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Indian Govt To Launch Aadhaar Based Cash Transfers On 1st Jan 2013


The Indian Government plans to roll out an Aadhaar based Direct Cash Transfer initiative from January 1, 2013. This decision was taken in a meeting by an executive committee set up by the government to roll out the cash transfer programme across the country.

According to a statement from the Prime Minister’s office, the meeting was conducted by the Prime Minister’s Principal secretary and the Cabinet Secretary and was attended by Secretaries and representatives of the Departments of Financial Services, UIDAI (Aadhaar), IT, Planning Commission, Expenditure, Posts, Rural Development, Social Justice & Empowerment, Tribal Affairs, Minority Affairs, Higher Education, School Education, Health & Family Welfare, Women & Child Development, Labour & Employment, Petroleum & Natural Gas, Fertilizers, and Food & Public Distribution.

Services To Be Offered: The committee stated that all government departments who are currently transferring cash to individual beneficiaries, will transition to this electronic transfer system based on Aadhaar Payment Platform. This includes all subsidy transfers like education loans, scholarships, MNREGA payments, old age pension, PDS subsidies, LPG subsidies, Indira Awaas Yojna subsidies and fertilizer subsidies, as indicated by a Business Standard report. The committee also mentioned that it will identify additional government schemes which can be transitioned to the new system and prepare a roadmap for faster and smoother transition.

Rollout Timeline: The committee stated that it plans to initially roll out the programme to 51 districts in the country, and hopes to cover 18 states & union territories by April 1, 2013 and 16 states & union territories by April 1, 2014. However, it noted that this timeline is currently tentative and is subject to the approval of the Prime Minister on November 26, in the first National Committee meeting on Direct Cash Transfers, where the committee plans to present the programme roadmap and timelines.

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The committee stated that Unique Identification Authority of India (UIDAI) will set up a dedicated team of technical experts who will work with individual ministries and help roll out this cash transfer system while Department of Financial services will formulate a universal financial inclusion through individual bank accounts.

Additionally, it also stated that various government departments, particularly state government departments, will work towards digitizing their databases while Department of Electronics and Information Technology (DeITY) and National Informatics Centre (NIC) will ensure convergence of these databases.

Setting up additional committees: As indicated by the statement from the Prime Minister’s office, the government had recently setup a National committee and an executive committee to formulate and launch this Aadhaar-based cash transfer system. However, the executive committee noted that there is a need to setup additional committees including a Technology Committee, a Financial Inclusion Committee and Implementation Committees within each ministry to ensure better co-ordination between ministries and quicker implementation of the system.

System Not Fool-Proof: Following the announcement, several states have pointed out that this cash transfer system is currently not fool-proof, as indicated by a Business Standard report. The report also cites Delhi Chief Minister Sheila Dikshit claiming that people were getting harassed while opening an Aadhaar-based bank account, which was also admitted by the Finance Ministry, which stated to the publication that they were currently looking for a solution to this problem. Financial Services Secretary D K Mittal stated that they are currently planning to open special camps to be organised by the state government, the Finance Ministry and banks, to open bank accounts in regions with large population.

Aadhaar enabled service delivery platform: Last month, the Indian Prime Minister had launched an Aadhaar enabled service delivery platform, enabling citizens to use the Aadhaar identity platform to identify and authenticate themselves for delivery of benefits/services by various government or private agencies. It also announced that currently 23 crore residents have enrolled for an Aadhaar number, while 21 crore Aadhaar numbers have been issued, in a span of two years.

Aadhaar e-KYC based Instant Prepaid Cards: Speaking at the #NAMA conference, Nandan Nilekani, Chairman of UIDAI, had recently announced the launch of Aadhar E-KYC powered instant prepaid accounts, for which a pilot project was to be conducted in New Delhi. He had stated that UIDAI had already partnered with 20 banks, and had tied-up with the NPCI (National Payments Corporation of India) and Visa for payments powered by Aadhaar enabled E-KYC  (Electronic- Know Your Customer).

State governments and agencies have also been conducting pilots for selected services through Aadhaar while banks are already accepting Aadhar number as a valid KYC (Know your Customer) document. DTH operator Dish TV (pdf) and mobile operator Vodafone have also started accepting Aadhaar for customer verification.

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