Dash for cash: PMO, Chidu and Ramesh aren't on same page

If there is any reason to believe that the Congress did its homework before announcing a plan to extend direct cash transfers to the whole country over the next 12 months, two recent examples tell us it ain’t so.

First, Congress ministers, including the Prime Minister himself, do not appear to be on the same page on whether or not this is a direct cash transfer scheme. Nor are they agreed on how the benefits or cash will be delivered.

Second, the place in which a pilot has been carried out - Kotkasim in Rajasthan’s Alwar district - seems to have been the wrong place to conduct the experiment in. In any case, it has not served as a show-case for how effectively cash transfers will work.

More from Business

Hyundai India’s Rs 27,870 crore IPO oversubscribed by 2.28X, largely driven by institutional investors How Indian fintech startups are driving Malaysia’s UPI-like digital payments revolution

Consider the first disconnect. The PMO has sent missives to ministries to prepare for cash transfers on a war footing. Manmohan Singh’s Principal Secretary, Pulok Chatterji, has already written to nine secretaries in various ministries that are part of the initial rollout from 1 January to “get down to the immediate task of operationalising direct cash transfers in the identified schemes in your department.”

So, the PMO says it is about direct cash transfers, but this is not what Rural Development Minister Jairam Ramesh, who even announced the slogan “Aapka paisa, aapke haath”, thinks the scheme is all about. He says it is about entitlement transfers.

Impact Shorts

More Shorts

Tata Harrier EV vs Mahindra XEV 9e: Design and road presence compared

As Trump weaponises tariff, Fed sees a bigger worry: Not jobs, but rising prices in America

In an interview to The Times of India, Ramesh emphatically said that the idea is to send benefits directly to beneficiaries, and not necessarily cash. “It is not cash transfers…Unfortunately, even the Prime Minister’s committee is called PM’s Committee on Direct Cash Transfers, but I have never said that this is direct cash transfers. Never.”

[caption id=“attachment_543404” align=“alignleft” width=“380”]  AFP[/caption]

But Finance Minister P Chidambaram was talking precisely of cash transfers to beneficiary accounts when he jointly addressed a press conference with Ramesh the other day. He said: “To start with there will be Banking Correspondents with miniature ATMs… they will act as the bank account operator with a handheld ATM to enable the beneficiary to withdraw the cash benefit,” PTI quoted Chidambaram as saying.

Can banks transfer anything other than cash?

Now, hear Ramesh in his Times interview: “The objective of the scheme is not transfer into bank accounts, the objective is transfer of the entitlement into the hands of the pensioner or the student. That’s the fundamental difference in what we are talking of.”

Ramesh and Chidambaram do not even agree on how the “cash” or the “entitlement” are to be transferred, and whether the infrastructure is in place.

Chidambaram said: “If the Aadhaar penetration is 80 percent and more, then it is a fair assumption that the beneficiary penetration of Aadhaar will be close to 95 percent. We hope to be able to do that by December 31… The infrastructure is in place.”

But Ramesh would probably disagree. According to him, the infrastructure the FM is talking about is not quite in place, and the infrastructure that is really in place, is not part of the scheme.

He said though the plan was to cover NREGA wages and pensions in the first phase, “I don’t see it happening on January 1. There are some structural issues.”

The structural issue for him is that NREGA payments often go through post offices - nearly 71 percent of it. “Unfortunately, the IT architecture of the postal department will start getting rolled out only in June 2013 and it will take a minimum of 15 months for the entire project to be completed.”

That’s not fast enough for cash transfers to be a vote winner in 2014.

From the statements of the PMO, the finance minster and the rural development minister, it is apparent that they are not on the same page. One is talking of cash transfers, another of entitlements transfer, and the third is talking of infrastructure being in place when it manifestly is not.

This brings us to the second reality: the Kotkasim pilot project on cash transfers, which can be considered inconclusive or a super success depending on which want you want to see it.

This is what the Kotkasim pilot was about - to see if paying cash instead of kerosene subsidy works.

According to a story in Hindustan Times today, while there have been complaints about the cash not reaching beneficiaries in time, the most dramatic change is the sheer drop in kerosene offtake after the scheme was launched in December last year. Sales fell from 84,000 litres in November 2011 to just over 5,000 litres 11 months later, “mainly due to stoppage of leaks.” Reason: “As much as 80 percent of the kerosene sold here was being routed to diesel water pumps,” says the newspaper, quoting an attendant at the fair price shop in Pur.

Chidambaram should be doing cartwheels since if cash transfers force bogus users out of the system, he will save a huge packet in subsidies.

However, that is not the only conclusion of the pilot. Apparently, Kotkasim is a relatively well off place, where daily wages often top Rs 250 and kerosene is not a deal-breaker for those who don’t receive the cash subsidy.

The newspaper’s verdict on the scheme is clear: “The leakage has been checked, but by virtually cutting kerosene supply. So, the pilot project has proved that the people of Kotkasim can live without kerosene, not that the idea of cash transfer is effective or desirable.”

In short, wrong place, wrong experiment, debatable results.

For Congress, there is a starker reality. Assuming the cash transfer scheme is effectively about cutting off bogus claimants for subsidies, how is it going to be a vote-winner? Will the people of Kotkasim, now denied cheap kerosene for water pumps, be happy they have been cut off or unhappy?

The only interim conclusion we can draw is this: fools rush into cash transfers without figuring out how it is supposed to work.