by Vivek Kaul
The second point is that the subsidy system, as it currently prevails, benefits a small number of people who are a part of the chain that is used to distribute the subsidy. In the case of food subsidies, these are the people who own the fair-priced shops that make up the PDS that is used to distribute foodgrains as well as kerosene. Until now, they have had a good time by selling a major part of the foodgrains as well as kerosene to the black market and making easy money in the process. Their interest is in ensuring that the current system does not change and that the status quo remains. This is also in the interests of the bureaucrats who supposedly monitor these shops that make up the PDS.
As Seetha points out: “In Chandigarh, ration shop owners who found their business gone overnight were at the forefront of fuelling opposition to the cash transfers.”811 These rentiers of the system have a huge nuisance value. And dealing with this nuisance value will be a very important and difficult part of ensuring that the cash transfer system is implemented across the country.
A second pilot project has been run in Puducherry. Here, the results are a little better than in Chandigarh. The people in the union territory were earlier unhappy with the poor quality of the rice that they used to get from the FCI through the ration shops. The cash transfer gives them an opportunity to buy better quality rice. Nevertheless, at the same time, the cash transfer is not enough to buy all the rice that they consume during the course of the month.
The pilot project in Puducherry also started in September 2015. The cash transfer has been set at Rs. 24.05 per kilogram of rice. This means that an AAY-card holder gets Rs. 841.75 per card (35 kg multiplied by Rs. 24.05), whereas non-AAY cardholders get Rs. 120.25 (5 kg multiplied by Rs. 24.05) per family member.812 The trouble is that, at Rs. 24.05 per kilogram of rice, the money is clearly not enough.
As Seetha points out: “The market price of the poorest quality broken rice is around Rs. 30 a kg while the subsidy amount is set at Rs. 24 a kg. Unbroken rice costs anywhere between Rs. 35 and Rs. 45 a kg.”813 This is something that people have been complaining about. Nevertheless, they are happy that the days of the FCI rice are over.
Another problem that has arisen is that of failed payments into the bank accounts of people. This is something that the experiment in Chandigarh is facing as well. As Seetha writes: “The administration admits [that] there are more than a thousand failed transactions every month, starting with over 6,000 in the first month (September 2015) to over 2,000 in May 2016. Unfortunately, the administration comes to know about failed transactions and the reasons quite late. ‘There have been 18,000 failures since September; it has taken us months to know the reason. Without knowing why they failed, how can I rectify the problem?’ [emphasis original] asks P. Priytarshny.”814 (Priytarshny is the Additional Secretary-cum-Director of the Department of Civil Supplies and Consumer Affairs in the Puducherry government.)
In one particular case, the money was going into the Grameen Bank account of a beneficiary. The beneficiary was unaware of this. He had been checking the account which he had informed the Civil Supplies Department about. This is a problem which is related to the Public Finance Management System–National Payments Corporation of India interface. Basically, money goes into the account that is the latest to be seeded with Aadhaar without the knowledge of the beneficiary.815
The bureaucracy in Puducherry is tackling these problems. And therein lies a lesson as well. For the cash transfer programme to work, the state-level bureaucracies will have to take an active interest in sorting out the initial problems. Also, it would mean cooperation from the banking system as well. The people into whose accounts money is going need to be given ATM cards so that they can withdraw money from ATMs instead of spending a lot of time going to the bank in order to withdraw money to buy the rice and wheat that they need.
There is another lesson that we can learn from Puducherry. Unlike in Chandigarh, in Puducherry there was no problem in identifying the beneficiaries. This was because the beneficiary lists as well as the PDS have been computerised for more than two years now. This wasn’t the case in Chandigarh. Hence, there is no point in starting cash transfer programmes unless computerised systems are in place.816 The larger point being that, as usual, implementation will be the key, and that is something that the various Indian governments over the years have never really been good at on the whole.
Furthermore, for the cash transfer programme to work, state governments will also have to take an active interest. Just the central government pushing it won’t work. After all, a cash transfer system won’t evolve overnight and can take many years to implement. It would require huge commitment levels from the politicians at the national level. This would mean not just looking at short-term electoral interests but also keeping in mind what is good for the country in the long run. And therein, sad to say, lies the basic disconnect.
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In fact, cash transfers need not work at just the distribution end of the foodgrains distributed through the PDS. In August 2016, the Odisha government decided to move on to cash transfers directly into bank accounts for the rice paddy acquired from farmers in 134 blocks.817
For this, the government has made seeding Aadhaar card numbers into bank accounts mandatory. As more and more Aadhaar numbers are linked to bank accounts, the state plans to move towards cash transfers for food security, social welfare as well as employment guarantee schemes.818
In fact, cash transfers are to be introduced across more and more government schemes, and for this the Aadhaar number needs to be seeded into bank accounts, establishing the unique identity of the beneficiary. An Aadhaar card is necessary in order to identify the right beneficiary. This helps in eliminating bogus identities, through which people can claim subsidies. So, for the government to be able to transfer money to individuals, the Aadhaar card needs to be linked to a bank account.
