Aadhar-based cash transfers – problem areas


Direct cash transfers have been advocated as better means of reaching the targeted beneficiaries with less cost and even lesser leakages. The ‘Aadhar’-the Unique Identity Number project of the Government of India is a facilitating link in this exercise. Suddenly the Government seems to have expedited the process of direct transfer of cash in place of numerous subsidies.
As early as January 2013, 51 districts out of a total 659 in the country, will see the roll out of this plan; 18 States will be covered by April 2013 and the remaining 16 States later by April 2014. Hence, in a way, the first roll out is a pilot project, success of which will add to the confidence of the Government.
At least two challenges are identified by the Prime Minister himself in what will be a big ticket reform. One, the completion of the ‘Aadhar’ project in time; just about 50 per cent of the work is completed in the 51 districts identified for direct cash transfer. The remaining 50 per cent is likely to be accomplished by January. Second, whether all the intended beneficiaries have bank accounts. This is a problem area as either the data is not there or it is patchy and often unreliable. As one cartoon aptly showed a beneficiary having an account in the name of ‘neta’- a pointer to new challenges is dispensing cash transfers.
The benefits of this reform are well known. It will reach the beneficiary without middlemen and their associated costs and possibilities of theft, pilferage etc. The Scheme presents the possibility of effecting considerable saving in Government’s welfare spending programmes. Presently, the subsidy bill is a huge 2 per cent of GDP. According to an estimate, at least 0.5 per cent of this can be saved easily using direct cash transfers. For instance, Aadhar-based transfers would be first used in respect of LPG cylinders. It is estimated that there are anywhere between 1 to 2 crores of fake LPG connections. Just removing them will bring in a saving of ` 2,000 to ` 4,000 crores to the exchequer.
Similarly, in respect of food subsidies, the present annual bill is ` 75,000 crores where the leakages are estimated be around 58 per cent! In fact in every subsidy that the Government runs, there will be ample scope for saving. This should reduce the strain on public finances and limit the deficit to a more desirable level.
Reform or no reform, however, the moot question is whether the Government will succeed in trimming its subsidy bill. There is a fear that ‘Aadhar’ linked transfers to bank accounts may make it lot more easier for the political establishment to run huge subsidy bills! One would have thought that loan waivers are bad and things of the past. But no, on the birthday of Mr Mulayam Singh Yadav, the State Government of UP, announced a loan waiver. All those who have obtained loans up to ` 50,000 from cooperative banks and paid up at least 10 per cent will be benefited by this largesse. This is expected to cost the cash strapped state a sum of ` 1,650 crores. Later, the UP Government may dole out unemployment allowance of ` 1,000 per month to every youth of the state in the age group of 25 to 40. All these are a part of the election manifesto of Samajwadi
UPA Government has not even made pretence of curtailing the burgeoning fiscal deficit. Probably, it is time to write a new law or make suitable amendments in existing ones to restrict the borrowings of the Government. Though there are guidelines and norms, they are flouted routinely. Even the Fiscal Responsibility Act has been set aside in recent years. Cash transfers should result in streamlining subsidy administration, not add indiscriminately to the burden of the exchequer. The Government’s plans in this regard are not clear. It should come out with specific and comprehensive details of new dispensation. [NT]