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Thursday, 07 July 2011 00:00
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So far, despite all the scepticism about a centralised database with the entire country’s biometrics, Nandan Nilekani’s obvious expertise ensured he had a smooth sail. He answered all critics head on and argued that the Aadhar biometric database he was creating could not be abused because it couldn’t be queried—so, for instance, it wouldn’t have any information on the caste or income of person X, but would just be able to say if a fingerprint belonged to X; it was only a means to establish identity, nothing else. The Task Force headed by him on the direct transfer of subsidies on kerosene, LPG and fertiliser, whose interim report is just out, is likely to be Nilekani’s first real test in terms of how far the political system is willing to go.

 

Not surprisingly, the interim report suggests a variant of the same formula for all three subsidies it is currently tasked with—in the case of LPG, the Task Force has suggested a capping of the number of subsidised cylinders a family can buy in a year to begin with; after this, it recommends direct cash transfers to the bank accounts of the target group—and since each bank account is to be linked to an Aadhar unique ID, there is no question of any leakage. Given the kind of clarity Nilekani has brought to bear on so many issues, the two-step formula is disappointing—it may be a politically savvy thing to do, but Nilekani just has to see the longevity of the plethora of schemes which began as short-term fixes. Indeed, as his own report points out, the under-recovery on LPG was a mere R9.1 in 2002-03 and has ballooned to R219.9 in 2010-11. Nor is Nilekani’s report the first one to recommend a cap-and-move-on strategy. In 2010, Kirit Parekh had a well-argued report on how the government could save on subsidy payments by capping benefits in real terms—so, if per capita incomes have risen 100% over a period of time, doubling LPG prices will leave consumers unaffected in real terms. Parekh, needless to say, was dumped unceremoniously. At the end of the day, since every politician knows the bulk of subsidies are stolen along the way, the real issue is not about whether the government wants to cut subsidies, it is about whether it wants to cut down on corruption. Will the political class allow a rank outsider like Nilekani to cut into this divine right?

 

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