People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 01

January 06, 2013




Cash Transfers: Govt Dips Hands into People’s Pockets


WITH much fanfare, the central government kicked off its pet project of Direct Benefits Transfer scheme on the new year’s day.  The earlier announcement made by the finance minister from the office of the Congress party at Delhi came in the line of fire of the Election Commission as the announcement came during the Gujarat assembly elections. Also, smarting under charges that this announcement initially called the Direct Cash Transfer scheme under the slogan “Aap ka paisa, aap ke haath” was appearing as a bribe to the people, keeping the 2014 general elections in mind, the government seems to have changed the title of the scheme. Even this high profile launch has scaled down from the initial 43 selected districts to 20 and will cover only a select 26 central schemes like widow pensions, educational scholarships for SC/ST, OBC, minorities etc, etc.  Food, fertilisers and kerosene are being kept out of the coverage for the moment. The scheme is slated to be extended to cover all governmental subsidies gradually. 


While we shall discuss the inherent weaknesses and limitations and its inability to reach out to the needy later, it should be underlined that the legality of this scheme is yet to be procured through a law enacted by parliament. The legislation “The National Identification Authority of India Bill 2010,” whose objective is stated “to provide for the establishment of the National Identification Authority of India for the purpose of issuing identification numbers to individuals residing in India and to certain other classes of individuals and manner of authentication of such individuals to facilitate access to benefits and services to such individuals to which they are entitled and for matters connected therewith or incidental thereto” is pending before the parliament. This bill was introduced in the Rajya Sabha on December 3, 2010 and referred to the Parliamentary Standing Committee on Finance for its examination. This Standing Committee presented its report to both the houses of parliament on December 13, 2011. 


The Parliamentary Standing Committee concluded its examination by stating, “In view of the afore-mentioned concerns and apprehensions about the UID scheme, particularly considering the contradictions and ambiguities within the government on its implementation as well as implications, the committee categorically convey their unacceptability of the National Identification Authority of India Bill 2010 in its present form. The data already collected by the UIDAI may be transferred to the National Population Register (NPR), if the government so chooses.  The committee would, thus, urge the government to reconsider and review the UID scheme as also the proposals contained in the bill in all its ramifications and bring forth a fresh legislation before parliament.” 


The government has not so far given its opinion on the Standing Committee’s report and has not either abandoned this bill with the a to bringing about a fresh bill or has not come with an amended bill before the parliament. The current launch of the scheme is based on the clearance of the Ministry of Law and Justice for issuing Aadhaar numbers, pending passage of the bill by parliament on the ground that powers of the executive are co-extensive with the legislative power of the government and that the government is not debarred from exercising its executive power in areas which are not regulated by legislation. The Parliamentary Standing Committee completely disagrees with such an understanding and states, “The committee are constrained to point out that in the instant case, since the law making is underway with the bill being pending, any executive action is as unethical and violative of parliament’s prerogatives as promulgation of an ordinance while one of the houses of parliament being in session.”


Apart from this issue of legality, the inherent weaknesses of such a system in India have been widely discussed. The 4G Identity Solutions contracted by the UIDAI for supply of biometric devises notes that, “It is estimated that approximately five per cent of any population has unreadable fingerprints either due to scars or ageing or illegible prints.” Our experiences with the MGNREGA has already shown that the reliability and success rate of fingerprint recognition, particularly for those doing manual work, is very low. 


Secondly, the system is based on reliable computer connectivity nationwide. India has not yet arrived at this stage. In an August 2012 speech, even the RBI governor D Subbarao referred to the Aadhaar-based biometric authentication in online transactions and noted that “the robustness of this technology is as yet unproven.”


Thirdly, cash transfers are to be done directly into the bank accounts of the beneficiaries. In India, today there are close to 32,000 bank branches in rural areas, i.e. less than 20 per cent of the over six lakh villages in the country. As many as 26,000 rural banks have been shut down since 1992, i.e. since the neo-liberal reforms began.


Fourthly, this non-availability of banks is sought to be made up by providing ‘banking correspondents’ who will take banking services to the villages. This Aadhaar scheme is being introduced in order to stop the leakages and corruption to ensure the transfer of subsidy benefits to the people. Instead, an additional category is being created whose proclivity for corruption and higher degree for facilitating on of leakages is already in evidence in other areas. 


Fifthly, Aadhaar is an identification programme. But the benefits of subsidies are based on eligibility and not on identity. In regard to many central schemes, including the public distribution system, the numbers of eligible persons as estimated by the Planning Commission has invariably differed, on occasions vastly from the estimations made by the respective state governments. Exclusion, therefore, is not due to lack of identity but due to the arbitrary definitions such as of poverty etc.


The cash transfer schemes in countries like Brazil and Mexico are often flaunted by the government as success stories. But it must be underlined that in these countries, cash transfers had not replaced the existing subsidies or schemes. They were an additional benefit.  In India, the first inkling of replacing the existing schemes through such cash transfers came as early as in the 2011 budget.


The basic philosophy behind this scheme is that over a period of time, the government will dismantle all its obligations in the social sector. Cash transfers will automatically and continuously reduce the government’s subsidy bill. This is so because as prices rise, the quantities available to people get reduced in proportion to the cash transferred. In its desire to keep the fiscal deficit as low as possible, the UPA-2 government is introducing this scheme is an effective and efficient way of reducing subsidies. Further, in this era of neo-liberalisation, the privatisation of all welfare schemes and earlier governmental obligations in areas such as education and health is to be legalised for private profit maximisation. This direct cash/benefits transfer scheme is, thus, another opening for merciless primitive accumulation of capital at the expense of the vast majority of our people.


(January 2, 2013)