Thursday, February 3, 2011


Poor still pay more than rich for the same services!

When it comes to poverty, there are certain facts that are universal. First, poorest of nations also house the wealthiest of people. Second, it is the poor who make the rich richer. And India is no exception. It is difficult to doubt the fact that there exists a yawning disparity between the rich and the poor. The divide is so huge that it is ubiquitously visible across the nation. Without an iota of doubt, it can be stated that over half of India's population is packed at the bottom-most of the pyramid and continue to struggle in order to earn the basic necessities for a decent living. Thus, they spend their whole life with an unending wish of upgrading themselves to a relatively better living!

Their dreams had remained unfulfilled because, India's 'super' High Net Worth Individuals (HNWIs) - around 1,20,000 in number – who comprise of 0.01 per cent of the total population still own a staggering 30 per cent of India's GNI. The rest of 99.99 percent population manages with the balance 70 percent. And if we take out the top 10 percent of our population, then there is hardly anything left for the remaining 90 percent! But what is intriguing is that people who are at the top of the pile, pay the least for basic amenities. It is the poor who end up paying more! And mind you, it remains to be the truth even after hundreds of pro-poor policies! Poor pay more for water than the rich. Since the poor, both urban and rural, have almost negligible access to portable water, they either lose out on the opportunity cost of time they spend to fetch water or they end up paying more to water mafias. In Delhi, for example, the water contractor charges Rs.500 a month for water supply compared to an affluent in another area who pays merely Rs.100 per month.

Similarly, in Mumbai, the slum dwellers pay 1.2 times more for rice, 10 times for medicine and 3.5 times for water than the residents who are better-off . If one goes by fuel consumption, the rich pay relatively less (for diesel and petrol) than the poor. If a rich, earning 10 times than a poor, pays the same price for diesel for his SUV, then the poor has to compromise on many needs to fill the tank of his irrigation motor or the genset. The same is the case with LPG cylinders. According to recent media reports, kerosene is officially sold in authorised ration shops at Rs.12.37 a litre, but it is actually sold for more than Rs.25 across five lakh private retail shops that has a consumer base of 16 crore poor households.

Moving further, when it comes to access to credit, a rich is always more credit worthy by banking norms and thus gets a loan at favourable terms. A poor, sans credibility, ends up paying much higher interest to private money lenders. It’s easier to get a loan for a luxury vehicle than a loan to hedge against agriculture or a petty enterprise. And mind you, this is in spite of the fact that the default rate in case of conventional loans are higher than loans given to poor in the form of micro finance. As per study, one-third of BPL people pay Rs.9,000 million as bribes annually for availing basic services viz. PDS, education, electricity, water, NREGA, land records and registration, banking and police and judicial services.

The biggest irony is that despite huge subsidies meant for poor, most of them do not reach. It is high time that we dump this sham done in the name of poor. At least, all the initiatives at the policy level should be stopped, which are making the poor aid the rich! And the worst is, the poor are being made to pay for the rich!


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