For Congress, cash transfers may be new MGNREGS

New Delhi: The Congress party staked claim to the government’s radical direct cash transfer programme that seeks to use the Aaadhar number, and a network of banks across the country to transfer subsidies and other benefits directly to the bank accounts of beneficiaries—thereby increasing the efficiency of and reducing leakages in government schemes.

add_main_imageFinance minister P. Chidambaram and rural affairs minister Jairam Ramesh addressed a meeting on this at the All India Congress Committee’s head office, sending out a clear signal that cash transfers will be to the United Progressive Alliance’s election campaign in 2014, what the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) was to its campaign in the 2009 national elections.

Chidambaram said on Tuesday that the benefits of 29 welfare schemes of the government would now be directly transferred to beneficiaries in 51 districts starting January in a pilot programme and then will be extended to 18 states from April. He added that in all, the government has identified 42 such schemes. Subsidies related to food and fertilizers have been excluded from the initial list, perhaps on account of the controversy their inclusion is likely to generate. Chidambaram added that only schemes that are currently amenable to cash transfers are being selected, which underlines the government’s prudence and caution. “Food is a complex issue and fertilizer is more complex than food... They are not being put into the system now as there are many issues that need to be addressed.”NextMAds

The government plans to start rolling out cash transfers in other parts of the country by April 2013.

N. Bhaskara Rao, a political analyst who has closely followed developments in the Congress party, said the move looks like an attempt by the party to create a positive environment similar to what it did with MGNREGs in the previous election. “It certainly creates a favourable environment provided they implement it well along with involving and sensitizing stakeholders at the ground level,” he said, adding that it was a “good talking point” for India’s oldest political party. The United Progressive Alliance (UPA) government also plans to bring the national food security Bill soon, said Ramesh. Analysts see this legislation too as a populist one, fitting in with the Congress party’s objective of reaching out to the common man (or the aam aadmi).

In 2009, the Congress reaped the electoral benefit of the MGNREGS job guarantee scheme and the farm loan waiver that wrote off around ₹ 70,000 crore of agricultural loans. Back then, the party used the slogan “Congress ka haath, aam aadmi ke saath” (The hand of the Congress is with the common man; the hand happens to be the party’s symbol) to good effect, winning 206 seats in the Lok Sabha.

Interestingly, on Tuesday, there was no mention of the aam aadmi, maybe because activist-turned-politician Arvind Kejriwal named his new party the Aam Aadmi Party. Instead, Ramesh, closely associated with coining the strategy and the slogans for the party in the 2004 and 2009 elections, repeatedly stressed the slogan the government and the party have coined for cash transfers: “Aapka paisa; aapke haath (Your money in your hand).”

Still, the government needs to address several challenges related to its latest, most ambitious exercise. Only 60% of the country will have Aadhaar numbers (the Unique Identification Authority has so far enrolled 270 million people, issued 220 million numbers, and is going at the rate of a million enrollments a day) by 2014, and just around the same number have access to a bank account today. Moreover, experts are divided on whether subsidies such as food should be at all replaced by cash. While Chidambaram said there are no immediate plans to do so, Ramesh added that the government’s aim is to not just transfer money to the bank accounts of people, but also ensure that they get it in their hands easily.

He also said the first meeting of the direct cash transfer committee headed by Prime Minister Manmohan Singh and held on Monday significantly changed the definition of the banking correspondent to enable even women self-help groups to become these. Banking correspondents are individuals or entities who offer basic banking services. Chidambaram also cleared the recent confusion about whether Aadhaar can be used as a proof of address and identity for opening a bank account by saying that it is an adequate KYC (know-your-customer norm) for opening a bank account.sixthMAds

“Let me make it absolutely clear that the UIDAI number is a good and adequate KYC for opening a bank account. It is a KYC for the name, it is KYC for the address. A bank account will be opened on the basis of KYC,” he said.

The 29 schemes identified in the first phase of the cash transfer project include 14 from the ministry of social justice and environment, five from the ministry of labour and employment, four from the ministry of rural development, and three from the ministry of minority affairs. “There will be no leakage and rent seeking, and the beneficiary will not have to pay anything to get the benefits,” Chidambaram said, referring to the scheme as a “game-changer”.

Even though there is no estimate of the amount the government could save on account of increased efficiency, when “duplication and falsification” gets eliminated there are bound to be savings, Chidambaram said.

Ramesh added that a meeting of district Congress presidents of all the 51 districts will soon be convened in New Delhi where party general secretary Rahul Gandhi and Chidambaram will brief them on the scheme.

Explaining the procedure, Chidambaram said that states already have lists of beneficiaries available that will be digitized and made available to the banks who will link the bank accounts of the beneficiaries to their Aadhaar numbers.

Rao criticized the announcement of what is essentially a government programme from the party’s office.

“The way they announced this at the party office with two ministers was a wrong strategy... The party is not distributing funds. This is a government programme.”