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Centre works out mechanism for direct cash transfer for food

Some UTs to start It from April 1, while other direct cash transfers to be launched from New Year

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Even as the Delhi government takes first step towards of food through its ‘Annashree Yojana’, the Centre has worked out an elaborate plan to disburse this subsidy to the beneficiaries directly in other states and union territories.

The pilot for the programme, worked out by the union food ministry, will be launched in Andaman and Nicobar island, Chandigarh, Dadra and Nagar Haveli, Daman & Diu and Lakshawadeep from April 1.

According to the plan, the existing targeted public distribution system won’t be dismantled after the cash subsidy mechanism is launched.

Instead, foodgrains would be supplied to the states at ‘appropriate cost’, which would be determined by the union department from time to time and would be akin to the prevailing market rate of grains. This price would be between the economic cost and the cost of acquiring grains. Economic cost is the purchase price of grains along with transport and other operational expenses associated with storing the grains.

Once this cost is fixed, the identified states and union territories would lift the grains at the 'appropriate price' from the Central government and add or absorb their own transaction cost to it while supplying to them to ration shops.

The ration shop owner will then sell the grain at the appropriate cost plus the transaction cost, adding his margin to the final beneficiary.

The calculation of subsidy will depend on the Central Issue Price, that is the price fixed for ration shops, and "appropriate " cost. The Central Issue price, for example, for wheat is Rs 4.15 a kg.

The difference between Appropriate Cost and the Central Issue price would be the subsidy amount and will be transferred to the bank account of the beneficiary a month in advance.

“The cash subsidy will be credited to bank account of the beneficiary one month in advance to enable him to purchase the grains,” a senior official said.

The addition to the appropriate cost by state governments and ration shop owners will not be subsidised by the Centre and states will have to work out a mechanism for this.

However, if it is found that despite the credited amount, the beneficiary has failed to lift the grains for two months in succession, the transfer will be stopped.

“The practical problem will arise because the amount which is already credited would have to be written off as no beneficiary will return back the amount,” the official explained.

The states and union territories which implement the cash transfer would have to ensure actual foodgrains is collected from ration shops in time to enable smooth transfer of food subsidy.

The government plans to start its most ambitious cash transfer scheme with 34 programme from January 1. However, for now food subsidy has been excluded from the programme. The Delhi Government, meanwhile, has already started Annashree Yojana, whereby a monthly cash subsidy of Rs 600 will be transferred using Aadhaar platform directly into bank accounts of the senior most women member of the family, not covred under either the below poverty line scheme or Atodaya Anna Yojana.

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