CASH TRANSFERS

Neo-Liberalism out to Cripple State Run Welfare System

Veeraiah Konduri

FROM January 1, 2013 onwards, the country’s poor will witness major changes in the delivery of welfare benefits. The direct cash transfer scheme, dubbed as a ‘game changer,’ is the latest such attempt to detract our attention from the demolition of the public distribution system (PDS) by different means which the government intends to undertake in accordance with the neo-liberal prescriptions. This push for ‘reforming’ the subsidy delivery through cash transfers came on the heels of major reforms measure such as allowing 100 per cent FDI in multi brand retail.With this scheme, government is planning to replace the state run welfare systems by market run systems.

Yet, despite the discussion for over two months, the government has failed to spell out what exactly it intended to achieve from this scheme. On their part, pro-government intellectuals and a section of the media are assiduously rendering their services in this task, by publishing stories about the failure of the public distribution system as well as by trying to put forward how the government has magnanimously been bearing the burden of subsidies so far. They are touting the scheme as a panacea for all the ills the PDS is suffering from. The basic premise that the government wants us to believe is captured in the slogan of the rural development minister, Jairam Ramesh, viz Aap kaa paisa aap ke hath mein. This implies that the intended beneficiaries will have to purchase grains, LPG, fertilisers etc from the open market at market price and then the government, after deducting the fixed subsidy, will reimburse the differential amount into beneficiaries’ accounts directly. Thus, the government wants to protect the market equilibrium by eliminating the dual price mechanism that stood at the core of the subsidy policies in the country. 

STRUCTURE FOR

IMPLEMENTATION

The prime minister has set up the structure for moving on to the electronic cash transfer system, linked to the questionable Aadhaar card scheme. This is a multi-layered structure, with a National Ministerial Committee and a National Executive Committee at the apex level and the Implementation Mission and Committees at the lower levels. The latter will consist of a Technology Committee, Financial Inclusion Committee and Electronic Benefit Transfer Committee. The National Ministerial Committee will look after the coordination between the agencies that are to implement the cash transfer scheme whereas the National Executive Committee is the actual implementing agency, with secretaries of 13 ministries being part of it.

The PMO has also taken upon itself the task of issuing circulars in the name of the direct cash transfer scheme overriding the parent ministries that are so far running the schemes. The PMO is, on a daily basis, inquiring into the infrastructure of the scheme whereas the finance minister, in an attempt to allay fears that were raised in the wake of faulty pilot schemes, said that implementation will not be undertaken unless he is satisfied personally about the preparedness. If we have a glance at the table alongside, we will see how the government has fast tracked the scheme and its operation within a span of three months by simply issuing circulars. On the other hand, a special division has been set up in the Planning Commission, as a nodal agency, under the leadership of a consultant to monitor the scheme, a curious sort of public private partnership in policy making!

Even after two months of discussion, however, the basic issues remain unaddressed. These are about the eligibility criteria and link-up with the Aadhaar card scheme. The government is claiming that with this shift in policy the deserving will get the full benefit in the form of cash. At the same time, a whole lot of circulars issued from the PMO have failed to decide the parameters regarding this scheme. An example is the Annashree Yojana, a purely cash transfer scheme, which the Delhi government has started. When met with criticism, the Delhi government came up with a clarification that this scheme merely covers and caters to the people who are not covered by any government schemes to date. The fixation of limit at Rs 600 per month seems to officially sanctify the understanding of the Arjun Sengupta committee that people are compelled to live at Rs 20 a day in India. But this shows that there are still people in the country who cannot access the welfare benefits! This fact makes a mockery of the government claims of striving to plug the leakages in the PDS. As for deciding the deserving category, the rural development minister says it is not possible to complete the socio-economic census before the end of 2013. One notes that this very census would form the basis for identifying the beneficiaries on the basis of their socio-economic status.

COMPOUNDING

THE CONFUSION

Another argument given is that this scheme would eliminate the intermediaries in the delivery of welfare benefits. But while in the existing PDS, except the bureaucracy attached to various departments, 2.40 lakh dealers are the only intermediaries, in the cash transfer scheme there will be an overlapping of administrative structures as mentioned above and also the financial institutions. In this way the new scheme would oust 2.40 lakhs PDS dealers from employment while bringing in lakhs of other financial and bureaucratic intermediaries.

There is also no clarity in terms of the operationalisation of the scheme. The rural development minister, in a rejoinder to newspapers, informed that the subsidy amount would be deposited in advance to facilitate the consumer to purchase from the market. But the pictorial presentation made by Unique Identification Development Authority of India (UIDAI) to the National Committee informs that the said subsidy amount would be deposited after the purchase and after following certain procedure. The finance ministry has its own version. The latest entry in the controversy is the difference between the finance ministry and rural development ministry on dividing the country into 20 clusters for the purpose of appointing business correspondents. Thus, with several different versions, the government is not clarifying the doubts and fears but further compounding the confusion.

