Aadhaar-Based Payment System in MGNREGA

The Aadhaar-Based Payment System (ABPS) for wage disbursement under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has garnered attention. A recent study published in the Indian Journal of Labour Economics examined the effectiveness of ABPS compared to traditional bank account methods. The study analysed over 3.14 crore transactions during the 2021-22 period across ten states. The findings reveal that the differences in timely payments and payment rejections between ABPS and traditional methods are statistically in.

Overview of the Study

The research was conducted by a team from Lib Tech India, focusing on wage payment delays. It involved transactions worth ₹4,602 crore. The study aimed to assess the efficiency and transparency of the ABPS after the Union government made it mandatory from January 1, 2024.

Key Findings

• The study indicated that 39% of ABPS payments were processed within seven days, slightly higher than the 36% for traditional accounts.
• Payment rejection rates were also similar, with 2.1% for ABPS and 2.85% for bank accounts.
• Despite these marginal differences, the researchers noted that ABPS can create more opacity for workers, complicating the resolution of payment issues.

Challenges with ABPS

Many workers reported issues with misdirected wage payments due to discrepancies between their job cards and Aadhaar details. The study brought into light that problems with account-based payments could be resolved locally, while ABPS issues are centralised and more difficult to address.

Process of Aadhaar-Based Payments

The payment process under ABPS involves three critical steps. First, a worker’s Aadhaar number must be linked to their job card. Second, the Aadhaar must be connected to their bank account. Finally, the bank must correctly link the Aadhaar number through the National Payments Corporation of India. This process contrasts with simpler bank transfers using only the worker’s name and account details.

Historical Context of ABPS

The ABPS was initially introduced as an optional payment method in 2016. After several extensions, it became mandatory in 2024. The government’s rationale was to enhance efficiency and transparency in wage disbursement. However, the study suggests that the underlying issues of payment delays stem from inadequate funding rather than the technological framework itself.

Implications for MGNREGA

The findings raise concerns about the effectiveness of ABPS in addressing wage payment delays. They suggest that while technology plays a role, systemic issues need attention. The focus should be on ensuring adequate funding and improving the overall payment infrastructure.

Questions for UPSC:

1. Critically analyse the impact of technology on wage disbursement processes in rural employment schemes.
2. What are the advantages and disadvantages of using biometric identification systems in government welfare programs?
3. Estimate the effectiveness of the Mahatma Gandhi National Rural Employment Guarantee Act in improving rural livelihoods.
4. Point out the challenges faced by workers in government employment schemes due to discrepancies in digital identification systems.

Answer Hints:

1. Critically analyse the impact of technology on wage disbursement processes in rural employment schemes.

1. Technology aims to enhance efficiency and transparency in wage disbursement.
2. ABPS has shown marginal improvements in payment processing times compared to traditional methods.
3. However, centralization of issues in ABPS complicates resolution for workers.
4. Underlying problems such as inadequate funding persist regardless of technology used.
5. Local resolution of issues is more feasible with traditional bank account payments.

2. What are the advantages and disadvantages of using biometric identification systems in government welfare programs?

1. Advantages include improved accuracy in identifying beneficiaries and reducing fraud.
2. Biometric systems can streamline processes, potentially speeding up payments.
3. Disadvantages include technical issues leading to misdirected payments or rejected claims.
4. Privacy concerns arise regarding the collection and storage of biometric data.
5. Discrepancies in identification can disenfranchise workers if details are mismatched.

3. Estimate the effectiveness of the Mahatma Gandhi National Rural Employment Guarantee Act in improving rural livelihoods.

1. MGNREGA aims to provide guaranteed wage employment, enhancing income security for rural households.
2. It has contributed to rural infrastructure development and improved living conditions.
3. However, challenges like delayed payments hinder its effectiveness.
4. Studies indicate that while it provides a safety net, it does not fully address poverty alleviation.
5. Overall, MGNREGA has had a positive impact but requires systemic improvements for greater effectiveness.

4. Point out the challenges faced by workers in government employment schemes due to discrepancies in digital identification systems.

1. Workers often face misdirected payments due to mismatches between Aadhaar and job card details.
2. Centralized resolution processes for ABPS issues can lead to prolonged delays in payment.
3. Workers may be excluded from benefits if their details are incorrectly linked or deleted.
4. Complexity of linking Aadhaar with job cards and bank accounts can be a barrier for many.
5. Overall, these discrepancies undermine the reliability and accessibility of government welfare programs.