Surjit S Bhalla
Posted: Thu Feb 17 2011, 02:49 hrs
Marie Antoinette, the liberal and concerned queen of France, on seeing the poor and hungry masses demanding bread, said in a fit of charity — “let them eat cake”. Member of the prestigious National Advisory Council (NAC) Jean Dreze surveyed the performance of the existing National Food For Work Programme (NFFWP) in July 2005 and concluded that the performance was “alarming”. The work guidelines were not being enforced, and the workers were not getting the minimum wage (only Rs 25 to Rs 30 a day). The major problem was with “muster rolls”. There was a lot of corruption, Dreze concluded. To help provide cake to the needy, the UPA government introduced a replacement for the NFFWP in the form of the National Rural Employment Guarantee Act (NREGA). This act would right the wrongs of existing NFFWP programmes. Why would it right the wrongs? Because it would be implemented by committed experts rather than by corrupt government officials.
Given the lessons learnt from the failure of food-for-work programmes, the NREGA is seemingly a booming success. In April 2008, Phase 3 of the programme was introduced across 285 additional districts. With this addition, all the districts of India have been covered, and the government claims that 130 crore workdays were provided in 2007-08 at an average wage of Rs 75 per person, per day. Buoyed by this success, the NAC recommended, and obtained, an expansion of the NREGA programme to more than triple the 2007-08 allocation, to Rs 39,000 crore in 2010-11. Interestingly, the programme continues to be non-corrupt and as evidence, there is the fact that all the money allocated for 2010-11 has not been spent.
However, the government, and the NAC, are asking for more money to be spent on the NREGA. Is it the case that the poor are actually getting bread under the scheme? And how likely is it that after decades of poor implementation and corruption (recall that food-for-work programmes first started in 1973), Indian administrators have suddenly become efficient and non-corrupt?
As agreed by all, corruption is the number one issue facing the country. The biggest scam that the country has encountered, ever, is the telecom 2G scam, where rough estimates suggest that Rs 40,000 to Rs 50,000 crore were “lost”, disappeared into thin air, did not accrue to the government, etc. Thankfully, such scams come once a decade or less.
But the scams pertaining to national welfare schemes like the NREGA and the public distribution system of food (PDS) may annually be about the size of the 2G scam, if not more. I repeat — the flow of corruption money via operation of NREGA, PDS, fertiliser subsidy, kerosene subsidy, etc, may well be substantially in excess of Rs 40,000 crore a year, and well in excess of 1 per cent of GDP each year. This conclusion is not new — the late PM Rajiv Gandhi reached the same conclusion in 1985 when he claimed that only 15 per cent of the money meant for the poor reached the poor.
Future articles will look into the possible “leakages” in the PDS and other subsidy schemes. For the moment, the NREGA deserves a closer scrutiny. To date, all expert analyses of the NREGA programme have regurgitated the official ministry of rural development (MRD) data on the administration of the programme — presumably the same statistics that the NAC, Dreze and others use to conclude that the people, via the NREGA, are eating both bread and cake. Using these statistics may be akin to asking the accused to be the judge! Fortunately, there is data from outside of the MRD that can be used to test not only the veracity of the MRD claims, but also the efficacy of the old, much maligned (and rightly so) food-for-work programmes.
All of this is possible through use of the National Sample Survey for 2007-08 (July 2007 to June 2008). The following question was asked of all individuals in households covered by the survey: How many days in the preceding week did you work as a casual worker in a public works programme? The respondent days will be an upper-bound to the NREGA programme since there can be public works programmes that are not NREGA.
The results are the following. The government claims of 130 crore person days of work seem to be wildly exaggerated (interestingly, not dissimilar to the CAG claim that Rs 1.76 lakh crore were lost in the 2G scam, rather than the more realistic figure of Rs 40,000 crore). The NSS figure is 46 crore person days total and 38 crore in districts where the NREGA was operational. The NSS data can identify whether a household was poor or not according to the Tendulkar poverty line; the result — only 8.8 crore person days of the NREGA programme were availed by the poor.
