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#2 from 2015: The things we do: Nudging people to give

Roxanne Bauer's picture
Our Top Ten blog posts by readership in 2015. This post was originally posted on April 7, 2015.
 

Man delivers gas cylinders in IndiaIn an appeal to civic duty, the Government of India is asking citizens to forgo a gas subsidy they receive so that gas cylinders can be transferred to the less fortunate. To encourage Indians to "Give It Up," the government called on business leaders to set an example and made the procedure extremely easy.

India recently launched an ambitious cash transfer program to help small businesses and households buy fuel.  Under the plan, consumers of liquefied petroleum gas (LPG), commonly referred to as propane or butane, receive a cash subsidy in their bank accounts to buy gas cylinders at market price.

Once joining the scheme, the subsidy, which is equal to the difference between the current subsidized rate and the market price, is transferred to the consumer’s bank account when he/she orders a cylinder.  Another transfer is then provided at the time of delivery of the cylinder. 

Last November, the Direct Benefit Transfer Scheme for LPG was rolled out across 54 districts, with the rest of the country participating by January 1 of this year. 

The scheme was launched by India’s previous UPA government in June 2013, but it was abruptly stopped earlier this year following court orders.  It has since been modified to exclude the requirement of providing a unique identification number (Aadhaar) to avail the cash subsidy.

The idea behind the direct benefit transfer is that it can ensure that the subsidy meant for the genuine domestic customer reaches them directly and is not diverted. The Government of India hoped to save millions each year by curbing diversions and leakages in the system but also to ensure efficient delivery of subsidies to the target beneficiaries— the consumers.

Enter Modi

Prime Minister Narendra Modi, elected in May 2014, recently asked banks and industrial houses to nudge their employees to surrender their subsidies.  He introduced the idea in his “Give It Up” campaign on March 27 that asks well-off people to give up their LPG subsidy— not as a cost-saving mechanism but so that the Government of India can transfer their cylinders to poor households that traditionally use firewood for cooking.  

“Give up voluntarily. If one crore people give up this gas cylinder subsidy... one crore poor families who burn firewood, which leads to deforestation, carbon emission (and) their children grow up in smoke... The cylinder (subsidy) you give up should reach to the house of that poor,” he said.

Focus on the Social

A 2013 study, conducted by the UK Cabinet Office Behavioural Insights Team in partnership with the Charities Aid Foundation (CAF) and the University of Bristol's Centre for Market and Public Organisation, states that an effective way to encourage individuals to act in a desired way is to “focus on the social”.  People are influenced by the actions of those around them and are more likely to give to charity if they perceive giving as the social norm. Focusing on the social, therefore, can include using prominent individuals to send social signals, drawing on peer effects by making acts of giving more visible to others within one’s social group, or establishing group norms around which subsequent donors ‘anchor’ their own gifts.

Company philanthropy campaigns can use these tactics. Employees are more likely to respond to a letter asking for a donation if the chief executive's signature is on it. Likewise, employees tend to give if they see their peers receiving formal recognition or additional respect for doing so.

Just three days after Modi called on the well-off to give up their LPG subsidy, Gautam Adani, an Indian business tycoon and the chairman and founder of Adani Group responded.  Adani nudged his employees to participate in the Give It Up campaign by signing a letter to all of the group’s nearly 8,000 employees in India.  The letter asks employees to opt out of the LPG subsidy, with the form for opting out attached. The company’s administration and human resources teams were also put on notice to support employees who signed the form to opt out.  Similarly, Tata group Chairman Cyrus Mistry endorsed the campaign, and 200 of the 1,500 distributors in Maharashtra state (which includes Mumbai) have chosen to opt out of the subsidy, with more are expected to follow suit. 

The endorsements from Adani, Mistry, and the LPG distributors focus on the social by making the action to forfeit the subsidy visible to others and by normalizing the idea.

Make it Easy

The behavioral insights study also suggested that an effective way to increase giving is to “make it easy”. If an organization wants to encourage someone to do something, it should make it as easy as possible for them to do so. This includes setting defaults that automatically enroll staff into giving schemes (with a clear option to decline), providing the necessary forms and paperwork to employees along with the request to donate, and setting up donation boxes or online systems that streamline the giving process.

The Government of India has made giving up an LPG subsidy extremely easy. A customer can log on to the following sites: mylpg.in, giveitup.in, ebharatgas.com, indane.co.in, hpgas.com to register his/her account details and selecting to decline the subsidy. Those not wanting to go online could give up subsidy of their LPG connection by sending a text message. For example, Bharatgas customers can text GIVEITUP to 7738299899.  Customers also have the option of downloading an app to give up their subsidy.
 
Those who are less inclined towards electronic processes, can go to their agency and fill out a form to give up their subsidy. The form is available at any distributor, and the customer simply needs to provide their consumer number and signature. The rest will be taken care of by the distributor. Finally, individuals can give their consumer number to the “gas delivery boy” who will provide them with a form and who can give it to the distributor.
 
Moreover, public sector oil marketing companies (OMCs) have given consumers the option to convert their current domestic LPG connection into a non-subsidized domestic connection.

This is not the first time a national leader has asked people to sacrifice for the greater good.  The second Prime Minister of India, Lal Bahadur Shastri, asked citizens to give up one meal a week so that the country could tackle food its shortage, and U.S. President John Kennedy famously challenged Americans to, "Ask not what the country can do for you... ask what you can do for the country."  Modi's request that people give up their LPG subsidy might not be quite as dramatic, but he is appealing to a basic sense of civic duty and compassion for the poor. The LPG subsidy was meant to help people below the poverty line, to make cooking fuel affordable.  Even though the subsidy is untargeted, that does not stop people and businesses alike from giving it up— especially when it’s normal and so easy to do so.
 

Photograph by Meena Kadri, via Flickr
 
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