By Dr. Amrit Patel:
The Government from time to time has introduced a plethora of welfare schemes involving, inter alia, provision of subsidy or subsidized goods for the socio-economic upliftment of poor in the country. However, numerous surveys and studies reveal that subsidized goods and welfare benefits have not been reaching to intended beneficiaries. The system of providing subsidies under various schemes of the Government has proved to be inefficient. The Central Government spent Rs.2.16 lakh crore on subsidies during 2011-12 accounting for 2.41% of country’s GDP. The budget for the year 2012-13 proposed disbursal of subsidies amounting to Rs.1.9 lakh crore.
Scheme: The Direct Cash/Benefit Transfer scheme provides for direct transfer of money into the bank accounts of eligible persons for pension, scholarship, payments under the Employment Guarantee Scheme and benefits/subsidies under other Government welfare programs. This can facilitate beneficiaries to use this money to buy goods and services in quantity and of quality from the market at competitive prices. Under the scheme the difference between the market price and subsidized price is directly transferred to the beneficiary in cash in proportion to the quantity uplifted from the market.
The scheme depends upon basic two requirements viz. Aadhaar, the Unique Identification (UID) Number and Bank Account. Aadhaar is a 12-digit individual identification number issued by the Unique Identification Authority of India [UDAI] to serve as proof of identity and address. The cash transfer will be enabled through ‘Aadhaar,’ a numerical biometric identification that is currently being given to all citizens of the country.The bank account is the most important criterion for the scheme.
On 1 January 2013, Government commenced implementing DBT scheme in 20 districts covering seven programs by crediting cash directly to bank account of eligible beneficiaries involving old age pensions, widow pensions, maternity entitlements and educational scholarships for SC/STs, OBCs, and minorities. Under the scheme, money meant for recipients of welfare programs is transferred to bank accounts linked to their UID Numbers. Cash handouts will replace the money the Government currently spends on subsidies on food, fertilizers and fuel, among others, under 42 Government programs and is expected to improve standard of living of 720 million people in the course of time.
Benefits: The scheme aims at minimizing incidence of corruption, eliminating falsification and duplication with regard to payments of subsidies. Incidentally, other benefits include [i] bringing transparency into the subsidy system [ii] significant improvement in the governance of Government programs as benefits would reach the beneficiary without any intermediation and delay [iii] elimination of fraudulent claimants and saving “considerable” amount. [iv] direct cash through bank account would empower poor because they can decide how best to spend the cash to meet with their emergencies for which surveys exhibit they are compelled to borrow from informal money lenders[v] effective implementation of this scheme leaving cash in the hands of people would lead to higher demand for goods, spurring manufacturing and eventually boosting economic growth [vi] impact of cash transfer is robust when the beneficiary is a woman or the household is headed by a woman[vii] create “multiple effects” for good governance without any confrontation with dominant caste and elite groups.[viii] scheme envisages to target BPL families and deposit Rs.3.2 lakh crore per year in the bank accounts of 100 million poor families that will improve financial inclusion and bank’s liquidity position.
Initiatives: Government has directed banks to reach half a million unbanked villages through bank branches, BCs and Common Service Center [CSC]. Banks would add this year 45,000 BCs to already 65,000 at present. CSCs would be ready in terms of equipment, connectivity, biometric device, card reader and printer within three months. Government will incentivize banks by paying a transaction fee and developing a business model to help banks recoup transaction costs. In 43 districts camps are organized to enroll every beneficiary of 34 welfare schemes and 3500 machines are deployed each with a capacity of about 50 enrolments per day and put in place accelerated process of generating Aadhaar for these beneficiaries.
The success of the DBT scheme depends upon Government’s commitment to address fundamental issues viz. [i] appropriate definition of poverty line, identification of intended beneficiaries under individual social welfare programs and accuracy in targeting only eligible beneficiaries including BPL households [ii] effectively  subsidizing the poor for food, fertilizer and fuel once the prices are market determined and are liable to fluctuate [iii] devising appropriate system, method and procedure to instantly transfer the cash subsidy to the poor and enabling them to withdraw hassle-free and [iv] State Government’s endeavor to initiate fundamental reforms to streamline PDS, if food is kept out of the scheme. However, currently there are serious constraints viz. [i] only 222 million people in India have so far enrolled into a biometric identity scheme and most poor families do not have bank accounts [ii] only 40% of country’s population has bank accounts. The current banking network does not have adequate penetration to handle expected number of accounts. Financial inclusion and availability of information technology infrastructure are grossly inadequate to transfer cash. Government expects more than 600 million, or about half of the country’s population, would receive the Aadhaar cards by 2014.
