should aadhaar be junked?

The last 60 days have not been good to India’s much-feted Aadhaar project.

On the 30th of January, the UPA pressed the pause button on direct benefits transfer for cooking gas. On 26 February, the Mumbai High Court directed Aadhaar to share its biometrics database with the CBI. A year earlier, a seven year old had been raped in Goa. And the investigating agency, struggling to make headway, had asked the Unique Identification Authority of India (UIDAI) for biometrics it had collected in Goa. UIDAI refused to share information saying such a move would violate privacy of its number-holders and that its biometric database and deduplication systems were not designed for forensic inquiries. In response, the CBI went to the Mumbai High Court which directed UIDAI to share its database.

The third blow fell on 24 March when investigative journalism portal Cobrapost aired videos that allegedly showed UIDAI’s enrolment agencies agreeing to enrol people from neighbouring countries in return for a bribe. Between them, these three events underlined long-standing questions about the Aadhaar project.

Between them, these three developments highlighted large worries about the ambitious Aadhaar project. Read more here.

the upa puts dbt-lpg on hold

out today, this story by my colleague yogima seth and me on a surprise decision by the upa to pause its DBT programme for LPG.

The government’s decision to put the Aadhaar-based direct benefit transfer (DBT) for cooking gas on hold could be a blow to the Unique Identification Authority of India (UIDAI), set up as one of the United Progressive Alliance’s flagship initiatives and aimed at ensuring that subsidies reached the right beneficiaries without fraudsters and middlemen ripping them off.  Ahead of elections, the government is at pains not to risk alienating any constituency, having already sustained heavy defeats in recent state elections, some of these in areas where the programme has been rolled out. Oil minister Veerappa Moily attributed the decision on Thursday to complaints about implementation of the scheme.


Dudu. Redux.

in october 2012, i had travelled to a tehsil in rajasthan called dudu where the congress formally announced that direct benefit transfers would be its magic bullet for the coming elections — in the state and nationally.

well, i just reported for a story by my colleague akshay deshmane on the role of DBT in the rajasthan elections. and this is what we concluded.

bad for aadhaar, good for cash transfers?

What is the future of one of India’s most high profile government programmes after Monday’s Supreme Court interim ruling on Aadhaar? And is there a collateral damage on election-facing UPA’s ambitious welfare schemes? The answers are starkly different. Aadhaar, unless the Supreme Court changes its ruling in the final judgement, has received a body blow. But, ironically, minus the linkage with Aaadhar, UPA’s direct benefits transfer (DBT) programme can perhaps get a boost.

a quick and dirty story on the fallouts of the supreme court’s interim ruling barring states from making aadhaar mandatory for accessing welfare. i should have added a para discussing the fallouts of doing DBTs without aadhaar. while deduplication would suffer, the instances of the old, etc, struggling to get their entitlements due to poor biometrics would also go away — assuming, that is, the new processes set in place by states do not use biometrics at all.

the promises and perils of using databases for welfare delivery

Imagine a database that contains the following data about your family. Household level information like address, caste, asset ownership, the kind of house you live in, when you came to the city/village where you now stay, ration card number, etc. And individual level information about including names, ages, educational background, occupation, incomes, bank accounts, existing illnesses, UID numbers, PAN numbers, welfare entitlements, etc, of your family members. And now, imagine this database is to be for determining your tax obligations. Also imagine it will be visible to — for they are the ones maintaining it — government employees in the block/district office.

The pros and cons are immediately obvious. If the government has near-perfect information about everyone’s financial status, tax fraud will come down. However, if the information is wrong or if it is accessed by outsiders, the consequences for you could be severe.

The government of Madhya Pradesh (GoMP) is creating something similar — not for the urban affluents but for the poor.

