The Direct Cash Transfer scheme
is a superior alternative to a virtually dysfunctional and a chronically
corrupt public distribution system in India.
It has the potential to usher a new era and emerge as one of the most
successfully targeted welfare measure in India with a unique ability to foster
a social change through conditional cash transfers. The triumph of this internationally
celebrated scheme depends entirely on its focussed, intelligent and phased
implementation and continuous monitoring at the grass root levels. One must also note with caution that this act
of cash evangelism should be seen as complementary and not as an exoneration or
substitution to the responsibility of a welfare state.
1.
The Tale of a failed Public
Distribution System:
The
Former Prime Minister Rajiv Gandhi is said to have made a statement that “out of every one rupee allocated for the
rural areas only 15 paise reaches the true beneficiary”. In the statement he referred to administrative
cost of delivery of services and the huge leakages (including rampant and
pervasive malpractices) that has become a strikingly and a sordid feature of
virtually all public welfare systems in India.
Though
more than two decades have passed since this rather politically incorrect
statement was made His words are still true today and are largely supported by
the following research data with facts that speak for themselves:
·
There
are about 500,000 fair price shops in India for universal social welfare which
are universally engaged in unfair practices.
This ranges from administrative malpractices, to clandestine substitution
of stock with inferior quality, to selling the produce to retailers with large
number of bogus cards and to finally ‘large stock disappearances’ that puts a
history sheeted burglars to shame.
·
Even
going by the records with a Planning Commission, a study released in March 2008
shows that only about 42% of subsidised grains issued by the central pool even
reach the target group.
·
Poor
supervision, lack of administrative control and non-existent accountability
have given a rise to a new ‘ration stock business’
in the market. Large number of middlemen
consume a large proportion of the stock meant for the poor. Lack of clarity on the eligible beneficiaries
leads to genuinely poor being excluded whilst the ineligible get several cards.
India
has the largest stock of grain in the world besides China, the government
spends Rs. 750 billion ($13.6 billion) per year, almost 1 percent of GDP, yet
21% remain undernourished and over 400 million people sleep hungry every night.
So what should one do to correct
the monumental inefficiencies and pervasive corruption in the Public
Distribution system in India?
One answer is reforms. Reform
Everything. But then Reforms are a
costly business. Surely any reforms like
better administrative control to PDS, better supervision, end to end
computerisation, tracking online stock levels would all have huge capital and
revenue costs associated with it which again dilutes the benefit to the poor by
increased cost of delivery. Then there
is also no assurance of it not being circumvented or abused in future.
A cheaper and a faster
alternative is to deliver the equivalent cash right to the bank account of the
beneficiaries by exploiting the colossal power of information technology using
biometric identifications. Enter the Direct
Cash Transfer Scheme (‘DCTS’)
2.
Direct Cash Transfer Scheme
(‘DCTS’) through ‘Aadhar’
International
organizations and experts from United Nation Development Programmes and
International Labour Organization and economists had always argued that the
Cash Transfers are better than transfers in kind given the administrative
bottle necks, malpractices and leakages that prevail in the developing
economies.
The thematic
foundation for the DCTS was laid in the Economic Survey 2009-10 which
delineated a radical shift in the governmental thinking that the poor can be
helped directly by cash than indirectly through subsidising the market prices
of procured food grains. Food Prices it
said “are best left to the market” and that subsidies and price reduction need
not go hand in hand to help the poor.
Therefore
the government came up with the DCTS scheme which is also planned for fuel and
fertilizer subsidies in the future apart from food subsidies. As per the scheme the beneficiaries will
receive cash based on their Unique Identification Cards aka Aadhar Cards
directly into their bank accounts and monies can be withdrawn through normal
banking channels like ATMs or through Banking Correspondents in villages where
banks do not exists.
By
direct transfer of monies to the beneficiaries, the DCTS promises to promote
efficiencies, improve targeting, control administrative expenses and facilitate
reforms as its stated goals. The
Government as per the recent media reports intends to introduce this scheme on
‘a war footing’ by kick starting large scale ‘openings of zero balance bank
accounts’ using Aadhar cards thereby seeking to prevent falsification,
duplication, forgery and nepotism in delivery of monies to the poor thereby using
IT to fight Poverty.
