Advantages

♤ Market distortions are minimized through direct cash transfers of subsidies. Otherwise dual price markets are created where two sets of prices for the same goods are present.

♤ Leakages, corruption and black marketing can be eliminated by direct transfer of cash. In PDS system where goods are physically moved, lots of diversions take place.

♤ Cash transfer reduces cost and is simpler to administer. Government spends a huge amount of money over administrative apparatus for subsidy disbursement.