UIDAI Sudhir Aggarwal Compendium_of_Papers_2009-10

THINKERS&WRITERSFORUM/CompendiumofPapers2009-10
1
Compendium of Papers
2009-10
Skoch Development Foundation
Gurgaon, Haryana

2
Published 2010
By
Skoch Development Foundation
(a Section 25, Not-for-Profit organization
under the Companies Act, 1956)
A 222, Sushant Lok, Phase I
Gurgaon 122001, Haryana
India
e-mail: info@skoch.org
web: www.skoch.org
© 2010. Copyright: Skoch Development Foundation
ALL RIGHTS RESERVED
No part of this compendium shall be reproduced, stored in
a retrieval system, or transmitted by any means, electronic,
mechanical, photocopying, recording, or otherwise, without
the prior written permission of the copyright holder(s) and /or
publishers.
The views expressed by authors are their own and not necessarily
shared by the publication, its editorial team or the organization.

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Compendium of Papers
2009-10

4
Technology
1. Money Laundering: An Insight into The Modus 2-10
Operandi with Case Studies
Arvind Giriraj and Prashant Kumar Mishra
2. Making India a solar energy economy - 2-10
Prospects & Challenges
Ravi Prakash
Governance
3. Dynamic changes during recent elections in 2-10
Urban Citizen of Andhra Pradesh
Kasturi Srinivasa Vijaya Sekhar and Dr R K Bagga
4. Srishti - A GIS Framework for Grass Root /2-10
Level Planning
G P Singh
5. Social Security for Urban Poor /2-10
JatinderSingh
6. E-governance, Social Networks and Public Policy /2-10
D C Mishra
7. City-wide Poverty Reduction Strategy Approach /2-10
ParamitaDattaDey
8. E-Governance - Efficiency and Challenges in India /2-10
HemantMistry
9. ICT to enhance the adaptive capacity of /2-10
the community to water affliction
Sakshi Saini
10. Technology enabled Super-Ecosystem for /2-10
Inclusive Growth: A super-ecosystem to look
at inclusion in totality
SrivalsanPonnachathandSubhroMukherjee
11. Good Governance and Employment /2-10
Generation through NREGA
Dipjoy Sen Roy
T A B L E O F C O N T E N T

5
Disaster Management
& Security
12. Battling Disasters through Partnering 2-10
Pawan Desai
13. Information Security Threats: Implications for 2-10
National Security
Dinesh Pillai
14. Information Security using Genetic Algorithm 2-10
and Chaos
Anil Kumar and M K Ghose
Financial Inclusion
15. Integration of Financial Markets of India: 2-10
An Empirical analysis of Post Liberalization Period
Gargi Sanati
16. Technology options for financial inclusion 2-10
K G Karmakar and N P Mohapatra
17. Issues and Challenges of BC/BFs in 2-10
Financial Inclusion
K G Karmakar and N P Mohapatra
18. Financial Inclusion through Financial revitalization 2-10
Bijay Kumar Swain
19. Reconciling Accelerated Growth with Inclusive 2-10
Growth through Panchayati Raj
NupurTiwari
Digital Inclusion
20. Universal Citizen Identity 2-10
David Gung
21. Digital Inclusion at Grassroots Level for 2-10
Achieving MDG
L R Yadav and R S Singh
22. Social Security for the Informal Sector 2-10
in India
Shrey Goyal and Varun Singh
23. CRM and Stakeholder Management 2-10
RamakrishnanRasipuram
24. Digital Divide in India: Measurement, 2-10
Determinants and Policy for Addressing the
Challenges in Bridging the Digital Divide
SumanjeetSingh
25. UID - Challenges, Applicability and opportunity 2-10
SudhirAggarwal
26. Scientific Infrastructure for Inclusive Growth 2-10
RajeshKumar
27. Assessment of Citizen Empowerment Under 2-10
E-Governance using Analytical Hierarchy Process
Case Study 'Jankari', RTI Call Centre In Bihar
S N Mukhopadhyay and Jayanta Chatterjee
Urban Development
28. Data Gaps in Urban Informality 2-10
Nithya Raman
29. Delhi Metro - Promoting Public Transportation 2-10
System for sustainable Urban Development
Surinder Pal Singh
30. Resource Mobilisation for Urban Infrastructure 2-10
Development: Instruments and their Potential
RamakrishnaNallathiga
31. Urban renewal and infrastructure - 2-10
Spotlight on Housing for the Urban Poor
Jatinder Singh
32. Fiscal Decentralization and Resource 2-10
Mobilization for Urban Infrastructure
K K Pandey

6
Money
Laundering
An Insight Into The Modus Operandi With Case Studies
Prashant Kumar Mishra
IV Year BA LLB Hons.
Arvind Giriraj
IV Year BA LLB Hons.
Introduction
Money Laundering refers to the conversion or "Laundering" of money which is illegally obtained,
so as to make it appear to originate from a legitimate source. Money Laundering is being
employed by launderers worldwide to conceal criminal activity associated with it such as drug /
arms trafficking, terrorism and extortion. But in simple terms it is the Conversion of Black money
into white money.
