Mar 5, 2013

ASIDE scheme - Evaluation perspectives

ASIDE is an infrastructural development scheme run by Department of Commerce. It funds state governments to develop infrastructure that would assist in exports. The stated objective reads:

The objective of the scheme is to involve the states in the export effort by providing assistance to the State Governments for creating appropriate infrastructure for the development and growth of exports.

The criteria for approval of projects under this scheme reads:

The proposals must show a direct linkage with the exports. The proposed investments should also not duplicate the efforts of any existing organization in the same field.

We are talking about infrastructure development that would have 'direct' linkage to exports. You can read the scheme in greater detail here. The central government bears a financial burden of 80 to 90% and the rest is borne by respective state governments. 
Over the last few years, a grand total of around 400 to 500 crores are being spent annually on this scheme. You can read the details of state-wise expenditure here

Now comes the problem area. Read the performance measure below:

The export performance and growth of exports from the State / UT will be assessed on the basis of the information available from the office of the Director General of Commercial Intelligence & Statistics (DGCIS). The office of the DGCIS will compile the State-wise data of exports from the Shipping Bills submitted by the exporter. The Shipping Bill form provides a column in which the exporter will enter the name of the State/UT from where the export goods have originated. Filling up of this column is mandatory with effect from 15.6.2001 under the FT(D&R) Act.

Sir, really? Do we have state level data for exports from shipping bills? Customs department never minds what the CHA/Exporter fills up in this particular column of shipping bill.  Most of the times, they fill the name of state of the port from where the exports are taking place. If good originates from Bangalore, it's likely to be shipped from Chennai, and there is no check on this column if the exporters randomly fills Tamilnadu as state of origin. I have seen many shipping bills where this column is wrongly filled. No one minds. And trust me, it's good. If they mind, and ask the exporter to show the origin documents, it would add another headache for the exporter.
Then there is the question of intermediate goods. The components might come for an automobile from different states, and the assembled car might be exported from one particular state. How do you account for that?
Then again there is the question of value add. Does gross measure justify the export performance?

And who is competent to do an evaluation on this scheme? What should be the methodology. The problem of all this struck me when I saw two totally divergent views on the same scheme. One (obviously pessimistic) was by CAG, and the other by IL&FS (obviously optimistic). The CAG report can be accessed here. IT's a little oldish report, but very relevant due to the perspective it offers. Two most important points from CAG report are:

  • A significant number of projects, primarily in the State Sector, involving ASIDE funding of Rs. 177.59 crore were either ineligible or had no direct linkage with exports.
  • Due to lack of capture of data regarding the States from which the exports actually originated (rather than the States from which the products were finally shipped out), ad hoc allocations were being made to States and not on the basis of the specified criteria. This resulted in allocation of ASIDE funds to the States where purchasing entities were located rather than to States which were producing the export items.

The IL&FS report is not openly accessible, but the statement by the Hon'ble minister of state, in the Parliament yesterday, about this study says :

An independent study by IL&FS of the working of the Scheme revealed that there is strong relationship between increase in allocation to States by the Government under ASIDE Scheme, and the subsequent increase in exports of the States. There has been an upswing in the exports from such the states which have received assistance under ASIDE. State-wise data on exports is not accurately recorded so far by DGCI&S due to technical reasons. 166 Export Processing Zones have been operational.

The truth lies, I hope, somewhere in between. IL&FS has vested interest in this scheme and to call it "independent study" is a joke. And the joke says that there is a strong relationship, whereas CAG denies it altogether. 

It's nice to have lofty goals when making policies, but to pin down and measure policy effects is a challenge in itself. I will elaborate my thoughts on this in coming posts.