The level of corruption in the public distribution system has been one of the rallying points in the cry for change.  The following are some of the corruption related arguments for change:

There is large scale corruption in the system

It is undeniable that there is a lot of corruption in the PDS, and something needs to be done about it.  In arguing that we should shift from PDS to coupons or cash transfers, we have to ask if the chances of corruption will be lower in the proposed systems compared to what we have.  There is little evidence to make that argument.  India has a number of cash transfer programs such as old-age pensions, maternity benefits, family benefit, etc.  P. Chidambaram introduced a well-publicised coupon system in one of his budgets, and there are other benchmarks for the suggestions being made today.  If one wishes to do so seriously, they could examine the level of corruption in such programs and compare it with the PDS.

The proponents of PDS reform have not offered any evidence as to whether these alternatives work.  There are scattered references to a cash transfer program in Mexico, and in other parts of the world completely ignoring the reality at home.  I suspect that there are two reasons why we see no evidence that cash transfers work better: nobody has chosen to carefully evaluate the alternatives for the lack of interest in such an exercise, and in part because the unpublicized official evaluations of coupon experiments are not flattering making it difficult for proponents to use them for their purposes.  The proposed reform is thus not evidence-based in the Indian context; it is a purely ideological project based on the mainstream economics today.

The fact that the proposed reform is mainly an ideological project should not deter us from the possible merits of the reform proposals.  If a well considered idea has a promise, it is well worth giving a shot.  Is the reform proposal a well-considered idea?

Corruption is entrenched in the PDS

One serious argument is that moving to channels that we know to be less corrupt than the PDS could be a strategic way of reducing corruption.  This is certainly a serious argument to consider, especially given the deeply entrenched culture of corruption in the PDS.  While I do believe that corruption is deeply entrenched in the PDS, I do not believe that the system is irredeemably lost.  Many State governments have demonstrated that they could make the system work if it becomes a political priority, Chhattisgarh being an important example.  Beyond the PDS, one can take the example of Bihar that was considered a hopeless government, but a determined CM has shown how things can turn around dramatically with some political will.  Where the political incentive is to make money off such programs, the odds are that a proposed alternative would suffer equally.

Proponents have also argued that the banking system is less corrupt, and so using that channel would help in reducing corruption.  It may well work in areas where there is a good banking network.  It would be a move worth considering in urban areas, but then the use of banks does not eliminate every scope for corruption.  Ghost beneficiaries could continue to exist, those who issue periodic identification documents to beneficiaries could charge them, shortages in overall allocation could be created (as it gets created in PDS), which could then be used for arbitrage.  Other possibilities abound.

It does not work since the subsidy is not given directly

One curious argument that found its way to the economic survey 2009-10, and has been repeated by some prominent economists is that the PDS does not work since the subsidy is not given directly to the citizen, but is instead routed through intermediaries.  The idea that cash transfers or coupons will eliminate intermediaries is silly.  We don’t expect beneficiaries to have the direct access to the coffers of the Ministry of Rural Development from where beneficiaries will directly take their allocation of cash without the interference of any official whatsoever.  Cash transfer will have its own set of intermediaries.

If intermediaries are the problem, then replacing the PDS with coupons is the silliest idea possible.  First of all, there will have to be a system of distributing the coupons periodically to the beneficiaries.  This will necessarily involve multiple layers of the government.  Beneficiaries will then have to collect their entitlements from a grocery store or other shops, which are nothing but intermediaries.  Private shopkeepers will not have the same kind of accounting formalities, or any other measure of accountability that ration shop dealer will have to maintain.  In essence, the grocery store is an intermediary with little accountability.  The grocery store owner will in turn have to submit the coupons to a government agency which will reimburse her.  This additional channel will create its own set of opportunities for corruption.  In all, the coupon system only represents more intermediaries and less accountability.

The system is too large to monitor

There have been reports in the media that the Chief Minister of Delhi, Ms. Shiela Dixit, advocated cash transfers since the PDS is too large to be monitored effectively.  This is curious in a lot of ways.  Delhi is one of the smaller states, and the size argument should be the least problem there.  It should be even less of a problem compared to other states, considering the fact that the state has fantastic transport and communication infrastructure that makes monitoring easier.  Curiously, the argument of size has not been offered on Public Works Department or other departments that are much larger in the state.  Will we even consider eliminating them?  Delhi also has a well established right to information movement that has focussed on the PDS from the beginning that would assist a well-meaning Chief Minister in the quest to monitor.

