It is the connection regularisation program, unconnected to DBTL or Aadhaar, which has helped remove invalid connections. Massively inflated notional savings from these connections are being presented as success of DBTL and or Aadhaar
While accepting that there is no statutory status to Unique Identification Authority of India (UIDAI), the numbering agency for Aadhaar, Finance Minister Arun Jaitley wants to push the unique ID number to all subsidies and monetary benefits to large section of beneficiaries. The main contention used by the Narendra Modi government for pushing Aadhaar is how it helped save 'huge' amount in the Direct Benefit Transfer of liquefied petroleum gas (LPG) (DBTL) scheme. However, both the claims, like weeding out bogus or fake connections through DBTL and Aadhaar, and the savings are without any substance. In fact, an analysis done by International Institute for Sustainable Development (IISD) reveals hollowness in the government's claims.
"There have been three principal changes to LPG subsidy policy since 2012: the introduction (and subsequent revisions) of the household cylinder cap, the implementation of connection validation and regularisation measures to identify and block invalid connections, and changes to the LPG subsidy disbursement mechanism DBTL or PAHAL. It is the connection regularisation program, which in no way required the introduction of either DBTL or Aadhaar, which has overwhelmingly been responsible for the identification and removal of invalid connections and associated consumption. These connections are now being presented as having been identified and blocked due to DBTL and or Aadhaar in FY2014–15 and a massively inflated notional saving calculated on this basis, when in almost all cases they were identified and blocked through processes unrelated to either initiative—in many cases several years prior to their (re)introduction," the report from IISD says.
In a talk on national TV channel, Finance Minister Arun Jaitley on Monday had said government will soon pilot a Bill to effectuate statutory status to UIDAI so that Aadhaar is mandatory. This is in contrast with the judgement delivered by the Supreme Court of not making Aadhaar number mandatory for availing benefits of government schemes. Jaitley has reportedly said that at a time when the government is determined to wipe out pilferage in distribution of subsidy meant for the rightful claimants, a unique number linked to bank account of the claimant is necessary.
However, IISD says, "The misrepresentation of the impact of direct transfer and of the role of the Aadhaar program within it are extremely damaging to the effective design and public oversight and accountability of subsidy reform policy in India."
Both the cylinder cap and connection regularization are simple and cost-effective initiatives to implement, therefore delivering a significant net fiscal saving and, in the case of a cylinder cap, immediately improving the highly regressive distribution of the existing subsidy, IISD added.
From 1 April 2015, the Central Government is distributing subsidy for LPG scheme through DBTL or PAHAL. Importantly, DBTL does not remove the LPG subsidy, but simply changes the mechanism by which it is delivered. There is a series of statements and media briefings by government and oil company representatives about humongous savings through the DBTL scheme. On 2 July 2015, the Chief Economic Advisor (CEA) had claimed an estimated savings of Rs12,700 crore from the scheme.
Later, the Ministry of Petroleum & Natural Gas (MoPNG), in a clarification, said the claimed benefit from DBTL for FY2014-15 work out Rs14,672 crore based on its estimates of sales to fake or bogus connections. The Ministry did not offer any calculation of subsidy component on such connections.
"As on 1 April 2015, there were 18.19 crore registered LPG Consumers and 14.85 crore active consumers implying a gap of 3.34 crore consumers which are duplicate / fake / inactive accounts blocked under PAHAL Scheme and related initiatives. If we take into account the quota of 12 cylinders per consumer and the average LPG subsidy of Rs336 per cylinder for the year 2014-15, estimated savings in LPG subsidy due to the blocking of 3.34 crore accounts work out to Rs14,672 crore, during that year," the MoPNG had said in a release issued on 12 October 2015.
However, IISD says this claim is far from truth or facts. "The Ministry’s latest figure rests firstly on the claim that the introduction of DBTL blocked a total of 3.34 crore LPG connections for the full financial year. Given the stated parameters of the program this is, self-evidently, a technical impossibility. DBTL was only introduced nationwide in January 2015, nine months into the financial year, and was only mandatory in a total of 8% of districts for six weeks or from mid-February to end-March 2015. To the extent that DBTL was responsible for the identification and blocking of any irregular connections in FY2014-15, this effect was therefore limited to the period in which DBTL was in operation, which represented a small fraction of the full financial year."