Money laundering is the criminal practice of filtering ill-gotten gains or “dirty” money through a
series of transactions, so that the funds are “cleaned” to look like proceeds from legal activities.
Money laundering is driven by criminal activities and conceals the true source, ownership, or use
of funds. The International Monetary Fund has stated that the aggregate size of money laundering
in the world could be somewhere between 2 and 5 percent of the world’s gross domestic product.
Money Laundering has a close nexus with organised crime. Money Launderers amass enormous
profits through drug trafficking, international frauds, arms dealing etc. Cash transactions are
predominantly used for Money Laundering as they facilitate the concealment of the true ownership
and origin of money. Criminal activities such as drug trafficking acquire an air of anonymity
through cash transactions.
The most common types of criminals who need to launder money are drug traffickers, embezzlers,
corrupt politicians and public officials, mobsters, terrorists and con artists. Drug traffickers are in
serious need of good laundering systems because they deal almost exclusively in cash, which
causes all sorts of logistics problems. One important aspect of money laundering is the tendency
and need for perpetrators to operate cross border schemes for the purpose of concealment and/
or to take advantage of the uneven developments in the national anti money laundering regimes.
Banks and financial institutions are vulnerable from the Money Laundering point of view since
criminal proceeds can enter banks in the form of large cash deposits. Bank officials therefore
need to exercise constant vigilance in opening of accounts with large cash deposits and in
checking suspicious transactions.
TECHNOLOGY II MONEY LAUNDERING – An Insight Into The Modus Operandi With Case Studies

7
Methodological Phases:
The basic money laundering process has three steps:
1. Placement - At this stage, the launderer inserts the dirty money into a
legitimate financial institution. This is often in the form of cash bank
deposits. This is the riskiest stage of the laundering process because
large amounts of cash are pretty conspicuous, and banks are required to
report high-value transactions.
2. Layering - Layering involves sending the money through various
financial transactions to change its form and make it difficult to follow.
Layering may consist of several bank-to-bank transfers, wire transfers
between different accounts in different names in different countries,
making deposits and withdrawals to continually vary the amount of
money in the accounts, changing the money's currency, and purchasing
high-value items (boats, houses, cars, diamonds etc.) to change the form
of the money. This is the most complex step in any laundering scheme,
and it's all about making the original dirty money as hard to trace as
possible.
3. Integration - At the integration stage, the money re-enters the
mainstream economy in legitimate-looking form -- it appears to come
from a legal transaction. This may involve a final bank transfer into the
account of a local business in which the launderer is "investing" in
exchange for a cut of the profits. At this point, the criminal can use the
money without getting caught. It's very difficult to catch a launderer
during the integration stage if there is no documentation during the
previous stages.
Following are the various measures adopted all over the world for
money laundering, even though it is not exhaustive but it encompasses
some of the most widely used methods.
• Structuring deposits
This method is also known as smurfing. In this method large amount of
money is broken into smaller, less-suspicious amount.
• Overseas banks underground/ alternative banking
Money launderers often send money through various "offshore
accounts" in countries that have bank secrecy laws, meaning that for all
intents and purposes, these countries allow anonymous banking. A
complex scheme can involve hundreds of bank transfers to and from
offshore banks.
• Shell companies
These are fake companies that exist for no other reason than to launder
money. They take in dirty money as "payment" for supposed goods or
services but actually provide no goods or services; they simply create
the appearance of legitimate transactions through fake invoices and
balance sheets.
• Investing in legitimate business
Launderers sometimes place dirty money in otherwise legitimate
businesses to clean it. They may use large business like brokerage firms
or casinos that deal in so much money it's easy for the dirty stuff to
blend in, or they may use small, cash-intensive businesses like bars, car
washes, strip clubs or check-cashing stores.
It gives an overview as to how this menace has developed into
transnational business involving various sophisticated techniques
and procedures. The ill-effects of money laundering are unimaginable
and have been discussed in next section.
1. http://www.financialcrimeforum.com/public/ last accessed on 8th November, 2008.
2. http://www.amlcft.com/ last accessed on 5th November, 2008.
Historical Evolution
Efforts to launder money and finance terrorism
have been evolving rapidly in recent years in
response to heightened countermeasures. The
international community has witnessed the use
of increasingly sophisticated methods to move
illicit funds through financial systems across
the globe and has acknowledged the need for
improved multilateral cooperation to fight these
criminal activities.
‘Money laundering’ as an expression is one
of fairly recent origin. The original sighting
was in newspapers reporting the Watergate
scandal in the United States in 1973. The
expression first appeared in a judicial or legal
context in 1982 in America.
Money laundering as a crime only attracted
interest in the 1980s, essentially within a drug
trafficking context. It was from an increasing
awareness of the huge profits generated from
this criminal activity and a concern at the
massive drug abuse problem in western society
which created the impetus for governments to
act against the drug dealers by creating
legislation that would deprive them of their
illicit gains. The term "money laundering" is
said to originate from Mafia ownership of
Laundromats in the United States. Gangsters
there were earning huge sums in cash from
extortion, prostitution, gambling and bootleg
liquor. They needed to show a legitimate source
for the money1
.
