Game Of The Name
What Govt Pays Out
How DCT Will Kick In
Before becoming the chairman of the UIDAI, Nandan Nilekani famously wrote about the need for a national ID system in his book Imagining India. He invoked that immortal statement by Rajiv Gandhi that only 15 paise of every rupee earmarked for the poor actually reaches them. And went on to doff his hat to his son, “In 2007; his (Rajiv’s) son, Rahul, offered his own estimate, saying that now a mere five paise of every rupee spent reaches the poor in some districts.” Well, it’s payback time. One only has to look at the grudging respect the Congress has earned from its political rivals for its Next Big Idea: the plan to ride on Nilekani’s Aadhar card to roll out Direct Cash Transfers (DCT) to the poor in 51 districts—and later nationally. And all within sniffing distance of the fast approaching 2014 polls.
Disturbed by the initial negative reaction that it was seeking to buy votes, the government was quick to replace the ‘cash’ in DCT with the more anodyne ‘benefits’. Incidentally, there was no direct mention of cash (or benefits) transfer in the Congress’s 2009 manifesto— apart from the line that, owing to fiscal responsibility, it would work to ensure that “all subsidies reach only the truly needy and poor sections of our society”. The politics is also probably why Nilekani politely declined Outlook’s request for a meeting, saying, “Thanks, but I’m not giving interviews on this.”
Aadhar is being touted as the “magic formula” to enable the “game-changing” DCT. Clubbing the two serves a key purpose—legitimising the Aadhar card, which has morphed from being a mere identity document to a service-delivery engine in a short while despite criticism from bureaucrats, policy experts, activists, even a few state governments. That Aadhar has top political backing is evident from Union finance minister P. Chidambaram making the announcement on DCT just a few days ago. Only last year he had made a scathing attack on Aadhar’s legitimacy, saying it was not following proper procedure and involved issues of security. Remember, the National Identification Authority Bill is yet to be cleared by Parliament, which is supposed to give Aadhar its powers.
It’s only when the government replaces the growing food, fertiliser and fuel subsidies (see chart) with cash that the “game-changing” idea will face its litmus test. It will not, of course, stop the UPA from going to the polls offering the promise of cash/benefits directly reaching the poor. Supporters of the government’s move also feel that it is time India found an alternative to the age-old public distribution system which is hobbled with leakages and corruption at all levels.
Getting NREGA wages via an Aadhar-enabled ATM in Ranchi
Officials in the PMO say that the Aadhar-enabled payment system would help weed out fake beneficiaries and ghost ration cards. Citing a study by the National Institute of Public Finance and Policy (NIPFP), which holds that integrating Aadhar with welfare schemes is likely to yield a 52 per cent return to the government on that investment, even after all costs are accounted for, the official says, “Surely it makes no sense to spend three rupees to deliver one rupee.” Another key argument in favour of cash transfers is that it empowers the poor with choice.
The government hopes to bridge the gap through “business correspondents” appointed by commercial banks. The banks seem to have taken to the idea because it is more cost-effective than opening a rural branch or maintaining a physical ATM. The correspondents will use hand-held devices to help authenticate the identity of the beneficiary and the credit balance in his bank account. Much of the success of DCT will depend on how this system will work.
Nov 29 Nilekani and Jairam Ramesh at a DCT conference. (Photograph by Sanjay Rawat)
At a broader level, not many share the government’s optimism about cash transfers as a modern way of disbursing subsidies. “Cash transfer is not a silver bullet for dealing with corruption. The identification of who will receive these transfers is still not clear. The government has been spectacularly unsuccessful in identifying the beneficiaries,” says social activist Harsh Mander. The fact that the government has announced the goal without actually defining the route is a cause for concern. Mander, for one, feels that it is erroneous to think of cash transfer as a substitute for provisioning public good—healthcare, education and food—without first putting a system in place.
The danger in not doing that is because the PDS is associated with the system of minimum support price (MSP) for farmers and price stabilisation which the government ensures. With the government procuring high amounts from farmers for PDS, an alternative use for that grain would need to be found. Likewise, the physical infrastructure of the six-decade-old PDS (thousands of stores all over the country and lakhs of employees) would have to be put to some use.
Also, cash transfers will not guarantee that the cash given for a purpose is actually used for it. According to many social activists, experience shows that delivery of food—rather than cash—is more likely to end up as food in children’s stomachs. Too much choice may not be desirable for very poor families—a recent experiment in cash transfers in a Delhi slum met with a mixed reception, with many women (the intended beneficiaries) saying they would prefer to get rations rather than deal with the many demands. Similarly, there have been negative reactions from at least one ‘successful’ pilot project cited by the UPA to claim that it has weeded out fake beneficiaries and reduced consumption, leading to savings.
