The BPL Blinder

Varying findings of different committee reports, an absolute lack of consensus and the dependence of poverty alleviation schemes on BPL estimates makes its calculation process extremely crucial. And now, despite accepting that 37% of India could be in the BPL category, the government has failed to notify it yet

After a prolonged dilemma over the number of persons falling below poverty line (BPL), the Planning Commission accepted the Suresh Tendulkar Committee report on the scale of poverty in India and found the recommendation regarding a higher number of people being covered under BPL schemes reasonable. Amid confusion and differences over the number of persons falling below poverty line obstructing the proposed legislation on food security in India, the Planning Commission decided to go with the BPL figures contained in the Tendulkar Committee report. With this, the number of people under BPL would rise to 37.2% of the total population (from around 27% earlier) a figure crucial to determine the extent of beneficiaries of government subsidies and the food security bill. However, despite the government having accepted the report in 2010, it is yet to notify the new poverty estimation, which will make the Tendulkar committee figures, though pegged as an underestimate, applicable to all Central government schemes.

The number of BPL people is determined at the national and state-levels by the Planning Commission through large sample survey of consumer expenditure carried out by the National Sample Survey Organisation (NSSO), often referred to as available data‘. Going by government definition, BPL is an economic benchmark and poverty threshold used by the government to indicate economic disadvantage and identify individuals and households in need of government assistance and aid. It is determined by using various parameters which vary from state to state and within states as well. But taking into account the Government‘s consistency in providing varying figures about the extent of poverty in India, it is difficult to arrive at an exact figure. The government adopts various measures to reduce poverty – through subsidised kerosene and cheaper grain for the poor population. With the government counting on these schemes to eradicate poverty in India, and the extent of these schemes dependent on the BPL numbers, it becomes increasingly important to adopt a correct methodology to arrive at a realistic figure that can actually serve in the interest of the most vulnerable classes of society where the benefits of government schemes are most required. In the absence of a uniform statistical measure of poverty, it is obvious that the government programmes for poverty alleviation will not prove meaningful.

Uncertainty within the government over actual BPL figures is evident from the varying estimates that different government-appointed committees have tabled. Report of the Saxena Committee, constituted by the Ministry of Rural Development, says that 49.1 % of the population in the country is living below poverty line, and at least 23% of the poor do not possess a ration card, leave aside a BPL card. “The exclusion errors from BPL lists frequently reflect the powerlessness of the most vulnerable and are a direct function of their weak political bargaining power and our inability to include them in state programmes in the last 60 years is a severe indictment of public policy and its implementation,” the Saxena committee has observed.

The latest poverty ratios released by Planning Commission based on 61st round of the National Sample Survey Organisation (NSSO) in 2004-5 estimated that 28.3% households in the rural areas were living below poverty line. In contrast to this figure for the same period, the Arjun Sen Gupta Committee constituted by the government for gauging poverty in the unorganised sector the country revealed that more than 77% of people are forced to live on Rs.20 or less per day, which is insufficient even for bare minimum requirements. The panel estimates the number of poor on basis of the National Sample Survey Office’s sample survey of expenditure and fixes state-wise number of poor. Baffled by the different poverty figures, the government has now asked all ministries to only use the planning commission’s figure of 27% in all its communications henceforth.

In line with the government instructions, the Planning Commission has now decided to maintain the state-wise number of BPL families (which decide the extent of schemes run by the state governments) as per NSSO data available, against the usual practice of state governments calculating these numbers. While the rationale behind the decision is still skewed, the Commission is further learnt to have issued a sealing to state governments that the number of BPL families should not exceed a certain estimate. The Parliament’s standing committee on Finance, headed by former Finance minister Yashwant Sinha has sent a serious note to the commission objecting the government’s move. The committee has also said that the number of BPL families should be decided by the state governments as it is primarily their job. Expressing apprehensions over differences between the Centre and states over population of Below Poverty Line (BPL) families and discrepancies in the existing BPL lists, Sinha has also cautioned the government against rolling out the proposed food guarantee law without resolving all the issues related to BPL population in the country. While urging the government to sort out all the issues relating to poverty criteria, estimation, identification and targeting before finalising the Food Security Bill, the Committee underlined that it was “concerned about the efficacy of the proposed Food Security Bill when the criteria of identification of the poor remains nebulous”. The standing committee has also noted that various expert groups have indicated different aspects of poverty based on different assumptions and context.

