Articles - NAC undermined - PRAFUL BIDWAI / The cash option - JAYATI GHOSH / An oil scam in Mumbai - ANUPAMA KATAKAM

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· NAC undermined - PRAFUL BIDWAI

http://www.frontlineonnet.com/stories/20110311280509200.htm

Volume 28 - Issue 05 :: Feb. 26-Mar. 11, 2011

By stubbornly overruling the National Advisory Council, the government risks defeating its purpose as a body that speaks for the poor and the disadvantaged.

HAS the Manmohan Singh government begun to regard the National Advisory Council (NAC) as an adversary who should be undermined? Going by their exchanges on key issues such as food security, wages under the National Rural Employment Guarantee Act (NREGA), and the implementation of the Scheduled Tribes and Other Traditional Forest-Dwellers (Recognition of Forest Rights) Act, 2006, and the Right to Information (RTI) Act, it would seem so. The Ministers and bureaucrats concerned have rejected or summarily dismissed as unworkable each of the NAC's recommendations on numerous issues.

Less than a year after it was established, the NAC is being treated by officialdom as if it were a liability, a body packed with idealists, romantics and, to use a favourite expression of the Right, “bleeding-heart liberals” who neither understand practical realities, nor are in tune with the right economic policies.

The signal that the NAC's proposals on the proposed National Food Security Bill (NFSB) have to be moderated or overruled came from none other than Prime Minister Manmohan Singh. In September, he expressed his opposition to the idea that anyone, including the dirt-poor and destitute, should be given food virtually free.

When the Supreme Court asked the government why it preferred letting food rot in its godowns to giving it away, Manmohan Singh was vehement that “this was not just possible”. He reiterated this later too.

This has little to do with possibility or feasibility; it is about moral judgment, in particular, Manmohan Singh's refusal to give a higher priority to fighting starvation and malnourishment than defending market forces and demand-supply “balances”. Manmohan Singh said giving food away free will kill the farmer's incentive to produce and adversely affect prices and wages.

He told the Supreme Court not to interfere in policy and administrative matters. His uncharacteristically harsh remarks speak of his strong convictions on the food security issue, which Manmohan Singh rarely shows on most others. A prominent exception is the United States-India nuclear deal, which Manmohan Singh doggedly pushed through by manipulative, Machiavellian means.

The NAC originally based its NFSB recommendations on a universal public distribution system (PDS), in keeping with the government's solemn pledge, expressed through President Pratibha Patil's address to Parliament on June 4, 2009, to enact a National Food Security Act to “provide a statutory basis for a framework which assures food security for all”.

Only a universal PDS can entitle every Indian to adequate food to prevent starvation and under-nutrition. It alone can tackle the twin hazards of exclusion (of those who most need affordable access to food) and inclusion (of the non-poor in entitlements meant for the poor) associated with “targeted” schemes. The NAC also added two other components: maternity and child support (including mid-day meals), and nutrition for especially vulnerable groups such as destitute, immigrants and calamity-affected people.

The NAC came under pressure to dilute the PDS' universal character. It limited the provision of subsidised grain to 75 per cent of India's population, including 90 per cent of rural people and 50 per cent of city-dwellers, with different entitlements and prices for the “priority” and “general” categories, which broadly correspond to the Tendulkar Committee's below- and above-poverty-line classes.

The pressure came from none other than Manmohan Singh and was transmitted through Planning Commission and Agriculture Ministry functionaries, and by NAC members such as Narendra Jadhav, a hard-boiled neoliberal.

Manmohan Singh was not satisfied even with the NAC's now-diluted recommendations, which would entail procuring and distributing 57 million tonnes in the first phase and 64 million tonnes by 2014, including 8 million tonnes for non-PDS entitlements. This is under 30 per cent of India's output of rice and wheat, estimated at 188 million tonnes for 2011-12 and 192 million tonnes for 2013-14.

In November, 2010, Manmohan Singh appointed the Rangarajan Committee to do a hatchet job on the NAC's recommendations. It duly delivered. It made questionable assumptions about PDS offtake, overestimated grain requirements at 64-74 million tonnes, and concluded that this could not be realistically procured domestically without unduly raising demand and prices, and sending PDS costs sky-high. Importing what remains would raise global grain prices and make the PDS more exorbitant.

