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Innovations in Public Sector Management:Evidence on Social Protection Programs

New Delhi, India | January 7

bIndia’s Varied Experience with Social

Protection Programs

Innovations in Public Sector Management:

Evidence on Social Protection Programs

January 7 | Delhi, India

Implementation of Social Protection

Programs in India

Jennifer Bussell, UC Berkeley

Social protection programs: Three considerations

• Innovation

– What programs are introduced?

• Incentives

– What pre-existing factors affect how policies are implemented?

• Information

– What do we know about the effects of the programs?

POVERTYACTI ONLAB .ORG 4

Social welfare spending has expanded in India

• For most individuals, accessing

public services is the

predominant mode of citizen-

state interaction

– Welfare benefits

– Utilities

– Identity documents

• Yet public service provision is

often highly flawed, as reflected

in inaccessible, expensive, or

inappropriate services

POVERTYACTI ONLAB .ORG

Ration card office, Kerala, India

Innovation – India has introduced many unique and

pioneering programs

• State E-governance initiatives and National eGovernance Plan

• Aadhaar

• Midday Meal, NREGS


Incentives – Policies do not necessarily take all

political and bureaucratic incentives into account

• Actual implementation of policies can be dramatically shaped by the

incentives of relevant politicians and bureaucrats

• These actors may not be involved with the design of policies but are

fundamental to their successful implementation

• Mismatched incentives can threaten even the most promising policy

initiative


Example: Common service centers

• One-stop citizen service centers

– Computerized

– Private sector support

• Fundamental government

services

– Driving licenses, birth certificates,

land titles, welfare benefits, tax

payments

• Considerable variation across

Indian states


Number of services available at centers (2010)


0

5

10

15

20

25

30

35

40

45

Explaining variation in reforms: Costs and benefits

Citizens Bureaucrats Politicians

Benefits - Improved

efficiency and

reduced cost of

service access

- Efficiencies in

internal processes

- Direct: Electoral

rewards

- Indirect: Potential

new rents from

contracts

Costs - Limited - Costs of learning

new processes

- Reduced illicit

income from

bribes

- Reduced illicit

income from

bribes


Implications and outcomes

• High levels of petty corruption are associated with less robust reforms

– Later adoption of service center policies

– Availability of 14 fewer services, on average

– Inclusion of fewer “bribe-prone” services

• High levels of grand corruption are associated with increased adoption

of public private partnerships


Information: Did reforms improve service quality?

Many remaining limitations in the system

• In the mid-late 2000s across India, 30-54% of people went outside the

“official” system to get services to which they are entitled

– Bribes, influence of friends/family, influence of bureaucrat, political influence,

middlemen, etc.

• This included ~40% of below poverty line households who paid bribes in

dealing with departments such as Housing, Land, and the Police

• Other and more recent efforts—such as Aadhaar—may face similar

incentive-based constraints in implementation and related limits to

delivery of benefits


Understanding the quality of policy

implementation requires better information

• Estimating the true effects of technology-based programs—

eGovernance, Aadhaar—is limited by lack of rigorous, randomized

evaluation programs

– Some experimental evidence that service centers can improve service delivery

• Promising evaluations in other areas—e.g. work programs, health

sector—provide strong evidence of the benefits offered by rigorous

evaluation

• Most types of social protection programs have the potential to be

evaluated in a similar manner


Sub-national variation in corruption can help

explain regional variation in outcomes


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Curbing Leakage in Public Programs with

Direct Benefit Transfers

Prabhat Barnwal, Michigan State University

Missing 40 million households with LPG connections


• Comparison of LPG (cooking fuel) households from different data sources

• Large gap in number of registered LPG connections vs. recorded LPG users

• Overall, about 40 million “missing” LPG using households

• Total LPG subsidy outgo:

– Rs. 48,000 Cr (US$8 billion)in 2013-14

– Rs. 36,000 Cr (US$6 billion) in 2014-15

“Losing sleep over subsidy leakage, not subsidy itself”: Pranab Mukherjee (2012)

Transforming the welfare delivery mechanism to

reduce leakage: Direct Benefit Transfers

• Leakage: Transfers to non-beneficiaries through illegal means

– Ghost beneficiaries, critical role of local intermediary officials

– Isolated databases, difficult and costly de-duplication

– Traditional enforcement (audit, penalty) is often ineffective

• DBT launched on January 1, 2013 in pension and scholarship programs

• LPG subsidy is the first major program under DBT, started in June 2013

• DBT seeks to provide benefits directly into the bank account of verified beneficiaries

– Utilizes a centralized payments infrastructure

– Aadhaar used for verification of beneficiaries

• JAM trinity (Jan-Dhan, Aadhaar, and Mobile) have gradually become the backbone of the DBT platform


LPG distribution and black markets

• Setting: an in-kind transfer program leading to market segmentation

– Universal subsidies for household domestic cooking

– Commercial usage of the same fuel is taxed

• Subsidized fuel (i.e. domestic LPG) diverted to the black market using “ghost” and duplicate accounts

• Commercial users purchase diverted subsidized LPG in black markets, instead of paying commercial LPG price

• How big is the price difference between subsidized domestic LPG and non-subsidized commercial LPG?

