Category Subsidy

Emperor’s Clothes 0

Jul12

Corruption India Graphics A recent CAG sample survey report stated that only 3.2% of the target households of the National Rural Employment Guarantee Scheme have benefited from the scheme. This means that 96.8% of the corpus spent on this most ambitious social sector scheme launched in Independent India’s history, might be going down the drain. Even though it was only a sample study and its results can not not be uniformly extrapolated, the statistics are still staggering. Decades after the famous confession of the then neophyte Rajiv Gandhi that for every Rupee spent by the government, only 15 paise reaches its intended recipients, things have only gotten worse. Subsequent studies have shown that the average utilisation figure may be still lower at around 6% only. Slowly but surely, the veneer of public good that’s draped around all government schemes is now coming off and the ‘emperor stands exposed with no clothes  on’.  All the rhetoric about caring for the poor is just that – rhetoric. These schemes are nothing but ingenuous machinations of the politicians, by the bureaucrats for their cronies. Government spending in India has become the fountainhead of corruption and any benefits to the needy sections of society is largely cosmetic and unintended.

If things have to improve, more and more technology needs to be brought into the distribution process. Technology can be used to better target subsidies and ensure transparency. continue reading »

How to pour into a test tube from a bucket? 0

Jul3

Have you ever tried pouring water into a narrow test tube from a bucket? Surely! You must have never tried such a thing and there is actually no need to do so even now. It is just that successive governments in India have attempted to do the just that with subsidies. That an overwhelming majority of subsidies are wasted is now an accepted fact. But yet, the enormity of this waste as well as the public apathy to such a waste is appalling. The consequences of this waste go much beyond wastage of public money. It has created huge inefficiencies in our systems that prevent the debottlenecking of our true potential.

Take the case of petroleum subsidy.  There is hardly a justification for the large differential between international and domestic prices for the entire population. Neither is there a logic for the artificial differential in the prices of petrol, diesel and kerosene. Just because the government is unable to target subsidies to the ‘needy segments’ of the populace it has opened the flood gates for everyone. But the resultant price subsidy is giving rise to monumental inefficiencies while providing very little succour to the marginal sections of society.  In case of kerosene subsidy, it is well established that the bulk of the subsidy comes to rest in the pockets of the black marketers and the corrupt officials from the lowest to the highest levels. Even the neediest sections of the society are unable to escape paying a premium above the government administered price for any extra kerosene beyond their limited quota. continue reading »

A Glass Half Empty 3

Jun7

A man at the tap needs a glass of water. You pour a glass of water into the system, but the man at the tap only gets a spoonful. What does one do in such a scenario? Politician’s solution to this problem has been to pour a bucketful of water into the system hoping that the man at the tap would get his glassful. Alas!! The man at the tap still goes thirsty because the more water you pour into a leaking system, the more it leaks.

This has been the story of subsidies in independent India. Successive governments have devised new schemes to pour more and more money into the system with pious intentions of benefiting one constituency or another. However the leakages and the holes in our system have kept growing bigger and bigger. The real beneficiaries of this system are an entire gamut of people who cling to governance apparatus like parasites. These people can be freely seen loitering in corridors of power, currying favours to the politicians and bureaucrats alike. continue reading »