Between December 2012 and now, it has taken the MoRD’s SECC (Socio Economic and Caste Census) survey and added household and individual level information like address, number of members, bank account numbers, NREGA card numbers, their entitlements, the quantum of land they own, whether the house is kuchcha or pucca, if it has a toilet, and so on. So far, about 85% of the households in the state, about 2.5 crore people, have been enrolled across urban and rural MP. It intends to use this database, called Samagra, for determining eligibility amongst the poor for welfare entitlements like pensions, scholarships and food.

Is this a good idea? The state government thinks so. But, if you look at a similar experiment carried out in Delhi, you will see how the use of databases can all too easily go wrong as well.

In 2008, the Congress government in Delhi had similar intentions in mind when it decided to overhaul its welfare delivery. Today, that failed experiment with databases reveals everything that can go wrong with databases: from exclusion to selective updation, from political profiling to privacy issues.

Delhi overhauled its welfare delivery architecture in two ways. One, it brought in databases. Two, it outsourced the last mile between the government and the people to NGOs. Both moves have badly failed. Please to be clicking on the links for more. Thank you.

enter, contingent liability

The government’s plan to make the Aadhaar number the centrepiece of the cash-transfer system is now facing opposition from a new quarter: banks. Several banks, led by State Bank of India, have expressed reservation against jettisoning their current systems in favour of the platform created by the Unique Identification Authority of India (UIDAI), which issues the Aadhaar number and wants to make it the basis to authenticate an individual’s identity before every transaction in bank accounts into which welfare benefits are deposited. These new lines of conflict are throwing posers to, and could even delay, what is being seen as UPA’s gambit for the next general elections, due in 2014: universalise cash transfers. The banks’ reservation to the UIDAI authentication platform, built along with the National Payments Corporation of India (NPCI), a payment gateway, centres around two points…

A joint story by my young colleague at ET, Ahona Ghosh, and creaky old m rajshekhar.

india’s payments dilemma. continued.

The Financial Sector Legislative Reforms Commission (FSLRC) could recommend that the Reserve Bank of India should grant limited purpose bank licences to telecom firms and other industries in order to promote financial inclusion. A working group led by Morgan Stanley India chairman PJ Nayak, tasked by the Commission to propose changes to the country’s payment laws, has proposed a radical new approach to ensure the unbanked get access to formal and secure payment systems, which includes restricting the central bank’s regulatory grip over payment and settlement systems.

Its prescriptions are significant as they offer an alternative last mile solution that could help UPA-2 operationalise its ambitious direct benefits transfer programme to ensure subsidy payouts reach intended beneficiaries through the use of technological innovations.

At the same time, it is getting flak from sectoral experts for not paying enough attention to accompanying risks. Says MS Sriram, a member of IIM-Bangalore’s Centre for Public Policy, “The report doesn’t balance risk and innovation. What is at stake here is small depositors’ savings. The RBI has to be conservative on these issues.”

The complete story by my colleague vikas and yours truly, here.

in which upa races towards its india shining moment

D-day is 18 days away. On January 1, the Congress-led UPA government will start migrating the delivery of welfare services to a new architecture: straight into an individual’s bank account, verified by a unique identification (UID) number called Aadhaar.

It’s a soft launch. The first of the three stages will unravel in 43 districts where a large percentage of people have bank accounts and Aadhaars. Also, in the programmes earmarked for stage I, worth about Rs 20,000 crore, transfers to bank accounts is already happening; what will change is that they will now be linked to the Aadhaar number to reduce, if not eliminate, duplication.

The complexity of the exercise will increase manifold as more of India is covered in the other two stages, in April 2013 and April 2014. This will also increase as more programmes are added, especially food, oil, fertiliser and employment. In full flow, the money flowing through those pipes could go up to Rs 300,000 crore. So, is the government ready?

It is moving with urgency to tie up loose ends for stage I: opening bank accounts, issuing Aadhaar and matching the two. It is also trying to drum up support. One such private forum on December 17 will see two champions of cash transfers in the government—Jairam Ramesh and Nandan Nilekani—brief the National Advisory Council (NAC) and select members of the media on the government’s plans. Here are six questions, gauging the government’s preparedness for cash transfers, the duo need to answer conclusively…

i am uploading this story late — was in arunachal when this latest magnum opus on cash transfers appeared. anyway, late being better than never, here it is. take a look?