As a 1993 UN Report noted: The basic
characteristics of the laundering of the
proceeds of crime, which to a large extent also
mark the operations of organised and
transnational crime, are its global nature, the
flexibility and adaptability of its operations, the
use of the latest technological means and
professional assistance, the ingenuity of its
operators and the vast resources at their
disposal.
In India money laundering is popularly
known as Hawala transactions. It gained
popularity during early 90’s when many of the
politicians were caught in its net. Hawala is an
alternative or parallel remittance system. The
Hawala Mechanism facilitated the conversion
of money from black into white. "Hawala" is an
Arabic word meaning the transfer of money or
information between two persons using a third
person2
. The system dates to the Arabic traders
as a means of avoiding robbery. It predates
western banking by several centuries.

8
4. UNDP, Corruption and Good Governance, Discussion Paper 3, p. 35 (2004).
5. Ibid.
6. Prakash Loungani and Paolo Mauro, Capital Flight from Russia (2000).
7. Objectives and Principles of Securities Regulation at http://newrisk.ifci.ch/144440.htm
Instances: Case Studies
Money laundering is the process that takes place every day in
every part of the world. Here are few instances when they were
unearthed and resulted in a great lesson for our policy makers.
RussianMoneyLaunderingScandal4
This scandal became public during the summer of 1999, with
media reports of $7 billion in suspect funds moving from two
Russian banks through a U.S. bank to thousands of bank
accounts throughout the world. Two Russian banks deposited
more than $7 billion in correspondent bank accounts at a New
York bank. After successfully gaining entry for these funds into
the U.S. banking system, the Russian banks transferred
amounts from their New York bank correspondent accounts to
commercial accounts at the bank that had been opened for
three shell corporations. In February 2000, guilty pleas were
submitted by a bank employee and spouse and the three
corporations for conspiracy to commit money laundering,
operating an unlawful banking and money transmitting
business in the United States.
OperationWire Cutter5
The U.S. Customs Service, in conjunction with the Drug
Enforcement Administration (DEA) and Colombian
Departamento Administrativo de Seguridad, arrested 37 people
in January 2002 as a result of a two-and-one-half-year
undercover investigation of Colombian peso brokers and their
money laundering organizations. These people are believed to
have laundered money for several Colombian narcotics cartels.
Laundered monies were subsequently withdrawn from banks in
Colombia in Colombian pesos. Investigators seized more than
$8 million in cash, 400 kilos of cocaine, 100 kilos of marijuana,
6.5 kilos of heroin, nine firearms, and six vehicles.
WireRemittanceCompany6
Both a wire remittance company and a depository institution
filed SARs outlining the movement of about $7 million in
money orders through the U.S. account of a foreign business.
The wire remittance company reported various persons
purchasing money orders at the maximum face value of $500 to
$1,000 and in sequential order. They received amounts ranging
from $5,000 to $11,000. The foreign business identified by the
wire remittance company also was identified as a secondary
beneficiary. The money orders cleared through a foreign bank’s
cash letter account at the U.S. depository institution.
The Indian cases involved that of Ketan parikh who brought
the stock market to fall and many Indian politicians who
received kickbacks for performing there executive functions
through Hawala channels. The Hawala Mechanism left virtually
no paper trail, which would attract investigations7
. The profits
generated from Hawala were surreptitiously invested in real
estate, gilt edged securities etc., to launder them. The list is
unending and there is dire need to control these forces.
Effects
Ill-effects of money laundering are seen all over the world
on almost all the sectors of life. More noticeable are
economic effects3
which are on a broader scale.
Developing countries often bear the brunt of modern
money laundering because the governments are still in
the process of establishing regulations for their newly
privatized financial sectors. This makes them a prime
target. In the 1990s, numerous banks in the developing
Baltic States ended up with huge, widely rumoured
deposits of dirty money. Bank patrons proceeded to
withdraw their own clean money for fear of losing it if the
banks came under investigation and lost their insurance.
The banks collapsed as a result.
Other major issues facing world economies include errors
in economic policy resulting from artificially inflated
financial sectors. Massive influxes of dirty cash into
particular areas of the economy that are desirable to
money launderers create false demand, and officials act
on this new demand by adjusting economic policy. When
the laundering process reaches a certain point or if law
enforcement officials start to show interest, all of that
money will suddenly disappear without any predictable
economic cause resulting in that financial sector to fall
apart. Laundered money is usually untaxed, meaning
the rest of us ultimately have to make up the loss in tax
revenue.
The negative economic effects of money laundering on
economic development are difficult to quantify. It is clear
that such activity damages the financial-sector institutions
that are critical to economic growth, reduces productivity
in the economy’s real sector by diverting resources and
encouraging crime and corruption, which slow economic
growth, and can distort the economy’s external sector –
international trade and capital flows – to the detriment of
long-term economic development. Money laundering also
facilitates crime and corruption within developing
economies, which is the antithesis of sustainable
economic growth. Money laundering reduces the cost of
doing business for the criminal element, thereby
increasing the level of crime.
