Beyond Money
Empower through Education

Udaan India Foundation believes in providing equal opportunity through education to children from disadvantaged backgrounds. N Madhavan and Aditya Govindaraj write about how the Foundation is making a difference

Did you know that 37% of global illiterates live in India? According to latest Global Monitoring Report, a whopping 2.3 million Indian children have never been to school. The future of the Indian economy hinges on our young population; most of them are poor and unskilled. They do not get what they deserve—their fundamental right to education; access to quality education remains a dream. Our country has the dubious distinction of having one of the highest school dropout rates and child labour levels in the world! Mumbai is no exception. Mamta Rangan, founder and trustee, Udaan India Foundation (UIF), followed her belief  that ‘education is key to change’ and set up Udaan in 2004 to help children of construction workers to enrol in mainstream schools.

Udaan, a project that started as an informal initiative, is now a registered trust with 800 students, 15 full-time teachers and over 25 volunteers under its wings. Most children who come to Udaan are from families with little or no formal education. Education is not a priority in such families; it is commonplace for children to drop out of school to contribute to the family income. Udaan is sensitive to the fact that the girl child is usually the worst victim of poverty and, often, forced to drop out of school. Hence, UIF pays special attention to the girl child—evident from the girl:boy ratio at their centres.

A child’s journey at UIF begins with the Kindergarten programme and continues through the learning years, steadily taking her/him towards employability and a better life.
Udaan’s learning centre lays the foundation of a child’s holistic development and imparts learning that ranges from the scholastic to the co-scholastic. Beyond this, children are guided, mentored and provided financial support on an equal opportunity basis, to meet his/her true potential. To open the world of books for children and supplement their language skills, UIF runs a community library that implements the ‘GROWBY’ reading programme of the Hippocampus Reading Foundation. Children are taken through a structured programme to become confident and eager readers. Under the guidance of qualified staff, the library brings relevant and meaningful literature within the reach of children who cannot afford to buy books. Udaan also has a computer centre that provides computer literacy to children. Through a defined curriculum, students from the eighth grade onwards undergo training in basic computer skills and learn the use of Internet which will equip them for skilled jobs. Udaan, through its work, hopes to see a perceptible change by way of increased enrolments in schools, decrease in school dropout rates and better job opportunities for the underprivileged. But, beyond that, Udaan aims to groom children to become confident young adults equipped to tackle various challenges in life.

Udaan welcomes volunteers to engage in a range of activities that include teaching, assisting the Saturday Club activities (such as art, music, drama and sports), managing events (like Annual Day, Sports Day), reading at the community library, organising health camps, field trips and fund raising. You can also be a part of a child’s journey by donating to Udaan. Your contributions wouenrld help Udaan-supported children realise their dream and help it reach out to many more children in need of quality education. All contributions to Udaan India Foundation are tax-exempt under Section 80G of the Income Tax Act. Payments can be made by cheque, favouring Udaan India Foundation or by remitting HDFC Bank account no. 02392000004643.

Udaan India Foundation
2202, Odyssey II Hiranandani Gardens, Powai
Mumbai - 400076 Phone: 022- 40000392
Email : [email protected]
Website: http://www.udaanindiafoundation.org

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Why people lose money in mutual funds

The majority of the investors buy when the market has already run up and is valued expensively. This often leads to disappointment when the market either goes down or sideways for years. If you avoid doing what others do and invest regularly in top fund schemes, you can easily make money from your mutual fund investments

Indian equity mutual funds have delivered excellent returns over the past 10 years or so. Their returns on a point-to-point basis may not have been great but investing in top funds through Systematic Investment Plans (SIPs) would have delivered good returns. And yet, over the last six months more than Rs10,000 crore has flowed out of equity mutual funds. Many are selling because they have made losses or meagre profits? It has been the same story in previous market cycles. Why do investors lose money in mutual funds? The main reason is that they put money into equity mutual fund schemes at the wrong time. In an interview with CNBC-TV18 on Friday, Prashant Jain, chief investment officer of HDFC Mutual Fund, said that “almost 80%-85% of the equity mutual fund inflows came in when the market was highly valuated at a price-to-earning (P/E) ratio of 17-18. This is one of the reasons investors tend to get disappointed when the market declines subsequently and it becomes frustrating for investors to hold on to their investments. So, when the market finally rises, after they have broken even or made some money, they pull out their investments. Therefore, we never see inflows at low P/Es and when the market begins to recover.”
 