The End of the Silly Common Banking Correspondent Model?

since may this year, i have been tracking a plan from the department of financial services to split india into 20 clusters, and to appoint a common banking correspondent company for all public sector banks operating in each cluster. it is a textbook case of policy adventurism. the department, a part of the finance ministry, has not paused to wonder whether putting one company in charge of all financial transactions of the poor — between the government and them, and amongst themselves — can result in that company developing monopolistic tendencies. something that banks themselves are deeply apprehensive about. strangely, alarm bells did not go off inside the department even when the auctions to appoint BCs started, and bids touched unexpectedly low levels.

well. there is good news at the end of all that. as this story reports today…

The government is likely to shoot down the Department of Financial Services’ (DFS) plan to appoint common banking correspondent (BC) companies for transferring cash to poor people and replace it with a country-wide network of ‘micro ATMs’, as it seeks to finalise the last mile payment architecture for cash transfers.

In a meeting on Monday evening, Rural Development Minister Jairam Ramesh, UIDAI chairman Nandan Nilekani, and Planning Commission officials met Finance Minister P Chidambaram to share their reservations about the common banking correspondent model. An official who attended the meeting told ET that it was agreed in-principle to junk this model but a final decision will be taken by the Finance Minister.

In a SMS to ET, Ramesh confirmed the development. “The DFS model is now history. Women SHG, Ashas, anganwadi workers, post offices, teachers, kirana stores, fertiliser shops, etc, can now be BCs,” he said.

the government is now thinking of using micro-atms, as the nandan nilekani report on micropayments had suggested, to make cash transfers reach across the last mile to targeted beneficiaries. whether these will work or not is an open question as well. but that is another story. to be written after another set of field trips. for now, i am glad that this one cluster, one BC model might be on its way out.

In which the Banking Correspondent Auctions finally go below the psychological zero percent margin mark…

for a while now, i have been reporting on the never-ending happiness that is the finance ministry’s “one cluster, one BC” model — essentially, to split india into 20 clusters and then to have one common banking correspondent company for all public sector banks operating in each cluster. this company would then be the only conduit through which welfare programme monies (and cash transfers) would flow from banks to the poor pensioners, nrega workers, what have you.

for a while now, there has been some concern that entrusting such a vital role to one company would sooner or later result in it developing monopolistic tendencies. this concern has been deepening as one saw companies put in incredibly low bids to win clusters — for an industry which has been saying that a 2% margin is not enough, bids have ranged between 0.86% to 0.02 and 0.01%.

but now, there is something new under the sun. a company called seashore has emerged as the L1 bidder for Orissa after bidding minus 0.06%. these guys propose to pay the govt 6 paise for every rs 100 the company delivers unto poor households.

makes sense?


read the story, jointly written by my colleagues nageshwar, atmadip and me.

Another update on the banking correspondent auctions

A newly-formed association of banking correspondent (BC) companies has criticised the finance ministry’s ongoing plan to split India into 20 clusters, and to appoint a common BC company for all public sector banks operating in each cluster. In a white paper released on Thursday night, the Business Correspondent Network Managers (BCNM) Forum, a grouping of 25 BC companies, faulted the ministry’s decision on a number of grounds.

The complete story here. For context, see this and this. Or scroll down this page and you will see a bunch of more granular posts on how this finance ministry plan has unfolded since it was first unveiled three months ago.

