Answer: 

Introduction:

Direct Benefit Transfer (DBT) has been visioned as an aid for simpler/faster flow of information and funds to the beneficiaries and to reduce the fraud in the delivery system.

Body:

Replacement of price subsidy with DBT could change the scenario of subsidies in India in following ways:

• Less leakage: Since in price subsidy there is lot of diversion to open market because of price differential and also because of middlemen involved in the process, DBT could reduce leakage significantly since the money is transferred directly into the accounts of beneficiary and because there is no price differential.
• Better Targeting: Price subsidies have a lot of inclusion and exclusion errors. According to economic survey 2015, the bottom 50% population consume only 25% LPG. Since DBT will be based on biometric identified process there will less chances of inclusion and exclusion errors.
• Reduction in fiscal deficit: The Pahal scheme in LPG shows that the Government saved Rs 14000 crore due to removal of ghost beneficiaries. The introduction of DBT could reduce Fiscal deficit for government and saved money could be utilized in expanding rural infrastructure which according to planning commission report is 30% more beneficial in removing poverty than price subsidies.
• Gives freedom to people to spend money: DBT is more democratic since it gives freedom to people to spend it as they want instead of paternal state approach of price subsidies on select products.

Conclusion:

The goal of the government in subsidy reform through DBT is not doing away with subsidies, but targeting them effectively so that they flow only to the intended beneficiaries. DBT could be a game changer in reducing subsidies amount, leakage, etc.

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