Hasty Cash Transfer: Appealing or appalling?

Finally the Govt. has failed to meet the deadline of Direct Cash Transfer( DCT) of subsidy in the wake of haphazard and unfinished preparation. They have now postponed it by four days.

The key purpose of DCT is to provide entitlements in cash to the poor via biometric identification under Aadhar. Any rational Govt. would have first assembled the data of beneficiaries before introducing schemes, intrinsically aiming at poor-benefit. But it is staggering that India still doesn't possess any authentic data of poverty when the entire system of social-welfare schemes rests on poverty-estimation. What is more surprising is that Govt. effort of identifying needy via Socio Economic Caste Census (SECC), which was supposed to be completed by 2006 is yet on play and Govt. is moving forward to live with the faulty list of beneficiaries. Hence many deserving needy will remain out of the ambit since beginning.

Govt. put its all energy into making people Aadhar enabled which doesn’t even estimate income data. Govt. would have done better to either associate it with specifying income data or simply expedited the process of SECC before distributing Aadhar in remote villages.

The selection of states and welfare programs also shows the poor insight of Govt. States like UP, Bihar, Orissa, and West Bengal, considered to be densely destitute, are not part of this first trial of DCT. Apart from this, Govt. has chosen mainly scholarship and pension schemes which are less or not at all tainted with leakage. Pilot projects are meant to be testified in challenging situations, if not entirely then at least on smaller scale. It is pertinent to mention that one of the testing trials in Kotkasim (Rajashthan) has comprehensively failed to deliver the desired results of DCT of Kerosene subsidy.  

Only 40% of India's 1.2 billion people have bank accounts, and only 36,000 of India's 600,000 villages even have a bank branch. There were plans to open 73,000 new "ultra small" bank branches of about 100 to 200 square feet apiece and hire one million banking employees in rural areas (according to minutes from a government committee overseeing cash transfers) but when the target seemed unattainable before deadline, there came a wild card entry i.e. Business Correspondents known as BC model. This model seems tricky. Representatives from companies, financial institutions, panchayat and even kirana shoppers etc can become a BC in far-off villages. These BCs will be deployed in villages with a micro-ATM. Villagers wanting to withdraw their entitlement will approach a BC, get his/her fingerprints verified on machine and will be paid by BC. Micro-ATM devices will be operated through wireless connectivity which is by and large intermittent and creaky. In case of any technological failure, beneficiaries might be deprived of their benefits. 

This Friday Union Agriculture Minister and Nationalist Congress Party ( NCP) Supremo Sharad Pawar cautioned the Govt. against hasty implementation of cash transfer schemes. Many Chief Ministers had also opposed the move in the recently held National Development Council (NDC) meeting. The implementation of DCT, without the consent of state governments, is certainly a tough call in the federal setup of the country. No single target pertaining to DCT has been achieved so far. The problem is that there was no visionary agenda for the same and many institutions were roped in without coordination. Govt. must understand that too many systems lead to no systematic system at all. Mr. Chidambaram, DCT is definitely a game changer (directing towards failure) and a pure magic (a black one).

Financial Inclusion : The vital Aadhaar

 With the advancement of technology in all walks of life, it is praiseworthy that Govt. is up to providing digital identity through Aadhaar to the people of country. It climbs a further step by enabling the citizens to use this Aadhaar identity for the purpose of gaining various benefits and services provided by Govt. or private agencies. If you turn your back on the political motive, the intent behind direct cash transfer of subsidies to the beneficiaries seems to be absolutely a commendable step taken by Govt. In theory, this Aadhaar-enabled-service-delivery may put an end to the problem of bogus beneficiaries and a resultant leakage of valuable resources.  Aadhaar can become a launch pad for the final destination of direct cash transfer of subsidies to the needy, provided the challenges of implementation and financial inclusion could be dealt swiftly in mission mode.

The Unique Identification Authority of India (UIDAI) is responsible for providing a 12 digit unique bio metric identification to all Indians.  Poor and underprivileged may also avail social benefits through this identity number via banking services, which most of them are devoid of till date. But providing Aadhaar card to every beneficiary is an uphill task  in the first place. The expedite expansion of the system of Aadhaar-card distribution in far off places is a huge challenge, to begin with. First Aadhaar Number was issued in a remote tribal village of Maharashtra in September, 2009. The Unique Identification Authority have registered more than 24 crore people in the country since two years. So far, 200 million people i.e.about 16% of India’s population have been issued Aadhaar numbers. UIDAI has set the target of providing Aadhaar no. to the 60 cr people in the first phase. It means at least one of three Indians will possess a unique identification (UID) number by next year. It is easier said than done given the procrastinating administrative set up.  

The government is rolling out Aadhaar Enabled Service Delivery initiatives in 51 districts across the country. Aadhaar-enabled applications will be used for making pension payments, MNREGA payments, PDS distribution and scholarship payments, among others. The Govt. is in tearing hurry to start cash transfers though a host of states have a negligible presence on Aadhaar map.  Asymmetric distribution of Aadhaar in the country is a major challenge the mechanism is facing now. A full scale nationwide implementation of Aadhaar is critical to meet the deadlines set by Govt for direct cash transfer of subsidy. Expansion of Aadhaar will now solely depend on the pro-activeness of state governments. It is a humongous task on the part of the Govt. to feasibly encompass all the states in the implementation of its ‘dream project’.

 The not-so-expanded banking system poses another risk to the full scale implementation of direct-cash-transfer mechanism. A close to 60 percent of India’s population is un-banked. Not many people in India yet hold a bank account, while  rural branches network of banks is meager and yet to be computerized fully. It will be tough business call for the banks to go for a massive investment in social banking and financial inclusion amid the pressure on margins and rising of bad debts. Banks are unwilling to bear the cost of opening up branches in remote areas without a proper business preposition. The moot challenge is how to strike a fine balance between banks' profits and social responsibility.  The direct cash transfer of subsidy can never function in the absence of all pervasive banking system.

 Subsidy payments and benefits under different schemes amount to nearly Rs.3 trillion, roughly 3.5% of the gross domestic product, according to government estimates. This can only be contained when we a have a robust identity data of the targeted populace and a widely spread banking network. Aadhaar has solved a major problem of giving an identity to the faceless beneficiary but fact remains that it is still a pilot scheme. A noteworthy reduction in subsidy shall only be possible if the Aadhaar becomes a mission via meticulous planning and quick implementation.