The finance minister has declared that ?for both kerosene and fertilisers, the Government will move towards direct transfer of cash subsidy to people living below poverty line in a phased manner.? Initially a carefully-made statement, this was later linked to the UID and a target given to complete the process this year. A fascinating set of arguments has emerged with the geeks? nirvana being around the corner. My worry in all this is that the UID, an otherwise excellent effort with its own carefully drawn out time perspectives in the 13th Plan, may get jeopardised in this welter of expectations. The UID is a number and the delivery of a benefit in a complex society where skills are used, and to corner them is also a process. The direct delivery of cash subsidy to India?s farmers, more than half still small and tenants, is an attractive holy grail of economists, including yours truly. It would be non-distorting and take care of leakages.

The last time the government asked an expert committee to develop a new pricing regime for fertilisers, it was under my chairmanship and the siren of direct transfers was also bewitching me. So, I went to a village in northern Gujarat near my weekend retreat. Now, it becomes very difficult to get the man who actually tills the soil to come to the chaupal as the place is for the Patels, in the north for the Chaudharis, and so on. In this village, only 11 farmers tilled the land in their own name. More than 45 were tenants. But tenancy is not recorded. It is, in fact, illegal. So, a large number of farmers don?t have an identity as farmers and some who have an identity in the village records, farm other people?s land taken in on illegal reverse tenancies. I came back chastened. But not to be thwarted by such obstacles, I persisted, for the siren beckoned. Some of the best fertiliser factories in India are cooperatives, like Iffco, Kribhco and GSFC. I got together with them since they are old comrades and we decided that in the areas they know well they will take on the challenge and make it successful. We could then expand with the lessons learned. They said that as a special concession to their economist friend they will do it in five districts. So, the published report of the Working Group recommended that ?in districts where the cooperatives and joint sector of the fertiliser industry have strong roots with farmers? associations, grass-root village level cooperatives and well-worked out distribution systems, a subsidy directly aimed at the farmer could be attempted to be administered in consultation with the farmers? groups.?

The then finance minister was not to be deterred by these careful messages and so he announced that the policy would be implemented in 30 districts with smart cards. Since that was not possible, nothing happened. Now, we are going one step forward and will implement it in the entire country. But a few days before the Budget, Sutanu Behuria, the fertiliser secretary, in an interview to this paper replying to a question on giving subsidy directly to the farmer, having presumably performed a revenue function in his early career, said in a somewhat matter-of-fact manner, ?State-level land records cannot be relied upon to identify the farmer as many of them do not own land. Besides, these records may not indicate whether the title holder does agricultural activity himself.?

The question is not the UID, which Nandan will surely implement in his own measured pace. It is the identity of the man, actually in many cases the woman, who is behind that number. Does s(he) have an identity of farming with fertilisers with that number? That is a question of the socio-political structure and not the Android?s sweep. Like the cat?s grin, the targeting question keeps on resurfacing in the direct subsidy case, since in fertiisers, at present, anybody can buy in the market at the subsidised price. So, those not effectively targeted will miss out. To be fair, the problem will be less if the price of urea is raised, again a point my expert group had raised in 2003 to implement the nutrient-based price. The government is well advised to raise the price of N and adjust the subsidy to reflect nutrient values.

In fact, the cash subsidy makes more sense in kerosene or food. Here the PDS doesn?t actually target much any more anyway. Many decades ago, Kalpana Bardhan had, quoting a committee I chaired on food distribution in Gujarat, shown that the number of ration cards is more than the population. Both me and Vijay Vyas had shown that if the non-poor are excluded, and for them some records are always available, the remaining population was close to the number of the poor. In food and kerosene, since the identification system is bad, direct subsidy or cash transfer won?t make us worse off. The poor don?t get covered now, and other things remaining the same, they won?t be with the direct subsidy. The siphoning off is there now and will become easier but the market price won?t be distorted and in the overall sense we will be better off. Only the non-poor cheats may unfortunately have an easier time.

Identifying the non-poor is of little consequence for those who argue that close to 70% of the population must get subsidised grain. These are the people with an identity, and with cash transfers they will be happier and distort the market less. Ditto for kerosene. The CM of Bihar, in a poverty seminar responding to me, said that targeting was impossible and argued for cash transfers. Another CM has implemented the scheme of cash transfers. A third announced a free TV set. If you can?t identify and give the really poor food, give everybody else a cash transfer. The more difficult governance questions will lie ahead and we will have time to solve them.

The author is a former Union minister