On the banking correspondent auctions…

for some time now, ET has been reporting on a worrying move by the philosopher kings in the department of financial services (the offshoot of the finance ministry tasked with managing the banking sector) to overhaul the banking correspondent (BC) model.

well, the auctions to appoint common BCs for all public sector banks in a “cluster” (one large or a couple of smaller states clumped together = one cluster) are underway. and the bids are frankly astonishing. after complaining for years that a 2% fee to deliver payments, etc, is not enough, companies are bidding ridiculously low amounts – the fourth auction was won by a company that bid 0.11% (or 11 paise to deliver to hundred rupees).

till now, i had been filing online stories (only for the ET website) after each reverse auction. the story out today, however, is written for the paper. it takes stocks of how the auctions are going and flags the fact that companies, about to be entrusted with a lot of public money for welfare, are bidding oddly low amounts.

this raises three possibilities. either, the economics of the BC model have changed entirely in the new approach (perhaps due to the fact that a monopoly is being created). two, companies are bidding out of desperation and they will fail to deliver. or, three, they are going all out to win contracts figuring they will work out ways to make it viable later (the time-honoured strategy of contract renegotiation after winning the bid, perhaps).

of banks, state firmans, bids and outcomes. part two: jharkhand

about a month ago, i wrote about a controversial plan by the finance ministry to split the country into 20 clusters, and to appoint a common banking correspondent company for all public sector banks in each. to understand the attendant implications, please click here. yesterday, the second tender in this series was awarded. it went to fino. which is now the common BC for all of jharkhand and parts of bihar. as with the first tender, the bid surprised industry folks. the whole story here.


Today’s Economic Times carries this story about an unexpectedly large change that is sweeping across the Bank-BC model. The Department of Financial Services, the part of the Finance Ministry which looks after the banking sector, has decided to split the country into 20 clusters and get all public sector banks in that region to work through a common Banking Correspondent company. This radical makeover of the sector is making a bunch of people, including banks, very nervous. They fear this could result in the rise of monopolistic tendencies amongst BC companies. Click here to read more.

a friend turned foe?

Anyone watching the telecast of the 2012-13 budget would have concluded that the Finance Ministry was solidly backing Nandan Nilekani’s Unique Identification Authority of India. The budget speech mentioned Nilekani by name. It mentioned the UID programme ten-odd times. And spoke about how Aadhaar would be used to overhaul existing subsidy regimes in India — from food to fertiliser.

Well. It’s now time to ask if that was the correct conclusion to draw. In an unexpected development, the Department of Financial Services (DFS), the unit of the finance ministry looking after the banking sector, has kicked off its own pilots for biometric authentication. A decision that a senior official in the UIDAI describes as a “purely anti-aadhaar play”.

See here. My story on a surprising development that raises large questions. For one, is this just cussedness by the department? Or is the government starting to create backup plans to Aadhaar so that cash transfers can be set in motion by 2014, Aadhaar or no Aadhaar?

uidai: bouquets, brickbats and bugbears

while i was out bobbing in the bottle green waters of lakshadweep’s lagoons — see previous post — this story on the uidai came out.

Barely six months ago, UIDAI was under siege-not just from civil society activists, but also from other parts of the government. The home ministry, one of whose arms was undertaking a similar exercise of identifying Indians, said UIDAI was setting the identity-bar low, which could pose a national-security problem.

A clutch of ministries, all potential users of its solutions, said UIDAI’s blueprint for cash transfers was not feasible.

Elsewhere, UIDAI’s parent, the Planning Commission, was rejecting its Rs 15,000 crore funding proposal and questioning its processes. And a Parliamentary panel examining a legislation that gave the UIDAI legitimacy was dismissing the project as one “conceptualised with no clarity of purpose”.

