Direct Cash Transfer Scheme India

ITM, Vashi

The Direct Cash Transfer Scheme

“Aapka paisa aapke haath"

Assignment of Managerial Economics

Ashok Hegde, Arun Khedwal, Rutuja Dighe & Sanjeev Shrivastava

8/25/2013

The government aims to transfer Rs 4.0 trillion (one trillion is 100,000 crore) a year

to beneficiaries of its subsidy schemes and welfare programmes. The new scheme

aims to plug leakages in the current subsidy regime and will cover more than half of

India's population, making it the world's largest cash transfer programme.

The Direct Cash Transfer Scheme “Aapka paisa aapke haath"

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Contents

Sr. No. Index Page No.

1. About the Scheme 2

2. Executive Summary 3

3. Introduction 4

4. International best practices 5

5. Evolution in India 6

6. What is direct cash transfer scheme? 7

7. What is Aadhaar? 8

8. Benefits, Application & Risk model of

Aadhaar

9-12

9. India Implementation plan 13-16

10. India: Statistics 17-18

11. What are the challenges? 19-22

12. SWOT Analysis 23

13. Report Card 24-26

14. Recommendations 27

15. Conclusion 28

16. References 29


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About the Scheme

To meet the socio-developmental objectives of poverty elimination and inclusive

growth, a number of Government sponsored programs and schemes have been

introduced. However, efficiency and effectiveness have not been achieved by any of

the programs and schemes optimally. Rampant leakages and corruption have made

many schemes dysfunctional. Direct cash transfer scheme has been aimed to

mitigate these malaises. Direct cash transfer scheme aims to reduce leakages, cut

down corruption, eliminate middlemen, target beneficiaries better and speed up

transfer of benefits to eligible individuals. The broad thrust and evolution of direct

cash transfers along with its operation model in India. Also included is a critical

evaluation of the problems, impact, readiness of the scheme in India followed by

important inferences and suggestions. This programme is inspired by Bolsa Familia

plan of Brazil reveals the key ingredients of a successful cash transfer scheme.

Figure: 1.1 Direct Cash Transfer Scheme, India


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Executive Summary

Money

Transfer

BPL (below poverty line) families would get ₹ 30,000 to

₹ 40,000 per year. APL (above poverty line) will get the Cooking

gas subsidy.

In all ₹ 4,00,000 Crore will be distributed in a year

How

When

Why

Challenges

Families with Aadhar card will get money directly in their bank

a/c’s

New bank a/c’s will be opened; Expansion of banks in rural area.

In 51 districts the scheme was launched from January 2013 with a

target to cover the entire nation by April 2014.

To check the leakages from the system & eliminate middle man from the system.

Ahead of 2014 elections, it is seen as big political thrust

Only 400 million Aadhaars issued till date, which leaves 800 million numbers to be issued before April 2014 which seems to be a tall task.

About 188,000 villages had banking connectivity in June 2012

whereas India has 700,000 villages


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Introduction

The Government's Economic Survey for 2010-11 proposed a scheme of cash

transfers, which was followed by an announcement by the finance minister to replace

subsidies on goods with cash transfers. The announcement comes as a huge relief

for all who believe it will solve all problems of poor delivery, mismanagement, and

corruption by government agencies

In a recent study by the Planning Commission, it is ascertained that the Public

Distribution System (PDS) is so ineffective that 58% of the subsidized grains do not

reach the targeted group and almost a third of it is trajected off the supply chain.

According to the Finance Ministry, the inefficiencies of the PDS cause the

government to spend ₹3.65 for transferring ₹1 to the poor. To generate budget

savings and reduce corruption, the Government of India launched the Direct Benefit

Transfer (DBT) scheme on January 1st, 2013. The DBT program aims that

entitlements and benefits are transferred directly to the beneficiaries with the help of

biometric Aadhaar-linked bank account. The programme covers schemes like

education, scholarship for the Scheduled Castes and Scheduled Tribes and pension

to the widows. Food, fertilisers, and fuel have been kept out of its purview at this

time. The DBT scheme aims at cutting a subsidy bill of ₹1,64,000 crores apart from

other benefits like better delivery, accurate targeting, broader choice, reducing

delays and corruption.

