Using Aadhar to put an end to the oil sector scam

Those concerned with the well known corrupt PDS have been expecting a technically sound and eminently practical solution from a leading technocrat.

Since its publication there has not been much discussion despite the critical need to reform PDS which is a big drain on the budget. The interim report deals only with LPG and fertiliser. It seems kerosene distribution will be taken up later. However, for the poor, LPG is less important. Also the black money generated by diverting subsidised kerosene (about Rs 28,000 crore per year) is larger than by diverting residential LPG (about Rs 24,000 crore per year).

Even more surprising is the absence of oil sector scam from the long list of scams getting national attention today. The PDS scam, involving an even larger amount of money, has failed to get the attention it deserves. Diversion of PDS kerosene and residential LPG is generating about Rs 52,000 crore on an annual basis. This should make it the mother of all scams in India. When other lesser scams are associated with some well known political leaders, the oil sector scam involves thousands of politicians, bureaucrats and petty businessmen at all levels. There is no single political leader or one political party who can be blamed for the oil sector scam.

Since the oil sector scam has been going on for a long time, we as a nation might have become immune to it. While exposing mafia operations in PDS kerosene, IOC officer S Manjunath in 2005 and district collector Y Sonawane in 2011 were brutally murdered.

Both events became cause celebre for only a few months. Later they disappeared from the national scene. To the Indian media, oil scams are not sensational any more. It is because of these reasons that the oil scam might not have come to the national agenda.

Hopefully the situation is different today. Thanks to the protest led by Anna Hazare against corruption there may be some hope that we may succeed in putting the oil sector scam on the national agenda.

In recent days, there have been three major developments to give birth to such a movement. A Supreme Court-instituted committee chaired by a former Supreme Court judge, Justice D P Wadhwa, has been publishing damning reports on the rampant corruption in PDS since 2009. According to Justice Wadhwa, “PDS is synonymous with corruption whose cancerous growth should be chopped off’.” The second development is the publication of the interim report by Nandan Nilekani to use Aadhaar to improve the efficiency of PDS. The third development is a report of July, 2011 by the Karnataka Lokayukta on the dismal state of PDS in the state. According to this report, Karnataka alone loses Rs 1,720 crores per year because of the diversion of subsidised PDS food items.

Wadhwa report

The Wadhwa report has suggested a computer-based information system as well as the use of biometric smart cards to reduce leakages. The committee was, in fact, recommending an Aadhaar type programme even before Nilekani was entrusted with that task.

While the Wadhwa report has brought out the most inherent problems of the current PDS, all its recommendations, with the exception of the use of a smart card system, do not deal with the basic problem. It has to do with an economic system which is bound to be corrupt when the same commodity is sold at two different prices. To quote late Dhirubhai Ambani, “I do not believe in not making use of opportunities”. There are thousands of Dhirubhai-type mini entrepreneurs in India who have been making use of such opportunities created by the multiple price system.

It is for this reason several countries have adapted food stamps or direct cash payment to assist the needy. When such a system is backed by a modern information technology using biometric smart cards, it is possible to reduce PDS-connected corruption to the minimum level. However, to implement such a system, we need political will.

Both the Wadhwa committee and the Karnataka Lokayukta reports have brought out the facts that there are far more ration cards issued than the number of families. For example, in Karnataka, there are 12 million households and the state has issued 15.9 million ration cards. These practices can be easily stopped by using Aadhaar.

The government has floated the idea of giving subsidy in the form of cash instead of goods. If implemented, such a revolutionary concept will reduce corruption considerably.

The Aadhaar programme will be a great tool to avoid any duplication which will otherwise happen. Cash transfer will eliminate the need to have dual pricing system. This will result in stopping any diversion of subsidised products.

For Aadhaar to succeed in reducing corruption in oil sector while distributing PDS kerosene and residential LPG, we need the following. First, there should be one price for any commodity be distributed under PDS. Multiple pricing is a sure recipe for corruption.

Second, beneficiaries should be given the choice of buying from any shops. For this they should be given subsidy in the form of cash.

This implies the closing down of fair price shops. Third, a simple computer based management information system to monitor the subsidy transfers to beneficiaries using Aadhaar program should be developed. Such an integrated approach will reduce corruption enormously. However for adaption of such a system we need some one like Anna Hazare to lead the movement to force the political system.