A lot of pilfering from fertiliser subsidies is happening due to policy flaws. This can be curbed if only the subsidy is given under Direct Benefit Transfer

On January 22, 2019, addressing NRIs and Indian-origin people at the inauguration of the 15th Pravasi Bharatiya Divas convention in Varanasi (Uttar Pradesh), Prime Minister Narendra Modi recalled what Rajiv Gandhi had Stated “Of the funds the Central Government sends, only 15 per cent of that reaches the people. If one rupee is sent from Delhi, only 15 paise reaches the villages, 85 paise disappear. Even as the country’s middle class kept giving tax honestly, this “loot” of 85 per cent also continued”. Modi added “I also want to tell you today’s truth as well. We used technology to end this loot of 85 per cent completely.” Elaborating on this theme, he explained:-

In the last four-and-a-half years, about Rs 580,000 crore, our Government, through various schemes viz. for a home, for education, for scholarship, for gas cylinder and to other such ends etc directly gives to the people, transferring it in their bank accounts. Now, just consider that if the country was being run through the old system, then even today from this Rs 580,000 crore, about Rs 450,000 crore would have disappeared or leaked. If we would not have brought a change in the system then this amount would have been looted like the former Prime Minister had accepted…,” Modi said.

That was before the 2019 General Elections. Today, when the 2024 General Elections are underway, the same discourse reverberates in the air even as the PM cites a figure that is nearly seven times. The amount spent on welfare schemes during the last ten years under the Modi - regime has gone up to a gargantuan of around Rs 4000,000 crore. Had the old system (read: before 2014) continued, the amount disappearing from the distribution pipe would have been Rs 3400,000 crore (4000,000x0.85).

What do the facts say?

The Union Government executes a plethora of welfare programs aimed at providing basic and necessary amenities and upliftment of the most disadvantaged members of society. It does so mainly through “Central Schemes” (CS) which are fully funded and implemented by it. A total of 740 CS schemes are currently under implementation. During FY2022-23, the CS spending was Rs 1208,000 crore

In addition, there are “Centrally Sponsored Schemes” (CSS) designed to supplement the efforts of the States in achieving various socioeconomic goals and implementing national priorities. These are funded by the central Government and the States in varying proportions viz. 90:10, 60:40, 50:50 and so on depending on the scheme. These schemes are implemented by the States. During FY2022-23, the spending on a total of 50 CSSs was Rs 412,000 crore. Put together, the total expenditure of the Central Government on CS and CSS schemes during the year was Rs 1620,000 crore.

Now, if we were to apply the 85 per cent magic formula dished out by the then Prime Minister Rajiv Gandhi, the amount pilfered while on the way to the beneficiaries would have been Rs 1377,000 crore. Only Rs 243,000 crore would have reached. Under the Modi - model, the entire Rs 1620,000 crore has been reached; courtesy of, the use of technology to transfer the money to their bank accounts.

How does it work?

 Under its flagship Digital India program, the Modi - Government has been implementing what is popularly known as DBT (Direct Benefit Transfer) for transferring the cash benefits and subsidies ‘directly’ to the Aadhaar-linked bank accounts of individual eligible beneficiaries. Launched by the erstwhile UPA - Government on January 1, 2013, its use has picked up pace under Modi since January 2015. As of date, DBT is used in 314 CS schemes.

The JAM trinity (Jan Dhan, Aadhar, Mobile) is a DBT enabler the ‘mover and shaker’ behind its successful implementation. Today, there are around 520 million Jan Dhan Accounts, more than 1.39 billion Aadhaar cards and 1.15 billion mobile connections. With this, the money can be ‘instantaneously’ transferred at the click of a mouse to tens of millions of beneficiaries spread all over the country. The DBT is free from the delays corruption and associated pilferage that was germane to the earlier arrangements under which there was human intervention, a host of intermediaries/mediators and the money was flowing through multiple layers in administrative offices.

To improve transparency, the Government has put in place the Central Plan Scheme Monitoring System (CPSMS) which ensures that all transfers to bank accounts are made strictly as per the list of eligible beneficiaries. The persons included in the list are authenticated with the use of an Aadhaar card that contains their biometric details thus removing any scope for fictitious claimants. The provision for such checks and balances has helped hugely in preventing bogus claims. As per the latest update on the DBT portal, the total savings by way of plugging leakages in the schemes due to the implementation of DBT during FY2022-23 was Rs 63,000 crore.

However, if we look at the food subsidy (the excess of the cost of procurement, handling and distribution of food over the price paid by the beneficiary/consumer), during FY2022-23, the Government was able to save over Rs 50,000 crore which works out to around 18 per cent in the total food subsidy bill of Rs 272,000 crore. This was made possible because of the “deletion of over 50 million duplicate and fake/non-existent Ration Cards”.

Likewise, under the Pradhan Mantri Kisan Samman Nidhi or PM-KISAN (, the Union Government provides income support of Rs 6,000 a year to farmers with a valid enrolment, paid in three equal cash transfers of Rs 2,000 every four months; the money is credited to their account via the DBT mode), it was able to save over Rs 10,000 crore during FY2022-23. This is about 17 per cent of the total payment of Rs. 58,000 crores during the year. The savings were due to the deletion of over 21 million ineligible beneficiaries.

According to the DBT portal, the Government has been able to generate a cumulative saving of Rs 348,000 crore by plugging leakages since the inception of the DBT. Of this, more than half or Rs 185,000 crore are savings in the distribution of food subsidies alone.

Notwithstanding the above, there remains a huge untapped potential for garnering more savings. This is because in the initial years, neither States used Aadhaar for validation nor the Centre made it compulsory even as the latter’s efforts in this regard were hamstrung due to protracted litigation in the top court. In such circumstances, a large number of ‘ineligible’ persons making their way to the beneficiary list was inevitable. While the Government has got rid of them in some schemes like PM-KISAN, it has a long way to go.

Meanwhile, Modi also needs to focus on areas where technology intervention alone won’t help. For instance, in fertilisers, the Government asks manufacturers to sell fertiliser at a low price to farmers. The excess of the cost of supply over it is claimed by the latter from the former as a subsidy. Since the subsidy is embodied in the MRP (albeit low), the subsidised fertiliser product must reach the farmer and be used only for growing the crop. If it doesn’t reach, then the benefit of subsidy is enjoyed by the person who grabs it. A lot of pilferage from fertiliser subsidies is happening due to this flaw in policy. This can be curbed if only the subsidy is given ‘directly’ to the farmers under DBT.

(The writer is a policy analyst; views are personal)