Bogged down by allegations of massive corruption and cornered by the Opposition on economic reforms measures, the Congress-led United Progressive Alliance Government on Tuesday outlined the details of an ambitious direct cash transfer based on Aadhar cards, which it claimed will prove to be a "game changer". The almost Rs 3,20,000 crore cash transfer scheme will be launched in stages and cover the entire country by the end of 2013, said Finance Minister P Chidambaram in New Delhi.
Eyeing massive electoral gains, the UPA has launched the scheme with the hope that it will prove to the big vote catcher for UPA during the 2014 Lok Sabha elections. Chidambaram pointed out that the benefit will go directly to the user while eliminating transmission and distribution losses.
But there are going to be several bottlenecks in the scheme. There are many logistical and procedural difficulties in the implementation of the scheme whie the benefits will only to go to Aadhaar card holders. Aadhaar coverage is patchy in rural areas and it must be linked to a bank account for the scheme to work. Moreover, the users might not be prudent with cash management.
But what exactly is cash transfer?
In lieu of subsidised food, fertilizer and fuel, BPL families would get 30,000-40,000 a year in their bank accounts. In all, almost Rs 4,00,000 crore will be disbursed. APL families too would get money for subsidised cooking gas. A pilot project for kerosene is already on in Alwar in Rajasthan. The scheme will cover the entire country by December 2013.
How will it work?
Families with Aadhar card, entitled to subsidies, pension, scholarships etc, will get money directly in their bank accounts. For this, they need to give their Aadhar card number to service provider, say, gas agency and bank. Option will exist to claim the cash subsidy at designated bank branch, by using a cash card.
What will it cover?
To begin with, only subsidy transfer for cooking gas. Centre has asked states to launch pilots for food subsidy. Work on fertilizer subsidy has just begun and over time, it will cover all subsidies.
When will it start?
There's a pilot project for kerosene in Alwar district while a test is being run for cooking gas in Mysore. By January 1, 2013, 51 districts with high Aadhar penetration will be covered. By December 2013, the whole country will be covered.
Why is it being done?
It is being done to check leakages from the system and give power of choice to beneficiaries, especially BPL families. Ahead of the 2014 elections, it is seen as big political thrust.
Can it falter?
Yes. Only 21 crore of 120 crore people have Aadhar cards. Most BPL families don't have bank accounts and several villages don't even have bank branches.