The introduction of Aadhar as a tool to transfer funds directly to the beneficiaries is a land mark step by the Government of India. The Planning Commission along with the Unique Identification Authority of India is planning to provide unique identification number (called Aadhar) all the residents of India which is linked to their demographic and biometric information which can not be duplicated. This help to give a platform that serves as an basic identification infrastructure for delivery of services to the poor. It address some of the major bottleneck of government schemes like payment of wages and ghost beneficiaries, duplicity of job cards etc. The added features of Aadhar like Know Your Customer (KYC), will help people no requirement for extra documents. It also eliminate the possibility of any ghost beneficiary due the features like eye ball scanning and both hand impression which cannot be duplicated. This study  also suggest that by using Aadhar, all the benefits given by the various schemes of state and central government will go directly to the target households who can then purchase their food items from any stores.

Key Words: Aadhar, MGNREGA, UID, KYC, employ guarantee etc.


The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was launched in February 2006 with a view of guarantee participatory and equitable growth of every section of the society. This possibly the largest social security program in the world. The MGNREGA has been stared with an objective of:

  1. i) Social protection for the most vulnerable people living in rural India through providing employment opportunities
  2. ii) Livelihood security for the poor through creation of durable assets, improved water security, soil conservation and higher land productivity

iii)    drought-proofing and flood management in rural India

  1. iv) Empowerment of the socially disadvantaged, especially women, Scheduled Castes (SCs) and Schedules Tribes (STs), through the processes of a rights-based legislation
  2. v) Strengthening decentralised, participatory planning through convergence of various anti-poverty and livelihoods initiatives
  3. vi) Deepening democracy at the grass-roots by strengthening Panchayati Raj Institutions

vii) Effecting greater transparency and accountability in governance

The National Rural Employment Guarantee Act. 2005 NREGA is a landmark in the history of social security legislation in India and promise to be a major tool in the struggle to secure the right to food. The Act provides enhancement livelihood security, giving at to least 100 days of guaranteed wage employment in every financial year to every household whose adult members volunteer to do unskilled manual work Panchayat at districts intermediate and village levels become the principal authorities for planning and implementation of the act. Continuous public vigilance in the implementation of the project laws and policies it is essential that the potential beneficiaries and other stake holders of the scheme are involved at every stage from planning to the to access their entitlements and assert their right under NREGA. Aadhar is potentially useful for reducing leakages in a large number of government programmes. In this analysis, we estimate the gains for some government programmes that can benefit through integration with Aadhar. We are looking at mnregs because of the existence of research literature and better data availability. An estimation of leakages helps us understand the reduction of costs that will come about through the use of Aadhar.

Literature Review

The mgnregs programe is envisaged to provide 100 days of employment to all rural households. The cost of wages under the scheme constitutes about 70 percent of the total scheme expenditure. In 2011-12, the wage expenditure bill of the government was to the tune of Rs. 24,864 crore (GOI, 2011). In order to ensure that this money reaches the intended beneciaries, the mnregs guidelines stipulate various transparency and accountability measures in the form of issuance of job cards, maintenance of muster rolls, monitoring and implementation systems and regular social audits. Despite these measures, studies indicate that implementation problems have been encountered in various states. A key problem with the implementation of mnregs is diversion of funds, through ghost beneciaries and fake work records. Based on data collected from 8 states,4 Chauhan et al. (2009) found a great deal of fraud such as making of fake job cards and improper maintenance of muster rolls. The report however does not quantify the leakages caused on account of these problems. A series of state-level social audits have made attempts to record these anomalies. An audit conducted by the Centre for Planning, Monitoring and Evaluation in 19 districts of Orissa during 2007-2008 (CPME, August 2008) found that muster rolls reacted 8.6 percent ghost beneficiaries, 23.1 percent ghost person days and only 61 percent of the claimed wage payments had actually been received by workers. Arguably, Orissa reflects the extreme end of the spectrum and other states like Andhra Pradesh, Tamil Nadu, and Rajasthan have been much more elective in taking measures to check corruption under mnregs (Dr_eze et al., 2008). While state-wise variations in the implementation of the scheme are inevitable, problems similar to those found in Orissa have also been identified in other social audits albeit with varying intensity. Uttar Pradesh (Dhuru, 2007), Jharkhand (CDE, 2007) and Chattisgarh (CDE, 2007) are some states for which similar audit reports are available.

The Process



The state government along with the Planning Commission and the Unique Identification Authority of India (UIDAI) and banks and post offices all are responsible for the effective payment system of MGNREGS through the Aadhar linked payment system. There must be proper coordination and cooperation among all these four players for timely and proper payment. So, keeping this in view we propose a Golden Quadrangle Model of payment system through Aadhar. All these parties must have a proper communication system for smooth flow of information. The center must understand the practical situation that exist and the state must have willingness to deliver the effective service, this is most critical when the center and state have different ruling parties. There also need for proper understanding between the UADAI personnel and the banking system. It is a synergetic relation the efficient delivery can happen only when all the parties give their best possible effort.



                   UADAI                               BANKS




CENTER                   STATE


This is possible when all are linked through a common database and a proper channel of communication network with proper prier planning and implementation.

SWOT Analysis of Payment in Mahatma Gandhi National Rural Employment Guarantee Scheme through AADHAR and Individual Bank Account:

Strength Weakness Opportunity Threat
No duplicity Lack of coverage till date Huge population remains to be covered Will be take too long time to cover all
Proper Identification Time consuming Shown positive response till date Lack of manpower to cover all
No corruption Lack of cooperation Government willingness Lack of awareness among people
No delay in pay Operational difficulties Chances of becoming mandatory May be stopped in between if government changes


It has been found that approximately 12 percent is being caused to the government on account of ghost workers and manipulated muster roll also we assume that 5 percent of the leakages can be plugged through wage disbursement using Aadhar-enabled bank accounts and 7 percent through automation of muster rolls. In addition to the benefits estimated above, integration of Aadhar with mnregs can lead to several other advantages that cannot be monetized. It is found that use of Aadhar can be combined with wireless networks to register work NIPFP applications online. This will make actual work demand visible on the network for those monitoring the programme. The sanctioning of materials for carrying out work under mnregs can also be linked to the Aadhar system. Real time data on the number of laborers engaged in the project through Aadhar authentication will allow supervisors to keep track of the materials required and therefore check pilferage. Aadhar-based authentication can also be used in conjunction with the bank correspondent model to ensure more efficient access to their funds by mnregs beneficiaries and make proper payment system. We also propose that if there will be proper coordination and communication between all the parties it will make the system more effective.



Aiyar, Yamini and Samji, Salimah (2009) Transparency and Accountability in NREGA – A Case Study of Andhra Pradesh, Working Paper 1, New Delhi: Accountability Initiative Bhaduri, Amit (2005) Development with Dignity, New Delhi: National Book Trust

CEC (2009) Delivering NREGS – Challenges and Opportunities, Hyderabad: Centre for Environment Concerns

CSE (2008) NREGA – Opportunities and Challenges, Policy Paper, New Delhi: Centre for Science and Environment

Dhavse, Rasika (2004) “Entitling 40 million rural workers”, available at http://www.indiatogether.org /2004/sep/pov-nrega.htm

Dreze, Jean (2004) “Employment as a social responsibility” in The Hindu, November 22, available at ttp://www.hindu.com/2004/11/22/stories/2004112205071000.htm


[1] Sri. Rajesh Kumar Sain, Associate Professor, Dept. of Management Ravenshaw University, Cuttack

[2] Mr.Jaya Prakash Rath, Sr.Lecturer Dept. of Management Ravenshaw University, Cuttack