Test cash-transfer scheme before launch warn experts

NC Saxena, member, National Advisory Council and R Jagannathan, editor, Firstpost.com explain to CNBC-TV18 that the cash transfer of subsidy scheme needs to tested before it is replicated across the country to prevent and resolve the challenges that have rendered similar schemes inefficient.

Below is an edited transcript of the discussion on CNBC-TV18 Q: Do you share the fear and criticism with the way the direct cash transfer scheme is being implemented by the government? Saxena: The cash transfer is certainly a welcome step because it will reduce corruption and improve political gains for the government as it can then claim that money is reaching the poor. But it has also got its limitations. Cash transfers will not be able to eliminate the problem of wrong classification of the poor.
Cash-transfer schemes will work where the beneficiaries, i.e. the poor, can be identified. The Aadhaar programme cannot identify the poor, it can only eliminate ghost names. The identification of the poor is only possible by government machinery. Q: Do you have a problem with this in principle or do you have a problem with the manner in which it is being executed and implemented? Jagganathan: I don't have a problem in principle with cash transfers because that’s a way of efficiently delivering the cash to the right person without having too many intermediaries in the middle. However cash transfers work only where the intention is to deliver cash to the beneficiary, but if cash is going to be given in lieu of food, you don't know what the cash will be used for, how it is going to be spent and ultimately, it may not serve the purpose of providing adequate nutrition.
The government faces the risk of a major crisis if it tries to rush and implement the cash transfer scheme in one year and reach out to 600 million people across 20 states to gain political mileage instead of first testing the scheme. Q: So, you believe the premature launch is essentially because of the government's desire to gain political capital? Jagganathan: I don’t think it’s prematurely being launched. But I think it will be a premature launch if it is extended to the whole of the country without any pilot projects. Q: Are you fearful of the fact that we are perhaps going to roll into another inefficient system because of the haste and the manner in which it is being executed? Saxena: In fact in the PDS system, the cash-transfer cannot be tried at all. The PDS has to be viewed along with the minimum support price (MSP). Once you buy 60 million tonnes of foodgrain from the farmers you need an outlet. So, therefore this cash-transfer scheme can be tried only in a limited sense. Any attempt towards large scale replication of the cash-transfer via the PDS is just not possible. Q: What do you see as being the big challenges to this scheme? Jagganathan: The challenges are at two levels. At the first level, the government has to exclude the strata of society that is not entitled to this subsidy and this poses a challenge to government that is focused on trying to give benefits to everybody for political mileage.
At the ground-level, the delivery of the cash benefit to the intended beneficiary is full of various challenges. So problems in the last-mile delivery could derail the entire scheme and that is why the scheme should not be rushed through.