UPA-II is playing what it hopes will be its biggest election card – the nationwide cash transfer scheme that aims to put a total of Rs 3.2 lakh crore per year in the bank accounts of 10 crore poor families, starting January next year. The per family/per year cash transfer amount will be Rs 32,000, almost three times the average annual earning of a below-the-poverty-line (BPL) family. The cash transfer will replace subsidies for kerosene, LPG, small pension payments as well as wages from job guarantee schemes. This means, according to senior officials in the PMO who spoke on condition of anonymity, the cash transfer scheme will be “fiscally neutral” since existing indirect subsidies will be replaced by direct cash transfers.
PMO officials said the “big difference” in this welfare reform will be a “huge spending impact on the economy” – poor families will have much more cash at their disposal. Massive in administrative scope and political ambition, the rollout is expected to be completed by April 2014, just in time for the scheduled general elections – the formal announcement will be made by Prime Minister Manmohan Singh on Monday. Singh will chair a meeting of the national committee on direct cash transfers before greenlighting the scheme. The committee’s members are the ministers of finance, rural development, HRD, labour, petroleum, fertiliser and women and child welfare, as well as the deputy chairman of the Planning Commission, Montek Singh Ahluwalia, and the chairman of the Unique Identification Authority of India ( UIDAI), Nandan Nilekani.
The showpiece welfare reform has the full backing of Congress President Sonia Gandhi, senior party officials said, requesting they not be named. Congress strategists are looking at cash transfers as the ‘NREG of UPA-II’, a senior leader said. However, many senior officials in the government, speaking on condition of anonymity, said the success of this massive welfare reform was critically contingent on Aadhaar, the electronic platform-based system for providing unique identification numbers for all residents, covering at least 80% of the population.
Aadhar is critical because the cash recipients’ bank accounts will be opened on the basis of their identification number – a process designed to eliminate diversion of welfare cash to non-BPL residents. The Aadhar number is the means to making basic banking services accessible to the poor as well as ensuring there’s no leakage during cash transfer. Aadhar’s coverage has so far been limited to urban areas in the three years since its launch. “As of now, we have enrolled 250 million, i.e. approximately one in every four Indians. The goal is to make it one in every three Indians by 2013, and by 2014, every second Indian will have an Aadhaar number,” Nilekani told ET.