#India – The Great Fertilizer Robbery


[Investigation] The Great Fertiliser Robbery

Big business houses are diverting subsidised fertilisers meant for poor farmers. G Vishnu exposes a shocking collusion that is costing the country crores of rupees
G Vishnu

2013-07-06 , Issue 27 Volume 10

Photo: AFPPhoto: AFP

Every year, the government spends anywhere between Rs 70,000-Rs 90,000 crore in subsidies to ensure affordable fertilisers for farmers to enable them to get a good yield. Yet, curiously, foodgrain production has not seen much increase, while farmers still continue to complain about unaffordable fertilisers.

In October 2012, TEHELKA had shown how flaws in the government’s pricing policy were letting private players increase fertiliser prices and siphon off subsidies (This Is Why Farmers Can’t Afford Fertilisers by , 1 October). An ongoing  by the Director General of Central Excise Intelligence (DGCEI) has now revealed the extent of the scam; how it has spread on a massive scale in the three states of , Maharashtra and Haryana. TEHELKA has access to exclusive information that the DGCEI is probing alleged evasion of excise duty by more than 50 big companies.

Officials detail how over the past five years, these business houses siphoned off 10 million metric tonnes (MT) of -grade urea for which the government had paid more than Rs 2,000 crore as subsidy. Despite having annual turnovers of over Rs 200 crore, these companies also avoided paying more than Rs 300 crore in excise duties to the government in the same period.

Fertilisers are essential to a successful agricultural yield. Over two decades now, the Government of India has been subsidising fertilisers with the aim of easing the burden on farmers. Among the various fertiliser combinations, urea is one of the most utilised. Whereas India produces up to 22 million MT of urea annually, close to 8 million MT is imported. For every tonne produced, the government reimburses the difference between the cost of production and the MRP. Currently, urea is sold at Rs 5,360 per MT ( Rs 5.36 per kilo) and the subsidy ranges between Rs 9,000- Rs 20,000 per MT. Industries that manufacture dyes, colouring agents, resins, plywood, etc, use technical-grade urea, which is priced at Rs 32 per kg (Rs 32,000 per tonne). The government subsidy, however, is only meant for urea used for agriculture and not industrial purposes.

The DGCEI probe, which started as an investigation into the excise duty evasion by manufacturers of CPC Blue (a pigmentation agent that adds colour to paints), also discovered that private players were diverting the urea meant for farming to their own godowns. On top of that, over the past five years, these companies had evaded excise duty in excess of Rs 300 crore by concealing the purchase of urea.

How they did this is a reflection of how deep the rot is. A DGCEI investigating officer describes the situation as “an economy, kind of like a cottage industry, especially in Gujarat. A well-oiled system is in place to facilitate diversion of urea to these companies”. The DGCEI found that in the past five years, two lakh MT of urea has been diverted in Maharashtra and 20,000 MT in Haryana, while around 10 lakh MT has been diverted in Gujarat alone.

Among the many companies who benefited from subsidised urea are big names that include Asahi Songwon (owner Paru Jaykrishna was president of the Gujarat Chamber of Commerce in 2007-08), Phthalo Color (owned by the Nanavati Group that also owns the Nanavati Hospital in Mumbai), Meghmani Organics, Narayan Industries and Narayan Organic, Heubach Intermediates and Ramdev Chemicals in Gujarat. Mazda Colours and Shreyas Intermediates in Maharashtra and Bhabani Pigments in Haryana have also illegally diverted the agriculture- grade urea for their purposes — consequently saving on importing technical -grade urea and paying the customs duty.

These companies — most of them based in Gujarat — would buy urea from ‘trading companies’ such as Karan Chemicals, Lakshya Ventures and Lakshmi Enterprises, who, in turn, would provide fake bills showing purchase of salt. Interestingly, salt is not required at any stage in the production of CPC Blue. Yet, on record, the 50-odd companies had bought 10 lakh MT of salt. For instance, Karan Chemicals, one of the trading companies, has 10 dummy firms that claim to be selling salts to these companies. “They have followed every trick in the book to pull off this scam,” says a dgcei official, showing TEHELKA bills for non-existent mountains of salt.