The question is: after Budget 2012, which increased UIDAI’s allocation by 47% to Rs 1,758 crore and handed it greater responsibility, is all that opposition a thing of the past now? The answer is yes and no.

fazed out. india’s fertiliser ministry and phase two in fert cash transfers

and now, another update on how india’s journey towards fertiliser cash transfers is unfolding. see it here.

some thoughts on this, though. this january, ET had reported that companies, wholesalers and retailers alike were nervous about the fertiliser ministry’s plans to reroute subsidy from companies to retailers. You can read about that, with context and all, here. well, the ministry has finally decided to scrap this intermediate phase, which was slated to start this kharif. this means the existing subsidy regime — where companies get the subsidy — will continue till it is possible to transfer the subsidy to farmers directly. for that to happen, they will all need to have UID numbers.

that said, this decision to scrap this intermediate phase is going to offer little more than short term relief to farmers and retailers. partly because once cash transfers start flowing to farmers — retailers/wholesalers/farmers will have to buy at full price anyway. also, more tangibly, cash transfers or no cash transfers, in the last few years, fertiliser prices have risen precipitously. see the point made by JNU professor himanshu in the last paragraph.

“While the price of urea has more or less stayed around Rs 500 over the past 6-7 years, that of DAP, for instance, has climbed from Rs 1,050 in 2010-11 to Rs 1,500 by June 2011 and is currently at Rs 1,900. It will definitely increase further.”

this precipitous rise in fert prices means we are using more urea than anything else. which takes us back to the crisis in indian agricultural soils. another thing the fert ministry continues to turn a nelson’s eye to.

haryana’s tryst with e-payments

Haryana is one of the first states in India to move towards e-payments of welfare programmes. Early last year, it began stopped disbursing its social sector pensions through sarpanches, and began using banks and banking correspondents instead. However, after six or so months, the state government called off the project and went back to the old approach. Given that the rest of the country is also moving towards e-payments, what does Haryana’s experience have to tell us? Is the new channel better at rooting out corruption? Is it more cost-effective at delivery than the erstwhile model?

ET emailed some of these questions to Ashok Khemka, the Director of the state’s Department for Social Justice and Empowerment. Read the interview here. You might also want to see this related story on the economics of the bank-BC model.


Some questions about the Banking Correspondent model

These are the heydays for the banking-correspondent (BC) model. Banks want to use them to extend banking into villages. The government wants to use them to deliver welfare payments.

In this followup to the financial inclusion story late last month, i argue that this confidence being reposed in the BC model is a tad premature.

On India’s Gambit to Get Everyone a Bank Account

First, the good news. Over the past few years, India has been moving rather aggressively towards bringing all Indians under the banking fold. Back of the envelope calculations suggest that 480 million Indians, about 96 million households, did not have access to banking as recently as 4/5 years ago. Well, since then, after some pushing by the RBI, the finance ministry and state governments, the number of No Frill Accounts, which target this chunk of our population, had climbed to 79.5 million by March last year. It is estimated at about 100 million now. The number of places which access to banking itself had trebled between 2009 and 2011 — zooming up from 35,000 or so to 105,000 locations.

However, look beyond the aggregate numbers and more worrying stats emerge. The vast majority of these accounts — three different studies estimate this percentage as ranging between 80-90% — lie dormant. The reasons are manifold. There is an absence of banking products that make it easy for the poor to save. This expansion of banking has largely been through banking correspondents (BCs), locals hired as quasi-representatives of banks. And this model isnot working so far — the representatives drop out of the business saying they don’t earn enough; elsewhere, village elite become BCs and use this new found control over fellow villagers’ financials  to reinforce their hegemony over the village.

On the whole, things are delicately poised. Most of these accounts have been opened with KYC documents. They belong to real people. The government can indeed start flowing its welfare programmes down this pipeline, betting people will start using the accounts on their own. The problems lie elsewhere. For one, we are not very sure about the BC as delivery channel — does it work? is it indeed more cost-effective than the channels used till now?


The government’s indecision on which of its two arms should capture the biometrics of all 1.2 billion Indians is causing collateral damage. Frustrated by the issue not being resolved quickly and difficulties in the business, Wipro, one of the largest enrolment agencies empanelled with the Unique Identification Authority of India, is considering quitting the business.

