Tuesday, November 27, 2012

Implementing Direct cash transfer in India - State is fighting back against corruption

Solving the puzzle called corruption

“If Central government releases one rupee for poor, only 10 paisa reaches them.”

These are not the words of any excited activist from the street, but that of former premier Rajiv Gandhi (Congress Plenary Session- Bombay).

Government disbursal system is so leaky that, a great deal of flesh will be removed from the chicken before it reaches its target. For accepting the application, moving the file, getting the signatures, at the time of disbursal... doors which will unlock after showing notes with Gandhi's face!!!

However, rising literacy and increasing awareness intensified the resistance against these practices. But people are still vulnerable, after all line of hope still passes through old veins only.

In such circumstances, direct transfer of subsides to bank accounts of beneficiaries by central and state governments will be a blessing for ordinary man. This progression will definitely eliminate the roles of middle men and ghost recipients from the system. As an added advantage a substantial section of rural poor will come under country’s formal banking system; this will also facilitate them to save their wealth in a systematic way.

At a time, when government subsidies are running above three lakh crore rupees, gains of direct cash transfers not only make the process straightforward, but also augment the efficiency of auditing and restrain the corruption at low levels.

Prime Minister's remarks on Direct Transfers

Let’s take a glance at Prime Minister's speech at initial meeting of National Committee on Direct Transfers,

"“We have just concluded a very useful round of discussions about a very important initiative that the government has taken.

The government today spends huge funds on schemes and programmes for the benefit of the common man and the under-privileged sections of society. These schemes have the potential to bring about improvements in the lives of a large number of our people provided they are targeted correctly and implemented effectively. The funds that are provisioned for direct benefits like pensions, scholarships and health-care benefits must reach the intended beneficiaries without delays and leakages. Apart from these direct benefits, the government also provides an amount of over 3 lakh crore Rupees in subsidies which too must reach the right people.

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.

I am happy at the widespread support that I have heard across the table for Direct Cash Transfers. I have also listened carefully about the challenges that lie in our way in moving to a system of Direct Cash Transfers. In the coming days we will need to make every possible effort to address these challenges.

The twin pillars for the success of the system of Direct Cash Transfers that we have envisioned are the Aaadhaar Platform and Financial Inclusion. If either of these pillars is weak, it would endanger the success of the initiative. I would expect the Finance Ministry and the Unique Identification Authority to work in close coordination to achieve a collective goal.

To move closer towards the goal of financial inclusion, the banking system perhaps needs to integrate the post office network, especially in the rural parts of the country. It also needs to ensure that the front end infrastructure is in place all over the country, both through the existing modes of banking and through newer innovative ones, so that people have no trouble in opening bank accounts and withdrawing and depositing cash. Ideally, the common man should be able to open a simple bank account on demand if they have an Aadhaar number. This would have many other benefits too, beyond cash transfers. For banks, the increase in the number of account holders would be an investment in their own growth. The Unique Identification Authority must ensure that the coverage of Aadhaar is adequate as per the rollout plan and no one is left out. An Aadhaar number should be available on demand if beneficiaries are getting left out.

I would urge the individual ministries to work in right earnest for implementation of the Direct Cash Transfers initiative. They will need to digitize their databases, most of which are with the States, and seed them with Aadhaar numbers. You will be provided help by both the Unique Identification Authority and the IT Ministry. But, you will in turn need to assist the States.

This is a program in which the implementation capacity of our government will be tested. We must ensure at all times that there is no duplication of effort, and technology is used to the fullest for efficiency gains.

The timelines we have set for ourselves are ambitious. Fifty one districts are to rollout from January next year and 18 States from April. And the rest of the country later in 2013. I have no doubt we can succeed in achieving these goals provided we work sincerely and collectively.

I wish you all success in your efforts to put in place a system of Direct Cash Transfers.”"

State Can still fight back

Direct cash transfer may diminish the ineptitude of system and curb corruption, but it will not solve the challenge by itself. Direct Cash transfers will come in to effect, once the person submit the application for loans or subsidies and officials sanction the same – nevertheless an old process. In the same way system can’t itself settle on who is eligible and who is not.

Corruption has the ability to evolve itself and adapt to the changing circumstances. Ghost recipients may still be able to sneak in, middle men may re-appear in another form... Government, its auditors, communities need to keep a relentless vigil against it.



1. Government of India

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