Finally, the press conference by the finance minister on December 31, 2012, indicates about a much scaled down implementation of the scheme. Instead of 43 districts, as originally conceived, now the cash transfers will be implemented in only 20 districts from January 1, 2013, and it will be scaled up to another 11 districts from February 1 and to 12 more from March 1. Also, the number of schemes that are to be brought under the new dispensation has also been scaled down to seven schemes and beneficiaries to mere two lakh from 20 districts. This forced scaling down clearly indicated how the government wished to force the rollout. Finally, coming to terms with the ground level problems, the Planning Commission gave authority to district collector to decide from when the scheme to rollout. Chidambaram himself told the press that there is no deadline for inclusion of key subsidy components – PDS, LPG and fertiliser – into the scheme, leaving the states into further compounded confusion.

OUT TO ELIMINATE

WELFARE MECHANISMS

So far, neither the government nor the UIDAI are explicit about the intentions of such forceful imposition of the scheme. To suit the slogan Aap ke paisa Aap ke hath mein, the government’s narration is being dished out through media in multiple versions, by many --- starting from Dr Manmohan Singh to the Congress general secretary Rahul Gandhi. The Planning Commission even hired so called experts from the NIPFP to put out a report supporting the deployment of UIDAI for this purpose. Linking up every thing to Aadhaar card appears an attempt to give an “Aadhaar to an Aadhaar,” as a columnist wrote.

There are two different sets of analysis in the pink press and these end up with different conclusions. The Planning Commission alleges that only 52 per cent of the money in benefits is reaching the poor and the rest is going waste in the transit or as the operational costs. Graphic analysis is being put out about how much the government can save through this direct cash transfer scheme. According to a report put out by the Mumbai based stock broking firm, Anand Rathi Financial Services, in the last week of November 2012, the government loses around Rs 75,000 crore annually due to leakages. Similar stuff has been dished out in the print and electronic media over the last two months. This analysis asks us to believe that the introduction of direct cash transfer scheme is meant to strengthen the delivery of welfare benefits, particularly making the distribution of kerosene, gas and grain leakage proof.

But the twelfth five year plan document is unambiguous when it states, “Major subsidies and welfare related beneficiary payments are to be shifted to a direct cash transfer by the end of the twelfth plan, using the Aadhaar platform with linked bank accounts.”

Thus the ultimate goal of the direct cash transfer scheme is nothing but elimination of the welfare mechanism.

The document further states, “Subsidy rationalisation, including direct transfer of cash subsidy to the poor, is a priority policy objective of the government and some initiatives are under consideration..... The subsidy regime needs to be urgently reformed to keep the total subsidy within the ceiling of 1.5 per cent of GDP in 2016-17.” This is the untold narrative behind the forceful foisting of such untested mechanism.

DUBIOUS CLAIM OF

LOOPHOLES PLUGGING

To establish that the scheme is designed out of a consultative process and its expansion is based on the lessons from pilot projects, the government appointed several committees to justify its policy shift. At the same time it is refusing to heed the sane advice from across the table. In the National Development Council meeting itself, many states called for caution on the scheme and the opposition lead states called for speedy passage of the food security Bill. A number of present and previous members of the National Advisory Council raised alarm over the scheme. Recently 208 distinguished persons petitioned the government expressing their reservations about the scheme as a whole as well as about the way it is designed for implementation. Despite the mind boggling revelations from the pilot projects, such as Kotkasim block in Rajasthan and Gollaprolu in Andhra Pradesh, the government has so far refused to read the writing on the wall. Instead of taking care of the inbuilt failures in the proposed scheme, the Planning Commission as well as the state governments are praising the pilot projects as if they would play a key role in plugging the leakages. This is evident from the arguments such as “80 per cent reduction of sales in kerosene in Kotkasim block” and “30 per cent leakages plugged in Golloprolu block.” But the fact is otherwise. People were forced to pay the market price in advance and then wait for the subsidy remittances into their bank accounts for more than six months. Failing to receive the subsidy amount, which they had already spent, they were forced to stop purchasing from the PDS dealers. Yet this very fact is being construed as success in plugging the leakages!

Not only that. The UIDAI is being promoted as an effective tool in eliminating the fake beneficiaries. But the same UIDAI handed over 30 per cent additional Aadhaar cards above the eligible population in Hyderabad district! Similar distributions of excess cards were also recorded in Himachal Pradesh. The union finance minister affirmatively announced in Kotkasim that all the 51 districts that were selected for this scheme have 80 per cent Aadhaar coverage whereas the table given alongside contradicts the statement. Moreover, as per the RBI statistics, only two lakh villages out of the more than five lakh have been brought under the banking network.

AS for the poor population, about 99 per cent of rural BPL families are beneficiaries of one or another welfare scheme. Moreover, out of PDS beneficiaries, nearly 85 per cent are dalits and adivasis. So in this mindless rush for making the Aadhaar enabled bank accounts as delivery channels, the government is out to exclude a majority of the deserving population. About the logistical problems, it is good to say as little as possible. With this scheme, a person who is sourcing rations from a ration shop within one’s village, would now be forced to travel at least a minimum of three km to avail of a bank or ATM facility so as to get the benefits, which means the loss of a day’s work. But we also know that with power shortages, one cannot get one’s account checked in one day, one would be suffering in fact the loss of several days of work. Thus the government’s hurriedly and ill conceived scheme, keeping votes in mind, is out to exclude the deserved beneficiaries, ending up in further loss of credibility of the UPA government.

Population Covered by Aadhaar Cards under the Pilot Project Districts for Direct Cash Transfer Scheme