Modi’s DBT Review 1: Chandigarh Stumbles But Project Needs Support

After the direct benefit transfer of LPG subsidy, one of this government’s boldest steps at subsidy reform was to experiment with direct cash transfer instead of subsidized food grains. This, if done properly, has the potential to be a game changer in delivering welfare to the poor – eliminating leakages and diversion of food grains, ensuring that benefits go only to those who are entitled to them and enabling them to exercise choice.

But in Chandigarh, where a cash transfer pilot kicked off in September 2015, resentment against the programme is rising, because the rollout has been anything but smooth. As with any new programme, this too has many teething troubles and these always generate dissatisfaction. But in Chandigarh, this dissatisfaction is being stoked up into popular anger by ideological opponents as well as sidelined entrenched interests, who are magnifying these initial glitches into concept flaws to discredit the very idea.

If these problems are not addressed forthwith, if bureaucrats trying to make it work are not given full support, if vested interests are not neutralised effectively and if political and perception management efforts are not taken up urgently, a backlash is inevitable. That, unfortunately, could see the experiment being abandoned without being given a fair chance.

Chandigarh, along with Puducherry and Dadra and Nagar Haveli, was chosen for the cash transfer pilots because of high degree of urbanisation, good banking and IT infrastructure and high levels of Aadhaar enrolment. Six months after the programme was rolled out, many beneficiaries complain about either not getting the money or getting it intermittently.

“Since September, I have not got either food grains or cash; how are we to manage,” is the common lament of women from extremely poor backgrounds. They are either domestic servants or casual labourers or wives of migrant labourers, hawkers or repairmen. Those who are getting money regularly insist it is not enough. (The cash subsidy has been fixed at Rs 95 per individual, which is worked out as 1.25 times the procurement price of food grains.)

Ironically, there is now nostalgia for the early public distribution system (PDS), even from those who used to complain about its flaws. “Anaaj chahiye, paisa nahin (we don’t want money, we want grains)”, “purana system theek tha (the old system was better)”, are two other common refrains. Closer questioning has them admitting that things were not hunky dory earlier. So, there could be a better-the-known-devil-than-the-unknown-angel syndrome at work.

But why should there be a problem in Chandigarh, of all the places? The roots of the problem go back to the way in which the National Food Security Act (NFSA) was implemented in February 2014.

Chandigarh started preparing to implement the NFSA in September 2013, two months after it was promulgated as an ordinance. The first step was the identification of beneficiaries, digitization of the beneficiaries list and issue of new ration cards. Chandigarh, at that time, had around 81,123 ration card holders registered under the older targeted public distribution scheme (TPDS). Under NFSA, it could enrol up to 4.96 lakh individuals (based on norms worked out by the erstwhile Planning Commission), which roughly works out to 1.24 lakh families. States were left free to frame their own inclusion and exclusion criteria for the priority households, while the norms for the Antyodaya Anna Yojana (AAY) households were what the central government had framed.

Fresh enrolments under NFSA began and the UT Administration spread the word through camps, advertisements, public notices, offices of the sub-divisional magistrates as well as through councillors and sarpanches/pradhans of villages on the outskirts of the city. Application forms (based on new inclusion criteria) were collected at various points – food and civil supply department’s service windows, e-sampark kendras and even fair price shops.

But only 56,689 applications were received for enrolment under NFSA - around 25,000 lesser than the number of ration card holders under TPDS. This is puzzling. Could people have voluntarily refrained from applying because they knew they did not meet the inclusion criteria? But the criteria for priority households were more generous than those for the earlier below poverty line (BPL) category, so many of the earlier ration card holders would still qualify. In fact, a large number of those in the earlier APL category have come into the priority households list. Even APL ration card holders are generally from the lower income sections and would like to get cheap food whenever it is possible. So why would they not have tried their luck and applied?

Could the non-appliers have been holders of bogus ration cards? These people would hardly have voluntarily decided to stay away; they too would have tried their luck at getting into the system. So such a huge drop in number of applications itself – scrutiny and weeding out comes later - does not pass the smell test.

One explanation could be the slum demolition drives which have been carried out in phases since November 2013. Residents of these shanties could have been ration card holders and not been able to apply for lack a host of reasons.

Whatever the reason, the missing 25,000 would later go on to create resentment about cash transfers. Here’s why.

Initially, the administration was focused on getting eligible people to enter the system. So, after first insisting on the application forms being notarized, it allowed self-certification after complaints that notaries jacked up their rates as people flocked to them. So, of the 56,689 applications received, the only rejections (772) were on grounds of duplication; the remaining 55,917 families got enrolled under NFSA.

New ration cards were not issued but old ones were either stamped or had paper slips stuck on them identifying the category of the family. The Act requires fresh ration cards to be issued, but as the latest Comptroller and Auditor General report on preparations for implementation of NFSA shows, no state has done this . From February 2014, the NFSA beneficiaries started getting 5 kg of wheat and rice per family member at Rs 2 and Rs 3 a kg respectively. In addition, each household got 10 kg of wheat at Rs 7 a kg.

But in order to avoid a situation where possibly eligible families were left high and dry, the Administration continued to give subsidized food grains to earlier ration card holders who had not applied for NFSA benefits, though at a higher rate of Rs 7 per kg (under NFSA wheat is sold at Rs 2 a kg and rice at Rs 3 a kg). Doing this was possible since the central government had not cut down the food grains quota for the Union Territory (every state had a quota of food grains under NFSA worked out on the basis of lifting of food grains under the TPDS).

So the 25,000 did not lose out, despite not being NFSA beneficiaries. With the implementation of the pilot, however, this section gets neither subsidized food grains nor cash benefits, since the cash transfer is only for NFSA card holders. Many of those in this category may be borderline APL and their economic condition not vastly different from NFSA beneficiaries, which fuels resentment against cash transfers. This again raises the question of why they were left out in the first place. Since they appear to be genuine cases and are around to take their rations, why were they not brought into the NFSA net, over two years after work on implementation started in 2013? This issue needs to be addressed one way or the other as part of the political management effort.

The Administration now plans to make the application and enrolment process simpler and easier so as to get more people into the system. “We want to achieve more registrations. In one month’s time we will achieve the target of enrolments,” assures Ajit Balaji Joshi, deputy commissioner and director, food and supplies. A door-to-door verification exercise is also being planned.

How rigorous this exercise is will be important. The latest CAG report shows arbitrary exclusions of eligible and inclusion of ineligible beneficiaries in many states. This is mainly due to lack of systems to verify claims, which makes inclusion/exclusion dependent on the discretion of local political leaders or officials. An article by Sitakanta Panda in Ideas for India, an economics and policy portal, notes that political connections are an important factor in identifying beneficiaries for doles and welfare schemes. “In rural areas, a politically-connected household is a significant 0.056 points more likely to obtain a BPL card than a household that is not politically connected, while in urban areas, this figure is 0.010,” Panda writes.

The Socio-Economic and Caste Census (which gives extremely granular data on the economic status of households) was supposed to make this task easier, but only the rural SECC report is out; there is no word on the urban one (which will apply to the bulk of Chandigarh). How the enrollment and verification exercise is done in Chandigarh, without the benefit of an SECC report, will determine the fairness of the NFSA as well as how effectively it curbs leakages in the system.

That is just the starting point. There are other problems in the implementation of cash transfers that will be dealt with in the second part of the series.