"In addition, publicly available information clearly demonstrates that DBTL was not responsible for identifying and blocking 3.34 crore connections or even a significant fraction of this figure, during any part of the financial year. Instead, the majority of the connections formally identified and blocked as of 31 March 2015 and presented as blocked by DBTL in the Ministry press release, were blocked prior to the nationwide introduction of DBTL, and through methods entirely unrelated to DBTL or Aadhaar," IISD said.
Plugging “Leakages”: Why Aadhaar is not sudhaar
IISD said, applying the connection-based methodology adopted in the Ministry’s release, and using publicly available information, it is possible to calculate the approximate additionality delivered by DBTL through the identification and blocking of irregular connections in FY2014-15 and the maximum associated saving in subsidy expenditure. Majority of potentially irregular connections identified for regularization were identified through list-based deduplication—a process unrelated to DBTL. The only mechanism for identifying and blocking potentially irregular connections that was specific to the DBTL program, as implemented, was Aadhaar-based deduplication.
Within much media reporting of the DBTL program, there has been a conflation of direct transfer with the controversial Aadhaar program. IISD said, it is important to emphasize that the direct benefit transfer modality does not require any linkage with Aadhaar in order to function, and that Aadhaar was effectively irrelevant to the operation of the DBTL program, serving mainly to increase the costs of implementation and therefore reducing any potential fiscal gain from the introduction of direct transfer. The government’s own figures have consistently demonstrated that the maximum number of potential duplicates identified in LPG databases through Aadhaar-based deduplication is about 1% or less of total connections assessed—a figure which may relate to an even smaller percentage of actual consumption, it added.
Data released by the Ministry of Finance indicates that as of 1 April 2015 there were 8.5 crore LPG customers linked to Aadhaar— over half of whom had been linked as part of the previous implementation of DBTL by the United Progressive Alliance (UPA) government in FY2013-14.
IISD said, "Assuming that around 3.5 crore connections were newly linked to Aadhaar prior to 1 April 2015 due to the PAHAL Scheme, that identification and blocking of potentially irregular connections occurred almost immediately upon registration, and taking into account the staggered nature of connection registration and differential monthly per-cylinder subsidy rates, the maximum gross saving in subsidy expenditure (i.e. before accounting for costs) from Aadhaar-based deduplication in FY2014-15 can therefore be estimated at about Rs12 to Rs14 crore—less than 0.1% of the government’s most recent stated estimate using the connection-based methodology."
"In comparison," IISD said, "on the basis of about 1.40 crore to 1.45 crore registered connections by the middle of FY2012-13, simple list-based deduplication (as outlined http://www.informatics.nic.in/uploads/pdfs/a9fdca31_LPG.pdf
) reportedly identified 18–19% of total connections and over 20% of total active connections, assuming around 1 crore registered connections were inactive as potentially irregular connections to be regularised or blocked. In other words, list-based deduplication was around 15 to 20 times more effective in identifying irregular connections than the Aadhaar-based method, while imposing less than 1% of the equivalent cost of implementation to both government and beneficiaries and raising none of the attendant issues regarding fundamental rights."
In short, IISD says, non-DBT-based reforms are potentially faster, more equitable and more cost effective. "In the case of LPG, the path to substantive subsidy reform is clear—reinstatement of a realistic per-household cylinder cap, adjustment of the per-cylinder price-to-subsidy ratio, a crash program of access extension to all non-connected households, and rapid expansion and formalization of access to smaller cylinders, both subsidised and unsubsidised). In the case of other subsidized products, such as kerosene and food grains, current and previous administration’s emphasis on direct transfer has similarly inhibited the introduction of potentially simpler, more equitable and more cost-effective reforms, and come at a substantial opportunity cost both to the poor and to the wider economy. A commitment to the timely and accurate provision of data is a necessary first step," the analysis concluded.