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Udit Misra
I cover economy and policy issues based out of New Delhi.

Why Rukhsana Opposes Direct Cash Transfers of Food Subsidies

Covering economy and policy in India can be hugely frustrating. One day you can hear how government wishes to launch a great new welfare scheme, which uses the latest technology and aims at targeting the most distressed. The very next day you could come across enough evidence of how that scheme is considered vile and unacceptable by the most needy themselves. What reconciles these two polar opposites is a mix of politics, misinformation and the legacy of decades of poor administration.

India’s first direct cash transfer scheme – Delhi Annshri Yojana (DAY) – to be set in motion from 15th December is a very good example of this. Let me introduce the scheme before introducing Rukhsana, the typical beneficiary DAY aims to target.

What is Delhi Annshri Yojana ?

On 12th December Sheila Dikshit, the Delhi Chief Minister, announced that her government will start DAY to provide Rs 600 per month to the bank accounts of 200,000 families which have been carefully selected in consultation with the various NGOs. The money will be given for food, although, as is the case with cash subsidy, one could use it for any purpose. Moreover, she clarified, this money is over and above all the existing food subsidies. Since the scheme has been functional, on paper, from the start of the financial year, the selected families will be given all the arrears too. Considering that the scheme so close to the Delhi assembly elections ( due next year) one could be forgiven to wonder if the move is more a political gimmick to win over marginal votes instead of resolving deep set problems. Anyway.

Sheila Dikshit made the announcement while inaugurating another big reform called  “Saral Money” which allows people to open new bank accounts with their neighbourhood Kirana shop owners. The Kirana shop owner would now use a micro-ATM to verify the identity of a person through his bio-metrics and then provide him with a bank account instantaneously. A Micro-ATM is like a Point of Sale (PoS) device that uses a phone connection and allows us to use pay using our debit or credit card. In this case, it also has a fingerprint reader attached to it. So you can type in your UID number and verify by giving your thumb impression. Then swipe your Saral Money Card and conduct the transaction. Of course, this would be possible only if you have a UID number but one cannot deny that it opens up the possibility to revolutionalise financial inclusion in India.

Why Rukhsana Opposes Direct Cash Transfers?

On the face of it, DAY appeared to have some merit. There are a lot of needy people who fall between the cracks that exist in the multiple welfare schemes run by the government. One would assume that any scheme that targets such people would be welcomed across the board. However, that is not the case.

On 13th December – the day after Dikshit’s announcement – campaigners for the right to food staged a protest at Jantar Mantar in Delhi. There were around 400 odd people protesting the government’s move to direct cash transfers, instead of providing subsidized foodgrains. Many of them had also come from Delhi and openly opposed the DAY.

One such person is 32 year old Rukhsana from the Trilokpuri area of Delhi.  Rukhsana  has 3 kids and is now separated from her husband. She works as a maid – washing dishes and cleaning clothes – in the nearby residential colony and earns around Rs 3500 per month – that is Rs 117 per day. However, she does not receive a single government subsidy. That means no cheap rice, wheat or sugar. It also means no subsidized LPG that many of the readers might be benefiting from.

The problem is that she does not have a ration card and her numerous attempts to get one have failed. Between sweeping floors and taking care of her 3 kids she does not have enough time and resources to follow up on her application.

Earlier in the year the local Gender Resource Centre (GRC) representative approached her and asked her to enroll in the DAY.  The GRCs are run by the Delhi Government in collaboration with the recognized NGOs to help citizens derive the maximum benefit from the various welfare schemes.

“They told me that since you do not get ration, why don’t you apply for this (DAY). At least you will get Rs 600 per month,” says Rukhsana.

Although terribly upset at the paltry amount of Rs 600, Rukhsana reasoned something is better than nothing and approached her local MLA (Member of Legislative Assembly) to get her application certified.

The MLA, belonging to the main opposition party to the ruling Congress – BJP- certified her application but told her that by doing so, she is signing away any chances of getting a ration card or subsidized ration in the future.

This totally spooked Rukhsana. She came back home and decided not to submit her application for DAY.

