Direct Benefit Transfers Witness 21% Decline In FY24

In the fiscal year 2023-24, the Centre's transfer of various subsidies and incentives to beneficiaries through the Direct Benefit Transfer (DBT) mechanism experienced a significant decline of 21 per cent, amounting to Rs 5.66 trillion. 

According to reports, this drop was attributed to reduced expenditure on fertilisers and food due to falling commodity prices, alongside the discontinuation of the extra free grains scheme.

Fertiliser subsidies, constituting a major portion of DBT transfers, amounted to Rs 1.78 trillion, marking a 25 per cent decrease compared to the previous year. This reduction was influenced by the stabilisation of input costs and global fertiliser prices, following a record surge witnessed in FY23. Notably, in FY23, the government absorbed the increased costs to shield farmers, leading to a substantial rise in fertiliser DBT transfers.

Similarly, food subsidies worth Rs 1.27 trillion were dispensed under the Public Distribution System (PDS) in FY24, reflecting a significant decline of 33 per cent year-on-year. 

This decrease was primarily due to the cessation of the extra free grains scheme, which was introduced in response to the COVID-19 pandemic in FY21. Although the additional grains scheme concluded in December 2023, the Centre extended relief by waiving the nominal charges for wheat and rice under the PDS for a five-year period under the National Food Security Act.

Since the initiation of the DBT scheme in FY14, beneficiaries have received benefits totaling Rs 35.5 trillion, with 53 per cent disbursed in cash through bank accounts and the remainder as in-kind benefits.

The surge in DBT transfers observed from FY21 onwards can be largely attributed to COVID-19 induced benefits and increased spending in key subsidies facilitated by Aadhaar-enabled DBT platforms.

The government's efforts to curb leakages resulted in cumulative savings of approximately Rs 3.5 trillion until the end of FY23. Notably, the elimination of 5.03 crore fake ration cards from the PDS system contributed significantly to savings, amounting to Rs 1.86 trillion.

Additionally, the removal of 4.15 crore fake beneficiaries and 1.13 crore voluntary subsidy relinquishments under the LPG-Pahal scheme led to savings of Rs 73,443 crore (21 per cent). Further savings were achieved through the identification and removal of 7.1 lakh duplicate beneficiaries under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and ineligible beneficiaries under the PM-KISAN scheme.

While the Centre's DBT initiative continues to make significant strides, several state governments are also enhancing DBT utilisation to streamline the distribution of subsidies and other incentives.

The decline in DBT transfers in FY24 underscores the dynamic nature of subsidy expenditure, influenced by factors such as commodity prices, government policies, and socioeconomic conditions.