“Aap ka paisa, aapke haath” (your money in your hands) is the slogan coined by

UPA II to promote the “Direct Cash Transfer” scheme which would be rolled out in

phases, initially covering 43 districts (out of 51 announced earlier) from 1 January

2013 and then entire country (640 districts) by end 2013.


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International best practices

Cash Transfer schemes originated in middle-income Latin American countries that

had good infrastructure and supply systems. They were positioned as formal,

publicly provided safety net programmes that essentially supplied cash to the needy

and helped them tide over the period of economic crisis. The earliest of such

programmes, Progresa, was initiated in 1997 in Mexico with a new approach

integrating interventions in health, education and nutrition. It was based on the

understanding that these important dimensions were direct correlates of human

welfare. In Brazil the first CCT programme was started in 1996 with a focus on child

labour. While some more programmes based on the CCT philosophy were

introduced to address specific areas, these were integrated in 2004 into the now

well-known programme — Bolsa Familia. Other countries that initiated CCT

programmes include Chile, Colombia, Ecuador, Jamaica, South Africa and Turkey.

In Asia, Bangladesh had a Female Stipend Programme as early as 1982 followed by

a Food for Education Programme in 1993. Food grants were later converted to cash

grants in 2002. Indonesia launched a pilot CCT programme called Programme

Keluarga Harapan (PKH) in 2007. Its beneficiaries are very poor households that

have pregnant women and/or zero to 15-years-old children. The PKH requires them

to access education and health services to be eligible for the cash transfer

Several countries including Jamaica, Philippines, Turkey, Chile, Mexico, Indonesia,

South Africa, Morocco and United States have adopted this system in the form of

Conditional Cash Transfer (CCT) programs. Under such Programs, direct cash is

provided to the poor families on condition that it’s used for verifiable investments in

human capital, such as regular school attendance or used in attaining basic nutrition

and health care.

The largest and the most successful conditional cash transfer program is the Bolsa

Família Program (BFP) in Brazil that covered close to 100 percent of Brazil's poor in

2007. Under the programme, the government transfers cash straight to a family

subject to conditions such as school attendance, nutritional monitoring, pre-natal and

post-natal tests. The entire system is managed through efficient targeting,

disbursement and regular monitoring of the disbursed funds.


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Evolution in India

The government in order to leverage technology solutions and in particular the

Aadhaar i.e. the Unique Identification (UID) programme for this purpose, constituted

a task force on “Direct Transfer of Subsidies on Kerosene, LPG & Fertilizer” headed

by Nandan Nilekani (Chairperson of UID Authority). The task force proposed the

Solution Architecture (Core Subsidy Management System (CSMS)) to achieve a fully

electronic back-office process for direct transfer of subsidy. The system would

automate all business processes related to direct subsidy transfer and can be

customized according to the business rules. At the very core of the system would be:

Aadhaar Integration, ERP Integration and Integration with nodal bank and payments

gateway.

The money will be directly transferred into bank accounts of beneficiaries. LPG and

kerosene subsidies, pension payments, scholarships and employment guarantee

scheme payments as well as benefits under other government welfare programmes

will be made directly to beneficiaries. The money can then be used to buy services

from the market. For eg- if subsidy on LPG or kerosene is abolished and the

government still wants to give the subsidy to the poor, the subsidy portion will be

transferred as cash into the banks of the intended beneficiaries.

For those who don’t have access to bank branches, they rely on ‘Banking

Correspondents ‘or BC.

It is a poverty reduction measure in which government subsidies and other benefits

are given directly to the poor in cash rather than in the form of subsidies.


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What is direct cash transfer scheme?

As the name suggests, direct cash transfer is the direct transfer of government

subsidies and other benefits to the entitled people usually provided by the

government. In India, the UPA government is going to introduce the scheme to reach

out to poor people directly in order to plug leakages and cut delays in transfer of

subsidies to the poor. The areas that would be covered by the program include

scholarships, pensions and unemployment allowances and later MNREGA and

Public Distribution Schemes. It is assumed that it will help to bypass corrupt

middlemen, would help in cutting down wastage and duplication. It is fundamentally

being established to ease the burden of subsidies and letting the genuine

beneficiaries avail the advantage.

It will help the government reach out to identified beneficiaries and can plug

leakages. Currently, ration shop owners divert subsidised PDS grains or kerosene to

open market and make fast buck. Such Leakages could stop. The scheme will also

enhance efficiency of welfare schemes.