Delhi’s RTI activists have met the Chief Minister time and again with well-documented information about corruption in specific ration shops, only to find the CM stonewalling.  If monitoring is THE problem, we would expect the Chief Minister to act on the information she was given.  Alas, that is not the problem.  How do we know that cash transfers will work better in her government? Do we know that existing cash transfers in Delhi work a lot better?  Sheila Dixit has been a wonderful Chief Minister for Delhi in many ways, but in this case her arguments cannot be less convincing.

The promise of right to information

Given that the PDS involves straightforward entitlements to specified beneficiaries, the right to information movement offers a terrific tool to contain corruption in the system.  Using the right to information, it is possible to identify precisely whether there is corruption in the system, who is corrupt and by what magnitude.  There is much that could be done to strengthen the RTI regime including proactive provision of information via notice boards, the Internet, mobile phones and other means.  If control of corruption is a goal, then we have to focus on means that we know to work, and means that have a promise instead of focusing our attentions on ideological projects with no demonstrated or theoretical reasons for the alternatives to work better.

The bottom line is that there is no doubt that there is a lot of corruption in the PDS and that something has to be done about it, and there is scant reason to believe that the proposal to change to coupons or cash transfers will reduce the level of corruption.  The government of Chhattisgarh offers to send a text message to anyone who wishes to monitor ration shop, whenever grains are delivered to such shops.  In addition, they have introduced stricter norms of documentation including the requirement that delivery trucks have to take a picture of the truck in front of the ration shop and send an MMS to the State government.  Such measures, along with the fact that the State government has responded more actively to complaints about the PDS have contributed to a major improvement in the system.  The power of right information can be extended even further using digital technologies more effectively.

A lot could be done to redress grievances about the PDS, which will automatically have an impact on how the system functions.  For example, setting up independent ombudsman, imposing penalties to officials who do not comply with PDS regulations, initiating independent call centres that could receive and officially lodge complaints, training the judiciary to respond to at least large-scale complains on the PDS, et cetera could be done.

Those calling for reforms have paid scant attention to other alternatives for better accountability.  It is particularly surprising when Chief Ministers and other powerful officials call for the reform, especially when we know that they could do a lot to change how the system works without radically reforming the system, if only it were their priority.

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Some scholars have pointed out that the motivation to dissolve the PDS comes from the ideological belief that the government should not be engaged in providing public services, and of course the material appeal this has for the rich.  The quest for PDS reform started in the context of India’s liberalization and globalization.  Pushed by multilateral agencies, the PDS was converted into a targeted system in 1997.  The motivation of these reforms was not one of protecting people from hunger – but the zeal to eliminate most public services.  Some of the loudest support for PDS reform today has come from people who have generally shown little concern otherwise for policies to protect people from hunger.  The sudden zeal shown by these enthusiasts for cash transfers and other alternatives to PDS is only bound to give the politically conscious observer the belief that such calls to reform are mainly to undermine the PDS, and not to create a system that works for the poor.

The offer of an alternative can thus be a smokescreen to dismantle what is well established.  I do believe that there are well meaning people who are proposing such reforms.  I guess that they would be well advised to think of creating a strong framework of rights within which coupons or cash transfers can be but one alternative that could be introduced slowly.

Similarly, a lot of push for so-called public-private partnerships comes from large consultancies, and associations of large corporations.  Dismantling the PDS and creating alternate forms of delivery can be a source of profits for many organisations.  One cannot ignore the fact that a lot of political support for reforms is ultimately garnered by such groups whose main motivation is not one of making the system work for the poor.

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Paying cash instead of grains will give people a choice

Another strong argument for coupons or cash is that the recipients will have the choice to spend it on what matters most to them.  Proponents of reform have argued that the Indian policymakers tend to be paternalistic, and often argue that if the government gives cash instead of grains, poor people may misuse it, including by drinking it away.  They have argued that it’s important to trust poor people to make choices that matter most to them.  I fully subscribe to that argument.  Even if there is a condition that beneficiaries should only buy food using the cash transfer, having the option of buying cheaper grains instead of rice or wheat offered in the PDS could be attractive to many a poor family.   Ashok Gulati argued that such choice could also bring about diversity in diet, which is a desirable goal.

