One reason India’s ambitious fertiliser subsidy reforms stumbled – Aadhaar authentication failures

To plug leakages in India’s annual outlay of Rs 70,000 crore on fertiliser subsidies, the government embarked on ambitious reforms in 2016. The reforms rested on the use of three databases – land ownership records, soil health cards and Aadhaar, the biometrics-based 12 digit identity number. The first two databases did not work, as previous stories in this series have reported. In the final part of the series, a look at how the linkage to Aadhaar is faring and what the future of India’s fertiliser reforms could be.

By February 2017, all fertiliser dealers in Nashik district in Maharashtra had received the new machines on which the Indian government’s fertiliser subsidy reforms rested.

The point of sale machines, which came equipped with fingerprint scanners, had been first distributed in two districts of Andhra Pradesh in June 2016. The idea was that fertiliser retailers would use them to scan the fingerprints of customers, verifying their identity using the Aadhaar database that contained the biometric information of India’s 116 crore residents. The machines would also confirm that the customers were legitimate farmers by checking the database of land ownership records which had been linked to Aadhaar. In addition, they would check the farmers’ soil health cards to assess the nutrient status of the soil of their farmers, based on which the retailers would sell subsidised fertilisers to farmers.

But two of the three databases – land records and soil health cards – did not work in Andhra Pradesh, as explained in the second and third part of this series.

By the time the machines reached Nashik, one of the 17 districts across the country which were added to the experiment, the reform had been whittled down to simply the use of Aadhaar.

Even this proved troublesome. Fertiliser sales hit the same well-reported roadblocks that other Aadhaar-linked schemes have faced.

The problems with Aadhaar

A basic problem is poor connectivity. Maharashtra is one of the more developed states in India, and among its districts, Nashik is well connected by road and has denser mobile networks. Despite that, 250 out of 1,400 of all fertiliser retailers – or 17% of them – were located in areas with such poor connectivity that their biometric machines were unable to connect to the servers to authenticate fingerprints, said Hemant Kale, district agricultural officer. The district administration has now given these retailers wireless internet-enabled dongles free of charge so that they are able to continue business unencumbered.

But even when the network is strong, fertiliser dealers report high levels of biometric authentication failures. “Of 100 bills I might process daily, 60% of them don’t match,” said Sumeet Sangpal, proprietor of Akshay Agro, a fertiliser retailer and wholesaler in Pimpalgaon, a relatively prosperous market town in Nashik. “The farmers don’t update their fingerprints, they come directly from their farms with muddy hands.”

A study by MicroSave, a consultancy firm engaged by the central government think-tank NITI Aayog, looked at the pilot projects in six districts and found the biometric authentication failure ranged between 10%-20%.

The authentication delays and failures become a bigger concern as farmers buy the bulk of their fertilisers during a small window period that lasts 50 days each during the start of both the monsoon and winter sowing seasons. In some districts, the MicroSave study found, there were as many as 500 farmers visiting a retailer at any given time during the peak sale period. The delays led to farmer unrest. One retailer in Pali in Rajasthan even reported having to sell fertilisers from inside police stations due to high incidents of violence.

In Velagaluru village of Krishna district in Andhra Pradesh, Ravi Prasad, a fertiliser retailer, said he skipped the use of the point of sale machine and resorted to manual sales during the peak season to manage the crowds.

But it is not just biometric authentication that is causing delays. In the new system, fertiliser retailers need to use the machines to record not just their sales but also the stock they have in their warehouses. In fact, the machine permits sales only of those fertilisers that show up in the retailer’s account in the central database. In July, Satish Khande of MK Agencies, one of the oldest agricultural shops in Pimpalgaon, complained that his sales had been delayed by 10 days because of a technical glitch – he had informed the district officials of the stocks he had received from the wholesaler, but this information had not been updated in their database.

Fixing the problems

On its part, the government is trying to ease the connectivity problems. The Centre announced during the 2017 monsoon session that it would provide all point of sale machines with either supplementary connectivity options, or buy new machines that already had these options built in. But the supply of the machines has been delayed.