The Rangarajan Committee's estimates assume a 100-per cent offtake of PDS entitlements. But even under a universal PDS (as in Tamil Nadu, or earlier in Kerala), the rich self-select themselves out, to the extent of 30 per cent. Procurement has been growing at 5 per cent a year, and 70 million tonnes-plus can be easily managed without excessively upsetting the market.

Procurement currently depends primarily on four States. There is considerable untapped potential in 13 others, including West Bengal, Maharashtra, Uttar Pradesh, Bihar and Tamil Nadu, to yield another 15 million tonnes. Between 2002 and 2008, an annual average of 7.9 million tonnes of foodgrains was exported. A complete ban on exports would help procure an additional 8 million tonnes.

Decentralised procurement and addition of millets will improve availability, at low prices. Even if there is a severe drought, the PDS shortfall would be about 4-5 million tonnes, a tiny proportion of global trade, which would not sharply raise world food prices.

Surely, implementing a PDS of this size is not too high a price to pay to overcome starvation and under-nutrition and make all Indians food secure. NAC members estimate this would add Rs.2,000-10,000 crore to our existing food subsidy bill (Rs.70,000 crore). This is a fraction of the government's revenues, which have risen three-and-a-half-fold over six years to Rs.800,000 crore. Rejecting such a scheme on fiscal grounds shows extraordinary callousness.

HOSTILE ATTITUDE TO NAC

The Rangarajan Committee's appointment has sent a strong signal to Ministers and bureaucrats on official predilections. They have adopted a hostile attitude to the NAC on a range of other issues too. Thus, the Ministry of Tribal Affairs (MoTA) has rejected all NAC recommendations on the implementation of the Forest Rights Act (FRA). A worthy law that restores alienated land to forest-dwellers and empowers their gram sabhas, the FRA remains poorly implemented. Almost 90 per cent of forest-dwellers' claims have been rejected.

The NAC proposed a bottom-up process of recognition of forest land rights (to which those living on forest lands for 75 years, dependent for their livelihoods on forests, and in occupations since December 2005 are entitled); greater transparency; secure access to forest produce; and effective veto power over diversion of forest land to non-forest uses (which was blatantly violated in the Posco case). The MoTA rejected all these.

The NAC strongly recommended that NREGA workers be paid the statutory minimum wage. This is an elementary imperative. But the Rural Development Ministry arbitrarily froze the wage at Rs.100 a day in January 2009. All that Manmohan Singh agreed to do after the NAC's pleas is to link the Rs.100 to the Consumer Price Index for Agricultural Labour to protect real wages. This means that some 13 million households from eight States, or 31 per cent of those covered by the scheme, are still deprived of the minimum wage.

The Supreme Court has said the minimum wage must be paid “in any event”, irrespective of “the financial condition of the establishment” or availability of workers at lower wages. The minimum wage sets “the lowest limit below which wages cannot be allowed to sink in all humanity”; paying anything lower amounts to “forced labour”. Manmohan Singh has sanctioned this.

The NAC's recommendations on the RTI have also been dismissed by the Department of Personnel and Training (DoPT) as infeasible. The NAC opposes the DoPT-proposed 250-word limit on each RTI query. It opposes the DoPT proposal to recover from the applicant the expenses incurred by the authorities to furnish the information. The DoPT has accepted this, but still wants Rs.50 for postal expenses. The DoPT would like an RTI to lapse on the applicant's death. The NAC opposes this.

By stubbornly overruling the NAC, the government risks defeating the purpose of creating an advisory body that speaks for the poor and the disadvantaged. The 14-member NAC consists primarily of retired civil servants, scholars and responsible civil society activists with experience of service delivery. It was seen as “the voice of conscience” in the United Progressive Alliance (UPA), and an acknowledgement that the growth process has failed to address poverty, hunger, deprivation and lack of social opportunity.

In its first avatar, the NAC succeeded in pushing the NREGA, the FRA and the RTI – partly with support from Members of Parliament belonging to the Left parties. But that link is now broken.

In its second avatar, the NAC is being stymied by the UPA. If the government fails to act as a forum of inclusive, pro- aam aadmi growth, and works merely as a facilitator of corporate investment and market forces, it will turn its back on the poor and the disadvantaged.