Action Plan: Need is, therefore, to formulate Strategic Action Plan [SAP] for three years [2013-16] indicating month-wise and State/ district/ block-wise targets for issuance of UID Numbers and opening bank account in urban India comprising metropolitan, urban and semi-urban centers which have significant number of branches of public and private sector banks and urban cooperative banks.
Rural Areas:Â [i]Â In rural area existing public and private sector banks have been providing banking facilities in about 90,000 villages with population above 2000 out of 700,000 villages. For these 90,000 villages, immediate need is to formulate SAP indicating village-wise and month-wise targets for issuing UIDs and opening bank account. This task should be completed in 2013. Banks can consider providing banking facilities in few villages around their existing branches particularly in the Service Area which the RBI has allocated to each branch since April 1989 and bank staff is much more familiar and gained field experience while financing IRDP and SGSY [ii] The Union Government in consultation with State Governments can consider involving all viable Primary Agricultural Credit Societies and rural post offices as BCs [iii] Progressively existing banks need to formulate SAP to provide banking facilities in all unbanked villages in five years [iv] Simultaneously, exercise to identify eligible beneficiaries under each of the social welfare programs of the Government should continue throughout the country covering all villages, block and district headquarters and completed in two years.
Awareness campaign: Government can consider announcing in its ensuing budget to celebrate 2013-14 “Direct Benefit Transfer “Year to create awareness among all stakeholders through a systematically designed massive result-oriented campaign. Awareness has to be created to sensitize all stakeholders for issuance of UID Number, opening bank account, identifying eligible beneficiaries under social welfare programs of the Government, crediting benefit in the form of cash in the bank account and facilitating hassle-free withdrawal of the cash. The print,  electronic and other mass communication media along with Government, banks, MFIs and SHGs can spread the details of the scheme among all citizens of the country through holding seminars, discussions, interviews, village meetings, among others. .
Issues: Issues that need to be sorted out expeditiously to speed up implementation of the scheme include, among others, viz. [i] Issue of the collection of biometrics data for Aadhaar and the National Population Register [a comprehensive identity database being maintained by the Ministry of Home Affairs].[ii] Millions of people are being enrolled for UID without any legal safeguards. The UIDAI’s draft bill rejected by the parliamentary standing committee should be expeditiously reconsidered to support UID enrollment with legal framework. The committee had urged the government to “reconsider and review the UID scheme as also the proposals contained in the Bill in all its ramifications and bring forth a fresh legislation before Parliament.” [iii] Problems viz. finger prints, connectivity, power failures, truant BCs etc.[iv] Single women, disabled persons and the elderly/sick persons who cannot easily move around to withdraw their cash [v] Inflation will easily erode the purchasing power of cash transfers accentuating poverty and starvation. DBT must be indexed to inflation, thereby giving no excuse to reduce welfare subsidies.[vi] UIDAI estimated 300 million people of 1.2 billion population have no official identification documents, viz. no electricity bill, voting card, bank account . This prevents them from opening bank accounts [vii] Budget allocation for food and fertilizer subsidies in 2012-13 was 136,000 crore, which is expected to rise in the revised budget-estimates. The Commission for Agriculture Costs and Prices [CACP] has recommended direct cash transfer of food and fertilizer subsidies to beneficiaries could rise to Rs.200,000 crore next year. CACP estimated Government’s savings of Rs.20,000 crore by direct cash transfer of subsidy to farmers.
According to UIDAI, apart from the herculean task of enrolment of eligible beneficiaries, it needs to be ensured that the authentication platform must not fail [it has to be 24×7 instantaneous and real time], operationally the system should not breakdown, no bugs or glitches in the system, to build with every delivery system that uses Aadhaar authentication for service delivery, an exception management system so that Aadhaar authentication failure does not become an excuse for denial of services to the people.