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| NREGA vs Nilekani | | The govt ought to prepare for a cash transfer regime |
| Business Standard / New Delhi Jul 10, 2009, 00:00 IST |
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A part of the raison d’etre of the Unique Identification Card (UID) project, given to Nandan Nilekani to implement, is to facilitate a more effective delivery of government services (through more accurate identification of the intended beneficiaries), or paying the equivalent value in cash hand-outs. Given the vast budgets for the programmes that would benefit, and the scale of leakages that is widely believed to exist, the UID project would (or should) help the government to save tens of thousands of crores of rupees. Once enough UID had been issued to attain critical mass, the government would (or could) transfer funds to these smart-cards, using technology that already exists. At one stroke, as it were, the government would save on the vast overheads involved in service delivery and supervision, as well as the leakages. If indeed it is true today what Rajiv Gandhi said two decades ago, that only 15 per cent of the money spent reaches the intended beneficiaries, a properly implemented UID project would pay for itself many times over.
If the government accepts this logic, there is little sign of it. The outlays on the kinds of programmes that could quite easily be replaced with cash transfers, are the ones that have got massive hikes in outlay. The scheme under the National Rural Employment Guarantee Act (NREGA), for instance, is to be expanded from Rs 16,000 crore in the Budget estimates of 2008-09 to Rs 39,100 crore in 2009-10, and a pilot programme is to be conducted in 115 districts to see how this can be dovetailed with existing agriculture schemes. If money can be directly transferred to the poor—without distorting the labour market, as is said to be happening—shouldn’t the government be moving in that direction instead? Similarly, a National Food Security Bill will be ready soon for consultation, the intention being to guarantee 25 kilos of grain at Rs 3 per kg to every poor family in the country. But delivering that grain is going to be a problem; the cost is at least another Rs 3, and no public distribution system exists in large parts of the country, especially in the areas where the poor are concentrated. A cash transfer would be a superior alternative—and without distorting the grain market.
Bear in mind that the food security programme will cost Rs 15,000 crore as grain subsidy, and perhaps another Rs 5,000 crore as overheads. The employment guarantee scheme is already costing Rs 39,000 crore. Since the number of families below the poverty line is about 50 million, these two outlays alone could be substituted with monthly payments of Rs 1,000 to each poor family. Mr Nilekani’s card was supposed to be the way out of all this. It might be argued that the card is still only an idea, and that making it a reality for millions of people will take years; therefore, all the existing government programmes have to continue. There is logic to this position, but what needs to be displayed at the same time is some preparation for a regime that will move from transfers in kind to transfers in cash.
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