A positive story from India

A couple of weeks back, I sent out a text message to my clients with feedback from various meetings. One of them replied back saying I was becoming the official purveyor of bad news. It is difficult not to be one in the current environment - whether you meet companies, bureaucrats, NGOs, journalists or the housewife, there is a litany of woes and I will write about them in future for sure. But for my first piece for this blog, I thought let me start with something positive.

For some time now, I have believed that governance is the bigger challenge for India – for the common man, for corporates and for investors. While the day to day debate is focussed on legislative changes, some undoubtedly very necessary and important, but what frustrates is execution and implementation for a wide variety of reasons – some due to vested interests where the status quo will be disturbed, some due to rent seeking, some due to perceived political gains, some to preserve the politics of patronage otherwise the mai baap sarkar’s role will stand diminished. I can go on but I will once again sound very negative.

But I have been very hopeful about Aadhaar or UIDAI, even as there are many skeptics. One of the primary objections has been around whether technology can deliver solutions in a country which is poor, where a large cross-section of the population, who are expected to benefit from this, is illiterate, where online connectivity even in urban centers is poor and so on and so forth. And my answer to that is the success of Rashtriya Swasthya Bima Yojana (RSBY). To my mind this is the best example in India of public private partnership (PPP) and the use of technology to deliver social service to the bottom of the pyramid.

I was first directed to the work of RSBY (and its champion Anil Swarup, Additional secretary & Director general (Labour Welfare, Ministry of Labour & Employment) by the CEO of a private sector general insurance company a few years back. In the four years since this scheme was conceived, 30.6 million smart cards are active today and there have been 3.8 million hospitalisation cases. The website of RSBY (www.rsby.gov.in) is not only very informative but also one of the most transparent websites among government departments. The scheme is a partnership between the government (central and state), insurance companies and hospitals (both private and public).

There are three elements of this scheme which make it unique and have been responsible for the spectacular success of this scheme – it is cashless, it gives poor the choice of where they want to get treated and it gives mobility, as in an immigrant worker enrolled in this scheme in Bundelkhand can get a treatment in Pune if he or she is working in a construction site in that city. Also as Anil Swarup proudly told me, “This is one of the only schemes which are working in Naxal areas as well.”

My wow moment on RSBY was not meeting Anil Swarup or the CEO of the insurance company. The wow moment came last year in a village in Bihar. I was in the dalit basti at the outer fringes of the village (yes that is the way villages are organized) and I could not find a single person who had got more than 3 days of work under MNREGA over the last three years! That is a story for another day. But an old lady walked up to me with her RSBY smart card and said, “Son, this card has been of no use to me.” I smiled and told her, “That’s very good to know because you have not fallen ill.” Then another man piped up that the card has been very useful for him since he had to undergo a surgery and it was completely free. He was thrilled because he was also reimbursed the costs for his journey to the hospital.

How is this important? When numerous attempts at universal health insurance with the help of public sector companies have failed, this initiative, for strange reasons carried out under the Ministry of Labour, and with the help of both private and public sector companies has been a huge success. And 30 million families mean 150 million people – 10% of India’s total population and may be nearly 50% of India’s population living below poverty line. When you think that one of the major reasons for usurious borrowings by poor people is to take care of health emergencies, a scheme like RSBY can have a huge impact in terms of peace of mind, less borrowings at usurious rates, and more consumption. According to Anil Swarup, the scheme would not have been a resounding success (it is) but for the investments made by the private sector general insurance companies.

So how will Aadhaar help RSBY? Or why do we need Aadhaar at all? RSBY uses the existing BPL data to enrol families. There is no de-duplication, there is no weeding out of ghost recipients etc. Aadhaar will potentially address some of these issues. But are such leakages really huge in India? Various estimates have put the leakages from various government schemes to anywhere from 30-50%. Rajiv Gandhi famously said that only 15% of spend reaches the intended beneficiaries.

