Why is there little or practically no information in the 2013-14 budget on Prime Minister Manmohan Singh and Finance Minister P Chidambaram’s pet scheme to bring about direct cash transfer payments to eventually replace price subsidies for food, fuel and fertiliser products? Who are going to be the real beneficiaries of the direct cash transfers via Aadhaar-linked bank accounts using the unique identification (UID) platform?
Food will not immediately be replaced by direct cash transfers, but the ultimate objective is to do so, especially with the impending passage of the National Food Security Bill. The union cabinet has approved the draft legislation which is expected to be introduced in the current session of Parliament. An election promise of 2009, the bill has had few supporters in the United Progressive Alliance (UPA) government. If it is now being pushed through it is surely on account of electoral considerations with an eye to the next Lok Sabha elections. But the food subsidy budgeted for 2013-14 is only Rs 90,000 crore (compared to the revised figure of Rs 85,000 crore in the current financial year), though the finance minister has said he will provide Rs 10,000 crore more. This will still be grossly inadequate for any food security programme. The fertiliser subsidy, on its part, has actually come down quite significantly, from the actual figure of Rs 70,013 crore in 2011-12 to the budgeted Rs 65,971 crore in 2013-14. The revised petroleum subsidy was Rs 96,880 crore in 2012-13 (revised estimates) and has been put at a mere Rs 65,000 crore next year. Should we not see all these figures in the light of what is on the anvil?
For political reasons, the government has been promoting the direct cash transfer scheme as an anti-corruption measure. But the real objective of the government is, of course, that it sees this as the way to reduce the “major subsidies” bill. On food, for example, given food inflation at more than 10% per annum, if the government keeps a check on the direct cash transfer payments, indeed, ensures that its real value per average household, ie, relative to consumer food price inflation rate, is not protected, then it will gradually reduce the major subsidies bill as a proportion of the gross domestic product (GDP).
Beginning this year, the government has initiated the Direct Benefit Transfer programme in 26 schemes (mainly for payment of scholarships of various kinds), confining it to persons who have a UID card and a bank account linked with the UID interface. But next month, the direct cash transfer scheme is to be introduced in the public distribution system (PDS) in six union territories. So the government will eventually presumably do away with the PDS in these union territories. But the direct cash transfer scheme is to be eventually scaled up to the national level. To understand the implications, keep in mind that the UID is not just for the poor or those eligible for cash transfers who have to procure UID cards. The UID involves the recording of photographs, fingerprints and iris scans of the whole population, and the entire information is then stored in a centralised, national security database. In 2013-14, some 600 million persons are expected to be photographed, fingerprinted and iris scanned. Most of the 6,00,000 villages in the country do not have a bank branch, but the government envisages the opening of some 200 million accounts, all interfaced with the UID. What is, in effect, being created is an information technology (IT) infrastructure that links all bank accounts to the UID, and, this, at the public expense.
The poor, in whose name all this is being done, have no savings worth the name and the banks do not give them loans because they lack the collateral security. We are not exaggerating; the pilot schemes that we just referred to are going to be “expanded nationwide to various transfer of all benefits” (“Statements . . . as required under the Fiscal Responsibility and Budget Management Act”, Union Budget 2013-14). Of course, the poor will have to deal with the banks via their banking correspondents (BCs) who will no doubt get their cut from the banks via the government coffers, but who is to stop these BCs from charging their customers more than the banks’ approved rates?
Think of it, a whole centralised, national security database is being created that can potentially be used to monitor the people enrolled in the UID, all this with no democratic accountability. Besides, via the banks, the financial system, much of it private-profit oriented, will have in place access to this database and thousands of crores of rupees under direct cash payment transfers, in effect very large additional sums of money, routed through them. And, the increasing flow of such benefits will be accompanied by the gradual dismantling of the PDS.
What then about diesel, kerosene, LPG, fertiliser and electricity subsidies? Basically, the pricing policy for subsidised goods will change to make the total amount of the subsidy “affordable” to the government and the subsidies will be better targeted, once more via Aadhaar-linked bank accounts using the UID platform. Overall, the expenditure on “major subsidies” will be targeted to come down from 2% of GDP in 2013-14 to 1.8% in 2014-15 and 1.6% in 2015-16. After all, doesn’t the UPA government fully agree with Moody’s, Standard and Poor’s, and Fitch that its major subsidies bill is “unproductive expenditure”? And, isn’t the Bharatiya Janata Party also won over to this idea of direct cash transfer payments? The biggest two beneficiaries of the whole operation, especially of the UID platform and the integrated database it has created, will, of course, be so-called national security and the financial, especially the banking, system.
This article was first published as Editorial in Economic & Political Weekly (30 March 2013).