Money laundering can also be associated with significant
distortions to a country’s imports and exports. On the
import side, criminal elements often use illicit proceeds
to purchase imported luxury goods, either with laundered
funds or as part of the process of laundering such funds.
Such imports do not generate domestic economic activity
or employment, and in some cases can artificially depress
domestic prices, thus reducing the profitability of domestic
enterprises.
3. Donato Masciandaro, Money Laundering: The Economics of Regulation, 7 European
Journal of Law and Economics 238, May 2005

9
Prevention
The combating of money laundering presupposes
the existence of capacity and resources at national
level. In India Prevention of Money-Laundering Act,
2002 has been passed which came into effect since
1st of July, 2005. As per Section 3 of the Act,
Offence of money-laundering covers those persons
or entities who directly or indirectly attempts to
indulge or knowingly assists or knowingly is a party
or is actually involved in any process or activity
connected with the proceeds of crime and projecting
it as untainted property, such person or entity shall
be guilty of offence of money-laundering.
Section 4 of the Act prescribes punishment for
money-laundering with rigorous imprisonment for a
term which shall not be less than three years but
which may extend to seven years and shall also be
liable to fine which may extend to five lakh rupees
and for the offences mentioned in paragraph 2 of
Part A of the Schedule, the punishment shall be up
to ten years.
Section 12 (1) prescribes the obligation on
Banking companies, financial institutions and
intermediaries (a) to maintain certain records
detailing the nature and value of the transaction
which may be prescribed, whether such transactions
comprise of a single transaction or a series of
transactions integrally connected to each other, and
where such series of transactions take place within a
month; 12 (b) to furnish information of transactions
referred to in clause (a) to the Director within such
time as may be prescribed and to (c) verify and
maintain the records of the identity of all its clients,
As per Section 12 (2), the records referred to in sub-
Section (1) as mentioned above, is required to be
maintained for a period of ten years from the date of
cessation of the transactions between the clients
and the banking company or financial institution or
intermediary, as the case may be.
An effective anti-money laundering program will
help minimize exposure to transaction, compliance,
and reputation risks. Such a program should
include account opening controls and the
monitoring and reporting of suspicious activity.
The Reserve Bank of India's extensive Anti-Money
Laundering (AML) guidelines has become
effective from March 2006. The AML norms such
as "Know Your Customer" emphasize that banks
must keep a record of their customers'
backgrounds in order to reduce and control the
risk of money laundering. The Money Laundering
Control Act of 1986 further defined money
laundering as a federal crime. The USA PATRIOT
Act of 2001 expanded the scope of prior laws to
more types of financial institutions.
Money Laundering is a serious threat to financial system of all countries
and it leads to destruction of the country’s sovereignty and character.
The combating of money laundering has assumed an urgent impetus at
both national and international levels as a result of the scale that money
laundering has begun to assume, especially with respect to the financing
of terrorist acts. The efforts being made to combat money laundering
are beginning to bear fruits in that it is now taking centre stage in all
jurisdictions. No one wants to be left behind mainly due to the
consequences of such a situation – those lagging behind might find it
difficult to transact and do business with the rest of the complying
world.
The negative economic effects of money laundering on economic
development are difficult to quantify, just as the extent of money
laundering itself is difficult to estimate. Nonetheless, it is clear from
available evidence that allowing money laundering activity to proceed
unchallenged is not an optimal economic-development policy because
it damages the financial institutions that are critical to economic growth,
reduces productivity in the economy’s real sector by diverting resources
and encouraging crime and corruption, and can distort the economy’s
international trade and capital flows to the detriment of long-term
economic development.
Developing countries’ strategies to establish offshore financial centres
as vehicles for economic development are also impaired by significant
money laundering activity through OFC channels. Effective anti-money-
laundering policies, on the other hand, reinforce a variety of other good
governance policies that help sustain economic development, particularly
through the strengthening of the financial sector. Despite the positive
developments, the criminals are constantly devising more elaborate
and evasive means to circumvent anti money laundering efforts.
We have to understand that it is problem not only for the government of
the country but for the people at large. Public awareness is necessary
as masses do not understand the problem itself. Our education system
should be able to inculcate the ideologies that our future generation
does not get involved in this process. There needs to be a vigilant
mechanism and our judiciary needs to punish these criminals early to
send out a message that money laundering is not tolerable to this
democratic society.
References
1. Nand C. Bardouille, "The Offshore Services Industry in the Caribbean: A Conceptual and Sub-Regional
Analysis," Economic Analysis and Policy (September 2001).
2. Mark P. Hampton, "Where Currents Meet: The Offshore Interface Between Corruption, Offshore Finance
Centres, and Economic Development," IDS Bulletin , vol. 27, no. 2 (1996)
3. IMF Staff Report on Nigeria, 2001 available at http://www.waado.org/NigerDelta/ Essays/Nigerian
Economy/IMFonNigerianEconomy.html
4. Pakistan moves on money laundering, BBC News, Nov. 6, 2001, at http://news.bbc.co.uk/hi/english/
business/newsid_1641000/1641138.stm
5. Prakash Loungani and Paolo Mauro, Capital Flight from Russia (2000).
6. UNDP, Corruption and Good Governance, Discussion Paper 3, p. 35 (2004).
7. Pranab Bardhan, Corruption and Development: a Review of Issues, University of California, Berkeley,
Journal of Economic Literature (September 2003).