If choice is something that we really care about, it is possible to introduce it in a limited extent in the ration shop itself.  Beneficiaries often have the choice of getting rice or wheat, choosing kerosene over other alternatives, et cetera.  The range of goods that are sold through the PDS could be increased, and a limited set of choice could be easily introduced within that system.  PDS reformers of a different brand have argued for a long time that the range of goods available through the PDS should be expanded, some of which should be sold commercially, in order to make the ration shop the more viable.  Such a system exists in Kerala.  While the range of choices may be increased at the ration shop, cash transfers are clearly superior alternative from the perspective of choice.

Poor people will use the cash transfer for the intended purpose

In response to the argument that men in poor families may use the cash for alcohol instead of food some have pointed out that 92% of the people who received cash to buy bicycles bought them in Bihar.  This was given as an incentive to send girl children to higher secondary school.  The assessment that money was used to buy-cycles as intended seems to be correct.  That said, it is a poor analogy to how cash transfers for food will be used.  In the example, girl children were expected to buy bicycles and provide proof of the purchase to the school teachers.  Such a mechanism would be totally infeasible in the case of monthly quota of food grains.

Kaushik Basu among others have argued that cash transfers should be made to adult women in the household, and this has proved around the world to result in higher spending by the families on food, education, health and other desirable ends.  I feel that this is a much more serious basis of arguing for cash transfers than the bicycle example.  Similarly, I am sympathetic to the argument that we have to trust the beneficiaries to use it for what they consider are the best reasons, even though it will result in some cases of what the society can judge reasonably to be a misuse of such benefits.

Coupons give a choice of shops

Another choice argument made by the proponents of reform is that cash transfers and coupons make it possible for the beneficiaries to go to an alternative shop in case the one that they’re dealing with is corrupt.  Today people are tied to a particular ration shop, and if the shop does not deliver they cannot do much about it.  The idea that people should be allowed to take their entitlements to a different place is powerful, and that can actually put a lot of pressure on corruption.  While that idea is powerful, it has strong limitations in a lot of rural areas that are serviced by very few shops.

The coupon system in particular will be vulnerable because of the fact that a private shopkeeper will have to recover her money from the government by providing the coupons, which could involve delays, corruption, et cetera.  This may prevent most shopkeepers from taking coupons, while the rest can merrily charge what they want without any accountability to the holders of the coupons.  Shopkeepers can cite this as an excuse and charge what they want from the coupon holders.  Since there will be no obligation for the shopkeepers to sell the goods at a particular price, they can hold the coupon holders to ransom without any legal accountability .  In other words, they can do exactly what a ration shop dealer would do in terms of charging excess price but the act will be totally legal.  It would be a case of eliminating a crime by eliminating the law.

The coupon system makes corruption a very attractive proposition since legal accountability is considerably reduced in public-private partnerships.  The argument of choice of shops hinges on the idea that there will be unrestrained competition between shops.  In most areas the choice of shops will be limited and the possibility of collusion is large.  Further, officials can easily ensure that honest shopkeepers do not get reimbursed on time and thus keep them away from the system.  If the profit motive of a shopkeeper will drive competition, it can also drive collusion and corruption to the last penny that can be extracted.  The removal of legal accountability, accounting norms and other features that now govern ration shops will only increase the attractiveness of corruption with the coupon arrangement.

Such a risk will be lower in the case of cash transfers, though it is possible that beneficiaries will be tied to either a bank or some intermediary from where they will have to collect the benefits; instead of paying a bribe at the ration shop, they will pay this at a different place.

The idea of giving a choice of shops could be done in a limited fashion within the PDS without compromising on accountability mechanisms.  In urban areas, users can be given the choice of going to any ration shop, and this can be made possible easily with the use of smart cards.  An official in Tamil Nadu told me that they consider such a proposal within the current PDS with respect to Kerosene, where the subsidy is high.  They proposed to open kerosene bunks that can provide an alternative to ration shops, and under measurement could be controlled more easily in mechanised kerosene bunks.  Running ration shop involves overheads, and the possibility that people may go to some other ration shop to collect their entitlements will threaten excessively corrupt ration dealers, and create a similar kind of pressure that coupons and cash transfers will accomplish.

