PolicyCan Aadhaar-enabled cash transfer schemes deliver?Kaushiki- December 20, 2012Recently, the governmentannouncedthat it plans to transfer benefits under various schemes directly into the bank accounts of individual beneficiaries.  Benefits can be the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) wages, scholarships, pensions and health benefits.  Beneficiaries shall be identified through the Aadhaar number (Aadhaar is an individual identification number linked to a person’s demographic and biometric information).  The direct cash transfer (DCT)systemis going to be rolled out in 51 districts, starting January 1, 2013.  It will later be extended to 18 states by April 1, 2013 and the rest by April 1, 2014 (or earlier).  Presently, 34schemeshave been identified in 43 districts to implement the DCT programme. Currently, the government subsidises certain products (food grains, fertilizers, water, electricity) and services (education, healthcare) by providing them at a lower than market price to the beneficiaries.  This has led toproblemssuch as high fiscal deficit, waste of scarce resources and operational inefficiencies.  The government is considering replacing this with an Aadhaar enabled DCT system.  It hasclaimedthat the new system would ensure timely payment directly to intended beneficiaries, reduce transaction costs and leakages.  However, many experts have criticised both the concept of cash transfer as well as Aadhaar (seehere,here,hereandhere). In this blog, we provide some background information about cash transfer, explain the concept of Aadhaar and examine the pros and cons of an Aadhaar enabled direct cash transfer system.Background on cash transferUnder the direct cash transfer (DCT) scheme, government subsidies will be given directly to the beneficiaries in the form of cash rather than goods.  DCTs can either be unconditional or conditional.  Under unconditional schemes, cash is directly transferred to eligible households with no conditions. For example, pension schemes.  Conditional cash transfers provide cash directly to poor households in response to the fulfillment of certain conditions such as minimum attendance of children in schools.  DCTs provide poor families the choice of using the cash as they wish.  Having access to cash also relieves some of their financial constraints.  Also, DCTs are simpler in design than other subsidy schemes.  Even though cash transfer schemes have a high fixed cost of administration when the programme is set up, running costs are far lower (seehere,hereandhere). Presently, the government operates a number of DCT schemes.  For example,Janani Suraksha Yojana,Indira Awas YojanaandDhanalaksmischeme. In his 2011-12Budget speech, the then Finance Minister, Pranab Mukherjee, had stated that the government plans to move towards direct transfer of cash subsidy for kerosene, Liquified Petroleum Gas (LPG), and fertilizers.  A task force headed by Nandan Nilekani was set up to work out the modalities of operationalising DCT for these items.  This task force submitted itsreportin February 2012. TheNational Food Security Bill, 2011, pending in Parliament, includes cash transfer and food coupons as possible alternative mechanisms to the Public Distribution System.Key features of AadhaarThe office ofUnique Identification Authority of India(UIDAI) was set up in 2009 within the Planning Commission.  In 2010, the government later introduced theNational Identification Authority of India Billin Parliament to give statutory status to this office.The Aadhaar number is a unique identification number that every resident of India (regardless of citizenship) is entitled to get after he furnishes his demographic and biometric information.  Demographic information shall include the name, age, gender and address.  Biometric information shall include some biological attributes of the individual (such as fingerprints and iris scan).  Collection of information pertaining to race, religion, caste, language, income or health is specifically prohibited.The Aadhaar number shall serve as proof of identity, subject to authentication.  However, it should not be construed as proof of citizenship or domicile.Process of issuing and authenticating Aadhaar number: First, information for each person shall be collected and verified after which an Aadhaar number shall be allotted.  Second, the collected information shall be stored in a database called the Central Identities Data Repository.  Finally, this repository shall be used to provide authentication services to service providers.For a PRS analysis of the Bill, seehere.Aadhaar enabled direct cash transfersAdvantagesIdentification through Aadhaar number:Currently, the recipient has to establish his identity and eligibility many times by producing multiple documents for verification.  The verification of such documents is done by multiple authorities.  An Aadhaar enabled bank account can be used by the beneficiary to receive multiple welfare payments as opposed to the one scheme, one bank approach, followed by a number of state governments.Elimination of middlemen:The scheme reduces chances of rent-seeking by middlemen who siphon off part of the subsidy.  In the new system, the cash shall be transferred directly to individual bank accounts and the beneficiaries shall be identified through Aadhaar.Reduction in duplicate and ghost beneficiaries:The Aadhaar number is likely to help eliminate duplicate cards and cards for non-existent persons or ghost beneficiaries in schemes such as the PDS and MNREGS.DisadvantagesLack of clarity on whether Aadhaar is mandatory:According to UIDAI,it is not mandatory for individuals to get an Aadhaar number.  However, it does not prevent any service provider from prescribing Aadhaar as a mandatory requirement for availing services.  Therefore, beneficiaries may be denied a service if he does not have the Aadhaar number.  It is noteworthy that the new direct cash transfer policy requires beneficiaries to have an Aadhaar number and a bank account.  However, many beneficiaries do not yet have either.  (Presently, there are 229 millionAadhaar number holdersand 147 millionbank accounts).Targeting and identification of beneficiaries:According to the government, one of the key reasons for changing to DCT system is to ensure better targeting of subsidies.However, the success of Aadhaar in weeding out ‘ghost’ beneficiaries depends on mandatory enrollment.  