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Adhikari and Bhatia 2009 (NREGA Wage Payments Can We Bank on the Banks).pdf

Adhikari and Bhatia 2009 (NREGA Wage Payments Can We Bank on the Banks).pdf

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INSIGHT
january 2, 2010 vol xlv no 1
EPW
 
Economic & Political
Weekly
30
This article has benefi ted from useful inputsfrom survey coordinators (Sunil, Kalyani,Shiva and Umashankar) and the entire survey team. We value Jean Drèze’s guidance andsuggestions, which have given shape to thisresearch. Special thanks are due to ReetikaKhera, Anish Vanaik and Siddhartha forhelpful comments. The fi eldwork wasconducted under the auspices of the KrishnaRaj Summer Programme at the Centre forDevelopment Economics (Delhi School of Economics).Anindita Adhikari (
aninditaadhikari@gmail.com
) is with the ASER Centre, New Delhi andKartika Bhatia (
kartikabhatia@gmail.com
) isat the Toulouse School of Economics, France.
NREGA Wage Payments:Can We Bank on the Banks?
Anindita Adhikari, Kartika Bhatia
The government of India hasshifted from cash payment of wages under the renamedMahatma Gandhi EmploymentGuarantee Scheme to settlementthrough bank accounts. This hasbeen done in order to preventdefrauding of workers and to givethem greater control over theirwages. Has this been achievedafter the switch? Based on asurvey in December 2008 in oneblock each in Allahabad (UttarPradesh) and Ranchi (Jharkhand)districts, this article probesquestions related to payment of wages through banks.
1 Introduction
T
he switch from cash to bank pay-ments of wages under the NationalRural Employment Guarantee Act(
NREGA)
has been acclaimed by the gov-ernment of India as the “world’s largestever fi nancial inclusion scheme”. But hasthis switch really served as an effectivecheck against the embezzlement of 
NREGA
 wages? Has the siphoning off by interme-diaries ceased? Have workers really gained greater control over their wages?This article probes these questions on thebasis of fi ndings from a survey conductedin December 2008.Critics have often decried public worksprogrammes on the grounds that they areeasy prey to corruption. The
NREGA
, beforeand after its inception, has also been a tar-get of such criticisms in spite of varioustransparency safeguards being built intothe Act.
1
1.1 Rationale for Bank Payments
Prior to the introduction of bank pay-ments,
NREGA
wages were paid in cashbased on the entries made in the “musterroll” (or attendance sheet) by the imple-menting agency – in most cases the grampanchayat. The muster roll, preparedevery week, is a record of the number of days worked and wages due to eachlabourer. After the muster roll is submittedto the block offi ce, funds are transferred tothe gram panchayat account. The money isthen withdrawn by the implementing agency to make cash payments to the labourers.Under this system of cash payments, theimplementing and payment agencies arethe same, i e, wages are paid by the sameagency that maintains the record of at-tendance and dues. This makes embezzle-ment of funds easier, as the money frominfl ated or fake muster roll entries madeby a corrupt ofcial will come into his ownhands. In order to monitor wage paymentsunder this system, the
NREGA
includes arange of transparency measures to max-imise vigilance of public funds by workersthemselves. These include public disbursalof wages (which also creates an opportu-nity for the public scrutiny of muster rolls),maintenance of workers’ “job cards” (ena-bling them to check their payment detailsat any time), and regular social audits. De-spite being mandated by the Act, thesechecks have often been fl outed and irregu-larities in wage payments have been wide-spread. Investigating these irregularitieshas given rise to a widely-held view thatthe vulnerability of the programme to di-version of wage funds is born from a sys-tem where the implementing agency andpayment agency are the same. Also, a sys-tem where cash passes through differenthands before it reaches the workers wasmaking it easy for contractors and middle-men to collude with gram panchayat offi -cials to divert wage funds.Against this backdrop, the main reasonsfor introducing bank payments
2
(or, insome areas, post offi ce payments) of 
NREGA
wages were presented as follows.First, by making an independent fi nancialinstitution, which is not involved in theactual implementation of the
NREGA
, re-sponsible for paying wages to workers,there is a distinct separation of the imple-menting and payment agencies. It isbelieved that this will de-incentivise theimplementing agencies from fudgingmuster roll entries, as they no longer haveaccess to funds at the time of the paymentof wages. Second, by paying workersdirectly through their bank accounts, thepossibility of middlemen laying theirhands on the wages of workers will alsobe made more difcult. Third, workerswill be initiated into the organised bank-ing system which will then pave the way for developing a habit of saving in thefuture. Fourth, this new system was alsoexpected to lead to more transparency inrecord-keeping, as banks generally main-tain fairly good records.
1.2 Motivation for a Survey 
Despite these seemingly clear advantagesof the system of bank payments, it is impor-tant to recognise that the banking system
 