Read about the outflows from mutual funds in November 2012 here.
 

Getting their timing wrong or going in and out of their investments is not limited to Indian investors. It is the same story in the US. One of the most widely cited studies on investor behaviour is a study by DALBAR, a research agency. DALBAR’s Quantitative Analysis of Investor Behaviour compares the investors’ returns against market returns. The most recent DALBAR study found that in the 20 calendar years ending in December 2011, the Standard & Poor's 500 Index had a 7.8% compound rate of return. In the same period, the average investor in US equity mutual funds earned just 3.5%. Even in the five-year period ending December 2011, mutual fund investors went in and out at the wrong times, resulting in inflows when the market declined and outflows when the market rose.
 

When it comes to systematic investing, the study showed that for the 20-year period the average equity investor earning $9,853 against a systematic investor’s earnings of $8,665, for a total investment of $10,000. This just the second time in history, since 1994 when the DALBAR study was first published, when the average equity investor outperformed the systematic equity investor. The average systematic fixed income investor overwhelmingly outperformed the average fixed income investor over the twenty-year period by earning over four times as much.
 

Buying when the market is rising and selling when it is down is true of every investor in every country and every period. Here is some information Thomas Gibson’s classic investment book titled “The Facts about Speculation”, published in 1923. Gibson found analysed around 4,000 accounts (a high number in those days) and states, “The most glaringly apparent cause of loss revealed by the investigation of these accounts was the almost universal habit of making purchases at high prices after a material rise had already occurred. This error is of a wholly psychological character” (emphasis ours). Fast forward almost 100 years later, it is exactly the same.
 

Gibson found out that majority of the investors bought right at the top of the cycle, with the average price of all purchases being within about 4 points of the extreme high. The price and value disconnect is so great that few investors pay attention to fundamentals and recognizing value and were solely focussed on price action. He found that 90% of the investors who relied on charts and other mechanical systems suffered losses. Investors usually bought on slight declines from high prices and sell on slight advances from low prices. This is a classic losing strategy.
 

Another folly, according to Gibson, is impatience. It is pertinent to note that humans are a fickle lot and overreact when markets crash (especially when it has been purchased right on the top). When the market is rising, everyone rushes in—investors, mutual funds, advisors and so on. Advisors erroneously tell investors to buy. Investors get carried away instead of thinking hard before putting bucket-loads of money into an investment.
 

The way to address this is to invest regularly, which is technically called SIP. While SIPs can sometimes lead to negative returns over a long period of time, over longer periods the number of periods of negative returns reduces (Read: SIP Smartly) Systematic investing also helps to navigate volatile markets and negate negative returns. Take a look at the returns over the past five years ended November 2012. Had you invested Rs20,000 in an index fund based on the Sensex in November 2007, your investment would be worth just Rs19,976 at the end of November 2012. The Sensex has moved nowhere from the start of November 2007 to November 2012. A quarterly systematic investment of Rs1,000 over this period would be worth Rs24,838, up 24.19%. Therefore one should not undermine the benefits of systematic investing and should continue even through the volatile market movements. However, according to the recent Computer Age Management Services (CAMS) data we have seen many investors exiting their SIP accounts before completion of the tenure. Net SIP registrations have been negative each month from April 2012 to September 2012.

