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Saving the Employment Guarantee Act
The 2004 Employment Guarantee Bill needs to be modified if its objective is to be realised. The critics and supporters of the programme should be able to reach a compromise on the identification of beneficiaries, coverage and wage rates. However, if the bill in its present form is passed by parliament, this cure could be worse than the disease.
drylands, water tables are falling, there is a growing scarcity of water. Whether you are a votary of big dams or tubewell irrigation or low-cost local solutions and however bitterly you may oppose each other, you cannot deny that we need to undertake a massive programme of catchment area treatment and rainwater harvesting. This is because if big dams have to live as long as planned, if they are not to silt up prematurely, we need to arrest the unbounded flow of water over their degraded catchments at every possible point. If we want to raise the rapidly falling water levels in wells and tubewells, we must impound rainwater where it falls, so that it can recharge groundwater, which is the main source of water in India today. In other parts of the country, waterlogging and floods are a major concern. Here too we need location-specific interventions to provide safe drainage for the excess water
n animated debate is raging around the Employment Guarantee Act (EGA) proposed to be enacted by parliament. While those of us who worked hard in drafting the bill are obviously disappointed by the many dilutions introduced in the initial blueprint, we should try to address some of the genuine concerns of the sceptics, and suggest a way forward for reaching a consensus on the act.
Addressing the Water Crisis
I want to begin by stating what needs to be recognised and agreed upon by everyone concerned with rural India, whatever be his or her ideological persuasion. We need to understand that we are on the verge of an impossible water crisis. In the Economic and Political Weekly
based on the principles of watershed management. Recent work shows that there is a definite solution to these seemingly intractable problems [Vijay Shankar 2004]. We must also accept that no private party working for profit is going to make the massive investments needed in these ‘public goods’. These investments have to come from the state. I see the EGA as a good way to embody these investments, which are both productive and labour-intensive. The aim has to be long-term drought- and flood-proofing, not merely short-term relief. If implemented properly, the programme has the potential to rid India of the scourge of recurrent drought and flood. The major ground for scepticism regarding state-led programmes flows from the many years of experience of this money going down the drain. No supporter of the EGA should try to deny that this is a valid concern. Those of us who live and work with the rural poor can tell you that they share the scepticism of the critics in this regard. So what do we do? We certainly cannot take the view that since the attempt has failed in the past, we should not make the attempt again. What we should try to do is to see whether there can be something new in the way we make the attempt this time around. I would like to urge that the EGA take a significant step in this direction. In the past, government employment programmes have been essentially relief works. A welfare state initiates these programmes to lower the pain of people in distress. A top-down dole. The EGA is different. It enshrines work as a right of the people. It also puts the onus on the people to demand work. Government responds to their demand. This makes a big difference. The only possible check to corruption in government works is a vigilant people. When work starts in response to a demand from the people, the chances are that people will be more involved and vigilant. I am not saying there will be zero leakage. I am suggesting that this is the only way leakages can be checked. The onus of success of the EGA is on the people themselves. It will succeed only if they are aware of it to begin with. And then active in deciding what works their gram panchayat should take up. And finally in exercising the necessary vigilance to check corruption. This is no passivity-inducing dole of a moodily munificent welfare state. It is a programme of and by the people. If they are not active, if they are not vigilant, it will not succeed. This is why parliament must also simultaneously pass
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an undiluted Right to Information Act (RIA) so that people have the requisite powers to exercise this vigilance. The EGA will be incomplete without the RIA. Grass roots people’s organisations have a critical role to play here – in mobilising people to deploy the powers inherent in their right to information. If only because political parties, whose cadre should really be doing this, have completely reneged on their fundamental responsibility towards the people in this regard.