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Please read other articles in this topic before getting here…

The cost of administering the PDS is high

Some economists have pointed out that the cost of administering the PDS is very high, and it is now possible to transfer cash to people at a cheaper rate.  This is one of the strongest arguments for a shift from PDS to cash transfers, in my opinion.  The amount of money that could be transferred just by eliminating PDS is substantial, and can go a long way in assisting poor families with it.

While making that argument, it is important to realise that an important proportion of the cost goes to transporting grains from surplus states to where it is needed, for warehousing, and other purposes that will not go away just by eliminating the PDS.  Perhaps the market will do this more efficiently, but we have not seen that happen with fruits, vegetables and other grains in which the government does not play a major role.  I should add that I am not ideologically presupposed to believe that the private sector does everything more cheaply than the government.  I would instead like a careful exercise to be made in understanding how the cost of private trade would change if the cost of transferring grains is absorbed by them instead, and if they are more efficient than the government.  The capacity that the government has to move around grains also has an impact on collusive speculation, something that we should be wary about in a country where food is a dominant part of the budget for such a large population.

The current system of procurements actually increases the price of grains for poor people who do not have access to PDS

Kaushik Basu made the argument that the government is a major hoarder of food grains, and in the process of procuring food grains and creating major stocks, we end up increasing the prices of food grains in the market.  Many poor people do not have an access to the PDS, and have to rely on the market for their food grains, and such procurement and hoarding increases the prices at which they buy.  Prof. Basu carefully distinguishes between the need to hold some buffer stocks, and excessive hoarding that would lead to a major increase in the food prices.

This is an important argument, but if we focus on excessive hoarding by the government, it is important to realise that it is not inherent to the PDS. The massive stocks that have been televised widely are mainly a recent phenomenon following the ill-advised move to target the PDS to a narrow section of the population in 1997.  Such targeting removed a large number of users from the system, and simultaneously the price of grains even for officially poor was increased over the market price, making it unattractive for anybody to buy through the system.  On top of this, there was also an increased procurement in the following years from the farmers, which altogether led to a massive accumulation of stocks well over the official buffer stock levels.  One cannot blame the PDS for it.

[Kaushi Basu’s article talks about the entire food grains system, and not just the PDS.  He is thus not arguing that the increase in stock is due to the PDS.  I am not arguing against his position, but would like to clarify that his concern cannot be added as an argument against the PDS].

We should give some new ideas a shot

The unceasing restrain of those proposing these reforms is that we should “experiment” with new ideas when we are confronted with a poor system.  There can be no argument against trying new ideas, and being creative.  Unfortunately cash transfer is not a new idea, and it is not terribly creative.  As I have argued elsewhere in this series, India already has many different forms of cash transfers.  The idea of coupons has been experiment with.  We not heard about the performance of these alternatives, and we perhaps never will, at least from the proponents of reform.

Cash transfers should be conditional

Ashok Gulati wrote about making cash transfers conditional upon families sending their children to school.  While this may be a suitable arrangement as an added support for families to send children to school, it is a very poor basis to determine food support for families per se.  A conditional transfer of that sort is better done through scholarships, school feeding and other school-based programmes.  Basic services such as food and health should not be offered with strong conditionalities attached to them.

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Many have argued that half the PDS entitlements reach the “non poor”.  I believe that resources are scarce, and the government should spend the money on people who need it most.  We should thus be concerned if resources are being spent on those who do not need it.  In considering whether resources reach the right people, we should remember that we have a rather poor system of identifying the poor.  The poverty-line based on which we classify a person as poor is woefully out of date and so people who would be identified by the society as living in abject poverty could be officially classified as ‘non-poor’.  As a result, the argument that PDS entitlements reach people who do not need is grossly exaggerated.

In addition to the definition problem, even those who could be officially classified as poor often get excluded given the problems with identification.  Proponents of reform are correct in identifying identification to be a problem; but then, they focus mainly on the non-poor being identified (which is an exaggerated problem), whereas my concern is that the poor are often left out in targeted systems.

Further, proponents of reform have made no argument on why the shift to coupons or cash transfers will improve the identification situation.  There is absolutely no reason either in theory and practice for the shift from the PDS to lead to an improvement in this dimension.  In fact, shifting to cash transfers will only worsen the identification problem:  The quality of PDS grains, the need to wait in line to get the grains, and other reasons make the PDS inherently unattractive to most middle-class and rich people.  As a result a lot of people who are well-off select themselves out of the PDS, which would not work with a cash transfer program.  Further, there are rich possibilities of providing different sets of grains (e.g. coarse grains) that may find a larger set of takers among the poor than those who have the means.  Cash offers no such means of self-selection.

