New Delhi: The rural development ministry has decided to return to cash payments for its flagship job guarantee plan in 60 Maoist-violence-affected districts in India to overcome the lack of banking and post office infrastructure in these areas.
The decision to pay cash was prompted by the fact that even business correspondents, or intermediaries of banks, have failed to reach these areas because of safety issues, Union rural development minister Jairam Ramesh said on Monday while addressing a day-long workshop on the scheme.
“There is right now simply no alternative to making cash payments especially in Naxal-affected districts,” Ramesh said. “In Bijapur in Chhattisgarh, Rs 40 lakh has been disbursed as wages in cash to around 4,000 workers in the last couple of months.”
The return to cash payments after scrapping it in favour of payments through banks and post offices in 2008 marks a recognition that banking services have failed to reach many rural areas, experts say. The Centre had made it mandatory for all Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) payments to be delivered through banks and post offices to prevent misuse of funds. The job plan promises 100 days of work to each rural household a year and has a budget allocation of Rs 40,000 crore this fiscal.
“The ministry is making a pragmatic assessment of the banking deficit. This way, at least people would get wages,” said Yamini Aiyar, director of the New Delhi-based Accountability Initiative. “This step could become retrograde if it becomes static. Simultaneously, steps have to be taken to improve banking penetration and build greater capacity in banks.”
Ramesh said some banks, especially State Bank of India, were working towards providing banking services over mobile phones to reach under-penetrated areas.
Earlier this year, in order to ensure quicker delivery of wages, the Centre had decided to pay Rs 80 a year for three years to state-owned banks for each account they have opened for a beneficiary of the rural job guarantee scheme.
Public sector lenders have opened around 11.4 million such accounts out of a total of more than 23 million bank accounts.
“Using only cash payments is not a retrograde step as the government needs to use any route available to ensure funds reach the workers,” said Anirban Roy, founder member and managing director of SEED Financial Services, a business correspondent. “There are certain practical problems because of which accessing these areas is difficult. One needs to set up manpower required to undertake this activity. Another issue is access. There are safety issues also involved—both for cash and the personnel deployed.”
Ramesh also indicated the need to rethink certain provisions of the law, including enhancing the 6% limit on administrative costs and a 60:40 spending ratio on labour and material.
Remya Nair contributed to this story.