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COMMENTS

uttam

4 years ago

PLS WRITE ABOUT lic RETURNS AS WELL.
THNKS

Suiketu Shah

4 years ago

I would advise readers not to invest in mutual funds.There are so mahy nfunds that for a layman its impossiblre to figure out which suits him and the rtight time to buy.Most relationship managers of Mutual funds and their agents are untrustworthy (thertein lies the cruz of the problem of the MF industry) and just want to achieve their target come what may.

If one of looking for investment from a longterm point of view there are enogh good share scripts and for short term FD's is very good.
Also if one if knowledgable,MF is a waste of time as the real returnes start coming anly after 5 yrs in which time ,if you have put money in the right shhares chances are returns wl be much much more more.

Chetan Shah

4 years ago

In reference to the discussions between Mr Nilesh and Mr Rajeev, I would like to add that those people who have a good knowledge in direct equities and has the capabilities of doing deep reasearch can make much more money by investing in direct equities but for a lay man it can be hazardous and we have seen that in the past years (and will see in the future too). For them a well diversified equity fund can give a far better return than PPF. Compare the SIP return of PPF and Franklin Prima Plus for 15 years and see the difference. If PPF has given a return of 7.78% compounded yearly, Prima Plus has given a return of 23.6%compunded yearly over the same period of 15 years. If some schemes have not given a decent return, its unjust to blame the MF Industry as abad investment avenue. In fact Equity MF is the best avenue for investment for a person who wants to invest in equity but does not have a very good hold or knowledge in the equity market. I have seen many investors making many folds in Equity MF over a period of 10 years and more. Time and patience in the volatile market is the only mantra needed in equity and equity related MF's.

Rajeev Kapur

4 years ago

ITC monthly closing prices since Jan 2007 till Nov 2012 shows 235% increase in market value of shares. With 1:1 bonus and dividends calculate SIP of 10000 per month for 71 months and you will think twice before you
invest in a MF again!

REPLY

Nilesh KAMERKAR

In Reply to Rajeev Kapur 4 years ago

Why ITC . . . Why not TTK Prestige or Bosch or Wockhart. Your SIPs in these cos would look even better.

spare some time Mr. Kapur and see this link too http://moneylife.in/article/indian-retai...

Rajeev Kapur

In Reply to Nilesh KAMERKAR 4 years ago

Thanks Nilesh. Read the report. Highlights very important reason for the investors losing money- selling the winners and holding on to losers. The figures for the MF investors would be similar for the same reason.

Rajeev Kapur

4 years ago

Monthly closing prices of Colgate since Jan 2010 till Nov 2012 show that SIP of 10000 would have resulted in 49% gain. Add dividend to that and compare it with the best MF SIP and decide for yourself how the investors are being taken for a ride by MF Lobby. Do not invest in more than one or two MFs - that too for diversification. MF industry is the biggest fraud on investors - it is manipulated by big fund houses and mega investors .

REPLY

Nilesh KAMERKAR

In Reply to Rajeev Kapur 4 years ago

How about calculating SIP in Colgate for a decade when Colgate stock prices did nothing, did not go anywhere . . . ditto for HUL.

Yet there's no denying the fact that those who can 'successfully' invest on their own have no reason to invest in MFs.

But, the Study done by ISB shows 90% of Indian investors lose money in the stock markets.

Rajeev Kapur

In Reply to Nilesh KAMERKAR 4 years ago

Market value of Colgate in 10 years from 2002-12 increased by 760%. - not adding the generous bonus in all these 10 years.

Did ISB study mention how many MF investors have lost their money?

Rajeev Kapur

4 years ago

Individual investment in stocks will give better results than any MF as one does not have to pay for the fat salary given to the portfolio manager, does not incur the turnover cost of scrips in MF that is done when faced with redemption pressure and the commission paid to the distributors. Care is required in selection of stocks as much as it is required for selection of MF. There are a large number of MFs that have given poor or negative returns.

The article indirectly makes a strong case for PPF as its returns over 20 years would have been far superior than the 7.8% compounded return quoted. In fact with tax rebate included the power of compounding over 20 yrs in PPF would have given better than most of the MFs. Mr Prashant Jain knows this very well.

