People's Democracy

 Parliament Panel Slams Employment Bill

Inadequate Response From Government

Smita Gupta

THE merry go round over the ‘National Rural Employment Guarantee Bill, 2004’ never seems to stop. To sum up the chain of events thus far: To fulfil one of the key promises made in the National Common Minimum Programme, the National Advisory Council (Chaired by Sonia Gandhi) submitted a Draft of the legislation to the government on August 15, 2004. This was welcomed by the Left (except that it placed a heavy financial burden on already bankrupt state governments and did not clearly demarcate liability for the payment of the unemployment allowance). The Bill tabled in Parliament was a far cry from the original NAC Draft, having gone through several rounds of dilution. In the face of severe criticism by the Left, NAC members and activists, a Group of ministers was formed, headed by Pranab Mukherjee, which included two of the strongest opponents of an effective Act, namely P Chidambaram and Montek Singh Ahluwalia. This Bill was referred to Parliament’s multi-party Standing Committee on Rural Development, which submitted its unanimous Report on the July 27, 2005.

RECOMMENDATION OF STANDING COMMITTEE

Calling it “one of the most important Bills introduced in Parliament after Independence”, the Committee is deeply critical of the fundamentally flawed Bill, both in terms of the process of drafting the Bill and the provisions. There is an acute absence of care while formulating such a vital and historically significance legislation. Given that the state governments will not only implement the provisions of the Bill but are also required to bear a part of the costs, the Committee is surprised that they were not formally consulted.

The Committee therefore invited the views of state governments and union territory administrations with the permission of the Speaker, to which 16 States governments responded.  The Committee also invited the views of experts, organisations and individuals through a Press Communiqué. Based on the deliberations, the Committee recommends substantive amendments to the Bill on several key aspects, without which this potentially path-breaking legislation would remain a mere delusion. The far-reaching recommendations are as follows:

(1) Universal eligibility without BPL criterion  (any adult should be eligible to apply for work); (2) Individual entitlements instead of household entitlements; (3) Time bound extension to the whole of rural India in 4 years (4) Irreversible guarantee, without "switch off" (5) Statutory minimum wages, No less than three-fourths of the National floor minimum wage (currently Rs 66) (6) Foodgrains to be valued at BPL prices (7) Payment of minimum wages under all circumstances, without introducing subjective criteria for quality and quantity of work (8) 100 per cent central funding (9) Mandatory payment of unemployment allowance (10) Increasing the unemployment allowance to one-half and three-fourths (11) Unemployment allowance payment by states, except when funds are not devolved by centre (12) Disqualification from unemployment allowance only for the duration of absence from work (13) Conformity with Seventy third Amendment (PRIs) (14) Schedules to be brought into main body of Act  (15) Flexible list of works, to be determined by States and PRIs in location specific manner, which women can undertake with ease (16) Minimum number of workers to start new works should be 10, not 50 (17) Provision of crèche and other facilities if there are 5 women or more (18) Compensation be increased from Rs 10,000 to Rs 25,000 (19) Non-compliance will attract a penalty of Rs 5000 or 3 months imprisonment (or debarring from holding public office in the case of elected representative).

RESPONSE OF NAC & GROUP OF MINISTERS

The adverse and critical Standing Committee report was the final blow for the UPA, with its pro-poor image taking a severe beating after the Gurgaon violence; the Left emerging as a greater champion of the NCMP on several issues such as BHEL; NAC colleagues Aruna Roy and Jean Dreze taking the issue to the streets; etc. On the very same day that the House panel submitted its Report, in a bid to salvage the sagging image of the Congress, Sonia Gandhi stepped in to seize the political initiative. She too threw her weight behind some of the main correctives suggested by the Left, NAC and the Standing Committee. (1) Universal entitlement (which probably meant both individual entitlements and no BPL criterion); (2) No “switch off” provisions; (3) Central role to Panchayats; (4) 100 per cent central funding.  It was a clear signal: politics must take command and check the pursuit of the increasingly anti-people and unpopular neo-liberal policies. Not surprisingly, her welcome initiative has brought on harsh attacks from the English press, with screaming headlines accusing her of “competitive populism” with the Left, which will hurl the country towards financial ruin. 

Under pressure from the Left and NAC to implement the NCMP, the Group of Ministers has accepted some of the recommendations of the Standing Committee, including: (1) Removal of BPL as a condition for eligibility of rural households; (2) No “switch off” provisions; (3) Payment of Statutory Minimum Wages; (4) “Principal” role to Panchayats; (5) Mandatory payment of unemployment allowance. Though this is undoubtedly a major gain, amendments are yet to be finalised, and many lacunae remain. 

