Dash for cash

Government unprepared but goes ahead with direct cash transfer

 
By Jyotika Sood
Last Updated: Thursday 17 September 2015

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THE Centre seems to have not done its homework before announcing the ambitious project of Aadhaar-based Direct Cash Transfer (DCT). Under the project, the government will transfer subsidies or payouts directly to the beneficiary’s bank or post office account. Officials in the government are sceptical if the DCT system can be kicked off in the prescribed time-frames because ground reality differs from what is perceived by politicians.

In November, Prime Minister Manmohan Singh announced the launch of DCT. Under the first phase, pilot projects will be undertaken in 51 districts across 15 states and three Union Territories from January 1, 2013. The system will then be expanded to 18 states from April 1, 2013, and to the rest of the country from April 1, 2014. “The main difficulty I have is with the timelines that have been set,” says Planning Commission member Mihir Shah. “A lot of work remains to be done, especially on issuing Aadhaar numbers, financial inclusion and Internet connectivity. All these cannot be achieved within the specified timelines and without these it is not possible to roll out the direct cash transfer,” Shah adds.

Under the project, every beneficiary must have an Aadhaar number issued by the Unique Identification Authority of India (UIDAI). It is issued after taking an individual’s biometrics: fingerprints and iris scan. Once people receive Aadhaar numbers, they can go and withdraw the money transferred to their accounts through a banking correspondent by authenticating their biometrics on a hand-held device.

But given the pace at which UIDAI is issuing Aadhaar numbers, a major chunk of the beneficiaries are likely to be missed in the first phase of DCT. Since September 29, 2010, when the first Aadhaar number was issued, UIDAI has covered only 18.6 per cent of the country’s population. This means on an average only nine per cent of country’s population receives Aadhaar numbers a year.

An analysis of the UIDAI data and the 2011 census by Down To Earth further shows that in 22 of the 51 districts that will be covered under DCT in the first phase, 50 per cent of the population have not enrolled themselves for Aadhaar numbers. In Rajasthan and Gujarat, enrolment is as low as 13.55 per cent and 5.78 per cent, respectively. Aadhaar enrolment in Hyderabad is 4,989,365, while according to the census, population of the city is just 4,010,238. The question is has the census missed out 900,000 people or is UIDAI goofing up?

The many challenges

Of the 50 Centrally sponsored schemes, the government has shortlisted 34 for direct cash transfers. Majority of these schemes are educational scholarships and fellowships, benefits for pregnant women, housing subsidy for beedi workers and some pension programmes. Sources in the Planning Commission say schemes like the Public Distribution System and Mahatma Gandhi National Rural Employment guarantee Scheme have a vast coverage. Schemes with less number of beneficiaries have been shortlisted under the project so that they can be implemented properly. But in the first phase, the system would be limited to only 29 schemes. The schemes were not identified till the magazine went to print.

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Another challenge has been posed by the Department of Financial Services’ proposal to create “one cluster, one banking correspondent” for all the schemes. As per the proposal, the country would be split into 20 clusters. Each cluster will have one common banking correspondent company. It would be the only conduit through which cash transfers will flow from banks to beneficiaries.

The problem, according to Shah, lies in entrusting such a vital role to just one company. This will inevitably result in monopolistic tendencies. Companies are already putting in incredibly low bids to win these clusters. For an industry that has been saying that a 2 per cent margin is not enough, bids have ranged between 0.86 per cent to even as low as an absurd minus 0.06 per cent, Shah adds.

To ensure that the deadline is met, the prime minister has asked UIDAI to set up a dedicated cell of technical experts to facilitate Aadhaar-enabled direct cash transfers and help individual ministries. He has also asked the concerned departments both in the Centre and states to digitise their database quickly, with the help of the Department of Information and Technology and the National Informatics Centre (NIC).

Speaking to Down To Earth, a senior official from NIC, however, says digitisation of schemes cannot be done in a month. Ministries may have prepared guidelines and roadmaps on how to go ahead but the whole process will take time as everything, for example records of the state and Central governments, need to be digitised and synced. Moreover, connectivity in remote areas and villages is a big challenge which even mobile companies have failed to overcome, he adds.

However, Shah is hopeful. Cash transfers are already taking place where school students are getting scholarships and fellowships. The only change DCT will bring about is that instead of going to various government departments to collect this money, the beneficiary will now have the money directly credited to her/his bank or post office account, he adds.

Related Articles: Will cash transfer check migration?

See Also: Direct Cash Transfer Scheme

 

 

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  • I would like make a few

    I would like make a few points behind the cash transfer programme. I was advocating giving fertilizer subsidy to farmers instead of industry for long. In November 2009, two IIM professors assessed the fertilizer distribution in India under different sectors using government data and suggested that subsidy to fertilizer be given to industry only. This report was submitted to the prime minister. I responded on this to the two professors. In my critique, I said they have not taken in to account what is happening on ground. More than 30% subsidy is going to other activities instead of reaching the farmers and dryland farmer is neglected as well in this. Also, some regions are not receiving fertilizers. So, to reach the real farmers uniformly, I suggested that the subsidy must be given directly to farmers individually or farmers cooperatives. This critique I sent to the prime minister. After this I did not receive any communication from the PM's office. However, in the budget presentation, the finance minister stated that fertilizer, kerosene and gas subsidies will be directly paid to consumers. After this, some MPs from Andhra Pradesh approached prime minister and submitted a memorandum, saying that the subsidy must be given to retailers and not to farmers. Just at that time, Andhra Pradesh chief minister lead a delegation of MPs, asking PM to permit export of 30 lakh tonnes of rice. Then I sent another mail to prime minister, countering these two issues. In my mail I brought to the notice of PM that there is no difference between industry and retailers, as most of these are in the hands of politicians under benami names. So, it is appropriate to give subsidy on fertilizer directly to farmers. In the case of rice export, I brought to PM's notice the fact that CM joined hands with millers and without paying minimum support price as fixed by the Central government collecting to rice as they don't have storage facilities. On this letter, six months later, I received a reply from department of fertilizers, saying that they are formulating how to pay the subsidy to farmers directly. For this, a commiitee was formulated. In the case of rice, deputy agriculture minister visited AP and asked the CM to pay the price by cheque as per MSP fixed. At that time the idea appears to be on three items -- fertilizers, kerosene and gas. As the government has formulated the bill on food security in which BPL is going to be defined may eliminate large part of mis-use of subsidy under PDS.

    Dr S Jeevananda Reddy

    Posted by: Anonymous | 8 years ago | Reply
  • The author has brought out

    The author has brought out the advantages and disadvantages of Direct Cash Transfer (DCT) under Dash for Cash (16-31st Dec. Down to Earth) and congratulations for the same.

    It is the fact that DCT certainly helps to minimize the cost of service delivery system (SDS) which is quite high compared to the amount or benefit reached the people.

    DCT may not completely stop the migration instead it may enhance the migration.

    It may increase the dependency rather than independence.

    The sustainability of the DCT is another challenge and creates uncertainty among the people.

    Assured income sometimes may lead for confinement and further poor development.

    Enhancing the cash resources alone may not help the people to create livelihoods, both quantitatively and qualitatively.

    Social Auditing may help the DCT for better utilization and effectiveness in reaching the targeted people.

    DCT should also ensure for the availability, accessibility and affordability (3As) of the matching inputs for developing livelihoods with better sustainability.

    In spite of the challenges and disadvantages, still DCT can be made effective with the better accountability, participation of the stakeholders at all levels in an transparent environment.

    Posted by: Anonymous | 8 years ago | Reply