REPLY

Nilesh KAMERKAR

In Reply to Rajeev Kapur 4 years ago

Mr. Rajeev Kapur,

The 20 years performance figures quoted by you are not correct.

Here is just but one proof … Rs.5000 invested in Franklin India Prima Fund on 28th Sept 1994 has grown to Rs.105125.12 on 26th October 2012


Similarly request you to kindly check for yourself the 10 year plus performance records of other diversified equity funds and you shall find on average they have given about 17% CAGR for that period – which is double than the rate of 7.8%

Why mislead people? What is the agenda sir?

Rajeev Kapur

In Reply to Nilesh KAMERKAR 4 years ago

With reference to your comments : please read the excerpts from the above article in ML. You can decide if anyone is being mislead or misunderstood. " The most recent DALBAR study found that in the 20 calendar years ending in December 2011, the Standard & Poor's 500 Index had a 7.8% compound rate of return. In the same period, the average investor in US equity mutual funds earned just 3.5%. Even in the five-year period ending December 2011, mutual fund investors went in and out at the wrong times, resulting in inflows when the market declined and outflows when the market rose."

Nilesh KAMERKAR

In Reply to Rajeev Kapur 4 years ago

1) Why talk of US returns and blame Indian MFs while trying to make out a case for long term investment in PPF vs Indian equities via MFs.

Nilesh KAMERKAR

In Reply to Nilesh KAMERKAR 4 years ago

Correction the fund mentioned above is Prima Plus Fund and not Prima Fund. - Apologise for the error

Liju Philip

4 years ago

When Sensex dipped to 8000 odd levels in 2009 many of my friends bailed out at a serious loss. I kept buying and they refused to listen. 3 years later, that purchase at the low levels has really borne fruits for me.

Iam happy when the markets fall as it gives me an opportunity to buy more.

Suiketu Shah

4 years ago

I had a disastrous experience in MFunds in 2010 ( ml is aware of this) mainly due to the deliberate wrong advise given by investment advisor of a top corporate.We bought those MF in Nov 2010 when sensex was at its peak.

They took false advantage of my lack of knowledge.The result.We have blacklisated the company and got more knowledgable and donot need MFunds now.We have got quite knowledgable in shares.No wonder MF's lose out as their agents are just looking for "bakras" to get their 10% commission and target.They care a damn about when not to buy.

Mf industry is rightly receding due t its pathetic agents called "weath management advisors"

Rgds
Suketu

Nilesh KAMERKAR

4 years ago

The individual investor in mutual funds likes to believe, it is because of someone else that he has lost money in mutual funds – and the sacrificial lamb for pinning the blame of this investing failure, is most conveniently the adviser or the agent.

But, most of the times the cause of such loses is the investor himself. As Benjamin Graham, the greatest investor who ever lived said “The investor’s chief problem – and even his worst enemy – is likely to be himself”.

If you have discipline and PATIENCE, it is really difficult to lose money in mutual funds. But, somehow, a large percentage of individual investors seem to have mastered this art of losing money in mutual funds.

To be a successful investor, one does not need high degree of intelligence or higher qualification – What is required is Temperament. It’s a matter of character and not intelligence.

The chief reason people lose is because they seek comfort in being part of the crowd, rather than in the ‘courage of conviction’ of doing the right thing, without being concerned about what the others are doing.

Amol Wagle

4 years ago

Is it the right time to start SIP's ?

REPLY

jaideep shirali

In Reply to Amol Wagle 4 years ago

You can start a SIP at any time, because SIPs are not aimed at finding the right time to enter or exit from the market. SIPs average your cost through the ups and downs in the stock markets.No expert can predict the peak and bottom in stock market cycles, so once you start a SIP, stay invested for atleast 5 yrs, irrespective of market trends, you can expect to earn good returns.