Figure: 6.0 Aadhaar based Direct Cash Transfer Scheme


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What is Aadhaar?

Aadhaar card, consisting a12 digit number issued for every individual, including

infants. Each individual of a family will have separate Aadhaar UID number. While

enrollment it verifies all the documents pertaining to an individual and collects

biometric information - photograph, ten fingerprints and iris through scanning. The

Unique Identification Authority of India (UIDAI) will issue for all residents in India (on

a voluntary basis).

Figure: 7.0 UIDAI (Aadhaar UIDAI new logo)

Figure: 7.1 Aadhaars Prototype


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Benefits of Aadhaar

Easily verifiable in an online cost effective way.

It is unique and robust enough to eliminate the large number of duplicate and fake

identities in government and private databases.

Aadhaar's guarantee of uniqueness and centralized, online identity verification would

be the basis for building these multiple services and applications, and facilitating

greater connectivity to markets.

It would give any resident the ability to access these services and resources,

anytime, anywhere in the country.

Aadhaar card can be used for opening Bank account, Gas connection, Ration card,

Phone connection, PAN card, Passport.

It would also be a foundation for the effective enforcement of individual rights.

Problems in Banking Sector

Despite emerging technologies in banking sector, rural people didn’t have access to

bank services, where 40% of the rural residents did not have bank accounts. As the

poor will transact in lower amounts banks will not find them attractive, as their

transaction costs are high.

Aadhaar authentication in banking

The strong authentication that UIDAI will vastly reduce the documentation that the

poor are required to produce for a bank account, and significantly bring down Know

Your Customer (KYC) costs for banks. So if every rural resident has an Aadhaar

card then the banks can help him or her opening an account with minimum costs

than earlier.

UID and its applications

Aadhaar card at present is issued on a voluntary basis. If it made mandatory it can

be used for various applications in different fields.

Government benefits

Government can transfer the benefit amount directly to the bank account of the

beneficiaries to which their Aadhaar card is linked. In this way we can avoid


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middlemen eating away the government fund. For the rural people if the bank

branches are not there in their village we can provide them the microATM facility

where he need to verify his identity by making a thumb impression on the microATM.

Then the person carrying the microATM will pay the benefit amount and the bank will

deduct this amount from the beneficiary’s account.

Figure: 8.0 Direct Fund Transfer Scheme Flow diagram

Voting

Using Aadhaar card as Voter’s ID and implementing a technology at election counter

where voter can either type his Aadhaar number or swipe his card, we can eliminate

duplicates thereby reducing rigging in elections.

Criminal acts

In a huge country like India it is always difficult to capture culprits. if any cc camera

fortunately records video of culprit then by using that photo we can easily find out

through the database of UIDIA. Also in some criminal acts if we get the fingerprints

of the criminal, we can try to match them with the database and easily catch the

culprit.

Corruption

As Aadhaar card number is linked to a bank account, instead of ATM’s we can use

Aadhaar card to withdraw cash, pay bills, cash transfer etc. Corruption, a major issue

in India can be solved by this approach as we use the card for every transaction that

we make, so it is easy to find the persons who transact in large amounts or who

transact or spend more than their income. By this, illegal transactions can be

controlled and corruption can be easily controlled.


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Perfect authentication

Aadhaar UID uses biometric scanning to ensure the authentic identity of a person,

whereas a Voters ID, driving license, even a passport can be forged.

LPG Distribution

LPG for Domestic Cooking is heavily subsidized. So people are using fake

connections and misusing the benefits. If Aadhaar card is integrated with the

customer database of LPG we can eliminate illegal diversion of cylinders.

Mobile connections

Mobile connections are widespread and these connections can be used for anti-

national activities. If we authenticate all the mobile connections of a person by linking

them to his Aadhaar number we can have a control on the fake connections.

E-commerce

Due to cash on delivery payment system offered by various e-commerce players

there is a risk of a fake customer order or a customer denying that he didn’t order it.

To avoid this we can authenticate the customer by asking his Aadhaar card number

and the mobile number, which is linked to the Aadhaar.

