Mahatma Gandhi National Rural Employment Guarantee Act: Review of implementation

September 23rd, 2013 No comments

In the recently concluded Monsoon Session of Parliament , the Parliamentary Standing Committee on Rural Development released a report on the implementation of the Mahatma Gandhi National Rural Development Act, 2005 (MGNREGA).  This blog provides a brief introduction to the key provisions of MGNREGA , followed by an overview of the major findings and recommendations of the Standing Committee.

I. MGNREGA: A brief introduction

A. Objectives: MGNREGA, which is the largest work guarantee programme in the world, was enacted in 2005 with the primary objective of guaranteeing 100 days of wage employment per year to rural households.  Secondly, it aims at addressing causes of chronic poverty through the ‘works’ (projects) that are undertaken, and thus ensuring sustainable development.  Finally, there is an emphasis on strengthening the process of decentralisation through giving a significant role to Panchayati Raj Institutions (PRIs) in planning and implementing these works.

B. Key features:

  • Legal right to work: Unlike earlier employment guarantee schemes, the Act provides a legal right to employment for adult members of rural households.  At least one third beneficiaries have to be women.  Wages must be paid according to the wages specified for agricultural labourers in the state under the  Minimum Wages Act, 1948, unless the central government notifies a wage rate (this should not be less than Rs 60 per day).  At present, wage rates are determined by the central government but vary across states, ranging from Rs 135 per day to Rs 214 per day.
  • Time bound guarantee of work and unemployment allowance: Employment must be provided with 15 days of being demanded failing which an ‘unemployment allowance’ must be given.
  • Decentralised planning: Gram sabhas must recommend the works that are to be undertaken and at least 50% of the works must be executed by them.  PRIs are primarily responsible for planning, implementation and monitoring of the works that are undertaken.
  • Work site facilities: All work sites should have facilities such as crèches, drinking water and first aid.
  • Transparency and accountability: There are provisions for proactive disclosure through wall writings, citizen information boards, Management Information Systems and social audits.  Social audits are conducted by gram sabhas to enable the community to monitor the implementation of the scheme.
  • Funding:  Funding is shared between the centre and the states.  There are three major items of expenditure – wages (for unskilled, semi-skilled and skilled labour), material and administrative costs.  The central government bears 100% of the cost of unskilled labour, 75% of the cost of semi-skilled and skilled labour, 75% of the cost of materials and 6% of the administrative costs.

MGNREGA was implemented in phases, starting from February 2006, and at present it covers all districts of the country with the exception of those that have a 100% urban population.  The Act provides a list of works that can be undertaken to generate employment related to water conservation, drought proofing, land development, and flood control and protection works.  Table 1 provides information regarding employment generation and expenditure under MGNREGA.

Table 1: MGNREGA: Key indicators

Year

Number of households provided employment (in crore)

Average number of person days of work per household

Total Expenditure (in lakh)

2006-07

2.10

43

8823.35

2007-08

3.39

42

15856.88

2008-09

4.51

48

27250.10

2009-10

5.25

54

37905.23

2010-11

5.49

47

39377.27

2011-12*

4.99

43

 38034.69

2012-13**

4.25

36

 28073.51

Source: Standing Committee on Rural Development; PRS. Note: *Provisional ** As on 31.01.2013

II. Findings and Recommendations of the Standing Committee on Rural Development

A. Achievements: The Standing Committee highlighted several achievements of MGNREGA in the seven years of its implementation, especially:

  • Ensuring livelihood for people in rural areas.
  • Large scale participation of women, Scheduled Castes and Scheduled Tribes (SCs/STs) and other traditionally marginalised sections of society.  SCs/STs account for 51% of the total person-days generated and women account for 47% of the total person-days generated.
  • Increasing the wage rate in rural areas and strengthening the rural economy through the creation of infrastructure assets.
  • Facilitating sustainable development, and
  • Strengthening PRIs by involving them in the planning and monitoring of the scheme.

B. Challenges: However, the Committee found several issues with the implementation of the scheme. As Table 1 (above) shows, the average number of days of employment provided to households has been lower than the mandated 100 days, and has been decreasing since 2010-11.

Key issues that the Committee raised include

  • Fabrication of job cards: While as many as 12.5 crore households have been issued job cards out of an estimated 13.8 crore rural households ( as per the 2001 census), there are several issues related to existence of fake job cards, inclusion of fictitious names, missing entries and delays in making entries in job cards.
  • Delay in payment of wages: Most states have failed to disburse wages within 15 days as mandated by MGNREGA.  In addition, workers are not compensated for a delay in payment of wages.
  • Non payment of unemployment allowances: Most states do not pay an unemployment allowance when work is not given on demand.  The non-issuance of dated receipts of demanded work prevents workers from claiming an unemployment allowance.
  • Large number of incomplete works: There has been a delay in the completion of works under MGNREGA and inspection of projects has been irregular.  Implementing agencies were able to complete only 98 lakh works out of 296 lakh works.  As Table 2 shows, a large percentage of works remain incomplete under MGNREGA and the work completion rate appears to be decreasing in recent years.

Table 2: Work completion rate

Year

Work completion rate (%)

2006-07

46.34

2007-08

45.99

2008-09

43.76

2009-10

48.94

2010-11

50.86

2011-12*

20.25

2012-13*

15.02

Total                  33.22

Source: Standing Committee on Rural Development. Note: * As on 30.01.2013

  • Other key challenges include poor quality of assets created, several instances of corruption in the implementation of MGNREGA, and insufficient involvement of PRIs.

