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Govt may link food subsidy with Aadhaar

By Surabhi Agarwal
July 29, 2014 15:39 IST
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The proposal to link the food subsidy offered by the government with the Aadhaar number is learnt to be back on the table. This comes after Prime Minister Narendra Modi's endorsement of Aadhaar and the Direct Benefits Transfer (DBT) scheme - both were launched during the previous government's tenure but lost momentum due to an uncertainty around the unique identity (UID) project.

DBT for food subsidy has been a much-debated issue, with many experts arguing against replacing food with cash for the country's poor. Under the current proposal, the government could continue offering foodgrains while linking the Public Distribution System (PDS) with Aadhaar to contain leakages.

In other welfare schemes, such as those for cooking gas, pension and scholarships, which are linked to DBT, cash is transferred directly into the bank accounts of beneficiaries.


  • Feasibility: PMO wants the Planning Commission to give a report on feasibility of implementing direct benefits transfer for cooking gas, pensions, scholarships, NREGS and PDS
  • Reach: A report on Aadhaar's penetration and digitisation of records is to be given for 300 districts
  • Timing: An announcement on this is likely during Prime Minister Narendra Modi's maiden Independence Day speech on August 15
  • Leakages: At present, almost half the subsidy offered by the government for food does not reach the intended beneficiaries
  • Target: The government has budgeted to give Rs 1,15,000 crore as food subsidy to over 180 million households
  • Benefits transfer: Before DBT for cooking gas was put in abeyance, around Rs 5,000 crore was already transacted through this channel; the fuel subsidy bill can be lowered by an estimated 20% through this scheme

The Prime Minister's Office has asked the Planning Commission to work on a report on the feasibility of implementing the benefits transfer project in five key schemes - those for cooking gas, pensions, scholarships, the National Rural Employment Guarantee Scheme and PDS. According to a government official, details of the extent of digitisation, Aadhaar penetration, etc, have to be provided for almost half the country, or 300 districts. "During his first Independence Day speech, Modi is expected to make an announcement in this regard," the official said.

The project has so far been rolled out only for cooking gas, pensions and scholarships. The government will take a call on how feasible it would be to extend the project to food subsidy, as well as the job guarantee scheme, based on the Planning Commission report.

The subsidy provided by the government for food is believed to be the most wasted. According to estimates, 40-50 per cent of it does not reach the intended beneficiaries. In the current financial year, the government has budgeted to offer Rs 1,15,000 crore as food subsidy to about 180 million households.

An earlier paper on linking Aadhaar and PDS had argued this would ensure delivery of the entitlement to the right beneficiaries and tracking of foodgrain movement.

However, many experts see rollout of an Aadhaar-based scheme for PDS as complex and unnecessary. Himanshu, an assistant professor at Jawaharlal Nehru University (JNU), says Chhattisgarh and Tamil Nadu have managed to drastically cut pilferage by employing technologies like SMS-based tracking and the global positioning system. "Currently, Aadhaar penetration is also weak in states like Jharkhand, Bihar and Uttar Pradesh, where PDS is the most required," he adds.

The government might already be working to address some of the concerns pointed out by Himanshu. Aadhaar's role has been recently expanded to cover four new states, including the most populous ones of UP and Bihar. "This is where the meat is. It will add 300 million population to the UID rolls," said the government official quoted earlier.

Linking ration cards with the unique identity number was also a prompt way to eliminate fakes and duplicates from the system, the official added.

"There are states where the total number of ration cards is greater than population," he said. Several of them have already started using biometrics and the UID number to clean their databases.

The government spends the most on subsidy towards food, jobs and cooking gas. Streamlining these payments could help it contain its subsidy bill and, thereby the fiscal deficit. Before DBT for cooking gas was put in abeyance, around Rs 5,000 crore (Rs 50 billion) had already been transacted through this channel. It is also estimated that almost 20 per cent of the fuel subsidy bill can be saved through this scheme.

However, lack of banking access to the country's poor is the biggest roadblock in the success of this project. But the government is understood to be already working on addressing some of these concerns. During his Independence Day speech on August 15, Modi is expected to make an announcement around financial inclusion and mandate two bank accounts per household.

Linking UID with Aadhaar has been in the pipeline for long. In 2010, the government had created a committee to prepare a road map for computerisation of PDS and linking it both to the Food Corporation of India (FCI) and the UID Authority of India. This had come after a Supreme Court order asking the government to consider computerisation of PDS "in consultation with the specialised agencies."

So far, UID has given out Aadhaar numbers to 650 million residents of the country.

With inputs from Sanjeeb Mukherjee

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Surabhi Agarwal in New Delhi
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