This fact comes straight from the horse’s mouth. In a written statement to the DGCEI, Piyush Patel, president of CPC Blue Manufacturers’ Association and owner of Ishan Chemicals, has admitted that his own company indulged in this illegal practice.

“So far as the purchase of salt is concerned,” reads a statement by Piyush’s son Shrinal Patel, also director of Ishan Dyes and Chemicals Ltd, “according to the market strategy, we are procuring urea in the guise of salt under the invoices for salt… However, under the compulsion of market strategy and to remain in competition, we had to adopt this way.” Patel’s views are similar to what others who have appeared before the DGCEI probe committee have said.

Distribution of urea comes under the ambit of the state government. Once the Department of Fertilisers (DoF) at the Centre decides on the allocation for states, it is the state agricultural departments’ job to ensure distribution to farmers. This is where the village-level Agriculture Business Centres (ABCs) come into play. These local-level agencies that connect with the farmer play a massive role in giving out fake bills to the Department of Agriculture (DoA) in the name of non-existent farmers. Till now, the DGCEI has raided over 15 ABCs in Gujarat, all of which were found handing out fake bills.

“What we found was simply by carrying out raids and scrutinising documents,” says a DGCEI investigating officer. “It is not possible that the state DoA does not know about these practices. Convenient arrangements have been struck between politicians, bureaucrats and these business houses.”

Little surprise then, that in 2011, the Gujarat government kept demanding more and more urea, even though the state was seeing a drought-like situation. Since 2006, Gujarat has been complaining about urea shortage, at times asking Union Minister of Agriculture Sharad Pawar to step in. The DGCEI is investigating the probable involvement of some of the cooperatives that manufacture urea in Gujarat such as the Krishak Bharati Cooperative Limited (KRIBHCO), Gujarat Narmada Valley Fertilisers Company Ltd (GNFC), Gujarat State Fertiliser & Chemicals Ltd (GSFC) and the Indian Farmers Fertiliser Cooperative Limited (IFFCO).

“Right now, we are probing the 50- odd CPC Blue manufacturing companies under the Customs Act,” says another DGCEI official on condition of anonymity. “The Centre has not shown enough grit to crack down on these practices. If the CBI is to come into the picture tomorrow, all these companies will be charged under the Essential Commodities Act and they can be held criminally accountable.”

Repeated attempts by TEHELKA to get these companies to respond were met with silence. The few who chose to say anything, like Bhabani Pigments and Narayan Organics, declined any wrong-doing on their part. Interestingly though, Shrinal Patel of Ishan Dyes and Chemicals had a different explanation.

“We get the product,” says Patel, “and test it in our lab. If a product works for me, I purchase it. I haven’t bought it from any authorised agency. We have been telling the Central government that we are willing to purchase it at any price, but our condition was that it should be made available locally. On import, the particle size of technical-grade urea is coated with nitrogen on the outside, causing loss, but the government did not accept it.”

That the government has been complicit in the unchecked diversion of fertilisers meant for the poor, gains currency from the DGCEI’s own findings. “Government agencies have played a major role in all this,” says a DGCEI official. “Till now, we have found excise evasion of 300 crore. The diversion of over 10 lakh MT of urea that we have found was from just CPC Blue manufacturers. All we had to do was figure out the scientific formula behind manufacturing CPC Blue — salt does not come anywhere in the process. If we are to figure out the formula for other industries that manufacture resins, plywood, paints and dyes, we should be able to make a complete crackdown on diversion.”

Despite the fact that, since September 2012, the Centre has set up teams in the 17 states to put a check on this practice. Even as recently as 14 March, the Chemical and Fertilisers Secretary Sudhir Mittal wrote to the states, urging them to set up a mechanism to curb diversion.

So, why has nothing happened? Officials in the DoF at the Centre blame the states for lack of transparency, negligence and unwillingness towards bringing diversion and black marketing to a halt.

“Our pricing policy is yet to be implemented,” says an official with the DoF in New Delhi. “Fertiliser prices have been skyrocketing for the past three years, increasing as much as five times in some cases. On the ground, this has resulted in the farmer using a single fertiliser to such an extent that the soil loses value in some years. This has been disastrous for Indian agriculture.”