If enrollment is not mandatory, both authentication systems (identity card based and Aadhaar based) must coexist.  In such a scenario, ‘ghost’ beneficiaries and people with multiple cards will choose to opt out of the Aadhaar system.Furthermore, key schemes such as PDS suffer from large inclusion and exclusion errors.  However, Aadhaar cannot address errors in targeting of BPL families.  Also, it cannot address problems of MNREGS such as incorrect measurement of work and payment delays.Safeguard for maintaining privacy:Information collected when issuing Aadhaar may be misused if safeguards to maintain privacy are inadequate.  Though theSupreme Courthas included privacy as part of the Right to Life, India does not have a specific law governing issues related to privacy.  Also, the authority is required to maintain details of every request for authentication and the response provided.  However, maximum duration for which such data has to be stored is not specified.  Authentication data provides insights into usage patterns of an Aadhaar number holder.  Data that has been recorded over a long duration of time may be misused for activities such as profiling an individual’s behaviour.ParliamentFirst no-confidence motion of the 17th Lok Sabha discussed todayNiranjana Menon- August 8, 2023Discussion on the first no-confidence motion of the 17thLok Sabha began today.  No-confidence motions and confidence motions are trust votes, used to test or demonstrate the support of Lok Sabha for the government in power.  Article 75(3) of the Constitution states that the government is collectively responsible to Lok Sabha.  This means that the government must always enjoy the support of a majority of the members of Lok Sabha.  Trust votes are used to examine this support.  The government resigns if a majority of members support a no-confidence motion, or reject a confidence motion.So far, 28 no-confidence motions (including the one being discussed today) and 11 confidence motions have beendiscussed.  Over the years, the number of such motions has reduced.  The mid-1960s and mid-1970s saw more no-confidence motions, whereas the 1990s saw more confidence motions.Figure1: Trust votes in ParliamentNote: *Term shorter than 5 years; **6-year term.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.The no-confidence motion being discussed today wasmovedon July 26, 2023.  A motion of no-confidence is moved with the support of at least 50 members.   The Speaker has the discretion to allot time for discussion of the motion.  TheRules of Procedurestate that the motion must be discussed within 10 days of being introduced.  This year, the no-confidence motion wasdiscussed13 calendar days after introduction.  Since the introduction of the no-confidence motion on July 26, 12 Bills have been introduced and 18 Bills have been passed by Lok Sabha.  In the past, on four occasions, the discussion on no-confidence motions began seven days after their introduction.  On these occasions, Bills and other important issues were debated before the discussion on the no-confidence motion began.Figure2: Members rise in support of the motion of no-confidence in Lok SabhaSource: Sansad TV, Lok Sabha, July 26, 2023; PRS.Figure3: Number of days from introduction to discussion on no-confidence motionsNote: Number of days implies calendar days.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.On average, no-confidence motions (excluding the one being discussed today) have been discussed for 13 hours over three days.  Discussions have lasted longer than 20 hours on four instances, most recently in 2003.  Today’s no-confidence motion was allotted 12 hours discussion time by theBusiness Advisory Committee.Following the discussion, the motion is put to vote.  26 out of 27 no-confidence motions (excluding the one being discussed today) have been voted upon and rejected.  This means that no government has ever had to resign following a vote of no-confidence.   On one occasion, in 1979, the discussion on a no-confidence motion against the Morarji Desai government remained inconclusive.  He resigned before the motion was put to vote.  50% of all no-confidence motions (14 out of 28) were discussed between 1965 and 1975.  Of these, 12 were against governments headed by Indira Gandhi.Figure4: Duration of discussion on no-confidence motionsNote: This graph excludes the no confidence motion moved on July 26, 2023.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.In comparison, confidence motions have a more varied history.  The first motion, brought in 1979 to demonstrate confidence in Charan Singh’s government, was not discussed at all.  The Prime Minister resigned before the discussion could take place.  Since then, 11 confidence motions have been discussed in Lok Sabha, with nine occurring in the 1990s.  During this period, several coalition governments were formed, and Prime Ministers sought to prove their majority throughconfidence motions.   These motions have been discussed, on average, for 12 hours over two days.Figure5: Duration of discussion of confidence motionsSource: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.Of the 11 confidence motions discussed in Lok Sabha, seven were accepted.  On three instances, governments had to resign as they could not prove that they had the support of the majority.  On one instance in 1996, the motion was not put to vote.  Following an eleven-hour discussion on this confidence motion, Prime Minister Atal Bihari Vajpayee announced his intention to resign on the floor of the House.  He resigned 16 days into his term.Vajpayee became Prime Minister again in 1999, and faced another confidence motion.   This time, it was put to vote.   The motion was defeated by a margin of one vote.  This has been the closest result on a trust vote in the history of Lok Sabha.  The next closest result was when a motion of no-confidence against P V Narasimha Rao’s government was defeated by 14 votes in 1993.  In most cases, results have been in favour of the government by a large margin.«12345678910»
PolicyCan Aadhaar-enabled cash transfer schemes deliver?Kaushiki- December 20, 2012