No proof required: PDS or NREGA, corruption must go on

No matter what in-the-name-of-the-poor scheme you cook up, the poor get less than 15 per cent

Written by Surjit S Bhalla | Updated: November 1, 2014 12:18 am
The PDS facts are as follows: 50 per cent of the food disappears, and the poor receive only 24 per cent of the food that reaches the ration shop. (Source: Reuters) The PDS facts are as follows: 50 per cent of the food disappears, and the poor receive only 24 per cent of the food that reaches the ration shop. (Source: Reuters)

There are several reasons why the case for retaining the NREGA employment system, as argued by 28 of India’s leading economists, should be dismissed.

First, India’s leading economists are likely to be just plain wrong, and naïvely so, in their assessment of the worth of the NREGA. While this job provision programme has been christened the Mahatma Gandhi NREGA, I feel it is important to not besmirch the Mahatma’s memory with such a corrupt programme.

Evidence suggests that India’s leading economists have generally been on the wrong side of economics and economic history. When the developing world, especially in East Asia, began changing course in the early 1960s, many of India’s “leading” economists stayed behind — and behind enough to cheer political moves like the Emergency and economic views like bank nationalisation etc. No prizes for guessing that the dominant view of India’s “leading economists” (hereafter ILE) back in the 1960s was in favour of heavy state involvement in the affairs of the economy.

Though much has changed in the world and in India, the ILE view has remained broadly the same — with minor adjustments. The ILEs are not so brazenly left that they support import controls or industrial licensing — but they are left enough to support “dole economics”, or massive government intervention in the name of the poor (though not necessarily for the poor). For them, it is enough to stop all debate with the simple comeback line — yes, corruption is high, yes, there are problems of delivery, but at least some money reaches the poor. In their letter, the ILE state: “Recent research also shows that corruption levels have steadily declined over time… While corruption remains a concern, experience shows that it can be curbed…” I guess corruption, like beauty, is in the ideology of the beholder, or the economist.

It has been documented by several researchers (also see my article, ‘1960s thinking on poverty, only in India’, IE, July 18) that the public distribution system (PDS) of foodgrains is one of the most corrupt public delivery systems in India and perhaps the world. The extent of PDS corruption has been openly acknowledged by every government in power, including the UPA government. The magnitude of the corruption involved is mind-boggling even for those more knowledgeable about these matters, for example, Fifa and the BCCI. In the July 18 article, I documented that the poor (Tendulkar poverty line) in India received only 12 per cent of the money spent in their name. Further, about 50 per cent of the foodgrains allocated to the PDS just disappears into thin air — that is,  half of the foodgrains that leave the godowns of the Food Corporation of India (FCI) never reach any ration shop. Think of it as black money generation of about Rs 60,000 crore a year.

This black leakage has been supported by every consumer expenditure survey undertaken by the NSS over the last 30 years. However, the government, in the form of the FCI, claims that there is zero leakage every year and it has its official website to prove that it distributed 50-60 million tonnes of foodgrains every year to the ration shops! The fact that only 30 million tonnes actually reached the ration shop is not of much concern or relevance to the FCI.

But, somehow, the NREGA is supposed to be different and subject to very little corruption. Why? Because defenders like the ILE state that the NREGA involves back-breaking manual work and is therefore self-selecting — only the poorest of the poor would take up a NREGA job. This assumes that in order to receive money for “back-breaking” work, you actually have to break your back, or even be there. Unfortunately, that is not the case. Calculations identical to those undertaken in PDS evaluations show that, far from having low leakage, the NREGA programme is possibly even more corrupt than the PDS system. These calculations are based on the NSS 2009-10 labour and employment survey, a survey that contained special and additional questions meant for monitoring and evaluating the NREGA programme.

Some basic results: the ministry of rural development website claims that in 2009-10, 284 crore man-days of work was provided to 5.26 crore households. The NSS survey indicates that 3.86 crore households worked on the NREGA for 147 crore workdays. Leakage — about half (48 per cent), and near-identical to that of the PDS.

