The Government’s decision to transfer certain subsidies directly to the poor, if implemented correctly, would result in

benefit directly transferred to citizens below the poverty line;

no subsidy for citizens who do not need it and can afford to buy goods and services at market price;

plugging leakages in indirect subsidy transfer;

benefit for minority shareholders of public sector enterprises, who unnecessarily suffer losses due to the subsidy burden borne by those enterprises (corporate governance and equality issue).

In countries such as Jamaica, Philippines, Turkey, Chile and Mexico, conditional direct subsidy transfer has been achieved after laying down clear conditions. India is not a small country and the Government has not been able to contain foodgrain wastage (10,688 lakh tonnes of foodgrains were found spoilt in FCI depots, enough to feed over six lakh people for over 10 years). Also, only 20 per cent of the population has been registered for Aadhar, which could be the starting point for such a large project.

In a country of 120 billion people, it won’t be simple to change the subsidy system and it certainly cannot be achieved overnight. A long-term plan is needed to achieve it in phases.

For direct subsidy transfer, the beneficiary should have a bank account. The wireless telecom network and Aadhar can play a significant role in achieving this.

Wireless telecom operators have achieved more than 70 per cent teledensity;

India has only approximately 1.2 lakh bank branches and, at the same time, telcos have a much larger dealer- and retailer footprint;

Wireless telecom operators have already completed KYC (know your customer) norms. By linking KYC and Aadhar, a bank account can be opened for each individual without need for physical branches;

The beneficiaries could collect cash from the designated retailer.

Taking your bank wherever you go

Will 2013 be the beginning of the end of the current banking system?

There is a strong business case for mobile banking in India.

Around 60 per cent of the population is financially excluded;

There are only around 1.2 lakh bank branches in a vast country with 6 lakh villages;

Transaction costs are huge at bank branches compared to mobile banking;

Mobile banking cuts transaction time to mere seconds.

Despite all these benefits, adoption of mobile banking is limited mainly to urban areas, which already have numerous bank branches. In urban areas the success of mobile banking is phenomenal in terms of number of users registered, as also transaction value per month. The main reason for this success is the proliferation of smart phones and smart apps launched by banks, which help cut transaction time. However, real success depends on the spread of mobile banking to tier-2 cities and rural areas, where more than 60 per cent of the population lives.

Making March auction successful

The 1,800 MHz spectrum auction held in November 2012 failed miserably in many ways, while the 800 MHz auction did not even see the light of day. Now the Government plans to conduct a second round of auction in March 2013 for the unsold spectrum (43 blocks) in an attempt to find new bidders and meet revenue targets.

The move to reduce reserve price by 30 per cent in four major circles — Delhi, Mumbai, Karnataka and Rajasthan — may not pay off as these are saturated zones and the reserve price is too high even after the reduction. Some slots may perhaps be taken by incumbents in need of additional spectrum to decongest their networks.

To make the March auction successful, the Government first needs to understand the ground realities faced by operators, who are debt-laden and face several regulatory issues and litigations. The Government should come up with positive policy initiatives to help the nation achieve the much-needed shift towards a digital economy.

Related Topics