If we consider the United Nations data, 220 million people in India suffer from hunger and the prevalence of hunger is found in all age groups ranging from infants to old. Food production has been going down, food imports are rising and food insecurity is on rise. Whereas, per capita availability of foodgrains was 190 kilogram per person per annum in 1979-80,it declined to only 186 kilogram in 2004-05. The Multidimensional Poverty Index (MPI), calculated by the Human Development Report Office of the United Nations Development Programme (UNDP), that looks beyond income at a wider range of household-level deprivation, including services, which could then be used to help target development resources, throw up stark statistics compared to regular poverty measures. The study has found that half of the world’s MPI poor people live in South Asia, and just over a quarter in Africa. There are 421 million MPI poor people in 8 Indian states alone – Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, West Bengal – as compared to 410 million in the 26 poorest African countries combined.

While clarity over the extent of poverty has always been a matter of debate, in a recent development, the entire process of the manner in which the poor are counted in India is under a legal scrutiny. The Supreme Court has asked the government to prove the efficacy of the BPL survey to be held in June this year, if all the poor identified fail to get government benefit. The court has asked the government to give reasons behind the Planning Commission putting up a cap on the number of poor in India, which many believe is unrealistic. The existing conflict between the Centre and states over who decides the number of poor is more of a political battle for an upper hand when it comes to taking credit for the impact of a welfare measure.

However, a scenario such as this calls for further introspection before the concerned parties quarrel over committee reports. Before deliberating upon the contours of who the government would recognise as ‘poor’, there has to be a consensus and stricter vigilance to ensure that the existing welfare measures are reaching the actual needy.

Of all the issues in power generation

The Electricity Act, 2003, was aimed to consolidate and replace several existing legislations on electricity. But 8 years down the road, the lack of consensus between states and the Centre threatens the very purpose of the legislation.

With effect from June 2, 2003, India adopted a new legislation called the National Electricity Act, 2003 (NEA), which replaced some archaic laws on electricity operations in the country. Among various other contours, the new Act consolidated the position of existing laws and also aimed to provide for conducive measures for developing the industry in the country. The Act was an attempt to address issues that had either prevented or impeded the reform process in India, thus generating a new hope in the electricity industry.

Before the government enforced NEA, the electricity sector in India was basically guided by The Indian Electricity Act, 1910 and The Electricity (Supply) Act, 1948, with generation, distribution and transmission of electricity being mainly carried out by state electricity boards. After the enactment of the Electricity Regulatory Commissions Act in 1988, when cross subsidies reached unsustainable levels, the government brought out the new legislation in 2003 to encourage the participation of the private sector, to bring in competition and also to distance state governments from tariff determination. The Act delicensed power generation completely (except for hydro power projects over a certain size), de-licensed distribution in rural areas and brought in a licensing regime for distribution in urban areas.

However, despite so many positives mooted in favour of the new legislation, the scenario of electricity in India is still marked by protests, burning effigies and ransacking of local electricity distribution authority premises. Coupled with the rising mercury and water scarcity, the people’s anger against long power cuts in places like Bihar turned volatile in many parts of the state some days back, with angry residents blocking roads, burning rubber tyres and ransacking electricity board offices, police said. But strangely enough, according to the latest data from Central Electricity Regulatory Commission (CERC), India’s installed capacity has risen to 170.23 GW, as on January, 31, 2011. The target for cumulative generation capacity addition for the 11th five-year plan (2007-08 to 2011-12) has been revised to 62 GW. Even with the projected average addition of over 12 GW every year during the 11th Plan, about 10 GW of peak shortage has been projected for March, 2012. Additionally, over 19,800 million units of shortage is expected for March, 2012.

