Current Economic Statistics and Review For the
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National Rural Employment Guarantee Scheme (NREGS) – A Review*
The National Rural Employment Guarantee Act (NREGA) was notified by the central government on 7 September 2005. National Rural Employment Guarantee Scheme (NREGS), coming under the Act, aims at enhancing livelihood security in rural areas by providing at least 100 days of guaranteed wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work. The Act was notified in 200 districts in the first phase with effect from 2 February 2006 and later extended to additional 130 districts in the financial year 2007-2008 (113 districts notified with effect from 1 April 2007 and 17 districts in UP notified with effect from 15 May 2007). The remaining districts have been notified under the NREGA with effect from 1 April 2008. Thus NREGA covers the entire country with the exception of districts having 100% urban population. The NREGS differs from the other rural employment scheme, Sampoorna Grameen Rozgar Yojana (SGRY) in that, the release of funds under NREGS is based on state proposals rather than on predetermined allocations. The scheme marks a major paradigm shift from the earlier wage employment schemes as it creates a rights-based framework for wage employment making the government legally accountable for providing employment to those who ask for it. NREGS is a demand-based programme, and hence, the requirement of funds and employment generation will depend on demand for work. The scheme aims at creating jobs and enhancing rural capital formation and not just providing a dole or an unemployment allowance. Thus, the scheme fundamentally avoids any moral hazard problem. The scheme thus has the potential of reducing the disguised unemployment in rural areas, and also could increase the overall total labour productivity. Salient Features The salient features of the scheme as it operates including its scope and coverage are : · Convergence of the NREGA funds with funds from other sources for the creation of durable assets is permissible. However, care is taken to ensure that NREGA funds do not substitute for resources from other sectors or schemes. Funds available with Panchayati Raj Institutions (PRIs) from other sources such as the National Finance Commission, State Finance Commission, state departments and other central or centrally-sponsored schemes can also be dovetailed with NREGA funds for the construction of durable community assets / works permissible under NREGA. Infact, as per the NREGA guidelines, it is mandated that social sector programmes such as literacy and health missions must be converged with the NREGS to extend the benefits of these programmes to NREGS workers and beneficiaries. · The number of households receiving employment increased from 2.05 crore in FY 2006-07 to 3.39 crore in FY 2007-08, a rise of 65%. Presently, the scheme covers 4.5 crore households. · In 2007-08, about 13 lakh works were taken up as against 8.26 lakh works in the previous year. In 2008-09, 27.2 lakh works were undertaken. · Women contribute around 43% to total person days of work. · Highest priority is given to the water conservation work which accounts for 52% of the total works given under NREGS. · Provision of irrigation facilities to lands owned by SC/ST contributes 14% and rural connectivity 17% to total works undertaken under the scheme. · Rs 4676 was the annual average amount spent on each household under the NREGS during 2007-08. This is 11% higher than Rs 4192 spent during 2006-07. For the financial year 2008-09, the annual average amount spent was Rs 6038. The NREGS helped in increasing the minimum wages in many states. The average rise reported was around 32%. Progress
NREGA covered 4.5 crore
households in FY 2009 and offered 216.04 crore
person days of employment.
The Union Budget 2009-10 has considerably hiked the
allocation under the NREGS to Rs 39,100 crore. FY2009-10 has witnessed
the highest outlay so far, which translates into a y-o-y rise of 144%. The
Budget has also increased the wages under NREG from Rs 60 per day to Rs
100 per day.
The national overview of the programme shows that the total employment provided under NREGS was 2.10 crore (in 2006-07), 3.39 crore (in 2007-08) and 3.51 crore (in 2008-09 till Dec 2008). Women’s participation has increased from 41% in 2006-07 to 49% in 2008-09. The number of households provided with employment was more for states in which more districts were covered (in phase 1 of NREGS). The graph below validates this finding
Source : http://rural.nic.in/budget/Budgetframe.htm and http://nrega.nic.in Goals & Guidelines The NREGS seeks to achieve the following goals based on predetermined guidelines. Goals
Guidelines
panchayat, stating the time and duration for which work is sought. The minimum days of employment have to be at least fourteen.
Employment will be given within 15 days of application for work, if it is not, then unemployment allowance as per the Act has to be paid. The liability of paying the allowance rests with the states. The unemployment allowance amounts to one fourth of the minimum wage for the first 30 days, and one half thereafter.
