Now that the government is fine-tuning subsidies,there is a case for rolling out Aadhar urgently
The long overdue cabinet decision to cut down on diesel and LPG subsidies could potentially backfire because of administrative gridlock. According to government data,there are about 14 crore domestic cooking gas connections in India. Excluding the households with double connections,typically in the cities,the number of households where a cylinder of gas reaches through the legal channels would be about half of Indias households. The existing distribution system is already riddled with leakages but the plan to cap the number of subsidised cylinders at six annually,followed up by the Congress state governments decision to add three more,complicates the implementation. The impact is likely to be felt by consumers,and their discontent could well be a pretext for a political party to promise to dismantle the regime,with unhappy consequences for the economy.
For LPG distributors,there are two concerns. The first is the unclear impact of the caps on the parallel black market channels many of them operate by diverting subsidised gas to all sorts of manufacturing units. A capped regime means bonafide consumers will be far less tolerant of such abuse as it will be more costly for them. The second is,of course,the sheer impracticability of trying to sort through each truckload of subsidised cylinder supply,that too from two layers of government,and then to develop a ledger entry system for each customer to make this a practical venture.
The smartest way for governments at the Centre and the states to sidestep this minefield is to ring in the Aadhar national identity scheme at the earliest. Already,200 million Indians hold an Aadhar card but the jump from there to a countrywide rollout has to be made on a war footing. Instead of creating a machinery that identifies each cylinder reaching a home as subsidised by the Centre or by the states,it is far more practical to send the subsidy as a refund to the households through bank accounts. The first obstacle will be the small base of subscribers in Aadhar,but the sheer ease of transactions for those who are in it will arguably create the demand from others who are not yet enrolled to get in too. The Centre must ensure the resources to finance Aadhar to make the rollout demand driven. This too is far easier than counting cylinders. After all,smart governance is about converting an obstacle into an opportunity.