By Anand Venkatanarayanan

This is Part 3 of a series of analysis by Anand Venkatanarayanan related to claims made about Aadhaar. Read Part 1 and Part 2, which were written in response to statements made by former UIDAI head Nandan Nilekani.

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The Government of India has argued in the Supreme Court and in Parliament that its primary purpose in promoting Aadhaar is to improve the efficiency of social schemes, and that the use of Aadhaar has generated huge savings since 2014.

The UIDAI (in a statement), its CEO Dr ABP Pandey (in a column) and the Attorney General of India (in the Supreme Court) have claimed that use of Aadhaar since 2014 has generated huge savings. This claim has even been repeated frequently by Nandan Nilekani (here, here and here). Of this figure, ₹26,408 crore (over half) is attributed (Rajya Sabha Starred Question 384, dated 07.04.17) to savings from the PAHAL (Pratyaksh Hanstantrit Labh) scheme.

Understanding the PAHAL Scheme

Most of the LPG cylinders sold to households by the Oil Marketing companies (OMCs), like BPCL, IOCL and HPCL, has an inherent subsidy component built into it.

Every household is currently entitled to purchase up to 12 subsidised LPG cylinders a year, which are sold at a price fixed by the government. Under the PAHAL scheme (also known as the Direct Benefit Transfer or DBT), this subsidy is no longer included in the price of a cylinder, but is instead provided to the consumer by bank transfer, with the consumer then paying the full cylinder price.

Initially every LPG connection was required to seed the bank account number of the connection holder to enable direct transfer of the subsidy. It was then determined that the best way to identify multiple connections with the same holder is to link the UID of the holder to the LPG connection.

Since UID is almost always unique for an individual, it was assumed that the linking will eliminate multiple connections and will reduce demand for subsidised cylinders which in turn will result in the subsidy outflow. This reduction in subsidy outflow is referred to as savings from UID on the LPG scheme.

Understanding the impact of the UID on the PAHAL scheme

An audit of the savings claim for the entire PAHAL scheme done by CAG for the period April — December 2015, points out that most of the savings (92%) is because of the fall in LPG price in the international market, and only 8% (₹1764 Crore) can be attributed to various initiatives (UID being just one among them) that reduced demand for subsidised cylinders. An IISD study however estimated the savings generated only by using UID is even lower (₹120 Crore) during this period.

It is possible to understand the impact of the UID on the PAHAL scheme, and compute an updated savings figure, by using publicly available data from the Government of India.

1. How much savings does Government of India claim Aadhaar has enabled in LPG subsidy?

Since 2015, the Government Of India has produced several different claims for the amount saved through the use of Aadhaar in PAHAL. The most recent (RS Starred Question 384, on 07.04.17) ₹26,408 crore savings claim is composed of three separate figures:


2. How is the above figure calculated?

Government Of India has provided supporting calculations for ₹14672 Crores and ₹6912 Crores, but has not provided any for the FY 2017 figure of ₹4284 Crores.

The calculations for FY 2014-15 and FY 2015-16 are provided below:

Hence the formula adopted for calculating savings is as follows:

Savings = Blocked connections x Duration x Subsidised Cylinders x Subsidy per Cylinder

3. Why the above figure is inaccurate

Every single one of the data points used in the above calculation is inaccurate as explained below:

Blocked Connections

All inactive connections have been inaccurately classified as having been active connections illegally drawing subsidised LPG prior to the launch of PAHAL, when Government Of India's own figures show that 1.02 Crore (in 2012) had been inactive for years and the majority of the remainder were inactive for reasons unconnected to PAHAL or Aadhaar. This is also reiterated by CAG report(on page 46)

Hence the government's estimate of connections blocked because of UID is much lower than they have claimed, since they attributed inactive connections and blocked connections through other means from 2012 as blocked by UID.

Duration

The calculations then assume that this incorrect figure for blocked connections applied to the whole year, when in FY