Some Shortcomings However, of late, the NREGS is facing some criticism from certain quarters as regards its effectiveness. Economists, activists, analysts have come out with several areas of weakness in the operation of the scheme. Some of these aspects are covered in this section along with our own comments. Considerable efforts still need to be taken so as to make the Act really effective. It has been found that, the NREGS appears to be deviating from its objective on two important counts. One, wages and the other, number of days for which employment was provided. In most states, the average employment in 2008-09 per household was only 47 days. While workers in Rajasthan were employed under the scheme for the longest duration at an average of 76 days, those in Kerala sought employment for an average of only 22 days. Out of the total 4.5 crore households that were provided jobs during 2008-09, about 14.5% of them could get 100-days of employment. The statistics reveal that about 10.62 per cent of the total 3.4 crore registered rural households in 2007-08 were provided 100-days of employment. During 2006-07, from a total of 2 crore households which were provided jobs, about 10.29 per cent of them could get 100-days of employment. As per an assessment done by the ministry, the national average of the number of working days per household under NREGA was 48 in the last fiscal and it stood at 25 till May this year. Our comment is that this situation should be viewed positively. Since the offer of employment is based on the demand supported by the need, if the number of days of employment offered under the scheme is less, then it should be interpreted as relatively low demand under the scheme which indirectly means that employment otherwise is normally available outside the scheme. Data for the three years during which NREGA has been in operation, 2006-07, 2007-08 and 2008-09 shows that on an average, only 50% of the households which registered under the scheme were actually employed. Further, the average number of days each household received employment was only 45 against the promised 100. The performance across states also varies a great deal. In terms of the percentage of registered households provided work, Maharashtra has averaged an abysmal 13% over the three years, while Rajasthan averaged 73%. In terms of the average number of person-days of employment per household too, the variation is stark. From 22 in West Bengal to 79 in Rajasthan. Our comment on this is the same as in the previous paragraph. The question that needs to be verified before passing any judgement on this issue is whether the employment was low because of less supply or lower demand in practice. With the central government likely to do away with the idea of curtailing states’ liberty of raising wages under the scheme, this will have two repercussions. One, it will strain the exchequer considerably given the current fiscal situation and two, most likely will breed inequality across states. States revise their minimum wages periodically, and as many as eight states increased their minimum wages substantially in 2007-08. Some like Uttar Pradesh and Rajasthan almost doubled the wage rate to Rs 100 from Rs 58. However, as the states know their local economy and are better placed to fix wages, the central government prefers to stay out. The centre had issued a notification in January this year, which in effect has capped the minimum wages of individual states at levels prevailing as on 1 January 2009. The notification stated that, states wanting to hike their minimum wage are free to do so, but the programme would go by the wages as on 1 January 2009. The centre can revise the rate if it is convinced by the individual state’s justification for a hike. Now, Orissa is all set to increase the wage rate of unskilled workers to Rs 90 from the current Rs 70. Our view is that the wages fixed under the scheme should normally be pitched slightly lower than the market wages, otherwise, the scheme will be offering employment of the first resort and not as the last resort. The average wage rate varies too. The average wage rate is a tad over Rs 85, but varies from around Rs 70 per person per day in states like Gujarat and Meghalaya to double that in Haryana. The scheme breeds inequality, partly due to some inherent shortcomings in the policy, but largely due to absence / inefficiency of the administrative machinery. Wage rates cannot be uniform across the states since the cost of maintenance, labour market conditions, etc., having a bearing on level of wages would vary from state to state. The scheme technically cannot breed any added inequality—at best it can only reduce inequality, since people without wages or employment are offered some guaranteed employment under the scheme. Of late, some harsh realities at the ground level of implementation are coming to the surface. In remote villages of Orissa, Haryana and some other villages, villagers are coming up with innovative ways to misuse their NREGA job cards, the detection of which is beyond the scope of scientific audits. In some parts of tribal Orissa, job cards are used to raise money from local money lenders. When villagers want to raise a loan, they pledge their cards with the money lender. The latter then collects the wages from the government using the card. In many cases job cards are used to substitute work done using machines. Despite registering under the scheme, the contractor dissuades the villagers from working and uses machines which are cheaper, to do the same. Those who willingly opt out are paid some money while the contractor pockets the wages. This violates norms of employing contractors and using machines. Job cards are used to fudge muster rolls and siphoning off wages. This is being slowly replaced by paying wages through banks and post offices. However, many point out