Indian Decade

UPA Promotes Direct Subsidies Payments

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Indian Decade

UPA Promotes Direct Subsidies Payments

The Congress Party is promoting a plan for direct subsidy payments ahead of the 2014 general election.

With the United Progressive Alliance (UPA) government in office for three and a half years, and having a poor track record to show for it, the government is now trying to revamp its image ahead of the 2014 elections.

A recent announcement of a cash transfer scheme is being touted by the Congress-led government as a game changer. The idea to transfer subsidies directly into the accounts of the intended beneficiaries has suddenly stirred new hopes in the demoralized party, which has been battered by corruption charges and is widely believed to be responsible for the economic paralysis the country finds itself in.

Under the scheme, families entitled to subsidies, pensions, and other form of entitlements will get these transferred directly into their bank accounts. The basis of this transfer is a Unique Identity Number (UID) or Aadhaar card (a 12-digit individual identification number) that the Indian government has been issuing to each citizen. This UID is very unique where all your personal and professional details can be traced by entering a twelve digit ID number into a database.

Staring early next month, this scheme will initially run in 51 districts spread over 16 states. By the end of the year the program will reach almost every part of the country.

It is believed that most of the subsidies the current government appropriates fail to reach in totality the intended beneficiaries due to intermediaries and leakages at various stages. The government argues that by transferring the money directly into the accounts of the people, such leakage and corruption can be curtailed. 

But the problem is not with the intention but rather the program's implementation. 

Newspaper reports suggest that only around 210 million (out of a population of 1.2 billion) have a UID or Aadhar card. The people who miss out are disproportionally likely to be those below the poverty line, the main target of the cash transfer, who often lack a bank account. With so many impediments and the 2014 elections fast approaching, how successful the scheme will be remains questionable at best.

But the government seems unconcerned by these practical considerations and is hoping that the mere idea of a direct cash transfer will score it enough political points to bring the Congress party to power again, much as an earlier scheme, the MGNREGA (Mahatma Gandhi Rural Employment Guarantee Act), did in the 2009 elections.

Concerned that this may work, a large part of the opposition is against the transfer scheme claiming that Congress is essentially bribing voters. The Bharatiya Janata Party (BJP), the main opposition party, is struggling to come up with a logical criticism of the new scheme, however.

The Congress is taking a great leap of faith. It hopes to turn the tide of popular anger. But it will not be easy.