– Jan 2014: about 75%

– Jan 2016: about 50%


Source: http://indiatoday.intoday.in

Direct Benefit Transfer for LPG (DBTL)

• Policy change: Subsidy transfers directly only to the verified beneficiaries into their bank account

• Pre-DBTL:

– The intermediating officials play an important role in enforcement (i.e. LPG distributor and delivery man)

– Difficult and costly to de-duplicate beneficiary list

• Post-DBTL:

– The role of intermediating officials is minimized

– De-duplication and elimination of “ghosts”

• The impact of enforcement would be undermined if

– Agents find new ways to manipulate the system

– Technology fails to deliver

– Due to displacement in fraud and changes in social norms


How to measure the impact of DBTL?

• DBTL was introduced in about 300 districts in six phases before getting terminated in early 2014

– Phase 1– 20 districts

– Phase 2 – 34 districts, and so on

• Difference-in-differences using two quasi-experiments: Compare outcomes in DBT and non-DBT districts before and after policy change

– Phasing-in of the policy across districts

– Unexpected termination of the policy

• Audit surveys in black market in 89 districts covering DBTL On & Off periods

– Supply side (LPG delivery men)

– Demand side (Small businesses)

• LPG transactions data on 4 million customers and about 3000 distributors


Predictions – if DBTL is effective


DBTL enforced DBTL terminated

Domestic LPG purchase

Black market LPG price

Commercial LPG purchase

DBTL’s impact on domestic LPG purchase


• 11–14% reduction in

domestic fuel

purchase by

households

Removal of enforcement: DBTL termination

• Domestic fuel purchase reverts to original level, suggesting an increase

in diversion of subsidized fuel

• Positive supply shock in the black market: price decreases by 13–19%

• Commercial firms return to the black market: reduces fuel purchase

through formal channels by 6–9%


DBTL termination and black market LPG prices


• Increased supply of

diverted LPG refills brings

black market prices down

quickly

• No such effect observed

in black markets in DBTL-

transition or non-DBTL

districts

Reimplementation of DBTL after 2014 elections

• DBTL was terminated in March 2014, before general elections

• Reintroduced in November 2014 in 54 districts and has now covered all

676 districts since April 2015

• Similar impact on domestic and commercial LPG purchases

– i.e., reduction on domestic LPG purchase is associated with increase in

commercial LPG sales


Policy summary


• Improving the design of public programs using DBT to reduce leakage in

social protection programs

– Recurring savings in LPG subsidy is huge

– Fiscal savings being used to improve LPG access to the poor

• Need to ensure last mile access and minimal genuine exclusion

– LPG is an urban fuel, used mainly by the middle and higher class

– DBT for kerosene and food need more efforts and coordination to improve end

user’s access and experience

Using Secure Payments to Improve Delivery

of Public Welfare Programs in India

Karthik Muralidharan, UC San Diego


High costs of delivering government transfers

Secure payments as state capacity


Several grounds for optimism as well as skepticism

• Optimism

– Reduce leakage; improve payment experience?

– Expand feasible set of anti-poverty policies?

– Leapfrog literacy constraints to financial inclusion?

– Will be a “game changer” for governance (both UPA & NDA)

• Skepticism

– Complex implementation challenges?

– Subversion by vested interests?

– Exclusion errors?

– Make benefits more difficult to access?



The AP Smartcard Program

Evaluation strategy

• MoU between J-PAL and Government of Andhra Pradesh to randomize

the phased roll-out of Smartcards across mandals (blocks)

– Areas are identical except for Smartcards—allowed us to credibly measure

program impact (treatment vs. comparison)

• Detailed household surveys—matched to official records

– Measure access, work done, payments process, leakage, opinions

• Compare key outcomes in treatment and comparison areas

• Detailed process report on implementation insights


Rollout was randomized at sub-district level in 8

districts with ~20 million people


Treatment and control mandals were identical on

average except for the Smartcard program


Variable Treatment

Mean

Control

Mean

Difference

(p-value)

Population 43,846 43,807 38 (0.99)

Pensions Per Capita 0.12 0.12 0.00 (0.68)

Jobcards Per Capita 0.54 0.55 -0.01 (0.86)

Literacy Rate 0.45 0.45 0.00 (0.95)

SC Proportion 0.19 0.19 -0.00 (0.88)

ST Proportion 0.10 0.10 0.00 (0.98)

Proportion of Population Working 0.53 0.52 0.01 (0.47)

Proportion Male 0.51 0.51 0.00 (0.94)

Proportion of Pensioners under Indiramma 0.70 0.69 0.01 (0.52)

Proportion of Old Age Pensions 0.60 0.62 -0.02 (0.20)

Proportion of Weaver Pensions 0.01 0.01 -0.00 (0.64)

Proportion of Disabled Pensions 0.13 0.13 0.00 (0.76)

Proportion of Widow Pensions 0.26 0.25 0.02 (0.13)