that even in schemes where money is paid through banks and post offices it is a Herculean task to ensure that the beneficiaries are themselves withdrawing the cash and using it for their welfare. Another scam has been unearthed in Balrampur, Uttar Pradesh (UP). The state Department of Rural Development has ordered a probe into the purchase made under the scheme at Balrampur in October 2008. Under it, goods worth Rs 5 crore had been purchased in violation of the guidelines of the Act or informing the department. According to the Act, every district can spend only four per cent of its NREGS budget to purchase items like information boards, registers, stationary and such material. But it does not allow any central procurement for entire districts and the purchases have to be done according to the task approved. According to official information, the Rs 5 crore procurements in Balrampur were made after the district had exhausted its limit. Tin sheets, metal almirahs, registers and other stationary items were bought with the approval from then district magistrate. However, the district officials could not explain why the items were bought or where they were utilised. The department has asked the district magistrate to conduct a probe into these purchases and take action against the guilty officials. Also, instances of over-payment, anomaly in payment have surfaced in Sitapur and Chandrauli districts of UP. In some villages of northern Kerala's Wayanad district, workers are employed at private farms, mostly owned by rich farmers, but paid by the government under the NREGA. Some of the other operational hurdles brought out in the working of the scheme are as follows. Also, we have mentioned comments and probable remedies for the same. · Irregularity of payment. Workers are not paid immediately after work. This should be addressed. · Not all find the NREGS lucrative. The prime reason is the wage differential existing in the villages or its neighbouring / surrounding areas. Workers are paid handsomely under various other works being undertaken. Also, during the peak farming season, agricultural wages during the cleaning and harvesting period are much higher than NREGP wages. This is what is expected to be. One cannot be critical about this point. The opportunity cost of not benefiting from the scheme, if higher, then demand need not be created by the NRGES by offering more lucrative wages. The objective is not higher wages, but provision of employment at reasonable wages when employment opportunities do not exist. · After assessment, some workers were paid as low as Rs 30, depending on the quantity of work done. This cannot be considered a bad practice. The scheme provides for payment of piece wages. Again to remind, the scheme does not offer unemployment allowance. · There may not be any work at all under the scheme. This cannot be the case. There are always opportunities to improve further rural infrastructure. This is the responsibility of development administration. · Of the 52.20 lakh people who have been issued job cards from the time the NREGS was launched, only 11,92,896 households were provided employment during 2008-09. There is something wrong about the comparison, the former talks about ‘people’ registered, and the latter about the ‘households’. · Some state governments (like Orissa) allow villagers to work on a piece-wage basis where wages depend on volume of work done. This gives them a chance to earn more than just the minimum wage. Piece-wage is different for various categories of works and is decided by the state government from time to time. This is absolutely a fair practice, and under piece wages, the amount earned could also be lower. · To some extent, NREGS has rendered agriculture more expensive for farmers and more rewarding for workers. NREGS has displaced farm labourers, in that labourers are shifting to works offered under NREGS. This is evident from the increase in agricultural wages since 2005-06 in some states. This observation has some meaning. But, this has to be carefully evaluated. Since the objective of the scheme is to fill the gap in supply of employment, this should not create an environment of wage competition and offer opportunities for ‘rent’ by creating an artificial shortage of labour for normal employment. This could have serious implications for food security and agricultural production and productivity in general. · Absence of grievance redressal system. State governments bear the primary responsibility for putting in place grievance redressal systems. Under Section 19, they are bound to formulate Grievance Redressal Rules for dealing with any complaint by any worker. Interesting ideas have been floated, such as the appointment of Ombudsman at the district level, but they are yet to see the light of day. · It fails on accountability, whereby applications may be rejected or issuing of receipts be refused. Without a receipt showing that work was demanded, workers cannot apply for the unemployment allowance. · Lack of professionals is an important issue. The Comptroller & Auditor General (CAG) Report has found that 19 states have not appointed full-time programme officer (PO) in 70% of the blocks it surveyed. The existing Block Development Officers (BDO) have been given the additional charge of NREGS. An Employee Guarantee Assistant (EGA) was meant to be appointed in each gram panchayat. The shortage of staff leads to delay in the payment of wages as paucity of engineers lead to long gaps between execution and valuation of work. The block officials ask for margin money to sanction the projects even as they are not responsible for it. · Lack of effective planning of the works to be done. The works are not effectively designed taking into account the requirements of a particular village. Very little has been done to mobilise the people to take active part in plan