New study points out the shortcomings of the Aadhaar-linked PDS system

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Updated: February 22, 2020 9:25 AM

The government claims to have saved Rs 90,000 crore by way of eliminating subsidy/benefit leakages by using Aadhaar, as the resulting identification system has helped identify ghost and ineligible beneficiaries.

Aadhaar linkage has had some unexpected fallouts.

The government claims to have saved Rs 90,000 crore by way of eliminating subsidy/benefit leakages by using Aadhaar, as the resulting identification system has helped identify ghost and ineligible beneficiaries. A new study by researchers associated with J-PAL, published by the NBER (a non-profit, US-based research organisation), shows that Aadhaar linkage has had some unexpected fallouts. The research shows that, in the case of Jharkhand, not only did Aadhaar add to exclusion thanks to errors but also led to extra costs for end-users.

The study highlights that while the scheme did lead to savings in terms of curbing excess supply of grains to PDS shops as the government could rationalise demand, it also led to added costs to the PDS structure given the state had to put up and maintain infrastructure for verification. Most important, the study highlights, quantity leakages—PDS shops giving only a portion of the quantity due to the beneficiaries—are a major route of leakages, and Aadhaar could not check this. The researchers instead recommend the smart-card system that Andhra Pradesh, where they conducted a study two years ago, opted for. The focus of this system was on convenience to the end-customer and not on gains from Aadhaar leakage.

While some activists will be quick to fault Aadhaar, what the study shows is the problem with the PDS system. With the FSA guaranteeing subsidised grains to two-thirds of the population, the chances of leakage and the unmerited subsidy outgo both remain large. The need is, therefore, to shift to a direct transfer system. In fact, a J-PAL study from 2016 indicates that cash-based transfers seem to work better than the PDS system as people tend to go for a better quality of grains and efficiently redistribute subsidy.

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