But the similarity does not end there. The PDS facts are as follows: 50 per cent of the food disappears, and the poor receive only 24 per cent of the food that reaches the ration shop. So, out of every Rs 100 spent on the PDS, the poor received 12 per cent.
In the case of the NREGA, 48 per cent of the jobs accrue to nobody (compare that with 50 per cent of disappearing food). Of the jobs actually provided, the poor receive 39 per cent. Thus, out of every Rs 100 spent on NREGA, the poor receive (0.52×0.39) or Rs 20, some
Rs 8 higher than the PDS. So the NREGA is quite corrupt, but more “efficient” than the PDS? Not so fast. Thirty per cent of NREGA expenditures are capital or non-wage expenditures. Thus, the workers receive only 70 per cent of total expenditures, and poor workers receive Rs 14 of every Rs 100 spent in their name. A new identity for the ILE — no matter what scheme you cook up, the poor get less than 15 per cent.

When the 28 ILEs wrote the letter, the ministry of rural development, the ministry in charge of delivering the NREGA, was quick to respond. In an internal note (but nothing is internal in this web world), it denounced the perpetrators of the letter as individuals seeking to protect their revenue stream, never mind the ideology: “In spite of clear evidence of rampant corruption at various places, the scheme continues to be presented as a successful scheme. This, perhaps, is due to a solid network of vested interests involving political party functionaries, government officials, NGOs, research institutes and experts desirous of milking the scheme to their advantage.” In my many years of observing policymakers and policy statements, I have yet to come across such a frank and honest assessment of the tribe to which I belong. Congratulations to the ministry of rural development for nailing it.

A more public airing of this PDS-NREGA comparison presented itself last week, when NDTV Dialogues anchor Sonia Singh invited me for a genuine debate on the NREGA, more so since former rural development minister Jairam Ramesh was part of the panel. But 15 minutes before the show was to begin, I was told to go home since Ramesh had cancelled his appearance. I returned home, only to learn later that Ramesh had miraculously appeared at the TV studio, ready to do the show, with all the pre-scheduled panellists present sans me. The show, and ideology, and corruption, must go on.

The writer is chairman of Oxus Investments, an emerging market advisory firm, and a senior advisor to Zyfin, a leading financial
information company