formulation. · Problems are faced in distribution of job cards as large number of needy households are in the queue ; selection, design and execution of projects, resulting in huge leakages. · The requirement of maintaining a minimum balance of Rs 500 is unaffordable to many. · The effort is more towards spending large amount of money rather than ensuring quality in work execution. · Social audit of the NREGS has not been done satisfactorily. It is alleged that audit reports are not available, however this is not completely true. The NREGA portal provides data for some states only. Many of the points above relate to weaknesses in administrative machinery. These should be addressed as part of monitoring and evaluation and taking corrective steps. Monitoring The Comptroller and Auditor General (CAG) conducted a performance audit of implementation of NREGA covering the first phase of the 200 districts. An audit is normally done when a scheme is more or less over. But for NREGA, the government took a very proactive step in asking the CAG to audit an ongoing scheme. The CAG chief is preparing his staff to ensure that starting next year, a thorough audit is done. It is hoped that by then, the government has put in place the right infrastructure. It was found that, the implementation in the beginning was slightly slow. There were leakages of a sub-optimal delivery because the system had not been tested but no mala fide was found. Vinod Rai, Comptroller and Auditor General of India (CAG), is of the opinion that, an oversighting mechanism of totally independent, apolitical and experienced people is a must for the scheme’s success when such vast sums of money is involved. He suggests, including MPs (Members of Parliament), professors, retired bureaucrats, social workers. Also, surprise checks can be conducted. Scope It goes without saying that the NREGS has a long way to go in living up to its mandate. It’s a delicate situation, wherein on the one hand, the scales tip in favour of NREGS, while on the other, the scheme faces brickbats. Amongst many other recommendations, is the proposal to link the minimum wage rate with inflation, so as to make the scheme more tenable, should be seriously considered. This may require amending the NREGA in order to be made reconcilable with the Minimum Wages Act. While there could be review of minimum wages from time to time, inflation linked wages may fuel wage inflation, which may not otherwise be present in rural areas where the supply shortage of labour may not exist. As observed earlier, already the minimum wages have been hiked in many states and also by the central government. Another powerful tool in the hands of the central government to make NREGS more accountable is Section 25, whereby anyone who fails to perform his or her duty under the Act is liable to a fine of up to Rs 1000. Recent experience shows that even relatively small fines can be of great help in keeping government officials on their toes. When a fine of Rs 1000 was levied on the Block Development Officer (BDO) of Karon Block in Jharkhand last year, he spared no effort to find an escape route. Thus, wider use of Section 25 could make a big difference. Unfortunately, no state government other than Jharkhand has used it so far. We agree that a good incentive structure be in place to ensure accountability. There is also a provision, under Schedule II Section 30, for compensating workers for delays in payments. If wages are not paid within 15 days, workers are entitled to compensation under the Payment of Wages Act. Yet again, Jharkhand holds the distinction of invoking the Act. Meanwhile, delays in payments appear to be getting worse, causing immense hardship to NREGA workers. This is a serious administrative lacuna and should be addressed. At the national level, the Central Employment Guarantee Council was set up to act as an active, independent watchdog for NREGA. It is endowed with a broad mandate and wide powers under the Act. Unfortunately, the Council is not doing its job, nor has it been enabled to do it. Further, the government seems to consider the Council as a purely advisory body, and to treat it like most advisory bodies, taking on board whatever advice turns out to be convenient and ignoring the rest. A telling example of disregard for the Council's advice was the ‘freezing’ of NREGA wages in January 2009, against the unanimous advice of Council members. This notification was recently suspended by the high court of Andhra Pradesh. In its place, the Ministry of Rural Development has recently notified a new-look Employment Guarantee Council, statutorily meant to monitor the NREGP’s working. Of the 15 non-official members, only two have been retained, Aruna Roy and Jean Dreze. Four of the 15 official members are from the Congress party. The NREGA states that the Council establish a central evaluation and monitoring system, advise the central government on all matters concerning implementation of the Act, review the monitoring and redressal mechanism from time to time and recommend improvements and prepare annual reports to be tabled in Parliament. It would also have powers to undertake evaluation of the various schemes made under the NREGA . These are some examples of the ‘dormant’ provisions and institutional mechanisms that could be activated to restore accountability in NREGA. However, there is some respite on the anvil. The central government is expected to expand the National Rural Employment Guarantee Scheme (NREGS); in that it plans to increase the number of days of guaranteed employment under the scheme from the present 100 days a year to 120 days. The Ministry of Rural Development is working towards the same and it has set up a task force to study the feasibility and financial impact of increasing the number of workdays under the scheme. This hike in number of work days may not have