Rajeev Kapur

In Reply to jaideep shirali 4 years ago

This is a fallacy perpetuated by distributors of MFs. The article itself quotes a five year period when there was very little gained by MF investors. Some years ago 2-3 years was considered as long term and now it is 5 years or more. Use the same SIP in a well managed, reputed company for direct investment for 5 to 20 years and get enormous returns - no MF can even come close to it.

Is Aadhaar being used as a political tool by the UPA government?

The ground-level infrastructure for Aadhaar-linked direct cash transfer is not yet ready. The base for this scheme, the UID project is surrounded with controversies. And yet the UPA government is pushing hard both the UID and the direct cash transfer scheme with an aim to lure voters for next general elections

 
Aadhaar or the unique identification (UID) number scheme, the United Progressive Alliance (UPA) government's ambitious project is becoming more controversial day by day. First it was a petition filed by retired Karnataka High Court judge Justice KS Puttaswamy and advocate Parvesh Khanna questioning the legal sanctity of Aadhaar, then the UPA's announcement to directly transfer cash in to a beneficiary's Aadhaar-linked bank account from January, which the Election Commission objected to. The latest is that the Police in Mumbai have found an Aadhaar letter with an illegal immigrant from Bangladesh, who had been residing in Gowandi area. This man used the Aadhaar letter for subscribing to several government schemes meant for poor Indian citizens. This also raises big question of for whom the direct cash transfer scheme is being aimed, is it the Indian citizen or residents or simply the voters.
 
Rush to directly transfer money before the Big Election?
The UPA, under the leadership of Manmohan Singh (Sonia Gandhi, to be precise), was able to retain power at the Centre twice—in 2004 and 2009. With the country slated to go for the next general elections in 2014, the UPA is facing difficulties on several fronts. In this situation, opposition parties and several prominent activists and citizens are raising questions on the intention of the Union government to roll out its ambitious direct cash transfer (DCT) scheme, using the UID or Aadhaar.
 
The UPA government has announced that from January 2013, residents from 51 districts (excluding eight districts from Himachal Pradesh and Gujarat) would get the subsidy amount, for about 29 schemes, directly transferred into their Aadhaar-linked bank accounts. This would be followed by 18 states that would be roped in the scheme from 1 April 2013 and the rest 16 states from 1 April 2014. As per a press release from Unique Identification Authority of India (UIDAI), as on October 2012, about 23 crore residents have enrolled for the UID and 21 crore have been issued Aadhaar letters. This means two crore residents do not have any info about their Aadhaar numbers.
 
The UPA government is trying to link Aadhaar-enabled service delivery to various government schemes such as MNREGA wage payments, PDS distribution, payment of social security benefits such as old-age payments and distribution of LPG cylinders. 
 
Bharatiya Janata Party (BJP), the main opposition party, complained to the Election Commission (EC) about the direct cash transfer scheme, following which the Commission has asked the UPA government to postpone implementation of the scheme in Gujarat and Himachal Pradesh where elections are underway. 
 
Noting that the Congress had dubbed direct cash transfer as a “game changer”, the CPI (M) politburo said the scheme was “indeed a game changer whose rules are weighted against the poor, in favour of the UPA-II government’s obsessive commitment to cut subsidies to the working people”.
 
The direct cash transfer would include schemes from ministry of social justice and empowerment, human resources development (HRD), minority, welfare, women and child development, health and family and labour and employment.
 
Direct cash transfers provide political mileage to rulers
According to a study by the World Bank , voters respond to targeted cash transfers and these transfers can foster support for incumbents, thus making the case for designing political and legislative mechanisms that avoid successful anti-poverty schemes from being captured by political patronage.
 
“In theory, anti-poverty programs such as conditional cash transfers (CCTs) may play a role in influencing individual political participation—in the form of voting—and preferences, strengthening democratic representation but also producing electoral rewards. For instance, by partly changing the economic circumstances of households, transfer receipts could persuade participant households to exercise their right to vote,” the study ‘Conditional Cash Transfers, Political Participation, and Voting Behaviour’, says.
 