To ensure leakages are minimised requires that the EGA be reinforced with a strong monitoring mechanism. The supremacy of the gram sabha in conducting social audit must be acknowledged here. But we must also recognise that the gram sabhas of today are often not able to effectively execute the constitutional responsibilities devolved upon them. For a certain period, that will vary from state to state, there is a need for grass roots people’s organisations to assist gram sabhas so that they may truly reflect the will of the most disadvantaged and needy sections within the village. Also to ensure that the works carried out are of the requisite technical excellence, contributing to the productive assets in the village. And so that there is complete transparency and accountability in the works carried out in all respects. A monitoring committee specially constituted for this purpose in each block should assist the gram sabha in this work. This committee must work under the jurisdiction of the gram sabha. An indicative list of those who could serve on the committee includes teachers of the village government school and the nearest government college, members of the village and block panchayat, representatives of voluntary organisations operative in the district, local journalists and other professionals, a government assistant engineer (from a department other than those involved in the work for the gram panchayat) and an officer of a nationalised bank operating in the block. Orientation programmes could be organised for the committee from time to time by the local administration with the assistance of credible and experienced voluntary organisations in the state. The committee would assist the gram sabha in monitoring the employment programme at three stages: programme formulation, during programme implementation and post-implementation. It is not
enough to ensure that works are carried out well. The first question has to be: how was it decided which public works are to be carried out in the panchayat? The decision on which works to carry out must reflect the needs and possibilities within the panchayat. Indeed, the decision should reflect these needs and possibilities within each ward of the panchayat. It should, in other words, be as locationspecific as possible. In order to ensure that this takes place in practice, these decisions must involve the largest number of people. All decisions must be taken in a series of village meetings, some of which need to be at the proposed work sites. In choice of works and site selection, preference must be given to those that benefit the economically and socially disadvantaged sections, such as women, dalits, adivasis, landless, marginal farmers, etc. Labour-intensive works (with a minimum wage to non-wage cost ratio of 60:40) must be given preference to maximise employment potential. The entire process should be as public and transparent as possible. Once the plan is made it must be presented every year for approval at a meeting of the gram sabha, specially convened for this purpose. The aspects of project implementation that the committee should monitor include decisions on labourers to be employed in a way that equity is ensured in allotting work and also in allotting work of different degrees of strenuousness. It should be ensured that no child labour is employed. Decisions on rates of payment for different kinds of work need to be worked out in a participatory manner so that everyone is aware of the basis for payment. The attempt has to be to ensure that everyone gets at least the statutory minimum wages, and that productivity norms are adhered to. The committee must see that proper work conditions prevail at the work site as per law (including specified hours of work, provisions for drinking water, rest, toilet facilities, especially for women, medical facilities, etc). And that payments of wages are made every week (or at least once every fortnight). Payment of wages must be made in a public, transparent and accountable manner either at the work site or at a public place most convenient to the largest number of labourers. Presentation of all records including muster rolls, bills, vouchers, measurement books, copies of sanctions, etc, in public meetings should be mandatory. The committee would help the gram sabha in preparing completion
and utilisation certificates of works under its jurisdiction. The monitoring committee should assist the gram sabha in each of the above tasks and suggest remedial action if necessary, including ways of improving the system in place as well as action against erring officials/people’s representatives. They would hear complaints from the members of the gram sabha and assess the veracity of the complaints. The committee will report on these to the district collector. Each gram panchayat in each block should be covered at least once in the five-year tenure of the monitoring committee in at least one of the three stages of programme formulation, implementation and post-implementation.
Fatal Flaw: BPL Conditionality
The draft of the EGA prepared by the NAC had the great merit of self-targeting. After all, only those really poor or really in need will come forward to do the kind of arduous manual labour to be performed under the programme. A potential source of leakage is automatically plugged. Limiting the benefit to those on the official below-the-poverty-line or BPL list (as proposed in the bill currently before parliament) destroys this self-selection mechanism. Indeed, this may be regarded as the fatal flaw making the programme a veritable non-starter. At the Samaj Pragati Sahayog, a grass roots initiative for droughtproofing and water security in central India’, we have over the last one decade implemented rural employment programmes across half a million acres of land in 50 of the most backward districts of Madhya Pradesh, Chhattisgarh, Jharkhand and Bihar. The experience gained through our work indicates that in many gram panchayats in India, given the provisions of the bill currently before parliament, it may become difficult to find the minimum number of people needed to complete a given work at any given time. This is because (a) the entitlement is restricted to BPL households only, (b) “household” is defined as “members of a family related to each other by blood, marriage or adoption and ordinarily residing together and sharing meals or holding a common ration card” (Clause 3 (f)), and (c) the guarantee is “subject to a maximum of one hundred days per household in a given financial year” (Schedule II, Condition 5). So the restriction is even more severe than being limited to BPL cardholders. February 12, 2005
Economic and Political Weekly
