#India- A ‘Cost-Benefit’ Analysis of #UID #Aadhaar #mustread

200 px

200 px (Photo credit: Wikipedia)


Vol – XLVIII No. 05, February 02, 2013 | Reetika Khera

A cost-benefi t analysis by the National Institute of Public Finance and Policy of the benefits from Aadhaar integration with seven schemes throws up huge benefi ts that are based almost entirely on unrealistic assumptions. Further, the report does not take into account alternative technologies that could achieve the same or similar savings, possibly at lower cost.

Reetika Khera (reetika.khera@gmail.com) is at the Institute of Economic Growth on a ThinkTank Initiative Associate Professor Fellowship.

I would like to thank Jean Drèze for helpful feedback.

A recent study released by the National Institute of Public Finance and Policy (NIPFP) presents an innovative “cost-benefit analysis” of the Unique Identification (UID) or Aadhaar project. This is, in principle, a welcome step towards more informed discussion and greater transparency of this project. On close examination, however, the widely-publicised conclusions of this study turn out to have a fragile basis.

In a nutshell, the NIPFP report covers the potential use of Aadhaar in seven major welfare schemes and subsidies. These are the public distribution system (PDS), Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA, or simply NREGA), school education (including teacher salaries, mid-day meals, textbooks and uniforms), fertiliser subsidy, liquefied petroleum gas (LPG) subsidy, Indira Awaas Yojana (IAY), and payments in other schemes (pensions, Janani Suraksha Yojana, accredited social health activists and the Integrated Child Development Services). It estimates that linking these programmes to Aadhaar will lead to a “saving” of Rs 1 lakh crore over 10 years (Mathew 2012), and that after accounting for the costs of integration with Aadhaar the internal rate of return of the project will be over 50%.

Benefits from UID-Integration

The main question pertains to the benefits of integration with UID. The NIPFP report recognises that not all leakages in these programmes can be fixed by UID-integration. Only “bogus” beneficiaries, i e, ghosts (e g, a dead person whose name remains on government records) and duplicates (one person getting benefits twice), can be weeded out.1Estimates of bogus beneficiaries are available for only two of the seven programmes considered in the NIPFP report (the PDS and NREGA).

For the PDS, the report uses the leakage estimates from a report of the Planning Commission published in 2005, based on the outdated data pertaining to 1997-2001.That study estimated that 57% of PDS grain is diverted, of which, 17% was attributed to “ghost cards”. The definition of ghost cards includes (a) below the poverty line (BPL) cards that are not in possession of their owners, and (b) the excess of the total number of ration cards over that of total households (ibid: 82). It is worth-mentioning here that PDS entitlements are fixed per household. It is quite possible that in some cases several members of a joint household obtained separate ration cards for their respective nuclear families. Whether this should count as a case of “ghost” cards, as the Planning Commission report assumes, is not entirely clear. In any case, there is no reliable and up-to-date estimate of the share of bogus cards in circulation.

For NREGA the report assumes that UID integration will lead to savings of 12% of total expenditure – 7% from “automation of muster rolls” and another 5% from linking NREGA bank accounts to Aadhaar (without explaining how these would curb corruption, e g, how automation of muster rolls helps to reduce leakages). If the idea is that some people who do not work manage to have their names on the muster rolls and wages are credited to their accounts (i e, are “bogus” beneficiaries), then this fraudulent practice can continue even if muster rolls are automated.

The real protection from wage corruption in NREGA comes through bank accounts as it separates the payment agency from the implementing agency.3 With bank accounts, wage corruption can still continue in three forms: collusion (where the bank staff and NREGA functionaries collude to inflate work attendance and credit wages into accounts of people who have not worked), extortion (when an official forcibly takes money from NREGA workers after it has been withdrawn from the bank account) and deception (when a worker’s account is operated by NREGA functionaries without his or her knowledge). In the first two cases (collusion and extortion), linking accounts to UID will not help to reduce corruption. Only in cases of deception (or “identity fraud”) can biometric authentication at the stage of withdrawal of wages help.4 Estimates of the breakdown of the different types of corruption are not available.