C. Recommendations: The Committee made the following recommendations, based on its findings:

  • Regulation of job cards: Offences such as not recording employment related information in job cards and unlawful possession of job cards with elected PRI representatives and MGNREGA functionaries should be made punishable under the Act.
  • Participation of women: Since the income of female workers typically raises the standard of living of their households to a greater extent than their male counterparts, the participation of women must be increased through raising awareness about MGNREGA.
  • Participation of people with disabilities: Special works (projects) must be identified for people with disabilities; and  special job cards must be issued and personnel must be employed to ensure their participation.
  • Utilisation of funds:  The Committee found that a large amount of funds allocated for MGNREGA have remained unutilised.  For example, in 2010-11, 27.31% of the funds remained unutilised.  The Committee recommends that the Department of Rural Development should analyse reasons for poor utilisation of funds and take steps to improve the same.  In addition, it should initiate action against officers found guilty of misappropriating funds under MGNREGA.
  • Context specific projects and convergence: Since states are at various stages of socio-economic development, they have varied requirements for development.  Therefore, state governments should be allowed to undertake works that are pertinent to their context.  There should be more emphasis on skilled and semi-skilled work under MGNREGA.  In addition, the Committee recommends a greater emphasis on convergence with other schemes such as the National Rural Livelihoods Mission, National Rural Health Mission, etc.
  • Payment of unemployment allowance: Dated receipts for demanded work should be issued so that workers can claim unemployment allowance.  Funds for unemployment allowance should be met by the central government.
  • Regular monitoring: National Level Monitors (NLMs) are deployed by the Ministry of Rural Development for regular and special monitoring of MGNREGA and to enquire into complaints regarding mis-utilisation of funds, etc.  The Committee recommends that the frequency of monitoring by NLMs should increase and appropriate measures should be taken by states based on their recommendations.  Additionally, social audits must mandatorily be held every six months.  The Committee observes that the performance of MGNREGA is better in states with effective social audit mechanisms.
  • Training of functionaries: Training and capacity building of elected representatives and other functionaries of PRIs must be done regularly as it will facilitate their involvement in the implementation of MGNREGA.

 

Government and RBI response to contain a depreciating rupee

September 9th, 2013 No comments

The depreciating Indian rupee was a recurring topic of discussion and debate in the Monsoon Session of the Parliament.  The USD/INR exchange rate depreciated 9% during this Monsoon Session, hitting a record low of INR68 to a dollar on August 28.  The Indian Rupee also depreciated 11% against the British Pound and 8% against the Euro during this session.  The rupee depreciation may feed into inflation by affecting the price of imported goods, especially of oil.  However, a cheaper rupee may boost exports, improving the Current Account Deficit (CAD).  This post discusses the reasons for the decline in the value of the rupee, and the steps taken to contain it.

The Prime Minister and the Finance Minister made statements in Parliament regarding the economic situation of the country and the currency.  The key reasons cited by the government for the decline in the value of the rupee are:

  • Large Current Account deficit: The current account (net exports of goods and services, remittances, and net dividend payments) has been in a deficit continuously for the last eight years.  Falling growth rate of Indian exports, coupled with a sharp rise in imports, especially of crude oil and gold, have increased this deficit.
  • Weakening capital inflows: The capital account (the net flow of funds through equity investments and borrowings) surplus has been used to finance the current account deficit for many years.  Capital inflows have reduced due to the improving economic situation in the US and other developed countries.  Investors are exiting developing markets in expectation of the US Federal Reserve increasing the interest rates, impacting the currencies of emerging markets, like India, Brazil, Russia, Indonesia, Turkey and South Africa.
  • Inflation: The PM said that part of the depreciation is attributable to the adjustment of the rupee exchange rate to the inflation differential, i.e. India’s relatively high rate of inflation versus other economies.

Figure 1: Excess of Capital Account surplus over Current Account deficit has been shrinking (in USD million)

Picture2

Source: Reserve Bank of India; PRS. Note: FY refers to financial year; for example, FY06 is financial year 2005-2006.

Table 1: Steps taken by the RBI and the government of India to stabilise the currency markets

Issue Details
Capital Outflow The RBI reduced the limit for outbound investment and remittances from India.
Encouraging Capital Inflows RBI has removed administrative restrictions on investment schemes offered by banks to non-resident Indians, and removed ceiling on interest rates on deposit accounts held by NRIs.

The government liberalised the FDI limits for 12 sectors, including oil and gas.  A Bill is pending in the Parliament to revise the FDI limit to 49% in the insurance sector.

RBI increased the current overseas borrowing limit for banks from 50% to 100%, and allowed it to be converted into rupees and hedged with the RBI at concessional rate.

RBI also allowed banks to swap fresh NRI dollar deposits with a minimum duration of 3 years with the RBI.

Limiting Imports and encouraging exports The Finance Ministry increased the customs duty on importing precious metals including gold and platinum.

20% of every lot of import of gold must be exclusively made available for the purpose of export.

Oil Import Needs

 

RBI decided to provide dollar liquidity to three public sector oil marketing companies (IOC, HPCL and BPCL) to help them meet their entire daily dollar requirements.

Government is also considering increasing its import of crude oil from Iran, and pay for it directly in Indian rupees.

Trade Deficit Ministry of Commerce is exploring the possibility of using local currency for trade with major trading partners.

RBI allowed exporters and importers more flexibility in management of their forward currency contracts.

Curbing Speculative  in currency RBI increased the short-term emergency borrowing rates for banks.