UID will solve the identification problem

On a related note some have argued that the introduction of Unique Identity Cards will solve the identification problems for cash transfers.  The idea that the use of unique identity cards would solve the identification problem is perhaps the most ill thought solution for the problem of identifying who all need food support.  The use of biometric identification will have a limited but significant impact in reducing the number of ghost cardholders, and perhaps in ensuring that the same person does not get multiple entitlements.  UID offers no way of identifying whether a person is poor are not.  In addition, if the UID is able to offer any help in identification, it can do so equally well for PDS as for cash transfers.

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In evaluating alternatives including cash transfers, it is first important to identify both contributions and failures of the system.  Proponents of reforms today have focused exclusively on the problems, without dwelling on the things that it has done.  There is a reason why the PDS is so popular in Tamil Nadu, Kerala, Andhra and increasingly in other states including Chhattisgarh.  In all these cases the PDS has worked and means a lot to the life of poor people.  It has failed in other parts of India, and sometimes miserably.  Given that the basic structure of PDS is the same across India, one should ask whether the failure of the PDS is due to the design of the system, or whether it is due to larger problems in how these states function.  If it is the former, it makes immense sense to reform or even replace the system.  If it is the latter, we may spend a lot of resources and energy into replacing the system only to find that the alternative will suffer the same fate in the states where it does not deliver.  One problem with the arguments to replace the PDS lock, stock and barrel is that they do not ask serious questions as to why the PDS has failed in some parts of India; and instead they assumes that the PDS has been a failure overall.

Apart from the fact that the PDS has functioned well in some states, we should also take into account some of the inherent advantages in its design compared to cash transfers.  For example, it is more versatile at critical times such as galloping food inflation in its ability to get the government to absorb some costs, compared to cash transfer programs or anything else.  While it is possible in theory to adjust the amount of the cash transferred by taking into account inflation, such a process is politically unlikely to respond to massive food inflation unlike the PDS, where there is a prefixed commitment to provide the entitlements at a certain price.  Further, such as system will automatically respond to differing levels of inflation across regions of India, whereas the cash transfer system will have to have a massive input of information about differing levels of prices in every region, and it has to be accompanied by very complex arrangements to provide different amount of support to people in different regions.

The PDS also provides some means of social intervention when there is coalition among traders to artificially increase the price of grains.  It has served as an outlet of grains bought by the government to insure farmers with a minimum price for their produce.  The PDS also serves to transport grains from many of the grain surplus states into places where it is required.  I will not claim that these functions cannot be done by alternate arrangements; but, if we have to evaluate the system, we have to take into account what it has done along with what it has not; and we have to take into account what the costs of doing it through an alternate system would be.  The calls for replacing the PDS have generally been accompanied by a dismissal of the PDS system as an unqualified failure that accomplishes nothing.  The reality of the PDS is far more nuanced.

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Nehru inspecting food at a ration shop (Courtesy: Life)

The Public Distribution System (PDS) in India has come under a vigorous attack in the recent months.  There have been calls to dismantle the system and to replace with alternatives such as providing coupons or cash transfers.  Without any doubt the PDS has serious problems, and performs abysmally in some parts of India.  Unfortunately, these are also among the poorest regions where the need for protection from hunger is the greatest.   Considering that the PDS is supposed to contribute to something as fundamental as food security, such poor functioning must be addressed.

In the recent past there have been discussions about replacing the PDS with a coupon system or with cash transfers. The coupon system involves giving beneficiaries food coupons that could be used in any grocery shop to get food entitlements.  Prof. Kaushik Basu, the Chief Economic Advisor to the Prime Minister of India, among others, have argued that beneficiaries should be allowed to use the coupons to buy anything – and not just food.  The cash transfer system involves depositing cash into the bank accounts of the beneficiaries that they could then use for any purpose.

I believe that the PDS should be reformed where it does not work, and I would even support eliminating the system if there are superior alternatives.   Our commitment should be to the goal of eliminating hunger and ensuring that everyone has at least the basic necessities to live on, and not to the means, especially if it fails miserably.  In this context of the current debates, I would like to ask if the PDS has completely failed, if the alternatives being proposed likely to succeed, and if those the only alternatives that we have.