A senior official at the Ministry of Chemicals and Fertilisers explains how the powerful fertiliser lobby has manipulated the situation to its advantage. “Most politicians do not antagonise this lobby,” he says. “No matter how hard you try to stonewall them, they still find a way to reach you.” The official cites a recent incident, when members of the fertiliser lobby made a presentation in a group of ministers (GoM) meeting much to the surprise of some ministers, who had managed to keep the private players away from influencing policy decisions. Other officials even recall instances when chief ministers have stepped in to stop probes.

These players have such a stranglehold on the sector that in the past three months alone, the ministry has spent Rs 300 crore excess while procuring.

“Around February every year, the DoF determines the quantum of fertilisers needed for the year and the procurement is planned,” says an official working for a PSU that produces fertilisers. “This year too, Indian Potash Limited (IPL, a conglomerate that started as a PSU, but is currently an amalgamation of cooperatives) was given the charge of importing 10 lakh MT of urea. But the ministry cleared only five lakh MT for import. IPL imported the same for $385 per MT in May. By June, when state-owned PSU MMTC placed tenders, the price of urea was $335. By 22 June, when the state-owned STC issued the tender, the price fell to $303. Being a private player, IPL understands the market fluctuations well, but it earned a lot in commissions by placing the order in May. The loss to the government for not giving the charge of import to a PSU was Rs 300 crore.”

Incidentally, the CAG had pulled up IPL in 2011 for getting undue benefits to the tune of Rs 762 crore after fudging its tenders. The explosive CAG report had raised expectations in some ministry circles that wanted to bring reforms and transparency. However, as the recent loss shows, the stranglehold is yet to loosen.

Amidst all this, the Indian farmer continues to lose out, as it is his fertilisers that are getting diverted and hoarded, while he has to buy it at a higher price. In a year when the total amount of subsidy spent on fertilisers touched a whopping Rs 90,000 crore, his fields benefit minimally and he is left wondering where the promised subsidy goes.

vishnu@tehelka.com

(Published in Tehelka Magazine, Volume 10 Issue 27, Dated 6 July 2013)

 

Memo to Sonia Gandhi : Cash transfer may not get you a win in 2014


English: Sonia Gandhi, Indian politician, pres...

 

