‘JAM Trinity’ linkage to check subsidy pilferage

Sanjeev Sharma

Tribune News Service

New Delhi, February 27

The Economic Survey has suggested that the “JAM Trinity” of Jan Dhan Yojana, Aadhaar and Mobile numbers can be the answer to India’s burgeoning subsidy problem that will allow the state to offer this support to poor households in a targeted and less distortive way.

Both the Central and state governments subsidise the price of wide range of products with the expressed intention of making them affordable for the poor. Rice, wheat, pulses, sugar, kerosene, LPG, naptha, water, electricity, diesel, fertilisers, iron ore, railways are just a few of the commodities and services that the government subsidises.

The survey states that converting all subsidies into direct benefit transfers is therefore a laudable goal of the government policy. Even as it focuses on second generation and third generation reforms in factor markets, India will then be able to complete the basic first generation of economic reforms.

Recent experimental evidence documents that unconditional cash transfers, if targeted well, can boost household consumption and asset ownership, reduce food security problems for the ultra-poor and opportunities for leakage.

The JAM Trinity allows the state to offer this support to poor households in a targeted and less distortive way. The other measures suggested are through mobile money and post offices.

As of December 2013, over 720 million citizens had been allocated an Aadhaar card. By December 2015, the total number of Aadhaar enrolments in the country is expected to exceed 1 billion. Linking the Aadhaar number to an active bank account is key to implementing income transfers.

With the introduction of the Jan Dhan Yojana, the number of bank accounts is expected to increase further and offer greater opportunities to target and transfer financial resources to the poor.

The Survey notes that there is always a question over how much of these benefits actually reach the poor. It concludes that price subsidies are often regressive: It means that a rich household benefits more from the subsidy than a poor household.

Giving statistics, it says that price subsidies in electricity can only benefit the (relatively wealthy) 67.2 per cent of household that are electrified. The poorest 50 per cent of households consume only 25 per cent of LPG. Majority (51 per cent) of subsidised kerosene is consumed by the non-poor and almost 15 per cent of subsidised kerosene is actually consumed by relatively well-off (the richest 40 per cent).