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Cash transfer debut today

New Delhi, Dec. 31: Over two lakh beneficiaries of welfare schemes will from New Year’s Day see the money flow straight into their bank accounts with the launch of the Centre’s cash-transfer scheme, a “game-changer” to replace a system under which it costs Rs 3 to send a rupee.

The transfer scheme will be launched tomorrow in 20 districts and cover seven welfare plans, mostly stipends for weaker sections. But food, fertiliser and fuel subsidies ‘ which guzzle the bulk of subsidies the direct transfers aim to reduce ‘ will not be covered in the initial phase.

The 20 districts are part of a larger batch of 43 spread over 15 states where the scheme will be launched by March to cover BPL families, but none will be in Bengal. The states chosen are those that have made rapid progress in issuing Aadhaar, the multi-purpose unique identity cards.

The spread of bank branches was another key factor. The states are Punjab, Delhi, Madhya Pradesh, Rajasthan, Jharkhand, Haryana, Tamil Nadu, Andhra, Maharashtra, Kerala, Karnataka, Goa, Jammu and Kashmir, Daman and Diu and Puducherry.

“We are proceeding with caution, 20 districts from January 1. In the seven schemes, the money will be transferred using the UIDAI platform,” finance minister P. Chidambaram said today. UIDAI or the Unique Identification Authority of India is in charge of the Aadhaar project.

The seven welfare plans include matric scholarships for SCs, STs and OBCs, Indira Gandhi Matritva Sahayata Yojana (for pregnant women), Dhanalakshmi scheme and stipends for SC/ST job-seekers.

Other than the first 20 districts, the scheme will be rolled out in 11 districts from February 1 and 12 more from March 1. “We have been moving with great caution so we don’t make mistakes,” Chidambaram said, calling the scheme a “game-changer” in governance. All districts in the country will be covered by end 2013, he added.

The payments will be transferred directly to the beneficiaries’ Aadhaar-linked bank accounts ‘ those opened with Aadhaar cards as ID proof.

Those who don’t have such cards but are eligible for the benefits will also get the payments through “bank correspondents”, officially appointed intermediaries who will receive the payments in their accounts and then transfer it to the eventual beneficiaries against receipt papers.

Anganwadi (social health group) workers, kirana store owners, members of co-operative societies are among some who could be the intermediaries. The aim is to phase out such intermediaries as more Aadhaar cards are issued.

On food and fertiliser subsidies, the current system will continue, Chidambaram said. “At the moment, there is no intention to transfer subsides on food, fertiliser, diesel and kerosene. Here, existing system will continue because there are complex issues.”

On LPG, which accounts for the bulk of fuel subsidies, the minister said: “I don’t know when it will be covered.”

Prime Minister Manmohan Singh last month said the scheme was aimed at ensuring that the subsidies of over Rs 3 lakh crore reach the right people. Finance ministry officials said it costs the government Rs 3 to transfer one rupee to the pockets of beneficiaries. The rest is lost in administrative expenses, waste and corruption.

Poll factors are at play, too. The UPA hopes to make the cash transfers a key plank in the 2014 polls, hoping the scheme will help it win voter support, much like the NREGA, the rural job scheme, and farm loan waivers had helped the ruling alliance cruise to victory in 2009.

Advocates of the scheme have cited a recent World Bank study that suggests a direct link between cash transfers and voting behaviour. The study found that such beneficiaries prefer any party that implements cash transfers.

The biggest and best known of all cash transfer schemes in the developing world is the Bolsa Familia in Brazil, catering to over 12 million families.

Mumbai launch

Mumbai and its suburbs are among the six districts in Maharashtra where the scheme will be launched tomorrow. The state is among the leaders in Aadhaar cards.

[…]

Work together to make cash transfer scheme a success, says Manmohan


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governmentgovernment departments
science and technologytechnology (general)

Ahead of the rollout of the United Progressive Alliance (UPA) government’s ambitious direct electronic cash transfer scheme on January 1 next year, Prime Minister Manmohan Singh on Monday directed ministries concerned to work in close coordination, focusing on enabling the poor to open bank accounts smoothly.

Dr. Singh also made it a point to ask the Union Finance Ministry and the Unique Identification Authority of India (UIDAI) to work together to ensure the scheme’s success. “I would expect the Finance Ministry and the Unique Identification Authority to work in close coordination to achieve a collective goal [of financial inclusion],” he said in his closing remarks at the first meeting of the national committee on cash transfers that he heads.

Money 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. 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 UPA is hoping the cash transfer scheme would do for it in the 2014 general elections what the farm loan waivers and the MGNREGS did in 2009.

So far, 12 ministries have identified schemes covering pensions, scholarships, wages under the national employment guarantee programme and subsidised ration to be covered under this scheme. Other ministries will join the 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.

So far the UIDAI has issued Aadhaar numbers to only 210 million people, but half of the rural populace does not have a bank account. “The twin pillars for the success of the system of direct cash transfers that we have envisioned are the Aadhaar platform and financial inclusion. If either of these pillars is weak, it would endanger the success of the initiative,” Dr. Singh said.

To move closer to the goal of financial inclusion, he added, the banking system perhaps needs to integrate the post office network.

Keywords: electronic cash transfer scheme

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