by R Jagannathan May 30, 2013, First Post
#Cash transfers #DCT #Espirito Santo #HowThisWorks #Politics #Sonia Gandhi #Subsidies
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The Congress party has set great store by the direct cash transfers (DCT) scheme, which it has relabelled as direct benefits transfer (DBT), and which it further hopes will result in a direct votes transfer (DVT) scheme and a game-changer in the next elections.
The Rs 64,000-thousand-crore question is: Will it work? Will it deliver the benefits as envisaged? And, more importantly from the Congress party’s point of view, will it deliver the votes?
The short answers are: maybe not, maybe not, and a definite no to the above three questions, in that order.
Memo to Sonia: get reforms going, get growth going.
DCT’s rollout has been patchy so far and the linkage between bank accounts and Aadhaar number seeding is still not 100 percent even in the 43 districts that were the initial targets for small schemes such as scholarships, pensions, et al.
The chances of high success in the big-ticket game-changer schemes like MGNREGA, LPG subsidies and ultimately food and fertiliser subsidies are very limited till 2014. Voters may at best get a glimpse of the promise of the scheme, but any glitches may also get magnified. One could neutralise the other.
The chances of garnering votes is thus limited, since DCT needs at least three to four years to implement properly on a national scale – but this is precisely where the Congress seems to be in too much of a hurry, and hence not paying enough attention to detail.
These are the broad conclusions of a detailed research report on DCT by Espirito Santo Securities (ESS) which discussed the issue with policy-makers, economists, and did some pilot studies where the scheme is being implemented (especially East Godavari district in Andhra).
This is ESS’s conclusion based on early results for DCT even in the first 43 districts where bank penetration and Aadhaar enrolments were supposed to have been very good. The report says only Rs 22 crore has been disbursed using the Aadhaar payments bridge, while more than twice that amount (Rs 57 crore) was paid out using traditional methods. DCT was less than a third of the total amounts disbursed.
If this is the outcome in districts with the best bank-Aadhaar penetration and that too for schemes that anyway involve only cash – scholarships and pensions – and where there is little fraud, one wonders how it will work for the more massive MGNREGA and LPG subsidy schemes that are being targeted for rollout in 121 districts by 1 July and 1 October this year, respectively. The complete national rollout is scheduled for 1 April 2014 – a tell-tale indication of where the election time-table could lie as far as the Congress leadership is concerned.
The Espirito Santo research is certainly not negative on DCT – and nobody beyond Sonia Gandhi’s National Advisory Council (NAC) has serious doubts that it can only be an improvement over the way welfare schemes are implemented right now, with lots of leakages, ghost beneficiaries, and excessive corruption. Estimates of savings for the exchequer range from a minimum of Rs 33,000 crore (according to the PMO) to a wildly optimistic Rs 1,10,000 crore of savings, according to a study by the National Institute of Public Finance and Policy.
The upper-end expectations are clearly pie-in-the-sky given our record of poor implementation of almost any scheme.
In the case of DCT, in particular, the problems lie in the short-term political expectations embedded in the scheme, which raise concerns about whether they will be implemented well enough and with long-term benefits in mind. Just as MGNREGA and farm loan waivers were implemented without great thought being given to scheme design and reviews, DCT too falls into the same basic cracks.
MGNREGA is facing hurdles in its seventh year of implementation, and the outlays on the scheme have been cut from peak levels just before the 2009 elections due to supply side problems (supply side means providing work for those who demand it). The farm loan waivers scheme has been negatively commented upon by the Comptroller and Auditor General (CAG).
Will it be the same story with DCT in 2014? These are Espirito Santo’s conclusions:
#1: Full rollout before 2014 is “extremely unlikely.” The best guess is that “the bulk of the savings will come only after the complete roll-out which may take two to three years.”
#2: Most experts are cautiously positive on DCT, but they dispute the quantum of benefits the government is expecting from it, since few believe that corruption will be eliminated.
#3: ESS does not see “DCT as addressing the near-term fiscal problem. It has to be accompanied by further cuts to subsidies, among other things.”
Conclusion: DCT will not be a game-changer by 2014. ESS says: “We estimate that the impact of DCT will be substantial only post 2015-16, unless the scheme dies down due to lack of political will post the 2014 elections.”
The larger point is this, as Firstpost pointed out earlier. Even in 2009, the Congress party only fooled itself when it thought MGNREGA was a game-changer, when the real thing that delivered it a convincing victory was fast-paced growth from 2003-2008. That, unfortunately, is not the case now.
Memo to Sonia: get reforms going, get growth going. DCT is a direct transfer of benefits to the next government in any case.

 

 

 

 

Cash transfer may hurt girls and kids, says Amartya Sen #UID


SANDEEP JOSHI, The Hindu

Amartya Sen:

Amartya Sen: “We should not accept corruption on some fatalistic ground that this is the way things are in our country.”

Eminent economist and Nobel Prize winner Amartya Sen has said the Union government’s cash transfer scheme can be a useful system to supplement other ways of making India a less unequal society, “but it is not a magic bullet, and its pros and cons have to be assessed and scrutinized with an open mind.”

In an interview to The Hindu, Dr. Sen said the modality of cash transfer is not the only issue “but also how much, and for whom, and also, instead of what?”

He sounded a note of caution in cash transfer of food subsidies, saying direct access to food often helps reaching nutrition to children and girls. But when the subsidy is given as cash directly it may benefit adults and boys more due to biased social priorities in Indian society.

Dr. Sen said the transition delays in cash transfer could cause extreme hardship to people, many of whom lead a hand-to-mouth existence.

 

Tripura Opposes Direct Cash Transfer #AAdhaar #UID


AGARTALA | DEC 07, 2012, Outlook
Tripura today opposed Centre’s plan for direct cash transfer to the bank accounts of the customers of fair price shop for giving subsidy on the plea that it would cripple the existing Public Distribution System (PDS).