The NIPFP report also recognises that estimates of duplicates and ghosts are not available for many schemes. What is the correct way to make assumptions on benefits of UID-integration in such cases? There is no easy answer to this, so what the NIPFP report does is either to apply the estimates of leakages due to bogus beneficiaries for one scheme to another (e g, in the case of fertiliser and LPG subsidies, the estimates applicable to the PDS are used),5 or – for the remaining schemes – to apply an arbitrary rate of 7-10%.6

Although these assumptions are termed “conservative” (Patnaik 2012), available evidence – patchy as it is – suggests otherwise. For example, an estimate of fraud in six pension schemes has been made by the Society of Social Audit Accountability and Transparency (Department of Rural Development, Government of Andhra Pradesh) for July-October 2012. Six types of corruption are documented: “dead persons”, “dual beneficiaries”, “partial payments”, “ineligible beneficiaries”, “not paid but drawn” and “other”. These social audit reports suggest that the total discrepancies in disbursement of pensions are around 2%. Discrepancies due to dead beneficiaries and dual pensions – problems that Aadhaar can fix – are a subset of this 2%. The rate assumed by the NIPFP report is 7%.

While the report admits that there are no “robust” estimates of duplicates and ghosts, it provides little justification for the rates assumed in the cost-benefit analysis. Anticipating questions about the assumptions, the anonymous authors of the NIPFP report do upload the spreadsheet with their calculations, inviting readers to “modify the assumptions and explore alternative outcomes”.7

Alternative Technologies

Biometric technology (of which Aadhaar is one variety) can help when there are bogus beneficiaries – ghosts or duplicates. Other, cheaper technologies (e g, computerisation) can also help weed out bogus cards and help plug other leakages. Tamil Nadu has a fully computerised PDS database and overall PDS leakages are very small (4% in 2009-10). In states such as Chhattisgarh, overall leakages in the PDS have fallen from 50% (in 2004-05) to 10% (in 2009-10) without any use of Aadhaar, but through computerisation and other measures (Khera 2011b). The question a cost-benefit analysis should really address is whether Aadhaar is more cost-effective than these and other alternatives, including local biometrics (used in Andhra Pradesh). This question is raised in passing, but not answered in the NIPFP report (Patnaik 2012).8

Concluding Comments

In short, NIPFP’s widely publicised cost-benefit analysis of UID is far from persuasive. It is almost entirely based on assumptions, not estimates, of the benefits of integration with Aadhaar. Where estimates (not assumptions) of bogus beneficiaries are used, they are unreliable or out of date. Further, the report does not take into account alternative technologies that could achieve the same or similar savings, possibly at lower cost.

The report also briefly considers the “costs” of integration of these schemes with Aadhaar. However, it makes no mention of the potential disruption that the integration exercise might cause. Disruption could be at the stage of integration (e g, old age pensioners may be unable to complete the required formalities) or during operations (e g, software, connectivity or biometric failures). By assuming, with touching optimism, that the UID system is reliable and seamless, the report fails to address crucial concerns that have been raised about this adventurous project.


1 For a detailed discussion on the types of corruption Aadhaar can weed out, see Khera (2011a).

2 “The reference period for the study was from 1997 to 2001 – the four-year period of the operation of TPDS. The household level information referred to the period from May to December 2001” (Planning Commission 2005: 13).

3 This practice has been in operation since 2008, except in Tamil Nadu. A few remote pockets were allowed to return to cash payments by Minister of Rural Development Jairam Ramesh in late 2011.

4 Note also that once those who were using “deception” to defraud the system, may turn to extortion and collusion once identity fraud becomes impossible.

