| Though this column is about the National Rural Employment Guarantee (NREG) Act, it is not about the flaws in the scheme which will ensure its costs will go up manifold, to Rs 150,000 crore a year when it is full blown ("Making an ass of u and me", Business Standard, October 25, 2004) or about the fact that the great Maharashtra success everyone talks of appears an illusion (Maharashtra's success, ha'ah, Business Standard, September 8, 2005) since the decline in the state's poverty was not significantly higher than that of the rest of the country. Nor are we talking of the point made forcefully by Surjit Bhalla that the NSS data show the poor are mostly fully-employed and so won't be available for the NREG anyway. |
| This column is about the problem with the panchayats, which, the theory goes, will ensure there are no leakages, that only the poor will get the guaranteed employment. The argument is simple--if the real beneficiaries don't get the money, they will bash up the sarpanch, as opposed to you and I, who, for instance, cannot do the same with the health minister for the poor quality of service in a government hospital since he is too far removed from us. The problem which got highlighted at a recent ADB-NIPFP seminar in Bhubaneshwar on fiscal de-centralisation (part of ADB India's local-experts-not-expats strategy) is that the panchayats are spectacularly unprepared for the glory that is about to be thrust upon them. |
| How do you judge whether any expenditure, such as that on the NREG, is effective? By looking at the accounts, right? Well, it appears that there are no records of either the opening or closing balances in the accounts of most panchayats in the country! Karnataka is one of the few states where such accounts exist, but despite the fact that decentralisation began in the state way back in 1983, it was only recently that the state managed to collect the data. After a World Bank study of four districts collected data relating to accounts in around 420 gram panchayats in four districts, the state's rural development minister, MY Ghorpade, was enthused enough to get this collected by ISEC-NIPFP for all the 5,700 gram panchayats. |
| What ISEC-NIPFP found was frightening. They found, for instance, that while the 11th Finance Commission reported that a third of the state's expenditures were made through rural local governments (the panchayats), this was shown as between 18 and 20 per cent in other documents in the state! The data on both revenues and expenditures collected from panchayats, it was found, were recorded differently in each case, even making aggregation impossible. Indeed, the 12th Finance Commission found even more glaring problems. It found that in some states, the panchayat expenditures exceeded revenues in each year, an impossible event given that panchayats cannot do deficit financing. It also found such huge fluctuations in revenues, which the data looked fishy--Tamil Nadu's panchayat revenues fell from Rs 650 crore in 2000-01 to Rs 388 crore the next year and then rose to Rs 891 crore in 2002-03. In other words, no one knows the true picture, yet states spend 20-25 per cent of their money through panchayats, and the government wants this to increase! |
| ISEC-NIPFP also found there was no real relationship between the size of the funds transferred to the panchayats and economic factors such as per capita income, population below the poverty line, and so on. A further complication is that in Karnataka alone, there were over 600 central schemes run through the panchayats that were ill-equipped to handle them, and certainly did not have the financial and managerial acumen to keep separate accounts for each. |
| "So what," it is argued, when this fatal flaw is pointed out. The panchayats have been running the SGRY anti-poverty programme very successfully for years, so there's no reason to a priori say the NREG won't be run equally successfully. Apart from the fact that it's impossible to judge the quality of a programme when you don't have access to even basic financial data, till date no one in the government has been able to show credible proof of the infrastructure that has been created by various food-for-work programmes such as SGRY over the years. And while there is no independent corroboration of the number of jobs claimed to have been created through such programmes; even official data show no major change in poverty in states where programmes such as the employment guarantee one are supposed to have been run successfully. Research firm Indicus Analytics shows, for instance, that while poverty in Maharashtra fell from 41 per cent in 1987-88 to 38 per cent in 1993-94 and 23 per cent in 1999-00, that for the country as a whole fell from 39 to 37 to 26 per cent, or a fall which is not significantly different--indeed, poverty in Gujarat fell from 28 to 22 per cent and then 12 per cent. Interestingly, a recent study by the rural development ministry on the SGRY found that over 65 per cent of the SGRY beneficiaries received a wage that was lower than the minimum wage. |
| It is, of course, possible that all of this can be fixed in the NREG. But the central point remains that until there is a system of getting critical data regularly from all panchayats, the system is begging to be abused. So far, however, most NREG proponents seem oblivious of the problems at the panchayat level. |
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