However, considering the demand for electricity in India, there is no doubt that India offers tremendous scope for the sector. Undoubtedly, the intent of the Centre has been to bring conducive reform processes for the power sector in India. But then, it has also been a historically established fact that India has always failed to meet its power sector targets by a significant margin and the power sector continues to be affected by the shortfall, both on the generation and transmission sides. While the reforms intended through the Act were a good start, the real problem with the dismal scenario of electricity in India, like several other schemes doled out by the Centre, has been in its implementation. The failure of government initiatives, in this case, is largely based on the gaps in delivery, which is caused by the differences between the Centre and state governments to reach to an agreement on crucial issues pertaining to the Act.

As per the Indian Constitution, the power sector is a concurrent subject and is the joint responsibility of the State and Central Governments. The power sector in India is dominated by the government, with the states and central government sectors accounting for 58% and 32% of the generation capacity respectively, while the private sector accounts for about 10%. The private sector, which was expected to boost its participation exponentially, has a small but growing presence in distribution and is now slowly making an entry into transmission. Problems with land acquisition, the inability of most new entrants to secure fuel linkages for existing and planned power projects and delays in getting environmental clearances have all led to frustrating delays in projects getting off the ground. Liberalisation in power generation, a provision under the Electricity Act, was expected to provide a much-needed efficiency boost to the private sector, which unfortunately could not happen. Even as the private sector is undeniably affected by these problems, an equally daunting shortcoming is in project execution capability. This weakness is reflected most visibly in the inability to mobilise the labour and capital needed to execute projects in a timely manner. The shortage of a skilled workforce has also emerged as a major constraint for infrastructure growth. The saga of the Ratnagiri Gas and Power plant in Maharashtra, and the erstwhile Enron project, which is yet to begin running at full capacity almost 15 years after it was built, goes on to prove that the country’s power sector reforms, mandated by the Electricity Act of 2003, have done little to alleviate the chronic shortage of power.

Formulation of the tariff policy has also been an aspect that had already led to a lot of litigation and confusion under the earlier regime. In a bid to overcome these confrontations, NEA placed the responsibility of formulating the tariff policy on the Central government, something that few state governments have fiercely contested making the implementation of the reforms practically impossible. In an exclusive conversation with B&E, K. C. Venugopal, Minister of State for Power, says that one of the hurdles in the implementation stage of the Act was the concerns pertaining to the financial viability of Discoms and persisting problems. “Some states invoked Section 11 of Electricity Act to disallow open access to the generators within the state. As per the Electricity Act 2003, Section 11 is meant to be invoked only in extraordinary circumstances like threat to security of state, public order, natural calamity et al. and is not meant to restrict open access.” Moreover, as per the Act, only 16 states in India have officially notified what constitutes as ‘rural areas’ and therefore the rural distribution, where the implementation of the Act is crucial, is yet to be freed up in nearly 33% of India.

Experts, however, are not impressed with the lack of coordination and consensus between the Centre and state governments in the electricity sector. Observes senior economic analyst Suvrokamal Dutta. “NEA is a step in the right direction, but implementation hurdles caused by a lack of consensus has slowed things down. The way ahead can only be positive if the control over all forms of energy remains with the Central government.”

The inability of the domestic power sector to leverage the considerable latitude provided by the landmark Electricity Act (2003) is well-documented. However, the Power ministry had pegged adding 100,000 MW of electricity during the 12th five-year plan, a projection which skeptics, along with the Union Environment minister Jairam Ramesh, termed ‘impractical’. The target was later revised to 62,374 MW. However, the ministry now hopes to add over 20,000 MW of power during FY 2012. But, a close look at the data suggests that a significant portion of that 20,000 MW is from projects that should have come on stream long ago. The cumulative generating capacity that was to be added in the 11th and 12th plans is 178,000 MW. Given the shortfall in the 11th plan, approximately 128,000 MW is needed during the 12th plan only to be at par. With India’s population growing at a phenomenal rate and economy poised for some serious growth, India’s need for electricity has never been greater. A coordinated plan to mitigate the problem of skills shortage and inadequate project implementation capability, using foreign (including Chinese) capital and skilled manpower if necessary, should be on top of the agenda for the government if we plan to improve the power scenario in the country.