Give direct cash transfers instead of subsidies, says Chidambaram

New Delhi: Finance Minister P Chidambaram today called for direct cash transfer of subsidies in food, fertilizers and petroleum by the end of the 12th Five-Year Plan period that began April 1, 2012, to bring down the subsidy burden.

“I would urge that by the end of the 12th Plan, these three major subsidies be rolled out across the country through direct cash transfers to the beneficiaries,” Chidambaram said at a meeting of the Planning Commission called to finalise the Plan.

Direct cash transfers would bring down the subsidy burden as the money would go directly to the “genuine” beneficiaries and “plug leakages” in the implementation of these schemes, he said.

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Chidambaram said on the non-plan expenditure side, the major subsidies are projected to decline from 1.9 percent of the GDP (gross domestic product) as per the budget estimates for 2012-13 to 1.2 percent in 2016-17.

The sharp fall as assumed in the plan may be over-optimistic due to heavy burden of subsidies given on fuel and fertilizers, he said.

Currently, pilot projects are under implementation for the direct cash subsidies for cooking gas and kerosene. The government plans to extend the direct transfer mechanism to the Union Territories in the first phase.

The finance minister also pointed out the need to set up a mechanism at the union cabinet level which will hasten decision-making on major investment proposals, especially in the infrastructure sector.

“I would urge that the authority to take the final decision should be vested in a national investment board to be chaired by the prime minister and the allocation of business rules should be amended to create such a mechanism,” said Chidambaram.

“Once the final decision is taken by the national investment board, no other Ministry or Department or Authority should be able to interfere with that decision or delay its implementation,” he said.

Chidambaram further said that the national investment board’s authority should extend to proposals worth a certain threshold or around Rs.1,000 crore.

He also said that analyses had shown that of the 147 centrally sponsored schemes currently in operation, 100 schemes are with an outlay of less than Rs.300 crore each for the whole country.

Given the cost of administering the schemes and the capacity now available within the states, these should be closed at the central level. The allocated funds of Rs.7,229 crore in the 2011-12 Budget could be added to the annual normal central assistance of the respective states to enable them to implement these schemes, he said.

The finance minister said the 8.2 percent average growth rate for the 12th plan period is achievable.

“The present target is a realistic assumption given that in the 10th Plan we achieved a GDP growth rate of 7.6 percent and in the 11th Plan the achievement has been 7.9 percent.”

IANS