Dec 03, 2012, 08.33 AM | Source: CNBC-TV18

Can cash transfer boost already existing govt schemes?

Indianomics, CNBC-TV18’s special show highlights the pros and cons of the direct cash transfer scheme with Pratap Keshari Deo, Food and Civil Supplies Minister in Odisha government, Kirit Parikh, economist and former Planning Commission member and Prof. Himanshu, economist from JNU.

Kirit Parikh

Former Member, Planning Commission

More about the Expert...

The Prime Minister and trusted aids on November 26, announced the launch of Direct Cash Transfer Scheme, which proposes to transfer subsidy amount given away by various departments of the government for the poor and the deserving, directly to the bank accounts of beneficiaries.


Indianomics, CNBC-TV18's special show highlights the pros and cons of the scheme with Pratap Keshari Deo, Food and Civil Supplies Minister in Odisha government, Kirit Parikh, economist and former Planning Commission member and Prof. Himanshu, economist from JNU.


The scheme will be implemented from January 1, 2013 covering 51 districts across 16 states. The Congress termed the scheme as revolutionary and game-changer, while opposition and the Left have their own share of criticism.


Below is an edited transcript of the discussion on CNBC-TV18.


 Q: None of the important subsidies are getting transferred as cash immediately as is being wrongly understood by media and others. Only 29 schemes are being transferred via cash from January 1 such as scholarships, pensions, funds for children, pregnant mothers. Do you think Odisha is ready for these transfers through bank accounts, smoothly?

Deo: Yes, we have a successful experience of money coming to the account in school and mass education department, women and child welfare department and health department. In case of food and fertilizer it would be difficult.


In 2009, Congress promised the food security bill, rice at Rs 3, wheat at Rs 2,  that is no where to be seen today and we are on the threshold of the next general election. They are mixing the things at the center and are confusing the entire lot in the country.


Q: Are there any glitches in the 14 schemes where money is currently being transferred through the Aadhar scheme?

Deo: No, at present the current scheme which is being transferred from the government corpus to direct beneficiary is through the institutions. Like ‘Janani Suraksha’ in the health department. When a lady comes to the hospital and gets checked, she is issued a card. The name is immediately registered and the money is transferred from the hospital to the bank account there and then. So, there is absolute transparency in that case.


In case of school, girl child in class 9th and 10th is given a scholarship it is done through the school headmaster, DI and CI of the school or of the district. So, there is transparency there as it is being done through institutions. If you take them individually, malpractices come in.

Q: Are you confident that there is no seepage or leakage of funds in these schemes?

Deo: As far as I know, there have been no complaints so far.

Q: Prof Himanshu, you’ve closely studied about a lot of social welfare schemes. Are you satisfied that the cash transfers through Aadhaar account is enough to believe that the process can be scaled up?

Himanshu: I don’t think the scheme is new. There is no introduction of direct cash transfer, it already exists. The programmes for which the cash transfers have been announced are already in the form of cash. So, even your analogy in terms of the stock market where there were physical papers converted into electronic transfers doesn’t hold, because they are getting cashed, anyway.


In most of the state governments even in the poorest, for example in Bihar some of the pensions and scholarships are already going through the bank accounts of the beneficiaries. So, I don’t know what is new in these reforms.


The problem with the public service delivery system that lead to the identification issue is, eligibility, nobody is discussing that issue. This is because wrong beneficiaries have been given the eligibility cards and those who require these benefits are not eligible to get it simply because they don’t have the card. This issue is far more crucial, but the second issue, which is a particular programme for the introduction of Aadhaar, will damage the benefits of the poor if they don’t have the Aadhaar cards.

One more layer of identification proof will make it more indirect rather than a direct cash transfers. So, people who do not have the Aadhaar card will have to go one. Until then they will not get the benefits as is the case of 51 districts.


Even in the 51 districts, Unique Identification Authority of India (UIDAI) could not claim a 100 percent enrolment for Unique Identification (UID). It is less than 80 percent and the remaining 20 percent are likely to be the people from the vulnerable groups, who are suppose to be the beneficiaries.

Q: Dr. Parikh, as Prof. Himanshu and Mr. Deo have pointed that the cash transfers are already happening, there could be problems for people who don’t yet have an Aadhaar card or a bank account. How much time will it take to transfer the non-food and fertiliser programmes through the cash or the bank account system?

Parikh: Currently, the government is planning to transfer scholarships, pensions. This is likely to help people who are more educated and are likely to have an Aadhaar card. Direct cash transfer is not much different than what is currently happening. It is now being done through Aadhaar card. It is a pilot test for the eventual goal of delivering fertiliser and food subsidies or even fuel subsidies through Aadhaar card.


I have been a supporter of distributing these subsidies through a smart card system long ago. As far as a question of not everybody having an Aadhaar card comes, we should think whether this new system is perfect or not. Dr. Himanshu’s study shows that 50 percent of the people below poverty line do not have the targeted Pubic Distribution System (PDS) cards.


If we have 80 percent with Aadhaar card, we have made an improvement over the previous schemes. So, any new system should not be considered super, excellent without any flaw whatsoever.


We should see how better it is than the existing schemes. From that point, there is not much new in it because the real scope for this would be to bring in food, fertiliser and fuel subsidy through Aadhaar card. So you can target it effectively and deliver it. Identifying poor is a huge issue and perhaps we should give up the whole idea of identifying the poor.

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