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Cash & Carry

The elephant in the room

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WRONG CARD? Aadhaar has little to do with identification of the poor

The biggest hurdle for the DCT programme is the identification of the poor.

The "gamechanger" announcement of the UPA 2 government on Direct Cash Transfers (DCT) for 45 schemes has generated much debate through the week with opinions flying around faster than money can get electronically transferred. At the heart of it, the idea of this proposed DCT is unexceptionable. Existing programmes where government transfers money to poor in the form of scholarships for students from marginalised groups, old age and widow pensions and a variety of other schemes, will now reach them directly through bank accounts by cutting out existing intermediaries. The transfer of money will be done through banking channels including business correspondents, micro ATMs and other channels using the Aadhaar platform as the authenticating mechanism to cut out duplication and fraud. Cash transfer programmes have existed in India for more than five decades now, and the recent announcement of the government does not include any new programmes. But the difference is the consolidation of these programmes on a technological platform and the use of alternative banking channels for transferring this money directly to the accounts of the poor.


In a refreshing change, the Prime Minister has chosen not to rush into an area where angels would fear to tread, and has kept most of the existing "in-kind" transfer of subsidies (mainly fertilisers and food) outside the ambit of the DCT programme. The only "in-kind" transfer that does feature in the list is the LPG subsidy where cash would be directly transferred to the accounts of the entitlement holders so that they can pay the full price to the gas agency for a designated number of cooking gas cylinders every year. However, the clamour for using this channel to transfer food subsidies is already getting louder with a section of economists and technocrats. Even before we examine the claims that are being made out for that it would perhaps be more pertinent to look at the programme as it has been announced and the likely challenges that it will face.


The biggest elephant in the room for the DCT programme is the identification of the poor. Contrary to the popularly held notion that the UID will solve this problem, the reality is that Aadhaar has little to do with the identification of the poor. It will only authenticate an individual's identity. The identification of the poor will be done through the Socio-economic Caste Census (SECC), an exercise that is mapping India's poor, undertaken by the ministry of rural development. The SECC is a year behind schedule by the MoRD's own deadline and six years behind schedule, since it was to be concluded (as a BPL census) by 2006. By all accounts, the entire exercise, predictably is likely to be very contentious and MoRD is all set to make a dog's breakfast of it, as it has of the preceding BPL surveys. Wrong identification of the poor simply means money getting transferred into the accounts of people who should not be getting it. And this is a problem that technology cannot solve.


The issuing of Aadhaar numbers with the ambitious deadlines set by the government is also firmly on the path of failure. While the UIDAI may achieve its target of issuing 400 million Aadhaar numbers, on schedule, what is being conveniently forgotten is that the UIDAI does not have a mandate of going beyond this and the rest of the numbers are to be issued by the National Population Register (NPR). The NPR is way behind schedule is unlikely to be able to rise to the challenge. Even in areas where the UIDAI is issuing the numbers, nothing short of a 100 per cent coverage is likely to have an impact since even a 90 per cent coverage does not necessarily mean that 90 per cent of the entitlement holders are covered.


Bafflingly, consensus still eludes the government on the modality of the bank transfer. The department of financial services persists with a model of giving banks monopoly over large clusters to deliver the business correspondent model while the UIDAI is pushing for a competitionbased model, with micro-ATMs at the core of the banking infrastructure. If this issue is not resolved soon, the pilots in even the first 51 districts are unlikely to succeed.


Good intentions are never an alternative to decisive policy action. In so far as the DCT programme delivering electoral outcomes is concerned, as the great American jazz musician, Duke Ellington, put it, "that question has no future". UPA 2 might just well discover that fiscal neutral proposals like the present proposal on direct cash transfers may well turn out to be vote neutral.

(The author is the Principal Adviser to the Supreme Court Commissioners on the Right to Food. The views expressed are personal)

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