Sunday, December 16, 2012

Why do I oppose the present cash transfer initiative?

You may call the Toll Free No. 18001801947 for inquiry, which is provided in the Aadhaar advertisement as published in the Time of India (New Delhi edition, page no. 2) dated 16 December, 2012 and find that it is not in service. This advertisement was published a day after the Delhi Government’s Cash-for-Food flagship programme titled Dilli Annshree Yojana was launched by the UPA chairperson Sonia Gandhi and CM of Delhi Smt. Sheila Dikshit. Under the Annshree Yojana, a monthly cash subsidy of Rs. 600/- will be provided to Delhi’s most vulnerable.

In India, cash transfers initiative has been hailed as a panacea for large number of problems faced by the citizens, particularly the poor, in accessing essential public services and goods. Transferring of direct cash subsidies into the bank accounts of citizens for services and goods like: LPG, food grains and kerosene under the public distribution system (PDS), fertilizers, scholarships etc. has been mooted by the government in order to avoid duplication of cards and reduce leakages in the system. Proponents of cash transfer believe that it will streamline expenses incurred by the exchequer and will, therefore, help in curtailing fiscal deficit. Please refer to the media report titled: Direct CashTransfer Can Control Inflation: Chakrabarty, which was published in the Outlook dated 14 December, 2012.   

In a report titled: 'Aadhaar Number to be Made Mandatory for 10 Schemes' published in the Outlook dated: 20 October, 2012, it has been mentioned that Aadhaar would be made compulsory for applying for old age pension schemes of old age, widow, differently abled, MGNREGA job card, ration card, driving license, water and electricity connections, property registration, Indira Awas Yojna, scholarships etc. in Rajasthan. In another media report published in The Hindustan Times dated: 28 November, 2012 entitled: Keep your UID cards ready to get married, buy house by Neelam Pandey, it has been stated that the Delhi Government wants to make UID card compulsory for work related to property and marriage registration.

For accessing direct cash transfer, enrolling for Aadhaar card has been made mandatory unlike in the earlier days of the so-called un-Constitutional UID project (The National Identification Authority of India Bill, 2010, Forty Second report by Standing Committee on Finance (2011-12), publication date: December, 2011, Fifteenth Lok Sabha, Ministry of Planning), during which making an Aadhaar card was optional (please check my blog entry: Envisioning India—The Potential of Aadhaar) and it was meant for those who faced problems in proving their identity (such as poor migrants in search of livelihoods) so as to access public services. But now Aadhaar card would help one to open a bank account so that direct cash transfer of subsidy could be made into that account.

In the following points, I would briefly discuss one by one the problems associated with cash transfers:

Problem 1: Providing one’s bank details including bank account number and IFSC code number in the Aadhaar application form is optional. (Please download the present Aadhaar enrollment form). If cash transfer becomes the order of the day for accessing any universal public service/ goods, then the Aadhaar application form should explicitly mention that giving one’s bank account details is mandatory. Otherwise, this might generate another round of standing in the queues, filling up of forms and then submitting them.  

Those using the Internet have encountered the problem of spam mails that are sent from Nigeria or some other place, where one is requested to provide one’s bank account details to the sender of such mails. There is no terms and conditions part provided in the Aadhaar application form that the information provided by the applicants for enrollment shall not be divulged by the government to any private party or corporation and such information shall be considered as confidential.

Problem 2: In the past a lot has been written against cost push inflation caused by rising NREGS wages. It has also been said that rising NREGS wages is making it harder for the farmers to hire agricultural labourers since the latter have started demanding for higher agricultural wages. (Please check my blog entry: Proposed changes in the NREGA: Why do I oppose them?). The same question can now be asked to the proponents of cash transfers whether this adventurous scheme might inject liquidity that could generate demand pull inflation via multiplier effect. For a detailed exposition on this subject, please consult the article titled: Cashing in on schemes for poor by Narendar Pani published in The Hindu dated 29 November, 2012.