Figure: 8.1 Aadhaar Card: One card for all

One card for all

If the Aadhaar card consists of all the information including address, photo, PAN

card number, license details, Voter ID, ration card we can remove all the cards and

use only Aadhaar card for all purposes thereby reduce large amount of paper. Link


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all vehicle registrations to Aadhaar card, all PAN card details to Aadhaar card. So

Aadhaar card will be the only card providing Unique Identification.

Actions to be taken

To reap benefits from all this sectors, we need to make UID mandatory to all the

residents of India. So that in 20 years down the line every person in the country will

have UID cards.

As the population in India is huge it is difficult to implement and authenticate each

time in every sector when a person want to receive any benefit. It will require

massive amount of supercomputer, processing power, bandwidth and IT

infrastructure at local, district, state and central level. This needs more budgets to

implement. There are also concerns that personal data will be revealed if back

search is done and possible security threat exists as bank accounts are linked to

Aadhaar card.

Figure: 8.2 Risk Model of Aadhar

So when we consider the risk model we see that, as it requires huge technology and

expertise the ability to execute is less but if we implement it we have a great

opportunity for economic growth so we might face an implementation risk. But if a

proper budget is allocated and the necessary technology is made available in every

sector it moves to the sustainability quadrant and thereby we accomplish sustainable

economic growth.


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India Implementation Plan

Basic Idea

The money is directly transferred into bank accounts of beneficiaries. LPG and

kerosene subsidies, pension payments, scholarships and employment guarantee

scheme payments as well as benefits under other government welfare programmes

will be made directly to beneficiaries. The money can then be used to buy services

from the market. For eg- if subsidy on LPG or kerosene is abolished and the

government still wants to give the subsidy to the poor, the subsidy portion will be

transferred as cash into the banks of the intended beneficiaries.

Figure 9.0: The figure shows the old Subsidies & Direct cash transfer Flow

The twin pillars for the success of the system of Direct Cash Transfers are the

Aaadhaar Platform and Financial Inclusion. If either of these pillars is weak, it would

endanger the success of the initiative. For the initiative to succeed, the Finance

Ministry and the Unique Identification Authority need to work in close coordination to

achieve a collective goal.


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The immediate critical success factors are given below:-

The government’s efficiency in dealing with the fundamental issues like the basis of

targeting, definition of poverty line & identification of intended beneficiaries.

Effectively subsidizing the poor for fertilizer or kerosene once the prices are market

determined and are liable to fluctuate. Devising a methodology to transfer the cash

subsidy to the poor. State government’s endeavor in taking up fundamental reforms

required in Public Distribution System (PDS)

Phase-I Phase-II

Direct transfer of subsidy through state governments/UT Administration. States purchase commodity from manufacturers at market price Central government transfers the differential subsidy directly to the state govts./UT. Subsidy amount is proportional to commodity uplifted from the retail points in a state/UT. States reform their distribution system based on the CSMS system proposed by the Task Force.

Subsidy transfer to beneficiaries. The cash equivalent of subsidy is transferred directly to beneficiaries through their bank accounts by linking transactions to Aadhaar. The commodity purchase and then transfer of cash subsidy to their account will be based on successful authentication of the beneficiary through Aadhaar at the point of sale.

The following steps have been taken by the government to guarantee a successful

implementation of the scheme:

An efficient Electronic Benefit Transfer (EBT) system would require the benefits

transfer system compatible with the banking system, transfer of funds to the

beneficiaries accounts and facilities for the drawl of the amount by the beneficiaries

as per their requirement. This will not only bring in greater efficiency in the transfer of

benefits but will also reduce pressure on the bank branches for dealing with these

transactions, reduce the requirement of multiple accounts for various schemes and

facilitate the process of financial inclusion.


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To ensure that every beneficiary of the government scheme has a bank account, the

banks must map the list of beneficiaries under every scheme, already available with

the state government, with bank account details. In case the beneficiary doesn’t

have a bank account, a new bank account for the family in the service area branch

should be opened. Vice versa, as soon as the bank account gets opened, the

beneficiary should get mapped.

For those who don’t have access to bank branches, they rely on ‘Banking

Correspondents ‘or BC. In May 2012, the Department of Financial Services (DFS)

chalked out a plan to split the country into 20 clusters for BCs. Each cluster is to be

managed by one BC company, elected by a price-based auction. The function of a

BC would be to pay the person who wants to withdraw money from his account in

case the person is not able to access an ATM or bank. The authentication by the

person would be given by a fingerprint on a micro-ATM.

