Poor homework may endanger direct cash transfer

A brilliant idea which still needs homework, but with eyes on polls, govt is in mood to wait


Prasanna Mohanty | November 27, 2012

Direct cash transfer will change the way our subsidy regime and social welfare programmes are run
Direct cash transfer will change the way our subsidy regime and social welfare programmes are run

There is little to doubt that direct cash transfer (DCT) of subsidies and other social benefits like pension and scholarships to the poor, which the UPA government is planning to roll out from January 1, is a brilliant idea. It will completely change the way our subsidy regime and social welfare programmes are run.

For long, there has a strong demand for putting the money directly in the hands of the poor in view of massive leakages and gold-plating, whereby a substantial chunk of the money went to the wrong people.

Consider this: DCT will mean the government disbursing about Rs 300,000 crore a year and every BPL family will get between Rs 3,000 and Rs 4,000 a month credited into their bank account.

But the moot point is whether the plan will work on ground.

For one, the programme is being launched in a tearing hurry. The government departments have less than five weeks to put a suitable mechanism in place. The focus is not so much on homework but the political gain it may fetch in the 2014 elections.

Just how prepared the government is, is clear from the prime minister’s address to the freshly minted National Committee on Direct Transfers (NCDT) on November 26. He identified two pillars — financial inclusion and Aadhaar — and said if either of the pillars failed, success of the initiative would be jeopardised. What he meant was the success depended on the poor having (a) bank accounts and (b) Aadhaar identity numbers, because both are necessary preconditions to get DCT.

Now, it is well known that most of the poor don’t have bank accounts. MNREGS is a good example. Some states like Tamil Nadu pay wages by cash. Payments are received three to six months late across the country. In fact, Odisha has objected to DCT saying that a significant chunk of BPL families, especially those in remote areas, do not have bank accounts.

Worse, we don’t even know how many BPL families and other beneficiaries have bank accounts in the 51 districts where DCT will start from January 1.
Second, UIDAI responsible for making Aadhaar cards has said only 20 of the targeted 51 districts have got their cards now and hopes to cover the rest by January 1. What happens if it fails? UIDAI was to deliver Aadhaar numbers by 2011. It is already late by two years.

In fact, the PM had identified another problem in his address to NCDT: digitisation of databases of the central government departments and state governments. That is a huge challenge.

But these are not the only problems. The oil ministry has said it will need 11 months to ready the mechanism to transfer subsidy for LPG and kerosene.
What about the other ministries and departments which will be transferring cash directly, like HRD, health, women and child development, labour and employment, minority affairs, social justice and so on? There are no words from them yet.

The PM is right in saying, “Direct cash transfers, which are now becoming possible through the innovative use of technology and the spread of modern banking across the country, open the doors for eliminating waste, cutting down leakages and targeting beneficiaries better”. But will it?

Highly unlikely, it would seem.




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