FISCAL POLICY

It should come as no shock that the proposals that stand rejected by the Group of ministers emanate from state governments and women’s organisations, fully supported by the Left. Underlying the rejection of these are two issues. The first is a fierce contest between neo-liberal fiscal conservatism and Keynesian expansionary policies. Broadly speaking, three positions are taken on the Employment Guarantee Act (EGA): that it is both desirable and feasible; and that it is neither desirable nor feasible; that it is desirable but feasible only under very restricted conditions. Some hail the guarantee as a social security measure, a palliative with limited value since it detracts from the real tasks of infrastructure expansion and social development. On these very grounds, it is denounced as misemployment of scarce resources. The Keynesians support for the EGA is most unswerving and argues that the guarantee will serve the twin goals of growth with employment by injecting effective demand into the system. These positions in turn derive from different approaches to fiscal policy. Some are guided by pre-Keynesian fiscal orthodoxy, which claims a scarcity of rupee resources and the inherent superiority of zero or low fiscal deficits. Since prospects of mobilizing resources through debt recovery and tax-effort too seem bleak to them, they prescribe restricted coverage, scope and entitlements.

In contrast, reliance on employment generation and the home market for non-inflationary growth constitutes the main plank of the Left argument for an EGA. The co-existence of unsold foodstocks, unutilised industrial capacity and comfortable foreign exchange reserves reflect the market's inability to realise the existing growth potential, due to lack of effective demand. An expansion in employment through government expenditure will increase the demand for wage goods, resulting in an increase in the production of industrial goods of mass consumption and utilization of excess food stocks. A multiplier is set in motion with demand as a lubricant, which in turn ensures that an expansion in savings on account of rising incomes will finance the investment.

FEDERAL CONCERNS

The second issue is fiscal federalism and decentralisation. All the four major demands made by state governments are as yet ignored. The first is that individual entitlements are both fair and simple. The logistical difficulties in calculating 100 days at the household level, rationing within households or resolving disputes arising from this is a major area of concern. The states pointed out that coping with joint family situations would also pose huge administrative costs and effort. Entitlements at the family level would cause intra-household competition for work, social tension and disadvantages for joint families. The states also say that while a case can be made for phased implementation, the stipulated time frame must be specified in the legislation itself, be it 4 or 5 years.

The states argue that the centralised and rigid definition of permissible works will make it very difficult to generate work and provide employment quickly. It also ignores key development activities like the construction of social infrastructure, maintenance of assets as well as services like sanitation, etc. The focus on durable and physical assets makes it less accessible to women, or to create work that reduces drudgery. States/Union Territories differ in geographical and local conditions. The restrictive codification at the Central level leaves no room to address location-specific requirements and robs the Gram Sabhas and Panchayats of the initiative to plan works. They therefore argued that productive works must be redefined in a far broader sense.

At present, the state governments are expected to bear twenty five per cent of the material component (including the wages of skilled and semi-skilled workers), expenditure on unemployment allowance, administrative expenses and the expenditure on facilities at the worksite as well as compensation, etc. A maximum of 2 per cent may be extended to the states as administrative expense. The States are not confident about their ability to meet the unaffordable financial burden placed on them. They consider it unfair that they must bear the liability for payment of the unemployment allowance even when the centre has not devolved funds to them. The states are also sceptical about the quantum of administrative expenses in a programme of this nature, which may be far higher than anticipated.

 Instead of full central funding, the NREGB 2004 responded to the states’ fiscal crises by severely diluting the unemployment allowance provisions, with the states determining eligibility conditions, and paying the allowance if their economic capacity permitted it. The states argued and the Standing Committee agreed that 100 per cent expenditure for the implementation of the different provisions of the Bill should be borne by the Centre, “keeping in view the financial position of the state governments and specifically when the Scheme is of the Union Government.”  They recommend mandatory unemployment allowance payment (by states unless funds are not devolved by the centre).  Individual entitlements, suitable work design, and national coverage can also play a crucial role in addressing the practical and strategic needs of women. It can reduce the drudgery; reverse worsening health status; improve their social status; etc.

The government is committed to vote on the Bill in this session, and will place the amendments in the House very soon. The government must be compelled to explain why it is rejecting some of the most crucial recommendations of the Standing Committee listed above, despite very sound arguments in their favour. The fact that the state governments who are to implement the Scheme have time and again made the same set of recommendations only add to their weight. Finally, these are so very important in addressing the interests of rural workers all over the country, in particular, women. The UPA must remember that a failure to live up to this most important promise of the NCMP might see them scurrying out of office as quickly as they came in.

The Task Ahead

Important Suggestions of Standing Committee Rejected by Group of Ministers

1. Time bound extension to all of rural India in five years

2. Full central funding

3. Unemployment allowance payment by States, except when funds not devolved by centre

4. Flexible and decentralized list of permissible works

5. Individual entitlements (the Left has demanded that failing this, definition of household must be nuclear family and 33 per cent jobs in each block must be for women)