To ensure that the government’s $65-billion (Rs 3.25 la­kh crore) worth su­bsidies and welfare measures reach intended targets without pilferage, government of India has put in place a new system to ensure that beneficiaries receive cash directly through banks. The mo­ve is a very innovative way to address recommendation ma­de by Kelkar committee for preparing a fiscal consolidation plan to withdraw all subsidies, saying the Indian economy is poised on the edge of a “fiscal precipice”. Money in electronic cash transfer (ECT) scheme will be directly transferred to Aadhaar or unique identification number linked bank accounts of beneficiaries of around 20 central schemes from January 1 in 51 districts of the country.

So far, 12 ministries have identified schemes covering pensions, scholarships and wages under the national employment guarantee progra­mme and subsidised ration scheme. Other ministries will join the ECT scheme when cash transfers are expanded to 18 states by April 2013. The scheme will cover the entire country by the end of next year. The government hopes this will remove the interface with government officials and minimise corruption. As the prime minister put it, “We have a chance to ensure that every rupee spent by the government is spent truly well and goes to those who truly deserve it.”

The central government did run few pilot projects for the so-called electronic cash transfer mainly in Delhi and Rajasthan. As it has been commented both in print and electronic media, there have been several gaps and the main deficiency has been failure of the government to transfer cash to the bank accounts of beneficiaries. Two issues are critical for the success of this ambitious programme. One, only Aadhaar cardholders will be entitled to the get the cash transfer facility, but at this point, only one fifth of Indians have Aadhaar cards. Nandan Nilekani, who drives the Aadhaar initiative, is confident that larger number is achievable. According to him, in three years, since the launch of the project in 2009, it has enrolled 270 million people. At the moment, at least a million Indians get enrolled a day and in 18 months time, an additional 320 million would get their Aadhaar identity. The chances of ac­hieving success are high as it is a technology driven approach and if government puts in more money in the project, one can reach almost 85 per cent of population in two years’ time. The only thing that one needs to observe and watch is the forging along with creation of duplicate records. And, second is the lack of banking facility. Finance ministry says the database of beneficiaries will be digitised by respective ministries and money will reach the targeted people through business correspondents, including women self-help gr­oups, panchayats and even individuals like school teachers. The banking correspondents will carry hand-held automated teller machines (ATMs) to enable the beneficiary to withdraw cash. Is the banking sector prepared for this? Going by the latest census report, 58.7 per cent Indian households had access to banking services in 2011, up from 35.5 per cent a decade ago. For every 100 new branches opened in fiscal 2012, close to 70 branches were in rural and semi-urban pockets. The comparable figure was 23.2 in fiscal 2005. Despite these, about 40 per cent of India’s adult population still does not have access to banking services. Many economic and banking experts are raising several do­ubts mainly focused on inability to reach everyone because efficacy of the banking correspondent model, on which the success of the cash transfer scheme depends, is not proved as yet for various reasons, including the fees that banks pay to such representatives.

Irrespective of various observations and the possibility of not achieving the targets of reaching the Aadhaar card number; there is one aspect which has a strong merit; this could prove to be change maker in social transformation. Such a transformation could be vividly observed if the government focuses, in the first phase, on all subsidies that are given under education domain. In school education, specific subsidies to students are monetary scholarships, books and stationery (free or at concessional pri­ces), noon meals and transport at concessional prices, whereas in higher education, it is subsidy in fees for socially backward, economically backward and girl students. The families and students are well endowed with capacity to see that they truly get the benefit. Moreover, Un­ique Identification Authority of India (UI­DAI) has recomme­nded a payment platform using micro-ATMs to disburse cash subsidies as it supports functions like deposits, withdrawals, fund transfers and balance enquiries. Thus, the government should concentrate on education domain in cash transfer scheme because one would touch the fertile minds that are the future of India. This would provide rich dividend as its success would create confidence in a population, which is still illiterate and are going to be the real beneficiaries in the long run. There is going to be one more fall out. The entire technology industry would have larger challenge of creating cost effective micro-ATMs and this would create larger job opportunities for the youth.

arun.nigavekar@mydigitalfc.com

(The writer is former chairman of UGC, former vice-chancellor of

University of Pune and founder director of NAAC)