One final statistic — for 285 Phase 3 districts, there was no NREGA between June 2007 and March 2008. Yet these districts had provided as much as 86 per cent of the workdays in non-NREGA programmes as was provided by NREGA after its implementation in April 2008.
A conservative estimate of the disappearance into thin air of money meant for the poor NREGA recipients in 2007-08 is about two-thirds of the money spent on the programme. Disappearance means money not accounted for by receipt, by the poor or the rich. It is unlikely that corruption in the NREGA has decreased in the last three years while having increased in all sectors of the economy. Which means that scam money in the NREGA, in just one year, 2010-11, is upwards of Rs 25,000 crore.
The writer is chairman of Oxus Investments, an emerging market advisory and fund management firm
However, the government, and the NAC, are asking for more money to be spent on the NREGA. Is it the case that the poor are actually getting bread under the scheme? And how likely is it that after decades of poor implementation and corruption (recall that food-for-work programmes first started in 1973), Indian administrators have suddenly become efficient and non-corrupt?
As agreed by all, corruption is the number one issue facing the country. The biggest scam that the country has encountered, ever, is the telecom 2G scam, where rough estimates suggest that Rs 40,000 to Rs 50,000 crore were “lost”, disappeared into thin air, did not accrue to the government, etc. Thankfully, such scams come once a decade or less.
But the scams pertaining to national welfare schemes like the NREGA and the public distribution system of food (PDS) may annually be about the size of the 2G scam, if not more. I repeat — the flow of corruption money via operation of NREGA, PDS, fertiliser subsidy, kerosene subsidy, etc, may well be substantially in excess of Rs 40,000 crore a year, and well in excess of 1 per cent of GDP each year. This conclusion is not new — the late PM Rajiv Gandhi reached the same conclusion in 1985 when he claimed that only 15 per cent of the money meant for the poor reached the poor.
Future articles will look into the possible “leakages” in the PDS and other subsidy schemes. For the moment, the NREGA deserves a closer scrutiny. To date, all expert analyses of the NREGA programme have regurgitated the official ministry of rural development (MRD) data on the administration of the programme — presumably the same statistics that the NAC, Dreze and others use to conclude that the people, via the NREGA, are eating both bread and cake. Using these statistics may be akin to asking the accused to be the judge! Fortunately, there is data from outside of the MRD that can be used to test not only the veracity of the MRD claims, but also the efficacy of the old, much maligned (and rightly so) food-for-work programmes.
All of this is possible through use of the National Sample Survey for 2007-08 (July 2007 to June 2008). The following question was asked of all individuals in households covered by the survey: How many days in the preceding week did you work as a casual worker in a public works programme? The respondent days will be an upper-bound to the NREGA programme since there can be public works programmes that are not NREGA.
The results are the following. The government claims of 130 crore person days of work seem to be wildly exaggerated (interestingly, not dissimilar to the CAG claim that Rs 1.76 lakh crore were lost in the 2G scam, rather than the more realistic figure of Rs 40,000 crore). The NSS figure is 46 crore person days total and 38 crore in districts where the NREGA was operational. The NSS data can identify whether a household was poor or not according to the Tendulkar poverty line; the result — only 8.8 crore person days of the NREGA programme were availed by the poor.
One final statistic — for 285 Phase 3 districts, there was no NREGA between June 2007 and March 2008. Yet these districts had provided as much as 86 per cent of the workdays in non-NREGA programmes as was provided by NREGA after its implementation in April 2008.
A conservative estimate of the disappearance into thin air of money meant for the poor NREGA recipients in 2007-08 is about two-thirds of the money spent on the programme. Disappearance means money not accounted for by receipt, by the poor or the rich. It is unlikely that corruption in the NREGA has decreased in the last three years while having increased in all sectors of the economy. Which means that scam money in the NREGA, in just one year, 2010-11, is upwards of Rs 25,000 crore.
The writer is chairman of Oxus Investments, an emerging market advisory and fund management firm