Change of role by Chidambaram
P Chidambaram as home minister had a different opinion about UIDAI and its Aadhaar. In November 2011, Chidambaram, in a letter to Montek Singh Ahluwalia, deputy chairman of Planning Commission, had stated that the data collected for UID does not meet the criteria laid out under the National Population Register (NPR) with regard to national security. The home ministry even claimed that UID number can be generated without any verification of documents, mandatory for it.
 
On 16 January 2012, RK Singh, as home secretary, wrote a letter to Cabinet secretary Ajit Seth. Singh said his ministry find it difficult to understand that while UIDAI is willing to accept documents issued by third parties (registrars of UIDAI) at the time of enrolment, it is not accepting data collected by government servants for NPR. “The UIDAI refuses to accept the data from Registrar General of India for de-duplication citing various grounds while it proceeds to collect data itself," he said.
 
Forward to November 2012, and the same Chidambaram, as finance minister touted the direct cash transfer scheme based on Aadhaar as “game changer”! He even rejected charges that the scheme is being used as prelude to general elections. Insisting that the programme has “nothing to do with elections”, he said, “Elections will come and elections will go. The scheme will be a ‘game-changer from the point of view of ordinary citizens of India’ and its benefits will be long-lasting.” 
 
What changed during the 12 months for Chidambaram as home minister and as finance minister? 
 
Direct cash transfers and Aadhaar linked bank accounts
Linking Aadhaar numbers to direct cash transfer is also not without issues. The government is trying to link the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) scheme and Aadhaar, which uses biometric identification, to directly pay money into labourers’ bank account. Experts have repeatedly pointed out that biometric identification for manual workers has a high 20% margin of error as fingerprints of such workers change (some does not even have fingerprints). The problem is similar with senior citizens.
 
According to Dr KC Chakrabarty, deputy governor of Reserve Bank of India (RBI), only 40% Indians have bank accounts. HR Khan, also deputy governor of RBI, had said that as of June 2012 around 1.88 lakh villages in India were connected to banking system. This also means, residents from about 5.12 lakh villages (if the Aadhaar linked DCT is really meant for such financially excluded regions), are still out of the banking system. In other words, to make the DCT a success, the UPA government need to bring people from these villages into banking system first.
 
As of now, according to news reports, the government has asked state-run banks to make sure that every household in these 51 districts, where the DCT is going be implemented, have a bank account. This is a huge task and it looks like the UPA government would miss its deadline for implementing the DCT scheme.
 
Even the Prime Minister’s Office (PMO) has asked ministries to take up implementation of the direct cash transfer scheme on a “war footing” before the launch of the programme on 1st January. The PMO also asked ministries to organise camps to fast pace enrolment under Aadhaar and also have to ensure the beneficiaries have bank accounts linked with Aadhaar numbers.
 
UIDAI and its partner still claim everything is for “financially excluded”
UIDAI maintained that the mandate for Aadhaar is to provide UID to residents who do not have any kind of identification and thus are deprived from various government schemes. In other words, it would bring people who do not have any identification into the financial system. It was also expected that with this clear cut mandate, others who have some ID proof can opt to stay out of Aadhaar enrolment. But looking at the way Aadhaar is being forced by the government , soon it would become mandatory, unless it is stopped by the Parliament or the judiciary.
 
Visa, the partner of UIDAI, has launched “Saral Money”, an instant-account linked to an individual’s Aadhaar number. In a release, Visa said, “This unique payment solution specifically targets India’s financially excluded regions and will support cash transfers for subsidies, scholarships and other government disbursements. Phase 1 of the program will roll out in key parts of New Delhi and the National Capital Region with the rest of the country targeted by the end of next year.”
 
