UPSC Express

• The program aims to transfer subsidies directly to the people through their bank accounts.
• Crediting subsidies directly into bank accounts help reduce leakages, delays, etc.
• DBT has now extended to most of the government schemes.

DBT has two components:

• Subsidy: When a government meets a part of the cost of providing a good or service to a beneficiary.
• Income transfer: When a government provides income support to a beneficiary.
• This is a pure transfer payment unrelated to the cost of providing any good or service.

Pros and Cons of DBT

Positives:

• Better targeting of the beneficiary: In case of physical delivery of subsided products there are numerous reports of leakages, diversion of supplies, black marketing etc.
• By the use of DBT there is an assured transfer of the subsidy to the beneficiary.
• Also the problems like product adulteration, delay in supplies are eliminated.
• There is no need to have an elaborate administrative apparatus maintained at huge cost to manage the rationing of subsidized commodities.
• DBT brings in transparency and efficiency, and enables beneficiaries to get their entitlements directly to them without any delay.
• Direct transfer increases the circulation of money that will help in increasing the demand in the economy. Thus, keeping the growth cycle viable.

Negatives:

• DBT is dependent on the banking system, which is backbone of the system.
• Hence, anyone without a bank account will not be able to avail subsidies.
•  In India, we still have the rural pockets where bank facilities has not reached yet.
• Now, the government in its move to provide universal financial inclusion is taking the initiative to provide each household with at least one bank account under Jan Dhan Yojna. Linking of the two systems i.e. DBT and financial inclusion is now actively pursued.

Related Scheme:

PAHAL (PratyakshHanstantritLabh):

• The Direct Benefit transfer of LPG (DBTL) scheme is PAHAL.
• Consumers who wish to join the scheme will have to either link their Aadhaar number into their bank account.
• DBTL is designed to ensure that the benefit meant for the genuine domestic customer reaches them directly and is not diverted.