Will it reduce poverty or fill corrupt pockets? A 7-item reality check

The seven key landmines in the scheme:

1. The EGA has no “allocated” funds. It is like a bottomless pit. Whichever project can be shown to be an EGA project will have to be funded by the Centre. Does the Centre have the will and the means to check corruption in the remotest of remote villages across the country? As The Indian Express first reported last week, a Rs 9-crore EGS fraud in Maharashtra involved a corrupt officer who “created” schemes where none existed, forged signatures and used the scheme to amass wealth for himself.

2. In theory, it’s only the very poor who come to do unskilled physical work, and when they get better off, they stop coming. This is the basis of the logic on which the scheme is extended to all, and not merely to those who hold BPL cards and are below the poverty line.

However, as the Maharashtra experience shows, it’s the better networked and thus relatively better off in the village who get work on locations closest to the village. This pushes the old and weak to far away areas that are less accessible.

3. The minimum wage at Rs 60 may sound very low. Yet, when people are so poor that they are willing to work for less, the contractor pays them less and pockets the difference, sharing it with his friends. As The Indian Express reported early this year from Mayurbhanj, one of the 150 backward districts with an 80 per cent poverty rate, workers were officially being paid Rs 50, but actually received only Rs 30.

This meant that 40 per cent of the wage component of the scheme was being pilfered.

4. Ironically, if the higher wage norm is actually implemented correctly, it distorts labour markets. The farmer who was willing to pay Rs 30 to hire 10 workers can no longer afford to do so. Raising wage levels in a village can actually raise unemployment.

5. Muster rolls are most vulnerable to corruption. One muster roll is prepared of those who actually work and another one, much longer, has names of the dead, the living, uncles and aunts, of those who will be paid. The payment received by the contractor is for the official roll, the payment made is for the actual. The difference, of course, ends up lining the pockets of the corrupt.

6. The bill suggests a big role for panchayats. This helps in choosing projects that help the village and overseeing the work far better than that in a Central scheme. This is good for quality control. But it does not prevent the chosen project to be a well on the land of the biggest landlord of the village. Nor does it prevent the road being built as one that would lead to the Sarpanch’s house. The quality, durability and choice of the “productive assets” created by such schemes has been seen to be of dubious quality in the past.

7. In other countries such schemes, known as “work fare” programmes replace the unemployment dole. It reduces fiscal burden by bringing down subsidies. For example, money spent by the government on food stamps goes down. In this manner the scheme is funded out of existing subsidy programmes for the poor. Here in India there is no initiative to fund the EGA spend out of current spending on subsidies.

The government will continue to have PDS and will run a few dozen anti-poverty programmes. There is no attempt to put full focus and state machinery behind this one programme.

There would have been more pressure to make it successful if the government discontined its other programmes and funded the EGA out of the existing Rs 40,000 crore being spent on subsidies.