5 The report states, “Using the estimates for PDS and MGNREGS as benchmarks, we assume that using Aadhaar-enabled system would result in a benefit of 7% of the total value of subsidies” (p 11) and “in the absence of such robust studies estimating the leakage from the system towards commercial use, we assume that use of Aadhaar would result in a benefit of 10% of the total value of the subsidy (similar to PDS)” (p 12).

6 See, for instance, p 10 where the report says, “In the absence of data on the extent of leakages that exist on account of fake and duplicate beneficiaries, we have assumed this figure to be 10% of the total expenditure incurred by the government on books and uniforms for school children”.

7 Initial attempts (twice, at a three-day interval) to download the spreadsheet revealed that the spreadsheet was password protected. Now one out of seven worksheets can be modified. The practice of posting reports without author names is also observable with the documents on NREGA and PDS on the Unique Identification Authority of India (UIDAI’s) website.

8 The cost-benefit work has been done by the MacroFinance group at NIPFP, a government-funded institution. The group has a project from UIDAI on financial inclusion which is perhaps why they focus only on UID. At the time of writing, no other paper on UID or financial inclusion was available on their website, raising the question whether the cost-benefit analysis itself was effectively sponsored by the UIDAI. Even if that is not the case, funding from the UIDAI to the MacroFinance group does create a possible conflict of interest, which would merit at least a short disclosure in the report.


Khera, Reetika (2011a): “The UID Project and Welfare Schemes”, Economic & Political Weekly, Volume 46, No 9, 26 February.

– (2011b): “Revival of the Public Distribution System: Evidence and Explanations”, Economic & Political Weekly, Volume 46, Nos 44-45, 5 November.

Mathew, Joe C (2012): “Big on Savings, Low on Leaks”, Business World, 24 November, available online athttp://www.businessworld.in/en/storypage/-/bw/big-on-savings-low-on-leak…

NIPFP (2012): “A Cost-Benefit Analysis of Aadhaar”, MacroFinance Group, National Institute of Public Finance and Policy, 9 November, available online at http://macrofinance.nipfp.org.in/FILES/ uid_cba_paper.pdf

Patnaik, Ila (2012): “Identify This”, The Indian Express, 3 December, available online at http://www.indianexpress.com/news/identify-this/ 1039542/

Planning Commission (2005): “Performance Evaluation of Targeted Public Distribution System”, Programme Evaluation Organisation, Planning Commission, Government of India, March, available online athttp://planningcomission.nimc.in/reports/peoreport/peo/peo_tpds.pdf




