Arshad Shaikh describes how the e-RUPI Digital Payment Solution will aid India’s journey towards digital governance and enhance a leakage-free system of direct benefit transfer
On 2 August 2021, Prime Minister Narendra Modi launched the e-RUPI Digital Payment Solution via videoconferencing. The Prime Minister said that e-RUPI will “play a huge role in making DBT more effective in digital transactions in the country and will give a new dimension to digital governance”. The PM claimed that the e-RUPI will “help everyone in targeted, transparent and leakage free delivery”. So what is this e-RUPI? Is it the same as digital currency or just a payment system like Paytm or GPay? Further, what is digital governance and what are the various dimensions of DBT (direct benefit transfer)? The e-RUPI is being touted as a tool to implement leakage-free welfare schemes. How far is this claim correct? Let us start with some history and theory about the whole issue.
THE RATIONALE FOR DBT
It is reported that former PM Rajiv Gandhi had once remarked that the ordinary citizen in India received only 15 paisa of a rupee that the government tried to pass on to him/her through the various welfare schemes. It was a candid acknowledgement about how deep rooted and well-entrenched lay the system of corruption within the pyramid of governance.
DBT was introduced in India during the UPA era and designed by the Planning Commission. It is a process of directly transferring a payment into the account of the beneficiary bypassing the concerned government department, thereby reducing the chance of the funds being directed to some other beneficiary (fraud) or shared by some other entity (leakage) for whom the benefit was never intended.
For example, as Prabhat Barnwal states in his working paper (Curbing leakage in public programmes: Evidence from India’s Direct Benefit Transfer Policy for LPG subsidies) that “a relatively less studied aspect of in-kind transfer programmes, which is usually inherent in their design, is ‘dual-pricing’ that provides the key economic incentive for diversion of subsidized goods. This occurs when the state provides subsidized goods at a lower price to programme beneficiaries, while non-beneficiaries continue to face the market price for the same good. Perverse economic incentives generated by large price gaps may lead to large number of ‘ghost accounts’, which provide a conduit to divert subsidized fuel that, in turn, can be sold in black markets and consumed in commercial usage”.
The Government of India came up with a new method to block this LPG subsidy leakage by making households “pay the non-subsidized price to purchase LPG from the same retailers, and receive the subsidy amount directly in their bank account after each purchase. Commercial users continue to purchase LPG at a much higher non-subsidized price”.
e-RUPI AND DIGITAL GOVERNANCE
The e-RUPI is a digital voucher, which a beneficiary gets on his phone in the form of an SMS or QR code. It is a pre-paid voucher that a person can redeem at a centre / commercial outlet that has been authorised for offering the particular product / service. For example, if the government wants to cover a particular treatment of an employee in a specified hospital, it can issue an e-RUPI voucher for the determined amount through a partner bank. The employee will receive an SMS or a QR Code on his feature phone / smart phone. He/she can go to the specified hospital, avail of the services and pay through the e-RUPI voucher received on his phone. Thus, e-RUPI is a one-time contactless, cashless voucher-based mode of payment that helps users redeem the voucher without a card, digital payments app, or internet banking access.
The e-RUPI should not be confused with digital currency like Bitcoin nor is it the same as mobile wallets like GPay and Paytm. Instead, e-RUPI is a person specific, even purpose specific digital voucher. This digital voucher developed by the National Payments Corporation of India (NPCI) helps in the task of digital governance in two ways. One, it extends the reach of the government to a larger base of citizens, as the e-RUPI does not require the beneficiary to have a bank account, a major distinguishing feature as compared to other digital payment forms. It ensures an easy, contactless two-step redemption process that does not require sharing of personal details either.
Another advantage is that e-RUPI is operable on basic phones also, and hence it can be used by persons who do not own smart-phones or in places that lack internet connection. Secondly, it will no longer be possible to fake the identity of the beneficiary nor can the legitimate beneficiary avail of the transfer but use it to buy some other utility or service. As of now, NPCI has tied up with more than 1,600 hospitals in India where the e-RUPI can be redeemed. However, it is expected that in the future, even the private sector shall use it to deliver employee benefits and MSMEs may adopt it for Business To Business (B2B) transactions.
e-GOVERNANCE AND THE FUTURE
The first thing that one must accept is that e-governance or digital governance delivers greater value to government services which are often criticised for their inefficiency and lower productivity. The various government services can be classified into 3 categories: G2C (government to the citizens), G2G (government to government) and G2B (government to business).
The various stages that any transformation to digital governance mandates have been enlisted in the book – “Electronic Commerce; A managerial perspective” by E Turban, D. King, J. McKay, P. Marshall, J. Lee, D. Viehland.
The first stage is Information and Publishing, where the portal only disseminates information.
The second stage is when the official two-way transactions commence. Privacy and security concerns are of paramount importance here as sensitive personal information travels between the government and the citizens.
The third stage is multipurpose portals where a myriad of services from different government ministries and departments are available with a single login.
Stages 4, 5 and 6 are portal personalisation, clustering of common services and finally you have full-blown Enterprise Transformation.
Some of the challenges encountered by nations include – legal and regulatory constraints, rigid administrative procedures, uneven distribution of internet access, lack of political will, low computer literacy of citizens, security vulnerabilities and financial constraints.
One genuine concern related to e-governance is the possible misuse by the state to deny the legitimate rights of its citizens by controlling the various services that they are entitled to avail for their basic needs related to health, education and access to legal services. However, like every tool devised by new technology, e-governance is also a double-edged sword that one cannot do away with as its benefits far outweigh any possible threats.
The Islamic system of governance emphasises justice and accountability. The head of the state is like a shepherd who has to take care of his subjects just as a shepherd tends and protects his flock. Digital governance is here to stay and expand exponentially in the future with the fast-paced development in big data, artificial intelligence and machine learning. Let us hope, it will lead us to a better world where governments and those in governance are transparent, just and put the rights of the ordinary citizens above everything else.