Rukhsana has a bank account and also has a UID number. She should benefit from the cash transfers the most since Delhi now has Saral Money option. She can just go to the Kirana shop, withdraw money from her bank account, buy her stuff and get back home. No need to waste a day’s wage in going to a bank or being cheated by the local PDS shop owner.

Then why is she resenting it?

Firstly, because she is made to believe that getting the new subsidy will foreclose all options of a ration card. One cannot overemphasize the significance and longevity of a ration card to the poor in India. Not only are they the irrefutable proof that one exists and is poor enough to deserve government aid, the ration cards often outlive their bearers. They are used by the next generation to either get a new card or continue withdrawing benefits. In her worldview, she simply cannot give up on a ration card of her own.

Secondly, Rukhsana is not convinced that getting direct cash subsidy in place of subsidized foodgrains is a good idea for her. “I would like to get wheat and rice at subsidized prices.  Buying from the market and getting reimbursed (the way direct cash subsidy works) is a bad idea. Have you seen how fast the prices rise in the market?” she asks me.

This is crucial point in the larger debate of whether we should dismantle PDS and move towards cash transfers. Market prices will move up instantaneously, while government’s help is likely to come with a lag. As it being witnessed in the Kotkasim (Rajasthan) pilot of cash transfers for Kerosene over the last one year, failure of the government to pay adequate subsidy at the appropriate time has led to Kerosene purchases being brought down by over 80%. One way to look at it – the government’s view – is to rejoice at the decline in subsidy due to lesser disbursal. But what about the people who could not afford to buy kerosene to cook food? Many of them have been protesting at Jantar Mantar for the last 3 days.

Rukhsana fears something similar would happen to her. Only this time it would be her food, not kerosene. At an all India level, it can have disastrous impacts on people’s health. India already has a shameful record of malnutrition and hunger.

She also believes that money in the bank is not as fungible as a ration card. “With a ration card if I am ill I can send my kids or my neighbour to get foodgrains on my part but not if I have money in my account,” she reasons.

Rukhsana also points out the typical problems one faces in dealing with banks. She does not know about Saral Money, which is being launched in 100 locations of Delhi. But she is not clear how will a micro-ATM solve her problems. Nor is she concerned about the fiscal deficit targets of the finance minister. She is evaluating the scheme from a consumer’s angle.

There are many reasons why one could consider direct cash subsidy as the idea whose time has come. Barring a few states, Public Distribution System is in shambles in the country for long enough for policy makers to feel that it is time to abandon it in favour of direct cash transfers. The chief benefit is the cut down in the administrative aspect. Beneficiaries will not be required to deal with so many “babus” who rob them of their quota of foodgrains.

Essentially, it is technical solution to the longstanding inability of the government to deliver subsidized foodgrains.  But it is also reflective of India’s society – after all many of us are involved in looting the poorest of their due. The question then is – how far can a technocratic solution address a social problem? Let me know what you feel.

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Shreekumar Thampy
Is it true that ration cards will be invalidated? If yes, I wonder whose brain child it is.
If we already have a bank account than it is necessary to open a new account?
If you already have a bank account, I think there is no need of another bank account. However I recommend different account as there would be no charges and no minimum balance requirements and you can track the subsidy and usage better with separate account.
 
 
Udit Misra
I have been with Forbes India since late 2008 and currently work as Assistant Editor. In the past , I have reported for Mint newspaper and produced special shows for CNN-IBN news.
In my spare time i follow sports, esp cricket, and enjoy reading/listening urdu poetry.
You can reach me at udit.misra@network18online.com and follow me on twitter @misraudit
 
 
 
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December 18, 2012 11:53 am by Is this Social Innovation? |
[...] if it does mean less corruption, what about the reach of the services to those who need it most? A recent article in Forbes takes the case of a lady, Rukhsana, who opposes cash transfers, explaining that the [...]
December 17, 2012 13:47 pm by Bharat
If you already have a bank account, I think there is no need of another bank account. However I recommend different account as there would be no charges and no minimum balance requirements and you can track the subsidy and usage better with separate account.
December 17, 2012 12:51 pm by Shreekumar Thampy
Is it true that ration cards will be invalidated? If yes, I wonder whose brain child it is.
December 15, 2012 14:51 pm by Fatema saify
If we already have a bank account than it is necessary to open a new account?