The Central Plan Scheme Monitoring System (CPSMS) is a public financial

management reforms initiative of the government of India which monitors programs

in the social sector and tracks funds disbursed. It provides real time information

exchange with the banks providing greater transparency and accountability to social

sector. It provides a platform for schemes for making payments directly in the bank

accounts of beneficiaries. Departments using CPSMS should map the details of the

bank account of the beneficiary in the scheme database of the CPSMS. This should

also be brought to the knowledge of the beneficiary so that she/he is aware that the

benefits shall be electronically transferred to the bank account.

Aadhaar Payments Bridge (APB) is a repository of Aadhaar number of residents

and their primary bank account number used for receiving all social security and

entitlement payments from various government agencies. This is the bridge/platform

that will be used for the Direct Cash Transfer. APB requires using Aadhaar number

as the primary key for all entitlement payments. This would weed out all fakes and

ghosts from the system and ensure that the benefits reach the intended

beneficiaries. The key steps in posting payments via APB are:


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• Service delivery agency that needs to make payments to its beneficiaries (such as

MGNREGA wages, scholarships disbursement, old age pension etc.) provides APB

File containing details of Aadhaar number, welfare scheme reference number and

the amount to be paid to its bank (called sponsor bank)

• Sponsor bank adds bank IIN (Institute Identification Number provided by National

Payments Corporation of India ‘NPCI’ to participant banks) to the APB file and

uploads onto NPCI server

• NPCI processes uploaded files, prepares beneficiary bank files and generates

settlement file. Settlement file is posted to bank accounts with RBI

• Destination banks can download the incoming files for credit processing after the

settlement file has been processed

Figure 9.1: India Direct Cash transfer implementation plan from 1st Jan-13 to 1st

April-14.


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Indian Statistics

The Prime Minister has set up three-tier architecture for monitoring the scheme. This

includes a national ministerial committee, a national executive committee and

implementation committees. The seven schemes that will now employ direct cash

transfers to beneficiaries’ accounts are mostly related to student scholarships and

stipends, the Indira Matrutva Yojna and the Dhanalakshmi schemes.

The states covered in the initial phase are Karnataka, Maharashtra, Delhi,

Rajasthan, Madhya Pradesh and Punjab and UTs of Pondicherry, Chandigarh and

Daman and Diu. Subsequently, four districts each of Himachal Pradesh and Gujarat

were exempted from the roll-out because of the assembly elections. This will be

extended to 11 more districts from February 1 in states including Kerala, Haryana,

Sikkim, Goa, Andhra Pradesh and Jharkhand and 12 more districts in states

including Tripura from March 1.

About Rs 32 lakh has been disbursed under the Direct Benefit Transfer (DBT)

scheme through the Aadhaar Payment Bridge, the Planning Commission said.

Figure: 10.0 Cash transfer till July-13 – Top five states


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So far, over 40 crore Aadhaar enrolments have been done, and the Plan panel was

hopeful of achieving the target of 60 crore by 2014.

Among the States, the largest number of Aadhaar enrolments has been done in

Andhra Pradesh and Maharashtra at 65,942, 390 and 62, 697,642, respectively, the

Plan panel said in a release.

The Government had allocated Rs 250 crore for various welfare programmes under

the DBT scheme launched about seven months ago covering distribution of LPG

subsidy, pensions, scholarships, Dhanalaxmi and Janani Suraksha Yojana.

Till June 30, 2013, a total of about Rs 35.53 crore was disbursed under the scheme,

and in July 2013 alone, about Rs 14.76 crore was disbursed.

“The DBT is now being implemented in 28 schemes across 121 districts and soon a

review meeting will be done to take stock of its progress and to expand it to other

schemes and the remaining districts of the country”.

The government will disburse Rs. 4 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.

The scheme has already been piloted for kerosene in parts of Rajathan, as well as

cooking gas in Karnataka. The scheme for cooking gas subsidies will also cover

eligible APL or above povery line families.

The Central cash transfer committee, that includes Ministers of finance, women and

child welfare, rural development, HRD, labour, petroleum, and fertilizer departments,

the Deputy Chairman of the Planning Commission, the Unique Identification

Authority of India (UIDAI) chairman and the Cabinet secretary to chalk out the

intricacies of the roll out.


