PAHAL—Direct Benefit Transfer Scheme for (LPG) – General Studies Paper 2 [ Detailed Analysis - Policies & Governance ]

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PAHAL is the first major Scheme of LPG connection in India that provides subsidies by Direct Benefit Transfer for around 150 million registered receivers; it is possibly the world’s largest DBT programme ever.

Note:

  • It accounts 3.5 % only of the total annual flow of government subsidies.
  • Not for those whose annual income is more than Rs. 10 lakh.
  • According to recent report total 57.5 lakh families have gave up subsidy.
  • 14.8 corers Families are getting subsidy in bank account.
  • 25 lakh new customers are added under PAHAL.
  • Aims at provision of around Rs. 20, 000 crore for the scheme which is about 8 % of the total provision of Rs. 250, 433 crore for subsidies in the 2016 - 17 Union budget

Lessons from PAHAL Targeting

Targeting

  • The goal of the government is to improve targeting subsidy effectively to flow only to the intended recipients.
  • The target of subsidy is to provide physical delivery of a product at lower than market price.
Currant LPG Subsidy system

Currant LPG Subsidy system

Currant LPG Subsidy system

  • So it is necessary to maintain an elaborate administrative tool to achieve the controlling of subsidized commodities; even with this exists problems such as:

- Product adulteration

- Leakages

- Ghost ration cards

- Harassment of beneficiaries by the rationing bureaucracy

Using DBT System

  • Subsidies are transferred to recipients directly through their bank accounts.
  • This scheme will only work with a bank account
  • Previously Jan Dhan Yojana campaign was also based on banking but it was only for limited peoples and PAHAL is biggest program in the world so it is difficult to maintain such a big program in Bank.

Advantages

  • New scope of payments banks and banking correspondents will be available in Villages.
  • Link with Jan Dhan Yojna to Aadhaar, the unique biometric identification system, so every people will get their unique identity because:

- The intended recipient receives the money in his account

- Reduction in the government’s subsidy burden

- Effective solution to outflows and mis-targeting problems

  • Associating Postal Account with Aadhaar

- The Post Bank accounts based on Aadhaar will get Direct Benefit Transfer for many Government schemes through the Post Bank.

Consumer-friendly Delivery System

LPG subsidy Delivery System

LPG subsidy Delivery System

LPG subsidy Delivery System

  • Disincentive of travelling to other villages to fetch the LPG cylinders
  • To get an LPG connection minimum requirement is to deposit, cost of a burner, regulator and cylinders.
  • Still some people are not able to afford it so government has introduce another scheme named as the Ujjwala Yojana scheme which is initiated to provide free or subsidized connections to around 50 million poor households over the next four years at the total cost of about Rs. 8, 000 crore.
  • Moving from 15kg cylinders to 5kg cylinders in rural areas will also help ease the cash-flow limitation for these households by decreasing the expense required for each refill

Story of “Rich”:

  • According to the CEEW study the richest 15 % of the population account for about 25 % of the LPG consumer base.
  • ‘Give It Up’ campaign:
    • 6% consumers has gave up their subsidy claim, only 14 % of the rich consumers actually ‘gave it up’

- Published on: June 2, 2016