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The scheme of things

Published : Dec 7, 2012, 4:22 pm IST
Updated : Dec 7, 2012, 4:22 pm IST

The cash transfer scheme is a flagship programme of the UPA government. It was mentioned in our election manifesto. It has been under discussion for a long time.


The cash transfer scheme is a flagship programme of the UPA government. It was mentioned in our election manifesto. It has been under discussion for a long time. We thought every family in the country should have a bank account in order to receive subsidy benefits. That makes this a factor for financial inclusion. With the present spread of the banking system, this is possible. We have cooperative banks, rural banks, private banks and nationalised banks. Banks are making use of self-help groups, ASHA (Accredited Social Health Activist) workers, cooperatives and schoolteachers to help needy people open accounts. Micro ATMs have proved technically sound. The opening of a bank account has been made possible through the UID (Aadhar) scheme. The government distributes more than3.6 lakh crore as pensions, scholarships and similar payments. This goes from the Central government to the state government and then on to the district administration before reaching the actual beneficiary. The experience is one of inordinate delay for the beneficiary. Under the new scheme, money due to people will reach their bank account directly. This is not a concession by the government but a right of the people. The scheme, which we plan to start in a month’s time, from January next year, simplifies everything. It is efficient and it makes for a non-corrupt delivery mechanism. For example, it is widely recognised that stipulated rations and other benefits are often diverted, duplicated and delayed. These deficiencies can be eliminated under the new system of direct cash transfers. The state governments and the Central government have attempted in various ways, over half a century, to streamline the distribution system, but to no avail. Massive leakages continue. Taxpayers’ money is cornered by crooks. The pilferage has to stop and the money saved can be used for deserving social and financial goals. For the time being, the government is not envisaging to take public distribution system ration and farm fertilisers under the cash transfer system. This is because the fluctuating price of food items and fertilisers may become a problem if money is distributed. The quantity of food items received by the ordinary people should not be affected. There has been criticism that the government’s intention is to cut down subsidies. On the contrary, the government firmly believes that subsidies should continue but they should reach those for whom they are intended. There are some practical difficulties, too. Aadhar has so far reached only 60 per cent of the country. Therefore, for now, the government has only selected 51 districts in 16 states for implementation where Aadhar penetration is more than 85 per cent. In a year’s time, it will be spread to all the 600 districts in India. As against what critics say, the government is not going to back out of supporting needy people in the areas of health and education. It will meet all its commitments in the social sector. That is the primary responsibility of the government. But an efficient delivery system should be welcomed by all, cutting across ideological differences.

$It will end delay and diversion P.C. Chacko ***

There are two aspects to the current debate on the cash transfer scheme. One is to streamline existing schemes that are based on cash transfer, such as widows’ pension or scholarships to Schedule Caste/Schedule Tribe students. (The government has said that there are some 29 schemes to be included in the cash transfer programme.) Cash transfers are allowed in such schemes as they are individual-based. That is a separate thing, and it’s already there. But even here there are complaints. The government has to ensure that the cash reaches people. Besides, the amount is negligible. This must be raised and indexed to prices. The second point is that if a widow gets her pension every month instead of every three months, this will be a big help. Proper bank linkage will certainly help. The scheme is not working satisfactorily. A lot of time and money is wasted in collecting what is peoples’ due. The point is to improve the existing system. To announce this as something entirely new is completely misplaced and unwarranted. However, behind all the hot air, the actual aim of the government is to cut down on subsidies and to have a narrow targeting system. What’s been announced is only the first step towards a much bigger policy change, namely, to cut subsidies. This is against the interest of the working people. Whatever they may say, the government wants to include food subsidy in the cash transfer scheme. Therefore, they have included the cash transfer scheme in the draft Food Security Bill. They want to legalise the cash transfer scheme. They want to substitute public goods and services by a small amount of cash. And that is what we are objecting to. One, the cash that’s going to be given will not be adequate, given the food inflation. Are you going to guarantee a requisite increase in the cash subsidy Of course not. Two, what is the guarantee that the money you give will be spent on what you are giving it for as there are so many demands on cash in a family. There is no guarantee that cash in lieu of subsidised food articles will be spent on food. Malnutrition data won’t change. What’s the main agency charged with the success of this scheme It is banks. But you have already destroyed the country’s public banking sector, and that is a total contradiction in the policy. You are selling off your public sector banks and causing huge staff reductions, and now you want the same truncated banking system, which you are handing over to the private sector, to take over millions and millions of individual accounts. How can this work. It’s quite preposterous. The scheme will also lead to further manipulation of prices at a time when the government is not able to curb food inflation. It will destroy the entire network of food procurement (critical for farmers) and the public distribution system (critical for the public to access food items). When food procurement and PDS are wound up, the consumer is going to be at the mercy of the market. The Left is totally against the cash subsidy scheme for food, fertilisers and kerosene.

$The cash won’t be adequate Brinda Karat ***