Read it again. Visa says “financially excluded regions” and “New Delhi and National Capital Region” in same release. When asked about it, a company official stated that “The first phase of the program is being rolled out in New Delhi for the benefit of all the financially excluded individuals, the migrant who would have travelled into the region and may not have a valid ID proof to open a bank account. However, the initiative has a larger vision to cover the nation and it's financially excluded regions going forward. The release is capturing both these aspects.”
 
When asked about selecting Delhi for the first phase of Saral Money, Visa said, “The pilot was rolled out in Delhi because Aadhaar coverage in Delhi was over 60% at the time—so it was an ideal testing ground.”
 
The payment services and solutions provider, however, sidestepped from answering question regarding “providing benefit to migrants”. Visa said it simply provides its “Saral Money” service on behalf of the banks, once they are happy with their KYC criteria as laid down by RBI (for opening bank accounts). 
 
In short, the UPA government, the UIDAI and its partners appear to be using the term “financially excluded” to target voters and customers.
 
When the beneficiary will get actual cash in hand?
The UPA government is pushing forward the direct cash transfer to the beneficiary’s bank account. This means, people will need to reach banks or ATMs for withdrawing cash. According to National Payments Corporation of India (NPCI), at the end of October, there were over 1.04 lakh ATMs in the country. State Bank of India (SBI) and its five units have installed 61,500 ATMs, while private sector and foreign banks put together have about 41,800 ATMs. Co-operative banks and regional rural banks have 1,150 machines. All the banks put together have plans to install additionally about one lakh ATMs over a period of next two years, the NPCI said, noting that this will take up the average to 170 ATMs per million of population from the current 85.
 
The only problem is that the majority of these ATMs are installed in cities or areas with dense population. Thus, unless banks go out of their way and install ATMs in rural areas, the financially excluded residents have to be dependent on the banks, especially on the public sector banks. For example, a Kalawati from a remote village may end up spending a day for getting the cash for subsidy from her bank, which may be mere Rs100 or Rs200. But then, the UPA government is just sending the cash to her account through Aadhaar, while withdrawing and using it to buy food at market rate is her responsibility! 
 
One of the pilot projects undertaken by the government for DCT was in Beelaheri village, which is about 130 km away from Delhi. The pilot to replace kerosene subsidies with cash has been running since December 2011. According to media reports, the demand for kerosene from Beelaheri village has come down substantially; however, the beneficiaries are clueless about the direct cash transfers. Villagers visit the ration shop and riffle through the pile of Aadhaar letters looking for their own letter. Pushkar Raj Sharma, a local government official overseeing the scheme in the area has been quoted saying, “The government has begun the cash transfers even to people who have not received their letters.”
Bengaluru-based Col (Retd) Mathew Thomas of Citizens’ Action Forum says, it is ridiculous to hope that cash for subsidies could be transferred using the UID biometric database. “Why is a biometric database required for cash transfer of subsidies? Hasn’t the US been crediting unemployment dole into SSN accounts, which have no biometrics, for over 70 years? UID is for all residents. Subsidies are for citizens. How would a government agency disbursing subsidies or a bank know whether a person with a UID number is a citizen or not? ” he said. 
 
UIDAI still says Aadhaar is not mandatory
As Moneylife has been constantly pointing out  Aadhaar and its issuer the UIDAI are rapidly exploiting their own mandate. Even today, UIDAI on its website says, “Any individual, irrespective of age and gender, who is a resident in India and satisfies the verification process laid down by the UIDAI can enrol for Aadhaar. Aadhaar number will help you provide access to services like banking, mobile phone connections and other government and non-government services in due course." 
 
Moreover, UIDAI still says that Aadhaar is ‘voluntary’ and “not mandatory” . The question is then why the UPA government is insisting to enrol every resident in the project?
 
Some residents from Kalyan in Maharashtra have been complaining that their children are being persistently asked by their school teachers to submit an Aadhaar number or enrolment receipt for reasons best known to the school management only.    
 