Significant positive program impacts on several

dimensions


Other main results

• No change in official outlays, but households got paid more

– Highlights importance of matched household surveys and randomized evaluation

• No reduction in access

– In fact, access and work done went up (fewer inflated muster rolls)

• Gains were broad-based (no one was worse off)

• Biometrics was key to reducing leakage

• Using local BCs was key to improving payments process

• Highly cost-effective

– Value of time savings alone (at NREGS wages) exceeds cost

– Leakage reduction was ~9x the cost (2% commission)


Strong user support for Smartcards


New

system

91%

Old system

3%

Neutral

6%

NREGA New

system

93%

Old system

3%

Neutral

4%

SSP

Summary of lessons learned

• Large potential gains from biometric payments

– Achievable in as little as two years, very popular with voters

• Implementation quality really matters

– Stable and empowered project leadership with political backing

– One district, one bank (insurance against poor implementation)

– Invest in last-mile financial inclusion and not just biometrics

• Focus on beneficiary experience more than fiscal savings

– Key to political success was focusing on making biometric Smartcards convenient but not mandatory

– Large leakage reductions anyway, but eliminated exclusion errors

– Strongly recommend similar approach for next few years

• Value of high-quality independent evaluations


Getting the financial architecture of social

programs to work for the poor: Some

learnings from experiments on MGNREGS

Rohini Pande, Harvard

Social protection program management

Common feature: Centralized financing but decentralized

implementation

Associated problems:

Beneficiary selection is at local level and disconnected from

financing (from state or federal exchequer)

Funds released in tranches cause short-run mismatches between

need and receipt of funds.

Concern:

– Poor financial practices imply excessive fund float and weak

implementation

– Rents available to local actors who determine access

Can technology-based innovations to program’s financial architecture help?


Focus on MGNREGS for innovations

• MGNREGS remains India’s flagship social protection program:

– Employs 100 million rural—equivalent to 1 out of every 3 rural adults.

– Increasing MGNREGS budget is a significant policy response to recent drought

– Fantastic example of data transparency—large scale administrative data made

available [Netnrega/nrega-reportdashboard.html]

– E-payments seen as potential impetus for financial inclusion


Households Provided Employment

http://mnregaweb4.nic.in/netnrega/dynamic2/dynamicreport_new4.aspx

Can e-governance improve fund management?

(joint with Banerjee, Duflo, Imbert, and Mathew)

• Study: Field experiment

evaluating expenditure-based

fund flow reform for MGNREGS in

Bihar

• Policy reform that we evaluate:

– Reduce number of administrative

tiers involved in fund release

– Funds released on basis of

expenditure (wage bill) incurred


Intervention design


Control Treatment

Decrease in spending

Estimated effect = Rs. 230,000 per GP for total of 4.1 million

USD

nrega.nic.in shows slightly higher number: Rs. 330,000 per GP


Reduced float of funds..


Balance in GP accounts

But no decline in work

Weeks worked (household survey)

Decline in officers’ wealth of over a third

Reported wealth of district officials


Some learnings of MGNREGs e-reforms:

Lesson 1: Data helped distinguish lower demand and corruption decline hypothesis. Short-run roll-back of program but in the longer run national roll-out.

Lesson 2: Bihar study: Better financial management reduced leakage but did not increase demand. Weaker evidence that local elite—Pradhans—lost wealth.

Lesson 3: AP Study: Reducing Pradhan control at payment delivery reduced leakage and increased access. Significant beneficiary support but less than universal take-up within villages.

Lesson 4: Ongoing work in MP: Potentially high returns to improving household ability to access banking system.


From reducing leakage to ensuring social protection for the

vulnerable… emerging points

(larger project joint with Field, Moore, Rigol, and Schaner)

MGNREGA has made a commitment to moving away from cash to bank payments. Work by Muralidharan et al. show that this is a very positive change

But as financial inclusion efforts get underway on a massive scale in India, open question on how G2P payments should be structured

We are working to examine whether direct transfer of benefits into a woman’s account for MGNREGA work without and with training on account usage matters—for both household and women’s outcome and the nature of corruption

Project is still underway, but we have three emerging lessons on program implementation


DBT—unless accompanied by significant training—

may continue to exclude the most vulnerable

1. 95% of bank clients know that they have an account. But,

overall, only 24% know their account number. Among those

who received financial capacity building, two-thirds can report

their account number.


2. Women who receive DBT + training are twice as likely to have a non-

zero balance, and those with deposits have balances more than four

times those of women who received bank accounts only.

The combination of financial capacity building and direct

benefit transfers has a powerful effect on financial inclusion


Technology alone does not change incentives:

Need adequate feedback loops

1) Having a bank account is not sufficient to receive DBT:

25% of male NREGA workers and 34% of female NREGA workers with a

bank account still receive public works wages in cash

2) And having wages deposited into a bank account still leaves

workers vulnerable to wage skimming:

Among workers who received their wages through DBT, 40% report that a

local official accompanied them to retrieve their wages on their last visit

to the bank.


R Subrahmanyam

Additional Secretary

Department of Higher Education

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