The Hindu Business Line : Creating sustainable employment models

ONE of the few well-rounded employment guarantee models I have seen is the Panchakki water mill of Mughal vintage in Aurangabad. The water mill gave employment to a few families for a long time and delivered marketable value that society needed, which sustained both the asset and the people dependent on it.

One is not sure how the proposed Employment Guarantee Scheme (EGS) design breaks the cycle of `poor demand leading to poor employment leading to poor income leading back to poor demand' in a more sustainable way than the other poverty alleviation programmes. It is for this reason one feels that the recent clone is also going to fail, like many of its predecessors.

It is more important that we create sustainable employment opportunities based on marketable goods and services rather than ones based on doles and external infusion. So long as the infusion continues it will provide some relief; but when it ceases, the EGS ceases — hardly worth what the beneficiaries are looking for.

The schemes should aim at creating assets that provide services which are the priority requirement of the villages or their target markets. Most of the current schemes relate to road construction, irrigation projects , and the like. Such schemes create assets whose ownership is public in nature (and hence nobody cares), and generate value which is not amenable to being priced and hence vanish over a period.

Most of them are the `dig a hole, fill it up' Keynesian variety plans which may provide temporary solutions to get out of recession but are not good enough as a developmental effort.

Let us look at some alternatives. Most of our villages lack public transport. With 200 families on an average, it is difficult to sustain round-the-clock bus services. If, instead, one villager is given an autorickshaw, it will provide employment to at least one family.

The vehicle would require little maintenance and would be available to the villagers whenever they want. It is right-sized and can hence be kept going, even with the lower revenues. It can further be used for twin purposes — to transport people or goods. Shorn of all the taxes, advertising, and other marketing expenses, it should be possible to price such autorickshaws at Rs 40,000-60,000. The government can finance this under any of its various schemes and recover the capital from the `owners' depending on the revenue generated, with incentives for accelerated repayments.

One could rope in the private sector in administering the scheme — autorickshaw manufacturers would be interested since it gives them access to a large market — six lakh (the number of villages) units every seven years (assumed economic life of one vehicle) is not a small number. Similar assets can be created in solar power generators, bio-gas plants, large TV sets (surrogate mini-theatres), communication equipment, etc.

If it is economically viable why would the people have not done it themselves already, some might ask. The current price of some of these assets is a deterrent. But the government could make them viable options by cutting the channel margins, taxes and duties, stocking costs and promotion. The government could also step in with financial aid to overcome the initial fear of insufficient capital.

A proviso could be that the asset would revert to the government (or the funding agency) if repayments are not commensurate with the revenues generated and the person concerned can be barred from participating in further schemes for a specified period. A recent article in this paper illustrated how for an investment of Rs 3 lakh, bio-mass is converted to electricity of an annual value of Rs 88,000 — a sum that can employ three-four people including may be a wood-cutter, the fuel-wood grower and the machine runners.

Two thousand kWh for a village is a sustainable consumption. If one such plant were to be installed in each of the villages in India it would cost Rs 19,000 crore (for six lakh villages) — a sum less than even one year's EGS expenditure. And much of this can come out of the electricity subsidy given to our villages.

Such models have the advantage of private ownership and the maintenance care that comes with it. These assets can be used elsewhere if they do not find enough use in the particular village, unlike ponds, roads, and irrigation systems which cannot be transplanted elsewhere, should they fail in creating commensurate economic value. Recoveries can be continuously re-cycled and the prog- rammes can run over a longer time.

Agricultural output is not going to fall because 5-10 families out of the 200 get out of their `disguised employment' status. What the others would have paid these for their employment will be paid for the new services they enjoy. Thus it creates additional value for the village.

In such close-loop models, the multiplier effect will more likely be played out within the village rather than outside.

(The author works for a large chemical manufacturer-exporter. The views are personal.)

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