The Indian government is examining the proposed scheme for direct disbursement of food subsidies in cash, instead of foodgrains under the Targeted Public Distribution System (TPDS), as demanded by some states.

The final contours of the scheme will be worked out in consultation with concerned agencies like the Ministry of Finance (Department of Expenditure) and Planning Commission, Food and Consumer Affairs Minister K V Thomas has said.

The governments of central state Uttar Pradesh, Haryana and Delhi have submitted proposals for direct disbursement of the food subsidy in cash to BPL (Below Poverty Line)/Antyodya Anna Yojna (AAY) families on a pilot basis in five districts, instead of distribution of foodgrains under the TPDS.

Later, the Bihar government also submitted a proposal in this regard, the minister said. Based on the proposals, a draft was prepared to test the feasibility of this alternative mode of transfer of food subsidy for BPL/AYY families under the TPDS.

Under the scheme, the Department of Food and Public Distribution will allocate funds to states for disbursement of the cash subsidy, based upon the number of AAY and BPL ration cards, Thomas said. There is no proposal at present for indexing the cash transferred to the beneficiaries to the rise in prices, he said.

He said the terms of reference of the task force on implementation of the Aadhar Project have been extended to examine and suggest an implementable solution for direct transfer of subsidies on food and kerosene using Unique Identification cards. The task force was expected to submit its report by August 31, 2011, Thomas said.