Indian Express, 19 August 2005
The National Rural Employment Guarantee Bill tabled by the UPA in parliament is the most ambitious anti-poverty programme in the history of India. Will the Employment Guaratee Act achieve its laudable goals and reduce poverty among the poorest of the poor? Or, will it become the mother of all scams, milking the taxpayer to line the pockets of corrupt bureaucrats, politicians, contractors and the village elite?
Only if the scheme is strictly honestly implemented and extremely well governed does it have any hope of becoming a genuine anti-poverty programme. The cynicism of those who believe it will be the biggest ever scam will have to be disproved by excellent governance and not merely well-meaning idealism. Is may not be enough to rely on the Right to Information Act that is hoped to give enough empowerment to the rural poor to do the EGA right. The government needs to be extremely watchful, appoint independent monitoring agencies, use the media and the public to the hilt and take harsh action against officers in case of misuse of the scheme.
So big has been the hurry to introduce the EGA, that the UPA has not even delayed it enough to examine the difficulties in the implementation of the Food for Work programme which it introduced last year in 150 most backward districts as a precursor to the EGA. Consequently there has been no time to learn lessons or make improvements.
There are many things that can go wrong in the implementation of the EGA.
1. The EGA has no "allocated" funds. It is like a bottomless pit. Whichever project can be shown to be an EGA project will have to be funded by the central government. Does the central government have the wherewithall to check corruption in the remotest of remote villages across the country? As the Indian Express found a corrupt officer "created" schemes where none existed, forging the signature of a senior officer and using the scheme to amass wealth for himself.
2. In theory, an Employment scheme is the best anti-poverty programme among the category of anti-poverty programmes, most of whom do not work very successfully. In theory, it is only the very poor who come to do unskilled physical work, and when they get better off, they stop coming. This is the basis of the logic on which the scheme is extended to all, and not merely to those who hold BPL cards and are below the poverty line.
In practice this means that one and all in the village can get employment under the programme. The Maharashtra experience has suggested that it is the better networked and thus relatively better-off in the village who get work on locations closest to the village. This pushes the old and weak to far away areas that are less accessible.
Also, considering that extent of disguised unemployment among one and all, even the owners of land-holdings who have more resources and are in a better position to approach the local administration, they often get better deals than the poorest of the poor do.
3. The minimum wage at Rs 60 may sound very low. Yet, when people are so poor that they are willing to work for less, the contractor pays them less and pockets the difference, sharing it with his friends. As the Indian Express reported early this year from Mayurbhaj, one of the 150 backward districts with an 80 percent poverty rate, workers were officially being paid Rs 50, but actually received only Rs 30. This was as much as they earned when they worked as day labourers and was thus the price at which they were willing to work. This meant that 40 percent of the wage component of the scheme was being pilfered.
The irony is that if the higher wage norm is actually implemented correctly, it distors labour markets. The farmer who was willing to pay Rs 30 to hire 10 workers can no longer afford to do so. Raising wage levels in a village can actually raise unemployment.
In addition, by providing people employment within the village itself, it reduces the migration to urban areas, reducing labour supply there. It raises wages in urban areas and encourages use of machines wherever possible.
4. A fourth manner in which corruption has been found to be rampant has been through false muster rolls. One muster roll is prepared of those who actually work and another one, much longer, and with names of the dead, the living, and uncles and aunts, of those who will be paid. The payment received by the contractor is for the official roll, the payment made is for the actual. The difference, of course, ends up lining the pockets of the corrupt.
5. The bill suggests a big role for panchayats. This helps in choosing projects that help the village and overseeing the work far better than that in a central scheme. It reduces the extent of adultration of cement and building materials, even if it cannot prevent it all-together. This is good. Further, it reduces delays in project implementation by providing free monitoring by the rural elite. But it does not prevent the chosen project to be a well on the land of the biggest landlord of the village. Nor does it prevent the road being built as one that would to lead to the Sarpanch's house. The quality, durability and choice of the "productive assets" created by such schemes has been seen to be of dubious quality in the past. Since 40 percent of the money in the EGA is to be spent on materials -- what does not reach the targeted poor by design -- in so far as the projects chosen subsidise the rich, they are a drain on the resources of an anti-poverty programme.
6. In other countries such schemes, known as "work fare" programmes replace the unemployment dole. It reduces the burden on the fisc by bringing down subsidies. For example, money spent by the government on food stamps goes down. In this manner the scheme is funded out of existing subsidy programmes for the poor. Here in India there is no initiative to fund the EGA spend out of current spending on subsidies. The government will continue to have a PDS and to run a few dozen anti-poverty programs. There is no attempt at putting full focus and state machinery behind this one programme. There would have been more pressure to make it successful if the government discontined its other programmes and funded the EGA out of the existing Rs 40,000 crore being spent on subsidies.
Making the EGA work successfully is a tall order. Unless the UPA really works hard at it, it could easily become just another one of the many darts that policy makers have thrown on poverty.
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