Evaluating direct cash transfers Part-II: Correct the mistakes and go ahead, junking PDS reforms wholesale is no solution
Currently, the burden of transitioning to the direct cash transfer system is on the poorest. The burden of change should be on the administration
Could the report of the evaluation study on the cash transfer pilots in Chandigarh, Puducherry and Dadra and Nagar Haveli, reported on Wednesday, lead to the government winding down on replacing in-kind subsidies with cash?
It could, since it will give a handle to cash transfer opponents to demand that existing pilots be scrapped and no new ones kicked off. The study showed the pilot programmes have been dogged by “non-trivial” implementation challenges.
Or could it lead to the government using the report to ensure better implementation of future cash transfer programmes?
Fortunately, the government appears to be adopting the second approach. It is actively considering proposals from Goa and Arunachal Pradesh to implement cash transfer programmes. But it is not rushing into it.
The report recommends allowing for longer preparation time in likely future programmes and using standardised checklists to prevent confusion and slippages from the scheme. That seems to be happening. So, in Goa and Arunachal Pradesh, the state governments are being told to clean up the beneficiary list, bring it up to date and digitise it and linking it with Aadhaar and bank accounts. The cash transfer scheme will be rolled out only after the central government satisfies itself on these counts. (But there is no getting away from the fact that most state governments are not keen on implementing a cash transfer programme.)
In addition, the department of food and public distribution is also examining a proposal from the Jharkhand government to try replicating the PAHAL scheme in food subsidy in the state capital, Ranchi. That is, as when buying cooking gas cylinders under PAHAL, people will pay the economic cost of wheat and rice at the ration shop and get the subsidy amount in their bank accounts. Here too, the readiness of fair price shops (POS machines to authenticate identity) as well as Aadhaar seeding of bank accounts is being ensured.
The proposal is still in its initial stages and the price that beneficiaries will have to pay upfront has not been worked out. This model involves less pain for beneficiaries as well as ration shop owners. The latter, if disgruntled, can prove to be a huge hurdle in the smooth implementation of cash transfers.
Despite highlighting the implementation glitches, the evaluation report, authored by Karthik Muralidharan, Paul Niehaus and Sandip Sukhtankar, remains positive about the cash transfer programme: “DBT-based PDS reform holds long-term promise”.
Muralidharan of the University of California, San Diego, is clear: "Our findings both support the long-term case for cash-transfer-based reforms to the PDS as well as the need to put in place a high-quality implementation architecture before making such a switch, and of minimising disruption to beneficiaries during this process.”
This, says Renana Jhabvala of SEWA Bharat (which has implemented two cash transfer pilots in Delhi and Indore district of Madhya Pradesh), is extremely important. “The burden of transition is falling on the poorest. Those most excluded have the least capacity to approach the system. The burden of change should be on the administration.”
Fortunately, even as it shines the light on last mile problems, the report also suggests ways to smoothen the implementation. These include standardising databases and record keeping, setting in place protocols for reconciling administrative and transactions data and the like. It also recommends seeding mobile phones to the beneficiary database in order to communicate with beneficiaries and using outbound calls as well as local language SMS to provide information.
The department of food and public distribution at the Centre is also working on these lines, persuading state governments to do the needful. If done seriously, this should address the issue Jhabvala raises. Smooth implementation is crucial not just for cash transfers in PDS but for all DBT. Recognising this, the DBT Mission is closely working with state governments to design robust processes. “We recognise that even a 1 per cent failure for us is 100 percent failure for the beneficiaries,” says Peeyush Kumar, joint secretary in the DBT Mission.
More importantly, the report makes a strong pitch for a policy shift to choice-based DBT pilots. In this, people up could be given the option of either shifting to cash transfer or continuing with subsidised rations. This, it says, will de-risk beneficiaries, especially the most vulnerable ones, from sub-optimal implementation.
This makes more sense. A uniform approach may not work very well in India where awareness and education levels vary widely, as do banking and communication infrastructure as well as access to markets. To shift to cash transfers in remote areas where banking infrastructure is virtually non-existent or where private traders have a negligible presence is a recipe for disaster. Also, as the report says, “. . . running such a choice-based system for a couple of years will allow for smooth and sustainable transition to a cash-based distribution of benefits by ensuring that problems during the transition period do not discredit the idea of DBT as a method for improving efficiency in the delivery of anti-poverty programs..”
This seems more in line with the government thinking in other DBT schemes as well. “We are not yet at the point of the curve where the government can think of withdrawing from critical services and shift to cash transfers. We are not looking at substitution,” says Kumar. Former NITI Aayog vice-chairman Arvind Panagariya was also a strong advocate of this choice model. Jhabvala, who also supports the idea, says administratively, it is quite feasible to offer this choice to people.
The evaluation report does not, as Jhabvala points out, look at how cash transfers influenced dietary behaviour and nutrition intake (a fact it admits and says should be addressed in future pilots) or what has happened to those not included among beneficiaries under the National Food Security Act (though it does flag the issue of exclusion errors). But it still gives valuable insights into how cash transfer programmes should be designed and rolled out.
It is now time to undertake more pilots to test out the idea, instead of junking it wholesale and continuing with the old system. The PDS has been around for several decades but is not an ideal route of subsidy delivery, even with reform. If that can still be given a chance, why not cash transfer, which has been around for less than three years and has not even seen a full-scale rollout yet?
This ends the two-part article. The first part can be accessed here.
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