With Nandan Nilekani led panel recommending a unique identification or Aadhaar enabled electronic payment system finance minister Pranab Mukherjee is expected to announce direct cash transfer to beneficiaries in the budget of 2012.
The government intends to transfer fuel subsidy for keresone and liquid petroleum gas (LPG) cylinders directly to the poor families instead of giving it to state run agencies. In coming years the platform would be extended to fertilizer and public distribution system of food grains. With this, the government aims to check its growing subsidy bill of over Rs 1,00,000 crore.
On basis of pilots implemented in states such as Andhra Pradesh and Jharkhand, Nilekani led panel on Thursday suggested an electronic payment module to ensure payments directly to beneficiaries and reduce transaction costs and leakages.
The unique identification authority of India (UIDAI) had introduced the concept of micro-ATMs in the pilot projects, where a person can withdraw money at his or her doorstep from an Aadhaar enabled no frills bank account. A micro-ATM is a small machine which connects to the banks server through the mobile phone of the banking correspondent.
Mukherjee, while receiving the report said, the system will enable bringing transparency and reduce avoidable delays. He wanted the pilots to be scaled up and implemented in more states for people and local governments to understand its benefits.
Other than direct cash transfer in place of indirect subsidy, the panel also said that the government can pay monthly allowance to anganwadi workers, school teachers and health workers through this Aadhaar enabled platform.
To make the system economically viable for banks, the panel wants the government to pay Rs 20 or 3.14% of each transaction, whichever is lesser, to banks. The banks will have to employ banking correspondents and procure 10 lakh micro-ATMs to provide banking service at the doorstep in country’s nook and corner.
“This will also lead to positive network externalities such as reduction in leakages and achieving financial inclusion,” the panel’s report said.
It also recommended that over a period of time, all payments of government over Rs1,000 should be made or received electronically. “Transacting all Government business using electronic payments will help reduce graft, and bring about greater transparency and accountability,” the report said.