Have you been receiving SMS’s saying:
Dear XXXgas Consumer, to avail LPG Subsidy in your bank account, kindly submit your Aadhaar to your Distributor and to your Bank immediately
These SMS’s are being sent by Hindustan Petroleum Corporation Ltd (HPCL), India Oil Corproation (IOC) and Bharat Petroleum Corporation Ltd (BPCL) to its consumers, in violation of the Supreme Court’s interim order that no one can insist on Aadhaar for any government schemes like ration card, bank account, cash transfer or issue of LPG subsidies.
This has been confirmed today by Oil Minister M Veerappa Moily. The unique identification card will no longer be mandatory for giving subsidies unless Supreme Court gives a clearance.
What ‘cash transfer’ essentially means is that instead of paying less at the point of purchase, the higher price must be paid, and the difference will be paid into your bank account.
The neoliberal theology against subsidies is that “Subsidies Create Market Distortions”. The unquestioned assumption we are supposed to accept here is that the market is a natural phenomenon, like rain or snowfall, and that any state intervention will distort its finely tuned natural functioning. (And we all know how strongly capitalism and economics stands for preserving “other” natural entities like forests and rivers and mineral resources!)
A market distortion is supposed to happen when a market reaches a price for an item that is substantially different from the price that would result while operating under conditions of “perfect competition”, that is, a situation in which all participants have complete information, there are no entry or exit barriers to the market and all market participants are independent rational actors.
The fact of course is that perfect competition does not exist in the real world, because none of these conditions is normally met in any human institution. The “rational economic actor” exists only in neoclassical text-books, and the operation of power through unequal access to resources ensures that there is neither complete information nor a barrier-free market entry. Capitalism in fact requires continuous intervention by the state in the market in order to ensure the best outcome for corporate profit.
This is how Investopedia describes market distortion through subsidies:
For example, many governments subsidize farming activities, which makes farming economically feasible for many farmers. The subsidies paid to farmers create artificially high supply levels, which will eventually lead to price declines if the goods are not subsequently purchased by the government or sold to another nation. Although this type of intervention is not economically efficient, it does help ensure that a nation will have enough food to eat.
Here’s a thought – how about re-defining “economic efficiency” – not as something opposed to people having enough to eat, but as those practices that result in everyone in a society having enough to eat?
The short argument against cash transfers instead of subsidies is that this is part of a World Bank-led global strategy to bring all the earnings of those in the informal economy into the formal economy. This essentially enables the hard-earned money of the poor to become available to unscrupulous players in capital markets (via banks) for speculation.
And that’s the purpose of Aadhar and cash transfers, not all the pious claims being made by Infosys and government.
Of course, at the moment, cash transfers on cooking gas appears to be linked to Aadhar, and so long as mandatory Aadhar is held up by the Supreme Court, gas agencies must provide gas at the subsidized price. But clearly, a separate critique of cash transfer as a policy is also crucial. For some arguments against cash transfers, especially by the Right to Food Campaign, see these earlier articles on Kafila: