Aadhaar Roundup-2

Aadhaar project has covered more than 33% of the country by enrolling 43 crore citizens and generating aadhaar numbers for 39 crore. Nearly 2 crore people are being enrolled every month. At this rate by July, 2014, Nearly 60 crore people will have aadhaar numbers. The DBT for Scholarships, Pensions and a few other schemes that started in Jan 1^st, 2013 in 43 districts had already transferred 40 crore into beneficiary accounts by March,31^st. At present cash transfers leveraging the aadhaar platform are coexisting with the EFT(Electronic Fund Transfer) of the earlier system. Government claims that no one will be left out from getting benefits for want of an aadhaar card. This is a slow start but is a work well begun.

The DBTL (Direct Benefit Transfer for LPG) was started on 1^st June,2013 in 18 districts after being postponed several times. Cash transfers of nearly 138 crores has happened in about 8 weeks (at a rate of 40 crore in 3 weeks) and is picking up speed. DBTL started in Mysore on 1^st July and in Mandi on 1^st August. There are nearly 72 lakh LPG consumers in these 20 districts. Out of these nearly 65% have linked their aadhaar number with their LPG Gas connection and nearly 40% have seeded their aadhaar number in their Bank accounts. These consumers get 450 rupees in their account when they book a cylinder and in return they are expected to pay market price for the cylinder (850-900) upon delivery. Another 450 rupees gets deposited in the account soon after this for the next cylinder. This continues for about 9 subsidised cylinders above which consumers have to pay market rate for the cylinders.

It is said that cash transfers are happening smoothly in 99.5% of the cases and complaints are minimal. Those cases where transfer has failed the reasons are inactive bank accounts, joint accounts linked with aadhaar number, wrong account number mentioned etc. It is the stated goal of the government not to exclude any body from getting benefits if they wish to. The government will be happy with, aadhaar linked with bank account percentage of 80%, the reason being it does not expect 10% consumers to claim benefits and another 10% consumers might possibly be duplicates.

The finance minister Mr. P. Chidambaram says even if subsidy out go for 1 crore consumers is avoided, at a rate of 9 cylinders per year and subsidy amount of 450 rupees per cylinder the savings will be a staggering 4,500 crore. Other estimates put the savings at nearly 2 billion dollars or 12,000 crores annually. By August 31^st in these 20 DBTL districts subsidy will be stopped for those consumers who have not linked their aadhaar numbers with bank accounts and gas connections. It should be seen if there will be last minute improvement in seeding percentage (Last minute action typical of Indians). It has been mentioned in articles that consumers will get benefits in arrears if they link their aadhaar number with bank account after cutoff date(31^st Aug) but within 6 months.

It has been mentioned in media that DBTL is working because the OMCs which had to do the major implementation are professional organizations. Digitized list of consumers existed since the 2000s. Most of the bookings for cylinders were being done using computers and servers. Besides OMCs have launched transparency portals to help consumers know exactly how many cylinders they have consumed in a year. When DBTL was rolled out these portals came in handy in giving information to consumers about their readiness for DBT. This might not happen in other schemes like MGNREGS, PDS and Fertilizers where corruption and inefficiencies might come in the way of quick implementation of DBT.

Scope of DBT is being expanded and in phase two 73 more districts have been brought under DBT. which makes it a total of 124 districts or about 20% of the entire country.

Raging Debate

Academics, Civil Society and Activists are of divided opinion when it comes to the debate on aadhaar project. Supporters say that this scheme will indeed work and the common man will benefit immensely. Critics are quick to point out the potential pitfalls. According to some the government is making undue haste in rolling out the scheme without proper ground work and planning. They also accuse the government of starting this scheme with an intension of garnering votes (Vote buying scheme). The election commission had stopped the government from rolling out DBT in several districts going to polls.

What is a notable aspect of the scheme is that it seems to be revenue neutral. In fact according to a crude study by Mc. Kinsey, the government will save nearly 140 thousand crore in a five year span once the scheme is completely rolled out. A more detailed estimate done by the NIPFP puts the savings at nearly 25,000 crore annually(Rs. 6000 crore=$1 billion). Assuming the annual cost of running the project to be 4,000 crores the Internal Rate of Return (IRR) is 53% according to the study. This means that the project will break even within the second year itself.

Critics of the project point to lack of financial inclusion, illiteracy and connectivity as hurdles. The argument that they make is infrastructure in the form of bank branches and telephone connectivity don’t exist in rural areas. Rural people are often poor and illiterate. They might not be able to get cash benefits and giving them cash without basic infrastructure will not work. These poor people are the most in need of cash and might withdraw all of the money in their no frills accounts making it uneconomical for the banks to service them. The UIDAI keeps its faith in the system by arguing about the yet to be launched banking correspondent network.

Financial Inclusion the Keyword

Major Banks have launched a joint scheme of financial inclusion where more branches are being opened in rural areas. They are also appointing correspondents (mostly small shop keepers) who would perform basic operations such as cash withdrawal, deposit and money transfer on behalf of the banks using a Micro-ATM. The correspondents are proposed to be paid a commission (nearly 2-3% subject to a ceiling) on a per transaction basis. Experiments have concluded that a banking correspondent model does not work if the commissions are so low. The government is looking at converting the post office network in to a bank called the postal bank. Department of Posts has asked for a funding of 1,900 crore for a project to network all its branches and computerize them with core banking. It has nearly 1.5 lakh branches spanning the length and breadth of the country. It has 23 crore small savings deposit accounts. The department is short of funds and is currently making losses to the tune of 5,000 to 7,000 crore a year.

The president of the world bank, a doctor himself, recently spoke in glowing terms about the prospects of the aadhaar project. He said among the innumerable benefits of the project, it might also be possible to fight communicable diseases like drug resistant TB which is spreading fast. He said people develop MDR TB when they are irregular in taking medicines. If a medical record of a TB patient is available on the cloud it might help in treatment. He also mentioned a scenario where an unconscious person brought into a hospital might be identified by his biometrics. Recently a dead body in Vishakhapatnam was identified using the Aadhaar database, helping in the investigation of the suspected murder.