Tuesday, June 12, 2018

The challenge with implementing public policy

You can have the best structured and incentive compatible policies and yet not have much impact on the ground in addressing the underlying problem. And this state of affairs can persist for years, even decades. Not for nothing is state capacity, in the opinion of this blogger, the biggest challenge facing India. 

Crop insurance and foodgrain procurement are two examples of where acute last mile gaps come in the way of realising desired outcomes. In both cases, it is easy enough to announce the best possible design of a crop insurance or crop procurement policy. But those announcements mean nothing when the rubber hits the road. In case of the former, the constraint is the insurance payout, while with the latter it is the actual physical procurement itself. There are no magic pill universally replicable innovations out of these problems.

Indian Express carries a story on the troubles faced by farmers selling off their produce at the public procurement centres at a mandi in Vidisha district of Madhya Pradesh.
Roop had received an SMS eight days ago from the cooperative society with which they are registered, asking him to come to the mandi on Wednesday, but the father and son chose to come a day earlier... Their token number, a chit issued the day they reached, is 234 — there are 233 farmers ahead of them in the queue. No more than 40 trolleys can be weighed in a day, which means the duo will have to spend at least five days before their turn comes... Until last year, trading at the mandi would happen between noon and 4 pm, when farmers would come, post-lunch, with their produce, which would be auctioned in the presence of mandi officials. This year, after chana prices started crashing due to a bumper crop and less demand, the government decided to buy directly from farmers — at Rs 4,500 per quintal — for the Central pool. Selling to the government offers farmers better returns than selling to private traders, which explains the rush... While the Singhs own their tractor-trolleys, many other farmers have hired vehicles to transport their produce to the mandi. “The rent for the first day is calculated according to the weight of the produce (anywhere between Rs 40 and Rs 80 per quintal of produce). From the second day onwards, we have to pay a daily rent for the trolley,” says Roop... The farmers wonder if a dharma-kanta (a weighbridge) would have eased their woes unlike the existing practice of unloading the produce on the floor of the mandi, packing it in bags, weighing each of them and sealing them, the entire process taking nearly 80 minutes for 40 quintals... Six days after they arrived at the mandi, the Singhs managed to sell chana from one of their trolleys. But they were told the chana in the second trolley had impurities. They will now get it cleaned and come back.
Consider the problems. Immediately after harvest, with chana prices crashing following a bumper harvest, farmers rush to offload their produce at the procurement centres over a very short time window. The procurement centre, without any weigh bridge or other logistics, has to get the produce graded, packed into gunny bags, and weighed. All this takes up an inordinate time for a single farmer and farmers stand in line for hours days! This wait in turn inflicts heavy tractor rental charges and other opportunity cost on the farmers. And even after waiting for days to get their chance, farmers face the prospect of being turned away and being asked to come back after rectifying some defect or other!

Much the same (difficult last mile gaps) applies to the Soil Health Cards or electronic national agriculture market place (eNAM). Sample this series of actions suggested on eNAM,
The following steps should be taken in a concerted manner: (i) unyielding focus on agri-market reforms starting with basics of assaying, sorting, and grading facilities for primary produce as per nationally recognised and accepted standards; (ii) creating suitable infrastructure at mandi-level (like godowns, cold storages, and driers) to maintain those standards; (iii) bringing uniformity in commissions and fee structures that together do not go beyond, say 2%, of the value of produce; and (iv) evolving a national integrated dispute resolution mechanism to tackle cases where the quality of goods delivered varies from what is shown and bid for on the electronic platform.
Each of the four steps, after putting in place the enabling implementation frameworks, need to be materialised. And that is where state capacity, persistent action, and committed leadership becomes necessary. 

Programs like Fasal Bima Yojana, Bhavantar Bhugtan Yojana, Soil Health Cards (see this and this), and eNAM are examples of reforms where enacting the rules and regulations is the easier part. But when the rubber hits the road, state capacity and other systemic constraints start to bind. There is only so much (mostly tinkering at the margins) that can be done with technology and innovation.

In simple terms, successful implementation of these require committed and stable leadership at the Ministry/Department level for atleast five years, maybe as mission-mode projects, with the mandate being to fix the plumbing challenges and demonstrate success with at least a few models. And they need to be complemented with responsive systems both at the level of the District Collector and the Joint Directors (or equivalent) of Agriculture in the District, in at least some of the districts. And it needs to be done in a phased manner with diligence, practical compromises and improvisation where required. 

And also, a one speed nationwide roll-out of such things may not be possible (state capacity) nor desirable (since it may run into political economy challenges). We need to look at the possibility of doing such stuff as a multi-speed campaign (which would also not concentrate discontent) - get everyone to the starting line with all the enablers (both regulations and requisite documentation), make available a practical implementation plan with the likely constraints and possible solutions around it, let the districts/states run with it at different speeds, and foster healthy (but not high enough stakes) competition among them. 

Many things which can be done relatively easily at the district level may not be possible for the States or Government of India to prescribe. It demands more of a gradual and bottom-up diffusion approach than a top-down, one-speed, universal coverage approach. 

This applies as such to the IBC too. As we go ahead, some or all of the following are likely - the Resolution Professionals (RPs) will be captured, judiciary will intervene indiscriminately, NCLT will be compromised, promoters will create hurdles even after resolution, and so on. We need some concerted systemic effort to be at it for a reasonably long enough period of time to allow some hysteresis to set in. 

A practical agenda for a government is to identify no more than 10 schemes/priorities, structure them as Missions, appoint an appropriate Joint Secretary/Mission Director for each for five years, give them a clear (but practical) road map, equip them with sufficient resources, and let them run with it for 5 years. And monitor them closely for five years at different levels.

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