Aadhaar-linked DBT hits roadblock in East Godavari #UID

Mohammad Ali, The Hindu
The Direct Benefits Transfer pilot project in East Godavari district of Andhra Pradesh with a claimed 95 per cent penetration pilot project, with a claimed 95 per cent penetration, has been full of problems, highlighting the pitfalls of extending the programme nationwide. File photo
Only 75% of MGNREGS workers have been enrolled; many without Aadhaar number denied access to benefits
The popular tagline for the Aadhaar-linked Direct Benefits Transfer (DBT) is Aam aadmi ka paisa, aam aadmi ke haath (People’s money in their own hands).
The DBT pilot project was launched in East Godavari district of Andhra Pradesh earlier this month, with Union Rural Development Minister Jairam Ramesh hailing the scheme as a panacea. “It is the largest experiment to reform a broken-down delivery system. If we are successful in this, we will… reform the welfare delivery system.”
And yet the pilot project, with a claimed 95 per cent penetration of DBT, has itself been full of problems. This highlights the pitfalls of extending the programme nationwide without adequate preparation.
Indeed, a cross-section of activists, bureaucrats and experts, this correspondent spoke to at the launch, felt the Union government was rushing things.
The near consensus is that there is too much pressure on the State governments to go ahead with the scheme. “At this rushed pace, the process will leave out the vulnerable and marginalised sections of society.”
East Godavari district has won the ‘National Aadhaar Governance Award’ for achieving a near total coverage of DBT. Yet, only 75 per cent of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) workers had been enrolled as on January 6, when the project was launched in the Gollaprolu block.
Over 3,96,040 out of the total 15,84,161 registered workers in the district were yet to be enrolled, according to Andhra Pradesh Principal Secretary (Rural Development) R. Subrahmanyam. The situation was the same in the enrolment of pensioners.
Not just this. Locals complained that those without the Aadhaar number were denied MGNREGS wages and access to PDS grain, which is not included in the schemes covered under DBT.
Mr. Subrahmanyam denied any irregularity. “Those who are yet to be enrolled in the Aadhaar system will be allowed to use the existing smart card for a period of two months,” he said.
The situation on the ground though is different. Take the case of Kurakula Ammaji of Narsingapuram village. Ammaji, who is in her eighties, travelled a few kilometres to the Gollaprolu block to complain about denial of PDS grain because she didn’t have the Aadhaar number.
“The authorities ask for the Aadhaar number for every social scheme… They are depriving us of food and pension because we do not have the number. Now you tell me, how are we supposed to feed ourselves?”
Kurakula Bhadrachalam alleged that he was not able to get MGNREGS payment from his bank. Earlier the payment used to be deposited in the bank account of a worker. But DBT links the bank account to the beneficiary’s Aadhaar number, making access to cash difficult without it.
Others like Perantala Goda, who have got the Aadhaar number, were worried about the transition from the smart card or the old system of the State biometrics to DBT.
“Even a slight disruption in the delivery system adversely affects our lives.”
The exclusion of a number of people from Aadhaar enrolment has led experts and activists like Reetika Khera to question the efficiency and credentials of the Central government, which has been “displaying unprecedented hurry… in pushing the UID at any cost.”
Ms. Khera, a faculty member of IIT Delhi, involved in the implementation of the MGNREGS and the PDS, argued that if the purpose of Aadhaar was “financial inclusion” of the poor, the cash transfer should not have been launched without covering all intended beneficiaries, especially the vulnerable sections. “Can you imagine the situation elsewhere when this is the state of affairs in East Godavari?”
Ms. Khera supports cash transfers for old-age and widow pensions, maternity entitlements and scholarships but opposes the government’s plan for “accelerated mass conversion of welfare schemes into UID-driven cash transfers.”
She also argued that Aadhaar was not equipped to address the bigger leakages through cuts and bribes, or inclusion of ineligible persons in the rolls.
Aadhaar registration has been low in most districts of Andhra Pradesh, so much so that the State government has had to defer its plans to roll out DBT in Hyderabad, Ranga Reddy, Chittoor, Anantapur and East Godavari districts.
An official told The Hindu that though beneficiaries of schemes such as the Indira Gandhi Matritva Sahyog Yojana, Dhanalakshmi and the Janani Suraksha Yojana were very few, DBT could not be rolled out because even this small number was not enrolled for Aadhaar by the January 6 deadline.
Social audit
Andhra Pradesh has managed to evolve an institutional mechanism for social audit of schemes like the MGNREGS. Sowmya Kidambi, Director of the Society for Social Audit, Accountability and Transparency, argued that what was needed was social audit of welfare schemes. “Rather than pursuing the path of social audits, which is the way to plug the bigger leakages in the schemes, the government is showing unnecessary haste in pushing DBT through.”
Keywords: Direct cash transfer scheme, Aadhaar-linked cash transfer, benefits transfer, East Godavari district, National Aadhaar Governance Award



Rajasthan- In Kotkasim, sarpanches want ‘ DIRECT CASH TRANSFERS “scheme scrapped

Cong hopes to fill poll bank with cash schemeParty to focus on big-ticket states, including Rajasthan

