A study of 88,020 rural roads built under the Pradhan Mantri Gram Sadak Yojana (PMGSY) has found that following a close election, the share of contractors with the same surname as the newly elected MLA rose by 75% — from 4% to 7% — and goes on state that preferential allotment to politically connected contractors leads to a 170% increase in the likelihood of these roads never being built.
The paper, “Building Connections: Political Corruption and Road Construction in India” by researchers of Princeton University and Paris School of Economics, has been published in the March issue of the Journal of Development Economics. Researchers Jonathan Lehne, Jacob N Shapiro, Oliver Vanden state that surnames are used are a proxy for the MLA’s social network, basing this on the premise that in India they identifiers of caste, religion and geographic provenance.
In an email response to The Indian Express, Lehne said, “We compared the composition of contractors awarded roads in each constituency before and after an election, focusing on the surnames of the contractors. We found that the share of contracts awarded to contractors who have the same surname as the winning politician increased after the election, relative to the share who have the same surname as the runner-up.” To ensure that the study captures a causal effect, it restricted the sample to very close elections, he said.
Examining data from electoral terms during 2001-2013, the study states that 4,127 road projects were allocated to contractors sharing a name with the MLA. It estimates that MLAs had intervened in the allocation of 1,600-odd road contracts worth $470 million, and that 500 all-weather roads from the sample, while listed in PMG’Y’s monitoring data as having been completed and paid for, do not exist on ground, as per Census 2011 data. “Regression discontinuity estimates at the road level show that political interference raises costs, lowers quality, and increases the likelihood that roads go missing,” it states.
“Overall, PMGSY has had impressive effects on employment and earnings in recipient villages. Our study shows that these benefits can be undermined when contracts are awarded based on contractors’ political connections rather than their efficiency,” Lehne said in his email.
A senior official with the Ministry of Rural Development, which is in charge of PMGSY, dismissed the report as “fallacious”. “The paper is fraught with misunderstanding of the Indian system. For instance, in Andhra Pradesh, every second person has a Reddy surname. It doesn’t show any kind of link between the MLA and the contractor who shares his last name,” the official told The Indian Express.
The official added that since the start of PMGSY, the entire process —from scientific selection of roads to standard bidding documents — has been very transparent and robust.
About the supposedly missing roads, the official said, “Many roads, earlier slated to be built, are often dropped due to non-feasibility in terms of issues with land acquisition or forest clearance. The report fails to ascertain all these facts.”
PMGSY was started in 2000 with the stated intent of connecting 300,000 villages. The paper observes that the results are telling due to the fact that PMGSY contracts mandate a transparent technical and monetary bidding process, with no formal role for the local politicians in the selection process. This, it states, points to the possibility of the ‘LA’s social networks including connections within the regional bureaucracy with. It goes on to state that favouritism in awarding contract was more likely when the official overseeing PMGSY [district collector] shared the MLA’s surname.
As a policy suggestion, it cites another study, Lewis-Faupel et al. (2016), to state that “the identification of corrupt interventions in PMGSY allows us to revisit the evidence… that e-procurement improved the quality of PMGSY road construction.”
Ministry officials said that most states have gone for e-tendering between 2009 and 2013. “Under PMGSY, we have encouraged smaller players since the contract sizes are small. There is always a likelihood of regional contractors getting it hence there is a surname correlation. It has got nothing to do with interference from any MLA,” said a ministry official.
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