Saturday, April 2, 2016

DBTL and Aadhaar: Calling the Bluff on Savings

R. Ramakumar

Siddharth George and Arvind Subramanian (S&A), who participated in the manufacture of that famous figure of Rs 12,500 crore as DBTL/Aadhaar-led savings in LPG subsidy, make a heroic effort to defend their case in today's Indian Express. In the process, they end up exposing themselves even more. You can read the piece for their argument, but here are the areas where they are on extremely slippery slope.

1) It turns out that S&A's much-trumpeted estimate of LPG savings is not "actual", but just "illustrative" and "potential". They admit it in the piece. They say: "We did not — and did not intend to — assert that that absolute figure was in fact the actual saving in 2014-15". Amen!

2) Regardless of what S&A say, the government had claimed in two official releases that the LPG savings were even higher than what S&A estimated for 2014-15: Rs 14,672 crore (see AND The first press release was in response to the International Institute of Sustainable Development's (IISD) rebuttal of S&A's claim of Rs 12,500 crore. Do not miss this crucial link.

3) S&A's method and its assumptions are deeply suspect. What do they do? They take a set of districts where DBTL was introduced ("treated") and another set of districts where it was not introduced ("control"). They then compare the trends of subsidised LPG consumption across these two sets. Then comes the key assumption: "We expect that DBT reduces consumption in treated districts because the scheme makes it more difficult for LPG distributors to divert subsidised cylinders to “ghost beneficiaries”."

What is the fallacy here? It is the following. What S&A are doing is to credit the DBTL with a function that it did not perform. It was not by forcing the LPG customer to pay full price and then putting a part of it into his/her bank account (which is what DBTL did) that the subsidised LPG consumption was reduced. What reduced the LPG consumption was the fact that the beneficiary list was effectively pruned of duplicates. And much of this pruning of the list was completed before the DBTL or Aadhaar-seeding was introduced. S&A should know that what made diversion of LPG cylinders more difficult was not the DBTL, but the fact that "duplicates", who performed the diversion function, were eliminated from the beneficiary list. It is also a fact that a number of genuine beneficiaries were pushed out of the list of LPG consumers eligible for subsidy by different dubious methods, including by forcing them to submit their Aadhaar numbers for seeding. How can S&A claim what was achieved by list-based de-duplication of beneficiaries and forced exclusion as having been achieved by Aadhaar and a bank transfer of subsidies? Surely, S&A do not consider Indians to be fools to simply swallow their point!

4) While S&A are eloquent about 2014-15, they are silent on the IISD's powerful rebuttal of the government estimates for 2015-16 as well. Here, IISD argues that the LPG savings for 2015-16 was just Rs 120 crore. Remember, here again, Arvind Subramanian himself had a claim of Rs 6,500 crore; he had said: "savings this fiscal are estimated at Rs 6,500 crore".

I have tried to summarise the IISD method and estimate in the article I wrote for the last issue of Frontline.

1 comment:

  1. S&A are mopping up the mess created by Modi & his Ministers. Framing this as an academic debate, and selectively answering easy questions is their way of trying to keep a lid on things.

    The Oxford educated CEA should be asked to explain his view on lack of accounting of costs & benefits of DBTL platform including Aadhaar, not just in terms of savings or exclusion, but about the silence about the broader equity implications of such targeting policy under PAHAL. Specifically, any benefits from DBTL should be weighed not just against expenditure towards DBTL & UID implementation, but in terms of progress towards bringing clean cooking fuels to benefit the public, especially in rural areas.

    The CEA is guilty of framing public policy goals of LPG in narrow instrumental terms of targeting subsidies, rather than expanding access to clean fuels. The 3rd chapter of this year's economic survey sets up the middle class as the bogeyman to avert the gaze from absence of a LPG distribution network outsides India's cities. Their promise to set up 10,000 distributors will take yrs. Before then this govt will deny benefits and tout it as an achievement.