Recently, the government announced that it plans to transfer benefits under various schemes directly into the bank accounts of individual beneficiaries. Benefits can be the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) wages, scholarships, pensions and health benefits. Beneficiaries shall be identified through the Aadhaar number (Aadhaar is an individual identification number linked to a person’s demographic and biometric information). The direct cash transfer (DCT) system is going to be rolled out in 51 districts, starting January 1, 2013. It will later be extended to 18 states by April 1, 2013 and the rest by April 1, 2014 (or earlier). Presently, 34 schemes have been identified in 43 districts to implement the DCT programme. Currently, the government subsidises certain products (food grains, fertilizers, water, electricity) and services (education, healthcare) by providing them at a lower than market price to the beneficiaries. This has led to problems such as high fiscal deficit, waste of scarce resources and operational inefficiencies. The government is considering replacing this with an Aadhaar enabled DCT system. It has claimed that the new system would ensure timely payment directly to intended beneficiaries, reduce transaction costs and leakages. However, many experts have criticised both the concept of cash transfer as well as Aadhaar (see here, here, here and here). In this blog, we provide some background information about cash transfer, explain the concept of Aadhaar and examine the pros and cons of an Aadhaar enabled direct cash transfer system. Background on cash transfer Under the direct cash transfer (DCT) scheme, government subsidies will be given directly to the beneficiaries in the form of cash rather than goods. DCTs can either be unconditional or conditional. Under unconditional schemes, cash is directly transferred to eligible households with no conditions. For example, pension schemes. Conditional cash transfers provide cash directly to poor households in response to the fulfillment of certain conditions such as minimum attendance of children in schools. DCTs provide poor families the choice of using the cash as they wish. Having access to cash also relieves some of their financial constraints. Also, DCTs are simpler in design than other subsidy schemes. Even though cash transfer schemes have a high fixed cost of administration when the programme is set up, running costs are far lower (see here, here and here). Presently, the government operates a number of DCT schemes. For example, Janani Suraksha Yojana, Indira Awas Yojana and Dhanalaksmi scheme. In his 2011-12 Budget speech, the then Finance Minister, Pranab Mukherjee, had stated that the government plans to move towards direct transfer of cash subsidy for kerosene, Liquified Petroleum Gas (LPG), and fertilizers. A task force headed by Nandan Nilekani was set up to work out the modalities of operationalising DCT for these items. This task force submitted its report in February 2012. The National Food Security Bill, 2011, pending in Parliament, includes cash transfer and food coupons as possible alternative mechanisms to the Public Distribution System. Key features of Aadhaar The office of Unique Identification Authority of India (UIDAI) was set up in 2009 within the Planning Commission. In 2010, the government later introduced the National Identification Authority of India Bill in Parliament to give statutory status to this office.
For a PRS analysis of the Bill, see here. Aadhaar enabled direct cash transfers Advantages Identification through Aadhaar number: Currently, the recipient has to establish his identity and eligibility many times by producing multiple documents for verification. The verification of such documents is done by multiple authorities. An Aadhaar enabled bank account can be used by the beneficiary to receive multiple welfare payments as opposed to the one scheme, one bank approach, followed by a number of state governments. Elimination of middlemen: The scheme reduces chances of rent-seeking by middlemen who siphon off part of the subsidy. In the new system, the cash shall be transferred directly to individual bank accounts and the beneficiaries shall be identified through Aadhaar. Reduction in duplicate and ghost beneficiaries: The Aadhaar number is likely to help eliminate duplicate cards and cards for non-existent persons or ghost beneficiaries in schemes such as the PDS and MNREGS. Disadvantages Lack of clarity on whether Aadhaar is mandatory: According to UIDAI, it is not mandatory for individuals to get an Aadhaar number. However, it does not prevent any service provider from prescribing Aadhaar as a mandatory requirement for availing services. Therefore, beneficiaries may be denied a service if he does not have the Aadhaar number. It is noteworthy that the new direct cash transfer policy requires beneficiaries to have an Aadhaar number and a bank account. However, many beneficiaries do not yet have either. (Presently, there are 229 million Aadhaar number holders and 147 million bank accounts). Targeting and identification of beneficiaries: According to the government, one of the key reasons for changing to DCT system is to ensure better targeting of subsidies. However, the success of Aadhaar in weeding out ‘ghost’ beneficiaries depends on mandatory enrollment. If enrollment is not mandatory, both authentication systems (identity card based and Aadhaar based) must coexist. In such a scenario, ‘ghost’ beneficiaries and people with multiple cards will choose to opt out of the Aadhaar system. Furthermore, key schemes such as PDS suffer from large inclusion and exclusion errors. However, Aadhaar cannot address errors in targeting of BPL families. Also, it cannot address problems of MNREGS such as incorrect measurement of work and payment delays. Safeguard for maintaining privacy: Information collected when issuing Aadhaar may be misused if safeguards to maintain privacy are inadequate. Though the Supreme Court has included privacy as part of the Right to Life, India does not have a specific law governing issues related to privacy. Also, the authority is required to maintain details of every request for authentication and the response provided. However, maximum duration for which such data has to be stored is not specified. Authentication data provides insights into usage patterns of an Aadhaar number holder. Data that has been recorded over a long duration of time may be misused for activities such as profiling an individual’s behaviour.