It’s a frustration that other enrolment agencies empaneled with the UIDAI — ranging from small outfits with 10-odd kits to larger players like Karvy with 1,000 kits or more — share. And so, drumroll, a little story on why enrolment agencies are nervously awaiting the cabinet’s decision on who should collect biometrics — the UID? NPR? both?

or why 2012 could be a massively disruptive year for farmers and the fertiliser industry

Vijay Thakur (name changed) is a worried man. This fertiliser wholesaler in Karnal, Haryana, buys subsidised fertiliser from companies and sells it to retailers in this agricultural district about 120 km north of Delhi. It is a steady, if not hugely profitable, business. Thakur fears that might change this year.

from the latest instalment on the fertiliser ministry’s strange attempt to redirect the fertiliser subsidy away from companies to farmers.  sigh. take a look.


of india, her increasingly fragile agricultural soils and an indifferent fertiliser ministry

in the middle of this year, i wrote about india’s weakening agricultural soils.

According to “Degraded and Waste Lands of India” , a report by the Indian Council for Agricultural Research (ICAR) and the National Academy for Agricultural Sciences, about 141 million hectares of our total geographical area of about 328.2 million hectares is under cultivation. Of this, about 100 million hectares — or 70% — is heading down a path where it will be incapable of supporting farming. What is going wrong? Farmers are making the soil work more, growing two or more crops a year, instead of one. This unplanned fertilization is exacerbating nutrient shortages and changing soils’ chemical composition . Levels of organic carbon in soil are dropping across the country, making soils more vulnerable to erosion and possibly resulting in the number of earthworms falling.

Not only are these excesses and imbalances reducing the productivity and life of soils, they are now starting to show up in our bodies.

in april 2010, to encourage more balanced fertilisation, the government of india came up with something called the nutrient-based subsidy. unlike the old system where only basic fertilisers containing nitrogen, potassium and phosphate were subsidised, the government extended the subsidy to sulphur, boron and zinc as well. and changed how subsidy was calculated as well — moving to a system where subsidy was pegged, not to cost of production, but to the nutrient content of the fertiliser.

the government reckoned that the NBS would give companies an incentive to produce more complex fertilisers fortified with micronutrients.

in this story published yesterday, i say that, “two years after its introduction, early signals suggest the NBS is not showing the desired results”.

Take NPK. In last year’s kharif, the NPK ratio was around 4.4:2.6:1. This kharif, it has worsened to 10.8:4.9:1… What about micronutrients? It’s hard to say. The fertiliser ministry simply does not collect data on micronutrient consumption. However, data collated by industry body Fertiliser Association of India (FAI) shows a puzzling trend. The consumption of zinc, ferrous and copper sulphates showed a modest rise over the last seven years, but that did not hold good for nutrients such as manganese sulphate, borax acid and molybdenum.

do take a look.

The Parliamentarians put their hand up

In perhaps its most serious setback so far, a Parliamentary Committee has rejected the Bill that governs the project to assign unique IDs to all Indians. Worse, the Standing Committee on Finance has advised the government to “reconsider and review the UID scheme” itself. Its report was placed in Parliament on Tuesday.

The questions that the Standing Committee has raised are significant and wide-ranging. They span technical and financial feasibility, echo worries about privacy and flag procedural anomalies like creating the UIDAI even before the bill had been passed, and more.

At this time, I am surprised that this report, easily the largest challenge to the UIDAI till date, has received such little attention in the media. Strange. Anyway, here is a small snapshot of the report that I filed. Do take a look.

I am now wondering how things will pan out from here onwards. As that grotesque old journalistic cliche goes, wait and watch.

What I talk about when I talk about Jharkhand

Watch Jharkhand. It is the testing ground for two pilot projects that challenge the historical templates for delivery of welfare services and banking services. Jharkhand is trying to use technology to retool the delivery of these services so that every citizen in the state can access them – easily, efficiently and corruption-free . What it is doing has a bearing on the rest of India. In the next year or so, Jharkhand will start throwing up answers on whether it is a good idea to convert India’s welfare programmes – that deliver benefits of about 3,00,000 crore on paper, but sizeably less in real – into cash transfers.

