Economy
Removing Impediments To Smart Welfare: Why The Aadhaar Legislation Is Good News
- A New legislation for Aadhaar will be tabled by the government, according to today’s budget speech by Arun Jaitley.
- SC had stayed compulsory usage of Aadhaar numbers for benefits transfer because of privacy concerns. The new law will address this problem.
- JAM based smart welfare can help plug massive leakages and also early some political mileage for the Modi government.
Aadhaar Logo
Finance Minister Arun Jaitley’s announcement, as part of the Budget 2016-17, that the government will provide a statutory status to Aadhaar is a welcome step. The finance minister also mentioned in today’s (29 Feb) budget speech that the union government will begin the roll out of JAM-based direct subsidy transfer for select recipients of fertiliser subsidy on a pilot basis. Should both of these promises be fulfilled it would represent a quantum change and reform of India’s most inefficient and leaky subsidy regime.
The Aadhaar platform now consists of unique identifiers assigned to over 98 crore Indians along with ‘top up services’ such as KYC (know your customer) processes for electronic identity verification of individuals.
With Jan Dhan bank accounts and mobile notifications the JAM trinity (Jan Dhan, Aadhaar and Mobile) can ensure subsidies only for the eligible recipients. Since only qualified recipients can receive payments to their bank account, the JAM trinity eliminates middlemen and leakages.
Stopping such leakages becomes important when one looks at the huge amount of leakages in the current convoluted, bureaucratic and opaque subsidy transfer regime.
A study in 2010 found a leakage of Rs 10,000 - 12,000 crores in fertiliser subsidies alone. Today, the numbers are likely to be much higher.
Urea, probably the most subsidised fertiliser, is smuggled out of country and sold for higher prices. It is also re-routed for industrial uses. There is no data as to whether deserving farmers benefit from the humungous amount in fertiliser subsidy.
The roll-out of JAM-based direct benefits transfer had been much delayed because the Supreme Court had stopped the government from asking beneficiaries of subsidies to compulsorily provide their Aadhaar numbers.
The SC order was in response to the objections raised about privacy issues involved with linking Aadhaar with bank account numbers, IT returns and a host of other government documents. There was also some concern about the UIDAI, the nodal organisation behind Aadhaar, operating without any legal sanction from parliament.
If the government manages to adequately address these privacy concerns and provides safeguards, then the SC can be expected to lift the stay order on compulsory usage of Aadhaar for benefits.
Fertiliser subsidies constitute a big chunk of the subsidy bill - plugging leaks and ensuring money in the bank accounts of deserving beneficiaries would be a great start in fixing union government finances. A new law for Aadhaar and the fertiliser subsidy can prove to be game changer for smart welfare - something Modi may want to flaunt in 2019.
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