India to roll out cash transfer of food subsidies from Sept - official

By Manoj Kumar

NEW DELHI (Reuters) - India plans to phase in cash transfers of food and kerosene subsidies from September, saving 10-15 percent of the $21 billion in annual outlays on the benefits by eliminating fraud, a senior finance ministry official said on Thursday.

Three so-called union territories, directly administered by the central government, would become a testbed for the measures, said Peeyush Kumar, the senior finance ministry official in charge of the cash transfer scheme.

Under the programme, each family will get a monthly subsidy of about 500-700 rupees ($19), which would be linked to a state-set procurement price of grains.

Prime Minister Narendra Modi, who has completed one year in power, wants to improve targeting of food and fuel subsidies to reach the poor - monetising benefits previously paid in kind that often went to waste or were stolen.

He launched a 'Digital India' drive on Wednesday to offer public services by linking bank accounts, identity cards and mobile phones in a national database.

Indian plans to reduce its subsidy bill by about 10 percent to $38.4 billion this fiscal year, about 14 percent of federal spending on programmes offering subsidised food, fertiliser and fuel, helped by reforms and lower crude oil prices.

The federal government has set a deadline of December for states to computerise all data on households now receiving subsidised food and fuel - to remove 'ghost', or fake, beneficiaries, Kumar told a seminar on benefit reforms.

Crisil, the Indian arm of Standard & Poor's, estimates that the federal subsidy bill could fall by 20 percent, or 250 billion rupees ($3.94 billion) a year, if the direct benefit transfer scheme is fully implemented.

Direct payments for cooking gas into people's bank accounts, launched earlier this year, have reduced sales of subsidised fuel by about one-fourth, mainly by eliminating ghost beneficiaries, said finance ministry adviser Arvind Subramanian.

($1 = 63.5 rupees)

(Reporting by Manoj Kumar; Editing by Douglas Busvine)