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First Published on: November 1, 2014 12:15 am
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    Bharet Vij
    Nov 2, 2014 at 5:22 pm
    If one can identify it, one can address it. Will the Modi Govt. have the requisite will to address PDS and MNREGA corruption?
    Reply
    1. B
      Bharet Vij
      Nov 2, 2014 at 5:22 pm
      If one can identify it, one can address it. Will the Modi Govt. have the requisite will to address PDS and MNREGA corruption?
      Reply
      1. I
        IndianWellWisher
        Nov 1, 2014 at 4:05 am
        Government run schemes can barely be effective - even in USA, INS (immigration) and IRS are quite incompetent. Defense to some extent is well run - even there, there are plenty of scandals helped by secrecy
        Reply
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          Anil Sarin
          Nov 1, 2014 at 6:09 am
          Insightful as usual. Backed by data, as usual. Surjit is a master of plain-speak. It is sad that men like Surjit are not taken much more seriously. I guess this refusal to debate facts says something about us Indians.
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            Anindya Acharya
            Nov 5, 2014 at 12:23 pm
            Dilip Abreu (Professor of Economics, Princeton University)Pranab Bardhan (Emeritus Professor of Economics, University of California Berkeley)V Bhaskar (Professor of Economics, University of Texas at Austin)Ashwini Deshpande (Professor of Economics, Delhi School of Economics)Jean Drèze (Visiting Professor, Department of Economics, Ranchi University)Maitreesh Ghatak (Professor of Economics, London School of Economics)Jayati Ghosh (Professor of Economics, Jawaharlal Nehru University)Deepti Goel (istant Professor of Economics, Delhi School of Economics)Himanshu (istant Professor of Economics, Jawaharlal Nehru University)Raji Jayaraman (ociate Professor of Economics, European School of Management and Technology)KP Kannan (former Director, Centre for Development Studies, Trivandrum)Anirban Kar (ociate Professor, Delhi School of Economics)Reetika Khera (ociate Professor, IIT Delhi)Ashok Kotwal (Professor of Economics, University of British Columbia)S Mahendra Dev (Director, Indira hi Insute of Development Research)Srijit Mishra (ociate Professor, Indira hi Insute of Development Research)Dilip Mookherjee (Professor of Economics, Boston University)R Nagaraj (Professor of Economics, Indira hi Insute of Development Research)Sudha Narayanan (istant Professor of Economics, Indira hi Insute of Development Research)Pulin Nayak (Professor of Economics, Delhi School of Economics)Nalini Nayak (Reader in Economics, Delhi University)Bharat Ramaswami (Professor of Economics, Indian Statistical Insute, New Delhi)Debraj Ray (Professor of Economics, New York University)Atul Sarma (former Vice-Chancellor, Rajiv hi University)Abhijit Sen (former Member, Planning Commission)Jeemol Unni (Director, Insute of Rural Management, Anand)Sujata Visaria (istant Professor of Economics, Hong Kong University of Science and Technology)Vijay Vyas (former Member, Economic Advisory Council to the Prime Minister).. They all are misleading only you are leading the government? MGNREGA is the very best scheme for the Rural India.
            Reply
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              Anindya Acharya
              Nov 5, 2014 at 12:23 pm
              Dilip Abreu (Professor of Economics, Princeton University)Pranab Bardhan (Emeritus Professor of Economics, University of California Berkeley)V Bhaskar (Professor of Economics, University of Texas at Austin)Ashwini Deshpande (Professor of Economics, Delhi School of Economics)Jean Drèze (Visiting Professor, Department of Economics, Ranchi University)Maitreesh Ghatak (Professor of Economics, London School of Economics)Jayati Ghosh (Professor of Economics, Jawaharlal Nehru University)Deepti Goel (istant Professor of Economics, Delhi School of Economics)Himanshu (istant Professor of Economics, Jawaharlal Nehru University)Raji Jayaraman (ociate Professor of Economics, European School of Management and Technology)KP Kannan (former Director, Centre for Development Studies, Trivandrum)Anirban Kar (ociate Professor, Delhi School of Economics)Reetika Khera (ociate Professor, IIT Delhi)Ashok Kotwal (Professor of Economics, University of British Columbia)S Mahendra Dev (Director, Indira hi Insute of Development Research)Srijit Mishra (ociate Professor, Indira hi Insute of Development Research)Dilip Mookherjee (Professor of Economics, Boston University)R Nagaraj (Professor of Economics, Indira hi Insute of Development Research)Sudha Narayanan (istant Professor of Economics, Indira hi Insute of Development Research)Pulin Nayak (Professor of Economics, Delhi School of Economics)Nalini Nayak (Reader in Economics, Delhi University)Bharat Ramaswami (Professor of Economics, Indian Statistical Insute, New Delhi)Debraj Ray (Professor of Economics, New York University)Atul Sarma (former Vice-Chancellor, Rajiv hi University)Abhijit Sen (former Member, Planning Commission)Jeemol Unni (Director, Insute of Rural Management, Anand)Sujata Visaria (istant Professor of Economics, Hong Kong University of Science and Technology)Vijay Vyas (former Member, Economic Advisory Council to the Prime Minister).. They all are misleading only you are leading the government? MGNREGA is the very best scheme for the Rural India.
              Reply
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                Ashoka Kalgude
