Integrating Aadhaar (unique identity number) with social welfare schemes would plug leakages and yield almost 53 per cent returns to the Government, says a cost-benefit analysis done by the National Institute of Public Finance and Policy (NIPFP).

The Government plans to roll out direct cash transfer to beneficiaries in 16 States in the first phase of Aadhaar-enabled services from January 1, 2013. The schemes to be covered include the public distribution system, subsidised LPG and kerosene, rural job scheme, subsidised fertiliser, health, education and housing.

The analysis takes into account the costs of developing and maintaining Aadhaar, and of integrating it with the schemes over the next 10 years. The 52.85 per cent benefit to the Government has been estimated “even after taking all costs into account, and making the modest assumptions about leakages, of about 7-12 per cent of the value of the transfer/subsidy,” it said.

However, the NIPFP study pointed out that that the 52.85 per cent internal rate of return to the Government would depend on how comprehensive and rapid the integration of these schemes with Aadhaar would be.

According to the cost-benefit analysis, by 2020-21, the total cost of integrating Aadhaar would be Rs 4,845 crore, the total benefit that may accrue would be is Rs 25,100 crore, taking the net benefit to the Government to Rs 20,265 crore.

The 12th Plan document, which is yet to be approved by the National Development Council comprising all State heads, aims at financial inclusion by providing Aadhaar-linked banking services to beneficiaries and progressively moving to ‘cash transfers’ for major subsidies, such as food and fertiliser.

Making a case for the Government’s objective of financial inclusion, the study says, in PDS, for instance, the Aadhaar-enabled system will not only reduce leakages by better matching supply with demand, but if the poor are able to access mobile-phone based payment systems, “this would be a revolution in financial inclusion.”

The analysis suggested that later numerous other schemes and programmes that involve some kind of transfer from the Government to a citizen or resident could benefit.

It quoted a report by the Consultative Group for Assisting the Poor that estimated that in 2008-2009, the 22 welfare schemes paid out a total of about Rs 3,25,000 crore in subsidies.

The full study is available at the Planning Commission Web site, an official release said.

aditi.n@thehindu.co.in

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