The daily holding requirements under the Cash Reserve Ratio for banks have been modified.

International Cooperation Government increased its currency swap limit with Japan from USD15 billion to USD50 billion.

The BRICS nations also agreed on a USD100 billion foreign currency reserve pool as part of their plan to create a BRICS New Development Bank.  India will contribute $18 billion to this fund from its reserves.

Source: Reserve Bank of India; PRS.

In response to questions raised about the economic situation in the country, the Finance Minister and the Prime Minister in Parliament emphasised that there were sufficient foreign exchange reserves to meet the external financing needs.  The government targets to limit the fiscal deficit to 4.8% of GDP, and the CAD to under USD70 billion in 2013-14.  More recently, the new RBI Governor, upon taking office on September 4, 2013, re-affirmed the central bank’s commitment to sustain confidence in the currency and to gradually liberalise the financial market.At the G-20 summit in St. Petersburg, the G-20 agreed to be mindful of the repercussions of the withdrawal of monetary stimulus by developed countries on emerging markets.  The G-20 central banks agreed to “properly calibrate and communicate” their monetary policy to minimise volatility of capital inflows and exchange rates to avoid adverse implications for economic and financial stability in emerging markets.

 

Land acquisition process can take 50 months

September 6th, 2013 1 comment

The new Land Acquisition Bill has detailed a process for acquiring land.  The process could take up to 50 months.  This will increase the gestation period of projects.  The new time line and the attendant uncertainty at each step will have to be factored in by promoters of projects while computing the costs and feasibility.

The details of the process are given in the Table below.  Some of the processes can be conducted concurrently with others. The processes which need to be done sequentially are shown in bold.  These add up to 50 months (not counting extensions).

Time limits for various steps for Land Acquisition under the new Act

Process Section Time limit
Social Impact Assessment 4(1) last proviso 6 months
Appraisal of SIA by review committee 7(4) and 7(5) 2 months
Examination of land acquisition proposal and SIA by appropriate government 8 No time limit specified
SIA expert group appraisal to Preliminary notification 14 12 months but extendable by appropriate government
Preliminary notification to updating of land records 11(5) 2 months
Preliminary notification to objections 16(1) 60 days
Preliminary notification to R&R survey 17(1) Time limit to be prescribed in Rules
Preliminary notification under section 11 to Declaration under section 20 15 and 20(7) (inconsistency) 12 months (S15)12 months but extendable by appropriate government; also court stay period excluded (S20(7))
Time for compensation claims to be made 22(2) 30 days to 6 months
Declaration to Award 26 12 months but extendable by appropriate government
Correction of Award by Collector 34(1) 6 months
Award to Possession of land by collector  39(1) After ensuring compensation is paid (3 months) and monetary component of R&R paid (6 months).
Time for infrastructure entitlements under R&R 39(1) proviso 18 months after award

Source: PRS

Total Time Limit (assuming no extensions): SIA (6 months) + Expert group appraisal (2 months) + Preliminary notification (12 months) + Declaration (12 months) + Award (12 months) + Possession (6 months) = 50 months.

 

Case not closed – Appointment of judges

September 5th, 2013 No comments

Parliament is considering a proposal to change the process of appointment of judges to the Supreme Court and High Courts.  A Constitutional Amendment Bill has been introduced in Rajya Sabha that enables the formation of a Judicial Appointments Committee (JAC), and states that the composition and functions of the JAC will be detailed in a law enacted by Parliament.  The appointments will be made according to the recommendations of the JAC.  This body replaces the current process of “consultation” with the Chief Justice of India (CJI) and other senior judges.

An ordinary Bill has also been introduced in Rajya Sabha which seeks to establish the JAC.  The composition of the JAC will be the CJI, the next two judges of the Supreme Court in terms of seniority, the law minister and two eminent persons.  These two eminent persons will be selected by a collegium consisting of the CJI, the prime minister and the leader of opposition in the Lok Sabha.  In case of High Court Judges, the JAC will consult with the chief minister, the governor of the state and the Chief Justice of the High Court.

The new system is widening the selection committee.  It includes representatives of the executive and senior judiciary, as well as two persons who are jointly selected by the executive (PM), judiciary (CJI), and the legislature (leader of opposition).

However, it may be diluting some of the safeguards in the Constitution.  At a later date, the composition of the JAC can be amended by ordinary majority in Parliament.  [For example, they can drop the judicial members.]  This is a significantly lower bar than the current system which requires a change to the Constitution, i.e., have the support of two thirds of members of each House of Parliament, and half the state assemblies.

The 120th Constitution Amendment Bill and the JAC Bill are listed for consideration and passing in Rajya Sabha today.  Given that these Bills propose fundamental changes to the process of appointments to key constitutional bodies, it is important that there be a wide debate.  The Rajya Sabha must refer these Bills to the Standing Committee for careful examination of various issues.

I have written a piece on this issue in the Indian Express today.

 

 

 

 

Enhancing SEBI’s Powers

September 4th, 2013 No comments

Recently, there have been instances of certain collective investment schemes (CISs) attempting to circumvent regulatory oversight.  In addition, some market participants have not complied with Securities and Exchange Board of India’s (SEBI) orders of payment of penalty and refund to investors.

In August, the Securities Laws (Amendment) Bill, 2013 was introduced in the Lok Sabha to amend the Securities and Exchange Board of India Act, 1992 (the SEBI Act, 1992), the Securities Contract (Regulation) Act, 1956 (SCRA, 1956) and the Depositories Act, 1996. The Bill replaced the Securities Laws (Amendments) Ordinance, 2013.