“I have written a letter to the Union Consumer Affairs, Food and Public Distribution Minister K V Thomas to withdraw the proposal for direct subsidy cash transfer and also clarify in detail how the new system would help the poor,” state Food and Civil Supply minister Manik De said.

The new system would be introduced in 51 districts of the country and the four districts of Tripura were also included among them.

De said the state government has received a communication from the Centre that all the card holders of ration shops should make their bank accounts for transferring the cash subsidy.

“It is difficult to get new bank accounts within January and also include their Aadhar (UID) numbers and send it to the Centre. In rural areas the banks are inadequate in number. The new system would leave us into inconveniences”, he told reporters.

FILED ON: DEC 07, 2012 20:29 IST

 

Aadhaar-obsessed Indian Government should check ground reality #UID


200 px

200 px (Photo credit: Wikipedia)

 

NOVEMBER 30, 2012, http://www.taxindiaonline.com/
By TIOL Edit Team
THE Prime Minister Dr. Manmohan Singh has put the Government in fast gear on the grandiose project for direct cash transfers (DCT) to beneficiaries of various subsidy-centric and other welfare schemes.
He exuded over-confidence the other day while addressing the first meeting of the National Committee on Direct Cash Transfers (NCDCT).
Dr. Singh stated: “Direct Cash Transfers, which are now becoming possible through the innovative use of technology and the spread of modern banking across the country, open the doors for eliminating waste, cutting down leakages and targeting beneficiaries better. We have a chance to ensure that every Rupee spent by the government is spent truly well and goes to those who truly deserve it.”
He should moderate over-confidence with ground realities, provide answers on ticklish and contentious implementation issues.
He should also direct the Government to simultaneously pursue other options to reduce subsidy leakages and thus make DCT a triple medicine o ensure that benefits reach targeted segments of population, reign in corruption in delivery system and reduce expenditure and fiscal deficit.
Take the case of fertilizer subsidy. A cost-benefit study of Aadhar project undertaken by National Institute of Public Finance and Policy (NIPFP) at the behest of Planning Commission has projected a modest saving of 7% in fertilizer subsidy scheme through DCT.
Savings many times more than estimated 7% can be achieved simply by re-engineering fertilizer subsidy mechanism by weeding out fiscal bias for certain nutrients such as nitrogen and products such as ordinary prilled urea. It would not cost Government anything to bring urea under nutrient-based subsidy scheme!
The Government can easily save a few thousand crore rupees by ordering mandatory production and use of coated urea and urea super-granules and by promoting use of nitrates-based nitrogenous fertilizers that cause lesser losses of nitrogen through air, runs-offs and seepages in the crop field.
A truly nutrient-based and product-neutral subsidy scheme, coupled with mass popularization of drip irrigation should not only cut subsidy bill by half but also ensure efficient use of irrigation water. This is the key to food security and sustainable agriculture.
UPA Government should not neglect such options and create an impression that aadhar is the magic wand for inclusive growth and expenditure reforms. It must decide whether it would cash subsidy to land owners or to the share-cropper (the actual farmer) or to both.
The Government should also disclose whether and how often it would revise cash subsidy taking into account the increase in global prices of fertilizer and raw materials and rapid depreciation of rupee.
Such concerns are equally relevant to kerosene and liquefied petroleum gas (LPG) that are primarily derived from imported crude. Would aadhar card-enabled DCT provide for automatic increase or decrease in fuel subsidies to reflect global price and forex changes?
And the acid test for the Government would be food subsidy. Would the Government automatically increase DCT/per person to reflect the regular increase in food procurement prices and the resulting rise in open market prices?
Would Aadhar mechanism have built-in mechanism to capture the inflation-caused swings in the number of potential beneficiaries especially who live on the threshold of dubious poverty line?
Yet another issue that can’t be pushed under the carpet is the urgent need to make the definition of poverty realistic and provide for inflation-indexing of poverty line.
As for implementation issues, a country bedeviled with power shortages and frequent breakdown of servers and telecom link can make aadhar-enabled electronic banking a pain in the neck for poorest of the poor.
When banking terminals at times fail in public sector banks in Delhi for hours, what is the guarantee that they would function in villages where power is supplied only for 6-8 hours as per the rural electrification norms.
There also many other challenges on the DCT road. The Government must list all concerns and disclose how it would resolve them. Credible and wholesome communication on Aadhar should replace government hand-outs to the media.
NIPFP study should have factored in all concerns and challenges before coming out with goody-goody projections.
The study claims: “We find that substantial benefits would accrue to the government by integrating Aadhaar with schemes such as PDS, MNREGS, fertiliser and LPG subsidies, as well as housing, education and health programmes. The benefits arise from the reduction in leakages that occur due to identification and authentication issues. Our analysis takes into account the costs of developing and maintaining Aadhaar, and of integrating Aadhaar with the schemes over the next ten years. Even after taking all costs into account, and making mod- est assumptions about leakages, of about 7-12 percent of the value of the transfer/subsidy, we find that the Aadhaar project would yield an internal rate of return in real terms of 52.85 percent to the government.”
The Government should commission a fresh study that should factor in all hidden and unrecognized costs of Aadhar-enabled DCT.

