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Anirudha Dutta
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Will Aadhar Put an End to Double Subsidy?

As a part of a project that I am working on, I visited Anita’s home the other day. Anita lives in a slum in Worli (Mumbai) with her parents and two siblings in a room about 40-50 sq ft. This is their world, the world of five adults and possibly a cat that kept a close watch on me and Tina as we spoke to Anita and her sister.

Gross family earnings will ensure that they are not classified as poor. While the city of Mumbai provides enough sources of livelihood, it doesn’t provide dignified living conditions to its denizens.

Two years back the family secured a LPG connection and we could see the two LPG cylinders in the house. They stood out in their bright red colour. The advent of the cooking gas has made life easier for the mother, saved her precious time and the small room gets less heated, a boon during the sultry summer months in Mumbai. Think productivity.

Our questions at one point of time turned to the PDS (public distribution system) and Aadhaar (UID). The family members have all got their Aadhaar numbers although they do not have any idea how it will be useful for them.

From the PDS shop, they only get pulses and kerosene these days. Rice and sugar, which was earlier available, has to be now bought from the open market for reasons not known to the sisters. Over the years the kerosene quota has got reduced.

I asked them that what do they now do with their kerosene quota since they have cooking gas at home. I was not too surprised on being told that they draw their full quota of kerosene even now.

And what do they do with it? They sell it to the local grocery store in their slum and make a tidy little profit. As I sat their thinking of illegal sale and profiteering, Anita told us that the money they get is saved to buy LPG cylinders! The ways of the poor and our erroneous assumptions. And the difficult question of morality behind subsidies.

So this family now enjoys a subsidy on their kerosene quota as well as subsidised LPG cylinders – a case of double subsidy. And they do not know that Aadhaar can put a stop to that.

(Graphic by Hemal Sheth)

(Graphic by Hemal Sheth)

The incentive to sell kerosene to the shop in their locality will still be there since the family will get its subsidy in their bank account, but Aadhaar will identify them as using cooking gas and make them ineligible to buy kerosene from the PDS shop. This is not about ghost card holders, ghost recipients, but about double subsidy.

I wonder what they would have done if they knew what the Aadhaar number could mean for them. May be someone will have to tell them of the other side – the scholarships the sisters could have got, the old age pension that their parents may become eligible for and the other benefits that will actually reach them if Direct Benefits Transfer (DBT) works properly. Plus the benefits to the country as the subsidy bill reduces.

A recent report by IIFL Institutional Equities, Savings on delivery, estimates that “on full implementation, it (UID) can reduce fiscal deficit by 2 ppt of GDP.” Under Nandan Nilekani, UID has made tremendous progress and is probably the only success of UPA-II. The risk is that in a rush to discover the next winning electoral slogan (Aapka paisa Aapke haath), the Congress leadership may have prematurely rushed into DBT without adequate groundwork or penetration of UID. Hopefully this will not derail UIDAIs efforts.

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Its about making a begining.....like trying to clean up ones house....many wil have to do away fond memories to create spacewith age old subsidies they have rightfully or wrongfully been getting....in the interest of equitable benefits we need to create fiscal space! With values like LPG, DBT etc. and others that will follow shortly the UID platform will be hard to resist be it for any Goverbment or the private sector or Individuals!...Its about managing the perception of change

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the 2 ppt reduction is a mathematical/economical calculation. Are they able to incorporate corruption of the Indian society in to their equations?
Anirudha Dutta
Thanks, Nathan. Corruption is not included in this calculation, I would guess.
The poor also indulge in petty corruption, though in this case may be inadvertently.This corruption harms the society to some extent as some one else who is eligible for kerosene does not get his legitimate quota or less of it.The trader who bought this kerosene sold it at black market rates and in turn this chain becomes another form of irregularity in our society.Similarly a Defence personnel who is entitled to a fix quota of liquor does not use himself but sells it in the civil area on higher rate to a local bootlegger who agains sells at higher rates to a civilian and this becomes another chain. So there are chains and chains and our nation keeps getting the tag of most corrupt society.
Anirudha Dutta
Indeed, Suresh. Some, like the family I have mentioned, do not see anything wrong in what they are doing. And after seeing how they eke out a living, I am not too sure where I stand on this debate. If only these people had access to formal finance, food grains from PDS, the promise scholarships went into their bank accounts and the education system taught them what it is supposed to, the debate would have been much easier. The worry for me is the decline in morality of the rich and upper middle class... what explains that?
Now that the government is probably in minority the derailment of aadhaar project could be by judicial activism. Several cases have been filed in the courts across the country. The standing committee scoffed at the project and said rework the strategy. Parliament has not debated about aadhaar at all. NIAI bill is stuck and it looks like a view will be taken by the next government after elections in 2014. Another problem the project could face is activism by the election commission. If it stops enrollment for aadhaar in the pretext of election code of conduct that would be a setback for the project.
Anirudha Dutta
Thanks, Mukesh, for the insightful comment. Indeed what you write could come true. My bigger fear is that the political system itself could derail Aadhaar, if it is turned into another electioneering slogan and fails to deliver on the promises of DBT. Mr. Nilekani's target is to make the process irreversible before the next elections.
 
 
Anirudha Dutta
Anirudha Dutta is former head of research at CLSA India Limited, a leading foreign brokerage house. While every number tells a story, there are many stories beyond numbers and both are equally important. This blog will attempt to tell some of these stories.
 
 
 
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September 22, 2013 09:53 am by Pompy Sridhar
Its about making a begining.....like trying to clean up ones house....many wil have to do away fond memories to create spacewith age old subsidies they have rightfully or wrongfully been getting....in the interest of equitable benefits we need to create fiscal space! With values like LPG, DBT et...
April 10, 2013 00:45 am by Exams, stress, parenting and demographic dividend | eParent.co.uk
[...] I end, a bit of pat on my own back. On 26th March, in my blog titled “Will Aadhar Put an End to Double Subsidy?” I had written, “The risk is that in a rush to discover the next winning electoral slogan [...]
April 09, 2013 07:31 am by Exams, stress, parenting and demographic dividend | Forbes India Blog
[...] I end, a bit of pat on my own back. On 26th March, in my blog titled “Will Aadhar Put an End to Double Subsidy?” I had written, “The risk is that in a rush to discover the next winning electoral [...]
March 28, 2013 20:33 pm by Anirudha Dutta
Thanks, Nathan. Corruption is not included in this calculation, I would guess.
March 28, 2013 09:43 am by Anirudha Dutta
Indeed, Suresh. Some, like the family I have mentioned, do not see anything wrong in what they are doing. And after seeing how they eke out a living, I am not too sure where I stand on this debate. If only these people had access to formal finance, food grains from PDS, the promise scholarships went...