Ghost Savings in DBTL: 99% gap between Jaitley’s claims and actual savings

Moneylife Digital Team 17 March 2016

Aadhaar and DBTL savings for FY2016 are less than 1% or Rs121 crore, excluding the costs of implementation, as against FM Jaitley's claim of an estimated saving of Rs15,000 crore, reveals an analysis from IISD based on publicly available information

The net fiscal impact of integrating Aadhaar into the Direct Benefit Transfer of liquefied petroleum gas (LPG) (DBTL) scheme during FY2015-16 is very low, and the expectations of substantial net savings in subsidy expenditure from the introduction of the Aadhaar scheme appears to be hugely misplaced.

"....the integration of Aadhaar within the DBTL programme resulted in total savings on LPG subsidy expenditure in FY2015-16 of approximately Rs121 crore – less than 1% of the estimated subsidy saving figure of Rs15,000 crore (as stated by Finance Minister Arun Jaitley), " reveals an analysis done by International Institute for Sustainable Development (IISD) based on information available in public domain.

On 11 March 2016, Finance Minister Arun Jaitley was reported as stating in the Lok Sabha that “targeted subsidy through Aadhaar of LPG consumers had resulted in savings of over Rs15,000 crore.” The same was repeated by Information Technology Minister Ravi Shankar Prasad in Rajya Sabha, while seeking support to the Aadhaar 'Money' Bill.

Even Nandan Nilekani, the former chief of Unique Identification Agency of India (UIDAI), in an article stated, "“we have…visible evidence of [Aadhaar’s] utility with Rs10,000 crore-plus savings in LPG subsidy in one year alone”.

IISD says, using publicly available information, and applying the same methodology as adopted to calculate additionality in FY2014-15, it is possible to provide an estimate of the fiscal impact of integrating Aadhaar within the DBTL programme in FY2015-16. This is calculated by applying the recorded deduplication rate achieved through Aadhaar integration to the total number of Aadhaar-seeded LPG connections, then applying the average monthly consumption rate per active connection and the monthly (variable) subsidy rate per cylinder (including both direct budgetary subsidy and uncompensated oil marketing company (OMC) costs) to arrive at a total ‘avoided’ subsidy expenditure figure due to Aadhaar before accounting for any costs of implementation.

The table below gives the monthly calculations of the total (gross) avoided subsidy expenditure due to the integration of Aadhaar into the DBTL programme in FY2015-16 (all figures in Rupees crore).

IISD says, "To obtain an accurate assessment of the net fiscal impact of integrating Aadhaar, this figure should then be offset against the costs of implementation. For example, assuming an average enrolment cost of Rs120 per person, the marginal cost of enrolling just those customers with Aadhaar-seeded LPG connections as of 1 March 2016 (i.e., not including the costs of non-LPG linked enrolment, or any of the costs associated with implementing and operating the DBTL programme itself) was approximately Rs1,343 crore – 20 times greater than the fiscal saving from integration into DBTL in FY2015-16. An accurate cost-benefit appraisal would also include the direct and indirect costs imposed on beneficiaries."

"Putting aside the relative merits of Aadhaar as a public policy tool, our calculations indicate that, instead of resulting in significant savings, the net fiscal impact of integrating Aadhaar into DBTL in the current financial year was likely to be minimal, and that expectations of substantial net savings in subsidy expenditure from the introduction of the Aadhaar scheme may be misplaced," IISD concluded.

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Comments

User

Mahesh S Bhatt

9 years ago

Can this be captured legally & fix Jaitley?? Mahesh

Bhamy V Shenoy

9 years ago

IISD has grossly underestimated the potential benefit of using Aadhar platform. They have based it on those who tried to duplicate. They have not been able to estimate or decided not to estimate how many cylinders which would have been diverted to commercial or auto sector were avoided. It is surprising it is the research of IISD which had showed significant advantage of using Aadhar and now they have tried to underplay the use.

In fact currently with residential LPG subsidy having fallen to less than Rs 50 or even zero because of the low oil prices, savings would be nothing. Does it imply that Aadhar is of no use. When there are policemen on the streets, there are no burglaries. Should we conclude that there is no use of policemen.

Jaitely's computation of Rs 15000 or that of Nandan Nilekani might have been based on when LPG subsidy was more than Rs. 500 per cylinder and assuming 30% of residential LPG is diverted, those numbers are in the ball park.

I

Davidson D

9 years ago

If the facts given above are accurate, then does n't it mean that FM is misguiding the Parliament and the people of India

vnrao

9 years ago

again you appears to be wrong because the diversion of domestic cylanders are avoided by linkin adhar no do not give distored pictue to to say thing diffrent

Krishnan Narayanan

9 years ago

This article is a repeat of the earlier one published a while ago.

Mohan Damodaran

9 years ago

True there could be exaggeration as every govt. does but fact remains Adhar is must for stopping leakages. This is not to suggest that there will be no problems but for perfecting a subsidy system you need the minimum basic requirements and Adhar is certainly that minimum.