The government has cited the twin benefits of achieving consumer satisfaction as well as subsidy savings to push the direct cash transfer before the next general elections, but civil society groups claim that many existing beneficiaries have been left out of the "game-changer" initiative.
Pilot projects that utilise the Aadhaar payment platform in East Godavari district of Andhra Pradesh and Alwar in Rajasthan have resulted a dramatic fall in off-take of subsidised products under the public distribution system (PDS). "It is because many beneficiaries don't have bank accounts or Aadhaar numbers," said Reetika Kheera of IIT Delhi, who conducted a study in Alwar.
In Alwar, kerosene sales fell by about 80% in the first six months of an Aadhaar-based pilot project. District civil supplies officer Ram Charan Meena claimed it was because kerosene was no longer being diverted to the black market.
"Earlier, kerosene was being diverted as an alternative to diesel, which is more expensive," he said, adding that the incentive of Rs. 34 per litre of kerosene for diversion has ended because subsidy is being transferred into the bank accounts of beneficiaries instead of that of fair price shop owners.
A similar scenario was witnessed in East Godavari district, where the monthly sale of rice fell by around 20%, and kerosene by 30%. "Under the new system, people with fake ration cards cannot do much," said Babu V, joint collector, East Godavari, and pilot in-charge.
The Planning Commission has estimated this would cut the government's annual subsidy bill of Rs. 3,20,000 crore by one-third. "More than savings, cash transfer will make the government delivery system more efficient," said Montek Singh Ahluwalia, deputy chairperson of the Planning Commission, which is one of the agencies tasked with bringing most government schemes under the Aadhaar umbrella by December 2013.
Babu, however, said the pilot has achieved higher satisfaction levels. Under the new system, beneficiaries can get all the subsidised items on their shopping list through a single visit to the fair price shop, and they get an SMS alert as soon as the articles arrive. Also, the new system reduced the possibility of ration pilferage.
However, National Advisory Council member Aruna Roy said that cash transfer will deprive the poor of essential services because it would be difficult to ensure that the money is used for the purpose it is given.
When asked for his comment, a UIDAI official termed them as "teething troubles" that were in the process of being resolved.
(Inputs from Ashok Das in Hyderabad and Urvashi Rawal in Jaipur)