Saturday, January 10, 2015

The benefits of Aadhaar

The (DBT) scheme of the Indian government, said to be the largest of its kind in the world, was technically rolled out across the entire country from January 1. It has been initiated with the transfer of the subsidy for liquefied petroleum gas (LPG), meant for cooking gas to the consumer's designated bank account that is also linked to her number. This is an important part of the government's programme to pass on as many subsidies as possible directly to the beneficiary concerned in order to avoid leakage. There are three legs on which the whole operation stands - the consumer's proof of identity as established through the biometric Aadhaar system, her bank account to which the subsidy will be credited and the beneficiary details of the service in question, in this instance supply of cylinders. So far close to 65 million or 43 per cent of the total number of consumers have registered and till now Rs 624 crore of subsidy has been disbursed through bank accounts. A massive 728 million people (58 per cent of the country's 2013 population) have registered under Aadhaar so far. In the last three months, 103 million have been opened under Jan Dhan Yojana, thus bringing under its ambit 98 per cent of targeted households. By any measure, all this adds up to a highly credible technological achievement for any country, not to speak of a developing one.

The key identification enabler, Aadhaar, was developed by the previous government but became mired in controversy, some of it created by the Bharatiya Janata Party itself, then in opposition. Thefor LPG was also introduced by the previous United Progressive Alliance government, but was held back when initial glitches surfaced. Right now, Aadhaar registration is not compulsory and a sixth of those who have registered for LPG have not furnished Aadhaar details. They have three months to do so. Even if a consumer fails to do that, she will not lose her subsidy for good as it will rest in an escrow account until the paperwork is complete. These important fallbacks have been introduced so that consumers can take their time to understand what they have to do and do it with confidence.

It is to the credit of Prime Minister that he saw the potential of Aadhaar as a key enabler for the DBT scheme and stretched out across bipartisan skirmish lines to revive and adopt it. Once the DBT scheme gets fully going, leakages resulting from the existence of fictitious consumers and impersonation will be virtually abolished. But more will need to be done to meaningfully target subsidies. The important task of identifying the deserving in order to make targeting work has to be a separate exercise and that is likely to prove challenging. Right now an absurdly huge proportion of households in several states has been designated as falling below the poverty line and, hence, entitled to many subsidies. This is a failure of targeting. As only three per cent of Indians pay income tax, determining incomes for the rest to enable effective targeting will be both difficult and controversial.