PUBLIC DISTRIBUTION SYSTEM AND CASH TRANSFER

The Government of India has announced that subsidies on food grains, fertilizers, kerosene and liquefied petroleum gas will be replaced by cash transfers to end users. A close examination of the objectives of the subsidies in food grains, fertilizer and kerosene and the implications of the shift raise some challenging questions. According to a recent report in the business magazine Business India, “A confidential study conducted by the Prime Minister?s Office (PMO) in consultation with various ministries has revealed that, based on the actual money spent by the central government during 2010-2011 under various subsidies totaling Rs. 211,474 crore (approximately $38 billion), the scheme can result in a net saving of Rs. 33,000 crore ($6 billion) by way of plugging leakages.” The replacement of price subsidies by cash payments is a longstanding demand of the World Bank and other representatives of international big business. So the government of India is approaching this issue of subsidies from economic perspective not from the social perspective. By doing so the original purpose of giving subsidies is defeated.