                Nov 3, 2014 at 4:02 am
                Nrega is just money laundering to grroots CONg foot solders. All top leader have other way of looting but they need one for bottom of COngress pyramid thus came this scheme
                Reply
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                  Ashoka Kalgude
                  Nov 3, 2014 at 4:02 am
                  Nrega is just money laundering to grroots CONg foot solders. All top leader have other way of looting but they need one for bottom of COngress pyramid thus came this scheme
                  Reply
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                    Brijkhanna
                    Nov 1, 2014 at 12:26 pm
                    Any number of Scheme like MNERGA shall not deliver the benefits unless corruption at every stage of delivery is not removed. Some time, we start believing that present system of delivery of justice better than the medieval system as being followed some of Middle East Countries. This looks brute but is effective in controlling crime
                    Reply
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                      Brijkhanna
                      Nov 1, 2014 at 12:26 pm
                      Any number of Scheme like MNERGA shall not deliver the benefits unless corruption at every stage of delivery is not removed. Some time, we start believing that present system of delivery of justice better than the medieval system as being followed some of Middle East Countries. This looks brute but is effective in controlling crime
                      Reply
                      1. A
                        avi
                        Nov 1, 2014 at 7:42 pm
                        ha ha.
                        Reply
                        1. A
                          avi
                          Nov 1, 2014 at 7:42 pm
                          ha ha.
                          Reply
                          1. S
                            SurajParkash
                            Nov 1, 2014 at 3:29 am
                            Mr Surjit S Bhalla is observations are correct and strong, but why does he feels the politicians and babus donot know, in fact all programmes like NREGA or Water Yojna’s are purposely made out complicated and tedious by Babus and their political bosses to give full leeway to engage in corruptions and bribes, and shares handed over to seniors and politicians so that such more schemes are floated and complaints are dumped somewhere. There is absolutely no accountability, and corrupt employees form Mafia and continue to stay at oe station for even beyond 20 years.Take the case of potable water supply in Haryana. Why and when canyou expect India to be upgraded in countries for ease of doing business ? Good intentions, misplaced attentions and not even feeble efforts to tighten bureaucracy will never ever bring India to the list of top 50 countries listed as good business atmosphere, and will slip back further from the present listing at 142..When the Govt can only spend hundreds of crores each month for loot by bureaucracy for a small city like Ambala, with a potion of 7 lacs,where 80 %, or 121 tube wells are admitted by PH itself stand damaged for last 6, 12, and even beyond 18 months. By the time money is looted in the name of fraudulent emergency repairs, and hardly 20 tube wells are repaired, 30 more tube wells get damaged. Modi Govt is rightly worried for cleanlinesson the streets, what about much more horrible situation where the water contaminated with sewerage, insects, snakes, even bones is forced into stomachs of citizens for last 18 months, and there is no one to check them. Newspaper reports, even agitations, matka phod’s, dharna’s outside PH offices, does not consute a complaint. Corrupt officers are not able to check their subordinates fearing counter complaints of their own hands in corruptions and bribes. Who will check this checks and balances situation and how can the country can expect better grade in list of countries for ease of doing business, when a major town like Ambala, biggest army and air force stations, headquarters of Ambala Division, Northern Railways, Telecom, Telephone, and world’s largest manufacturing hub in world for scientific Instruments, Mixies, etc are suffering from water borne diseases through uncontrolled and unchecked corrupt PH authorities in Ambala In Azad Nagar people are forced to get water midnight 12 AM to 4 AM, that too erratically 2-3 times a week, and people to meet family, or family functions, and building constructions and repairs are forced to obtain water from water mafia @ Rs 400 per tanker, that too non potable. But PH authorities are enjoying life counting the bribe monies collected each night. SurajParkash 9315879780
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                              indian
                              Nov 3, 2014 at 5:38 am
                              Dr. Bhalla, if corruption is the determinant of implementing any govt scheme, we cannot run Indian govt at all ! With this parameter, pls shut down the police dept, the railways, defence procurements etc. I would also suggest you get some gr-root statistics instead of secondary and tertiary derivatives. By the way, dole is prevalent in the most capitalist of economies - so stop cribbing about the concept of dole. I have found, anecdotally, MNREGA to be corrupt, yet increasing the negotiating power of farm labour. One of the impacts of this, is the tremendous of farm equipments (tractors, threshers, etc) in the country - farmers find it difficult to get labour and hence, turn to automation. But then, Dr. Bhalla can be dogmatic till the cows come home.