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What are the challenges?

Till now the cash transfer is done through post office and banks. But now it is about

to undergo a significant expansion in the scope of direct cash transfer. A change of

this magnitude might have challenges which the experts have analyzed and

government is yet to find a justifiable solution to it. Some of these are:

1) Will everyone receive their Aadhaar number in time: In three years, the

government has issued about 400 million Aadhaars, which leaves 800 million

numbers to be issued before April 2014 which seems to be a tall task.

2) Issued a bank account in time: According to the deputy governor of RBI, only 40%

of Indians have bank accounts. Talking about villages in particular, about 188,000

villages had banking connectivity in June 2012 whereas India has 700,000 villages.

The experience with bank accounts in the 43 stage-I districts may not be an

appropriate benchmark for the rest of India.

3) Will banking channel be ready in time: Currently, the banking correspondents

cover only 70,000 villages which require a further 10-fold expansion. At present, BC

companies are very few and even if the target is achieved it will take time to find

people and train them.

4) Who actually should benefit from the Direct Cash Transfer Scheme: The last BPL

census was done in 2002 and an overly optimistic estimate of the time by which the

new list would be ready is mid 2013, however a realistically optimistic deadline would

be Dec 2013. A major question in front of the Indian Government is that whether it

should use the 2002 list or wait for the new list. If it uses the old list then money

would keep going to a lot of people who should not be getting it and if it waits for the

new list by leaving the BPL programs out of the scheme, then a lot of benefits for

which it is originally planned will not be getting transferred. A separate issue to be

tackled is how to ensure that reasonably affluent families do not make it to the BPL

list as has happened in the part due to linkage of various government welfare

programs to the BPL list.


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5) Possible scam under its way: A September 2008 study by UK’s Overseas

Development Institute had found that India has 100 million migrant workers who are

mostly away from home. In some other cases, the bank transfers the subsidy to the

respective accounts but fraudsters divert it to some fictitious accounts by even

forging the signatures. With the entire banking system going on line, a dishonest

bank employee can even access the signatures of the poor borrower. This is

happening in several states.

Figure: 11.0 The picture showing the complicated path of the benifeciary.

Direct Cash Transfers, which are now becoming possible through the innovative use of

technology and the spread of modern banking across the country, open the doors for

eliminating waste, cutting down leakages and targeting beneficiaries better. It is also being

looked upon as a very effective tool in combating corruption when it comes to implementing

welfare programmes of the government.


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Report Card

The five states under DBT report that thousands of beneficiaries are left out of the DBT

coverage at every step of opening the Aadhaar-paired account

Jharkhand

When it comes to percolation of benefits through the

UPA government’s ambitious direct benefit transfer

(DBT) programme, Jharkhand fares the worst among

states. The programme remains a nonstarter in all

the four districts in the state where it was rolled out in

the first phase. And it is not difficult to figure out why.

This ignorance among government officials is

indicative of the state’s progress in implementing the

ambitious programme of the UPA government.

Seraikella-Kharsawan, the first district in the state

under DBT since January, has more than 46,500

beneficiaries of different schemes. Only 500 are

receiving the benefits.

According to the status report of the National Payments Corporation of India, the gateway for

payment under DBT, released in March this year, cash benefits have returned from the bank

accounts of 10-15 per cent beneficiaries even though the accounts were integrated with

Aadhaar

http://maps.google.com/maps?ll=23.35,85.33&spn=1.0,1.0&q=23.35,85.33%20(Jharkhand)&t=h

http://www.npci.org.in/home.aspx


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Maharashtra

Only Post-Matric scholarship beneficiaries from

Scheduled Castes and Other Backward Classes

On record, Wardha, Maharashtra’s pilot district for

DBT, has the highest percentage of Aadhaar

registrations for any district in the country.

According to the Unique Identification Authority of

India, 1.08 million Aadhaar cards (84.6 per cent)

have been generated against a population of 1.3

million. Some 360,000 beneficiaries have linked

their bank accounts with Aadhaar and the district

administration has disbursed Rs 2.07 crore to these

accounts. Despite high number of enrolments and

generation of Aadhaar IDs, cards are yet to reach

many in the district. Worse, the administration has

no clue about the number of missing cards and the reason they are missing.

