Opinion Saving a good idea

Originally,the idea behind Aadhaar came from a security point of view. At that time,under the NDA,identity numbers were to be given to Indian citizens,not residents. The subsidy angle came later. But because the UPA wished to duck security and immigration,we switched focus to subsidy-targeting and from citizens to residents. Given excess information (beyond name,age,residence,biometry) that is now being collected,there are serious issues about privacy of data and profiling. Indeed,some people from UIDAI have tacitly suggested data collected can be auctioned to generate revenue for UIDAI. Other than photographs,functioning of biometry machines also seems to be sub-optimal. But let’s leave that aside. In Davos,the deputy chairman of the Planning Commission stated,“We will simply make it compulsory for those benefiting from government programmes to register for the UID number.” We should therefore stop beating around the bush. Aadhaar is mandatory for obtaining subsidies and the Nilekani task force has to develop plan and pilots for CCT on that basis.

But let’s take another problem that no task force can resolve. It has to be resolved by the government and the UPA hasn’t been successful in handling it. CCT is contingent on that too. Subsidy entitlements are for those who are BPL (below the poverty line). We have a problem because those who should have been issued BPL cards haven’t been issued one (exclusion issue) and because those who shouldn’t have been issued BPL cards have been issued one (inclusion issue). If we have studies that show the PDS is being diverted to non-BPL,we should be careful. Some of that may be leaked to those who should have been given BPL cards,but haven’t.

What have we done on poverty numbers? We have tinkered with poverty lines,using NSS,61st round,2004-05 data and have generated different numbers of the poor. We will do the same when NSS,66th round 2009-10,surfaces. This doesn’t get anywhere,more so because NSS is a survey,not a census. Since the Ninth Plan,we have talked about decentralised and participatory identification of BPL and indicators have evolved during the Tenth Plan.

Let us have another quote,this time from paragraph 32 of the president’s address to Parliament in June 2009: “Targeted identification cards would subsume and replace omnibus Below Poverty Line (BPL) list… Identification of beneficiaries for other programmes which currently use the omnibus BPL list would improve identification based on programme objectives with the common underlying principle that all identification of beneficiaries will be done through gram sabhas and urban local bodies and the list placed in the public domain to be open to challenge.” Lest we forget,that paragraph 32 was supposed to be implemented in the first 100 days of UPA 2. Had the CTT task force had force,and not just a task,this would have been implemented by now. And food subsidies,not just petroleum products and fertilisers,would have been included in the

list of items.

Exclusion of food means the government can’t handle BPL identification and the National Advisory Council. As an equally important issue,have we implemented market-based price determination of petroleum products after the administered price mechanism (APM) was scrapped in 2002? That’s indeed the party line. But retail prices of petroleum products are not quite market-determined. Apart from indirect taxes,import parity principle is hardly transparent. Therefore,there will be lack of clarity about how retail prices of kerosene and LPG,and consequent subsidy calculations,are worked out. LPG will be described as an urban middle-class consumption item. Others will rightly point out that NSS data show this is no longer the case. Kerosene will be described as a poor person’s consumption item. Food has been excluded. For slightly different reasons,petroleum products will also be excluded. That leaves fertilisers,where we have already accepted nutrient-based and direct transfers.

This doesn’t mean CCTs are a bad idea. Far from it,and several countries,including developing ones in Asia and Latin America,have successfully experimented with CCTs. Especially in education,there are also experiments with education vouchers in more than one state. However,what is the Nandan Nilekani task force going to examine? Is it a cash transfer or is it a voucher? From the nomenclature of the task force,we are talking about a cash transfer. But let’s think of a voucher first. A voucher offers choice,competition and efficiency. However,exercise of vouchers requires existence of choice on the supply-side. One can’t use food stamps if there is only one PDS shop within a radius of 10 km. Yes,supply-side responses occur,but they don’t occur instantly.

Moving on to cash transfers,if they are conditional,they are de facto not that different from vouchers and there will be universal resistance (on several counts) if we move on to unconditional cash transfers. On CCTs,shouldn’t we learn from what is now acknowledged to be a mistake,making NREGA payments mandatory through banks and post office accounts? That required a level of financial inclusion we don’t have. If we wish to successfully introduce CCTs,those pilots should be in so-called elitist and urban areas,where delivery is less of a problem.

The writer is a Delhi-based economist

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