In a series of articles, I look at various arguments for and against the proposed shift from the PDS to a system of coupons or cash transfers.  You can read them by clicking the links below:

1. The PDS absolutely does not work… Or does it?
2. PDS does not reach the right people
3. Corruption in the PDS: well alternatives work better?
4. Giving people a choice with coupons and cash transfers
5. Other assorted arguments (Identification problems, cost of administration, and other problems with the PDS, and do we have a reason to believe that the alternatives well solve them)
6. The politics of PDS reforms

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Compared to most other states in India, Tamil Nadu is noted for widespread provision of education, primary health care, nutrition support, rural roads, electricity, water and other public services. These services are typically well planned and tend to work well. I examine what determines Tamil Nadu’s performance. I argue that widespread and decentralized collective action for public services plays a critical role in it but such collective action is a new phenomenon, dating back to the seventies. I also argue that normative challenges by major social movements, changing influences of various social groups and raising individual capabilities among common people played an instrumental role in enabling such collective action that ultimately had an impact on public services.

Click here to download the dissertation.

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In 2004 website called yelp.com was created to help people find local businesses such as small restaurants, salons, etc. The idea of the website was simple. Any user or a business can locate itself on the map and provide basic information about itself. For example, a restaurant could describe itself and provide its menu and other details, and any user could review the organisation. Someone who is looking for a service, e.g. salon in a particular area, can now search easily for all salons by the price, services and reviews.

What yelp does is to enable people anyone to find information about services, and at the same time to offer information about it in form of reviews. With millions of users contributing a little bit of information each, the overall knowledge base becomes tremendous. The idea of yelp could be extended in powerful ways to deal with public services and public assets.

Making information easy to access

Every Panchayat in Tamil Nadu is expected to maintain a register with all the public assets in the Panchayat. This particular Panchayat was supposed to have six ponds, but then two of the ponds were “missing”, naturally, under the houses of some influential people. If we go through other such registers in other such offices, we will be sure to discover missing houses, dams, ration shops, roads and many other public facilities.

Most of us do not have an access to these registers to find out what assets and services exist officially. The access will be even more curtailed for those who are seeking to establish corruption. While the right information laws do provide us with legal access to such information, laying our hands on it takes much effort. This naturally deters public involvement in dealing with corruption.

Imagine now the ability even for an amateur to lay hands on such information with little effort. For example, we can create an application that will list all the public assets within the 2 km area of where one is standing using a mobile phone. This can radically change our ability to monitor the government, and the ability to watch comes with the ability to transform. Such applications can put pressure on the government, and force it to perform better.

Providing feedback

While discovery is one aspect of and yelp, feedback is the other. Let’s take NREGA as an example. We can easily develop an application that allows anyone to provide feedback on each project and to rate them. This will help us create a large database of information about the quality of works that can transform the way we discuss programmes like the NREGA. Having concrete information will put pressure on corruption and poor quality, and will also help us to discover where things work. This will help us learn effective methods, and perhaps create rewards for those who make them work.

Campaign tool

Having a tool like this can also enable campaigns in interesting ways. It should not be difficult for activists working on PDS, or even the media to start a campaign for people to evaluate the functioning of ration shops. In a very short time, we could have a large volume of information that can then serve as the basis of an informed campaign. Similarly a campaign to evaluate the usage of MP or MLA funds could also have interesting democratic implications during an election. We can go on and on with other examples.

Getting there

Interestingly, a lot of information about public services and assets is already available online. For example, basic information about school infrastructure of almost every school is available in one place. In states like Andhra Pradesh, we can identify every project in every village with information on everyone who received any money for working in NREGA. There are many other such examples, and the availability of information online is increasing exponentially.

While information is expanding rapidly, the format of presentation leaves much to be desired. India’s budget documents continue to be presented in hundreds of PDF tables. God knows what one is supposed to do with that. School information systems or NREGA information do not come with adequate geospatial data. There is also no way of developing applications for people to provide feedback on these projects. But these issues can be addressed with a little bit more work, now that the real hard work of collecting the basic databases and putting them online has been done.

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National Rural Employment Guarantee Act (NREGA) is primarily a programme aimed at creating public assets that would be useful for the society at large. When NREGA was created, it relaxed this principle by allowing projects in private lands of selected marginalised communities including SCs and STs. The Minister for Rural Development is now trying to extend this by permitting works in private lands owned by small and marginal farmers who are not SCs and STs.