Rajasthan

Udaipur, Ajmer and Alwar of Rajasthan are among the

first 20 districts in the country to roll out DBT in January.

Five months on, many beneficiaries say they prefer the

earlier system of payment through cash or bearer

cheques. Their aversion is not unreasonable. Barely 23

per cent of the beneficiaries in these districts have

received government benefits in their accounts since

DBT was introduced. Of the rest, most have been left out

of DBT as their accounts are not seeded with Aadhaar.

As of April, 24,000 of the 33,000 beneficiaries in Udaipur

were not receiving benefits due to this reason.


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Delhi

The Delhi government claims 95 per cent success in

providing an Aadhaar number to citizens. But its

achievement does not seem to be trickling down to the

poor of the national capital.

According to Dharampal, divisional commissioner of Delhi

and nodal officer of DBT for the state, Delhi has brought

nine Central schemes under DBT. Though 22,000

beneficiaries have Aadhaar cards and their UID numbers

seeded with bank accounts, only 9,000 are receiving

benefits. Dharampal says the state-sponsored Annshree

Yojana is doing well in comparison to the Central schemes

under DBT. All the 45,000 identified beneficiaries of

Annshree Yojana are receiving benefits. Their number

would increase to 100,000 in next couple of months, he

claims. Ground realities paint a different picture.

Andhra Pradesh

Only scholarship and pension beneficiaries Andhra Pradesh

is arguably the only state that was prepared to roll out DBT.

It ran a two-year campaign to enroll people under Aadhaar

and also experimented with models to implement DBT. In

the first phase, the state selected five districts where it had

already implemented a state-initiated cash transfer

programme for scholarship and pension schemes. According

to M V S Rami Reddy, deputy director general of UIDAI,

Andhra Pradesh, about 75 million of the 85 million

population in the state have been enrolled in the

programme. More than 58 million cards have been

generated. The five first-phase districts have a population of

27.5 million, of which 90 per cent have been enrolled in Aadhaar. The scheme was

successful in Andhra Pradesh


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Recommendations

Identification of beneficiaries

Selection criteria should be kept broad-based and inclusive. Lessons can be learnt

from the successful implementation of Brazil’s Bolsa Família Program.

Vulnerability to fluctuating market prices

Prices can be averaged out yearly based on forecasts. Cash subsidy should allow

flexibility in the choice of commodity to the beneficiary. The amount of subsidy

should be calculated based on the number of individuals per household rather than

assuming an average household size.

Transfer of cash subsidy

To expedite the implementation, bank accounts can initially be opened for one

member per household. The withdrawal can be done at bank branches and ATMs

through debit cards and through the business correspondent model using smart

cards, PoS devices, etc.

Infrastructure

We believe that the infrastructure must be built before starting a scheme and not

vice-versa

For Women’s

It would be better if it is thoroughly meant for women, as they are responsible for the

household needs such as food, health, education, kerosene, LPG etc.


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Conclusion

The programme is inspired by such successful schemes existing in countries like

Brazil and Mexico and cities like New York and Washington. In India too, introducing

this new way of physically-delivering subsidies may seem a brilliant technological

shot to end the middlemen fraud, but the government still needs to substantiate its

fool proof preparedness against the trepidation it has been confronting from the

masses and quite a few experts.

The new system is expected to reduce this cost and subsidy bill through better

targeting.

If the entire system is managed through efficient targeting, disbursement and regular

monitoring of the disbursed funds this can result into transforming the rural India.

The real success of the policy lies in the accuracy and efficiency in identification of

worthy beneficiaries, i.e. BPL Households.

We would love to hear from you what you feel about the direct cash transfer scheme.


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References:

http://uidai.gov.in/

http://www.npci.org.in/documents/AEPSFAQBank.pdf

http://en.wikipedia.org/wiki/Unique_Identification_Authority_of_India

Website Referred:

www.google.com

www.wikipedia.com

www.economicstimes.com

www.thehindu.com

www.youtube.com

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http://www.google.com/

http://www.wikipedia.com/

http://www.economicstimes.com/

http://www.thehindu.com/

http://www.youtube.com/

Economy & Finance

Direct Cash Transfer Scheme India