8. Andrei Shleifer and Robert W. Vishny, "Corruption," Quarterly Journal of Economics, p. 600 (August 2002).
9. Donato Masciandaro, Money Laundering: The Economics of Regulation, 7 European Journal of Law and
Economics 238, May 2005.
10. Objectives and Principles of Securities Regulation at http://newrisk.ifci.ch/144440.htm
CONCLUSION

10
Making India a Solar
Energy Economy
Prospects & Challenges
Ravi Prakash
5th Year, B.A.LL.B.(Hons.),
Hidayatullah National Law University,
Raipur
Introduction
Renewable energy in India - an overview
The electrical and power sector in India has developed significantly over the 65 years of
Independence. As the socio-economic pattern of India kept continuously evolving and development
reached far off to the remotest village of it, in spite of achieving great strides in electricity sector1
,
access to power and reliability of power remains the major issues. Currently, India is ranked fifth
globally in installed power capacity with nearly 147.965 GW2
. The fossil fuel (mainly coal) based
power generation contributes to 76 GW of electricity while renewable comprises of 48.6 GW including
hydro- power and 12.6 GW without it3
. Howsoever, India's fast economic growth comes with a
growing demand for energy and it is also predicted that as it propels the path of socio-economic
reforms, it will face an acute shortage of power until & unless total generation capacity is increased
proportionately. The impact will be most severe on rural masses4
. There would be a desperate need
for some miraculous energy sources for remote village house -holds.
The challenges & problems are manifold (energy security being one) before an emerging economy
like India which has millions of it populace below poverty line. A country which faces crisis of
energy security and at the same time cannot refrain from contributing positively in averring the
impact of climate change is left with no other solution than to switch over to renewable energy
production. India has been endowed with a vast pool of renewable energy sources such as hydro,
solar, wind, bio-mass etc. At presently renewable energy contributes about 9% (12.6 GW) of total
installed electricity capacity in India5
. The result achieved in the renewable energy sector during 10th
five year plan (2002-07) was positive and it provided the regulatory authorities with the optimism to
initiate major reforms in renewable energy power sector6
. Even the current five year plan outlines a
target of generating additional 14-20 GW of electricity from renewable source of energy7
. It identifies
solar power generation as one of the means to achieve it. If the trend during tenth five year plan (2002-
07)wastopromote&generateelectricityfromwindpowerplantsthenperhapscurrentfiveyear(2007-
12) plan will be known for generation of electricity from solar power plants. The advantages of
renewable energy are expected to contribute significantly in the developmental process.
India's recent success in clean energy is just a beginning. The trends and analysis outlines in the
following pages provides a glimpse of exciting developments to come, and reveal that with
continued policy support, investment and technological innovation, India could become a global
leader in renewable energy. A sound legal and policy framework is essential to continue this
trend. These policies largely relates to financial, fiscal incentives or special directives aimed to
encourage/enforce utilities to buy renewable energy power, promotes companies to set up renewable
energy projects, equipment companies to manufacture renewable energy equipment or private
and government entities to undertake R&D relating to renewable energy.
Solar energy - the promising prospect
"The Central power plant, like much bulk electric transmission, will soon become a white elephant,
uneconomic to run, and difficult to sell. Such plants are likely to survive in significant number by
2030 in any market economy and would be replaced by more localised electricity generation."
- Amory Lovins, Int'l Energy Expert
TECHNOLOGY II Making India a Solar Energy Economy – Prospects & Challenges

11
The days will not be far off when power plants will shift from large,
remote centralised stations to rooftops, basements, and backyards
with no fuel cost characterised by quality & reliability. As human
civilisation witnesses a gradual shift towards harnessing cleaner form
of energy from various sources; the solar energy is going to play an
important role. Perhaps, it is the only energy which has absolutely no
fuel cost. To tap the infinite energy from the sun and transform as well
as to transmit it to each household, the Indian govt. has accelerated
promotion of the use of universally available solar energy through its
various policies and incentives.
India due to its geo-physical location receives solar energy equivalent
to nearly 5,000 trillion KWh/ year, which is far more than the total
energyconsumptionofthecountrytoday8
.Butitproducesaverynegligible
amount of solar energy i.e. a merely 0.2 percent compared to other
energy resources9
. The Govt. of India, in all its recent policies relating to
power sector has given due importance to harness the sun's energy in
various ways10
. Solar energy is harnessed through the available
technologies like Solar Photovoltaic (SPV), Solar Thermal (ST), and
Concentrating Solar Power (CSP). Some parts of India like western part
of Rajasthan (Thar desert) receive the required solar radiation for use of
Concentrating Solar Power (CSP) technology. It is estimated that a 60
km x 60 km of area can produce 1, 00,000 MW of power using CSP
technology. The advantages which distributed generation of solar energy
brings are unique. It provides easy access to power for tail-end users like
rural people; it avoids high transmission & distribution (T&D) costs,
provides reliable and quality power and is environmentally benign. It
also indicates that a decentralised power generation can perfectly
complement decentralised development and governance11
. Even national
electricity policy 2005 (NEP) envisages that in order to ensure better rural
electrification infrastructure and to operate and maintain supply system
forsecuringreliablepower;theresponsibilityofoperation&maintenance
and cost recovery could be discharged by utilities through appropriate
arrangements with panchayats, local authorities, NGOs and other
franchisees etc12
. So, the promotion of generation of solar energy can
significantly contribute in attaining the developmental agenda.