As of May 11, 2020, there are 67,152 confirmed cases of COVID-19 in India. Since May 4, 24,619 new cases have been registered. Out of the confirmed cases so far, 20,917 patients have been cured/discharged and 2,206 have died. As the spread of COVID-19 has increased across the country, the central government has continued to announce several policy decisions to contain the spread, and support citizens and businesses who are being affected by the pandemic. In this blog post, we summarise some of the key measures taken by the central government in this regard between May 4 and May 11, 2020.
Source: Ministry of Health and Family Welfare; PRS.
Industry
Relaxation of labour laws in some states
The Gujarat, Himachal Pradesh, Rajasthan, Haryana, and Uttarakhand governments have passed notifications to increase maximum weekly work hours from 48 hours to 72 hours and daily work hours from 9 hours to 12 hours for certain factories. This was done to combat the shortage of labour caused by the lockdown. Further, some state governments stated that longer shifts would ensure a fewer number of workers in factories so as to allow for social distancing.
Madhya Pradesh has promulgated the Madhya Pradesh Labour Laws (Amendment) Ordinance, 2020. The Ordinance exempts establishments with less than 100 workers from adhering to the Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961, which regulates the conditions of employment of workers. Further, it allows the state government to exempt any establishment or class of establishments from the Madhya Pradesh Shram Kalyan Nidhi Adhiniyam, 1982, which provides for the constitution of a welfare fund for labour.
The Uttar Pradesh government has published a draft Ordinance which exempts all factories and establishments engaged in manufacturing processes from all labour laws for a period of three years. Certain conditions will continue to apply with regard to payment of wages, safety, compensation and work hours, amongst others. However, labour laws providing for social security, industrial dispute resolution, trade unions, strikes, amongst others, will not apply under the Ordinance.
Financial aid
Central government signs an agreement with Asian Infrastructure Investment Bank for COVID-19 support
The central government and Asian Infrastructure Investment Bank (AIIB) signed a 500 million dollar agreement for the COVID-19 Emergency Response and Health Systems Preparedness Project. The project aims to help India respond to the COVID-19 pandemic and strengthen India’s public health system to manage future disease outbreaks. The project is being financed by the World Bank and AIIB in the amount of 1.5 billion dollars, of which one billion dollars is being provided by World Bank and 500 million dollars is being provided by AIIB. This financial support will be available to all states and union territories and will be used to address the needs of at-risk populations, medical personnel, and creating medical and testing facilities, amongst others. The project will be implemented by the National Health Mission, the National Center for Disease Control, and the Indian Council of Medical Research, under the Ministry of Health and Family Welfare.
Travel
Restarting of passenger travel by railways
Indian Railways plans to restart passenger trains from May 12 onwards. It will begin with 15 pairs of trains which will run from New Delhi station connecting Dibrugarh, Agartala, Howrah, Patna, Bilaspur, Ranchi, Bhubaneswar, Secunderabad, Bengaluru, Chennai, Thiruvananthapuram, Madgaon, Mumbai Central, Ahmedabad and Jammu Tawi. Booking for reservation in these trains will start at 4 pm on May 11. Thereafter, Indian Railways plans to start more services on new routes.
Return of Indians stranded abroad
The central government will facilitate the return of Indian nationals stranded abroad in a phased manner beginning on May 7. The travel will be arranged by aircraft and naval ships. The stranded Indians utilising the service will be required to pay for it. Medical screening of the passengers will be done before the flight. On reaching India, passengers will be required to download the Aarogya Setu app. Further, they will be quarantined by the concerned state government in either a hospital or a quarantine institution for 14 days on a payment basis. After quarantine, passengers will be tested for COVID-19 and further action will be taken based on the results.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