The Bill makes the following key amendments:

a) Definition of Collective Investment Schemes

The SEBI Act, 1992 defines CISs as schemes in which the funds of investors are pooled, yield profits or income and are managed on behalf of investors.  It also exempts certain types of investments which are regulated by other authorities.

The Bill introduces a proviso to the definition of CIS.  This proviso deems any scheme or arrangement to be a CIS if it meets all three of the following conditions: (a) funds are pooled, (b) it is not registered with SEBI, or it is not exempted by SEBI Act, 1992, and (c) it has a corpus of Rs 100 crore or more.  These provisions could potentially lead to some schemes not conventionally defined as CIS to fall under the definition. For instance, partnership firms operating in the investment business or real estate developers accepting customer advances could be termed as CISs.

SEBI has been given the power to specify conditions under which any scheme or arrangement can be defined as a CIS. This raises the question of whether this is excessive delegation of legislative powers – usually the parent act defines the entities to be regulated and the details are entrusted to the regulator.

b) Disgorgement (repayment) of unfair gains/ averted losses

SEBI has in the past issued orders directing market participants to refund i) profits made or ii) losses averted, through unfair actions.  The Bill deems SEBI to have always had the power to direct a market participant to disgorge unfair gains made/losses averted, without approaching a court.  This power to order disgorgement without approaching a court is in contrast with the provisions of the recently passed Companies Bill, 2011 and the draft Indian Financial Code (IFC) which require an order from a court/tribunal for disgorgement of unfair gains.

Further, the Bill specifies that the disgorged amount shall be credited to the Investor Education and Protection Fund (IEPF), and shall be used in accordance with SEBI regulations.  The Bill does not explicitly provide the first right on the disgorged funds to those who suffered wrongful losses due to the unfair actions, unlike the draft IFC.

c) Investigation and prosecution

The Bill empowers the SEBI chairman to authorise search and seizure operations on a suspect’s premises.  This does away with the current requirement of permission from a Judicial Magistrate.  This provision removes the usual safeguards regarding search and seizure as seen in the Code of Criminal Procedure, 1973, the recently passed Companies Bill, 2011 and the draft Indian Financial Code.

The Bill also empowers an authorised SEBI officer to, without approaching a court, attach a person’s bank accounts and property and even arrest and detain the person in prison for non-compliance of a disgorgement order or penalty order.  Most regulators and authorities, with the exception of the Department of Income Tax, do not have powers to such an extent.

d) Other Provisions of the Bill

The Bill retrospectively validates consent guidelines issued by SEBI in 2007 under which SEBI can settle non-criminal cases through consent orders, i.e., parties can make out-of-court settlements through payment of fine/compensation.  The United States Securities and Exchange Commission settles over 90% of non-criminal cases by consent orders.

The Bill retrospectively validates the exchange of information between SEBI and foreign securities regulators through MoUs.

The Bill sets up special courts to try cases relating to offences under the SEBI Act, 1992.

For a PRS summary of the Bill, here.

A balancing Act- The Land Acquisition Bill

August 29th, 2013 No comments

The Land Acquisition Bill is slated to be taken up for consideration and passing in the Lok Sabha today. The government had circulated an amendment list in the last session of Parliament. In a column in the Financial Express, MR Madhavan discusses the major features of the Land Acquisition Bill and the associated issues that Parliament may need to consider while deliberating on the Bill.

Economic growth and job creation require efficient usage of land resources. It is important that a fair and transparent process for purchase and for acquisition of land is followed. For the purchase of land, a key concern is the authenticity of land titles, and the government has drafted a Land Titling Bill for this purpose. In the case of land acquisition, the following questions need to be addressed. What are the end-uses for which public interests will trump private property rights, and justify acquisition of land from a person who is not willing to part with it? What should be the process followed? Since there is no market mechanism of discovery of prices in these cases, how should compensation be computed? Is there a need to address non-land owners who may be displaced by the acquisition process? Does the acquisition process get completed in a reasonable amount of time, and is there finality to the acquisition? In sum, do both sides—the acquirer and the land owner—perceive the process to be fair?

The current Bill addresses these questions in the following manner. It defines public purpose to include infrastructure projects (as defined by the finance ministry, with some exclusions); projects related to agriculture, agro-processing and cold storage; industrial corridors, mining activities, national investment and manufacturing zones; government administered or aided educational and research institutions; sports, healthcare, transport and space programmes. It also enables the government to include other infrastructural facilities to this list after tabling a notification in Parliament. The significant difference from the current Land Acquisition Act, 1894, is that land cannot be acquired for use by companies unless they satisfy any of the above end-uses.

The Bill includes a requirement for consent of the land owners in some cases. If the land is acquired for use by a private company, 80% of land owners need to give consent. If it is for use by a public private partnership (PPP), 70% of the land owners have to agree to the acquisition. The rationale of having differential consent requirements based on ownership—including the lack of any such requirement if the land is for the use of the government or a public sector undertaking—is not clear. Why should a land owner, who is losing his land care, whether the intended project is to be executed by the government or a private company?

