Government unprepared but goes ahead with direct cash transfer
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.
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
We are a voice to you; you have been a support to us. Together we build journalism that is independent, credible and fearless. You can further help us by making a donation. This will mean a lot for our ability to bring you news, perspectives and analysis from the ground so that we can make change together.
Comments are moderated and will be published only after the site moderator’s approval. Please use a genuine email ID and provide your name. Selected comments may also be used in the ‘Letters’ section of the Down To Earth print edition.