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Economy Feb 13, 2013

Direct benefit transfer: nobody to take onus of frauds

By Rajesh Pandathil

More evidence is emerging that the United Progressive Alliance was in a hurry to roll out the direct benefit transfer scheme.

According to a report in the Mint today, neither the UIDAI nor banks are willing to take the liability for any likely fraudulent transaction in the scheme.

The government has sought the opinion of the law ministry as to who should be held responsible for any likely frauds - UIDAI, banks and or the relevant ministries administering the welfare schemes for which the cash will be transferred.

It is surprising that the government launched a scheme, which has the potential to become a breeding ground of scams in the coming years, without putting in place a mechanism to take the responsibility of such an eventuality.

And interestingly, one of the officials quoted in the report accepts that frauds are possible in any system, "though the current system of Aadhaar-based authentication is being made robust and foolproof".

Direct benefit transfer is aimed at distributing directly to the poor the subsidies and cash as part of the government's welfare schemes to beneficiaries' bank accounts.

The backbone of the scheme is the Aadhaar number provided by the UIDIA to which the bank account will be linked.

The question is whose liability is it if somebody fraudulently withdraws money from someone else's account by misusing the authentication service?

The question is whose liability is it if somebody fraudulently withdraws money from someone else's account by misusing the authentication service?

A cautious government had in January scaled down its direct benefit transfer roll-out to 20 districts across 16 states as against the initial plan of launching it in 51 districts.

By 1 March as many as 43 districts will come under the scheme. Only 10 welfare schemes have been brought under the programme initially. This will rise to 26, still less than the earlier planned 42.

Finance Minister P Chidambaram had admitted that Aadhaar enrollment, which is key to the scheme, was lagging. In the first phase, money was credited even if the beneficiary did not have the Aadhaar number.

An earlier Times of India report had said various experts have raised suspicion as to how the benefit would be finally given away to beneficiaries.

Doubts were also raised whether the National Population Register (NPR) would be effective if used instead of the UID number to identify the end-users of the scheme.

The NPR, according to the Census of India website, "would be a register of usual residents of the country". It provides a comprehensive identity database that would help better target the benefits and services under the government schemes/ programmes, improve planning and help strengthen security of the country.

According to the government's plan, the UIDAI will cover 600 million beneficiaries of the direct benefit transfer and the rest will be covered by the NPR. It is this plan that is being criticised by the observers.

Another concern they had raised was about the proposal by the department of financial services to hand over monopoly contracts to give away money, essentially a 'one cluster, one banking correspondent company' model, the ToI report said.

The country will be divided into 20 clusters and each cluster will be handled by one company which will send out banking correspondents to distribute cash from banks to beneficiaries through hand-held micro-ATMs.

Many had smelled a rat when for the first rollout of this model companies had aggressively bid for the distribution contract, the report said.

These companies had bid for a paltry fee of less than 2 percent. In some areas, the bids were "ridiculously low", the report had said.

But the government has gone ahead with its plan.

According to an estimate by a government task force, to cover the entire country the requirement will be 10 lakh banking correspondents.

The task force had recommended a commission of 3.14 percent, but the finance ministry has brought it down to 1.5 percent, another ToI report said. The government is yet to decide on this.

According to the Mint report, the scheme works as follows: respective government departments will send the name and Aadhaar number of beneficiaries of the welfare schemes under them to banks. Banks will send these details to the National Payment Corporation of India, which will then credit the money to the beneficiary account that is linked to the Aadhaar. The banking correspondent verifies the beneficiary and makes the payment through the hand-held ATMs.

It is here that the frauds are likely to happen.

"The question is whose liability is it if somebody fraudulently withdraws money from someone else's account by misusing the authentication service?" a government official rightly asks in the Mint report.

With nobody yet to take the onus of such an eventuality, it remains to be seen that whether the scheme will live up to its slogan of "aapka paisa, aapke hath mein".

by Rajesh Pandathil

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