INSIGHT
Economic & Political
Weekly
 
EPW
january 2, 2010 vol xlv no 1
31
does not function in a vacuum and is vul-nerable, in some respects, to the samepressures as the system that preceded it.Social hierarchies which bind workers in afeudal and exploitative relationship withgram panchayat ofcials and contractorsare deep-rooted rural realities, which arebound to exert their inuence on the sys-tem of bank payments as well. Findingsfrom previous surveys and social audits inOrissa in 2007 as well as in Deogarh(Jharkhand) in October 2008 have shownthat even wage payments through banksare not free of the maladies which affl ict-ed the previous system of payments: cor-ruption, fraud and misconduct (Vanaik and Siddhartha 2008; Drèze and Khera2008; Kar 2009).The most disturbing ndings haveemerged from a recent social audit of fi vegram panchayats in the Karon block of Jharkhand’s Deogarh district, where theearlier nexus of corruption between con-tractors and gram panchayat offi cials nowincludes banks as well.
3
In a case of bla-tant collusion, in the Ranidih gram pan-chayat, it was found that contractors hadbeen siphoning off funds from the ac-counts of 
NREGA
workers in connivancewith the offi cials of a cooperative bank.The workers’ accounts were brazenly manipulated by the contractors; in fact,many workers were completely unawarethat an account had been opened in theirname! Other irregularities included ask-ing
NREGA
workers to sign withdrawalslips in bulk (for the purpose of “proxy withdrawals” in their name), and extort-ing money from workers after they with-drew money from the bank. For instance,in the Ganjebari gram panchayat of thesame district, the local postmaster hadtaken signatures of the
NREGA
workerson blank withdrawal slips, in collusionwith a contractor, making it possible forthem to extract money from their postoffi ce accounts.As this experience illustrates, the systemof bank payments is not a fool-proof pro-tection against corruption, and the groundrealities can be quite different from whatone might expect from the positive argu-ments presented earlier. However, bank payments certainly offer useful opportuni-ties for tightening the noose. In order toexplore these issues more deeply, determinewhether Deogarh was an isolated case orthe manifestation of a more widespreadproblem, and more generally to evaluatethis new system of 
NREGA
wage payments,a survey focusing specifi cally on bank payments was undertaken.
1.3 Survey Method
Our survey covered two blocks each inAllahabad district (Uttar Pradesh) andRanchi district (Jharkhand). In Allahabad,the sample blocks wereKarchana and Shankar-garh. Karchana is wellconnected to Alla-habad city and, beingclose to the Ganga, ispredominantly agri-cultural land. In com-parison, Shankargarhis relatively remoteand has a primarily rocky terrain, with silica mining and rock breaking as the main activities. In Ranchidistrict, both sample blocks (Mander andAngara) are relatively accessible from thecity of Ranchi. Mander lies in the plains,with most land under agriculture. Angara,on the other hand, has a hilly terrain, andsome Maoist activity is palpable here.As mentioned earlier, gram panchayatsare the main implementing agenciesunder the
NREGA
. In Allahabad district, theimplementation of the
NREGA
is largely carried out by the sarpanch and the pan-chayat secretary on behalf of the grampanchayat. In Jharkhand, however, thereare no gram panchayats (because grampanchayat elections are yet to take place),and the
NREGA
is primarily implementedby the block administration with thepanchayat secretary and the
abhikarta
 (de facto entrepreneur).
4
The absence of gram panchayats and other grass rootsinstitutions in Jharkhand has given spaceto private contractors and middlemen. Theblock administration and panchayat secre-tary, incapable of implementing and moni-toring
NREGA
works on their own, oftencontract them out (in effect) to private par-ties. Since there is no role for private con-tractors in
NREGA
, these private playerscan only make a profi t through swindling.Two payment agencies (i e, specicbanks, or post ofces where applicable)were selected in each block (see Table 1).From these, ve “Payment Orders” (themost recent) for worksites in differentgram panchayats were chosen for verifi ca-tion.
5
Thus, the survey covered fi ve grampanchayats in each block.
6
Twenty work-ers were randomly selected from eachpayment order, and banks were asked tofurnish their account details.Banks were also asked to share thedetails of the gram panchayat accounts,for the sample gram panchayats. Theverication process involved interviewingas many as possible of the 20 workers se-lected in each gram panchayat, followedby a public verifi cation of all the entries inthe payment order. Awareness generationaround the system of bank payments wascarried out simultaneously.
1.4 Socio-economic Background
We interviewed a total of 259 workers, of which 201 (78%) were men and 58 (22%)were women. This male-dominated sam-ple refl ects the fact that the paymentorders we based our sample on had a highproportion of males. That, in turn, ispartly due to the relatively low participa-tion of women in
NREGA
in the sample dis-tricts. Another reason, however, is that the
NREGA
workers listed on the paymentorders are those who have a bank (or postoffi ce) account. We often found that wom-en workers did not have an account intheir name and received their wagesthrough their husbands’ accounts. To thatextent, there is an under-representation of women workers in our sample.As one might expect, education levelsamong
NREGA
workers were relatively low.Almost half (45%) of the sample workerswere illiterate, with only 21% having com-pleted class 10. In Allahabad district, castedivisions were palpable with spatial segre-gation also clearly visible. Members of theupper castes were economically better off,
Table 1: Sample Payment Agencies
District Block Sample Payment Agencies
Allahabad Karchana Bank of Baroda, Eastern Uttar PradeshGrameen Bank (Panchdeora, Bhaderwa andBharaon branches)Allahabad Shankargarh Bank of BarodaBank of Baroda, Eastern Uttar PradeshGrameen Bank (Lohgarh and Bashara Uperhar branches)Ranchi Angara Jharkhand Grameen BankPost office (Jonha and Tati Silway branches)Ranchi Mander Ranchi-Khunti Central Cooperative BankUnited Bank of India
 
