How Aadhaar plugs leakages in PDS and LPG subsidy transfer

While Aadhaar-linked transfers for LPG started in November 2014 when it was relaunched, PDS transfers are expected to start soon

New Delhi: The Supreme Court on Tuesday allowed the government to use Aadhaar data for direct benefit transfer (DBT) of liquefied petroleum gas (LPG) and public distribution system (PDS), including foodgrain and kerosene. The three-judge bench comprising justices J. Chelameswar, S.A. Bobde and C. Nagappan found merit in the use of Aadhaar-linked benefit transfers for LPG and PDS as it stops leakages, but said it cannot be made mandatory for other social schemes.

While Aadhaar-linked transfers for LPG started in November 2014 when it was relaunched, PDS transfers are expected to start soon. “We are looking at how to go about PDS transfers and it will take us a few days to decide on it,” said D.K. Mittal, mission director, DBT.

Right now, subsidy under PDS is provided through subsidized rates at government shops for a stipulated amount of foodgrain and kerosene.

Here’s how the technology at the backend of the DBT system works using the Aadhaar data to make it leakage-free.

The National Payments Corp. of India (NPCI), a clearing house, has developed a platform called Aadhaar Payments Bridge (APB) system. “The platform uses an Aadhaar number as the financial address,” said A.P. Hota, chief executive officer and managing director, NPCI. The government provides an input file which carries three inter-linked data points—Aadhaar number, government scheme code and amount—of all the beneficiaries.

NPCI, through a mapper it has developed, has connected all 12-digit Aadhaar numbers with six-digit bank identifiers, or the recipient bank with which the Aadhaar-linked bank account resides. Once the input file is received, NPCI debits the total DBT amount from the bank account of the government. The mapper then sorts the recipient banks to which the various Aadhaar numbers are linked with and disburses the amount accordingly.

At the bank level, each bank’s mapper after receiving the money segregates the amount to be paid to each Aadhaar number holder, and credits the amount to the bank account linked to it.

“Since the benefit is linked to Aadhaar number, no one person can get multiple benefits for the same scheme,” said Hota.

The system ensures that there are no duplicate payments and leakages, considered to be the biggest reason for deployment of Aadhaar-based transfers.

Right now, NPCI undertakes around 3.5 million transfers through the platform every day, out of which most are LPG transfers. Under the Pahal scheme of LPG subsidy, 139.1 million beneficiaries have received Rs.23,476.60 crore in their bank accounts since the scheme was relaunched.

The option of subsidy transfer through non-Aadhaar based channel is also available. Here the attached bank accounts get money through National Electronic Funds Transfer.

Under both the channels, the customer needs to link the LPG consumer number to the bank account. “The government did a comparison test and the APB system was found to be more suitable and after much deliberation, it was decided to embrace it,” said Hota.

As per a report in The Financial Express in April, 30 million bogus LPG connections were detected and weeded out through the DBT scheme.

He added that the government has directionally decided to channelize all PDS and LPG transfers through the Aadhaar-linked channel.

The LPG transfers are done from the Centre but the PDS subsidy transfer roll-out will be through state governments as ration cards are issued by states.