Digital payments is the latest topic of popular discussions. Government makes huge payments every year in the form of salaries, pension, social benefits, subsidies, interest, contractual services etc. It’s quite encouraging to know that it has gone digital in a big way in disbursing these payments.
We explored the issue of digital payments by the government to the suppliers, contractors, farmers, and their employees and social benefits transfer to the households and the individuals. Mr. Dipankar Sengupta, Senior Technical Director with NIC, shares with Ankur Aggarwal how the journey of digital payments started and what constitutes the digital payments system of the Government of India. Mr. Sengupta has been active in developing the platform that enables end to end management of complex system of digital payments by the government.
Ankur: There is a lot of buzz around DBT these days. Direct transfer of LPG subsidy into the bank account of the citizen is a positive step towards maximum governance and highlights the strength of the government institutions. I would request you to throw some light on the digital payments system of the government.
Mr. Sengupta: Digital payments by the government is a big domain and the journey started with digitalization of public finances way back in 2001. The Controller General of Accounts (CGA) collaborated with NIC for the development of an application that could help CGA maintain government accounts efficiently. By 2003, a prototype of the application was ready and it was christened as COMPACT. The Department of Stationery & Printing under Ministry of Urban Development was among the first takers of the application. By 2005, the COMPACT application was ready, which was deployed in all the Pay and Accounts Offices (PAOs) of the Government of India (GoI) by 2006. The PAOs are responsible for making payments on behalf of the government. COMPACT enables the PAOs in accounting automation.
Later Government e-Payments Gateway (GePG) was developed by the Government of India which enables payment automation and helps the government do away with paper based (cheques or cash) payments. Majorly, salary to employees and contract payments to business suppliers are made through GePG. COMPACT and GePG are integrated and an e-payment can be initiated from the COMPACT at the PAOs which can be routed through the GePG.
Ankur: How the payments of subsidies are made by the government then?
Mr. Sengupta: The government makes payment to the citizens under various social schemes and for implementing each scheme there may be various implementing agencies involved. Earlier the funds were transferred to the implementing agency which was in turn responsible for making the payments to the citizens. Despite control measures in place, there used to be leakages of funds at the time of distribution. A new ecosystem was developed for monitoring the implementation of the scheme. Central Plan Scheme Monitoring System (CPSMS) was piloted for four Flagship schemes of the GoI e.g. MGNREGS, NRHM, SSA and PMGSY in 2008-09. The system was later renamed as Public Financial Management System (PFMS). PFMS portal acts as the front-end platform that registers the implementing agencies and the beneficiaries for social security benefits. There are more than 17 lac implementing agencies and 27 crore beneficiaries registered on the PFMS portal. A payment initiated from the PFMS portal is routed through the APBS for Aadhaar enabled accounts and through NEFT for the rest of the accounts.
Aadhaar Payment Bridge (ABP) is a payment gateway platform for retail payments and facilitates seamless transfer of payments to Aadhaar Enabled Bank Accounts. It has been created by National Payments Corporation of India (NPCI) which has been instrumental in designing other retail payment systems such as Unified Payments System (UPI), RuPay Debit Card, Immediate Payment Service (IMPS) amongst others. APBS was launched in 2011 and started offering funds transfer under DBT scheme for LPG subsidy from 2013 onwards. In FY 2016, 42 central schemes and 50 state schemes offered fund transfer through DBT and hence through APBS.
Ankur: I believe the Government of India (GoI) stands for the central government. If these are the initiatives of the central government then how are the state government ready for making the payments.
Mr. Sengupta: There is an administrative arrangement defined by the constitution of India and each state is a separate administrative unit. They are independent to build their own applications. There are a number of central government schemes which are supposed to be implemented by the states. Funds for implementation of these schemes are transferred directly by the central government to the bank accounts of the citizen. Also, the states are invited to use the digital payments mechanism for the implementation of state schemes.
Ankur: I think digital payment mechanism takes away discretion from the government officials which benefits the citizens. How do you respond to that?
Mr. Sengupta: There are two sides to it.
Certainly, reduction in discretion corresponds to reduction in dependence of the citizens on the public officials. This empowers the citizens in many ways. They need not visit the government offices just to know the status of their payments if it does not reach them in a stipulated period of time. A citizen may do so by using the ‘Know Your Payment’ option on the GePG or PFMS portal. The dependence could result into unusual or non-operational delay which may even result into exploitation in some cases.
But dependence on officials needs to be separated from business discretion of officials. In case of business payments, contractual terms also play a role in deciding when and how the payments would become due. The magnitude and conditions for advance, intermittent or final payments are mutually agreed upon and are determined by the level of completion of task. Using the digital payment platforms, a business enterprise cannot skip its contractual obligations which have to be met first to be eligible to receive payments. By making faster payments it is never suggested that contractual obligations should go for a toss.
Ankur: Thank you Mr. Sengupta for proving me the valuable insights?
Mr. Sengupta: You are most welcome. I must say Maximum Governance is doing a great job of curating knowledge to for sharing. I wish you all the very best.