FE Editorial : Bye bye, leakages
The Financial Express: Nov 27 2012, 01:28 IST
The government’s decision to begin rolling out Aadhar-based payments to 51 of India’s 659 districts by January next year, 18 states from April 2013 and the remaining 16 states by April 2014 or earlier is probably the biggest reforms step the country has seen in a long time and, more important, has seen relatively little opposition as compared to measures like, say, raising the FDI limits in insurance from 26% to 49%. In other words, never mind whether Parliament is allowed to function or not, Aadhar-based reforms are here to stay. Depending on how fast it is rolled out, Aadhar-based payments can help shave off 0.5 percentage points from India’s subsidy payments (currently around 2% of GDP) when fully rolled out—the figure can be more depending on whether other payments are also Aadhar-based; scholarships, for instance, don’t come under the budget definition of subsidies. And while Aadhar payments are supposedly revenue-neutral, they have the potential to increase the money in the hands of the beneficiaries. As an election strategy, more money in the hands of the poor has to be a powerful one.
Take the issue of losses first. In the case of LPG cylinders where Aadhar-based payments will be the first to begin, it is estimated that there are 1-2 crore fake/duplicate connections. Just eliminating these will save between R2,000 crore to R4,000 crore. Ditto for the R75,000 crore spent on food subsidies where leakages are estimated to be around 58%. In the case of MGNREGA, similarly, just around a
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