Crucially, despite all the brouhaha about Aadhar, it is yet to become sanctioned by law, and is by present definition not mandatory. Its coverage is not complete anywhere in the country, even in its own showcase states. There is still confusion over what Aadhar seeks to do. The fact that it wasn’t mandatory and had no services attached to it—like the pan card or the passport had—has discouraged many from getting into it. Nilekani, however, is clear in his thoughts on Aadhar. He had told Outlook last year, “We’re an identity authentication system. We only confirm that X is X. Other people can build applications on top of that.” Sure, conditional cash transfers have worked in other countries. Brazil is a good example. So is Mexico. Cash transfers, therefore, are not necessarily a bad thing. But in a country with so many poor (and poorer infrastructure), it’s not something that can be exclusivised and rushed through without thinking through the enormous consequences.
Establishing (at least in mindspace) a direct link between New Delhi and India’s poor is attractive, particularly when elections are fast approaching. There’s also no denying that the present system of subsidies needs to be majorly improved upon. “This is our opportunity to bring in that change, but this might not be the way,” warns Mahajan. Poll gimmicks, however expedient and catchy, are not always the answer. One has to think of the morning after.
Aadhar Will Help Indians Obtain ‘Financial Identity’
Govindraj Ethiraj,Co-authoring a book on Aadhar
The government’s decision to launch cash-based transfers based on Aadhar has drawn some criticism. Some concerns are valid, but it would help to focus on the collateral benefits of both initiatives which, in some ways, could dwarf the original stated purpose.
Aadhar’s primary aim was to create a unique identity for Indian residents, so that the government could deliver benefits and subsidies directly, potentially saving thousands of crores of taxpayers’ money.
But one of UIDAI’s key efforts has been to expand financial inclusion by giving 250 million enrollees (so far) the option of opening bank accounts with data they submitted during enrolment. This would be ancillary to the process of touching the unbanked millions by opening no-frills accounts.
In the last two years, Indian banks added 70 million such accounts. Using Aadhar, identity for these no-frills banking transactions can now be authenticated in real time from anywhere, anytime—think of a Visa/Mastercard system which allows you access to your bank account from any ATM. Banks are already using Aadhar for this.
Now comes cash transfers. RBI figures show only 40 per cent Indians have bank accounts. New accounts with authentication capability will help millions of Indians own active ‘financial identity’. Both Aadhar and cash transfers can kickstart a host of transaction-led services and therefore enhance the consumer economy. I would focus on those outcomes.
Aadhar Can’t Odentify Poor, Only Eliminate Ghost Entities
Direct cash transfer is a welcome idea as it will reduce dual pricing. But let us not be too euphoric about the scheme as it has many limitations, while bringing a political advantage for the government.
Firstly, the scheme would be used in programmes targeted at the poor where identification would be a huge issue. When you talk about kerosene and fertiliser subsidies but don’t have a methodology to identify the target people, it could become a problem. This cannot be done with Aadhar. It cannot identify the rural poor. It can only eliminate ghost entities. For cash transfer to work, you need to have a good system for identification of the poor.
Also, if cash is given instead of grain, what do you do with the large amount of grains bought from the farmers? If you abolish PDS, you will also have to abolish MSP (minimum support price) as they are two sides of the same coin. In giving cash in lieu of PDS grain, we also need to look at issues like the grain rotting in our godowns and increasing open market prices. Even in healthcare, there could be the issue of doctors and hospitals charging more through tests and services.
Direct cash transfer has worked in a few countries like Belgium and Mexico where the urban population is high. But these countries have a good coverage of bank branches. In India, many rural areas don’t have bank branches. Besides, banks also charge a commission for their services.
The Congress party’s trumpcard of direct cash transfer is predictably going to trip badly (Socialism, Cash Down, Dec 10). The cons clearly outweigh the pros. In a country where a single ID for every person remains a dream and Aadhar is yet to cover more than half the population, DCT is just another election gimmick. Unless the three ‘I’s—identity, infrastructure and implementation—are in place, cash transfer seems good only in theory. Besides, one disturbing question remains: where is the poorest of the poor going to stretch his pocket to pay the non-subsidised price for grain, kerosene or his lpg connection, if he has one.
