Ministries move to direct e-payment by March

Dear Comrades,

In a move supposed to significantly reduce corruption in government transactions and facilitate direct disbursement of subsidies, the government has developed an e-payment system. By March 2012, all central ministries are to switch to the system, to make payments to both state government and individuals.

Finance minister Pranab Mukherjee will inaugurate the system on Monday, for direct credit of dues from the Government of India into the account of beneficiaries. The transactions will be made through the government’s e-payment portal, using digitally signed electronic advice.

Under the traditional system, paying units in the central government use cheques, cash, demand drafts or, in a few ministries, electronic clearance systems for payments to employees and vendors. In recent years, RTGS (Reral Time Gross Settlement) and NEFT (National Electronic Funds Transfer) facilities provided by the Reserve Bank of India are also being utilised in various ministries through the banking channel.

The new system is expected to bring transparency and expedite direct payments from central paying units on subsidies to consumers of fertiliser, kerosene and cooking gas. This should ensure adoption of other e-services, due to its efficiency and ease-of-use. The paperless transaction is also expected to reduce overall transaction costs and promote ‘green’ banking, the finance ministry said.

The e-payment system eliminates physical cheques and their manual processing, so there is expected to be a plus for checks on corruption. Further, the constraints of manual deposits of cheques by payees into their bank account would also go. Currently, 130,000 agencies receive funds from the Government of India.

Salaries and other payments to other individuals such as suppliers and vendors would be covered under the e-payment facility immediately. Transactions between the Centre and state governments will also be made through the e-payment mode by March 2012. Some parts of pension payments done manually on Friday will also come under the new mode. However, petty payments currently made by issuing cheques to drawing and disbursing officers may continue. Inter-department payments may also take some time to come under e-payment, as would social sector payments.

An official at the Controller General of Accounts, which has developed the e-payment system, said it had been designed to ensure all government departments, including the railways, can benefit. “This will be a major step towards government’s preparedness for direct disbursement of subsidies. It will stop corruption at the cutting-edge level. There will be more transparency… Going forward, we will push defence and railways to get into this. States can also join,” said the official.

The CGA is also looking at providing SMS alerts to beneficiaries once the e-payment has been made.

BS Reporter / New Delhi October 29, 2011, 0:39 IST Business-Standard.Com