Home / Opinion / Online-views /  Can Aadhaar plug leakages in direct benefit transfers?

The Supreme Court in its 13 March order on mandatory seeding of Aadhaar with various services gave partial relief to the middle class by indefinitely extending the deadline of linking Aadhaar numbers with Permanent Account Number (PAN) and mobile numbers but it refused to extend the same to the poorest who avail of various public services and transfers from the state.

The supposed argument in favour of Aadhaar being important rests on the assumption that such a process will reduce leakages in delivery of public services. There are now numerous articles and papers which debunk these arguments—not only on the necessity of Aadhaar in reducing leakages but also the extent of exclusion with Aadhaar-based authentication.

The expectation that direct benefit transfer (DBT) will lead to reduction in leakages over the existing system of in-kind transfer of grains as part of the public distribution system (PDS) has led to the government experimenting with DBT in Chandigarh, Puducherry and Dadra and Nagar Haveli. All three primarily urban areas are Union territories with better urban infrastructure in terms of banks compared to other urban areas.

However, a study conducted by NITI Aayog found that the extent of leakages in DBT through Aadhaar-seeded bank accounts has not been lower than the earlier estimates of leakages under the PDS. The study was conducted between January 2016 and March 2017 in these three Union territories.

The study found that on average, one-third of respondents reported that they have not received the DBT transfers compared to the official record which showed that everybody has been transferred the amount. While the extent of leakages reported here is almost similar to the extent of leakages reported in the case of PDS from the NSSO 2011-12 surveys, these are not strictly comparable to the PDS leakages.

While the PDS leakages are arrived at using the NSSO consumption surveys matched with official records, these were directly matched with passbooks and therefore, are a much more reliable estimate of leakages than the PDS leakages which are estimated upper bound of leakages in the PDS. Unlike the PDS leakages which include exclusion as well as quantity fraud, these are estimates of exclusion alone. Clearly, a move towards DBT has not yielded any efficiency gains as far as leakages are concerned even in the states and Union territories with the best infrastructure and a primarily urban population. These are likely to be much higher in the case of rural areas with low penetration of financial services, network connectivity and large-scale illiteracy.

Of those who received benefits, almost half reported irregular payments. Only one-sixth reported receiving SMS-based information on their mobile phones, despite Aadhaar seeding. Within this one-sixth, more than 80% reported that the information was in English and not in a local language. In almost all cases, the time taken to access DBT was more than with PDS and beneficiaries spent more money for purchasing the same quantity of food than from the PDS.

The excess monetary cost in case of Chandigarh was Rs89 per household per month, Rs125 in Puducherry and Rs30 in Dadra and Nagar Haveli. The excess cost was almost one-fourth the total value of transfer from DBT. Almost two-fifth of the beneficiaries reported some grievance from the DBT system.

While DBT does not do any better than the much maligned PDS, there is also evidence to show that it is less effective in combating malnutrition compared to the PDS system. The impact of DBT is only half of the impact if grains are delivered in kind. But then why does the government persist with a flawed DBT system and insist on Aadhaar linkages for the most essential of public services such as PDS, NREGA and the midday meal scheme?

The answer is less to with the efficacy of Aadhaar and DBT in improving public service delivery, but more to do with safeguarding the very foundation of Aadhaar, which seeks to replace all other forms of identities with this ubiquitous number.

The only defence that the government is left with in the face of mounting evidence of data leaks and authentication failures is the millions of citizens who are required to use it with no choice to opt out of it.

It is not the millions of citizens who need Aadhaar for efficient delivery of public services, but the Aadhaar system which derives its raison d’être by linking Aadhaar with these services. While the Supreme Court has allowed partial relief to the middle classes, it has failed to provide justice to the millions of poor who actually look forward to the Supreme Court to save them from the tyranny of Aadhaar.

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