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No need for hype but certainly a hope

    Jairam Ramesh
    Varad Pande
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We are grateful to Narendar Pani (Editorial page, “Cashing in on schemes for poor,” November 29, 2012) and Bharat Bhatti and Madhulika Khanna (Editorial page, “Neither effective nor equitable,” December 4, 2012) for starting a useful debate on the United Progressive Alliance government’s Direct Benefits Transfer (DBT) initiative.

At the outset, it must be emphasised categorically that this is not an initiative driven by electoral calculations, nor is it “a further reduction in the effectiveness of social welfare schemes,” as Mr. Pani’s article suggests. On the contrary, this marks a paradigm shift, where the State is explicitly taking responsibility to ensure that welfare schemes and basic entitlements reach the intended beneficiaries much more effectively than at present. In addition, the present proposal of the government clearly addresses the challenges observed by Bhatti and Khanna in the Kotkasim experiment for providing kerosene subsidies.

What will DBT do?

It is worth explaining briefly what the government is seeking to do. The DBT programme aims that entitlements and benefits to people can be transferred directly to them through biometric-based Aadhaar-linked bank accounts, thus reducing several layers of intermediaries and delays in the system. The last-mile of the initiative is the most important — the system will allow actual disbursements to take place at the doorstep of the beneficiaries through a dense, interoperable network of business correspondents (BCs) using biometric microATM machines. Thus, the yardstick of success is not going to be that the money has reached a bank account, but that it has reached the hands of the intended beneficiary — a student, a pensioner, a widow, an elderly person, a disabled person, a poor family.

Why is DBT a paradigm shift?

There are several dimensions to this. First, the link to Aadhaar and the use of biometrics ensures that the problems of “duplicates,” i.e., the same person getting the benefit more than once, and “ghosts,” i.e., a non-existent person getting the benefit, are addressed. Second, it makes it possible for money to reach the intended beneficiaries directly and on time — so, for example, pensions, which reach the beneficiary once every four to six months in many parts of India, can now reach her bank account on the first of every month. Third, a dense BC network on the ground with microATMs will allow payments to happen at peoples’ doorsteps, ensuring that the poor get the same level of service that the rich and middle-class in India get. Fourth, as it is a platform based on an open architecture, State governments can use this platform as much as the Central government. This is important, because the government views this programme as a cooperative endeavour between the Centre and the States, and the States will have a critical role to play (in fact, many chief ministers, including of the Opposition-ruled States, are strong champions of the programme). Fifth, the potential benefit to internal migrants who send remittances to their homes is huge. It is estimated that Rs.75,000 crore worth of within-country remittances are made in India every year — many of these are lifelines for their families. Seventy per cent of these remittances are today channelled through informal (and illegal) channels which impose high costs on them. The Aadhaar-based microATM network can ensure that remittances take place instantly and at much lower cost to migrants.

Tackling the challenges of implementation

Having said all this, we would be the first to admit that there are numerous challenges of implementation that lie ahead. That is why the government is proposing to move ahead only gradually and with caution. First, the programme proposes only a modest beginning in Phase I, covering 34 schemes — largely scholarships, pensions, and other benefit payments — in only 51 (of the over 600) districts. It will be ensured that at least 80 per cent residents in each district have an Aadhaar number and an Aadhaar-linked bank account before any payments are started. And no one who does not have an Aadhaar number will be denied benefits. Only based on the learning from this phase, would the programme be expanded. Second, a system of independent concurrent evaluation is being embedded, to ensure that we get objective feedback on the challenges of implementation. There already are useful lessons from five Aadhaar pilots in different parts of the country. Third, subsidies on food and fertilizer have not been included in the first phase, recognising that these are highly complex and require considerable thought. Chief ministers seem to have varying views on this issue, with some supporting the linking of DBT with fertilizer and food (and other Public Distribution System commodities), while others oppose it. Such issues will best be left to the discretion of the States. Fourth, the issue of mobile connectivity, a major challenge in backward areas and essential for online authentication, is being addressed in parallel, by adding more mobile towers (especially in backward districts) and through the ambitious government programme of taking broadband internet connectivity to every panchayat within two years. Fifth, the existing discredited BC model is being fundamentally changed, with an open architecture replacing monopolies. This would enable anyone — kirana shops, women’s self-help groups, primary agricultural cooperative societies, post offices, Accredited Social Health Activists and anganwadi workers, etc. — to become BCs. The business model for BCs is also being revamped to make it more lucrative. The post office network (a key payment channel, especially for pensions and Mahatma Gandhi National Rural Employment Guarantee Act payments) is also being reformed with the postal department committing to upgrading to a core banking solution (CBS) system across all its post offices within the next 18 months.

On the Kotkasim experiment, Bhatti and Khanna identified two main concerns from a user perspective — erratic and delayed payments due to a lack of coordination, and the time and effort required to go to and deal with banks. They also noted the absence of an objective assessment of the programme by the government.

Each of these is being addressed in the government’s proposal. Bank accounts are going to be Aadhaar-linked that will ensure duplicates and ghosts are eliminated. Beneficiary accounts are going to be linked to Aadhaar and bank account numbers before any payments are made, and payments will be made instantly using the Aadhaar Payment Bridge — this will ensure that payment delays don’t happen.

An interoperable BC network with microATMs is going to be put in place so that beneficiaries have access to banking at their doorstep, which will reduce the hassle and delays involved in dealing with bank branches. And as mentioned, a concurrent evaluation system is being embedded to ensure that we get objective feedback.

Conclusion

The DBT initiative is not a or the silver bullet for the malaise that plagues our delivery system. It is, more realistically, a first step in re-engineering its very foundations. We are neither evangelical or dogmatic about DBT. Instead, we believe that rather than having endless ideological discussions “for” or “against” DBT, it is better to be pragmatic and try it out seriously and systematically, albeit in a cautious and phased manner.

(Jairam Ramesh is Union Minister for Rural Development. Varad Pande is with the Ministry.)

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