Employment Guarantee Scheme (EGS)

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Highly infl uential in thinking about employment creation programs in India

was the initial experience in Maharashtra. An early food-for-work program

implemented in the western Indian state of Maharashtra was widely regarded

as very successful in its initial years, and indeed was the inspiration for

later national efforts. The Employment Guarantee Scheme (EGS) started

on a pilot basis in 1965 in one district (Sangli) and a modifi ed EGS was

implemented across the state in 1972, following one of the most severe

droughts in the region in recent history. The scheme was soon suspended

for two years, replaced by central government schemes, but in 1974 the

state government decided to set up a permanent scheme using only state

resources, leading to resumption of the EGS. It was provided a statutory

basis with the enactment of the Maharashtra Employment Guarantee Act

of 1977. The scheme is fi nanced by urban taxes (on professionals and motor

vehicles) with matching grants from the state government.

The EGS is unique for several reasons, including its age, being one of the

oldest such schemes in the developing world, its large scale of operations at

inception, and the fact that it guarantees employment (rather than merely

assuring it). The EGS provides a guarantee of employment to all adults

above 18 years of age who are willing to do unskilled manual labor on

a piece-rate basis. Its primary objective is thus creation of employment

opportunities with the secondary objective of creating rural assets to

provide drought proofi ng, soil management and conservation. Starting

from 4.5 million person days of jobs created in its fi rst year, the EGS was

generating more than 100 million person days of employment by the early

1980s (190 million in 1986), before declining to 80–90 million person days

after 1989 (Dev, 1995). Cumulatively, the scheme spent Rs 27 billion up to

1991 to create about 2.3 billion person days of employment in the state. Not

surprisingly, the EGS is one of the most analyzed public-works programs

in the literature, and received high marks in its initial years from most

evaluations (Gaiha, 1996; Datt and Ravallion, 1994; and Dev, 1995).

There was a sharp decline in the coverage of the EGS after 1988 following

a virtual doubling of the wage rates in May 1988. Prior to that, EGS wage

rates were less than market wages but this was reversed with the wage

hike. According to some studies, this resulted in rationing of employment

opportunities, leading to exclusion of eligible participants (and thus eroding

the nature of the ‘guarantee’). In more recent years, observers have also

noted a deterioration in other elements that translate the guarantee into

actual delivery of the EGS benefi ts, including informal program guidelines,

extensive monitoring, unscheduled fi eld visits, vigilance tours by offi cials

at various levels, and the advisory and supervisory roles of unoffi cial

statutory committees. Although targeting errors of undercoverage (type

one errors) are not considered a source of major concern, the declining

coverage, quality and maintenance of rural assets created and problems

of governance are noteworthy, given the exemplary history of the EGS.

Figure 2.3 SGRY – scheme history

For example, a recent review found wage employment generated through

food-for-work continued to be important, contributing a signifi cant 40

to 45 per cent of total family income of benefi ciaries, but the work was

not organized in the lean season, and bribes had to be paid to obtain the

employment (PDI, 2000). Even more recently, a petition has been fi led in

the Bombay High Court accusing the state government of diverting money

from the Employment Guarantee Fund of the EGS into its general-purpose

budget (Bavadam, 2003). Ironically, the legal action has been brought by

a former member of the Planning Commission who is also a member of

the committee set up by the state government to review the Maharashtra

Employment Guarantee Act 1977. The state government believes the trend

decline in coverage of the EGS refl ects a declining need for the scheme in

view of improvements in rural economic conditions.