Such renewable energy power production potential in India can be easily
scaled up innovatively in an affordable and sustainable manner.
Howsoever, the prerequisite to success of any such massive plan is a
comprehensive legal/policy framework for the entire cycle of
development for each of these renewable energy resources.
Presently, solar energy is facing three fundamental challenges i.e.;
cost, its manufacturing procedure (R & D) and the land acquisition for
erecting solar power plants. Nevertheless, the Govt. (Central as well
as State) through various policy measures has recently attempted to
address these challenges. It is also estimated that once the scaling of
solar energy is done a greater access to the market will be facilitated13
and its cost will come at par with conventional source of energy. All
the policy measures focus on promotion of R&D in the respective
technology to enhance the efficiency and viability of the project. As
these technologies will be categorised as environmental sustainable
technologies (EST's); under the existing international legal framework,
the developed economies have an obligation to transfer technology14
.
The land acquisition policy has been always a controversial issue in
India15
, but, perhaps one of the viable solutions to it is the acquisition
through local bodies, panchayats & municipality. All the existing
policies provide for the acquisition of land by involving local bodies
and panchayats for the successful implementation of projects.
Indian electricity sector
(Legal & regulatory
framework)
The constitutional scheme essentially provides for a federal
structure of governance16
. Electricity is a subject matter of
concurrent list17
in the constitutional scheme which
essentially means that both Centre & State can legislate &
regulate the subject matter. As the delicate balance of power
in legislative field is tilted in favour of Centre rather than
federal units (states)18
, the central law gains a primacy over
state law in situation of conflict. According to article 254(1)
of the constitution, in case of conflict between laws made by
centre & state over the same subject matter, the state law
becomes void to the extent of repugnancy19
. Howsoever,
presently the most important legislation to regulate power
sector is Electricity Act, 2003 by central govt.
ElectricityAct,2003
The Electricity Act, 2003 is a major enactment which
regulates generation, transmission and distribution of
electricity in India. This law is well supplemented with a set
of by- laws, policies, codes, rules, and regulations covering
all aspects of power sector20
. The impact of such a sound
legal framework can be easily witnessed by analysing power
sector performance post-200321
. The Central law provided an
enabling framework to stimulate private investments for
capacity augmentation in a de-licensed regime22
, ushered
required competition in the power market23
, established
regulatory and monitoring agencies/ bodies24
and contained
features like open access25
, captive generation26
,
cogeneration27
etc. Various provisions of the Electricity Act,
2003 give a major thrust to the renewable energy sector &
put forth the need and priority to promote renewable energy
through its enabling provisions The relevant provisions for
this are as follows:
Under Sections 3(1) and 3(2), it has been stated that the
central govt. shall prepare and publish the National
Electricity Policy and National Tariff Policy, in
consultation with the state governments and authority for
development of the power system based on optimal
utilization of resources such as coal, natural gas, nuclear
substances or material, hydro and renewable sources of
energy.
The central govt. had notified the two policies viz. National
Electricity Policies- 2005 (NEP) & National Tariff Policy- 2006
(NTP) which lay down further policy framework for the
development and generation of renewable energy.
Section 4 states that the central govt. shall, after
consultation with the state governments, prepare and
notify a national policy, permitting stand-alone systems28
(including those based on renewable sources of energy
and other non-conventional sources of energy) for rural
areas.
In pursuance of the above mandate, the Central govt. had
formulated a policy known as Integrated Rural Electrification
Policy- 2006 (IREP).

12
Section 61, 61(h) and 61(i) states that the appropriate
commission shall specify the terms and conditions for the
determination of tariff, and such determination should be
guided by the following factors such as the promotion of
cogeneration and generation of electricity from renewable
sources of energy; and the National Electricity Policy and
Tariff Policy.
According to Section 86(1) and 86(1) (e); the SERC's
shall discharge the following functions in order to harness
a cost efficient renewable energy from various sources :-
(i) promote cogeneration and generation of electricity from
renewable sources of energy (ii) to providing suitable
measures for connectivity with the grid (iii) sale of
electricity to any person, (iv) purchase of electricity from
such sources, a percentage of the total consumption of
electricity in the area of a distribution license.
The Electricity Act, 2003 casts a significant duty upon the
concerned various authorities to provide a suitable
framework for the generation of power from renewable
sources of energy.
National electricity policy - 2005 (NEP)
The policy formulated by central govt. in pursuance of sec.
