“We will undertake significant reforms such as the enactment of a law to ensure that all government benefits are conferred upon persons who deserve it, by giving a statutory backing to the Aadhaar platform. Public money should reach the poor and the deserving without any leakage.” – Finance Minister Arun Jaitley in his Union Budget 2016-17 speech
The Aadhaar project was aimed at authenticating beneficiaries and directly transferring benefits and services to them. Currently over 98 crore Aadhaar numbers have been generated. The government has been able to directly transfer benefits to 16.5 crore beneficiaries through it. The Direct Benefit Transfer (DBT) in LPG has been particularly successful and the Government aims to expand it to other schemes. The Government expects to save Rs 15,000 crore in leakages in cooking gas subsidies each year. If the Government could save 40% of what it spends on food grain subsidy by reducing leakages, it will save about Rs 50,000 crore annually.
No wonder the Government is keen to expand the Aadhaar platform by introducing a bill for targeted delivery of financial and other subsidies, benefits and services using the Aadhaar framework in the current session of Parliament. Mr Jaitley in his budget speech announced that DBT of fertilizer subsidy will be piloted in a few districts. At present manufacturers sell subsidized urea to farmers and claim the subsidy from the Government. India gives a large subsidy on fertilizers, about Rs 72,000 crore annually. DBT of fertilizer subsidy to farmers will plug the diversion of urea to non-agriculture uses and neighboring countries.
However the Aadhaar project lacks legal backing and the Supreme Court has limited its use to cash transfers, PDS and MNREGS. Legal backing to Aadhaar can help it overcome legal challenges and permit Aadhaar to be linked to many more Government schemes. The Supreme Court has asked a constitutional bench to look into whether the Aadhaar platform violates the citizen’s right to privacy as it collects and shares biometric data of citizens. A legal backing to Aadhaar is just a statutory step; it does not amend the constitution which is perhaps needed to permit schemes like Aadhaar. So, if the constitutional bench decides that the Aadhaar platform violates the right to privacy, the legal backing will not hold.
Clearly the Government has decided to invest further in the JAM (Jan Dhan, Aadhaar, Mobile) trinity. Reducing leakages and better targeting of beneficiaries will provide more fiscal space to government. Additionally delivering within-government transfers (e.g. MNREGS) via JAM will reduce idle funds, lower corruption and improve ease of doing business with the Government. The last-mile delivery challenges (getting money in the hands of the beneficiaries in rural areas) and opposition from civil society groups (which petition against the Aadhaar platform) will be the most difficult to overcome.
Shobhit is the executive director at VIF.