Financial Daily from THE HINDU group of publications
Monday, Aug 29, 2005
Government - Policy
Industry & Economy - Rural Development
National Rural Employment Guarantee Scheme Last straw on the camel's back?
As the Standing Committee of Parliament points out in its exhaustive report on the Bill as presented to the Lok Sabha, "before drafting such an important and historical Bill, adequate homework does not seem to have been done".
According to the Standing Committee, the Department concerned did not even bother to obtain an impact assessment/evaluation/study of a similar Scheme of the Maharashtra Government and the problems faced by that Government in implementing the Scheme".
More important, the Standing Committee has faulted the Centre for not having formally consulted the State Governments before finalising the Bill. It must be granted that such an omission is totally uncharacteristic of the Manmohan Singh Government, which has been exerting itself even more than usual to involve State Governments in all such decisions.
Anyway, the Standing Committee has redressed this infirmity by calling for the views of State Governments. As expected, while the States contributed their ideas, they admitted to difficulties in contributing their share of the cost of the Scheme, which is expected to be only about 10 per cent.
The gamut of the proposed Employment Guarantee Scheme is, indeed, impressive. The Scheme offers a guarantee of 100 days of paid employment, the wages being at the level of the minimum wages of the States.
Every adult member of a family offering himself for work is guaranteed a job. Incidentally, this calls for the preparation of a list of projects which can be implemented as part of the Scheme.
The Bill provides for a plethora of officials, including a Programme Officer at Village Panchayat level as well as Programme Coordinator at Block level, ostensibly to assist the Gram Panchayat, which is to be assigned the bulk of the responsibility for implementation. There is room for conflict between the Panchayat and the Programme Officers.
The preparation of the list of works and its publication in local newspapers are intended to give sufficient information to the public about the works to be taken up under the Scheme. The Bill also goes into details, such as the provision of muster rolls by the Programme Coordinator to the Panchayat.
The very term "Muster roll" reeks of the odour of corruption. Whether and how the glare of mandated publicity will diminish the prevalence of corruption is to be seen in the light of actual experience. The involvement of the Panchayat in the implementation of the programme, limited though it is in view of the presence of the official hierarchy, is, of course, one guarantee that the works will be executed as planned.
The political commitment of the Gram Panchayat and its Chairperson is expected to ensure this. At the same time, given the ground reality of caste predilections and political leanings of Gram Panchayat Chairmen, it is difficult to ensure that the implementation will be carried out smoothly, efficiently and uninfluenced by extraneous considerations.
In this context, the experience of the Maharashtra Employment Guarantee Scheme gives little room for complacency. Over its 30-year existence it has become a synonym for leakage of public funds to the local bureaucracy and politicians.
It is significant that the Maharashtra EGS has also not led to any perceptive reduction in deprivation in rural areas witness the continued and heavy out-migration from the villages of Maharashtra to the cities, such as Mumbai. One hopes that the National Rural Employment Guarantee Scheme does not go through the same bitter experience as the Maharashtra EGS.
Admittedly, it must be conceded that a great deal of effort has gone into the framing of the Bill, notwithstanding the caveats entered by the Standing Committee in its remarks on the lack of adequate homework. At a minimum, the Bill has taken care of supervisory requirements.
The Bill ensures that there will be adequate personnel to help implement, monitor and audit the Scheme. Incidentally, there is a reference to social audit of the Scheme by the Programme Coordinator and the Gram Panchayat. There is obvious implicit conflict in this, to the extent that the Programme Coordinator cannot himself be the main implementer and the judge.
In this context, the exact meaning of social audit remains to be specifically defined. It would be well worthwhile depending on established NGOs and outside experts to conduct social audits in a sample of villages rather than go through the routine for the entire universe of villages covered by the Scheme.
"Social audit" has to bring in disciplines other than accounting and engineering with which conventional auditors are familiar. This is best outsourced to competent experts outside government. One cynic observed that at least social audit is a "guarantee" of employment for unemployed professional sociologists and economists a valuable and unintended spin-off of the Rural Employment Guarantee Scheme (REGS).
The crucial question is whether the REGS will result in the accretion of needed assets to the rural sector. Experts have planned that provision should be allowed for including building of facilities, such as for primary healthcare, schools and the like. I feel that the schedule mainly defines the priority list of schemes. But it can be interpreted to include provision for these essential items.
Perhaps, this can be included under the head "Creation of durable assets and strengthening the livelihood resource base of the rural poor". Anyway, schools and health centres are much-needed facilities and should be accommodated in the scheduled items.
One concern I have is about the extra care taken to ensure that the unemployed who do not get jobs under the Scheme get an unemployment allowance, if they do not get the benefit of the Scheme. Laudable as the objective is, it runs counter to the fact that we do not have any Unemployment Insurance Scheme for the general public.
The declared intention is to put pressure on the State Governments to create and offer jobs to those covered by the Scheme. But I am afraid the unemployment allowance included in the Scheme may give rise to substantial litigation and avoidable administrative work. It would have been far better to ensure that those who offer themselves for work and do not get it are assigned to suitable work locations in other areas.
The paper work involved in adjudging whether or not the unemployment allowance claims are justified can be quite nerve-wracking and unproductive. Yet another employment opportunity for petition-writers and lawyers at block and taluk headquarters!
The report of the Standing Committee shows that the Committee as well as the departmental representatives of Government of India appearing before it seems to have treated rather casually the massive extra fiscal burden posed by the REGS Bill.
According to one estimate made by the Standing Committee, the estimates range up to approximately Rs1,00,000 crore indeed, a hefty addition to the fiscal deficit leave alone the burden on the States. Obviously, the complacency shown by the departmental representatives about the feasibility of accommodating this burden shows an extent of overconfidence in the ability of the Finance Minister to pull revenue rabbits out of his hat.
But given the obduracy of the Left, and the unreasonableness of the Finance Minister's colleagues in the Government about petroleum pricing, I am afraid the REGS may be the proverbial straw on the camel's back.
The Finance Minister has no option but to raise taxes or petroleum prices or run red ink all over. The coming Budget will tell whether the Finance Minister has been able to square the magic circle of REGS, crude oil price increases and the divestment debacle.
NREGS brew is guaranteed to give headaches to the Prime Minister and the Government. The sooner the "guarantors" do the sums and make the necessary fiscal changes be it costlier petrol or diesel or food, the better for the fisc and for the growth of the economy. It is not by mortgaging the fiscal integrity of India that India's poor can be assured jobs. That is a perilous way to go.
While it is alright for the political parties to bask in the plaudits for bringing in the NREGS, it is important to communicate the costs to those who matter that there can be no free lunch in a lesson of economic history. There can be no employment guarantee without a guarantee of tax rises and price rises of petroleum products in the not too distant future. The luxury of an employment guarantee demands the certainty of pain of an effort at raising resources.
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