Evaluation of direct benefit transfer (DBT) OF food subsidy

Abstract

The Cash Transfer of Food Subsidy Rules was gazetted by the Government on August 21, 2015. The cash transfer of food subsidy is expected to aid the Government in weeding out fake beneficiaries and in plugging leakages in the system. Direct Benefit Transfer (DBT) of food subsidy has been implemented fully in the Union territories of Chandigarh, Pondicherry and Dadra & Nagar Haveli. This study evaluates the pilot launch of DBT in Chandigarh in terms of the overall experience of beneficiaries. The study evaluates the arguments and empirical evidence in favour of and against replacing in-kind transfer of food subsidy with cash transfers. It concludes that there is a strong case for initiating a national roll-out of DBT of food subsidy. The study evaluates the possibility of making DBT conditional on educational and health outcomes but concludes that the costs far outweigh the benefits. The study isolates the global best practices in comparable cash transfer schemes through cross-country comparisons. Based on the insights gained during the evaluation phase, it suggests key improvements to the design of the scheme including the introduction of Electronic Benefit Transfer cards, changes in the method for the computation of food subsidy and an ‘Exclusion Approach’ using the Socio-Economic Caste Census data to increase targeting efficiency.