Thus, if there are three BPL cardholders living under one roof, sharing meals in one family, the total days of employment they will together be entitled to in a year will be 100 and not 300 days. In any case, BPL surveys in India lack all credibility. Many really deserving families get left out simply because they are migrant or homeless. This point needs to be particularly stressed because official estimates of poverty have recently been questioned from many other points of view as well [Sen and Himanshu 2004; Ray and Lancaster 2005 and Subramanian 2005]. Although making very different critiques of the official poverty estimates, each of these writers bring out the severe underestimation of poverty by the government. Thus, it is clear that targeting the employment guarantee to the ‘official’ poor will leave out millions of really poor people in rural India. On the other hand, it is also very well – known that there is widespread corruption in the way households get included in the BPL list. Local vested interests are able to muscle their own people into the list quite irrespective of whether they are really poor or not. Such people are highly unlikely to offer themselves to do the arduous manual labour involved in the programme. We may then be left with a situation in many panchayats where because of the restriction of the entitlement to those on the official BPL list, we may not be able to find the minimum number of people required to complete a work at any given time. We must remember that unlike many other BPL-based schemes, this is not an individual beneficiary centred programme. We are speaking here about ‘public works’ to be carried out by hundreds of labourers together in each gram panchayat at one time. Problems would be further compounded especially if allocations to panchayats for the employment programme are made on the basis of number of BPL cardholders (as in the public distribution system). Let us visualise a typical scenario that is likely to emerge. Officially, the average number of poor households in a gram panchayat in India is around 150.1 The number of those entitled to 100 days’ work would get reduced further depending on how many of the poor share one roof. Suppose on an average 1.5 BPL cardholders live together. This would mean only 100 people in a gram panchayat would each be entitled to 100 days work in a year.2 And not all of these people would like to labour, given that many of them are not Economic and Political Weekly
really poor or unemployed. The kind of works to be taken up under the programme would typically require at least 100-200 people working together at one go. So no really productive work may get done at all in many panchayats. Only in panchayats with large populations or high numbers of ‘official’ poor would any work take place.3 Particularly difficult situations are likely to emerge in the sparsely populated adivasi areas. As has been well-established [Shah et al 1998, Ch 5], adivasi poverty in India is characterised by high land-man ratios, relatively low landlessness but very poor land productivity, forcing marginal and even small farmers to depend on agricultural labour for their livelihood. Most of the ‘landed’ agricultural labourers widely reported in NSS surveys are adivasis. In many of these adivasi dominated gram panchayats there may be problems in finding enough ‘officially entitled’ people to begin public works. Meanwhile, several really poor people who could not make it to the official BPL list would be deprived of the employment they need and deserve. Apart from those who should have been on the BPL list in the first place, there are millions of families in India whose existence hangs precariously in balance around the official poverty line. In years of distress these households regularly slip below subsistence levels. Restricting the entitlement to BPL families would deprive these deserving households when they most need state support. In any case, it is difficult to visualise in practical terms how authorities would turn away non-BPL people in search of work. People who may be even migrating out of the area for employment as thousands do every year from villages in Orissa, Jharkhand, Bihar and Chhattisgarh. Not all of those who migrate belong to the BPL list especially not in years of drought. The incredible thing is that under the current employment programmes all these people are eligible for work. We have an extraordinary situation that the present employment guarantee bill could actually reduce employment opportunities for such people.4 It is not that the government has no experience of the problems the BPL list throws up. Reliance on this list was a critical reason for the disastrous performance of
one of the biggest anti-poverty programmes in India, the Integrated Rural Development Programme (IRDP). Thousands of crores went down the drain forcing the government to finally abandon the programme. It is not clear why we want a repeat of the IRDP. It is better not to have an EGA than to base it on the BPL list.
Another issue that worries the sceptics needs to be addressed. This is the concern that paying minimum wages will draw labour away from agriculture and/or make it unviable, since market wages are generally much lower than the statutory minimum. My own response would be to ask: do we want, therefore, to condemn the poorest in India to eternal poverty? And why do we use different standards for urban and rural, organised and unorganised workers? There can be no compromise with the payment of statutory minimum wages as per the Minimum Wages Act, 1948. This would, in any case, be contrary to rulings of the Supreme Court as in the 1982 Asiad case. But in a spirit of conciliation and making the EGA work, could we consider the suggestion that the employment guarantee be switched off during the peak agriculture season in each area, when demand for labour in agriculture (and potential conflict with the peasantry) is at its highest?
Finally to the issue of fiscal burden. Again, my own view is that national priorities must be biased in favour of ending the suffering of the poor during droughts and floods. Spending around 1 per cent of GDP for drought- and flood-proofing Indian agriculture must be regarded as a reasonable investment especially when in recent years we have had millions of tonnes of foodgrain rotting in the godowns of the Food Corporation of India 25-36 per cent of which has found its way into the open market or exported out of the country in the last three years (see the table). Why can’t we use this grain instead to support the EGA? Investments under the EGA will also help continuously replenish
Table: Exports and Open Market Sales as Percentage of Rice and Wheat Offtake, 1996-2004
1996-98 0 1998-99 3 1999-00 20 2000-01 16 2001-02 33 2002-03 36 2003-04 25
Source: Bulletin of Food Statistics, Ministry of Food, Government of India, various issues.