UIDAI is still under heavy criticism for concerns like privacy issues, use of biometrics and the incentives being paid for enrolling more residents. Many voices have been raised against the forceful implementation of the UID project, with most objections focused on concerns over privacy. In addition, the incentive issue will certainly push government employees to enrol more residents by any means, when they don’t know what UID is and how it would affect their lives.
 
Aadhaar not accepted as proof in many government departments
While the RBI has asked banks to accept the Aadhaar letter as valid proof for opening a bank account, several government departments and private companies refuse to accept the UID. Aurobindo Banerjee, one of Moneylife readers and former chief commissioner of Income Tax wrote an open letter to UIDAI chief Nandan Nilekani  asking about the legal status of Aadhaar and its acceptance as valid proof by mobile operators.
 
One non-governmental organisation (NGO), Coimbatore Consumer Cause, in a letter to prime minister Dr Manmohan Singh has highlighted several issues of un-acceptance of Aadhaar. It claims that Passport offices, regional transport offices do not accept Aadhaar as valid document.
 
Private companies may be overcautious and are not accepting Aadhaar letter as valid proof from subscribers, which is right as the onus is on the mobile operators to prove that the subscriber is genuine and it has done the know-your-customer (KYC) checks.
 
What is preventing the Passport Office from accepting Aadhaar letters is that these letters are being issued to all ‘residents’ and not citizens of India. And passports are meant for only citizens. In other words, for the UPA government any resident with Aadhaar can be converted into voter but the passport office and other such government departments know the difference between citizen and residents. Hope the common sense prevails throughout other departments as well. 
 

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COMMENTS

Dayananda Kamath k

4 years ago

uid was basically introduced to pass on the subsidies to bangladeshis and also to politicians and their stooges. when subsidy given to a few hundred companies and govt departments can not be monitored how subsidies given to crores of indians can be monitored. oil companies were not able to recover the deficit as per the scheme and they were being paid at the whims of govt. how ordinary man can followup the paltry sum given as subsidy.direct credit of subsidy is nothing but bribing the voters. once intorduced it can not be withdrawn just like the reservation. it is people of india realise these game plans of these politicians . you are being paid your own money with a substantial portion pocketed by the politicians.

Nithin

4 years ago

UID/Adhaar is a basic step in building a reliable database of all Indians. It is definitely going to have a lot of issues and practical difficulties considering the size and diversity of our nation. Nevertheless it is a right step in building a sustainable infrastructure in long run. Expecting it show benefits in short a period is very ambitious. Cash transfer and other associated scheme are to be carefully built on top of UID. They have to done carefully and can give benefits in long term, something like in 5-10 years. The critics and also the government are expecting the scheme to show quick benefits, as quick as Jan 2013. This is the basic reason people are on two sides in this matter. If we think of long term UID is a great initiative. A right step which if followed by several other right ones, can give benefits. If this can reduce corruption in country by at least 10%, think about the economic benefit our nation will have.

nagesh kini

4 years ago

Now that a lot of money is sunk in,Aadhar is a fait accompli. It is infractous now to question its legal/constitutional validity.
Instead, either the long in use and time tested PAN/Election cards would have been good enough with a little of tweeking.
Now that it has come to stay with PC the FM having withdrawn his earlier reservations as HM, there is nothing to prevent the GOI from mandating it only for Indian citizens, which it rightly ought to be. This major flaw needs to be rectified. Otherwise wrong people, like the Bangla Deshis and other illegals will hold cards and claim benefits to the detriment of genuine beneficiaries.
What is mysterious is why ground level infrastructure was not put in place right from the beginning and was it allowed to turn into a major bottleneck at the implementation stage now.
The selection of the locations for the pilot roll out appears to be flawed - when the desperate need is to reach out to the real rural Bharat, going to hamlets closer to metros like the NCR makes it politically incorrect as a suspected vote catching device.
All the systemic concerns pointed out by various knowledgeable civil society members need to be addressed to make the entire system really workable.

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