Blockchain Based Direct Benefit Transfer System For Subsidy Delivery

Abstract

Delivery of subsidies to deserving beneficiaries forms an essential part of government expenditure. In 2018-19 alone, the Government of India spent $60 Bn on welfare subsidies, majorly through the Public Distribution System(PDS). Of this amount, it is estimated that 40% was lost in the form of misuse, corruption and related inefficiencies in the system. Recognising this problem, the government began Direct Benefit Transfers in 2013 for a select few schemes, for instance, LPG subsidy. Using Aadhaar and biometric tokens for validation, the beneficiaries would receive the subsidy as direct cash transfers to their bank accounts. However, in reality, the DBT program has had the same efficiency as the PDS. According to the analysis of the DBT policy, the key drawbacks of this system are lack of auditability, inability to control the use of funds for intended purposes, and over-reliance on the banking infrastructure, which is underdeveloped in the rural areas. In order to plug loopholes in the DBT system, we propose a blockchain-based system. Blockchain consists of cryptographic hash secured distributed ledgers which maintain an immutable log of transactions between all participants of a blockchain network. They have the ability to execute Smart Contracts, which allow for automation of execution of real-world contracts given that certain specified conditions are met. Appropriating the Governments Aadhaar UID, we aim to develop a smart blockchain which automates the disbursement of subsidy which bypasses the need for banks in rural nodes while creating an auditable and transparent ecosystem to curb corruption and financial mismanagement.