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BW Businessworld

Doling Out Directly

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It was the late Rajiv Gandhi who stated that out of every rupee that the Indian government spends on subsidising the poor, barely 10 paise reaches the actual beneficiaries. The rest, he estimated, was lost to leakages in the system. While not everyone agrees with the 10 paise estimate, almost everyone agrees that much of what India spends on subsidies goes to people other than those for whom the subsidies are intended.

Most of the foodgrain and kerosene meant to be sold through the Public Distribution System (PDS) fair price shops are sold on the black market.

The rationale behind the diesel subsidy is that it helps the farmers who run pump sets to irrigate their fields. But a large chunk of the subsidised diesel also goes into the fuel tanks of the cars and SUVs of the rich and the middle class. Take almost any subsidy and the story is the same.

The leaks are not just in the system of subsidies. Even in the welfare schemes — like the job guarantee scheme — the payments meant for the poor are siphoned off by middlemen.

For some time now, there has been a view gaining ground in the Planning Commission and the various ministries of the government that direct transfer of funds to the intended beneficiaries will help plug many of the leaks in the system. Five small experiments, in three different regions of the country, have been initiated to demonstrate proof of the concept's viability.

Senior assistant editor Joe Mathew travelled to Alwar, Ranchi and Mysore to see how well these experiments are going. His report shows both the promise and the problems of the new system. Read about them in our cover story.

While on the subject of wastage, already 40 million tonnes of high quality coking coal have been burnt and several hundred million tonnes more have been rendered unusable because of the fires in the coalfields of Jharia. These fires have been raging for over a 100 years now, and entire villages have collapsed because of them. Why hasn't the government of  Jharkand or, for that matter, Bharat Coking Coal Ltd, which owns the coalfields, been able to douse the fires? Correspondent Yashodhara Dasgupta and chief photographer Bivash Banerjee travelled to Jharia to find out. Their report is on page 46.

(This story was published in Businessworld Issue Dated 02-07-2012)