Open Forum

New Delhi, 6 April 2011

Collapsing Welfare System

BIOMETRIC SMART CARDS VITAL

By Dhurjati Mukherjee

While the GDP growth has been quite high over the last few years --- with the current year expected to witness a 9% jump --- the main challenge before the Government is the need to uplift the poor and backward sections. Thus, reaching welfare to them is a big task.

Over the last decade, the Government’s spending on social welfare grew nearly five-fold, rising from $ 9 billion in 2000 to $ 42 billion in 2010. Over the next five years, India will spend $ 250 billion on services for the poor. The big problem is about $ 100 billion of this, if unreformed will be stolen, misused or otherwise wasted.    

It is estimated that as per a latest study by economists around 55 per cent of the Rs 56,000 crores that the Government will spend this year on subsidized food will never reach the real beneficiaries. At least 20 million ration cards for subsidized food are in the names of ‘ghosts’, people who do not exist, or people who do not actually fall in the category.

Undoubtedly, the welfare system is in a state of collapse as the poor are too scared to assert or reveal their identity and get the benefits. To address this problem the Government decided to provide a 12-digit Unique Identification Number (UID) that will be proof of identity across the country.

The UID will have three biometric details --- iris, photograph and 10 fingerprints --- which will ensure that it does not falter on its mandate to ensure uniqueness across a large population and minimize the likelihood of the system incorrectly rejecting or accepting a person.

It would also help the process of social security reform of clearing ghosts, diversion of funds and other attendant anomalies and help the process of ensuring that subsidies/assistance reach the people for whom they are intended.

If the value of a beneficiary’s food entitlements (presently rice, wheat and kerosene) is transferred to a smart card, he or she can use it anywhere in India. The PDS can also be greatly expanded to regular, retail shops. This will allow better access as only about 57% of BPL households can reach PDS shops. And over Rs 20,000 crores required to in delivering subsidized food would also be saved. 

It is in this context that a smart card gains significance. Around 600 million are expected to be provided UID numbers by 2014. This will also facilitate people having an identity to enter the banking system and avail of facilities. Presently, only one in four people have a bank account which is sure to change in the coming years.

It may be pertinent to mention here that credit facilities at much cheaper rates (than those provided by the money-lenders) would be easily available to rural artisans and small farmers along-with subsidies. Add to this technology which is destined to transform the lives of the poor and economically weaker sections in a big way.

Experts believe that given the country’s info-tech prowess, there is no reason why the UID project would not be successful. It would not only help the poor to prove his/her identity but also easily avail various facilities provided by the State Government or the local panchayat. Tribals in remote districts of Jharkhand, Bihar or Chhattisgarh, homeless residing in jhuggi-jhopri colonies or railway tracks would have no problem in proving their identity. As things stand today, due to lack of address and identity they cannot avail any facilities.

While lot of programmes like the NREGS, Integrated Child Development Programme (ICDS), National Rural Health Mission (NRHM), Rashtriya Swastha Bima Yojana (RSBY) et al have been continuing for years, the results of their success have been far from encouraging. And with the Food Bill expected to come into force, it would be necessary to ensure that the beneficiaries are properly identified and the benefits reach them fully. Clearly, the IUD should augur well in reaching the right beneficiaries with technology extending the required help and support to serve the interests of the poor. 

Particularly, as the social sector spending of the Centre and the States more than doubled between 2004-05 and 2009-10 from Rs 1.73 lakh crores to Rs 4.46 lakh crores and from 5.33% of the GDP to 7.23%. In the coming years, this is expected to further increase in view of the emphasis for inclusive growth to upgrade the living conditions of the poor, specially those residing in the rural areas. But unless the desired beneficiaries can be reached, the purpose would be defeated, as is happening now.

It is expected that the much of the corruption inherent in the system would get weeded and the vicious nexus of politicians and Government officials cornering the benefits of subsidies and grants would not be successful with the introduction of the UID cards. Moreover, the development paradigm would find a new orientation with benefits reaching the lowest tiers of society.

According to a study by McKinsey the Government can save money to boost social sector spending by 25 % by channeling cash via bank accounts. It is in this context that launching cash transfers in lieu of subsidized kerosene, cooking gas and fertilizers gains significance and a Government task force is expected to come out with the modalities so that this could be made operational by March 2012.

Clearly, biometric technology has shown the way forward whereby anyone can make use of this by using fingerprints and irises. It is believed that the biometric smart cards will reduce but might not completely eliminate leakages.

Add to this, with rural banking and use of mobile telephones steadily gaining momentum it would facilitate mobile banking using biometric cards. The process would need 3G broadband to be really effective and this should become a reality within a year. In fact, cash transfers have worked well in Brazil, Mexico, and Chile. These countries give poor families cash transfers in various areas and reports suggest that only the intended beneficiaries get the benefits.  

Thus, the announcement of the Finance Minister in the current Budget to give subsidy for kerosene, LPG and fertilizer in the form of cash transfer is to be welcomed as it is expected that only the intended beneficiaries reap the benefits. Experts believe that leakages would be reduced from 60%o to 15% with cash transfer through smart cards.  ---- INFA

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