Problem 3: A much discussed criticism leveled against NREGA is that wages do not reach the manual workers in time. The study entitled MGNREGA Sameeksha: An Anthology of Research Studies on the Mahatma Gandhi National Rural Employment Guarantee (2005) Act 2006–2012, published by the Ministry of Rural Development, GoI, has documented that due to delay in wage payments, people employed in NREGS works in Mandla, Madhya Pradesh and Narmada, Gujarat shifted back to lower-paying works. The NSSO survey on MGNREGA findings in FY 2009–10 indicate that in Andhra Pradesh, about 68 per cent of households who worked in MGNREGA received payments within 15 days; in Rajasthan, 10 per cent of the households received payment within 15 days and in Madhya Pradesh 23 per cent of the households received payments within 15 days. The CAG audit (Performance Audit Report No. 11, 2008) conducted in 2006 found that there were delays in payment in 213 Gram Panchayats in 16 states including, Andhra Pradesh, Chhattisgarh, Jharkhand, Karnataka, Uttar Pradesh and West Bengal.

There are a number of examples available from grassroots to illustrate that middlemen get a portion of the money when much delayed payments are deposited in the bank accounts of NREGS workers. Such poor people constantly faced threat and harassment from babus and contractors. Bank accounts opened in their names have hardly ended their exploitation. People walk more than 6 kms to reach banks to withdraw money. The MGNREGA Sameeksha report has spelled out some of the problems in the existing banking system: a. Poor coverage/network of banks/post offices; b. Non-streamlined record-keeping at banks/post offices; c. Low level of literacy or illiteracy among NREGS workers; and d. Low Cash and Line Limit.

What is the guaranty that cash transfer would be deposited timely in the bank accounts and not be siphoned off? The Kotkasim experiment in Rajasthan's Alwar district illustrates that moving towards a cash transfer system for kerosene has failed since subsidy payments were erratic and cumbersome. For more, please check the article titled Neither effective nor equitable by Bharat Bhatti and Madhulika Khanna, published in The Hindu (dated: 4 December, 2012.

Problem 4: For a rural society, which is caste-based, relying on micro-ATMs held by business correspondents is asking too much for last mile connectivity. The economic viability of the ‘business correspondent model’ is too under doubt. Please check the article entitled: The "Aadhaar" of Direct Cash Transfer is more of assumptions, less of ground-level realities by MS Sriram, which was published in The Economic Times dated 14 December, 2012. There are places where the accounts that have been created under the business correspondent model have remained dormant, with no transactions happening. Please check the blog entry titled Analyzing the Business Correspondent Model (PartII) Why isn’t it working?–Dormancy of No-Frills Accounts by Nikhil Dugal dated 29 October, 2012.    

A factsheet prepared by Deepti KC (Institute for Financial Management and Research) mentions about a study by Centre for Micro Finance titled: Business Correspondent Model-An analysis of the financial viability of the Customer Service Providers and Client Satisfaction that has found that agents are struggling to make their business profitable and financially sustainable as the current commission structure is not adequate to cover agents’ costs. In addition, agents are facing issues with cash management and liquidity due to unwillingness to share risks by both BCs and banks.

Genuine NREGS workers have faced fingerprint recognition problems in the Ratu Block in Ranchi District, Jharkhand. Please check the article entitled: Experiments with Aadhaar by Bharat Bhatti, Jean Dreze and Reetika Khera published in The Hindu dated 27 June, 2012.   

It must be added that cash transfer initiative will not solve the problem associated with shortage of qualified staff in various departments who are people/consumer friendly. As has been pointed out by various activists, the government is trying to hide its own failure by introducing cash transfer so that people start relying on the market for goods and services.

Problem 5: It may sound silly but I would like to show here how the Aadhaar enrollment form confuses a citizen. If one goes through the enrollment form (please download the present Aadhaar enrollment form from here), one will find that driving license is considered as a valid document both as a proof of identity (PoI) and as a proof of address (PoA). However, if one flips over a driving license (check the image provided), which is presently issued in Delhi, one can read: "Driving License particulars not to be used as Residence Proof".    

Problem 6: Transferring a meager sum of cash into the bank account of intended beneficiaries without taking into account size of the household and rate of inflation might push one further into poverty. Some of the State governments already provide 35 kg of foodgrains to every BPL household on a monthly basis at subsidized rates. There has been a reversal of the performance of PDS in many states including Chhattisgarh. Therefore, Central government’s effort to introduce cash transfer by replacing the PDS may face stiff opposition from the state governments. The Socio Economic Caste Census (SECC), which got started to enumerate BPL households in various states is not yet over and has faced various challenges. Without waiting for the results of SECC, how can the government start with an adventurous cash transfer scheme? Why is the hurry for UPA 2 to rush for a scheme that may have been successful in Brazil but could fail in India?

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