What is the game?

A new game changer is onto us. Let us see what is this new game, the Congress’ Cash Transfer, all about. When India’s PM  announced its roll out he said “The funds that are provisioned for direct benefits like pensions, scholarships and health-care benefits must reach the intended beneficiaries without delays and leakages. Apart from these direct benefits, the government also provides an amount of over Rs. 3 lakh crore in subsidies which too must reach the right people.” (news report)

On the face of it, it looks a winner and a great one at that. Who can really object if the benefits of subsidies and other benefits like pensions, scholarship, healthcare benefits reach the intended beneficiaries directly while reducing leakages? No one will.

Is there any game behind the elegance of what just a number, aided by technology, can do?

The Design
Possession of Aadhar card does not tell you anything other than the fact that a person xyz exists and this can be corroborated through biometric identification. The same zyz and can not claim at other times to be someone else, say abc. So, this will take care of the problem of multiple identities (like bogus ration cards). Good.

But the possession of an Aadhar card can’t tell you if the person is a citizen of India or not. If you are living in Pune or Mysore you will say, oh that’s not a real problem. It is a real problem in the border areas or areas easily accessible through our borders -given our porous borders. It is also a real problem in metros like Mumbai and Delhi or Kolkata. You can imagine what all could happen when anyone, really anyone can get an Aadhar number.

Without any effort to enumerate all Indian Citizens as individuals, we are creating another standalone structure of Aadhar, causing not just duplication of efforts (the now in limbo National Population Register), but we also leave it open ended. No one will know if Aadhar coverage is universal (enough) or not.

The next problem is even more relevant for reducing leakages of subsidies. Mere possession of Aadhar card can’t tell you if the person is indeed eligible for the intended benefits. For example it will not tell you if the person is Below the Poverty Line (BPL). One has to assume that the existing ‘mechanisms’ (read -Babus and middlemen including the ruling party’s workers) will need to ‘certify’ this.

There is no clarity about what the real poverty level is. Remember the flak received by the Government for fixing the poverty line as daily consumption of less than Rs 28.65 in urban areas and Rs 22.42 for rural areas. Completion of the Socio Economic Caste Census, 2011 (SECC), which is being conducted under the aegis of the Ministry of Rural Development will help decide the new poverty line through a new comittee, according to Jairam Ramesh.

Let us assume that we all can somehow agree to a new poverty line. How will you decide which Aadhar number qualifies to receive the cash transfer? remember, what is at stake is quite huge according a news report-
“The government will disburse Rs. 3 lakh crore every year, with each BPL (below poverty line) family getting between Rs. 3,000 and Rs. 4,000 a month in a designated bank account.Each family will get its cash transfer on the basis of its Aadhar or National Unique Identification (UIDAI) card.”

Can you imagine the incentives that will be out there to ‘certify’ someone to be eligible’ or ‘ineligible’ to receive his or her Rs 3, 000 to 4,000 per month?

The initial roll out will be for the existing cash based benefits like Pensions, Scholarships, and healthcare benefits. The real game will start later as and when the subsidies in kind (low priced grain, diesel, kerosene etc) will get converted into cash equivalent to be deposited in their bank accounts and all people start buying at the market prices. This raises many knotty issues:

1. How will you determine cash equivalent of subsidy? Will you use fluctuating market price? How much consumption (in Kg or litres ) will you consider in this calculation?
2. What if the market prices increase and people (or those certifying agents) ask for more money when the elections are round the corner. They always are.
3. What if someone says that he needs to consume more diesel because his borewell is deep or his crops need more water?
4. Will this cash per month be increased every year to allow for rising prices? Will not the prices themselves rise in anticipation? (Inflationary expectations as the economists call this)
5. Will not the political parties compete in promising heftier than other increases in the cash per month?
6. Will the existing delivery mechanisms e.g. PDS (the ration shops) be scrapped? Why shouldn’t they be scrapped? Given our penchant for keeping defunct or useless state machinery in tact this is very serious and real question.
7. Many subsidy assistance schemes overlap -will all these schemes be merged into a single poverty assistance scheme? Why not?

The Playing Field
I have already talked about problems in linking an Aadhar number to eligibility under some scheme or other. Aadhar itself is still a long way to go to cover most of the ‘eligible’ population. Aadhar’s promised benefits of quick identification and non duplication are yet to be tested on a massively scaled up level at the huge numbers of points of verification. The IT technozars will no doubt assure us that all is well and will be well. But take a simple test -try reserving a railway ticket through the IRCTC web based system. It will be clear to you -how a great idea flunks when faced with a massive scaling up. And here, we are talking about opening of a huge number of new bank accounts initially and monthly receipt of money by the poor through banks or business correspondents all over the country. What kind of supporting infrastructure will be needed to handle the technical problems?

Read this as well http://buff.ly/UuW0WQ

The second problem is about the banks – To open an account, banks want not just identity but also the prooof of residence. How a street dweller is going to do that? Another chance for the ‘rent seeker’ in our system to gouge the street dweller. It has been already conceded that the banking network in  its current design will never be able to handle disbursal of cash to people living all over the country. What role will  the banking correspondents will play while disbursing cash to people from their bank accounts? What if a poor woman has money in their bank accounts (assuming that she can verify it on her mobile phone) but can’t get it in her hands for buying small quantities of ration for the next meal because the business correspondent wants a cut?

The New Middle Class
When LPG, kerosene, diesel etc. starts selling at market prices the middle class will find it tough, very tough. Will not a section by section of society e.g. unions representing municipal workers, rikshaw drivers start demanding cash transfer to their ‘communities’ for some reason or other? Make no mistake, the new middle class is huge and is very very vocal. No party will be able to resist their demands.

Do we really wish to unleash such forces that demand entitlements, when there are already too many of them, in the name of helping the poor? What should be done to help the poor? This important question has to dealt with separately.

The Game
The real game is to concentrate all powers of sops and doles in the hands of those in power and those who wish to remain in power perpetually. Helping poor is the smokescreen now made enchanting through promises of what technology can do. For any of the above reasons the game might backfire on its creators. That will be there problem.

The subsidy, the inflation, and fiscal deficit will all balloon.

There is going to another problem  for us,  for the society -we will sink further into being a type of people who live by constantly demanding everything and rarely giving anything. It will need generations of change efforts to come out such a mentality.

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2 thoughts on “What is the game?

  1. Read SL Rao’s post in the Financial Express of Dec 25
    http://www.financialexpress.com/news/superficial-versus-deep-reforms/1049762

    To quote from it:
    Direct cash transfers by themselves will do little. The Aadhar project is ambitious and unique. It will take time for the country to be covered.
    There must be foolproof identification of desired beneficiaries. For reducing waste and theft in subsidies and help to the poor, an easily accessible ATM-type bank network must be in place. Mere cash transfers without a supporting banking system and means for identifying target beneficiaries will take us nowhere. Village power-hierarchies of caste and community must not come in the way. Social audits must be by trained people with immediate resultant actions.
    Political parties must immediately agree on these basic reforms

    Like

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