However, estimating the scale of poverty with respect to a fixed BPL is relevant
for many purposes…
N. C. Saxena
Planning Commission makes estimates of the percentage of population below poverty line in states and for the country as a whole. This is being done since the Alagh Committee submitted its report in 1979, followed later by the Lakdawala Committee, which submitted its report in 1993. The original poverty line following Alagh Committee was fixed at Rs 1.50/Rs 2.00 per capita per day as the value of a consumption basket that provided the desired number of calories per capita per day for rural and urban areas separately at 1973-74 prices. The poverty line has been indexed upwards in subsequent years to reflect the impact of inflation in accordance with the recommendations of the Lakdawala Committee. These poverty lines are applied to expenditure class wise population distribution as obtained from the large sample NSSO Consumption Expenditure Surveys.
Estimating the scale of poverty with respect to a fixed poverty line is relevant for many purposes, including judging whether the development process is helping the poor. It also helps to assess which states are doing better in poverty eradication. If definition of poverty is changed every two to three years then comparability of whether number of poor people is declining or not will be lost. However, by its very nature any cut-off would be arbitrary. The present poverty line measures extreme poverty or destitution, as a very large number of households above the line also deserve government attention and subsidies.
The percentage of poor in 1993-94 was 37.3 percent in rural areas and 32.4 percent in urban areas, yielding a combined estimate of 36 percent for the country as a whole. The poverty percentage is not uniform across States. Poorer states have a much higher percentage of poor as compared to the richer states.
The quinquennial large sample NSS survey for the year 2004-05 was comparable to the 1993-94 survey, and the Lakdawala method applied to this survey yielded a poverty estimate of 27.5 percent. However, by the time these estimates became available, the methodology for estimation of poverty was already under review, as the Planning Commission had appointed an Expert Committee under Prof. Suresh Tendulkar to revisit the appropriateness of the poverty line. The Tendulkar Committee concluded that whereas the urban poverty line being used was reasonable, the manner of indexing the rural poverty line recommended by the Lakdawala Committee underestimated the actual expenditure by the rural poor on education and health, and therefore needs to be revised upwards from 28 to 42 percent approximately.
As per Tendulkar Committee estimates, the poverty line for urban areas is fixed at a consumption expenditure of Rs. 579 per capita per month, and for rural areas at Rs. 447 per capita per month at 2004-05 prices. On a thirty day basis this amounts to per capita consumption of Rs 20 per day for urban areas and a per capita consumption of Rs 15 per day for rural areas at 2004-05 prices. These amounts at June 2011 price are updated to Rs 32 and 26 respectively to reflect the effect of price rise since 2004-05.
The Tendulkar Committee recommendations, applied to 2004-05 NSS data, yielded a higher estimate of poverty ratio of 37.2 percent country as a whole, comprising of 25.7 percent in urban areas and 41.8 percent in rural areas. This estimate has been accepted by the Planning Commission for 2004-05. According to a recent press report, the overall number of poor households declined from 37.2% in 2004-05 to around 32% in 2009-10. This would still mean that there are about 40 crore people living as destitutes below the starvation or hunger line of Rs 32/26 per day, and this number is more than the total population of India when we became independent. The number of the poor in absolute terms too has gone up from 30 crores to 40 crores since the era of liberalisation began.
It is unfortunate that the Planning Commission, while describing the above facts in its affidavit to the Supreme Court, used a language that was highly insensitive to the poor peoples' concerns. In para 5 it said that Rs 32/26 per capita for urban/rural areas was adequate to meet expenditure on food, health, and education, and will provide the desired calories. It gave an impression that people at that level are happy with their status, and the people above this line were quite well-off and deserved no government subsidy.
Planning Commission has not fixed a uniform cap of 37.2 percent for every State. In fact the estimate of poverty differs from State to State from a high of 57 percent for Orissa to 9 per cent for Nagaland and 13 percent for Delhi. However, the percentage fixed for each State does amount to a de-facto cap for that State as far as central allocation in some schemes and subsidies are concerned, such as Old Age Pension, Total Sanitation Campaign, PDS, etc.
It should be kept in mind that out of about 200 centrally sponsored schemes, only about 5 or 6 are linked to the BPL categorization. The Centre's case is that in any system of entitlement which is not universal, there will be a cap. The key issue is whether the cap is fixed in a rational manner. It must be noted in this context that some States have issued more BPL cards than warranted by Planning Commission poverty estimates, and that the Central government has not placed any restrictions to this so long as the concerned State makes its own provision for the additional subsidy and grain requirement. Thus, in effect there is a ceiling on the resources only in a few schemes that a State can claim from the Centre on this account. It should also be noted that such use of official poverty numbers as a parameter to determine devolution of resources from Centre to States has not been used in other contexts, by both the Planning Commission and the Finance Commissions, which devolve funds on a formula which is independent of the poverty line. Many centrally sponsored schemes, such as NREGA, ICDS, MDM, NRHM, SSA, etc are universal, whereas some others such as IAY use a more complex formula of deciding district allocation on the basis of SC/ST population and agricultural population, whereas for individual selection 25 percent weightage is given to the BPL status and 75 percent to homelessness.
The most important scheme linking benefits with the BPL status is the public distribution system, for which the Department of Food & Public Distribution has been following the poverty head count ratios of 1993-94. Grain is allocated to the states based on this number plus ten percent to account for the transient poor. In addition, some states such as Tamil Nadu, Andhra, Delhi, the NE states also received quota for the APL, which was not given to the poorer states on the ground that they did not lift it in the past when the market price was low. This policy favours the well-off states and punishes the poorer states.
The new Food Security Bill also uses the same formula as before of BPL plus ten percent (called priority group) for deciding the state-wise quota. The observation of the Deputy Chairman in the press conference that the BPL concept has been given up for PDS is factually not correct. Thus if for Orissa the BPL cutoff line is 57.2 percent, adding ten percent to it will show that 63 percent would get subsidized foodgrain under the priority category. In addition perhaps another 20 percent people will get only 3 kg per month under the general category at a much higher price. Even today in addition to BPL (plus ten percent), many privileged states get APL quota at the subsidized rates. What would be the fate of these states is not known. Thus the priority group of the new Bill is very much comparable with the existing system for Antyodaya and BPL category, as both use the cutoff line of BPL plus ten percent.
Similarly the joint statement issued a few days back that the 'present state-wise poverty estimates using the Planning Commission methodology will not be used to impose any ceilings on the number of households to be included in different government programmes and schemes' is confusing. The reality is schemes such as the Total Sanitation Campaign and Old Age Pension will continue to be linked with the present BPL line of 37 per cent. The Socio Economic and Caste Census (SECC) being done now will only determine who these people are, but the number will continue to be restricted to the state-wise cap. Any change in the formula will require Cabinet sanction. The impression generated in the press that all schemes will become universal after the SECC results is totally misconceived.
(Saxena is Member of the National Advisory Council) As told to Sangita Jha