Discuss the challenges in implementing subsidy reforms in India. How can they be made more

Q.8 Discuss the challenges in implementing subsidy reforms in India. How can they be made more targeted and efficient?

Ans:  Subsidy reforms in India aim to rationalize expenditure, reduce fiscal burden, and ensure benefits reach the intended beneficiaries. However, challenges like political resistance, leakages, and inefficient targeting hinder their effective implementation.

Challenges in Implementing Subsidy Reforms

1. Political Resistance: Subsidies are often seen as populist measures, making reforms politically challenging. Example: The LPG subsidy reform faced backlash initially, but the PAHAL scheme successfully reduced leakages by linking subsidies to Aadhaar.
2. Leakages and Corruption: Inefficient delivery mechanisms lead to diversion of subsidies to unintended beneficiaries. Example: Before the Direct Benefit Transfer (DBT) system, fertilizer subsidies were often diverted to industrial use instead of reaching farmers.
3. Lack of Awareness: Beneficiaries, especially in rural areas, are often unaware of subsidy schemes and their eligibility. Example: The PM-KISAN scheme faced initial challenges due to low awareness among small farmers.
4. Inadequate Infrastructure: Poor infrastructure for subsidy delivery, such as banking networks in rural areas, limits effectiveness. Example: The Jan Dhan Yojana improved banking access, enabling efficient DBT for subsidies.
5. Complex Bureaucratic Processes: Cumbersome procedures and red tape delay the disbursement of subsidies. Example: Delays in the Fertilizer Subsidy Scheme often affect farmers during the sowing season.
6. Fiscal Burden: High subsidy expenditure strains government finances, limiting funds for other developmental projects.

Measures to Make Subsidies More Targeted and Efficient

1. Direct Benefit Transfer (DBT): Linking subsidies to Aadhaar ensures direct transfer to beneficiaries, reducing leakages. Example: The PAHAL scheme saved ₹50,000 crore by eliminating ghost beneficiaries in LPG subsidies.
2. Use of Technology: Digital platforms and data analytics can improve targeting and monitoring of subsidies. Example: The e-NAM platform helps farmers access better prices, reducing the need for price subsidies.
3. Awareness Campaigns: Educating beneficiaries about subsidy schemes and eligibility criteria can improve uptake. Example: The Kisan Call Centres and Krishi Vigyan Kendras disseminate information about agricultural subsidies.
4. Rationalizing Subsidy Coverage: Limiting subsidies to the genuinely needy can reduce fiscal burden. Example: The 2016 LPG subsidy reform restricted subsidies to households below a certain income threshold.
5. Performance-Based Incentives: Linking subsidies to outcomes, such as increased agricultural productivity, can improve efficiency. Example: The Per Drop More Crop scheme under PMKSY promotes efficient water use in agriculture.
6. Strengthening Local Governance: Empowering local bodies to implement subsidies can ensure better targeting and accountability. Example: The 15th Finance Commission allocated funds to local bodies for improving basic services.

Source : IGNOU: Page Number 27 : PDF Link Ye ek chapter hai : ECONOMIC REFORMS AND Social Justice SOCIAL JUSTICE  PDF Link …..Padh lena

Keywords: Subsidy Reforms, Direct Benefit Transfer (DBT), Fiscal Burden, Leakages, Aadhaar-Linked Subsidies, Targeted Delivery

Extra Info :  The total subsidy spending on the three Fs – food, fertiliser and fuel – has gone up from Rs 2cr to Rs 5 cr between 2019-20 and 2022-23.   Why guaranteeing MSP is essential for farmers and India ? MSP because “minimum” means the lowest possible, “support” means assistance, and “price” refers to the price that is meant to provide minimal support. to prevent farmer suicidesreduce the impact of inflationto conserve waterprotect public healthpreserve national wealth. Indian Express Article: Link