Wednesday, April 20, 2011

Good Governance : Subsidies - Let Us Forget Them

In India 37% population of the country i.e. about 45 crores or 10 crore families live below poverty line which means an earning of less than Rs10/- a day per person. It is imperative on the part of the government to help this large chunk of population to enable it to live above BPL and contribute effectively to furtherance of development process.For this government provides food subsidy, fuel subsidy and has embarked upon programs to provide houses, drinking water and sanitation, rural roads, health, education and minimum employment guarantee program.
All these programs are wonderful and the intention is also commendable. It is not understood why the authorities are blindly following the subsidy route when they all know that not even fifty percent of the subsidies reach the target group and more than half the amount in such activities is the administrative cost. Also why we  only see 45 crore mouths to be fed and not 20 crore hands who can revolutionize the fortunes of this country in no time. Perhaps it gives a feeling of greatness to politicians and inflates their ego to a level where they feel that they are the 'Ann Daatas' ( food providers ) to such large section of humanity. Or simply put, this methodology is more vote catching than actually looking after the welfare of poor class Or the lure of partaking in the accompanied loot encourages them to toe this faulty line. 
Let us assume we adopt the methodology of providing employment to 10 crore family heads for 25 days in a month at a daily wage of Rs100 on the lines of NREGA. This gives a daily earning of Rs 17 to each member  of 45 crore BPL family at a total cost of 3,00,000 crores to the government. It places 2600 crore more man days at the disposal of government in addition to 400 crore man days likely to be generated through NREGA (yearly allocation of Rs 40,000 crores ). This huge sum of Rs3,00,000 crores can be made available by rationalizing government expenditure in the following manner.
  • No need of any food subsidy from centre and states making available a sum of 1,25,000 crores a year as it is food worth Rs 25000 crores reaches the target group, the rest is absorbed by administrative costs, pilferage and going into wrong hands.
  • No need of any subsidy on kerosene, thus saving Rs16,000 crores which largely goes as administrative cost, theft and adulteration in diesel.
  • Rationalizing subsidy on diesel. This should be made available only for agricultural sector use and goods movement through trucks. By doing this an amount of Rs 30,000 crores can be saved on the diesel subsidy and used for this noble mission. Use of subsidized diesel by passenger cars, government ministries like railways, defence, road transport etc., industry and power generators is a colossus waste of government resources.
  • Rationalizing subsidy on cooking gas by taking out home users paying an annual I Tax of Rs 5000 and above and stopping pilferage for use by commercial establishments can result in a saving of minimum Rs20,000 crores in this subsidy.
  • Annual funds of Rs 40,000 crores earmarked for NREGA will stand merged into this activity.
  • Government spending of Rs 58,000 crores on Bharat Nirman will carry a manpower expenditure of about 20%, adding another Rs 11,600 crores.
  • The other social sector allocation of about Rs 1,00,000 crore along with the social sector spending of all states can easily cover the balance Rs 58,000 crores out of envisaged Rs 3,00,000 crores required for providing a meaningful above poverty line existence to our people. Still where ever necessity of providing help is felt direct cash payments could be resorted to.
A few musts to achieve definite success in this program :
  • In such an endeavor the NREGA wages and direct cash payments where ever or when ever necessary should be linked to inflation index.
  • All payments should be paid into the bank accounts of beneficiaries. For this banking sector has to gear up in a big way otherwise the Indian innovation will see to it that there are lots of pilferages and manipulations.
Such a program will have a bigger chance of success as there is least chance of pilferage for only one authority is involved in certifying work done and paying into the account of the worker. With the help of UID linked bank accounts the payments can be monitored effectively. All these families could be linked to ESI scheme and provided healthcare benefits We will have 45 crore additional Indians with their heads high and a feeling that they are living on their own earnings and not on the doles and freebies provided by politicians and  other mighty and powerful of the society.