For biometric authentication failures, fertiliser dealers have already improvised a solution. When the fingerprints of the farmers do not match, said Sangpal: “Instead of losing a sale, I simply put my own fingerprint instead.” So does Prasad, the retailer in Velagaluru village – he uses his own biometrics to feed in details of the manual sales he makes.

The system allows for alternative fingerprints because not all farmers own the land they cultivate. Since Aadhaar is linked to land records, tenant farmers would not be able to buy fertilisers if the system did not have such a provision.

But the downside is obvious – fertiliser sales can now be made against any Aadhaar number and no one can track whether the buyer is a farmer. In Krishna district, many farmers have engaged autorickshaw drivers to buy fertilisers for them.

The impact on pilferage

It will be hard to conclusively determine the success of Aadhaar-enabled fertiliser delivery until the government regularly releases reports on how the pilot projects in 19 districts across the country are faring.

Said a researcher who worked with the central government on the scheme: “Some leakage at the individual beneficiary level happens in most of the subsidy schemes including the public distribution system.”

The only way to plug the leakages, said the researcher, was by linking the subsidy to land records and soil health cards, and ensuring no subsidy was given beyond the recommended quantity of fertilisers based on the two databases. “That would require a lot of work by the government,” he said.

Still, there could be some positive effects of the reforms, even without the linkage to land records and soil health cards. The MicroSave report found 299 retailers in the six districts that it studied did not register with the mobile fertiliser management system, which was introduced by the previous government in 2012 to track sales from wholesalers to retailers. Neither did they renew their licences to sell fertilisers. The study suggested these retailers may have opted out of the system because they were faking sales to farmers to siphon off the fertilisers to others, and feared their fraud would get exposed once the Aadhaar-enabled system came into place.

In Krishna district, the authorities claim fertiliser consumption in the district has come down by 7% over the course of the last year, even as the area under cultivation has increased by 3%. But it cannot be ascertained at this stage whether the reduction was because of check on pilferage or monsoon conditions, demonetisation and other external factors.

From pilots to nationwide roll out

So far, the government has tested the fertiliser scheme in 19 districts, dealing with 11,353 retailers. Scaling up the scheme to the rest of the country would mean training and equipping 1,75,619 retailers to make Aadhaar-enabled transactions. According to a government report on the software developed for the point of sale machines, there could be as many as 999 different kind of errors that retailers would need to comprehend. Kale, the district agricultural officer in Nashik, said training retailers takes a minimum time of three months.

Earlier, the government had said it would launch the reforms in the rest of the country by January 2018. But recent media reports, which remain unconfirmed, say the government has decided to extend the scheme to seven states from October 1, based on the “good feedback” they have received from the pilot projects.

However, the MicroSave study warned that a formal grievance redressal mechanism was needed before the scheme was scaled up nationally. This mechanism, it recommended, should include a detailed process of registering complaints and resolving them within stipulated time. There are no reports in the public domain about the government putting in place such grievance redressal methods even in the 19 pilot districts. Scroll.in’s reportage from two districts – Krishna in Andhra Pradesh and Nashik in Maharashtra – showed that farmers remained dependent on retailers to improvise a solution for authentication problems.

The MicroSave study also recommended that the launch of the scheme needs to be preceded by public outreach among farmers. “Assessment of the six pilot districts revealed that a majority of the farmers received the information about Aadhaar authentication requirements for purchasing fertiliser only after arriving at the retailer outlet,” it said. “This leads either to the retailer refusing to sell them fertiliser or to transactions being short-circuited.” In the absence of effective communication, poor farmers were vulnerable to be cheated by retailers, it said.

The study concluded, “The need to devise and test solutions for these challenges in the subsidy distribution system before it is scaled-up is essential.”

By all measures, whether ground realities or government preparedness, India looks far from ready for an effective translation of the fertiliser subsidy reforms planned in New Delhi to farming villages across the country.