3 of the Electricity Act, 2003 aims at laying guidelines for
accelerated development of the power sector, providing
supply of electricity to all areas and protecting interests of
consumers and other stakeholders keeping in view
availability of energy resources, technology available to
exploit these resources, economics of generation using
different resources, and energy security issues.
Accessibility to electricity and availability of power by
2012 to all are the twin goal set out in the NEP29
. The policy
in order to meet its various objectives emphasises in
harnessing power from renewable sources of energy. It
postulates a decentralised distributed generation facility from
renewable sources of energy for establishing a reliable rural
electrification system30
. It also provides for the necessity &
importance of grid connected renewable energy31
. The policy
outlines following measures for the promotion & generation
of renewable energy:
To make efforts to reduce the capital cost of projects
based on non-conventional and renewable sources of energy
by promoting adequate competition within such projects and
promotional measures32
.
To make efforts for research, development,
demonstration and commercialization of non-conventional
energy systems which meets international standards,
specifications and performance parameters33
The spirit of sec. 86 of Electricity Act has been given a
new life in the policy by mandating following to the SERC34
:
:: To specify percentage of RPO (Renewable Energy
Purchase Obligation)
:: To determine applicable tariffs for renewable energy
power
:: Such purchase of power by distribution companies shall
be through competitive bidding process
:: To determine an appropriate differential in prices to
promote renewable energy technologies35
.
The cogeneration of electricity should be promoted to
encourage energy efficiency and grid stability. The SERC to
facilitate necessary arrangements between co-generator and
distribution licensee for purchase of such surplus power36
.
The policy strengthens the mandate of Electricity Act,
2003 regarding generation of power from various sources
effectively. The provision also mandate generation of power
based on stand-alone system37
.
National tariff policy - 2006 (NTP)
The NTP has been formulated by Central govt. in compliance
with sec. 3 of Electricity Act, 2003 and in continuation of
National Electricity Policy-2005. The NTP sets out objectives
like assured electricity to consumers at reasonable and
competitive rates, financial viability of the sector, promoting
transparency, consistency & predictability in regulatory
approaches across jurisdiction & encouraging competition38
.
The policy stipulates that the appropriate commission39
has
to determine preferential tariff for procurement of renewable
energy power by distribution licensees under renewable
purchase obligation (RPO) regime as envisaged under
section 86(1)(e) of Electricity Act, 2003.
(1) "..It will take some time before non-conventional
technologies can compete with conventional sources in
terms of cost of electricity. Therefore, procurement by
distribution companies shall be done at preferential tariffs
determined by the Appropriate Commission.
(2) Such procurement by Distribution Licensees for future
requirements shall be done, as far as possible, through
competitive bidding process under Section 63 of the Act
within suppliers offering energy from same type of non-
conventional sources. In the long-term, these
technologies would need to compete with other sources in
terms of full costs."
(3) The Central Commission should lay down guidelines
within three months for pricing non-firm power, especially
from non-conventional sources, to be followed in cases
where such procurement is not through competitive
bidding.
The various SERC had taken an active initiative (either
suo- motu or on received application by stakeholders) to
determine the tariff for electricity generated from solar power
according to the norms and principles set out in NTP.40
Integrated Rural Electrification Policy (IREP) as formulated
under mandate of sec. 4 & 6 of the Electricity Act, 2003
supplements the electricity generation from renewable
sources as envisaged in the above mentioned policies
appropriately.
OtherLegislations/Statutes
Setting up of solar power plant on a commercial basis and
increased grid- interactive energy will attract (directly/
indirectly) various other central or state statutes e.g. land
reforms, environmental legislations and tax regulations.
Perhaps this is one of the reasons why a majority of state
policies contain a mechanism of single window clearance41
.
As the financial incentives are granted and administered by
both centre & state respectively, various regulatory
authorities at both levels assume an important function.
Similarly, even to set up a large grid interactive solar power

13
plant under MNRE scheme require basic input such as land;
which remains an exclusively state subject.
Another set of legislations which is likely to cause more
hiccups are environmental legislations. Some state policy
proposes to use barren wasteland for the generation of solar
power, but by virtue of Supreme court ruling all such
wasteland falls within the definition of 'Forest'42
which
demands clearance under Forest Conservation Act, 1978.
Although, generation of solar energy is a zero-carbon
program which hardly has any adverse impact on climate
change and environment, the land policy (especially
agricultural land) will certainly affect and impact the future of
project in several states.43
The advantage with solar power
generation is that it neither causes air pollution, nor requires
any environmental impact assessment (EIA) as needed in
case of hydro power; neither does it cause noise pollution.
So, the energy promised by solar power plants generally
reflects a win- win situation for all stakeholders.
Why not a new renewable energy law
With all promising future of renewable energy potential in
India, a separate renewable energy law is expected to play
the role of a catalyst in the sector. It is important to note that
India is one of the few countries that pioneered the
development of renewable energy and initiated reforms at
institutional and policy framework in early 1990s. The
anomaly of the situation lies in the fact that the
administrative machinery at the centre as well as at the state
level for dealing with the activities of the renewable energy
sector has been in place for a fairly long period of time but no
concrete legislative policy exists. Moreover, there is a
specialized financial agency, the Indian Renewable Energy
Development Agency (IREDA)44
to cater the financial
requirements of the renewable energy sector in India. So,
perhaps a concrete, comprehensive legal framework on
renewable energy will stimulate growth and provide greater
opportunities in the area.
