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Finance Ministry backs the Direct Benefits Transfer system sans Aadhaar

NEW DELHI: The finance ministry has backed the Direct Benefits Transfer system as a superior method for targeting subsidies to the poor but said the Aadhaar platform is not the only route for such transfers, signalling a waning of enthusiasm for UPA’s flagship project.

“It must be made explicitly clear that Direct Benefit Transfer scheme is operating in 27 schemes of the government and Aadhaar has not been made mandatory in any of them… Even without Aadhaar, the Direct Benefits Transfer scheme will be a superior scheme,” the finance ministry’s department of expenditure said in an office memo sent to the oil ministry on May 26.

The memo was sent to incorporate the finance ministry’s view in the report of a panel set up by UPA to review the DBT scheme for LPG cylinders. The report was submitted in late May.

By acknowledging that DBT schemes can go on without Aadhaar, the finance ministry appears to have reversed its earlier position on the critical nature of this ambitious programme, the brainchild of former Infosys CEO Nandan Nilekani.

Finance Ministry backs the Direct Benefits Transfer system sans AadhaarKey to DBT lies in accuracy

The ministry under Pranab Mukherjee had allowed the Unique Identification Authority of India (UIDAI) to expand its enrollment mandate from 10 crore residents to 20 crore residents without the Cabinet’s nod. In September 2011, the finance ministry had also set up a task force under Nilekani, heading UIDAI at the time, on creating an Aadhaar-backed payment infrastructure for routing all subsidies to the poor.

This task force report facilitated the UPA’s push to expand UIDAI’s biometric enrollment mandate further, first to 60 crore and later to 93 crore-odd people and drive banks to open Aadhaar-linked accounts across the country.

Reservations expressed by banks about the efficacy of the scheme were also overruled by the UPA.

But the government, now run by the NDA, appears to have changed its view. “Aadhaar is not a must for this scheme to work,” said a senior oil ministry official. “We are studying the report and may take a view after consulting all stakeholders, including consumers,” he added.

The key to direct transfers lies in the system’s accuracy and integrity.

“The basis for identification could be anything other than Aadhaar but the DBT scheme will work only when you are able to identify genuine customers and have their bank accounts linked to get cash subsidy,” said a member of the committee on cash transfers for LPG cylinders. If you read the report’s fine print, its emphasis is on effective implementation and any alternative of Aadhaar should be welcomed.”

The controversy over cash transfers for the LPG cylinder subsidy erupted earlier this year. The cabinet committee on political affairs had in January suspended the scheme and set up a committee to review the process.

The committee has backed cash transfers in its report and concluded that the DBT scheme was successful in reducing diversion of cylinders and eliminating ghost/duplicate connections, thus helping with the key objective of reducing the Centre’s subsidy burden.

But it also red-flagged several difficulties faced by people in obtaining Aadhaar or UID numbers, linking this to bank accounts and LPG databases and getting grievances addressed.

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