Page 2 of 2 India's reform
pains By Kunal Kumar Kundu
irrigation, road works, railways and
power, is mind-boggling. According to some
estimates, as much as Rs1 trillion (about US$21
billion) may be stuck in unfinished projects. A
substantial part of this investment will be lost
forever and the remaining will see time and cost
overruns rendering the projects unviable.
An example of the state of affairs of the
much-touted Pradhan Mantri Gram Sadak Yojana
(Prime Minister's Rural Road Program) would be a
case in point. The government launched the
Pradhan Mantri Gram Sadak
Yojana in December 2000 as a 100% federally
sponsored scheme with the objective of providing
road connectivity to all unconnected habitations
with a population of 1,000 (500 for hilly areas)
and above by 2003 and those with a population of
500 and above (250 for hilly areas) by the end of
the 10th Development Plan (March 2007). The
program was to provide connectivity to 141,000
unconnected habitations and also upgrade the
existing roads. An amount of Rs582 billion was
estimated to be the funding requirement for the
period ending March 2007.
A performance
audit carried out by the comptroller and auditor
general (CAG) of the program was conducted between
January and June 2005 covering the period 2000-05.
This included a test check of Rs15.95 billion or
16.92% of the total reported expenditure and also
involved technical inspection of 51 roads in four
states carried out through the Central Road
Research Institute in New Delhi. The audit
revealed the following:
Though five out of seven years of the life of
the program were completed, only 33,875 or 24% of
the initially targeted 141,000 habitations
(revised to 173,000 in March 2005) were provided
with connectivity up to March 2005.
The funds utilized between 2000 and 2005 were
Rs122.93 billion, which was only about 30% of the
proportionate estimated requirement of Rs 415.71
billion up to March 2005, going by the initial
estimate of Rs582 billion for seven years.
Program funds amounting to Rs3.13 billion or
19.58% of the test-checked expenditure were
diverted or parked in unauthorized deposits, or
spent on unapproved or inadmissible items of work
or used in making undue payments to contractors.
Works were executed by the states without
conforming to the standard design and
specifications prescribed in the Rural Roads
Manual. This involved the additional expenditure
of Rs1.68 billion.
A total of 143 works were abandoned midway or
remained incomplete after incurring expenditures
of Rs440 million as the land required was not made
available by the states. Seven percent or 1,653
completed works took more than the stipulated time
of nine months, with delays ranging up to a
maximum of 39 months.
The test-checking of records in the states
showed that an amount of Rs500 million was spent
on unapproved items of work executed in 17 states,
Rs600 million was charged to the program toward
tender premium and lead charges that were not
admissible, and undue benefit involving Rs340
million was extended to the contractors. Also, the
target date for the execution of works was
extended up to 39 months and liquidated damages
amounting to Rs350 million were not recovered from
the contractors.
Clearly, as a CAG
mentioned, the program was taken up without
assessing the magnitude of the work involved and
without any realistic assessment of the funds that
could be mobilized. The guidelines had to be
revised more than once up to November 2004 and the
ministry did not have clear targets to monitor the
progress and achievements.
And this is
just one of the instances. Things are hardly any
different in the case of investments in social
infrastructure. For example, Sarva Shiksha Abhiyan
or SSA (Education for All) was launched with the
aim of enrolling all out-of-school children and
establishing education guarantee centers,
alternative schools and back-to-school camps by
2003. The date was revised to 2005 only in March
of that year. However, out of 34 million children
(as on April 1, 2001), 13.6 million or 40% of the
children aged six to 14 years remained out of
school as of March 2005, four years after the
implementation of the scheme and after having
incurred an expenditure of Rs111.34 billion.
Some of the findings of the performance
audit are:
Funds were irregularly diverted to
activities/schemes that were beyond the scope of
SSA. In the districts test-checked by audit in 11
states, Rs9.99 million was spent on items not
permitted under SSA. Besides, in 14 states/union
territories (UTs), financial irregularities of
Rs47.25 million were also identified.
Five states/UTs failed to maintain the SSA
norm of 1:40 for teacher/student ratio. The ratio
in primary schools and upper primary schools
ranged between 1:60 and 1:130 in test-checked
districts of Bihar. Cases of uneven distribution
of teachers among schools were identified. Rural
schools did not have enough teachers.
A total of 75,884 primary schools in 15
states/UTs were operating with only one teacher
and 6,647 schools in seven states had no teacher.
SSA envisaged the establishment of at least
one primary school/education guarantee
scheme/alternative innovative education center
within 1 kilometer of each habitation throughout
the country. The audit revealed that such a
facility did not exist in 31,648 habitations in 14
states/UTs.
There were delays ranging between one and nine
months in supplying free textbooks in seven
states/UTs. This could have adversely affected the
pass percentage of the students. Free textbooks
were not supplied to 750,000 children.
A large number of schools in most of the
states/UTs were functioning without buildings.
Drinking water, toilets or separate toilets for
girls, electricity and compound walls were mostly
not available. Repairs and maintenance grants were
released without specific proposals and also even
to schools without their own buildings.
In two districts in the state of Jharkhand,
school grants of Rs4.79 million were released to
2,369 non-existent schools.
More than five
decades after India's independence and one and a
half decades after reforms, the Indian economy has
such inadequate infrastructure that the
monsoon-dependence of the agricultural sector has
almost remained the same. As of now, Rs500 billion
worth of agricultural produce in India is wasted
because of inadequate infrastructure. It is a
criminal waste in a country where about 30% of the
population lives in poverty. Every monsoon failure
leads to a spate of suicides by Indian farmers who
are unable to withstand their worsening debt
burden.
Reforms, anyone?
Kunal Kumar Kundu is a senior
economic analyst with a leading foreign bank in
India.
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