Cash transfer gets thumbs down, less than 60% cash reaches beneficiaries

Cash transfers were introduced in Chandigarh, Puducherry, and Dadra and Nagar Haveli as a substitute for the Public Distribution System (PDS) on a pilot basis in 2015. A programme evaluation study found glaring results, as significant proportion of the amount disbursed via Direct Benefit Transfer (DBT) was not reaching to the beneficiaries.

Less than 60% cash is getting into the hands of beneficiaries. This difference between disbursement and in-hand receipt represents weak implementation, the report concludes.

This official study was conducted by J-PAL and was submitted by to the Department of Food, Government of India and NITI Ayog in August 2016. The findings are crucial as the discussion around provisioning a Universal Basic Income in lieu of schemes such as PDS is doing the rounds in India.

The evaluation was conducted in two phases: the first one ran from September 2015 to February 2016 and the second one from June to July 2016. In the second phase, the situation improved slightly. There has been a reduction in the proportion of beneficiaries receiving nothing or less than full entitlement in Chandigarh and Puducherry.

Subsidy amount, not enough

Subsidy amounts may not reflect the additional time and monetary burden on beneficiaries. For instance, beneficiaries incur average travel and opportunity costs of extra Rs 84 per month in accessing cash via DBT in comparison with equivalent PDS entitlement. This is why 75% of beneficiaries think subsidy amount is insufficient and expect it to be higher.

However, the sample study found that with cash transfers, respondents conveyed that they were able to buy a higher quality of grain from the market than they were getting at the PDS.

PDS preferred over DBT

The majority of beneficiaries in Chandigarh and Puducherry continue to prefer the PDS over cash transfer. The opposite was the case in Dadra and Nagar Haveli, where, after only four months of implementation, 56% of beneficiaries expressed a preference for DBT over PDS. Beneficiaries were more favourable towards DBT over time as implementation improves and exposure increases.

Implementation remains a key concern. The study recommends that reconciling payment and receipt records should be given top priority.