Limits to digitisation in development II

Digitisation and online application processes have been promoted as a cure to the problems of weak program administration. But, underlining the limitations of this view, it is reported of a scam involving fake claimants to the PMFBY in Tamil Nadu.

The miscreants have allegedly used the login and password details of officials from the agriculture department to upload around five lakh fake entries in the portal, and collected the funds for each fake entry. Earlier, district collectors would approve the process, after checking all relevant documents such as land records, ration cards, etc. The Centre started the online application system to make the process easier.

An Indian Express investigation exposed a scam in the disbursement of Government of India's scholarships for minorities in Jharkhand (and Bihar). On the face of it, all the ingredients of digital governance are in place - National Scholarship Portal, schools with their enrolment login, Aadhaar-based enrolment, and Aadhaar-based bank accounts, and DBT platform intermediated disbursals. 

This is a brief account of how the scam plays out,  

In a typical case, middlemen convince a school owner to provide the login ID and password on the NSP, or use a fake school letter pad to obtain them. Then, they involve banking correspondents to open accounts of prospective beneficiaries using their Aadhaar cards and fingerprints before applying for scholarships on their behalf. “Once the scholarships are credited, the next step depends on the deals these middlemen strike, either with the beneficiaries or schools. Sometimes, the beneficiaries remain unaware and the money is split between the agents, banking correspondents, and school staff. Sometimes, the schools are unaware,” said a school official, speaking on condition of anonymity.

And this about the challenges with effective administration of a program like this,

Norms for the scheme, which was launched by the UPA Government in 2008, state that applications need to be verified first by designated nodal heads in schools who are registered with district welfare officers. The applications are then checked by the district and state nodal officers before being sent to the Minority Affairs Ministry, which verifies and uploads them on the NSP before disbursal through DBT. On paper, the system is fairly foolproof. But on the ground... the process being subverted at the first step itself.

In several cases, middlemen either convinced school owners or nodal officers to provide the NSP login IDs and passwords or used fake school letter pads to obtain them. They involved banking correspondents to open accounts of prospective beneficiaries using their Aadhaar cards and fingerprints before applying for scholarships on their behalf. Officials point to a number of reasons why the scam slipped under the radar — from connivance at the local level to staff shortage to difficulties in handling the NSP... "Many schools are not verified by the district. That is where the problem lies. The forms are accepted or rejected by the district administration. First, the school owners themselves need to verify, then at the district level, and finally it comes to me. I do random checks but that is not sufficient. I am also overburdened. We need a more robust system. We have often alerted the concerned district but there is no action," said Raj Kishore Xaxa, the state nodal officer. At the district level, officials pointed to a staff shortage. “In Ranchi, there are only two Block Welfare Officers when there are 16 more required. The rest of the work is seen by the supervisors. We do check the authenticity and reject forms when we find any discrepancies,” said Sangeeta Saran, District Welfare Officer, Ranchi. According to Xaxa, who is also project manager (administration) at the Jharkhand State Minorities Finance and Development Corporation (JSMDC), the implementing agency, “the scholarship portal is not very robust”... “technical” problems of the NSP that did not allow for cross-verification at the state level. “We are not able to see the account numbers of beneficiaries, leaving little scope for cross verification,” Xaxa said.

Even with the most water-tight work-flow and validations, coupled with data analytics, there will always remain weak spots which will get gamed by enterprising scamsters. There is no substitute for physical verifications.

In theory, it is possible to have tight data capture process, rigorous and multi-layered digital approvals of both registration and payment releases, and sophisticated data analytics to spot fraud. This would require the data capture/entry process to be digital (or without human discretion), the approvals processes to be reducible to checklists which can then be incorporated into a work-flow algorithm, the work-flow to be water-tight, and the availability of sophisticated data analytics solutions. None of these are actually possible in practice to make a meaningful enough difference, not even remotely close. 

Take the attractive idea of data analytics. It's a widely held view that any large data can be easily analysed to tease out discrepancies and frauds. This is true only to an extent. The example from India's banking sector here and here shows, even with much larger volumes of more standardised data, there are serious limits to data analytics and there is no substitute to human verification and physical inspections. These problems will be much greater with less standardised and more problematic data sources.

Following the exposure of the scandal, the Jharkhand government is reported to have changed the process making physical verification mandatory for all schools/colleges and applications. That's a step in the right direction. The challenge though is with its effective administration.