much of a financial impact on the exchequer as very few households seek employment under the scheme even for the entire mandated 100 days. The central government is also expected to do away with the idea of curtailing states’ wage rates under the scheme (NREGS). The government is likely to go ahead despite the strain on the exchequer, due to substantial hikes in minimum wages by states during the last two years and concerns that higher wage rates led to ineffective targeting. Only recently, the scope of the scheme has been further enhanced by allowing work done on private land belonging to small and marginal farmers to create assets. According to a notification by the Rural Development Ministry, NREGS work will include, provision of irrigation facility, horticulture plantation and land-development facilities on land owned by small and marginal farmers. This means that these farmers can get assets built, like irrigation facilities, on their private fields with the help of labour paid for by the central government under the NREGS. However, the farmers have to get their ‘desired works’ approved by the gram panchayat for inclusion under projects available for wage employment under NREGS. The Finance Minister also emphasised on convergence of various other schemes relating to agriculture, forests, water resources and rural development. He also stated that, particularly, importance should be given to water conservation projects to be taken up under the scheme. Restoration of water bodies would be of utmost importance considering the drought situation the country is in today. The most significant impact that the NREGS can make is, by addressing the drought situation in the country. Scanty rainfall and drought in major parts of the country has got the central government to mull the repackaging of the scheme. A host of other activities ranging from cooking of mid-day meals, to running a cr`eche are likely to be included to provide an alternative source of rural employment and livelihood in the current situation. It may also include construction of kitchen-cum-store for running the mid-day meal schemes. The government also plans to bring the conservation and preservation of ancient monuments as a part of NREGS activities. In the coastal sector, proposals include construction of fish landing centre, drying yards and boat jetties as new jobs. Earth excavation for heritage monuments & its conservation and manufacturing of mud bricks for use in construction of Aanganwadi centres may also be included in the list of NREGA jobs. The government also plans a convergence between different works of NREGS and its Bharat Nirman programme. Among the proposals lying before the ministry includes, setting up of Bharat Nirman Sewa Kendra, a mini secretariat under the NREGS, and the Backward Regions Grant Fund. This would accommodate multiple development project needs in one place and encourage convergence at the gram panchayat level. States can be advised to take this as the ‘core’ activity this financial year. This activity would need convergence of NREGS labour with funds for BRGF, stated an official. ‘Lok Sewaks’ are also likely to be appointed to monitor the scheme. Recommendations Various suggestions have been offered to ameliorate the shortcomings in the NREGS. Some of them are as follows :
Initiative The government plans to lay a 12-lakh km, countrywide optic-fibre network at an overall investment of Rs 40,000 crore over the next five years sourcing labour from NREGA. Since a major chunk of this would be the wage cost, the government proposes to tap the NREGA programme. Those provided work under the scheme will be asked to dig trenches and perform associated construction work for the network, thereby saving Rs 20,000 crore of the cost of the project, as they would be paid from NREGA funds with the Ministry of Rural Development. The remaining would be tapped from the universal service obligation (USO) fund, in which around Rs 14,000 crore is currently lying unutilised. The USO fund, is meant for rural telecom and broadband projects. However, since NREGA cannot be utilised for this project in its current form, certain changes would have to be made to it. The cabinet secretariat has already given the project its go-ahead and a group has been constituted to draft its details, which will shortly be put before a group of ministers. The communications & IT ministry would act as the nodal agency. New legislation would also be enacted bringing uniformity to charges paid to state governments and local municipal agencies to dig routes for laying the optic fibre. The project would be synchronised with the Pradhan Mantri Gram Sadak Yojana, wherein ducts are laid during the construction of roads so that separate digging can be kept to a minimum. Summing Up The scheme, in its current form has the potential of providing safety net to rural labourers who are not able to secure employment on a regular basis and may suffer deprivation, is however wrought with some shortcomings particularly the way in which the scheme is implemented. The responsibility of implementing the Act lies with the states and the ministry provides financial assistance to them as per provisions. The ministry also monitors the implementation of the Act and issues necessary advisories to states to make it more effective. Though NREGA is one of the most powerful state initiatives with a potential to bring radical change in the rural development, it is essential to focus on raising labour productivity in the backward regions of the country, to meet the objective fully. For this, the necessary infrastructure has to be in place. Also, the state government’s have to exercise immense political will to make the scheme a huge success. Effectively implemented, NREGA has the potential to transform the geography of rural poverty. · This note has been prepared by Deepa Vaidya |