Diptosh Majumdar New Delhi, Dec2,2012, DNA


There is a game-plan within a game-plan. As meetings are held daily in the suddenly hyperactive Prime Minister’s Office in South Block, and finishing touches given to the “direct cash transfer” scheme, it is apparent that the government is leaving nothing to chance. And there is a realisation that the Congress fortunes will change dramatically if the government and the party together concentrate on the four politically significant states of Rajasthan, Maharashtra, Karnataka and Andhra Pradesh.
Yes, the government will make a definite effort to impress upon the electorate in all states that it is the real “aam admi” party, and that is why this cash transfer scheme to be launched at the beginning of 2013, has been conceived. But the party believes that if they concentrate their energies on four specific target states, they would have accomplished a great deal. After all, the number of seats up for grabs in these states adds up to 143. Maharashtra alone accounts for 48 followed by Andhra Pradesh with 42.
These states have been identified because, in each of these provinces, the Congress has a primary organisational architecture. For example, the Congress is capable of doing well in Rajasthan with its 25 parliamentary seats under
chief minister Ashok Gehlot, but there is a prevailing sense of helplessness among party workers because the party has lost ground due to anti-incumbency sentiments. A focussed political campaign along with a flawless implementation of the cash transfer scheme can renew contact with the voters. To begin with, the Rajasthan districts to benefit from the programme are Ajmer, Udaipur and Alwar.
Similarly, Karnataka politics is in a mess with former chief minister BS Yeddyurappa leaving the BJP.
In Maharashtra, the Shiv Sena would rely on a sympathy wave following the death of Balasaheb Thackeray, but the Congress believes its impact will be restricted to a few pockets, and the MNS will still be a key neutralising factor.
Finally, in Andhra Pradesh, the Congress is launching the scheme in the five districts of Hyderabad, Anantpur, Chittoor, East Godavari and Rangareddy.

Sowmya Sivakumar Jaipur
The gung-ho optimism about ‘direct cash transfers,” the UPA’s chief springboard for the next polls, may have a darker side. Sarpanches of Kotkasim block, Alwar district – where the country’s pilot project for direct cash transfers (DCT) of kerosene subsidies has run since the last 9 months – want the project to be scrapped, if it continues to be shoddily implemented.
“We have collectively written to the collector stating that we are receiving numerous complaints from people. The system will work only if advance subsidies are deposited on time. Three months’ advance subsidies were supposed to be deposited in December itself when the scheme started. But it came late, only once for 2-3 months.
Some have bought kerosene at market price, but haven’t received any subsidy amount yet,” chorus sarpanches from Kotkasim. “There are 1000 ration cards in the panchayat, but only about 200-300 have opened accounts. There are at least 100 families in the panchayat who actually need kerosene but have stopped consuming it as they have not been able to afford buying at the market price without the subsidy in hand in advance,” said Kaphtan Singh Chowdhry, sarpanchpati of Ghikaka panchayat in the block.
The much touted reduction in offtake – from 84,000 litres in Kotkasim block before the scheme was launched, to 12,000 litres now – is in fact a combination of plugging diversions and sharp drop in consumption, but the latter not all out of choice.
Bank accounts have been opened in the name of the mukhiya (household head) who, in many cases, are too old to go the bank a few kilometers away and stand in the queue for Rs33-36 (the subsidy amount per litre). In such cases, someone in the family has to accompany him. In interior villages, where there are no banks even in a 5km radius, this will mean wasting a whole day’s time and wage for availing the subsidy,” said Pooja Yadav, sarpanch of Teovas panchayat.
This has been reiterated in a recent study done by freelance researchers Bharat Bhatti and Madhulika Khanna in Kotkasim, under the guidance of right to food economists Jean Dreze and Reetika Khera. “The poorest households seem to be the worst hit under the new system. For them, going to the bank to collect the subsidy means losing a day’s wages and also transport costs. For some, these costs exceed the subsidy…many households are yet to receive any subsidy, despite shelling out Rs 500 to open a (supposedly “zero-balance”) bank account,” it noted, concluding all this has led to curtailment of consumption.
Ramcharan Meena, district supplies officer (DSO) of Alwar said, “we have conveyed these practical difficulties to the government. They are now talking of introducing mobile ATMs in rural areas which will facilitate easier cash withdrawal. This is only a pilot and we will improve based on its learnings,” he said.



