The Indian government has been following a policy of subsidizing a number of products and services for the people. Subsidized products are sold through the public distribution system, but this distribution system is rather ineffective and often subsidies do not reach the intended recipients. Former Prime Minister Rajiv Gandhi once lamented that a spend of Rs. 100 translated to only Re. 1 benefit for the ordinary citizen. Ninety nine percent of welfare benefits fell into the hands of people operating a corrupt system.
LPG is one item of consumption for the ordinary citizen that is being subsidized by the government. The crude is imported by spending scarce foreign exchange. The high cost of LPG is subsidized to the end user to a large extent by the Indian government. The subsidies given by the oil companies are reimbursed to them by the government. Now when the government incurs huge expenditure on account of subsidies at the cost of foreign exchange as well as by running up a huge fiscal deficit, the least it would do is to take abundant caution that the benefits reach the intended recipients.
To prevent pilferage or leakage of subsidies given to consumers, the government has issued Aadhar cards to citizens. These cards are biometric identification cards. The government has further directed consumers to link their cards to their bank accounts and stated that henceforth that LPG will not be supplied at subsidized costs, but that the subsidy will be reimbursed to the consumers by directly paying the same into their Aadhar linked bank accounts.
In pursuance of this scheme, as many as 10 crore LPG consumers have furnished their Aadhar linked bank account numbers for availing the direct transfer of benefit into their accounts. They will pay for the cylinders in full and receive the cash benefit in their bank accounts. This will also help to end the black marketing in LPG cylinders and ensure that the benefit reaches the intended recipients. Prime Minister Narendra Modi tweeted his joy in the accomplishment of this ambitious scheme that had been achieved in about just two months.
This Direct Benefit Transfer for LPG or PaHal as it is called in short for Pratyaksha Hastaantarit Laabh covers about sixty five percent of the 15.5 crore consumers in the country. The Scheme has overtaken similar programs in China, Mexico and Brazil, where the number of such accounts did not exceed 2.2 crore. At present, subsidized LPG costs Rs. 417. The scheme was launched on November 15th 2014 in fifty four districts and was introduced in the rest of the country on January 1st 2015.
It is estimated that the government can save about ten to fifteen thousand of the Rs. forty thousand crore LPG subsidy bill. It is expected that almost eighty percent of the consumers will be brought under the scheme by the end of February. In combination with the Pradhan Mantri Jan Dhan Yojana, the scheme is a step towards financial inclusion for all.