Over the same period, the state will also throw up answers on whether its new model of rural banking can address the last-mile problem better than existing models. The state has found an ally in the Unique Identification Authority of India, the government body headed by Nandan Nilekani that is creating the backbone and the architecture to deliver welfare benefits. The UIDAI number two, Ram Sewak Sharma, is from the Jharkhand IAS cadre. The two stories that follow explain what Jharkhand and UIDAI are doing, and why the rest of India should be interested.

a couple of weeks ago, i went to jharkhand to take a look at the state’s plan to use aadhaar to pay nrega wages. this is the first large scale test for the aadhaar proposition of biometric verification and electronic benefits transfers.

a high stakes pilot, essentially. and so, a report from jharkhand on the rollout, an explanation on what makes them critical, the challenges before the pilots, and the parameters which could be used to decide success/failure of the rollout.

along the way, i also discovered that the state govt is planning to use its common service centres as extension counters for banks — it is a part of this drive to overhaul nrega’s payment structure in the state. it is an interesting idea which seems to be significantly better than the banking correspondent model everyone seems to be so excited about.

see both stories, here.

Why the Banking Correspondent companies are unhappy with the UIDAI

Today’s ET carries this story about the ongoing tussle between the UIDAI, the body tasked with developing the architecture for delivering cash transfers, and the banking correspondent companies, which will have to do a part of the actual delivery.

Broadly, the UIDAI thinks villagers should be able to access their bank account through any BC terminal and has, ergo, notified a set of specifications which have the BC industry up in arms. They charge that the UIDAI specifications are too narrow and exclusionary — only biometric (so people cannot identify themselves using, say, numeric codes), only online (putting previous investments in smart cards, etc) at risk.

There is merit in both arguments. I am convinced of the need for interoperatability. In the existing dispensation, most villagers can access their accounts only from the local BC agent. Which leaves them entirely at the BC agents mercy. While working on this story, I spoke to a ex-employee of a BC company who told me that 70-75% of the BC agents in Punjab are either sarpanches or their kin. It is BC companies which handle NREGA payments, etc, in Punjab (and elsewhere). And the village elite have figured that becoming BC agents is a ‘soopar’ way to hold onto their hegemony inside the village.

Needless to say, this is also a complete corruption of NREGA which was, remember, pathbreaking in how it took payment away from the guys who were allocating work. And started putting cash right into bank accounts.

Interoperatability would solve those problems by leaving villagers free to go to whichever BC agent they please. And yet, there are questions. How should standards be determined for networks? Take what Abhishek Sinha, the head of EKO, a small BC which lets people access their accounts through mobile phones, says in the story. Public infrastructure, he says, needs to be open and non-prescriptive at the front-end. “Different villagers might be more comfortable authenticating their identity through a card, a phone, a fingerprint or a numeric code. The network should be able to accommodate all those options, and leave room for innovation.”

This is a story I need to drill deeper into. Some of the official reasons why the BCs oppose interoperatability are disingenuous. Among other things, I was told most villagers stay in their own village and so, do not need interoperatability. An argument which, at a time of rising migration, boggles the mind.  Even this assertion of past investments going bad is not true for all BCs. Most of whom already have biometric devices. Further, biometric devices which are more or less already compliant with what UIDAI wants.

Seems to me that the larger threat lies in the proposed move to bring all BC accounts into banks’ core banking software. And in interoperatability. That is the hunch, anyway. Now to see whether it is correct or not.

india’s inchoate journey towards cash transfers

and, at long last, a good combative story.

A World Bank study released earlier this year enumerated the rot in Indian welfare programmes. About 91% of subsidised grain meant for the poor in Bihar never reached them. Only 32-51 % of the pensions for the elderly, destitute, widows and the disabled reached them.

These are holes that Finance Minister Pranab Mukherjee sought to plug in Budget 2011, when he announced that, in the coming years, all welfare benefits would be deposited into the bank accounts of beneficiaries, starting from June 2012.