The UPA no longer emphasises “equitable growth” or “growth with equity”. Rather, it is becoming a slave to GDPism, or the obsessive pursuit of growth, while awkwardly outsourcing equity through paltry, anaemic, social sector programmes. If it is not to lose all credibility, the UPA government must urgently correct course.

· The cash option - JAYATI GHOSH

http://www.frontlineonnet.com/stories/20110311280510900.htm

Volume 28 - Issue 05 :: Feb. 26-Mar. 11, 2011

Cash transfers, the latest global development fashion, involve several risks in India, not least the risk of forgetting the need for continuing structural change.

ALTAF QADRI/AP

CASH TRANSFERS THAT allow poor people to buy some food and other essential commodities in private shops will be much less effective in a period of rising prices of such goods. Here, at Pipari village in Uttar Pradesh, a daily-wage labourer feeds her child.

WHEN I was growing up, several decades ago, middle-class society in India was always a little delayed in catching on to Western fashions whether in music or dress or in other aspects. The past decades of globalisation seemed to have changed all that. Modern communications technology has ensured that at least the upper income deciles of the Indian population now have immediate access to knowledge about the latest trends and fashions in most parts of the world. And so there is hardly any time gap in the adoption of such fashion here as well.

Except, it would seem, in the matter of development policy. In this case, for some reason, Indian policymakers and practitioners tend to be behind the curve, taking up the fads emerging in the global development industry only with a lag, sometimes even after the ideas have been discredited in their place of origin.

As it happens, the area of development policy – and within that, specifically of poverty reduction – is hugely characterised by fads. This is also because of the tendency of the international development industry (including not just aid donors and multilateral organisations but also the huge range of researchers, experts and consultants funded by them) to keep searching for the single universal panacea, the magic silver bullet that will finally solve the problems of poverty and backwardness.

Within the span of just the past few decades, we have seen the fads move from an obsession with the “Washington Consensus” combination of macroeconomic and micro policies, to the extolling of microfinance, to the concentration on “governance”. The latest fad is that of cash transfers, which are now being cited everywhere as the solution to the problem of poverty. There has been a veritable tsunami of books and articles hailing cash transfers as the most necessary, obvious and imperative strategy for poverty alleviation.

These cash transfers can be conditional (subject to households meeting certain demands) or unconditional; targeted (given only to households or individuals meeting particular criteria) or universal. But essentially they amount to just what they sound like – the transfer of money to people by governments, rather than the provision of goods and services.

The basic idea sounds so simple and easy that a toddler could think of it: Why are people poor? Because they have no money. So let us give them money – then they will not be poor anymore. The proponents of cash transfers tend to present this as a radically new idea, some even suggesting that this is the recent creation of governments in the South, especially Latin America. In reality, of course, this particular idea has a long history.

IN THE ‘ARTHASASTRA'

Kautilya's Arthasastra specifies a system of taxation payments from the rich in order to enable transfer payments to the poor, including not only financial assistance during calamities but welfare payments to the chronically indigent and those unable to earn their own livelihood. Islamic rulers in the middle ages were required to follow the tenets of zakat, using state revenues to provide income transfers for the poor, the elderly, orphans, widows and the disabled. Other historical examples abound, including from Europe.

The basic idea of cash transfers (although not all schemes are identical) is to provide poor people with money and give them the freedom to choose what to do with it, rather than spending the money on what are seen to be cumbersome and inefficient public services.

Of course, this then generates other choices that have to be made: who gets the transfers? And how much? If they are universal, that will usually imply spreading the money around rather thinly, to the point where they account for very little. But if they are targeted, then the familiar problems of targeting (unfair exclusion, unjustified inclusion, large administration costs, possibilities of leakage) all become significant.

It is increasingly recognised that if they are to be effective at all, cash transfers have to be assured, relatively easy to deliver and monitor and large enough to affect household income. But that also means they have to be reasonably significant chunks of public spending. And this begs the question of what expenditures they are replacing.