Kirti Pariwakam, Pune
It seems peculiarly fitting that the UPA, inheritors of Nehru-era socialism, have remained glued to vote-catching devices ever since it won power in 2004. The Sachar Committee was the first such device, to woo minorities. Aadhar is another, a half-heartedly thought-out plan, which languished till now but has been resurrected on the home stretch to 2014. Despite faring badly in the pilot project districts, it’s still being heralded as a flagship scheme. It’s doomed to be another national failure, and it will be too late to make amends. Who will halt such disastrous experiments at the taxpayers’ expense?
Ritu Pandey, Delhi
Your cover story begins disarmingly with Rajiv Gandhi’s “immortal 15 paise statement” but fails to mention that it was the very same Congress regimes, including Rajiv’s own, that allowed the hijack of 85 paise out of every rupee earmarked for the poor! Is Aadhar really the game-changer it's being made out to be? How many of our blighted illiterate millions can actually operate bank accounts? Even if they get cash, won’t liquor and gambling be the likely priorities? Plus, it’s no secret that Janardhan Poojary’s loan melas of yore were usurped by unscrupulous politicians, but had to be repaid by generations of clueless ‘beneficiaries’. Avatars of those human vultures are still around to laugh all the way to the banks where the Aadhar funds will be disbursed.
Vinod Kumar B., Bangalore
Within weeks of the launch of Aadhar cards, there were reports of fake Aadhar cards being confiscated! If the Congress-led government succeeds in this, its next target will be subsidised education in state-funded universities and colleges. All this will further choke the ordinary Indian already reeling under the cap on subsidised lpg cylinders and constant petrol price hikes.
G. Anuplal, Bangalore
Aadhar is a sham. The work has been outsourced to private companies, whose only objective naturally is to issue as many cards as possible, never mind proper verification.
Abhilash Thadhani, Ahmedabad
A large number of Indians—almost half of Indian adults—have never ever had a bank account, much less visited an atm. And we are talking about “direct cash transfer”?
Jean Dreze, Bharat Bhatti and Reetika Khera visited the DCT pilot in Ramnagar in Jharkhand and found just 50 workers enrolled under it. In that too, the bank’s business correspondent complained of software glitches resulting in NREGS workers having to visit him several times for their wages. The problem could, of course, be genuine, or a handy excuse to refuse delivery of money. Besides, a fair price shop owner might charge villagers money for computerised transactions. These are some of the many questions that have to be answered before claiming that DCT will check corruption and improve efficiency.
Shyamal Barua, Calcutta
One can think up any number of benefits that can be delivered if a citizen can be uniquely identified via a central data storage facility. But many an advanced country has abandoned such projects half-way through after finding the cost of issue not worth the benefit it can render. There’s also the tremendous scope of misuse. To expect such an unreasonably costly, hugely inefficient and non-transparently created instrument to efficiently and transparently deliver cash to intended targets in inaccessible regions is hoping against hope. Aapka paisa to kya? Jeb hamari.
Manish Banerjee, Calcutta
28 D, Ramki,
In a democracy, there is no veto power for any one political party.
Majority wins, and though I agree that aadhar is a money-making scheme for software companies, thanks to carelessness of the ruling party, that is a side effect of democracy. To go one step further, I would say that most of the laws passed by the Congress,( in case that escaped your attention ), are draconian and definitely need repealing.
What you may be suggesting is a referundum. Referendums are part of any vibrant democracy, and should be welcomed to India.
However, no party could have a veto power in a functioning democracy as you seem to imply,
More importantly, UK which implemented that project, did not make that biometric passport as a project by one party............
More importantly it did not require to pass a LAW to make passports biometric. It was executive policy of the UKPA.
To add another point here - India has 27 major states. Out of them, just 7 - Maharashtra, Delhi, Haryana, AP, Kerala , Assam and Rajastan are ruled by the CONgress party. All rest are ruled by other parties and except UP, all states are ruled by parties opposed to CONgress politics. Given the federal nature of republic it is imperative that any decision on DCT involves all political parties.India is not a feudal monarchy to have all decision making handed over to SAINT SONIA and PRINCE RAHUL.
Male Unblocked >> Simlpy because the other parties ( and we know your favourite one ) were nt good enough to even win that many.
That cannot be a reasonable justification. As i said, the voter id card was not a project by one political party. The ration card and PDS were not schemes by one party.
Likewise Aadhar and DCT should happen only with approval of all leading political parties.
Remember that India is not a France, we are a federal republic with states being given powers in some areas. Aadhar and DCT cannot bypass our federal system.
25 D Ramki,
'Why should we even allow a project being pushed by a party which won less than 30% of popular votes,..'
Simlpy because the other parties ( and we know your favourite one ) were nt good enough to even win that many.
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