Seven months on, India’s journey towards cash transfers is looking muddled. Too many players. Too many approaches. There is confusion and conflict at each of the four steps to cash transfers: identification, opening bank accounts, payments and transactions.

here is — drumroll — my story on this country’s move towards cash transfers. do take a look. and let me know what you think.

Cash Trance

In his speech this year, the Indian finance minister announced that India would deliver the fertiliser subsidy directly to farmers from next year onwards. Shortly after the budget, the government’s National Informatics Centre insisted that it be allowed to develop the necessary software. A small update from the trenches here.

This software, sources in the fertiliser ministry told the Economic Times, will now be tested in selected districts of Rajasthan, Orissa, Tamil Nadu, Assam, Haryana and either Karnataka or Andhra Pradesh. In Rajasthan and Orissa, the pilots will be conducted in Ajmer and Sambhalpur, respectively.

For context, see this story re larger changes in fertiliser policy. And see this story re the cash transfers themselves. India really seems to be rushing to implement cash transfers without sufficiently understanding how retailers and farmers will respond to them, or what cash transfers might mean for food security and rural livelihoods.

Will be very important to track these (and subsequent) pilots, methinks.

Cash Transfers + Fertiliser Subsidy + Impatience = ???

And this is the second story in the fertiliser package that the Economic Times published.

The ministry of fertilisers is planning to migrate to cash transfers in three phases. In the first phase, to be completed by December, it will extend its fertiliser management software beyond the 30,000 fertiliser warehouses to 230,000 licenced retailers. In the second phase, scheduled to begin from the next kharif season (June 2012), the nutrientbased subsidy will be re-routed from companies to retailers. The third phase, cash transfers to farmers, will be rolled out once farmers are allotted unique identification (UID) numbers. Each phase is posing large questions, especially related to time.

Really, listening to the mandarins, I found the timelines scarcely believable. More here.

Changes In India’s Fertiliser Policy. Circa 2010

Every year, Lakshminarayan Sharma, a sharecropper in a village about 30 kilometres off the ancient town of Vidisha, Madhya Pradesh, rents 10 bighas of land from a bigger farmer and plants soya and wheat. For several years now, he has been seeing a worrying trend. The soil is weakening. Traditional crops, he says, do not grow in this soil any longer. Further, yields from the newer varieties of soya and wheat fall if fertiliser use is not continually increased. Take GW, he says. In 2005, when he first used this high-yielding variety of wheat, “It delivered good yields if half a sack of fertiliser was used for every sack of seeds. Three years later, it needed a sack of fertiliser for every sack of seeds. Otherwise, output would fall by half.”

Travel across India and this is a narrative you will encounter often — soils are weakening, yields are falling, all despite a robust increase in fertiliser application.

This trend of diminishing returns to fertiliser use is one reason why the bureaucrats in the fertiliser ministry are overhauling (and i do not mean that as a journalistic cliche) the country’s fertiliser policy. in this story, i reach some preliminary conclusions on what the new policy means for farmers, companies and the government itself — will there be greater diversity of fertiliers? what about prices? will the new approach help in better outcomes for the environment? etc etc etc etc etc…

take a look.

Arcadia, Utopia…

It’s a polarised debate. Always has been. Those who make a living expanding the possibilities of technology feel it can solve many economic ills, even those of the India that lives on 20 a day under the trembling glow of a lantern. And those who engage with that very India say technology solutions are fine, but they belie an understanding of rural lives and livelihoods.

The divide is back in focus, over a Rs 1,50,000 crore question: should the government continue to give grain, fuel and fertiliser to the poor at below-market prices, or should it transfer cash to their bank accounts? Wanting a better return on the Rs 1,50,000 crore the government gives as subsidy every year, finance minister Pranab Mukherjee , in his budget speech last month, signalled a move to the cash-transfer system.

my colleague shelley singh and i look at the issues that the government must address to make cash transfers a success.