3.
It has Potential for effecting Radical
social change through conditional transfers
One of
the most pleasant features of the scheme is the potential of fostering a
radical social change thereby leading to rapid development of human capital. The Government can link pre-conditions or a
desired social objective for DCTS scheme.
for eg, the government can mandate that attendance of the child in
school (especially the girl child) is mandatory pre-condition for cash transfers
or that vaccination of child is compulsory for every household desiring to
receive benefits under DCTS scheme.
Linking
conditional cash transfers with fulfilment of desired social objectives is said
to be working very well in Mexico, Brazil and Nicargua. In Bangladesh, Pakistan, and Turkey, where
school enrolment rates among girls were lower than among boys, the conditional
cash schemes is said to have helped the cause very well.
According
to economists and researchers, it is better that the monies must be transferred
to women of the household rather than men leading to women empowerment in
patriarchal society and better control and monitoring of household expenditure
and preventing squandering of cash.
4.
Eliminating Bottlenecks in the
Scheme
However
there are many bottlenecks to the introduction of these scheme. In a survey conducted by the National
Federation of Indian Women (NFIW) and the Right to Food Campaign, in Delhi
slums. 91% of them wanted subsidized food grains to continue and did not opt
for cash. The reasons are not too
difficult to understand, the poor tend to look at ‘Ration cards’ as a valuable
asset and have an irrational fear that losing ration cards tantamount to giving
up a substantial benefit in favour of a small monthly amount that may not last
long or can stop anytime.
The fear
is also that a price raise in future can potentially dilute the value of money
leading them into double jeopardy. Opting
for the cash scheme in lieu of ‘ration card’ is seen as akin to cutting the
proverbial goose that laid the golden eggs.
This is because there is a lack of reliable information and support centres
available to them to explain the scheme in detail. Therefore it is necessary to ensure that a
comprehensive plan for dissemination of information of the scheme be also setup
for an informed choice to be made and to clarify queries of the poor.
A second
Bottleneck of the scheme is said to be the problem of financial exclusion that
exists in India. It is said that only
40-50 percent of the Indians have bank accounts and not all people (especially
in the rural areas) have access to banks
or banking system and therefore the scheme is palpably ignorant of ground
realities and that its implementation is a lofty goal. One solution is to link it with post office
bank accounts and use the services of 1.5 lac post offices of India which are
deeply pervasively, widely distributed and ubiquitous in all villages in India
or which are at least within travelling distances of all rural areas. The other solution is to use banking
correspondents from villages who ensure banking services reach to the masses.
5.
Role of a welfare state cannot be
substituted by Cash Evangelism
The
frontline in December 2012 edition notes “Any dismantling of PDS would also
mean an end to food grain procurement which forms an important institutional
support to india’s peasantry” thereby leading to chaos in the food grain market
and utter destruction of India’s peasantry.
The fears are well founded only if the government intends to suddenly
implement the scheme all at once.
However if a phased and gradual method of implementation is chosen, the
market tends to self-adjust and self-correct itself and absorb the produce in
the long run. The governmental purchases
of the stock are substituted by private purchasers and increased demand from
cash rich rural households leads to adequate demand and supply in the open
market.
It is
also pointed out that cash is a fungible commodity and it cannot assure that a
quantity of food grain can be purchased by a household if the market price rise
further. The increase in inflation can
decisively defeat the scheme. One must note
with caution that DCTS should be seen as complementary and not as an
exoneration of the responsibility of a welfare state. Therefore the role of the welfare state in
continuously monitoring and controlling inflation is in no way exonerated by
doling out cash to the beneficiaries.
Concluding thoughts
finally efficient delivery of welfare in the world’s largest democracy is
understandably a task of monumental proportion. Research suggests that a multi-pronged
approach towards poverty eliminations and social welfare always works better. Economist
Esther Duflo notes
“It is not easy to solve the problem of poverty, a little bit of well-targeted
help can have sometimes a surprising effect. A push on the right lever can make
a huge difference but it is often difficult to know where that lever is. Above all what is clear is that no single
lever can solve every problem”