A lot of progress has been made as far as the issuance of Aadhaar cards is concerned. As the Economic Survey of 2015-2016 points out: “The current government has built on the previous government’s support for the Aadhaar programme: 210 million (21 crore) Aadhaar cards were created in 2015, at an astonishing rate of over 4 million (40 lakh) cards per week. 975 million (97.5 crore) individuals now hold an Aadhaar card – over 75 per cent of the population and nearly 95 per cent of the adult population.”
So the coverage of Aadhaar is more or less universal, and those who still remain to be covered should end up being covered very soon. But the same cannot be said about bank accounts. Nevertheless, rapid progress is being made on this front as well under the Jan Dhan Yojana Scheme.
As of August 10, 2016, 23.6 crore bank accounts had been opened under the Jan Dhan Yojana scheme. The accounts have a total balance of Rs. 41,723 crore.819 This is a huge jump from the 5.3 crore bank accounts that were operational as of the end of September 2014. Also, nearly 3 lakh accounts were opened per day under Jan Dhan Yojana in 2015.820 Even after this rapid progress, a lot still remains to be done on this front.
As the Economic Survey of 2015-2016 points out: “Despite Jan Dhan’s record-breaking feats, basic savings account penetration in most states is still relatively low – 46 per cent on average and above 75 per cent in only 2 states (Madhya Pradesh and Chhattisgarh).” The Economic Survey was published in February 2016. Given that some time has elapsed since then, the figures quoted above would have improved since then. What also does not help is the fact that only 27 per cent of villages have a bank within a distance of 5 kilometres. This means that last-mile connectivity is a problem. This problem should be addressed to some extent with the RBI issuing fresh licences for 11 payment banks and ten small banks. It can also be addressed by taking advantage of India’s very good mobile penetration levels and making greater use of mobile payment technology.
Hence, the point is that rural India is still not ready for cash transfers. At least, not yet. This means that replacing subsidies with cash transfers in rural areas, however much sense that makes, will have to wait.
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The economists Ashok Gulati and Pritha Banerjee feel that, instead of pricing urea at lower than its real price, the government should simply make a cash transfer of Rs. 6,000-7,500 per hectare. This amount has been obtained by taking the fertilizer subsidy amount of more than Rs. 1.1 lakh crore (the amount stated by the government plus the arrears that remain unpaid) and dividing it by the 140 million hectares of net sown area. This works out to around Rs. 7,857 per hectare. Nevertheless, given that the subsidy amount has been outstanding for the past few years, an approximate figure of around Rs. 6,000-7,500 per hectare could be taken as the subsidy amount.821
At the same time, it needs to be ensured that small and marginal farmers get the bulk of the subsidy. Gulati and Banerjee suggest that the subsidy paid through cash transfers should be higher for farmers with less than four hectares of land. The trouble is that, given the state in which land titles are in India, it is very difficult to identify precisely who the small and marginal farmers are.
A better way out of this, at least till cash transfers become the order of the day, is to follow the domestic cooking gas model and limit the number of bags per farmer. This would ensure that the small and marginal farmers get the urea that they require at a subsidised rate. At the same time, the larger farmers would have to pay the market rate for the urea that they buy. This could be carried out through a biometric pointof-sale authentication. This approach has been tried successfully for foodgrains as well as kerosene in Andhra Pradesh. Having a biometric authentication would also ensure that the subsidised fertilizer doesn’t get diverted into the black market and reaches those it is meant for.
The Economic Survey of 2015-2016 calls it BAPU, or Biometrically Authenticated Physical Uptake. In fact, this could be a viable solution in rural areas until they are ready for cash transfers. The average state preparedness for BAPU is 12 per cent. But some states, like Andhra Pradesh, at 96 per cent (the new Andhra Pradesh, since Telangana’s preparation is abysmally low, at 0.1 per cent), and Chhattisgarh, at 42 per cent, are reasonably well prepared for it.
The major challenge here would be to get point-of-sale biometric machines installed at shops which sell the subsidised fertilizer. Nevertheless, this is something that the local government can easily deal with.
Having said that, financial inclusion as well as mobile penetration in the larger cities is much better today. And that is where things need to start. Given this, the Shanta Kumar Committee has recommended that cash transfers be introduced by starting with the “large cities with more than 1 million [10 lakh] population, extending it to grain-surplus States, and then giving [the] option to deficit States to opt for cash or physical grain distribution”. The Committee has also said that the “cash transfers can be indexed with inflation” and “given to the female head of the family”.
This, I believe, is the right way forward.
xviii The pie chart figures add to slightly more than 100 per cent due to rounding-off errors.
xix A period of three consecutive years.
xx Assuming that the data is arranged in increasing order of magnitude, the first (and lowest) decile is the ten per cent level. Thus, the third decile represents the thirty per cent level, and so the bottom three deciles represent the lowest thirty per cent of the data.
13.THE RIGHT TO WORK?