The Bill specifies that the compensation will be computed in the following manner. Three factors are taken into account: the circle rate according to the Stamp Act; the average of the top 50% of sale deeds registered in the vicinity in the previous three years; the amount agreed upon, if any, in case of purchase by a private company or PPP. The higher of these three amounts is multiplied by a factor, which varies from 1 in urban areas to a number between 1 and 2 in rural areas, depending upon the distance from the urban centre. To this amount, the value of any fixed assets such as buildings, trees, irrigation channels etc is added. Finally, this figure is doubled (as solatium, i.e. compensation for the fact that the transaction was made with an unwilling seller). The justification given for the multiplier ranging from 1 to 2 is that many transactions are registered at a price significantly lower than the actual value in order to evade taxes—the moot question is whether such under-reporting is uniform across the country?

The Bill states that all persons who are affected by the project should be rehabilitated and resettled (R&R). The R&R entitlements for each family includes a house, a one-time allowance, and choice of (a) employment for one person in the project, (b) one-time payment of R5 lakh, or (c) inflation adjusted annuity of R2,000 per month for 20 years. In addition, the resettlement areas should have infrastructure such as a school, post office, roads, drainage, drinking water, etc.

The process has several steps. Every acquisition, regardless of size, needs a social impact assessment, which will be reviewed by an expert committee, and evaluated by the state government. Then a preliminary notification will be issued, land records will be updated, objections will be heard, rehabilitation and resettlement survey carried out, and a final declaration of acquisition issued. The owners can then claim compensation, the final award will be announced, and the possession of the land taken. The total time for this process can last up to 50 months. The big question is whether this time frame would hinder economic development and the viability of projects?

The Bill provides for an Authority to adjudicate disputes related to measurement of land, compensation payable, R&R etc, with appeals to be heard by the High Court. There are several restrictions on the land acquired. The purpose for which land is acquired cannot be changed. If land is not used for five years, it would be transferred to a land bank or the original owners. Transfer of ownership needs prior permission, and in case of transfer in the first five years, 40% of capital gains have to be shared with the original owners.

Recent cases of land acquisition have been followed by public protests, and the stalling of the acquisition. Whereas some of these may be driven by political agendas, the old Act was perceived to be unfair to land owners in several ways. The challenge for Parliament is to examine the new Bill and craft the law in such a way that it is fair (and perceived as such) to land owners, while making acquisition feasible and practical for projects that are required for economic development and other areas of public interest.

Does the financing of “Rights” laws impinge on the rights of states

August 20th, 2013 No comments

In the last decade, some schemes have been recast as statutory entitlements – right to employment, right to education and right to food.  Whereas schemes were dependent on annual budgetary allocations, there rights are now justiciable, and it would be obligatory for Parliament to allocate sufficient resources in the budget.  Some of these rights also entail expenditure by state governments, with the implication that state legislatures will have to provide sufficient funds in their budgets.  Importantly, the amounts required are a significant proportion of the total budget.

There has been little debate on the core constitutional issue of whether any Parliament can pre-empt the role of resource allocation by future Parliaments.  Whereas a future Parliament can address this issue by amending the Act, such power is not available to state legislatures.  Through these Acts, Parliament is effectively constraining the spending preferences of states as expressed through their budgets passed by their respective legislative assemblies.  I have discussed these issues in my column in Pragati published on August 16, 2013.

Status of Legislation in the 15th Lok Sabha

August 19th, 2013 No comments

The ongoing Monsoon Session of Parliament is being widely viewed as the ‘make or break’ session for passing legislation before the end of the 15th Lok Sabha in 2014. Hanging in balance are numerous important Bills, which will lapse if not passed before the upcoming 2014 national elections.

Data indicates that the current Lok Sabha has passed the least number of Bills in comparison to other comparable Lok Sabhas. The allocated time to be spent on legislation in the Monsoon Session is also below the time recommended for discussion and passing of Bills by the Business Advisory Committee of the Lok Sabha. Eight out of a total of 16 sittings of the Monsoon Session have finished with only 15 percent of the total time spent productively.

Success rate of the 15th Lok Sabha in passing legislation

India’s first Lok Sabha (1952-1957)  passed a total of 333 Bills in its five year tenure. Since then, every Lok Sabha which has completed over three years of its full term has passed an average of 317 Bills. Where a Lok Sabha has lasted for less than 3 years, it has passed an average of 77 Bills. This includes the 6th, 9th, 11th and 12th Lok Sabhas. The ongoing 15th Lok Sabha, which is in the fifth year of its tenure, has passed only 151 Bills (This includes the two Bills passed in the Monsoon Session as of August 18, 2013).

In terms of parliamentary sessions, Lok Sabhas that have lasted over three years have had an average of fifteen sessions. The 15th Lok Sabha has finished thirteen parliamentary sessions with the fourteenth (Monsoon Session) currently underway.

Bills Passed by Lok Sabhas

Legislative business accomplished in the 15th Lok Sabha

For the 15th Lok Sabha, a comparison of the government’s legislative agenda at the beginning of a parliamentary session with the actual number of Bills introduced and passed at the end of the session shows that: (i) on average, government has a success rate of getting 39 percent of Bills passed; and (ii) on average, 60 percent success rate in getting Bills introduced.

final2.2

final2.3

The Monsoon Session of Parliament was scheduled to have a total of 16 sitting days between August 5-30, 2013. Of the 43 Bills listed for consideration and passage, 32 are Bills pending from previous sessions. As of August 18, 2013, the Rajya Sabha had passed a total of five Bills while the Lok Sabha had passed none. Of the 25 Bills listed for introduction, ten have been introduced so far.

The Budget Session of Parliament earlier this year saw the passage of only two Bills, apart from the appropriation Bills,  of the 38 listed for passing. These were the Protection of Women Against Sexual Harassment at Workplace Bill and the Criminal Law (Amendment) Bill.