 

Glitches in cash transfer pilot project worry govt


By , TNN | Dec 3, 2012, 03.28 AM IST

Glitches in cash transfer pilot project worry govt
Jairam Ramesh, who is is a key person for the implementation of this programme which is being viewed by the political class as UPA-2’s “game changer”, has conceded that there would be operational issues in implementing the direct cash transfer scheme.

NEW DELHI: The government is alarmed by the fact that the year-long cash transfer pilot project in Alwar district‘s Kotkasim block has virtually been a non-starter as money has rarely, if ever, come into the bank accounts of intended beneficiaries.

Reacting to a report that TOI front-paged on December 2, rural development minister Jairam Ramesh said, “The Kotkasim thing is a very serious issue. There will be operational issues. That’s why this is being rolled out in the 51 districts. We will learn all these issues and then we’ll take a call.”

Ramesh is a key person for the implementation of this programme which is being viewed by the political class as UPA-2’s “game changer”. If it gets stymied by lazy implementation, the political dividends for UPA may be minimal. Possibly mindful of that, Ramesh said, “That’s why I have proposed that we must admit a system of concurrent evaluation. It should not be only officials giving you feedback that everything is very rosy and working on the ground.”

Asked whether cash transfers were being made into an electoral issue, the minister said, “What we’re saying is what’s yours should be yours. Today pensions are paid once in five months and you have to pay a bribe to get what is yours. This is also a huge anti-corruption step. I’ve seen with my own eyes how people have to pay bribes to get their measly Rs 200 pension.”

‘Cash scheme can tackle graft better than Lokpal

Ramesh felt direct cash transfers to intended beneficiaries was “far more efficient in dealing with corruption than the Lokpal model”. “The Lokpal model is needed but to think that the Lokpal is a panacea as some fellows seem to think is ridiculous,” he said.

Asked if ‘cash transfers’ is the right term, given that schemes proposed by the government entail some element of cash, but don’t replace subsidies like food, Ramesh said: ” It is not cash transfers. I have never used the word. It’s the media that’s going gung-ho and unfortunately even the Prime Minister‘s committee is called PM‘s Committee on Direct Cash Transfers.”

What would he call it then? “I would say it is direct benefits transfer. Direct entitlements transfer would be another. It is not direct cash transfer. If we were replacing the food or fertilizer subsidy with cash, that would be direct cash transfer. I react very negatively to the words ‘direct cash transfer’.”

Confusion over #Aadhaar and #NPR #UID #Biometrics


  , ET
Thursday October 25, 2012, 03:46 PM

We just went and got our biometry done for NPR (National Population Register).  Census enumerators had visited us earlier and before the appointed NPR dates, we got an enrolment form we were supposed to fill up.  NPR biometry was being done at a neighbourhood government school and we were expected to turn up with assorted ID-s and our Aadhaar cards.  When we presented our Aadhaar cards, no other ID was needed.  Biometry wasn’t necessary either, since that was picked up from Aadhaar cards.  In other words, the Aadhaar database was sufficient to establish identity and biometry.  There will subsequently be a NPR card too.

