Smartcards safeguard NREGS funds

Amit Mitra Hyderabad | Updated on March 25, 2014

Study in AP shows smartcards bring down funds leakage, transfer time

Introduction of biometric smartcards to transfer NREGS and pension payments in Andhra Pradesh has resulted in a 40 per cent reduction in leakage of government funds, according to an independent study.

The study, funded by Omidyar Network set up by eBay founder Pierre Omidyar, also showed that the time saved in payments more than covered the administrative costs involved in the operation of the smart card system.

Speedy disbursal

While the earlier time taken to collect the payment by a NREGS worker was an average of 120 minutes from the nearest post office, the new system reduced the time to 90 minutes, which included waiting in queue and authentication of the smartcards.

The study was executed by Abdul Latif Jameel Poverty Action Lab (J-PAL), a research centre at the Massachusetts Institute of Technology. It was done over a period of two years, covering eight districts in the State and 16,000 households across 886 villages.

The study showed that while the administrative cost for the implementation of the smartcard scheme in these districts was $4.25 million a year, the time saved resulted in savings worth $4.44 million a year, with the total disbursements of government funds for the scheme being $350 million in the two years.

“This shows that the time saved in making the payment can cover the entire cost of implementing the smartcard scheme,” Karthik Muralidharan, a lead researcher with J-PAL and Assistant Professor at the University of California, San Diego, said.

Funds leakage

Before the introduction of the new payment system, there was a leakage of government funds to the extent of 30 per cent. With the gram panchayat being the actual distributor of the money to the NREGS workers, leakage was rampant at this level, according to the study.

“The leakage was in three forms – ghost workers (workers who did not exist but the grama panchayat drew funds for the work they were supposed to have done), over-reporting of number of working days and underpayment to the actual workers,” Karthik said.

After the introduction of smartcard payment system, wherein the beneficiary had to personally swipe his card and get the payment, the leakage was seen to come down to 18.5 per cent.

“And this leakage comes from the 50 per cent that is yet to be converted to the new system,” Muralidharan said.

The conversion from the traditional payment to the smartcard system has only been about 50 per cent in these districts in the last two years.

Published on March 25, 2014

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