MNREGS and UP’s unquenchable thirst for loot

Governance Now
oct 16-31, 2011

For the past three months a team of 250 accountants and auditors from the comptroller and auditor general of India (CAG) has been grappling with an enormous amount of data on various schemes of rural development and health in Uttar Pradesh. More than ` 17,000 crore has been spent on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) alone in the past five years and this team’s job is to audit the expenses.
After struggling with the tonnes of data provided by the various state government agencies (there are more than 7,52,000 projects under MNREGS in the current year alone), the team is reported to have sought 250 more auditors and accountants to decipher the riddle. But still they are at their wits’ end. The tools of auditing and accountancy are woefully inadequate to verify the mountains of money the Mayawati government claims to have spent under the MNREGS and National Rural Health Mission (NRHM).
Take the implementation of this NRHM scheme in a Bahraich village. Under the scheme, the government gives direct cash help of ` 1,400 to each child-bearing woman in rural areas. According to records, 250 women in the village were given the dole in just one financial year, 2010-11.
A generous state administration indeed, except that there’s a problem. The village has only about 500 families. That would mean that there was a pregnant woman in every second household and that most of the women were of child-bearing age and that all of them were pregnant at the same time!
“This is more of a biological riddle than accounting,” said an officer closely associated with the audit.
Of late, the union rural development ministry has been grappling with more than just biological and accounting riddles. When it put the Uttar Pradesh government’s MNREGS funds disbursement under the lens in May, it turned out that it was dealing with all kinds of impossibilities: logical (such as ` 6.6 crore being spent to erect seven brick enclosures to guard saplings), geographical (such as a road from Taj Mahal to Red Fort being built in Corute village of Varanasi district), mathematical (such as labour being paid ` 44 lakh for 19,178 persondays at ` 120 per personday) and even astrophysical (such as compressing 1,000 days into six months so that they could pay one labourer for 1,000 days of work between April and September). Not to forget the supernatural such as roads and drains worth crores laying themselves out without human intervention or help (e.g., a ` 10 lakh-road in village which was laid without using any labour)!
We have been told fact is stranger than fiction but in Uttar Pradesh fiction wins hands down. For its sheer farcical genius and for its absurdly simple yet extremely well organised methods of mammoth loot, UP could well be unparalleled. Even fiction is generally weaved around a grain of fact. But the governance machinery here carries no such burden in its brazen and inhuman loot of funds meant for the rural poor. A spot visit by four Governance Now reporters to six districts revealed how criminal falsehoods were masquerading as sacred facts.
Our reporters, led by Yash Vardhan Shukla who scented the scoop, visited no less than 16 projects picked randomly from the MNREGS management information system (MIS). The MIS is filled by the concerned state government departments and the rural development ministry puts it up on its website. (That is the other stunning aspect of this MNREGS scam, it is out there in public domain!)
As you will see in the following pages, the violations are screaming and the gall of the corrupt is stupefying. Here is a common thread of violations that runs through all these projects:
n There are huge gaps between “estimated cost” and “actual expenditure”. In most of the cases the actual cost is not just 10 or 15 percent higher but several thousand times high.
n MNREGS was meant to reverse the top-down approach to planning and execution of development projects. Our reporters invariably found that the villagers had no role in deciding the development work. And when something happened, they had little clue about the costs involved. Social audit by the gram sabhas is almost unheard of.
n MNREGS was meant to help the unemployed and hence contractors were kept out and material cost was limited to 40 percent of project cost. In most cases, that is not the case. There are cases where projects worth a crore and more have been implemented without engaging any labour including one in which a pond was dug without any payment made for man or machine. But material (bricks) worth ` 2 crore was purchased.
n And for all violations that were caught, the state administration has only one answer: a clerical mistake in data entry by the MIS operator!
By all indications whatever is going on in Uttar Pradesh in the name of central welfare schemes is a crime against society. Those involved in the crimes seem quite unafraid of consequences or are sure that there shall be none. That is the reason why a data entry in a village in Varanasi has shown ` 1.01 crore spent on a road project titled “Agra ke Taj Mahal se Dilly ke Lal Kila Tak”! Oh, the audacity of the UP babus!
The truth of the matter is, there is nothing that can be done. Even the union rural development ministry that provides the funds can’t do much. When minister of state Pradeep Kumar Jain ‘Aditya’ called a meeting in Varanasi in May 2011 to take stock of the irregularities, the district magistrate skipped the meeting and the next in the chain of command, chief development officer (CDO) S K Singh, dismissed every glaring irregularity as a “data entry mistake”.
Beyond going on tours and writing letters to the state government, the union ministry can do little. After his enquiry tour, ‘Aditya’ wrote: “On the whole the district administration has shown a lack of interest in the affairs of MNREGS. The DPC (district planning commissioner who is the district magistrate himself) has no interest in the MNREGS projects and their implementation. There is serious dereliction of duty on the part of the district administration. This requires a serious enquiry.”
We can be quite certain that the enquiry will never happen because only the state government can order it. We will never know how much white money has been converted into black money using the MNREGS route because in Varanasi district alone it funded no less than 13,018 projects in just one year. Here alone, ` 66.64 crore was disbursed under MNREGS in just one year (2010-11). It is impossible to verify all the projects of Varanasi district, forget lakhs of them across the 72 districts of Uttar Pradesh and many more across the country.
Uttar Pradesh alone has spent more than ` 17,000 crore on MNREGS in five years (over ` 1,29,000 crore nationally). Multitude stories of diversion and leakage of MNREGS funds have hit the national headlines from across the country. So this set of scams from Uttar Pradesh should not even have merited a squeal.
If we are screaming, it’s only because in UP the MNREGS loot has gone way beyond leakages and diversions. Here the demon is devouring the funds. If this continues and spreads to other states, it will undermine the welfare scheme to the extent that sooner than later questions will be raised on the wisdom of continuing the MNREGS.
John Maynard Keynes had said that economic growth can be generated by hiring people to dig holes and then hiring some more to fill them. In the following pages, you will see how well the UP administration has understood Keynes and generated an entire new economy for itself. Here’s an economy that needs to be sent into depression right away. n