To dig holes in the ground, paid for out of savings, will increase not only employment, but the real national dividend of useful goods and services. It is not reasonable, however, that a sensible community should be content to remain dependent on such fortuitous and often wasteful mitigations… once we understand the influences upon which effective demand depends.
– JOHN MAYNARD KEYNES
In May 1950, the writer Mulk Raj Anand had a conversation with BR Ambedkar. During the course of this conversation, Ambedkar described capitalism as the “dictatorship of a private employer”. In the same conversation, Anand asked Ambedkar, who happened to be the Chairman of the Constitution Drafting Committee, which had drafted the Constitution of the newly Independent India, why the right to work had not been made a fundamental right.822
To this, Ambedkar replied: “I was only one of the members of the drafting committee.”823 In Independent India, the right to work was a part of the Directive Principles of State Policy. As per Article 37 of the Constitution, the provisions contained in the Directive Principles were not enforceable by any court. At the same time, the Article also stated that these principles were “fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws”.
Hence, it was the responsibility of the state to strive to achieve these principles. Some of the principles were as follows:
a) Citizens, both men and women equally, have the right to an adequate means of livelihood.
b) There should be equal pay for equal work for both men and women.
c) Children should be given the opportunities as well as the facilities to develop in a healthy manner.
d) The right to work, to education and to public assistance, in certain cases, should be guaranteed to all.
e) There should be a uniform civil code for all citizens.
A step towards the legal enforcement of the right to work was taken by the passage of the National Rural Employment Guarantee Act (NREGA). Parliament passed this Act on August 23, 2005. It was notified through the Gazette of India (Extraordinary) Notification dated September 7, 2005. A little over four years later, on October 2, 2009, an amendment was made to the Act. The NREGA was renamed as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
The mandate of MGNREGA is to provide at least 100 days of guaranteed work during the course of a financial year to adult members of every rural household who are willing to do unskilled manual work. The idea is to “enhance the livelihood security of the rural poor through the generation of wage employment opportunities in works, leading to the creation of durable assets”.824
The MGNREGA was launched in phases. From February 2006 onwards, it was first implemented in 200 districts. It was then extended to 113 more districts on April 1, 2007, and a further 17 districts on May 15, 2007. With effect from April 1, 2008, the remaining districts were also brought under the Act.
Currently, the scheme covers 625 districts in the country with a substantial rural population.825 Here are some of the relevant characteristics of the scheme:
a) The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) was created as a means to implement the Act.
b) The various state governments which actually implement the scheme have the power to make rules and amend the state-specific schemes.
c) The scheme is self-selecting, i.e., only those who want to do manual unskilled work can volunteer for it.
d) The Act provides a legal guarantee for wage employment. Work has to be allocated within 15 days of an individual submitting an application or “from the date when work is sought in case of an advance application, whichever is later”.826
e) If work is not provided within the sanctioned period, an unemployment allowance needs to be paid. This allowance amounts to 25 per cent of the minimum wage for the first 30 days and 50 per cent of the minimum wage after that. 827 f) If the employment is provided beyond a five kilometre radius, the individual has the right to a 10 per cent extra wage.
g) Any decision regarding the choice of work to be undertaken needs to be made in open assemblies of the Gram Sabha. The Gram Sabha is basically the meeting of all adults (people over 18 years of age) in an area covered by the Panchayat. The Gram Panchayat needs to ratify the plan. At the same time, the Gram Sabha has the right to monitor the execution of the work being carried out within the Gram Panchayat.
h) As far as possible, the work which is carried out under the MGNREGS needs to be performed manually without the use of any labour-displacing machines. The idea, of course, is to use India’s natural comparative advantage of unskilled and low-skilled
labour for work. In fact, the Act does not allow contractors to carry out any work.
i) Every household applying for work needs a job card. Any adult in the household can apply for a job card. A job card contains a list of names of the members of the household along with some basic demographic information as well as blank pages in order to record the work carried out and the payments made.828 The process of verification for this is carried out by the Gram Panchayat, which basically needs to look into whether the applicant lives locally. At the same time, it needs to check whether the applicants are adults.
j) It is the job of the Gram Panchayat to conduct periodical surveys to assess the demand for work. It needs to develop a shelf of projects and the order in which they need to be taken up. This needs to be submitted to the state government. In fact, as per Sections 16(3) and 16(4) of the Act, every Gram Panchayat needs to make a development plan. The development plan needs to have the following components: 1) An assessment of the labour demand in the panchayat; 2) Identification of the works which will be enough to meet the labour demand; 3) Estimation of the cost of the works as well as the wages; 4) Estimation of the benefits in terms of the employment generated as well as physical improvements.829
While making the development plan, the Gram Panchayat needs to ensure that the estimated number of projects be much more than the estimated demand. The development plan should estimate the benefits of the employment that it generates in terms of person days. It should highlight the physical improvement that is envisaged, measurable in specific units. It should also highlight the benefits to the community.830
All such plans from across the state are aggregated, and the state government is expected to submit a labour budget to the central government by December 31 of every year. On the basis of this, followed by some discussion, the central government allocates money to the state for the MGNREGS for the next financial year.