NEW DELHI: Come July and you will have cash equivalent to your cooking gas subsidy in your bank account, marking the biggest shift in delivery of handouts which could help government curb leakages and reduce the strain on public finances.
The switch is part of the ambitious three-phase deadline set by Prime Minister Manmohan Singh to make the "kind-to-cash" transition based on the Aadhaar numbers.
At a meeting chaired by Pulok Chatterjee, oil companies, finance and petroleum ministries and the Unique Identification (UID) Authority agreed to put in place a cash transfer mechanism in 50 districts with high Aadhaar penetration by January 1. The cash transfers will start by April 1 in all the districts, where the Aadhaar enrolments are underway. Government has set July 1 as the deadline for the countrywide rollout.
Under the proposed plan, everyone with a gas connection will have to go to their gas dealers and preferred banks and submit their Aadhaar number. The government will transfer the money into your back account at the start of each month once the cash transfers start. The amount could be used to buy cooking gas at market rate. So, if a cylinder costs Rs 900 per cylinder, you will get Rs 450 for each cylinder till you have exhausted the quota of subsidized cylinders: from six to nine depending on the state where you live.
The vigorous push for cash transfers is seen as aimed at marrying good economics with smart politics, with the drivers hoping that the switch can prune the subsidy bill without hurting the voters. Rather, an assured amount of cash in millions of bank accounts across the country, so goes the reasoning in certain quarters, can generate a fund of goodwill for the government in the build up to the 2014 parliamentary polls.
So far, oil companies have only undertaken a pilot project in Mysore, where around 20,000 connections are now mapped to Aadhaar, but cash transfers into individual accounts are facing hiccups due to insistence by banks that subsidy amount be deposited without using Aadhaar.
In addition, officials said, there are at least three crucial missing links.
For starters, not everyone has an Aadhaar number, which is at the heart of the scheme, with states like Uttar Pradesh yet to join the identification drive. Currently, there are 21 crore numbers, which would cover roughly five-six crore households, while there are 14 crore cooking gas connections. Nandan Nilekani's UID Authority has been tasked with registering 60 crore individuals but the deadline for this is March 2014. The agency has told the PMO that it can expedite the process but speeding it up to that extent may be tough. As a result, oil marketing companies have now been asked to step up the UID registration drive and take the penetration to at least 80% of the population.
The absence of bank accounts is seen as another hurdle given that the last census showed that just around 58% of households in India have an account. Although the finance ministry is asking banks to ensure that each household has at least one account, a new mechanism for fund transfer based on Aadhaar is also being proposed. Those who have a gas connection and Aadhaar but no bank account will benefit from the new system as the amount can be claimed from a bank linked to the oil company. You will need to go to the designated bank's branch, fill up a withdrawal slip and submit your Aadhaar to claim the subsidy, an official said.
To ensure that an individual does not end up getting subsidy on multiple connections, oil companies have to scrub the list but so far only 2.6 crore of the 14 crore connections have been verified. Officials, however, said that this was a comparatively easier task to achieve.
However, the government is keen to ensure that the mechanism is in place in the penultimate year before the 2014 elections. Sources said that the PMO has asked oil companies and the ministries to finalize a roadmap by the end of the month.
Times View
The fact that Aadhar cards are yet to be handed out to a majority of people and several crore do not have bank accounts either presents obvious problems for the proposed cash transfer system of doling out subsidies. It is important, therefore, that careful thought goes into figuring out how these hurdles are to be surmounted and that the implementation too lives up to the plan. After all, the idea behind moving to cash transfers is to improve the mechanism of delivering subsidies. If that does not happen because of faulty design or execution of the mechanism, it could well spell the end of a promising experiment.
