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Focus: GS-II Social Justice


The Centre has prescribed that the free power supply scheme should be replaced with the direct benefits transfer (DBT) as a condition to allow States to increase their borrowing limit.

Free Power

  • Tamil Nadu was the first State to introduce free power in September 1984.
  • In the last 15 years, Maharashtra has been the only State that scrapped the DBT scheme within a year of introducing it.
  • Karnataka, which has been implementing it since 2008, may become the first southern State to have DBT in power supply.

Advantages of DBT

  • Middlemen will be eliminated. Hence leakages will be reduced.
  • As Aadhar card is based on biometric identification, fake & duplicate beneficiaries will be eliminated.
  • DBT scheme allows time-bound transfers hence avoids delays in transferring money, which is one of the biggest problems beneficiaries are facing.
  • This scheme eliminates intermediaries and rents for ‘fair price shops’ because subsidies and benefits of welfare schemes are transferred directly. This will help Indian economy in the long run as the structural expenditure will be reduced.
  • Transparency in the distribution of benefits.
  • As everyone can purchase goods at market price, there will be healthy competition between the sellers in the market. The problem of middlemen diverting subsidized grains to markets will be eliminated.
  • It encourages people to have bank account.
  • The problem of food grains storage and spoilage in the process can be eliminated.
  • Circulation of money will be increased, which can lead to a significant increase in the GDP.
  • It will help India to transform itself into cashless economy.

Disadvantages od DBT

  • Still there are many rural & tribal areas, which don’t have banking facility and road connectivity.
  • As of now, only 3% Indians pay income tax. So, determining the income of the rest of the citizens is still a challenge hence making it difficult to identify the deserving beneficiaries.
  • Most of the banks appoints Business Correspondents to enroll beneficiaries in rural areas. They may open more than one account for each beneficiary for incentive. And there are many complaints that they are not giving passbooks to the beneficiaries making them unaware of the scheme. Illiterate beneficiaries are more vulnerable in this case.
  • Direct cash may not be used for intended purpose and can be used in unhealthy ways. For example, the cash instead of food subsidy may be spent on drinking and smoking as most of beneficiaries’ families’ heads are men.
  • Micro ATMs, which were set up to deliver cash benefits at door step are not present in many areas hence many beneficiaries have to travel long to withdraw money.
  • Most of the beneficiaries’ families’ heads are men. This will be a disadvantage to women as there is no guarantee that they will get their share of the cash.

Direct Benefit Transfer (DBT)

  • DBT Mission was created in the Planning Commission to act as the nodal point for the implementation of the DBT programmes.
  • DBT has shown promising results in pilot schemes being run in different parts of the country, these include PAHAL (modified DBTL for LPG subsidy), Public Distribution System (PDS) in Puducherry, Chandigarh and Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) payments in Jharkhand, Bihar, etc.

Categories of Schemes covered under DBT

The scope of DBT include all welfare/subsidy schemes operated by all the Ministries/ Departments of Government of India directly or through implementing agencies, which involve cash / kind benefits’ transfers to individuals.

  1. Cash Transfer to Individual Beneficiary – This category includes schemes or components of schemes wherein cash benefits are transferred by Government to individual beneficiaries. Example PAHAL, MGNREGA, NSAP etc.
  2. In-kind Transfer from Government to Individual Beneficiary – This category includes schemes or components of schemes wherein kind benefits are given by the Government to individuals through an intermediate agency.
  3. Other Transfers – Apart from these two categories of schemes, there is another category of transfers from the government to different non-government functionaries who help in facilitation of various government schemes till the last mile. This category includes transfers made to the various enablers of government schemes like community workers, NGOs, in the form of honorarium, incentives, etc. for successful implementation of the schemes.

-Source: The Hindu

December 2023