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"Why is DBTL a roaring success while the other DBT schemes are still struggling?": Deepak Maheshwari

Posted on November 12, 2013 by Sumita Kale

Ever since the launch of Direct Benefit Transfer (DBT) on January 1, 2013 most of the 13 crore plus household customers of cooking gas cylinders – including those in the middle and upper income class, have been preparing themselves to eventually deal with the scenario of paying the market price for gas cylinders, hitherto supplied at heavily subsidised administered pricesThe impact, however, be somehow cushioned by the payment of the subsidy amount directly to the bona fide consumers, albeit capped to just 9 cylinders per annum per householdEvery time a consumer pays market price for the LPG to the distributor, he or she gets the subsidy thereafter directly into the bank account.


What is interesting is that though DBTL (this is how DBT for LPG is referred to, in the government-speak) debuted on June 1 only across 20 districts and subsequently extended to another 34 districts, on an on-going basis DBTL alone is accounting for more than 80% of all DBT transactions in terms of volume and more than 80%!


This surprising situation begets the obvious question "Why is DBTL a roaring success while most of the other 25 odd schemes under DBT are still struggling?  To get to the bottom of this conundrum, let us see what lies beneath and beyond the surface.


Scope and Scale of DBTL Three product categories, namely the Food, Fertilizer and Fossil Fuel (3F) account for almost half of India’s total subsidy, with fuel alone accounting for close to Rupees 1.40 Lakh crores (USD 27 billion), according to Fossil-Fuel Subsidy Reform in India: Cash transfers for PDS kerosene and domestic LPG -  a joint study by the Institute for Sustainable Development (IISD) and The Energy Research Institute (TERI)Within the category of fuel we have diesel, kerosene and Liquefied Petroleum Gas (LPG)Diesel prices are being increased slowly month-on-monthKerosene continues to be distributed largely through the PDS route notwithstanding that it was one of the first successful pilot for DBTAfter a lot of deliberations, the government decided that LPG would be supplied at market price and the subsidy amount would be paid to all domestic consumers of LPG for a certain number of bottled cylinders.


Let us look at the volume of transactions for DBTL as compared to all the other schemes under DBT as tabulated below based on the YTD (Year-to-Date) reports up to September 30 and October 14.


Duration  

Noof Transactions

% by volume

Amount transferred (Rs.)

% by value

1 Jan 2013 to 30 Sep 2013

DBT (excluding LPG)

2,858,511

22

2,688,493,391

36

DBT (LPG)

10013634

78

4,713,983,419

64

DBT - Total

12,872,145

100

7,402,476,810

100

1 Jan 2013 to 14  Oct 2013

DBT (excluding LPG)

3275413

20

2941299581

32

DBT (LPG)

12,771,484

80

6,139,896,378

68

DBT - Total

16,046,897

100

9,081,195,959

100

1 Oct 2013 to 14  Oct 2013

DBT (excluding LPG)

416,902

13

252,806,190

15

DBT (LPG)

2,757,850

87

1,425,912,959

85

DBT - Total

3,174,752

100

1,678,719,149

100


As of September 30, DBTL accounted for 78% of all DBT transactions by volume and 64% by valueBy October 14, DBTL accounted for 80% of all DBT transactions by volume and 68% by valueConsidering that different schemes debuted under DBT at different points of time, let us look at the incremental progress between these two dates to get a better comparisonWithin the first two weeks of October, DBTL accounted for 87% of all transactions by volume and 85% by value!


While even DBTL is far from the perfect state and there are several people even within the districts covered who may not be getting subsidy payment for LPG even after paying the market price, it is obvious that some things must be many things going well for it where other schemes continue to struggleThese may include the following:


  • Digitised database - Firstly, there are just three suppliers of LPG cylinders - namely Indian Oil, Bharat Petroleum and Hindustan PetroleumOver the years, their customer databases were already digitised.
  • Little dependence on state governments - DBTL implementation is being fully funded by the central government and each of the three LPG supplier is a public sector oil marketing company (OMC) under the Ministry of Petrochemicals and Natural Gas, Government of IndiaBeyond some administrative support, state governments do not have much role in case of DBTL thereby making the implementation relatively smoother.
  • Prevailing financial inclusion for a significant number of beneficiaries – Most LPG consumers are in the relatively higher socio-economic categories, higher urban concentration, higher propensity to have a bank account, thereby making it easier and faster to seed the Aadhaar number.

No wonder, as of January 1, 2014 DBTL is slated for covering 289 districts or 45% of all the districts in the countryIn the long run, DBTL could actually turn out to be the first scheme to achieve national scale, with almost universal coverage.


Obviously, there is DBTL (DBT schemes at large) and there is DBTL (DBT for LPG)!

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Author Deepak Maheshwari, a public policy professional, is currently associated with ICFI as Advisor.

   

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