rent-seekers feeding off the system.