INSIGHT
january 2, 2010 vol xlv no 1
EPW
 
Economic & Political
Weekly
32
with the sarpanch and panchayat secre-tary also belonging to this group. Theblocks surveyed in Ranchi district had apredominantly tribal population.
2 Banking in Survey Districts
In both survey districts (Allahabad andRanchi), accounts have been opened in avariety of banks such as grameen banks,cooperative banks, nationalised banks andin some cases even in post offi ces (Table 1).Most (87%) of our survey respondentswere bank account holders, while 13% (allin Angara block) had their accounts in apost offi ce. In Allahabad there has been arecent trend towards shifting accounts of 
NREGA
workers from post offi ces to banksdue to a charge levied by post offi ces fortransfer of 
NREGA
funds.
7
2.1 Opening of Accounts
In the survey districts, the accounts werebeing opened proactively by gram panchayatand bank ofcials, but in a haphazard waresulting in many workers being left out.The common practice is for gram pan-chayat offi cials or contractors to takegroups of 
NREGA
workers to the bank to gettheir accounts opened. We found that 44%of our sample workers were accompaniedby a gram panchayat offi cial at the time of opening an account, and 16% had been ac-companied by a contractor. Only 28% of the sample workers had opened their ac-counts on their own. Thus, close to 90% of sample workers were present at the bank at the time of opening of their accounts,and the rest were not. Many (40%) of theworkers had opened their accounts oversix months prior to the survey, and had de-veloped some familiarity with banking pro-cedures. In the worst cases, they had noknowledge that there was an account intheir name. For instance, in Mandro grampanchayat of Mander block, many peoplewere unaware that their accounts had beenopened. These irregularities refl ect the ab-sence of strict norms and guidelines for theaccount opening process, as well as a lack-adaisical attitude on the part of gram pan-chayat and bank offi cials.
2.2 Type of Accounts
Ideally there should be a separate accountfor each person listed on the job card, andin the case of joint accounts, all members– including women – should be included.In the absence of this, women workersmay be deprived of the opportunity to col-lect and keep their own wages. In our sur-vey, a large majority (89%) of workers hadindividual bank or post ofce accounts,and the rest (11%) had joint accountswhich included the names of female mem-bers of the household. However, this is nota confi rmation that women were alwaysproperly included in the banking system(as individual or joint account holders),since anyone listed in a payment order isnecessarily an account holder. As mentionedearlier, some women were paid throughtheir husbands’ account. An instance of “exclusion” of women workers was foundin Bhaderwa gram panchayat, Karchanablock, where some women workers com-plained of being shooed away from the bank when they went to open their accounts. Asif this was not enough, they were asked tobe satisfi ed that accounts were beingopened in the name of their husbands.In a clear breach of the Reserve Bank of India’s directive that banks should openzero balance, “no frills” accounts for
NREGA
 workers, we found that about half of our

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