This proposal has been welcomed by some like Mihir Shah and has been sharply criticised by Aruna Roy and Jean Drèze among others. I believe that the proposal has merits and problems, and can be taken up cautiously with some institutional safe guards.

Asset creation

NREGA can used to create assets like small ponds or wells in private lands and this can assist in improving the productivity of these lands. If these are created in lands of people who need these facilities but cannot afford it, NREGA can serve an important social purpose. In fact, I would go further and say that NREGA will serve a useful purpose even if it is used in private lands of relatively well-to-do farmers. If this is done, it is implicitly like giving a subsidy for creating useful assets and this may not be a bad thing especially at a time when farming is not considered a lucrative option. This may also help in winning the support of farmers who are now upset with NREGA since it puts pressure on them to increase wages of labourers.

The promise of asset creation is matched by challenges of widespread corruption and shifting the focus of NREGA from traditionally marginalised social groups.

Accountability is difficult

Taking up public works in a private land raises a lot of thorny issues of accountability. First of all, block offices are typically stretched to the hilt and will not be able to actively supervise the construction of very small projects. This will create a lot of scope for misusing NREGA.

Secondly, there are standards of record keeping for public assets that does not hold in private lands. For example, it is quite easy to claim that a new well will be constructed using NREGA when a well exists already. There are many such avenues for making easy money in private property. Arguably such misuses do happen in public property as well, but there are at least some standards and documentation and there is at least a chance of making officials accountable. In case of private lands, easy corruption is all too possible.

Thirdly, in Andhra Pradesh (and perhaps elsewhere) payments to labourers were being made through the farmers when work took place in private lands. A few that I met mentioned that they were given a lump sum for the project and they paid labourers according to market wages that was lower than the NREGA wage. This goes against the very spirit of NREGA and extends the exploitation of labourers by paying the less than minimum wages.

Shifting focus from primary constituency

It is fairly common across India for public works to benefit mainly the dominant communities. By restricting the scope of asset creation in NREGA to marginalised communities there was some scope to ensure that they will get at least something out of this programme. In a powerful article Aruna Roy and Nikhil Dey argued that removing this restriction will make it socially impossible for these communities by shifting the control of the programme into the hands of dominant communities and the elite. So far NREGA has been clear in terms of its target communities and has had some impact in reaching the worst-off in the society.

So far, in my view, the dominant communities have left NREGA alone – and have at most considered this programme a thorn in their flesh. By getting them into the ambit of NREGA, it is quite possible that the social control of the programme will shift into their hands. The vision they will have for NREGA will be different from those of the marginalised sections, and in many ways contrary to them. If this happens, NREGA can be affected and the potential it holds for labourers will be seriously compromised. This problem can be particularly severe in states where landless labourers have limited influence in the society and politics.

Alternatives

There are the problems of accountability and shifting of social control on one hand, and the promise of using NREGA to create highly useful social assets on the other. I believe that some of these problems can be addressed by thinking creatively.

As far as accountability goes, I believe that it is practically impossible in our society to punish farmers if they misuse NREGA funds by either not creating an asset as per the project or if they underpay the labourers. In order to reduce such misuses, all payments must be done through official channels as would be done in any public NREGA work and farmers should be kept entirely out of the payment mechanism. This may help in addressing some forms of underpayment. Additionally, some legal provisions must be created for accountability of those who use NREGA in their private lands, including mandatory documentation procedures. This can be a double-edged sword especially in the lands of marginalised communities, but some measure would be useful to avoid gross misuse.

Thirdly, instead of having open-ended option of using NREGA in private lands that would create permanent scope for misuse, we can have short periods when works in private lands can be taken up in a campaign mode. For example, the month of May or June can be designated for this purpose. When it is done in a short window, it would be possible to create additional monitoring and other mechanisms to reduce corruption. It also reduces the scope for creating a culture of corruption where private parties can routinely work with officials in making easy money through NREGA. I feel that having such periodic campaigns will also help in preventing a sustained social control of NREGA by dominant communities.

These are preliminary thoughts on a complex question. Hopefully if changes are made to NREGA it will be done responsibly without compromising the little hope that NREGA has had for a large number of men and women in India.

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