                              Reply
                              1. I
                                indian
                                Nov 3, 2014 at 5:38 am
                                Dr. Bhalla, if corruption is the determinant of implementing any govt scheme, we cannot run Indian govt at all ! With this parameter, pls shut down the police dept, the railways, defence procurements etc. I would also suggest you get some gr-root statistics instead of secondary and tertiary derivatives. By the way, dole is prevalent in the most capitalist of economies - so stop cribbing about the concept of dole. I have found, anecdotally, MNREGA to be corrupt, yet increasing the negotiating power of farm labour. One of the impacts of this, is the tremendous of farm equipments (tractors, threshers, etc) in the country - farmers find it difficult to get labour and hence, turn to automation. But then, Dr. Bhalla can be dogmatic till the cows come home.
                                Reply
                                1. T
                                  Tellitasitis
                                  Nov 3, 2014 at 12:08 pm
                                  Dr Bhalla has hit the nail on the head. A good expose that deserves to be spread across other media...ignore for a moment that ndtv disallowed you. People need to know what they have always suspected..there's something fishy about these welfare handouts.
                                  Reply
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                                    kaps
                                    Nov 2, 2014 at 7:33 am
                                    Keep it up Bhalla Ji. Keep the honest opinions and review/view of policies going on the blog/Net. This is more powerful medium of waking up the citizens then pre cooked discussions/shouting on TV..
                                    Reply
                                    1. K
                                      kaps
                                      Nov 2, 2014 at 7:33 am
                                      Keep it up Bhalla Ji. Keep the honest opinions and review/view of policies going on the blog/Net. This is more powerful medium of waking up the citizens then pre cooked discussions/shouting on TV..
                                      Reply
                                      1. C
                                        Chandra Sekaran VT
                                        Nov 1, 2014 at 1:32 pm
                                        As a common citizen,I have never stopped wondering how the so called economic pundits talk of growth percentage merely estimated from the expenditure towards that specific program with out understanding the reality that actual reach as indicated by rajiv i could be a mere 10% or 15%.Also I have not seen any indian ,america returned india,or american economist that a country should plan its economics based on its own natural resources and,strength ,character of its people.#1.Our strength #1.Even though China 's land m is bigger than us, India has 10% larger irrigable land .But China produces on an average 2.56 times more than India.Hence all Indian or borrowed investment should go towards COLLECTIVE FARMING, with Technology &money (in cash) input to this GOAL of achieving 2.56 times the current production level.This will improve local economy, enhance sustainable employment &make India an AGRI EXPORT NATION.This effort will for ever improve our economy in a sustainable way.I will continue if this gets published after INDIAN EXPRESS TEAM APPROVES THIS WORTHY OF BEING HERE
                                        Reply
                                        1. C
                                          Chandra Sekaran VT
                                          Nov 1, 2014 at 1:32 pm
                                          As a common citizen,I have never stopped wondering how the so called economic pundits talk of growth percentage merely estimated from the expenditure towards that specific program with out understanding the reality that actual reach as indicated by rajiv i could be a mere 10% or 15%.Also I have not seen any indian ,america returned india,or american economist that a country should plan its economics based on its own natural resources and,strength ,character of its people.#1.Our strength #1.Even though China 's land m is bigger than us, India has 10% larger irrigable land .But China produces on an average 2.56 times more than India.Hence all Indian or borrowed investment should go towards COLLECTIVE FARMING, with Technology &money (in cash) input to this GOAL of achieving 2.56 times the current production level.This will improve local economy, enhance sustainable employment &make India an AGRI EXPORT NATION.This effort will for ever improve our economy in a sustainable way.I will continue if this gets published after INDIAN EXPRESS TEAM APPROVES THIS WORTHY OF BEING HERE
                                          Reply
                                          1. A
                                            alex
                                            Nov 3, 2014 at 11:52 am
                                            excellent.
                                            Reply
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