Several of the more well-known “success stories” that are usually highlighted involve targeting and conditionalities upon recipients that range from light to onerous. Brazil's Bolsa Familia is a grant provided to families with less than a threshold monthly income, with the requirement of attendance at government clinics and 85 per cent school attendance. Another commonly cited example is the Oportunidades programme in Mexico, which is a highly conditional cash transfer system based not only on a complex system of eligibility (age, gender and level of education of each family member, electricity and tap water, household assets) but also requiring family members, especially mothers, to meet various time-intensive conditions such as attending talks about health and meetings and providing “voluntary” community labour.

By contrast, the South African scheme of universal pensions and child support grants is also described as a system of cash transfers, even though it is more akin to standard welfare payments that are common in almost all developed countries.

There is no doubt that progressive redistributive transfers are desirable. Indeed, redistribution is a major, even critical element of any fiscal system of taxation and public expenditure. Minimum income schemes for the destitute, pension payments for the elderly, child support grants, unemployment benefits and other forms of social protection are obviously desirable in themselves and constitute requirements for any civilised society, even the poorest one.

They also contribute in the short term to more effective demand and, therefore, have positive multiplier effects, and in the long term to healthier, better educated and more secure populations.

So the question then is not whether or not to oppose cash transfers in general, but rather what specific importance to give them in an overall strategy of development and poverty reduction. Cash transfer cannot and should not replace the public provision of essential goods and services, but rather supplement them. However, the current tendency is to see this as a further excuse for the reduction of publicly provided services, and replace them with the administratively easier option of doling out money.

In many countries, the argument has become one of encouraging governments to give the poor cash transfers that will allow them to access whatever goods and services they want that are generated by private markets, rather than struggling to ensure public provision.

Such a position completely misses the point. In Brazil, for example, Bolsa Familia can be based on minimum school attendance because there are enough public (and free) schools of reasonable quality that children of poor households can attend, which required prior public investment in quality schooling and teacher education.

Providing small amounts of cash to allow people to visit local private quacks will hardly compensate for the absence of a reasonably well-funded public health system that provides access to preventive and curative services. Cash transfers that allow poor people to buy food and other essential commodities in private shops will be much less effective in a period of rising prices of such goods.

This is important because it is not as if the discussion about cash transfers is operating in a policy vacuum. Ultimately, social and economic policies are all about choices, and this is most starkly evident than in the allocations of public expenditure. Governments typically do not have the luxury of being able to ensure enough spending to provide good quality public services and provide cash transfers that are large enough to be at all meaningful. In most developing countries, the choices to be made are not only about having good quality schools versus transfers that incentivise parents to send their children to school but even more basic choices: road or health clinic; electricity or piped water; schools or higher education institution; one airport or many railway stations; this region or that one?

In India, where much of this basic part of the development project still remains woefully incomplete, the urge to adopt (however belatedly) the latest international development fashion involves several risks. Not least is the risk that we will forget the necessity of putting in place the basic physical and social infrastructure required for a reasonable quality of life for all the people, and ensuring access to productive employment with good conditions of work. The need to provide direct transfers of income to disadvantaged sections of society is obvious and urgent, but it cannot allow us to forget the continuing need for structural transformation.

· An oil scam in Mumbai - ANUPAMA KATAKAM

http://www.frontlineonnet.com/stories/20110311280504100.htm

Another scam, this one also involving a brutal killing, grabs the headlines in Maharashtra.

VIVEK BENORE

THE PLACE AT Jondhalwadi near Manmad where Additional District Collector Yashwant Sonawane was burnt alive on January 25.

A FEW months after the Adarsh building controversy rocked Maharashtra, another story of fraud has grabbed the headlines in the State. It involves the gruesome murder of a State government official and the uncovering of the operations of an oil mafia. Though a crackdown on oil depots has been ordered and an investigation into the killing and the racket has begun, the ordinary citizen feels that corruption has become all pervasive.

The scam also brings into the limelight the larger issue of fuel availability to the poor man. Those involved in the racket would siphon off kerosene allotted for the public distribution system (PDS), adulterate it and sell it in the black market. The poorer sections, who use kerosene as cooking fuel, are compelled to buy it from these racketeers at prices which are well above PDS rates.

Jolted by the murder of the government official – Yashwant Sonawane, who attempted to blow the whistle on the theft – the Centre announced a new system that it hopes will curb the oil thieving. A hidden chemical in kerosene will show up when the oil is adulterated. A seven-page order has been issued already. The government plans to reintroduce the market system. Licences and stocks of dealers will be under constant surveillance. Gazetted officers and the police will be empowered to conduct raids and checks.

