Sun, Oct 28, 2012 - Page 14 News List

India’s poor split on new cash-in-hand welfare programs

New Delhi’s experiments in replacing subsidies with cash handouts are part of its grand scheme to maximize efficiency in the distribution of its US$61 billion welfare budget

By Adam Plowright  /  AFP, BUDHI BAWAL, India

Kerosene dealer Dharamvir Yadav poses for a photograph at his shop in Budhi Bawal Village in India’s Rajasthan state on Oct. 15.

Photo: AFP

Uddal Singh, a retired Indian army sergeant, is part of an experiment trying out radical changes to the Indian welfare system that the government plans to adopt nationwide — and he is furious.

He, along with the 250,000 residents of Kotkasim, a bloc of Alwar District in western Rajasthan state, were chosen to be part of a pilot scheme to end the sale of subsidized kerosene, a fuel used by the poor for lighting and cooking.

Instead of buying it at a heavily discounted rate at the local government shop, those with ration cards were each — in theory — paid cash by the government and required to purchase the liquid at the market price.

“Since one year, no money has come into my account, not one paisa [cent],” the mustachioed 58-year-old said bitterly in the village of Budhi Bawal, a dusty one-street settlement of a few thousand people, mostly farmers.

Instead of lighting his kerosene lamps, he says he now makes do with candles at night.

Officials “come here to the shop, see the record of our ration card numbers and say the money will come,” he said outside the grubby Fair Price Shop run by the local government dealer.

The Kotkasim trial has been disruptive, tricky to implement and — depending on who you listen to — either a roaring success in cutting wasteful state spending, or a disaster that has caused hardship.

The conclusions are important.

In New Delhi, where the trial is viewed as a model for the future, the government is fast-tracking plans to distribute as much of India’s US$61 billion welfare budget in cash as possible.

India is home to hundreds of millions of some of the poorest people on the planet, who depend on government handouts for survival.

“As long as the money arrives in people’s accounts, the scheme is not a bad idea at all,” village leader Rakesh Kumar told reporters in an interview.

However, he estimates 70 percent of people in his area have had problems receiving the cash.

“We have had to deal with the fallout of the government’s experiments,” Kumar said.

The attraction of paying cash to the poor and leaving them to spend it has been enhanced by two foreign programs which are broadly seen as successful: Mexico’s Progresa-Oportunidades and Brazil’s Bolsa Familia.

Under the cash model, governments can keep better track of the money they spend, cut out middlemen and even make the money conditional on beneficial things such as sending children to school.

They also bring the poor into the banking system, obliging them to open accounts to receive welfare payments.

Nandan Nilekani, who runs Aadhar, the Indian government’s scheme of handing out new biometric IDs, says the system has already reduced fraud.

“When Aadhar is used, in some of pilots, there has been a 20 percent to 30 percent reduction in beneficiaries by reducing duplicants,” he said, pointing to trials in the states of Tripura, Jharkhand and Andhra Pradesh.

Across India, 200 million people already have a new unique Aadhar ID and Nilekani’s scheme aims to cover half of the population, or 600 million people, in the next 18 months.

“On the basis of Aadhaar, we can ensure that the benefit of schemes reach genuine beneficiaries and that there is no mediator,” Indian Prime Minister Manmohan Singh said last weekend.

India subsidizes everything from fertilizer and food to kerosene, so cutting waste is crucial to the government’s drive to rein in its budget deficit.

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