It is in this context that an experiment carried out at Kotkasim, a district in Rajasthan, is of immense importance and relevance. In Kotkasim, there has been a very successful experiment carried out in direct transfer of cash subsidy to people who have the entitlement to get subsidies kerosene. Three months subsidy was transferred in advance to the bank accounts of the beneficiaries and then they had to buy kerosene at market prices from authorised PDS shops. The ration shop (PDS) owners also had to lift the kerosene at market prices. The arbitrage for adulteration, siphoning off and selling in the open market etc was gone. In four months the off-take of kerosene came down by 87%. Imagine the savings in misdirected subsidies that is possible throughout the state and the country. India does not need more outlays in entitlement programs, but it needs better governance and better deliveries. Read more about the experiment here: Direct to home.

So where does Aadhaar come in? With 50% of adult Indian’s having no bank accounts, with financial inclusion having remained a pipedream because opening and maintaining these bank accounts in remote areas is just not viable, Aadhaar can usher in a new era of financial inclusion. Opening of no-frill bank accounts which just need the Aadhaar number for KYC is a reality today (over one lac accounts have been opened in Tumkur district of Andhra Pradesh Karnataka alone), and if cash subsidies are directly paid into these accounts, then these accounts become commercially viable for the banks (low cost of opening, regular cash transfer and transactions taking place) and with micro ATMs, bank correspondents and mobile money being reality today, financial inclusion and financial security will be a reality. The savings that the government will incur by weeding out part of the corruption, ghost recipients, and misdirected subsidy like you and I receiving subsidy on LPG consumption), will have a huge macro impact in this country. And as Nandan Nilekani, Chairman, UIDAI, never tires of telling, Aadhaar is also about giving choice to the poor people, something that you and I take for granted, and thus, leading to empowerment.

Before imagination starts running ahead of reality, let me say that all this is not going to happen tomorrow. Entrenched vested interests will seek to derail much of this. But we all need to spread the good word and build a momentum, so that outcomes rather than outlays become the larger part of the political and public discourse. Before you say that things will never change in India, think about RSBY, think about Kotkasim experiment and think about the transparency portal put out by the oil companies where you can track LPG consumption and see how misdirected the subsidies are. Read this excellent piece by Bibek Debroy in Economic Times – To reform subsidies, weed out the well-heeled and wealthy from list of beneficiaries. All this has been achieved within this same system you and I curse every day and mostly by the same bureaucrats we love to pillory.

However, I would also like to use a word of caution – the RSBY system is not perfect (is any system out there perfect?) and Aadhaar is still largely in the proof of concept stage. RSBY system is being gamed by some unscrupulous doctors and hospitals and at times with the active connivance of insurance company officials. But given the real time availability of information, many fraudulent and other unscrupulous transactions are being discovered earlier than usual. A study in Dainik Bhaskar showed that in Chattisgarh, one hospital (Gupta Hospital) conducted 604 hysterectomy operations in 900 days. There were a few other nursing homes and hospitals that showed similar alacrity in conducting hysterectomy operations.

Independent studies conducted by academics (one such study is The Implementation of RSBY in Chhattisgarh, India: A Study of the Durg District) have suggested ways to improve the design and technology of RSBY to ensure that greater transparency and to ensure that the schemes objectives are better met, but nobody doubts that RSBY is working much better than any other scheme before it that attempted universal health insurance. Also either RSBY or Aadhaar will neither be a panacea for all that ails India’s poor, impoverished and disenfranchised masses nor will they be the last word or one size fit all solution, but they are a step towards better governance.

This positive story of India is as true as the story of unprecedented corruption, policy paralysis, poor governance etc. Which one would you want to start talking about the next time you are sitting with your friends for a drink or when you meet your colleagues or business acquaintances? One of my clients wrote to me when he heard some of the above stories: “I maintain snowflakes are small and irrelevant but when combined with others and they accumulate on top of a hill one day they result in an avalanche. 30mn RSBY cards, 150mn UID numbers, a reduction in Kerosene sales = avalanche of benefits in 3-5 years.” If you have come across other such stories, do write in to me. I look forward to your comments and suggestions because most ideas come out of a dialogue and conversation, at least for me, since I am not talented enough to dream of the benzene structure in my sleep.