Here’s why the poor are poor

on AAY. “I had never thought that the Government would launch the world’s biggest food security programme for 1.5 crore very poor families like mine and provide wheat at Rs 2 per kg and rice at Rs 3 per kg under the AAY.”

This year’s Economic Survey tells you more about AAY. It was launched on December 25 2001 to provide 25 kg of grain to 1 crore BPL (below the poverty line) families through the targeted PDS (public distribution system). From April 2002, the entitlement was increased to 35 kg a month. In line with the panch-priorities of this year’s budget, we are told in 2003-04, AAY will cover an additional 5 million households. Hence, Survey’s 1 crore becomes the ad’s 1 crore. The budget speech tells us 25 per cent of BPL households will be covered through AAY in 2003-04. The calculation is: 26 per cent of India’s population is BPL. That’s 300 million people and with 5 members per household, we have 6 crore households. Twenty five per cent of that is 1.5 crore. Great idea. The food mountain is rotting in the open or being eaten by rats. Sub-standard grain can’t be exported. Let’s feed it to poorest BPL families.

However, preconditions are necessary. You must identify BPL families, issue them ration cards and decide which BPL households are entitled to AAY. States should have done all this by January 2002. Other than AAY, all BPL households are entitled to subsidised food at rates slightly higher than AAY.

In the Supreme Court, PUCL filed a case against the government on food-related poverty alleviation schemes. The court appointed N.C. Saxena as a commissioner. You can download the first Saxena report (October 2002) from the Net and in the interest of transparency, the I&B ministry should have carried excerpts from the Saxena report. Here is a summary of what it says.

Almost a year after the Supreme Court instructed that the mid-day meal should be compulsory in all government schools, UP, Jharkhand and Bihar have not implemented it at all. Other states show partial implementation. Karnataka covers 7 out of 25 districts. MP and Maharashtra only cover tribal areas. Rajasthan says the scheme can’t be implemented unless 50 per cent of costs are borne by the Centre. UP wants the Centre to bear transportation costs.

North-East argues that costs of transporting grain from FCI godowns is too high. Maharashtra can’t issue ration cards to migrant and homeless households. In UP, you must bribe to get a ration card. And so it goes on.

The Saxena report also mentions another anti-poverty scheme, Sampoorna Gramin Rozgar Yojana (SGRY). In this, employment is provided against cash and grain, with 25 per cent of cash costs contributed by states. Since states are bankrupt, they have lifted only 50 per cent of the allocated grain. There is no budgetary provision at the state-level, budgetary mismanagement at the Centre and complete absence of clear guidelines. These findings are no different from the findings of a succession of studies commissioned by the Planning Commission in 2002. All about anti-poverty schemes like SGSY, SGRY, PMGY, PMGSY, AAY, IAY, JPRGY, SJSRY and VAMBAY. Don’t worry. I am not going to give you expansions of these acronyms. There are more than 350 such social sector schemes. When there are loans, in a state like UP, 50 per cent of the loan goes in bribes. When there is construction, as in IAY, funds are misappropriated by local administration and contractors. CAG reports routinely talk of fund diversion from anti-poverty schemes. In a state like AP, only 2.84 per cent of the rural poor are covered by SGSY. The decline of poverty in a state like Gujarat has nothing to do with anti-poverty schemes.

So why bother with these anti-poverty schemes and what have they got to do with India becoming a developed economy in 2020? Of course, the I&B ministry has to justify its budgetary allocation of Rs 890 crore.

Look at it this way. The budget provides Rs 8181 crore for rural development. If you add other schemes, the budget spends at least Rs 10,000 crore on rural anti-poverty schemes. Rupees 49,907 crore of subsidies on food, fertilisers, LPG and PDS kerosene. That’s Rs 60,000 crore.

If you include all subsidies, the total subsidy bill is at least 10 per cent of GDP. That’s a colossal figure of Rs 274,352 crore. Given in the name of the poor. If you transfer this money directly to 30 crore people below the poverty line, each such individual will get Rs 9145 a year. Clearly, that’s not happening.

Depending on the scheme, anything between 6 per cent and 25 per cent reaches target beneficiaries. The remainder is swallowed up in leakage and administrative costs. Such as salaries and pensions of those who administer anti-poverty schemes. You no doubt know the budget now has an action taken report (ATR), telling us how earlier budget promises have been implemented. Last year’s ATR told us about reports of the Expenditure Reforms Commission (ERC), set up in 2000. These 10 ERC reports talked of downsizing in 36 ministries/departments and according to last year’s ATR, these reports are being “processed”. This year’s ATR doesn’t mention ERC. Presumably processing is still going on, which is why this year’s budget tells us the number of central government employees will increase from 34,21,202 in March 2002 to 34,86,935 in March 2004. This is worse at state government level.

I think we will be closer to developed country status when government ads tell us that all such anti-poverty schemes have been scrapped and related government employees retrenched.