Pleases e ethe video by Reetiak Khera


In the hurry to meet targets, UIDAI is missing its goals


In the hurry to meet targets, UIDAI is missing its goals

Lost Identity- Prabha Jagannathan

Feb1, 2012- The Week

The division among economists and social activists over whether the Unique Identity (UID) programme, or Aadhaar, will streamline the government’s social sector and welfare programme roadmap or disrupt it seems to be widening further. The high profile project, say critics, has become fixated on achieving targets, while losing its way on its goals.
In fact, a bitter row that broke out recently threatened Aadhaar’s very existence. The ministries of home and finance took on the UID Authority of India and Montek Singh Ahluwalia, Planning Commission’s deputy chairman, echoing the long-simmering apprehensions within the government. The row, however, was papered over soon with Home Minister P. Chidambaram saying his ministry had “no rift” with UIDAI chairman Nandan Nilekani.
Also, the home ministry agreed to enable its own biometrics smart cards based on the National Population Register (NPR) with Aadhaar numbers, meekly toning down its concerns over the possibility of fraudulent UID numbers creeping into the system. The UIDAI has delegated hundreds of small companies and overnight outfits to collect fingerprint and iris data, leaving gaping authentication holes in the process.
Rural Development Minister Jairam Ramesh, whose ministry is expected to be a key beneficiary of Aadhaar in large programmes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme, preferred to keep his own counsel. Some officials at the ministry later suggested that the home ministry’s biometrics card and the Aadhaar number could coexist because they had “different objectives”.
MGNREGS and the National Old Age Pension Scheme entail cash delivery as a fundamental part of their functioning, and Aadhaar, say economists and social workers, can be used efficiently in them. However, Aadhaar’s unstated long-term goal of replacing welfare programmes, such as the public distribution system (PDS), with cash worries many. Once the Right to Food Act is implemented, cash disbursal will become an intrinsic option for the government. “Aadhaar functionaries on the ground are telling people that they will get easier access to social schemes if they get the number. They are not telling them that the services will be replaced by cash. The government should state this openly and transparently if it is moving to cash in welfare programmes,” says development economist Reetika Khera.
Apart from the policy issues, Aadhaar is facing many execution challenges as well. According to Nilekani, three per cent of the population has fingerprint problems, which make their registration difficult. Surveys, however, peg the figure at 5-15 per cent. Then another 20 million people have cataract, making iris scan a tough job. Solutions for these problems are yet be figured out. Also, thousands of hastily issued Aadhaar cards are lying unclaimed with post offices and at social work organisations.
The fresh row seems to have rekindled the concerns over the relevance of the UID exercise. Some critics even say it is creating a secondary ecosystem of ‘corruption, collusion and deception’, comprising lobbyists, hardware suppliers and those who benefit from fudging UID data.
Glitches detected by pilot schemes have been brushed under the carpet and no real cost-benefit analysis of the project has been done, thanks mainly to the Prime Minister’s keen interest in it. But what is worrying economists and social activists more are its tall claims of benefits and non-relevance on the ground. “I am fully convinced that those in charge of this exercise have no understanding of how these social sector programmes or even corruption actually work on the ground. The UIDAI claims that bank transfers will eliminate corruption, but welfare programme cash transfers have since 2008 been made through post offices and banks,” says Khera, who has worked with development economist Jean Dreze, the architect of NREGS.

Read more here 


Kractivism-Gonaimate Videos

Protest to Arrest

Faking Democracy- Free Irom Sharmila Now

Faking Democracy- Repression Anti- Nuke activists


Kamayaninumerouno – Youtube Channel


Enter your email address to follow this blog and receive notifications of new posts by email.

Join 6,227 other followers

Top Rated

Blog Stats

  • 1,849,647 hits


November 2021
%d bloggers like this: