Leakages in benefits intended for the poor can be curtailed by giving them vouchers

30 August, 2012

In many of the Government sponsored benefits schemes for the poor such as distribution of subsidised foodgrain, free elementary education, rural health, and Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS), leakages do take place - preventing the beneficiary from getting his due benefits.

FOR EXAMPLE, according to the 11th five year plan (Table 4.1.8), 54% of the offtake from the stocks of the Food Corporation of India (FCI) never made it to the beneficiaries in the year 2004-05. On top of that, a large volume of FCI grain stored in the open was washed away by rains, devoured by pests or stolen. Similarly, under MGNRES, a portion of the wages do not reach the beneficiary at some places. Rampant teacher abseenteeism in public scools is leading to a similar exit to private schools at some places.

Providing vouchers to the intended beneficiary can help in mitigating leakages. These vouchers will enable the holder to buy the speciied good or service at subsudised price from a public or private provider of his choice. The provider can then exchange the vouchers for cash to the extent of the subsidy from the Government, reported The Times of India.

The key to fostering efficiency under this scheme is to require the public providers to fully recover their costs and compete against private providers. With the help of these vouchers, the holder can buy any specified commodity (foodgrain) from a specified shop or obtain service (enrolment in school or healthcare) from a provider of his choice at subsidised prices.