'Pensions not alms': A case for Centre to raise payout to ₹500 a month

The government should raise social security entitlements, specifically the meagre ₹200 a month pension given to the old and the disabled and ₹300 a month to widows.

The maternity benefit should also be raised and the restriction on the number of eligible children should be removed, Jean Dreze, visiting professor of economics at Ranchi University and the driver of social security legislations under the Manmohan Singh government told The Federal in a Zoom interview.

The payout under the National Old Age Pension Scheme (NOAPS) has stagnated at ₹200 a month since 2006. To continue with the same amount when there has been considerable erosion in the purchasing power of the rupee smacks of tokenism. The maternity benefit of ₹6,000 per child was part of the National Food Security Act (NFSA) of 2013. But it was not acted upon till 2017 when the amount was “illegally” reduced to ₹5,000 and limited to one child per woman, Dreze said. “India does not have a one-child policy,” so why the restriction, he asked.

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Need to hike NOAPS, widow pension, maternity benefits

Dreze is among 51 professors, editors and research scholars who wrote to the Finance Minister on December 5, demanding an increase in NOAPS to at least ₹500 a month. This would cost ₹7,560 crore based on the current coverage of 2.1 crore pensioners, they said. Raising widow pensions to at least ₹500 a month would cost ₹1,560 crore. The maternity benefit of ₹6,000 per woman per live birth would cost ₹8,000 crore a year, assuming a birth rate of 19 per thousand, 90 per cent coverage and 60 per cent contribution by the Centre. Similar requests made to Finance Minster Arun Jaitely in 2017 and 2018 but were ignored, the letter said.

Dreze objected to the government merging entitlements under the Pradhan Mantra Garib Kalyan Anna Yojana (PMGKAY) with those of the National Food Security Act (NFSA) from this month. In the wake of the COVID-19 pandemic, the government gave bonus
rations of 5 kg/month free of cost to NFSA beneficiaries from April 2020. This was in addition to their entitlements of 5 kg/month of wheat, rice or millets at ₹2, ₹3 and ₹1 per kg respectively. The merged scheme, also called PMGKAY gives the NFSA grain entitlements of 5 kg/month free of cost for a year but has discontinued bonus rations.

In Dreze’s view, giving the grains free will not make a material difference to the beneficiaries as they will save ₹10, ₹15 or ₹5 a month depending on the opted grains. But it would disrupt the Public Distribution System (PDS) as, in states like Jharkhand, PDS dealers’ commissions are adjusted against the amounts that consumers pay. Instituting a new system of dealer payments would take time. The discontinuation of bonus rations abruptly when the poor are grappling with the after-effects of the COVID-19 pandemic is bad policy, he said.

Also read: Free food distribution reduced income inequality in many states: Report

Dreze said the government would save more than ₹1.5 lakh crore by merging NFSA entitlements with those of PMGKAY. The savings should be used to consolidate social assistance entitlements and also to expand the primary education and healthcare programmes. He admitted that bonus rations under the erstwhile PMGKAY could not have continued indefinitely as foodgrain stocks were depleting and the wheat and rice harvests last year were rather poor.  But they could have been phased out.

Under Prime Minister Manmohan Singh’s two terms, India laid the foundations of a social assistance programme that was going to be perhaps unique among developing countries. The rights-based approach to employment (rural employment guarantee scheme or MNREGA), information (Right to Information), forest rights (Forest Rights Act) and education is now being replaced. People are now regarded as ‘labharthis’ or beneficiaries. When people have rights and know their entitlements, they can demand them. This has resulted in improvement of the efficiency of PDS. Leakages and corruption, which in states like Jharkhand (where Dreze teaches) has reduced a lot. Another difference under this government is the emphasis on contributory schemes like Atal Pension Yojana, but this is not of much use to those who have little income, Dreze said.

Is a sunset clause necessary?

Should entitlements under NFSA have a sunset clause? The Act entitles 75 per cent of rural folk and 50 per cent of urban Indians to 5 kg of wheat, rice or millets per month. Shouldn’t the share of eligible people decrease with a rise in income levels? Dreze said this was built into the scheme – as India urbanised more and more people would be filtered out. But demonetisation, COVID-19 and low growth rates were reducing poverty levels at a decreasing rate, he said.

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Dreze was not in favour of raising the issue price of foodgrain entitlements under NFSA, when free rations stopped. At ₹2, ₹3 and ₹1 for wheat, rice and millets before 2023, income transfers were being achieved at a low transaction cost. If the issue price was raised, achieving the same level of income transfers would need more foodgrains to be given, and the transaction costs of procuring the grains, securely storing them and moving them to consumers would increase.

‘Solution lies in Optional Public Service’

The professor and social activist who has taught at the London and Delhi Schools of Economics and authored books with Nobel Laureates Amartya Sen and Angus Deaton, proposed Healthcare as an Optional Public Service or HOPS as a replacement for India highly privatised healthcare system and high out-of-pocket expenses. Under HOPS, everyone would have access to free public healthcare of a certain minimum standard and people who could afford it could opt for private healthcare.

Also read: Centre, 3 states spent more on pension than salary, wages in FY20: CAG report

Dreze cited various reasons why India may not be able to implement UK’s National Health Service, not the least because when NHS was created private health practitioners were integrated into it. Dreze was not sure that India’s vast and entrenched private healthcare system would allow this. But he said states could individually make quality healthcare in the public system a right and when aggregated over time, India could have a system that measured up to the NHS.