Print edition : February 07, 2014

Participants in the protest organised by the Pension Parishad demanding enhanced pension, at Jantar Mantar in New Delhi on December 18. Photo: Meeta Ahlawat

The tussle within some Central government Ministries over proposed cuts in the budget for rural development schemes has affected a promise made to senior citizens.

THEIR wizened faces said it all. Though there was disappointment, there was also a glimmer of hope that their trek to the national capital would not go in vain. For almost a month, senior citizens, most of them poor, had been pouring into New Delhi from 25 States to demand what they felt was a decent pension from the Central government. They were told rather categorically by the Congress-led United Progressive Alliance (UPA) government that there was no money for pensions and that further cuts in social sector spending were on the anvil. This fiscal fundamentalism of the government soon after the Congress met with serious electoral reverses in the recently concluded Assembly elections seems surprising.

The senior citizens’ efforts to meet the Prime Minister also went in vain. This was the sixth time they had converged in Delhi to remind the UPA government of a promise it had made in Parliament. That was after the National Social Assistance Programme (NSAP) had been restructured on the Prime Minister’s suggestion to work out the increased budgetary outlay required to give slightly enhanced pension amounts.

The government’s indifferent response angered the leaders of the agitation, the former National Advisory Council member Aruna Roy and the veteran trade unionist Baba Adhav. In a letter to the Prime Minister, they wrote: “We are now increasingly convinced that the idea propagated by the government of growth with a human face is a travesty… if growth alone matters and the rich must get richer, let us know so that we will make our future plans knowing that the promised human face is an opportunist mask.”

To make matters worse, further budgetary cuts were made on existing rural development schemes. Union Minister for Rural Development Jairam Ramesh sent angry missives to the Finance Minister and the Prime Minister describing the cuts as “savage”. According to reliable sources, the matter may be reviewed but at best it may be a restoration of the status quo rather than a hike as allocations in the revised estimates (RE) suggested. However, in the battle between the various Ministries of the government, in particular the Ministry of Rural Development (MoRD) and the Ministry of Finance, over inadequate budget allocations, the matter of a decent old-age pension has once again been relegated to the back-burner. While an impression is sought to be created that there are conflicting views within the government, ultimately it is the writ of the fiscal fundamentalists that will run. And therefore, any protests by fraternal Mnistries are at best an exercise in posturing. In fact, rather than increase allocations, several budget cuts were imposed on the existing schemes of the MoRD.

At present, the Central government gives only Rs.200 a month as old-age pension and that too only to people in the below poverty line (BPL) category. The poverty line itself is something that has not been free from controversy, with the government declining to look at the calorific requirement as a criterion as prescribed by the Indian Council of Medical Research (ICMR). Different States disbursed different pension amounts, with some of them contributing nothing and very few even matching their minimum wage rates. One of the long-standing demands has been to fix at least Rs.2,000 as the pension amount or at least half the minimum wage. All central trade unions, including the Congress-affiliated Indian National Trade Union Congress (INTUC), have been demanding a minimum wage of Rs.10,000.

In March 2013, Jairam Ramesh made a commitment in Parliament on pensions. He had also assured the Pension Parishad, a group of around 100 organisations led by the likes of Aruna Roy and Baba Adhav, that the NSAP would be restructured and that the APL/BPL classification would be removed to make way for universal coverage; that any exclusion would include those who pay income tax and those receiving pensions higher than the amount provided under the NSAP. Other assurances included a contribution of Rs.500 a month towards pension by the Government of India with an appeal to State governments to contribute a matching amount; indexing pension amount to the inflation rate; widow pension to all divorced, separated and abandoned women over the age of 18 years; pension to single, unmarried women above the age of 40 and for those persons with 40 per cent disability or higher irrespective of age; and disbursement of pension on a fixed date by Direct Benefits Transfer.

The 60th round of the National Sample Survey (NSS) calculated that 65 per cent of the elderly were dependent on others; the percentage of women who were dependent was even higher. The urgency is clear. A health check-up conducted on the people who had come for the protest showed that many of them were underweight, some a mere 28 kilograms, said Purnima Chikremane of the Pension Parishad.