Yashwant Sonawane, Additional Collector of Malegaon, was driving by a kerosene depot at Manmad near Malegaon in Nashik district on January 25 when he saw some men pilfering oil from the tankers parked at the depot. An attendant reportedly alerted Popat Shinde, said to be the leader of the gang. Sonawane's car was intercepted shortly afterwards. Kerosene was poured over him and he was burnt alive.

During the scuffle, Sonawane, say the police, grabbed Shinde and pulled him into the flames. While Sonawane's body was found charred beyond recognition, Shinde was found with 80 per cent burns and was rushed to hospital. Shinde died on January 31.

The outrageous killing caused an uproar in the State. It exposed a terrible rot in the PDS, says Vivek Montiero of the Centre of Indian Trade Unions (CITU). “This racket operates throughout the country. You may recall the killing of an Indian Oil official in Uttar Pradesh when he exposed the adulteration racket a few years ago. In spite of the crackdown, it will be hard to dismantle the apparatus,” says Monteiro.

Activists say that such a racket can thrive only if a nexus exists between the thieves and the officials. The racket must have been operating for years. It is only the very public death of Sonawane that has stirred the administration into cracking down on it, they say.

Following the incident, close to 80,000 government officials went on a cease-work protest. The opposition parties have asked for an inquiry by the Central Bureau of Investigation. The police, meanwhile, arrested close to a dozen people. Home Minister R.R. Patil issued orders to crack down on all oil depots in Maharashtra. The police raided 200 places and arrested 180 people, according to their reports.

There is more than meets the eye in the Sonawane incident, says a police officer investigating the case. An official government car was a conspicuous sight in the districts and it would not be that easy to torch it, the officer said, adding: “Something was going on between Sonawane and Shinde.”

Indeed, when Shinde died his family accused Sonawane of having taken bribes from him. They said Sonawane threatened to expose Shinde because the latter was not paying Sonawane his hafta (bribe).

Speaking to the media a day after her father died, Shinde's daughter Jaya Borse said: “It's true that my father had been in the oil business for over a decade. But, my father's business was being supported by Sonawane and several officers who were paid on a monthly basis.”

However, officials who knew Sonawane told Frontline that the Additional Collector was a clean officer and he paid the price for coming in the way of Shinde's business.

Police sources say Sonawane had been putting together a dossier of proof on Shinde's illegal activities. Apparently, his staff had seized 4,000 litres of kerosene and 3,000 litres of petrol from Shinde's dhaba (roadside eatery) in Panewadi village Manmad. Sonawane had suggested that the police seal the oil found and take action against Shinde under the Essential Sevices Maintenance Act (ESMA). A report had been filed by Sonawane on this, but no action was taken.

A look at Shinde's antecedents suggests that the State government had ignored reports of his illegal business. Six first information reports (FIRs) and one externment order were registered against Shinde between 2006 and 2010. But nothing was done and he continued to run his business.

Maharashtra is one of the few States that have several oil depots. Manmad is located at an intersection of four highways and is a convenient spot for oil depots. So this belt hosts two of the largest oil depots in the country. While there is no clear picture on the extent of the pilferage that takes place, informed sources say the value of pilfered fuel would amount to nearly Rs.5,000 crore annually.

Reportedly, the oil theft in Manmad takes place openly. Each depot gets a certain amount of kerosene for the PDS. Filled up tankers are met at predetermined isolated spots on the highway and the pilfering gangs make off with vast amounts of oil. The tanker drivers, obviously, are in cahoots with the thieves. Every day, 300 tankers are filled at the depots, and so a fair quantity is stolen every day. The stolen kerosene is not just adulterated and sold for a premium: a large portion of it is used for adulterating petrol and diesel as well, say the sources.

Manjunath Shanmugam, an Indian Institute of Management (IIM) graduate, paid with his life for trying to expose the corruption in petrol marketing. Satyendra Dubey was killed in Gaya, Bihar, for fighting corruption in the Golden Quadrilateral highway project. Sonawane is another victim of corruption. Their deaths only caused some protests and little else. Rackets continue to flourish.