DBT EXECUTIVE SUMMARY

DIRECT BENEFITS TRANSFER IN FOOD
RESULTS FROM ONE YEAR OF PROCESS MONITORING

EXECUTIVE SUMMARY
Government of India (GoI) began to roll-out Direct Benefits Transfer (DBT) in lieu of food rations provided through the Public Distribution System (PDS) in three Union Territories (UTs), i.e. Chandigarh (CDG), Puducherry (PDY), and Dadra and Nagar Haveli (DNH), in September 2015. J-PAL conducted a process monitoring study of DBT in food from January 2016 to March 2017. The process monitoring comprised three rounds of household surveys conducted with a representative sample in each UT.
Key findings from the study are:
1. Implementation quality, i.e. perceived receipt of payments, has improved over time, but continues to remain a non-trivial challenge.
 In the most recent round of beneficiary surveys (conducted in Jan-Feb 2017), we found that:
o CDG: 67% reported receiving DBT, 20% reported not receiving DBT, and 13% did not know
o PDY: 67% reported receiving DBT, 24% reported not receiving DBT, and 10% did not know
o DNH: 65% reported receiving DBT, 16% reported not receiving DBT, and 20% did not know.
 While many of those reporting “don’t know” had not updated their passbooks, the results suggest that only 2/3 of beneficiaries on average confirm receiving the DBT benefits.
 However, the fraction of beneficiaries reporting not receiving DBT has fallen over time.
2. Yet, official records suggest very low failure rates, suggesting key gaps in beneficiary awareness of receipt of funds as well as administrative understanding of these gaps.
 Though official records indicate a transfer failure rate of less than 1%, around 20% of beneficiaries report not receiving benefits even as of March 2017.
 It is difficult to know the exact reason for stated non-receipts (such as money going to a different account or passbooks not being updated)
 While it does not appear that there are leakages in the system, it is crucial to understand whether the gaps are on account of awareness/knowledge of transfers, payments being made into bank accounts beneficiaries do not access, or processing errors.
3. Beneficiary communications (especially using mobile phones) can be substantially improved.
 Standard information on the transfers, particularly via auto-generated SMS, is not being provided to beneficiaries regularly, potentially leading to awareness gaps on receipts.
 Beneficiaries do not seem to have a clear way to report their grievances.
4. On average, it costs beneficiaries more (in time and money) to travel to banks (to access cash) and markets (to use cash) than in collecting food rations. In contrast, those who use ATMs to access cash spend less time and money on DBT and market purchases than under the PDS.
 Using ATMs over banks lowers the time costs of access by 31 minutes on average, but only 37% of beneficiaries possess ATM cards for the bank in which DBT is received.

 With DBT, beneficiaries spend extra per household buying the same amount of grain in the market out of their own pocket, but they purchase higher quality grains from the market.
5. Yet, we find that beneficiary preference for DBT over in-kind PDS benefits grew over time
 65% of beneficiaries across the three UTs now prefer receiving cash transfers over food grains, compared to less than 35% at the start of monitoring.
 Beneficiary preferences are influenced by the choice and flexibility that DBT affords them and higher quality of grain that they can now purchase.
 However, one challenge is that as they purchase higher quality grains, they also perceive that the amount of the subsidy is inadequate, making this a potential source of grievance
6. Recipients state using cash to increase dietary diversity and improve quality of food grains purchased, but the design of the UT pilots does not allow credible evaluation of the impact of DBT on food consumption and nutrition (since there was no comparable control group).
 95% of beneficiaries, state using transfers for expanding dietary diversity.
Based on these findings, we recommend the following measures to improve programme implementation:
1. Nodal departments within GoI should increase scheme monitoring using available data, particularly reconciling transactions data with administrative data on beneficiaries to allow for immediate grievance redressal related to reports of non-receipts.
2. State level implementing departments should expand the use of mobile phones as a tool to increase interaction with beneficiaries and provide rapid grievance redressal.
a. Providing local language SMSes with clear information on transfer status can be implemented quickly and at low cost and effort but can go a long way in increasing awareness and salience of transfers.
b. Using outbound calls for information provision, labelling of transfers, grievance redressal and documenting beneficiary feedback across DBT schemes is an efficient and effective way of maintaining connection with beneficiaries.
Overall, our findings suggest that DBT-based PDS reform holds long-term promise, and that over time beneficiaries prefer DBT to PDS. Yet, given the implementation challenges as well as unknown impact on food consumption and nutrition, we recommend the following approach to DBT-based reforms:
1. For the next round of DBT-based PDS reforms, GoI works with states to set up choice-based DBT pilots, where beneficiaries can choose if they would prefer to avail cash DBT in lieu of in-kind benefits through PDS. Such an approach insures beneficiaries against welfare losses, and will allow for a politically and ethically risk-free approach to policy experimentation with DBT.
2. These pilots should be accompanied by careful research (with a statistically-valid control group) on food consumption and nutrition impacts of DBT in lieu of PDS.
3. The combination above will allow policy-makers to better understand both beneficiary preferences as well as nutrition impact of cash versus kind approaches to food security.