The disparity

The fact is that universal social security, despite being a long-standing demand, benefits only a very small percentage of people at present. Calculations show that the organised sector, which accounts for only 7 per cent of the workforce, takes up Rs.1.64 lakh crore of the government’s largesse, while the bulk of the working force of 93 per cent, which is without any social security, receives only Rs.14,000 crore. Those who participated in the dharna at Jantar Mantar included 85-year-old Maini Masumat from Araria, Bihar; 68-year-old Dada Dharam Dade from Pune; 70-year-old Shankhi from Chitrakoot; 75-year-old Darogi Saini from Muzaffarpur, Bihar; and 63-year-old Jayamma from Bangalore.

One-third of the 102 participants were found to be anaemic and a large number underweight. The majority of the participants complained they had no medical facilities and that the primary health centres and government hospitals did not provide them free medical facilities. Clearly, the participants demanding a fair pension belonged to the most vulnerable sections of society.

Turf issues

It was in October 2012, when the pension for widows and the disabled was increased by Rs.100, from Rs.200 to Rs.300, that the Union Cabinet directed the MoRD to draft a proposal for a comprehensive NSAP. A task force was constituted under Mihir Shah, Member, Planning Commission, with the objective of undertaking a review of pension schemes and to suggest reforms. As there was a demand from the Pension Parishad too, the MoRD was asked in March 2013 to draft a proposal after consultations with the Pension Parishad. The Ministry apparently took this exercise rather seriously and identified 3.16 crore people (only BPL category) as being eligible for government pension, and the government’s liability was estimated to be Rs. ,546 crore. The Ministry, in a note, admitted that the present pension amounts could not be “considered dignified under the present cost-of-living circumstances, all pensions were not on par (old-age pensions were lower than that for widows and the disabled), there wasn’t any automatic indexation as was in the case of the MGNREGA [Mahatma Gandhi National Rural Employment Guarantee Act] wages, that beneficiaries were restricted to BPL households where BPL lists are notoriously unreliable and that the BPL/APL distinction had been done away with in various other programmes like the Food Security Bill, National Rural Livelihoods Mission or the Nirmal Bharat Abhiyan; and the definition of widows and disabled was far too restrictive”. The note further pointed out that in very few States were pensions paid monthly because since 2002-03 the pension scheme had been converted to “additional central assistance” handled by the Ministry of Finance and its counterparts in the States, which led to delays and diversions at the State level.

So, not only were pension amounts minuscule, even the disbursement had major administrative hitches and a turf battle was apparent between the two Ministries. The note went so far as to suggest that the government “must immediately announce its intention to introduce universal pensions with clearly defined exclusion criteria” and also that an expert committee be set up to come up with a road map to accomplish the objective. However, the Ministry strongly recommended that all pension amounts be brought on a par and set at Rs.500 a month up to 79 years and Rs.1,000 beyond 80 years and indexed to inflation. The definition of widows needed to be changed to include women over the age of 18 and not those above 40 years alone. The Ministry calculated the additional revenue burden as well, pointing out that the additional expenditure of Rs.15,500 crore would constitute 0.15 per cent of the Budget though the number of beneficiaries would go up from 3.16 crore to 3.62 crore in 2013-14. It further suggested that the NSAP should go back to being a centrally sponsored scheme in the MoRD “in order to ensure better implementation and timely delivery of pensions”. However, the amount proposed was still far less than what the Pension Parishad had demanded, that is, not less than Rs.2,000 a month.