 

When I read assorted stuff about subsidies and benefits being Aadhaar-based, I am confused.  First, there is an issue of BPL identification and there are problems of both inclusion and exclusion with it.  In other words, people who should be excluded are included.  And people who should be included are excluded.  Identifying BPL and deciding who should be beneficiaries of subsidies is a political decision, not just economic.  Of course, cash transfers are more efficient.  However, in many subsidy schemes, what is described as leakage is sometimes subsidies to poor who haven’t been included in BPL enumeration.  If all poor actually get subsidies, from a budgetary point of view, the subsidy bill may actually increase.

 

Let’s leave that aside.  Second, what exactly is Aadhaar and what does it mean to say stuff will be Aadhaar-based?  I can appreciate utility of the Aadhaar database and it does eliminate multiplicity and “bogus” individuals.  Hence, procedural costs of assorted government documentation declines. However, Aadhaar hasn’t just been the database, it’s also the card.  What use is the card, apart from the fact that once you have the card, the biometry can be scanned from it?  And what will be the point of the Aadhaar card, once there is a NPR card?  After all, NPR is for Indians, while Aadhaar is for residents of India.  That’s what I presume.  Any entitlements, so to speak, will be based on NPR cards.

 

Aadhaar only got a head-start and provided the database.  In practice, so far as I personally am concerned, no one has accepted Aadhaar cards as identity.  Perhaps that will change, beginning with bank accounts.  However, I repeat, that’s really the database, not physical cards.  I can understand expenditure on databases.  But was expenditure on physical cards really necessary?  With NPR, won’t this be rendered superfluous?

 

Apart from purely symbolic value, what’s the point of a big song and dance, including photographs, of dignitaries distributing Aadhaar cards to poor people?  Our experience with the NPR “camp” was also different from our experience with the earlier Aadhaar “camp” in our locality, though admittedly, this is a small sample.

 

Broadly, there were two groups of people who turned up for the Aadhaar “camp”, probably reflective of the neighbourhood.  There was a category of relatively richer and more educated people and there was a category of relatively poor people, mostly those who render some variety of domestic service and live in “unauthorized” locations nearby.  At the NPR “camp”, the second category was completely absent.  Perhaps they weren’t enumerated in the Census and perhaps they didn’t obtain enrollment forms.  Though possible, this seems unlikely.  More likely, because of advertisements, hype, publicity and resultant awareness, they saw some benefit from Aadhaar, but not from NPR.  If my understanding is correct, it should actually be the other way round.  As a government, the conclusion is inescapable.  Because of tussles across ministries/departments and confusion over what was intended, we have made a hash out of it and squandered some amount of money in the process.

 

We needed the Aadhaar database and we needed the NPR card.  It seems to me there was greater clarity before 2004 about who we needed to map.  Subsidies will be for Indians.  Why did we bother about foreigners who were resident in India?  Unless we assumed that these “foreigners” would eventually become Indians?

 

Laying a new #aadhaar, without a debate ? #UID


 Oci courtesy- The Hindu
Pratap Bhanu Mehta Posted online: Thu Oct 25 2012, 02:13 hrs
The paradigm shift in welfare needs as much public debate as corruptionIndia is at two critical inflection points. Its administrative practice was corrupt, secretive, hierarchical, arbitrary and overtly centralised. The welfare architecture that went with this state leaked like a sieve, produced all kinds of price and productivity distortions, was captured by the powerful and caught in a rigid bureaucratic logic. The revolt against old administrative practice is now being played out in the open. It has not followed a neat institutional logic, but it has brought us to the point where it is clear that business as usual cannot continue. But we are potentially in game-changing territory on the welfare architecture as well. With the launch of Aadhaar-linked cash transfer schemes, we are putting together the building blocks of another possible but exciting paradigm shift. The paradigm change in welfare needs as much public debate and attention as corruption.

