Economics

Modi’s DBT Review 2: Teething Troubles Can and Must Be Addressed Urgently

India food grain (ROBERTO SCHMIDT/AFP/Getty Images)
Snapshot
    • Volunteers could not trace large numbers of those on the list (perhaps because of bogus cards or demolition of slum clusters).
    • There is no provision for people to get the money retrospectively, so, in effect, they have lost out on a few months of rations or cash.

The grumbling over the cash transfers pilot started with the exclusion of 25,000 non-NFSA card holders from the programme, as the first article in the series pointed out. But this group was not entitled to the cash transfer and, hence, to gripe. More problematic was the fact that even entitled households are finding themselves cut out.

The Chandigarh Administration was told about the decision on the pilot programme in February 2015. Ration shop owners and civil society activists insist that the pilot was rushed through without adequate preparation, but the Administration denies this.

In July, the National Service Scheme (NSS) was roped in to do a survey-cum-awareness building exercise. Student-volunteers were told to contact 60,000 households, verify their addresses, tell them about the cash transfer experiment and ask whether or not they were in favour of it.

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But the volunteers could not trace large numbers of those on the list (perhaps because of bogus cards or demolition of slum clusters). They could not conduct the survey in a few localities because of aggression by local political leaders, who also warned people about the dangers of the experiment. Some of these leaders – from the BJP and the Congress – are also ration shop owners, who faced closure.

The survey showed no overwhelming support for, or tremendous resistance to, the idea, though those backing it were marginally more than the opponents. But now the latter’s ranks appear to have grown.

The cash transfer programme rolled out on schedule from 1 September. But, of the 55,917 NFSA card holders, only 41,167 benefited because their bank accounts had been seeded with their Aadhaar numbers. The others got neither food grains (since the 93 ration shops in Chandigarh were closed down), nor transfers, leaving them disgruntled.

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The union department of food and civil supplies maintains that Aadhaar was never compulsory for cash transfers, but the Chandigarh Administration is right in insisting on this. Aadhaar is important to authenticate identity and ensure that money goes only into the beneficiary’s account.

Where the Administration can be faulted is in its failure to facilitate the linking of bank accounts and Aadhaar. The NSS volunteers continued to work with the beneficiaries for a few months, helping them with all the bank-related processes, but this does not seem to have been enough. This writer found several cases where the seeding had been done as late as December 2015 or January this year. There is no provision for people to get the money retrospectively, so, in effect, they have lost out on a few months of rations or cash. The number of Aadhaar linked accounts has now gone up to 45,700, but that still leaves a large number of entitled households bereft of any benefit.

Should the Administration have waited to sort this out before launching the cash transfer programme? Yes. Because the problems that beneficiaries are facing gives strength to the criticism of activists that the programme was rushed through without adequate preparation as well as to the allegation that this is a deliberate and diabolical attempt by the government to prune the subsidy bill merely by keeping people out.

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But having an Aadhaar-linked bank account does not ensure that money reaches regularly. A survey by the Delhi-based Centre for Equity Studies of 200 beneficiaries in December revealed that 40 per cent had not got their payments, forcing them to buy rations on credit – something that this writer also had to hear from several beneficiaries. A survey on the working of the programme by the Abdul Latif Jameel Poverty Action Lab (JPAL), commissioned by the central government and Niti Aayog (but is not in the public domain), is also reported to have indicated that 30 per cent of the beneficiaries with Aadhaar-seeded bank accounts had not got their money. This writer came across several cases where money had come only for a couple of months. For daily wage earners making multiple trips to the bank to check on payments is an extra burden. Not all of them have smartphones or are subscribed to mobile alerts to check the status of payments.

Food and supplies department officials insist this is just not possible – Rs 1.98 crore is being transferred every month. Delays in getting details of bank accounts and Aadhaar seeding could, they say, hold up the initial payment, but once money starts going to a beneficiary, there is no chance of it being interrupted.

Each month the UT Administration sends a demand to the central government, with a list of beneficiaries to be paid in the following month. The central government then transfers the required funds to UT Administration on the first of every month. The Public Finance Management System (PFMS), an online system for reconciling government financial transactions, brings together the digitised list and the banking system and then the money goes into individual accounts through the National Payments Corporation of India platform.

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District food and supplies officer Praveen Kumar points out that affected beneficiaries could be checking the wrong bank account; money automatically goes to whichever account is the latest to be seeded with Aadhaar. This is a problem with the PFMS-NPCI system over which, Kumar says, the department has little control. Besides, he says, every month there are at least 100 cases where the money transfer bounces back.

Payment transfer problems dogged the first-ever cash transfer pilot in the case of kerosene in the rural Kotkasim block of Alwar district of Rajasthan in 2011. But the banking infrastructure as well as Aadhaar seeding were not well developed at that time. Why should similar problems arise over four years later in Chandigarh, which won the Prime Minister’s award for Jan Dhan Yojana coverage and claims 90 per cent Aadhaar enrolment?

There are problems with the PFMS and NPCI which the Administration has highlighted in review meetings. For the beneficiaries, however, all this is irrelevant; all they know is that they are not getting money or rations. The department, Kumar says, has set up helpline numbers and other grievance redressal mechanisms, but people say they rarely get satisfactory responses, if at all.

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It is not as if people who are getting money regularly are a happy lot. The money, they say, is not sufficient to buy rations from the market and they need to pay extra out of their own pocket.

The subsidy amount of Rs 95 has been worked out as 1.25 times the minimum support price (factoring in the economic cost of reaching subsidised food grains to ration shops) and is also roughly the difference between the subsidised price and the market price. While this makes sense at a macro level, it makes little sense to individual beneficiaries. The cheapest rice is between Rs 20-25 a kg and a family of five (buying 5 kg per person) will have to spend between Rs 500-625 a month per person, while they get only Rs 475 as cash transfer. They do not get the cash equivalent of the additional 10 kg wheat they were given in the PDS. So the optics of the programme get all wrong, even though the action is economically sound.

People also complain about open market prices increasing after the programme kicked off; rice by Rs 2-3 a kg and wheat flour by Rs 4 a kg, but this could not be independently verified. They also find the quality inferior to what they got under the PDS. These complaints could be overstated in the case of rice, since PDS rice has been diverted for adulterating rice in the open market. But it certainly is a genuine issue for people who largely consume wheat.

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The PDS supplied whole wheat, which people would get ground in the neighbourhood flour mill. So even inferior quality wheat yielded bran in the flour. But whole wheat is not as easily available in the retail market as rice is, and so families have no choice but to buy ready-made flour. The cheapest flour which they can afford is almost entirely devoid of bran and nutrition.

Hence, a renewed nostalgia for the old PDS, despite people admitting that there were times they got ration only once in two months. “Par kuch to milta tha (at least one got something),” say women who have not got cash in their Aadhaar-seeded bank accounts. The Administration appears close to declaring defeat. As a backup plan, it has renewed licences of 45 ration shops. The empire is clearly striking back.

(The last and concluding part of this series will look at what course correction is possible in Chandigarh and the lessons for any future cash transfer programmes the government may undertake)

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