Should the state give food grains and other ration items to the needy people or should the state give them just enough cash to buy these items themselves? That was the ‘cash-vs-PDS’ debate raging for years. It is no longer a matter of debate now. A pilot project has been underway in Chandigarh, Puducherry and urban areas of Dadra and Nagar Haveli, and depending on its outcomes, the cash option – under the direct benefit transfer (DBT) scheme – is likely to become a reality across the country. DBT is already functional for pay various cash benefits. One missing piece in the puzzle – legal backing for the Aadhaar – is also now falling place.

As finance minister Arun Jaitley said in his 2016-17 budget speech, “A social security platform will be developed using Aadhaar to accurately target beneficiaries.” The platform is an advanced version of the direct benefit transfer (DBT) platform. The plan is to create a master database of all Indians, including beneficiaries, through linking Aadhaar, national population register and socio-economic caste census and directly transfer subsidy or benefit in their bank accounts.

However, critics argue that it is only the government which stands to benefit from the cash transfers, as it would help in pruning subsidy (see Jean Dreze’s interview in the following pages) – and it may not be good news for the country’s poor. As inflation fluctuation is a reality, replacing public provisioning of goods and services with cash transfer can further marginalise the poor. There is a fear of “unfair exclusion and unjustified inclusion” in cash transfer system.

In Chandigarh, where subsidised ration has been replaced with cash transfer, Governance Now came across many families who could not buy the same quality and quantity of ration with the money transferred in their bank accounts. There were also beneficiaries under the food security law who are yet to receive any cash subsidy. In Puducherry, many beneficiaries were unaware in which account they have received cash transfer (read ground reports in the subsequent pages).

It will be disastrous if the government chooses to replace public education and health services with cash transfer. The cashless health insurance scheme, Rashtriya Swathya Beema Yojana (RSBY), is one such example where the government nudges citizens to use private services, instead of strengthening public services. Brazil, one of the pioneers in using cash transfer, tripled its public spending as the share of GDP on health and education, while it introduced Bolsa Familia, an antipoverty conditional cash transfer programme, says Jayati Ghosh, a renowned economist. It rather made a precondition for people to ensure better attendance in school and use primary health care to be able to qualify for cash transfer. The Latin American countries didn’t substitute public provisioning of goods and services with cash transfer but rather complemented it, says Ghosh.

In celebrated work ‘Poor Economics’, economists Abhijit Banerjee and Esther Duflo say, “In Mexico, social welfare payments come with free nutritional supplements for the family.” The authors, based on their study of Asian and African countries, argue that there is need to shift the focus from calorie-based food intake – which could be either ensured by cash transfer or giving ration – to nutrition-based food security programme. They don’t say one is preferable over the other.

Then there are concerns over privacy and data protection. According to the justice AP Shah committee, which submitted its report in 2012, a legal framework on privacy is a prerequisite to creating large biometric, digital identity programmes, including Aadhaar and NATGRID. Countries running cash transfer already have some form of legal framework to deal with the right to privacy violations.

Jaitley sees the Aadhaar bill as “a transformative piece of legislation which will benefit the poor and the vulnerable”. Notwithstanding the controversial manner in which it is being passed, let’s keep our fingers crossed.