6. India’s social protection architecture
Bihar) where the programme suffered from large leakage or quality problems, people were more open to substituting it with cash (54 per cent).
The study concluded that the unpopularity of cash transfers (where PDS works well) can only be offset by making the transfers much larger than the implicit value of food subsidies. However, this may not lead to net savings for the government.
Narayanan (2011) notes that unconditional cash transfers work well where no specific goal is intended, but instead a general safety net is to be provided - for example, old age pensions. On the other hand, if the intention is to promote a particular developmental goal such as better nutrition, greater school attendance and so forth, then either conditional transfers, vouchers or direct provisioning of the good or service work better.
Of these three which is to be preferred usually depends on the quantity and quality of the relevant infrastructure (physical or digital), digital or formal literacy, as well as more subtle factors such as familiarity with existing systems or unfamiliarity with new ones.
All five aspects of social protection system discussed above - nature of the goal (insurance or assistance), eligibility (domicile or work relationship), legal rights or lack thereof, type of targeting and type of entitlements - have strong implications for inclusion or exclusion from programmes, timeliness of delivery, and extent as well as type of corruption or leakages. For example, cash transfers suffer from smaller leakages but have proved to be far less inclusive than the PDS due to lack of banking infrastructure. On the other hand, PDS has proved to be more inclusive during the crisis, but generally suffers from more leakage problems than direct cash transfers, in some cases exceeding 50 per cent (Gulati and Saini 2015).
the NFSA. 237 million ration cards and 808 million beneficiaries are recorded nationally making it by far the largest safety net in the country.5
Drèze and Khera (2017) note that, over the years, many states have moved beyond a Below Poverty Line (BPL) approach, toward a more inclusive (even near-universal) PDS coverage using their own resources (see Tables 1 and 7 in their paper). In some cases, such as Tamil Nadu, coverage of subsidised grain is universal. But the coming of the NFSA has set a national floor. Simultaneously leakages have been reduced in many states -including states that have not traditionally been associated with good governance (such as Chhattisgarh). The NFSA plus the state-level extensions are thus the largest social assistance programme in India. As we will see in the next chapter, this system proved to be crucial during 2020, especially in its extended form under the PM Garib Kalyan Yojana.
Despite its large coverage, however, it is also true that a failure to update population data has resulted in an exclusion of vulnerable households.
Mandated NFSA percentages have been applied to 2011 population levels and hence the number of households which need assistance now exceeds the initial targets. If the NFSA percentages are applied to population numbers for 2020, an estimated 100 million people are found to be excluded.6 In Jharkhand, for example, the failure to update the population numbers has meant that once the BPL and Antyodaya ration card quotas are exhausted, the remaining households are either issued Above Poverty Line (APL) cards (the ‘white card’) or no card at all. Either way, they are not entitled to subsidised grains.7 Targeting, in practice, often means setting an arbitrary quota and then finding people to fill this quota. Deserving households that do not make the quota end up on waiting lists.
the requirement of a ration card was an important way this problem was handled during the
Covid crisis.8
In addition to selecting the right households, the second major challenge in programme
implementation is to ensure that these households (and not some other non-deserving ones) actually avail of the entitlements. The major development here in the past few years has been the move to Aadhaar-based biometric authentication (ABBA).
Without going into the details, the process works as follows.9 At least one member of the household acquires an Aadhaar number that is linked to their biometric identity (thumbprint, photo, iris scan).
This number is linked (‘seeded’) to the PDS account (ration card number). This is supposed to ensure that the identity of the person availing the grain at the shop can be authenticated and the transaction recorded in the system. The aim is to reduce identity fraud as well as discourage dealers from pilferage to the extent that they think they could be held responsible for unaccounted grains in the system.
Even though the principal rationale for ABBA has been to reduce leakages (inclusion errors), it is rather the resulting exclusion errors that have made the headlines. Several newspaper reports as well as targeted surveys have reported failures of authentication resulting in a denial of entitlements to genuine beneficiaries (Khera 2017).10 Despite these problems, in 2018, the Supreme Court allowed governments to continue with the system for availing benefits or entitlements under welfare programmes.
The issue of ABBA in PDS has attracted the most attention because it affects hundreds of millions, and exclusion errors in the system can mean
6. India’s social protection architecture
and more benefits, the accuracy of underlying demographic data becomes critical. However, often the same IDs that were intended to be replaced by the more reliable Aadhaar, have been used to enroll people into the system, essentially carrying over the errors into the new database (Khera 2017).
In addition to problems of network access or other technical failures resulting in authentication failures,11 there have also been cases reported of failures due to fingerprints not being readable, particularly in older workers who have worked with their hands their whole life. Further, the problem of this design is that the Fair Price Shop dealer, who is often responsible for pilferage, is still key to the ABBA process.12 He or she can falsely report an authentication failure to a customer and divert the quota to the open market.
A recent paper by Muralidharan, Neihaus, and Sukhtankar (2020) documents the results of a large RCT in Jharkhand to measure the trade-off between reducing leakages and excluding deserving beneficiaries. The authors find that moving to ABBA from earlier paper-based authentication did not reduce leakages, or when it did do so, this came at the cost of increased exclusion errors.
One more long-standing problem with the PDS is worth noting here, viz. the contrast between excluded deserving households on the one hand and excess grains in storage with the Food Corporation of India (FCI) on the other. In brief, the problem is this. Procurement of grain from farmers at Minimum Support Prices (MSP) typically varies with the electoral cycle. But the distribution does
not expand or contract with procurement. It cannot contract for obvious reasons of legal entitlements under the NFSA. It cannot expand easily for two reasons. First, officials fear that temporary increases in distribution would have to be made permanent and that this may not be sustainable. Second, when distribution occurs, in accounting terms it appears as a food subsidy and hence becomes part of the fiscal deficit. If grain is not distributed, it appears as FCI losses and does not show as part of the government budget.13
Finally, we note that, there continue to be calls for replacing the in-kind system entirely with cash transfers, using an Aadhar-linked direct benefit transfer (DBT) programme (Gulati and Saini 2015).
However, given that the problems with ABBA described above will also be present in a DBT
system, the question of how to avoid exclusion errors remains pertinent in either cash or in-kind systems.
The problem of exclusion from the system either due to lack of a ration card or because of authentication problems, can have profound consequences during a crisis such as Covid-19. A recent study by Dvara Research and Gram Vaani on exclusion and grievance redressal in social protection programmes found that deserving households were excluded from free rations being provided under the Pradhan Mantri Garib Kalyan Yojana (PMGKY, discussed in greater detail in the next chapter) mainly because they did not have a ration card, which was an eligibility criterion in the relief package (Seth, Ahmed, and Ruthven 2020).14 This despite the fact that, as noted earlier, states did try to waive this requirement for availing free rations in the crisis.
The pandemic has presented an opportunity to move beyond these legacy problems and implement a universalised PDS that can truly end food
insecurity in India.