Unspent funds

Figures prepared by the Centre for Budget and Governance Accountability on the budget burden on account of universal pensions for the aged threw up shocking figures. The number of elderly person (60 years and above) in the unorganised sector stood at 9.65 crore, while those in the organised sector and who were getting pensions was a mere 72 lakh. The total expenditure on pension by the Centre and States (2011-12) was Rs.14,370 crore, while the corresponding amount for the organised sector was Rs.1,66,169 crore. The per capita expenditure for the elderly, therefore, was Rs.124 in the unorganised sector and Rs.19,051 in the organised sector. It was further calculated that the expenditure at the rate of Rs.500 a month for the 9.65 crore elderly people would be Rs.57,720 crore and, at the rate of Rs.2,000, would amount to Rs.2,31,600 crore. While Rs.20,000 crore was lying unspent with the MoRD, the budget cuts proposed this year included Rs.15,000 crore of the MoRD and Rs.5,500 crore of the Ministry of Human Resource Development. A further argument was that there were substantial unspent balances with the State governments.

In his November 12 letter to the Prime Minister, Jairam Ramesh wrote that he had been informed about the “savage cuts” being proposed by the Finance Ministry on all the flagship programmes of the MoRD, in order to meet the fiscal deficit target. Some of the proposed budgetary cuts were as high as 50 per cent. He said these cuts were “completely unreasonable” and that “apart from sending the wrong political signals, they will severely jeopardise the implementation of these programmes”.

“Demoralising effect”

The Minister wrote, the cuts had “already had a very demoralising effect”. He requested the Prime Minister’s intervention to “salvage” whatever was possible. On November 16, he sent a letter to Union Finance Minister P. Chidambaram pointing out that the “RE proposal by the Secy (expenditure) will severely affect these programmes in the States that need them most”. While accepting the argument that the cuts were because of substantial unspent balances, he pointed out that the unspent balance was much less when compared with the corresponding figure on April 2012. “It is not proper to assess unspent balances at this juncture because as per the approved guidelines of different schemes, State governments are eligible for the release of the first instalment after having spent 60 per cent of the available funds. It would thus be clear that at any given point of time, there is a minimum float available with the State government which is necessary for them to implement our programmes in the rural areas in the most effective manner.” The cut of up to 35 per cent in the National Rural Livelihood Mission (NRLM) would affect reimbursement of a portion of the interest paid by self-help groups; “going back on this commitment which was made on the basis of a Cabinet decision”, would directly hit three crore poor women, including those who have made “prompt repayment of their loans”. Additionally, the cuts will affect the Himayat programme in Jammu and Kashmir and Roshni, the scheme launched in the 27 districts affected by left-wing extremism. The Minister proposed that he was not averse to a cut of less than Rs.500 crore. Similarly, regarding the Pradhan Mantri Gram Sadak Yojana (PMGSY), which saw a massive budget cut, the Minister wrote he was willing to surrender Rs.8,000 crore by postponing some of the expenditure. He, however, categorically ruled out any self-imposed cuts in the Indira Awas Yojana, arguing that additional funds were required. On MGNREGA, where the budget (RE for 2013-14) had been slashed by Rs.2,000 crore, the Minister was more emphatic, stating that “we are going ahead with whatever has been planned, especially in the special focus States of Bihar, Uttar Pradesh, Odisha and Jharkhand”. He reminded Chidambaram that since 2006, he and his predecessor “have consistently stressed that since MGNREGA is a demand-driven, not allocation-driven programme, Finance Ministers must necessarily find resources required for its implementation, come what may.”

The proposed cuts are clearly at variance with the Prime Minister’s opening remarks at his press conference on January 3. Painting a picture of optimism about his government’s achievements in rural India, he said he had committed a “New Deal for Rural India” in 2004 and that the government had delivered on that promise very “substantially”. The MGNREGA had assured agricultural labour of a minimum wage and increased their bargaining power; real wages in rural areas had increased faster than before and per capita consumption had also gone up in rural as well as urban areas. Clearly, if the cuts come into force, the much-talked-about gains will not be sustainable.

Notwithstanding the diametrically opposed posturing within the government and the pressure from outside not to cut, but rather step up, social sector expenditures, it seems unlikely that the quarters that call the shots in the government are likely to relent. At best, it may be a restoration of the status quo to present a veneer of fair play. With a strident demand for more fiscal conservatism, including shrill criticism of the existing minimalist populist measures, and a shift of emphasis to better governance rather than stepped-up expenditures, the writing on the wall is clear.