People oppose the rush for cash

Say linking cash transfers with Aadhaar will cause problems

By Jyotika Sood
Published: Wednesday 26 December 2012

Centre for Advocacy and Research, along with over 200 academicians, activists, scientists, theatre persons and civil liberty groups, has issued a statement opposing the rush to link cash transfers with Aadhaar numbers (read Dash for cash).

The statement states that the signatories support cash transfers for old age pensions, widow pensions, maternity entitlements and scholarships, but have serious reservations about the government’s rush to link these cash transfers to Aadhaar numbers.

“We support appropriate, people-friendly use of modern technology, but linking schemes like Public Distribution Scheme (PDS), MGNREGA and other essential entitlement programmes with Aadhaar will cause huge disruption,” says Reetika Khera, development economists at IIT-Delhi and a signatory. “Think of an old man who is currently getting pension from the local post-office. He will have to run around getting his ‘UID-enabled’ bank account activated and then may find his pension held up because of fingerprints problems, connectivity issues, power failures and truant ‘business correspondents’,” she says.

  • No replacement of food with cash under PDS
  • Immediate enactment of National Food Security Act, including universal PDS
  • Cash transfers should not substitute public services
  • No UID enrolment without a legal framework
  • UID to be voluntary
  • UID should be kept out of PDS, NREGA and other essential entitlement programmes

The statement signatories say they oppose introduction of cash transfers in lieu of food and other commodities supplied through PDS for many reasons. First, subsidised food from PDS is a source of food and economic security for millions of poor families. In 2009-10, implicit transfers from PDS wiped out about one-fifth of the “poverty gap” at the national level, and close to half of it in states like Tamil Nadu and Chhattisgarh. Recent experience shows that it is possible to further revamp and reform PDS without delay.

Second, banking system in rural areas is not yet ready to handle large volumes of small transfers. Banks are often far and overcrowded. The alleged solution, banking correspondents, is fraught with problems. Post-offices could possibly be converted into useful payment agencies, but this will take time. Besides, rural markets are often poorly developed. Dismantling PDS would disrupt the flow of food across the country and put many people at the mercy of local traders and middlemen.

They argue that there are concerns for special groups such as single women, the disabled and the elderly who cannot easily move around to withdraw cash and buy food from distant markets. Moreover, inflation could easily erode the purchasing power of cash transfers. “When the government refuses to index pensions or NREGA wages, how can it be trusted to index cash transfers to the price level?” people say. Even if some indexation does happen, small delays or gaps in price information could cause significant hardship for poor people.

Citing example of the Kotkasim fiasco in Rajasthan’s Alwar district, they say it is a telling example of how the inappropriate cash transfer schemes can have disruptive effects. The experiment was launched with much fanfare and immediately projected as a “stunning success” based on the fact that kerosene subsidy expenditure had declined by 80 per cent. But in fact, the main reason for this decline was the collapse of the entire kerosene distribution system.

An impression has been created that the government is all set to launch UID-enabled cash transfers on mass scale before the 2014 elections. This is misleading and looks like an attempt to make people rush to UID enrolment centres. It also diverts attention from the government’s failure to enact a National Food Security Act. The food security bill, very weak in the first place, has been languishing with a Standing Committee for a whole year. Meanwhile, food stocks are accumulating on an unprecedented scale. The need of the hour is a comprehensive National Food Security Act, not a potentially disruptive rush for UID-driven cash transfers.

Subscribe to Daily Newsletter :
Related Stories

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.