Aadhaar Payment Bridge System : A technological enabler

The direct benefit transfer to be implemented through the Aadhaar payment bridge will be a powerful enabler in functioning of the subsidy programmes managed by different government functionaries at different level (Centre, states , local governments ). It will ensure much greater speed, transparency and accuracy by making payment directly to a beneficiary via an Aadhar linked bank account. In the process, it reduces leakages and can alleviate corruption at a perceptible level .

Here , we will try to depict  two scenarios to show how the Addhar platform of Direct benefits transfer is different from the present procedure that banks use for bulk payment with the help of RTGS /NEFT platform or via the old-fashioned route of a treasury  cheque clearing .

Scenario 1: How it happens now

Let us suppose a particular Gram panchayat has 4000 active job card holders, who are getting regular payments for their work done under NREGA. These workers have their accounts opened in different bank branches or BC (business correspondent) outlets, after which  they have to submit their respective details ( Bank , Branch code  , IFSC Code , MICR code and account numbers )  to the Panchayat Office. The panchayat Office will make separate bank-wise lists comprising of workers name, account number and their pay amount and will send the list to the respective banks. After reaching the bank branches, each of these cheques will go for clearing from the branch where the Block actually maintains its funds for NREGA. Finally; after clearing of the funds, the Bank will upload the file for disbursement of wages. This cumbersome process normally takes 10-12 working days in the present setup, if not more. In exceptional cases, the Block office might submit their list of all wage earners to a single branch, and that branch will make bulk NEFT to the account holders of other banks. But again ; if the account numbers or IFSC codes are wrongly listed, the whole process might get more delayed because of rejections .

Scenario 2: Payment via Aadhar Payment Bridge

 Now let  us come to the situation where the Block / panchayat Offices use the Aadhaar payment bridge for the wage disbursement. Here, we must keep in mind, this APB system uses Aadhaar number as a financial address of a beneficiary, not his bank account or IFSC code of the branch having his account. In this count, it is grossly different from RTGS/NEFT system of RBI. What the beneficiary needs is only one Aadhaar enabled bank account. The panchayat does not even have to get information from the beneficiary whether the beneficiary has actually linked his account. It can be done by a server-to-server verification with UIDAI. Similarly, the banks also sends information regularly through an automated server-to-server connect and placing on NPCI mapper.  NCPI mapper acts as a repository of Aadhar numbers along with IIN (institution identification number) to which Aadhar number is mapped. Thus without much hiccups, the accounts are being enrolled with   Aadhar payment bridge. Once a payment request is uploaded by a Bank , it gets validated almost on a real-time basis to beneficiary accounts using Aadhar as an unique financial address .

Presently, 300 banks in India are capable of opening Aadhaar enabled bank accounts. If a customer links multiple accounts to the Aadhaar payment bridge, it will take the latest one to be the valid one, as Banks regularly sends new enrolments to the NCPI mapper .

 Now, 20000 gram panchayats in Andhra Pradesh is already using this Aadhar enabled payment system. The PMJDY recently launched will ensure more Aadhaar numbers being feeded into banking system.

Our newly elected BJP government has understood the effectiveness of the Aadhar platform, and instructed its ministry of Rural Development to enrol at least 2 crores NREGA workers in 300 DBT districts within 31^st December 2014 .

Diesel price decontrol in India : Making a case for a Oil sector regulator

  

 In the backdrop of the recent decontrol of diesel prices by the BJP government, it is pertinent to revisit the risk of cost-push inflation when the crude price will again reach peak level of around $140 per barrel. With addition of taxes from central/ state governments, it can reach as high as 90 per litre. Will not it pose a huge effect in RBI’s plan of inflation targeting of within 6 per cent by Jan 2016?

Let us go a little deeper into the broad reasons of a continuous fall of crude prices from 2012. Firstly, the US has turned into a net exporter for the first time due to huge exploration post 2008. Secondly, the OPEC countries of the Middle East have gone into price war for their market share. Thirdly, the economic outlook of the Eurozone is very bleak leading to lower demand from this part of the world. Last, but not the least, some of the Asian countries are deregulating prices of oil sectors in a world of declining crude. So, the subsidy bills going down leads to increase in prices instead of the crude price fall, leading to dampening demand.

India is the fourth largest consumer of oil worldwide after US, China & Japan *. So, running a subsidy regime covering all sections of the society is not at all an efficient move by the government.

 In the Indian context, there was a clear case to end the regulation regime . The opaque nature of the pricing by the government where government impose tax and give subsidy on the same product was not welcome.

But considering the mid-term nature of the dampening factors of oil demand and a fresh price shock in 2-3 years’ time make a case for creating a cycling buffer by the government. Such buffer is present in banking sector also, and the RBI has repeatedly vowed for its maintenance by the commercial banks. An autonomous regulator in the model of GAIL  should be created which will manage this buffer fund and will come into play when our crude price will be sky rocketing and will have cascading effect on our inflation numbers. The buffer would be created by keeping apart a part of tax on diesel by both central and state governments. It will save our economy from the price fluctuation internationally. . These doses of regulation should always be there to smoothen the economic activities, and also to save our poor people from inflationary risk, which is actually a form of regressive taxation for them.