Time allocated for legislation in the Monsoon Session

The Lok Sabha is scheduled to meet for six hours and the Rajya Sabha for five hours every day.  Both houses have a question hour and a zero hour at the beginning of the day, which leaves four hours for legislative business in the Lok Sabha and three hours in the Rajya Sabha. However, both Houses can decide to meet for a longer duration. For example, Rajya Sabha has decided to meet till 6:00 PM every day in the Monsoon Session as against the normal working hours of the House until 5:00 PM.

The Business Advisory Committee (BAC) of both Houses recommends the time that should be allocated for discussion on each Bill. This session’s legislative agenda includes a total of 43 Bills to be passed by Parliament.  So far, 30 of the Bills have been allocated time by the BAC, adding up to a total of 78 hours of discussion before passing.

If the Lok Sabha was to discuss and debate the 30 Bills for roughly the same time as was recommended by the BAC, it would need a minimum of 20 working days.  In addition, extra working days would need to be allocated to discuss and debate the remaining 13 Bills.

With eight sitting days left and not a single Bill being passed by the Lok Sabha, it is unclear how the Lok Sabha will be able to make up the time to pass Bills with thorough debate.

 

Outlawing corruption

August 15th, 2013 No comments

In an Indian express editorial, Mandira Kala discusses the Bills, addressing corruption and good governance, pending in Parliament.  She discusses what their fate may be given that the Monsoon session is widely being viewed as a make or break session  for the government to get its legislative agenda through Parliament.

The monsoon session of Parliament started on a stormy note last week. Question hour was disrupted on most days and only one government bill was passed. There are 11 days left in the session and more than 40 bills pending for parliamentary approval. With the 15th Lok Sabha drawing to an end, this session is being viewed as a “make or break” session for the government to get its legislative agenda through Parliament. Since 2010, there has been much debate in Parliament on corruption and an important part of the government’s legislative agenda was the introduction of nine bills in the Lok Sabha to address corruption and improve governance through effective delivery of public services.

Three of these bills have been passed by the Lok Sabha and are currently pending before the Rajya Sabha. These include legislation to address corruption in public office, enforce standards and accountability in the judiciary, and protect whistleblowers. The government has proposed amendments to each of these bills that the Rajya Sabha will have to consider and pass. If the Rajya Sabha passes these bills with amendments, they will be sent back to the Lok Sabha for approval. It is difficult to assess in what timeframe these bills will become law, given that both Houses need to agree on the amendments.

The Lokpal and Lokayuktas Bill creates a process for receiving and investigating corruption complaints against public officials, including the Prime Minister, Ministers and Members of Parliament, and prosecuting these in a timebound manner. The government amendments include allowing states the flexibility to determine their respective Lokayuktas and giving the Lokpal power of superintendence over the CBI, if the case has been referred by him. A mechanism to protect whistleblowers and create a process for receiving and investigating complaints of corruption or wilful misuse of discretion against a public servant are proposed under the Whistleblowers’ Protection Bill, 2010. The amendments proposed by the government prohibit whistleblowing if the disclosure of information affects the sovereignty of the country and its strategic, scientific and economic interest. The Judicial Standards and Accountability Bill requires judges to declare their assets, lays down judicial standards and establishes processes for the removal of judges of the Supreme Court and high courts. The bill is not listed in the government’s legislative agenda for the monsoon session and media reports suggest that the government intends to make amendments to it.

In the arena of strengthening governance and effective delivery of public services, there are three bills currently pending in Parliament. The Citizens’ Charter Bill confers the right to timebound delivery of goods and services on every citizen and creates a mechanism for redressing complaints on such matters. The Electronic Delivery of Services Bill mandates that Central and state governments shall deliver public services electronically no later than eight years from the enactment of the law. The parliamentary standing committee had highlighted that the Citizens’ Charter Bill and Electronic Delivery of Services Bill have an inherent overlap, which the government would have to resolve. While the former is listed for passing in this session, the government plans to withdraw the latter and replace it with a new bill. This new bill is not part of the list that is up for consideration and passing this session.

To create a reliable method of identifying individuals to facilitate their access to benefits and services the National Identification Authority of India Bill was introduced in Parliament to provide unique identification numbers (“aadhaar”) to residents of India. This bill has not been listed for parliamentary approval during this session. Two other pending bills do not find place in the government’s legislative agenda for the session either. These include legislation that curbs the holding and transfer of benami property and regulates the procurement process in government departments to ensure transparency, accountability and probity. The Prevention of Bribery of Foreign Public Officials Bill, which imposes penalties on Indian companies and individuals who bribe officials of a foreign government or international agency, is listed for passing this session.

Each of these nine bills were introduced in the Lok Sabha. If they are not passed by both Houses before the 15th Lok Sabha is dissolved in 2014, no matter where they are in the legislative process, the bills will lapse. This implies that the entire legislative process will have to start all over again, if and when there is political will to legislate on these issues in the 16th Lok Sabha.

The challenges in getting legislation passed by Parliament are many, given that its overall productive time, especially time spent on legislation, is decreasing. Typically, Parliament spends about 25 per cent of its time debating legislation, but in the past few years this average has declined to 15 per cent. While the time lost by the House due to frequent adjournments is difficult to make up, parliamentarians will have to cautious about passing bills without the rigours of parliamentary debate. It is uncertain what the trajectory of the anti-corruption legislation in Parliament will be — enacted as law or resigned to a pool of lapsed legislation.