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these stocks. In fact, these investments are absolutely essential to sustain agricultural growth in India, which has just had its worst decade since independence. After all, the single most important factor contributing to the dismal performance of Indian agriculture in the 1990s was the decline in public capital formation. This is particularly true of the areas left untouched by the green revolution or those where this strategy has proved a failure. In states with plentiful rainfall such as Chhattisgarh, Jharkhand and Orissa, for instance, we have the cruel paradox of thousands of families migrating in search of work every year, when an appropriate farming strategy backed by massive rainwater harvesting could bring about an agricultural revolution there. Work has already started in this direction and the EGA could add great momentum to this drive. But again to make the opponents play ball, could we agree to begin applying EGA first only to the 150 most backward districts identified by the Planning Commission? This could be where the National Food for Work Programme is currently under way. This is something the government is already committed to. It
could then be gradually extended to the whole country within an agreed time frame, knowing that the need for an employment guarantee will decline over time in each EGA area. The fiscal burden is, therefore, not for all time to come. And if it is larger in years of crisis, that is how it must be. Extend it gradually across the country over the next 10 years if you find five too short. But please do not pass the completely diluted version of the Act currently before parliament. That cure would be worse than the disease itself. -29
the gram panchayat area. Every gram panchayat shall, after considering the recommendations of the gram sabha and the ward sabhas, prepare a development plan and maintain a shelf of possible works to be taken up under the Scheme as and when demand for work arises”. Clause 17 adds: “the gram sabha shall monitor the execution of works within the gram panchayat”. Thus, works are to be taken up in each gram panchayat area. There may then be many panchayats where no work takes place. 4 The existing Sampoorna Grameen Rozgar Yojana and the National Food for Work Programme are to be merged into the New Rural Employment Guarantee Programme
1 The latest official estimates of poverty in India are based on the 55th Round NSS data, which throw up a figure of 190 million rural poor in 1999-2000. At an average family size of five, this gives us 38 million rural poor households. There are 2.35 lakh gram panchayats in India. 2 To understand the absurdity of the provisions under the current bill, consider a family with four BPL cardholders living under one roof. If all four of them apply for employment, within 25 days they will be told that there is no more work available for them in the current financial year as their quota of 100 days is over. 3 Let us remember that according to Clause 16 of the EGA “the gram panchayat shall be responsible for identification of the projects in
Ray, R and G Lancaster (2005): ‘On Setting the Poverty Line Based on Estimated Nutrient Prices’, Economic and Political Weekly, January 1. Sen, A and Himanshu (2004): ‘Poverty and Inequality in India’, Economic and Political Weekly, September 18 and 25. Shah, M, D Banerji, P S Vijay Shankar and P Ambasta (1998): India’s Drylands, Oxford University Press, New Delhi. Subramanian, S (2005): ‘Unravelling a Conceptual Muddle: India’s Poverty Statistics in the Light of Basic Demand Theory’, Economic and Political Weekly, January 1. Vijay Shankar, P S (2004): Waterlogging Problem in North Bihar: Towards a Solution, Bagli, Samaj Pragati Sahayog (mimeo).
Summer School in Mathematical Finance, April 2005
An intensive weeklong summer training school in Mathematical Finance is planned from Monday April 4 to Saturday April 9, 2005, to be held in IGIDR Mumbai. The topics covered will include A Review of Probability Theory and Stochastic Calculus, Option Pricing Theory, Risk Modelling, Term Structure Models, Monte Carlo Methods, and Empirical Methods in Finance. Speakers include Professors V. S. Borkar (TIFR), S. Juneja (TIFR), R. L. Karandikar (ISI Delhi), A. Sarkar (GE India Research Lab), A. Subramanyan (IIT Bombay). We invite applications from students and young faculty with demonstrated aptitude and interest in Financial Economics, Statistics, Financial Engineering and Management, and Financial Mathematics. Preference will be given to research students. Applications (with a brief resume and an academic reference letter) should be sent to The Registrar, IGIDR, Gen. A. K. Vaidya Marg, Goregaon (East), Mumbai 400 065 by post or by fax (022-2840 2752) or by email (email@example.com) by February 25, 2005. Please add “Mathematical Finance” header to your envelope or electronic message. IGIDR will provide boarding and lodging to the selected participants. In addition, selected outstation participants will be paid train travel allowance (First class) on furnishing the tickets.
Economic and Political Weekly
February 12, 2005
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