2 Dec. 2012 10:59 PM IST
Cash transfer of subsidy is possibly one of the most ill-thought of measures. It has also hit the first hurdle. Despite the prime minister’s intention to implement from Janauary 2013, there are indications from many departments, particularly the petroleum ministry, that it may be delayed by a year. That brings the earliest date of subsidy transfers, if at all, to October next year.
It also appears to be the first step to eliminate subsidies, as apprehended by CPI-M leader Sitaram Yechuri. Other political parties, including BJP has expressed opposition to the scheme. Yechuri says that subsidy amount would remain fixed but prices of commodities would be continuously increased. Cash transfers would not keep pace with inflation.
The subsidies for 2011-12 were around Rs 216,297 crore or 2.41 per cenr of GDP and 58 per cent of this did not reach the target group
Petroleum ministry has the biggest problem also. It has to transfer Rs 73,637 crore a year on petroleum and fertilizer subsidies to the beneficiaries. But for years together it has not received the subsidy. It is marked in the budget but is not transferred. Some of it has been given to it in long-term bonds as the government did not have that much of cash to give it. Apart government has decided not to transfer fertilizer subsidy under the new scheme.
Many other departments may have similar problems.
In the ultimate, though the scheme would be launched with fanfare, the beneficiaries, whatever little they might be getting, would be the biggest losers. Transferring the money to bank accounts in remote villages is not easy. It has enormous cost on the banking sector. The banking correspondents who move with hand-held equipment in remote areas have faced problems of having cash of up to Rs 20,000 while demands go into lakhs.
There are apprehensions that cash transfers would exclude more poor people. Nikhil Dey of Mazdoor Kisan Sangathan says, “NREGA is a massive cash transfer programme and we have seen that leakages and corruption have not disappeared as a result of wages being credited into the workers’ bank accounts”.
The government has found that the scheme has virtually failed in Tamilnadu as rural banks don’t have enough deposits to make payments to labourers who turn up in large numbers. Apart they lose their wages the day they visit the banks. One bank branch serves at least 15 habitations. One or two branches located there have to cater to about 15,000 NREGA workers.
Chhattisgarh chief minister Raman Singh has opposed the scheme. He says given the limitations of banking and IT infrastructure, the system of cash transfers will lead to increased inconvenience to beneficiaries.
Besides, it also needs to be understood that petroleum subsidies are not just marked for the poor. It has a bigger social purpose of keeping energy prices affordable, transport and cooking costs and inflation in check.
Cash transfer will convolute the basic concept of subsidy. All subsidies are not just targeted merely at the below poverty level people.
Farm subsidies have that primary purpose. That is how the US has been able to have affordable food prices and one of the highest nutrition level for its citizens. Low food prices have been able to keep poverty and inflation at the lowest level in the US.
The new scheme apparently has a design to ultimately do away with all subsidies. Cash transfers would thus become a one-time euphemism, may be more for political purposes to influence the voting pattern in the 2014 elections. It is doubtful that the government would be able to transfer Rs 3.2 lakh crore cash, as announced.
Linking it to Aadhar - UID - card is apparently another folly. The UID has not received parliamentary approval because of apprehension of invasion of privacy of a citizen. Apart it creates a biometrical data base that can be misused.
It is no secret that Adolf Hitler had used such data to eliminate millions of people.
The government is laying too much trust on the UIDAI chairman, Nandan Nilekani’s 70-page “Interim Report” presented to the then Finance Minister Pranab Mukherjee in July 2011.
There has been no debate or discussion either in Parliament, with state governments or outside on the merits of the report. The UK, the USA, Australia and The Philippines rejected such schemes as it impinges on the freedom and privacy of citizens.
A citizen is not just a number and the Constitution guarantees him freedom of movement and basic privacy. Can any government ever ensure that biometrical data like fingerprints would not be misused either by a successive government or by others, including anti-social elements, khap panchayats and terrorists?
It calls for immediate delinking of subsidies from UID. Let us immediately give up UID and save lakhs of crores that the nation is supposed to invest in a scheme which would have the least usage but can open up a Pandora’s box for its misuse. The UID’s own documents admit flaws in their system.
After cash transfers were introduced in Kotkasim in the Alwar district of Rajasthan, offtake of kerosene came down by 80 per cent. An IIT, Delhi study found that it came down, not because there was any corru, but because legitimate beneficiaries were no longer able to access their entitlement. Many did not have bank accounts, others had functioning accounts, but the subsidy either came late or never at all, forcing them to give up on kerosene.
It seems the government is in a great hurry. They have not analysed data well on the pilot districts where such schemes were introduced.
Instances of 17 Latin American countries, including Brazil, Indonesia and some other countries are often cited to stress on cash transfers. But all those countries have far less population, far less poor and much smaller geographical area. In India it all takes gigantic proposition with complex social and political problems.
The government of the day with high fiscal deficit, current account deficit, low value of rupee may have reason to cut on its expenses. But subsidies should definitely not be the first to grapple with. Cash transfers have its costs too.
Let it be stopped for the moment so that deeper thought could go into how to benefit the poor. The scheme can ultimately sideline the poor and heap them with more miseries.