Poverty estimation in India

August 5th, 2013 No comments

The percentage of the population living below the poverty line in India decreased to 22% in 2011-12 from 37% in 2004-05, according to data released by the Planning Commission in July 2013.  This blog presents data on recent poverty estimates and goes on to provide a brief history of poverty estimation in the country.

National and state-wise poverty estimates

The Planning Commission estimates levels of poverty in the country on the basis of consumer expenditure surveys conducted by the National Sample Survey Office (NSSO) of the Ministry of Statistics and Programme Implementation.

The current methodology for poverty estimation is based on the recommendations of an Expert Group to Review the Methodology for Estimation of Poverty (Tendulkar Committee) established in 2005.  The Committee calculated poverty levels for the year 2004- 05.  Poverty levels for subsequent years were calculated on the basis of the same methodology, after adjusting for the difference in prices due to inflation.

Table 1 shows national poverty levels for the last twenty years, using methodology suggested by the Tendulkar Committee.  According to these estimates, poverty declined at an average rate of 0.74 percentage points per year between 1993-94 and 2004-05, and at 2.18 percentage points per year between 2004-05 and 2011-12.

Table 1: National poverty estimates (% below poverty line) (1993 – 2012)

Year

Rural

Urban

Total

1993 – 94

50.1

31.8

45.3

2004 – 05

41.8

25.7

37.2

2009 – 10

33.8

20.9

29.8

2011 – 12

25.7

13.7

21.9

Source: Press Note on Poverty Estimates, 2011 – 12, Planning Commission; Report of the Expert Group to Review the Methodology for Estimation of Poverty (2009) Planning Commission; PRS.

State-wise data is also released by the NSSO. Table 2 shows state-wise poverty estimates for 2004-05 and 2011-12.  It shows that while there is a decrease in poverty for almost all states, there are wide inter-state disparities in the percentage of poor below the poverty line and the rate at which poverty levels are declining.

Table 2: State-wise poverty estimates (% below poverty line) (2004-05, 2011-12)

State

2004-05

2011-12

Decrease

Andhra Pradesh

29.9

9.2

20.7

Arunachal Pradesh

31.1

34.7

-3.6

Assam

34.4

32

2.4

Bihar

54.4

33.7

20.7

Chhattisgarh

49.4

39.9

9.5

Delhi

13.1

9.9

3.2

Goa

25

5.1

19.9

Gujarat

31.8

16.6

15.2

Haryana

24.1

11.2

12.9

Himachal Pradesh

22.9

8.1

14.8

Jammu and Kashmir

13.2

10.4

2.8

Jharkhand

45.3

37

8.3

Karnataka

33.4

20.9

12.5

Kerala

19.7

7.1

12.6

Madhya Pradesh

48.6

31.7

16.9

Maharashtra

38.1

17.4

20.7

Manipur

38

36.9

1.1

Meghalaya

16.1

11.9

4.2

Mizoram

15.3

20.4

-5.1

Nagaland

9

18.9

-9.9

Odisha

57.2

32.6

24.6

Puducherry

14.1

9.7

4.4

Punjab

20.9

8.3

12.6

Rajasthan

34.4

14.7

19.7

Sikkim

31.1

8.2

22.9

Tamil Nadu

28.9

11.3

17.6

Tripura

40.6

14.1

26.5

Uttar Pradesh

40.9

29.4

11.5

Uttarakhand

32.7

11.3

21.4

West Bengal

34.3

20

14.3

All Inda

37.2

21.9

15.3

Source: Review of Expert Group to Review the Methodology for Estimation of Poverty (2009) Planning Commission, Government of India; Press Note on Poverty Estimates, 2011 – 12 (2013) Planning Commission, Government of India; PRS.

Note: A negative sign before the number in column four (decrease) indicates an increase in percentage of population below the poverty line.

History of poverty estimation in India

Pre independence poverty estimates: One of the earliest estimations of poverty was done by Dadabhai Naoroji in his book, ‘Poverty and the Un-British Rule in India’.  He formulated a poverty line ranging from Rs 16 to Rs 35 per capita per year, based on 1867-68 prices.  The poverty line proposed by him was based on the cost of a subsistence diet consisting of ‘rice or flour, dhal, mutton, vegetables, ghee, vegetable oil and salt’.

Next, in 1938, the National Planning Committee (NPC) estimated a poverty line ranging from Rs 15 to Rs 20 per capita per month.  Like the earlier method, the NPC also formulated its poverty line based on ‘a minimum standard of living perspective in which nutritional requirements are implicit’.  In 1944, the authors of the ‘Bombay Plan’ (Thakurdas et al 1944) suggested a poverty line of Rs 75 per capita per year.

Post independence poverty estimates: In 1962, the Planning Commission constituted a working group to estimate poverty nationally, and it formulated separate poverty lines for rural and urban areas – of Rs 20 and Rs 25 per capita per year respectively.

VM Dandekar and N Rath made the first systematic assessment of poverty in India in 1971, based on National Sample Survey (NSS) data from 1960-61.  They argued that the poverty line must be derived from the expenditure that was adequate to provide 2250 calories per day in both rural and urban areas.  This generated debate on minimum calorie consumption norms while estimating poverty and variations in these norms based on age and sex.

Alagh Committee (1979): In 1979, a task force constituted by the Planning Commission for the purpose of poverty estimation, chaired by YK Alagh, constructed a poverty line for rural and urban areas on the basis of nutritional requirements.  Table 3 shows the nutritional requirements and related consumption expenditure based on 1973-74 price levels recommended by the task force.  Poverty estimates for subsequent years were to be calculated by adjusting the price level for inflation.