In some ways, the political economy effects of the potential paradigm shift in our welfare architecture could be momentous. We are in a moment of great possibility, but we need to think through exactly what we are doing to build this new architecture very carefully. The design of large-scale welfare systems, once institutionalised, is very difficult to change. It took half a century to get modest healthcare reform in the US. Under the 12th plan, there is going to be unprecedented spending on a healthcare system. But there is no evidence yet that we have the foggiest idea of how to design an incentive-compatible system that will actually yield results. Most institutional debates in healthcare, for example, seem blissfully unaware of complex ground conditions and behavioural issues that need to be taken into account while designing the grand new architecture we are proposing.

The potential of Aadhaar has been discussed more. There are legitimate concerns over privacy that still need to be addressed. But the case for moving towards cash transfers is quite compelling. In moral terms, it gives citizens the autonomy to exercise the kind of subtle choice they need to cope with varying and difficult circumstances. There is an obtuse paternalism in claims that the poor cannot make relatively rational choices. The idea of millions of women directly receiving cash in their bank accounts is an enticing and empowering one. The practical case is also quite compelling. It would be a little Panglossian to argue that Aadhaar will eliminate all corruption. But there is no doubt that it has the potential to remove a lot of intermediaries as far as citizens are concerned. In the case of fertiliser and fuel subsidies, it could liberate us from the worst distortions in pricing and the sheer criminality the current system produces.

There are important issues of technical detail in assessing the promise of this paradigm shift now under way. But there are some puzzles about the way in which the political establishment is framing the shift to a new welfare paradigm. First, sections of the establishment seem to think that Aadhaar allows us to bypass the need to build capacity in the state, as if this were one technological solution to a human organisation problem. In fact, the opposite is true. Over the course of its development, Aadhaar will require an even more sophisticated state. There is sophistication in the Aadhaar team, but unless that percolates into all other parts of the bureaucracy we will end up with the same dysfunctional system with a layer of technology. I suspect some of the luke-warmness to the potential of Aadhaar comes from this thought. For years we have, justifiably, been fed the idea of state failure. To turn around and then ask citizens to trust the state with something potentially as game-changing as Aadhaar is still a leap of faith for most. Aadhaar can be a catalyst for state reform. But there has to be more evidence that these changes in the other parts of the state are indeed being catalysed. The rot of the old bureaucracy still casts a shadow over any promise Aadhaar might have.

Second, there is the issue of political framing. The problem with the UPA is that it thinks it can have everything. Hopefully, the fiscal crisis will jolt it out of its stupor and force it to make some choices. So on the one hand, it has to be credited for going down this path of building a new architecture. On the other hand, a lot of its most visible political commitments smack so much of the old, ossified paradigm that you are not sure which way it will eventually turn. The issue of PDS is a complicated one. In part, the complication comes from the uneven development geography of India. In some areas, potential starvation is still an issue; while in most of India the debate now has to shift to nutrition rather than starvation. There is a possibility that the supply response to potential spending in cash may indeed vary. So it is possible that we may need a modest PDS even with cash transfers. But what is clear is that the proposed food security bill is a travesty that promises the worst of both possible worlds. It delivers less than what many states are already delivering; at the same time, its logic is completely at odds with the new supple and flexible architectures that are now becoming a possibility. So Aadhaar, if implemented well, signals the possibility of a 21st century welfare state. The food security bill is a throwback to the 1970s, with all the distortions and rigidities of the old system. Which signal should we pick up?

Finally there is the uncertain political economy. Much has been made of the literature that suggests that cash transfers in Latin America favoured incumbents. Depending on the timing and context, cash transfers can have electoral consequences. But apart from one shot effects, we do not yet know enough about the dynamic political effects of a cash-based welfare regime. Current subsidies have been hugely distortionary. But they were under limits induced by the fear of inflation. Because delivery was relatively hard and ineffective, political mileage was more limited. But with an effective cash based system, the temptation to run ahead of fiscal sustainability and productivity may be even greater.

A less distortionary, more effective and autonomy-inducing welfare state is possible. But we need to attend to it with more diligence. There is no stopping India, if it can use this inflection on accountability and welfare to do away with the old regime and usher in a new.

 

The writer, president of the Centre for Policy Research, is contributing editor, ‘The Indian Express

express@expressindia.com

 

 

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