Making sense of the poverty debate

Governance Now
Nov 1-15, 2011   

Junking poverty line and removing caps on the number of beneficiaries of social welfare schemes are good policies to follow, except that the government is less than keen to live up to its own words

What is poverty line?
It is the planning commission that fixes the ‘poverty line’. As per the planning commission’s last affidavit before the apex court, this line represents an “expenditure” of ` 32 per head per day on food, health and education (but not house rent) in the urban areas and ` 26 per head per day in rural areas – both at June 2011 price level.
For a family of five, this works out to be ` 4,824 per month in urban areas and ` 3,905 per month in rural areas. Any family spending this or a lower amount a month is considered a below poverty line (BPL) family.
The calculations are based on the Tendulkar committee’s recommendations of 2009 which drew the line at ` 18 per head per day of expenditure in urban areas and ` 15 per head per day of expenditure in rural areas, at the 2004-05 price level. This was scaled up to the June 2011 price level to reach the current poverty estimate.
The scaling up means the BPL population has gone up to 40.74 crore from a little more than 37 crore earlier.
The Tendulkar committee worked out the poverty estimate from the data collected by the national sample survey organisation (NSSO). This means, it was an indirect assessment and not actually based on a direct survey of the poor families.
In 2002, an attempt was made to identify the BPL families directly on the basis of 13 socio-economic indicators but it got mired in litigations and eventually came unstuck.

What is socio-economic and caste census of 2011?
This is a first of its kind census being carried out at the moment to identify the BPL families directly by generating “information on a large number of social and economic indicators relating to households across the country”.
It will do the following: (a) rank households based on their socio-economic status, so that the states and union territories can objectively prepare a list of families living below the poverty line in rural and urban areas; (b) make available authentic information on the caste-wise breakup of population in the country and (c) provide the socio-economic profile of various castes.
Three sets of parameters are being used for the purpose of identifying the BPL families – automatic exclusion, automatic inclusion and ranking based on seven deprivation indicators.
It is the findings of this census, to be available sometime next year, that will form the basis for identifying the beneficiaries of various welfare schemes, as per the October 3 joint press briefing by planning commission deputy chairman Montek Singh Ahluwalia and rural development minister Jairam Ramesh.

Controversy over poverty line
The planning commission was accused of doing a lazy job, when it merely scaled up the old Tendulkar committee’s poverty estimate, which several leading economists and food right activists said best suited to benchmark the “destitution line”, rather than the poverty line. The paltry sums – of ` 32 in urban and ` 26 in rural areas – were not sufficient to provide healthy living conditions and good education in the current economic conditions, they argued.
Ground realities are quite stunning. Forty-six percent of the country’s children below the age of three continue to be malnourished, according to a government report. A recent World Bank report said 2.4 crore Indians are pushed into poverty every year because of the unbearable health-care expenses. And India continues to remain in the bottom pile (ranked 67 among 81 countries in 2011) in the global index of hunger.
Therefore, when Ahluwalia and Ramesh said on October 3 that the poverty line was being junked, it gladdened the hearts of many. They announced two policy changes: one, from now onwards the planning commission’s poverty estimate would ‘not’ be used to select the beneficiaries of the social welfare schemes and, two, there would be ‘no’ capping on the number of beneficiaries. The beneficiaries would be henceforth determined on the basis of the socio-economic and caste census 2011 findings.
But a few days later, Ahluwalia reversed his stand, provoking another round of uproar. In a letter to attorney-general Goolam Vahanvati, who will represent him in the supreme court in connection with the right to food, he said he was not abandoning the poverty line and that the beneficiaries of subsidised foodgrains would be capped to “fit” the provisions of the food security bill.
The bill proposes food entitlement to be capped at 75 percent in rural areas – of which 46 percent will be “priority households” or the BPL families – and 50 percent of urban population – of which 28 percent will be “priority households” or BPL families.
Incidentally, the October 3 briefing had also introduced an element of ambiguity by adding that “an expert committee will be appointed to ensure that this methodology is consistent with the provisions of the food security bill as it finally emerges”. Its import was clear only when Ahluwalia wrote the letter to Vahanvati later insisting that the number of beneficiaries will be subject to the provisions of the food security bill.

Why is poverty line or BPL tag important?
Right now, a large number of welfare schemes of the union and state governments are linked to the poverty estimate and the beneficiaries are selected on the basis of their BPL status. Some of such central schemes are: public distribution system, national old age pension, Indira awas yojna, national family benefit scheme, pradhan mantri gramodaya yojna, swarnajayanti gram swarozgar yojna, Jawahar gram samrudhi yojna, rashtriya swasthya bima yojna and so on. The state governments have an equally impressive number of such schemes.

What is the way out?
Going by the policy statement of October 3, by Ahluwalia and Ramesh, the logical step is to remove the cap proposed in the food security bill.
The socio-economic and caste census will provide more accurate data to identify the needy requiring help. It, therefore, makes little sense to adhere to an arbitrarily fixed poverty line.
The natural question that follows from this is: why is then Ahluwalia not proposing what seems to be the next logical step but creating confusion? The answer lies in his continued insistence on keeping the subsidy under a tight leash – but only when it comes to social welfare schemes,  never when it involves industry. For example, he has never uttered a word against “revenue foregone” on the corporate income tax that amounted to more than ` 80,000 crore for the financial year that just ended. n

feedback@governancenow.com