Table 3: Minimum calorie consumption and per capita consumption expenditure as per the 1979 Planning Commission task force on poverty estimation

Area Calories Minimum consumption expenditure (Rs per capita per month)
Rural 2400 49.1
Urban 2100 56.7

Source:  Report of the Expert Group on Estimation of Proportion and Number of Poor, 1993, Perspective Planning Division, Planning Commission; PRS

Lakdawala Committee (1993): In 1993, an expert group constituted to review methodology for poverty estimation, chaired by DT Lakdawala, made the following suggestions: (i) consumption expenditure should be calculated based on calorie consumption as earlier; (ii) state specific poverty lines should be constructed and these should be updated using the Consumer Price Index of Industrial Workers (CPI-IW) in urban areas and Consumer Price Index of Agricultural Labour (CPI-AL) in rural areas; and (iii) discontinuation of ‘scaling’ of poverty estimates based on National Accounts Statistics.  This assumes that the basket of goods and services used to calculate CPI-IW and CPI-AL reflect the consumption patterns of the poor.

Tendulkar Committee (2009): In 2005, another expert group to review methodology for poverty estimation, chaired by Suresh Tendulkar, was constituted by the Planning Commission to address the following three shortcomings of the previous methods: (i) consumption patterns were linked to the 1973-74 poverty line baskets (PLBs) of goods and services, whereas there were significant changes in the consumption patterns of the poor since that time, which were not reflected in the poverty estimates; (ii) there were issues with the adjustment of prices for inflation, both spatially (across regions) and temporally (across time); and (iii) earlier poverty lines assumed that health and education would be provided by the State and formulated poverty lines accordingly.[1]

It recommended four major changes: (i) a shift away from calorie consumption based poverty estimation; (ii) a uniform poverty line basket (PLB) across rural and urban India; (iii) a change in the price adjustment procedure to correct spatial and temporal issues with price adjustment; and (iv) incorporation of private expenditure on health and education while estimating poverty.   The Committee recommended using Mixed Reference Period (MRP) based estimates, as opposed to Uniform Reference Period (URP) based estimates that were used in earlier methods for estimating poverty.[2]

It based its calculations on the consumption of the following items: cereal, pulses, milk, edible oil, non-vegetarian items, vegetables, fresh fruits, dry fruits, sugar, salt & spices, other food, intoxicants, fuel, clothing, footwear, education, medical (non-institutional and institutional), entertainment, personal & toilet goods, other goods, other services and durables.

The Committee computed new poverty lines for rural and urban areas of each state.  To do this, it used data on value and quantity consumed of the items mentioned above by the population that was classified as poor by the previous urban poverty line.  It concluded that the all India poverty line was Rs 446.68 per capita per month in rural areas and Rs 578.80 per capita per month in urban areas in 2004-05.  The following table outlines the manner in which the percentage of population below the poverty line changed after the application of the Tendulkar Committee’s methodology.

Table 4: Percentage of population below poverty line calculated by the Lakdawala Committee and the Tendulkar Committee for the year 2004-05

Committee

Rural

Urban

Total

Lakdawala Committee

28.3

25.7

27.5

Tendulkar Committee

41.8

27.5

37.2

Source: Report of the Expert Group on Estimation of Proportion and Number of Poor, 1993, Perspective Planning Division, Planning Commission; Report of the Expert Group to Review the Methodology for Estimation of  Poverty, 2009, Planning Commission; PRS

The Committee also recommended a new method of updating poverty lines, adjusting for changes in prices and patterns of consumption, using the consumption basket of people close to the poverty line.  Thus, the estimates released in 2009-10 and 2011-12 use this method instead of using indices derived from the CPI-AL for rural areas and CPI-IW for urban areas as was done earlier.  Table 5 outlines the poverty lines computed using the Tendulkar Committee methodology for the years 2004-05, 2009-10 and 2011-12.

Table 5: National poverty lines (in Rs per capita per month) for the years 2004-05, 2009-10 and 2011-12

Year

Rural

Urban

2004-05

446.7

578.8

2009-10

672.8

859.6

2011-12

816.0

1000.0

Source: Report of the Expert Group to Review the Methodology for Estimation of Poverty (2009) Planning Commission; Poverty Estimates 2009-10 and Poverty Estimates 2011-12, Planning Commission; PRS

Rangarajan Committee: In 2012, the Planning Commission constituted a new expert panel on poverty estimation, chaired by C Rangarajan with the following key objectives: (i) to provide an alternate method to estimate poverty levels and examine whether poverty lines should be fixed solely in terms of a consumption basket or if other criteria are also relevant; (ii) to examine divergence between the consumption estimates based on the NSSO methodology and those emerging from the National Accounts aggregates; (iii) to review international poverty estimation methods and indicate whether based on these, a particular method for empirical poverty estimation can be developed in India, and (iv) to recommend how these estimates of poverty can be linked to eligibility and entitlements under the various schemes of the Government of India.  The Committee is expected to submit its report by 2014.


[1] While private expenditure on education and health was covered in the base year 1973-74, no account was taken of either the increase in the proportion of these in total expenditure over time or of their proper representation in available price indices.

[2] Under the URP method, respondents are asked to detail consumption over the previous 30 days; whereas under the MRP method five low-frequency items (clothing, footwear, durables, education and institutional health expenditure) are surveyed over the previous 365 days, and all other items over the previous 30 days.