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A jolt for Aadhaar

UPA shouldn't have put on hold its only good idea

Business Standard Editorial Comment  |  New Delhi 

The decision by the Union Cabinet to put "on hold" the transfer of subsidies to households using cooking gas through Aadhaar-linked bank accounts is unfortunate, and should be reviewed. It is certainly the case, as this newspaper has previously argued, that the United Progressive Alliance (UPA) dilly-dallied over Aadhaar for too long and eventually gave itself too ambitious a timetable for its roll-out in the hope of making it a major political point in this year's general elections. It was always going to be difficult to scale up direct benefit transfers in time. However, at the very least, that was being ambitious. What now appears to be a retreat, in the face of mounting problems with linking bank accounts to Aadhaar, is not a sensible strategy. The problems being faced in giving all beneficiaries bank accounts and linking them to Aadhaar are the basic teething troubles the programme was likely to face. They should have been foreseen; and even if they take time to overcome, that does not mean the scheme should be subjected to a review at a crucial stage of its implementation.

It is unfortunate that the single good, big idea of the UPA in its second term appears to have become the victim of politics. First the implementation of Aadhaar was delayed due to inter-ministerial warfare, in which the home ministry batted instead for its rival ID system, the National Population Register, which has very different aims. In the process, much of the elegance of the original Aadhaar idea - which relied on a lightweight enrolment process with minimal "verification" - had to be dropped. That has contributed to the problems visible in the roll-out of Aadhaar-linked transfers today. Subsequently, the government neither pre-empted nor properly fought the various legal challenges mounted by those who do not wish to see Aadhaar come to fruition for various reasons. And, finally, just as the system is being partially tried out, the general elections and the Congress' disarray have spooked the government into virtually giving up on the process. A combination of internal warfare, poorly fought legal battles and political cowardice has put on hold the use of Aadhaar for transfer of subsidies for cooking gas - a good illustration of exactly what has gone wrong with UPA-II.

It is worth remembering exactly why Aadhaar is crucial - more now than ever. First of all, there is little doubt that India's subsidy regime is ruinously expensive and unsustainable. It is leaky and fails to help those whom it should. This is precisely why Aadhaar needs to become a feasible alternative for providing direct transfers. In addition, financial inclusion is now no longer an option; it is clear that household savings need to be mobilised and more people need to be brought into the formal financial net. Aadhaar is a crucial instrument for making that happen. Both these imperatives, of subsidy reform and financial inclusion, are even more urgent today than when Aadhaar was first suggested. Instead of holding the use of the programme in abeyance, what was needed from UPA-II was a strong statement of commitment to the unique ID and to expanding its scope. After all, even if in one or two underbanked districts the linkage of cooking gas subsidies to Aadhaar-enabled bank accounts was a problem, that is no reason to hold up the entire programme. To do so at this late stage reveals that the UPA cannot even show commitment to its own good ideas.

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First Published: Mon, February 03 2014. 21:40 IST