In a major policy shift, finance minister Pranab Mukherjee has proposed direct cash transfer of subsidies for fertilizer, kerosene and LPG to the BPL families. Food subsidy, which has been a contentious issue because of the huge pilferage in the delivery system (well over 50 percent of PDS supply is leaked), has been kept out of the present plan.

Going by the budget speech, Mukherjee proposes to introduce the new system by the end of the current fiscal and has set up a task force under UID chairman Nandan Nilekani to work out the modalities. Nilekani is expected to submit his report by June this year.

For those who are worried about the leaky delivery system the policy shift has come as a welcome change, though not without the concerns over poor targeting mechanism and the piecemeal nature of the present move.

Manisha Priyam, who teaches political science in Delhi university, would have liked the finance minister to transfer cash for food subsidy too. That would have substantially improved the cash basket of the poor. She would also have preferred this measure to be part of a larger social policy of the government to improve the living condition of the poor by taking care of their education and health needs. She advocates a greater role for the states who play a crucial role in implementing the subsidy regime and as some have shown, their own initiatives have yielded better results in the delivery of subsidized items.

Biraj Patnaik, advisor to the supreme court-appointed special commissioners on right to food, is rather cautious and has reservations about transferring cash for fertilizer subsidy directly to the farmers. He says, in absence of land reforms and the problem of large scale tenancy, the subsidy will end up with rich land lords. Besides, he thinks, unless the issue of poor targeting is sorted out, the old problem of leakage will continue.

The Greenpeace India, which has been campaigning for shifting to organic farming and produced a report painting an alarming picture of the declining productivity of soil because of excessive dependence and promotion of chemical fertilizers, says the regime change will help only if the focus is shifted away from chemical fertilizers. Gopi Krishna, who piloted the study, proposes that the farmers be given the “option” to buy organic fertilizers and fix the problem of supply side bottlenecks, like hoarding and smuggling of fertilizers.

Limiting the subsidy on LPG to the BPL families may not, however, go well with the middle class, which has to bear the brunt of de-control of petrol and the prospect of de-control of diesel. The new regime will lead to rise in LPG price subsidy on which is universal at present.

But even for those batting for the cash transfer, the real test will come when the modalities are worked out. Unless targeting is made fool-proof, the old problem will endure.