There is a need of a new comprehensive renewable energy
law because:
:: The use and prospect of renewable energy is not limited to
only electricity generation rather extends to important
sectors like transport.
:: Under the existing regulatory and legal framework there is a
divide between the electric power sector and other energy
sector (like coal, petroleum, Natural gas)45
:: To make renewable energy an engine of the common man's
growth requires a detailing of technological, developmental,
legal policy and institutional framework.
:: Renewable energy like bio-fuels cannot be regulated under
Electricity Act 2003.
National policies
The Central government's approach to renewable energy is
quite clear as it targets for at least 10% of grid-connected
power to come from renewable sources by 2012; which
indicates an increasing push for clean energy. In addition to
the Electricity Act, 2003 and policies outlined above, the
central government has provided several specific renewable
energy incentives. These are predominantly fiscal incentives,
including direct and indirect tax benefits, renewable energy
financing and guidelines for solar feed-in tariffs. For the
purpose of all these fiscal incentives as well as the
monitoring of projects, the ministry of new and renewable
energy along with IREDA remains the nodal agency.
Otherimportantincentivesbycentralgovt.for
promotionofrenewableenergy
Direct tax benefits
Accelerated depreciation: The Central govt. presently
allows for accelerated depreciation at the rate of 80-100% on
a written down value46
basis for various renewable energy
items under section 32 Rule 5 of the Income Tax Act, 1961.47
Tax Holiday: Under section 80 (I) (A) of the Income Tax
Act, the central govt. offers a 10 year tax holiday for all
infrastructure projects.48
Indirect tax benefits
Specified renewable energy devices (including Solar
Energy) and equipment can obtain excise duty exemptions or
concessions.
Equipment for solar photovoltaic and solar thermal and
power generation plant and machinery enjoy a reduction in
customs duty.
Foreign Direct Investments
Foreign investors can enter into a JV with an Indian
partner for financial and/or technical collaboration
Proposals for up to 100 per cent foreign equity
participation in a JV qualify for an automatic route49
Government encourages foreign investors to set up
projects on Build, Own and Operate (BOO) basis50
Apart from all these in direct benefits and incentives include:
Industrial clearances are not required for setting-up a
renewable energy industry
No clearance is required from central electricity authority
(CEA)51
for generation projects up to Rs 1 billion.
Soft loans are available through IREDA for renewable
energy equipment manufacturing
The project can also enjoy various incentives under
Semi-conductor Policy 2007, as silicon used in STP & SPV
power plants is a semiconductor.
Generation based incentives (GBI) by MNRE for
solar power plant (SPV & STP)
The MNRE has issued two separate GBI schemes (one for
STP and other for SPV) exclusively for promoting solar power
generation in the state. The guidelines propose to extend the
incentive to a cumulative capacity of 10 MWp in a state and
a total of 50 MWp across the country during 11th five year

14
plan. The scheme is available to only those solar power
project developers who install and commission their eligible
project before 31st December 2009. The essential criterions to
be satisfied by the eligible projects are:
Grid interactive solar power generation plants with a
minimum installed capacity of one MWp52
A project developer can set up a solar power project
(SPV or STP) up to a maximum capacity of 5 MWp in the
country.
Captive utilisation of power will not be eligible.
If a project developer avails the benefit under sec. 32,
rule 5 of the Income Tax Act, 1961 (claiming accelerated
depreciation), then is not eligible for GBI incentives.
According to the GBI guidelines, all eligible solar power
developer needs to furnish specific information in the
prescribed format to the IREDA.53
A project developer needs
to furnish detail information on technical and performance
features, technical specifications, requirement and
availability of land, title of the land, capital cost, estimated
life of the SPV/ STP power plant, quantum of electricity
expected to be generated and fed to the grid, proposed sale
price of electricity from PV power plant, duration of power
purchase agreement and power purchase rate(s),
arrangements for power evacuation and the time frame for
installation / commissioning of the grid PV power plant etc.54
The disbursement of incentive will begin only when a
minimum capacity of one MWp is commissioned and sold to
the grid. Howsoever, the GBI scheme excludes the provision
of third party sale, banking and wheeling of power while
availing it.
Feed-in tariffs for solar power
The GBI guidelines have provisions requiring IREDA to pay
eligible solar photovoltaic power (SPV) generators a
maximum of Rs. 12 per kWh providing they were
commissioned prior to 31 December 2009.55
Photovoltaic
projects commissioned after this date will receive a maximum
of Rs. 11.40 per kWh.56
Solar thermal projects (STP) will
receive a feed-in tariff of Rs. 10 per kWh.57
This incentive
amount would be in addition to the power purchase rate
negotiated with the purchaser of the power. The total amount
paid to the generator (power tariff plus incentive payment)
would be no more than Rs. 15 per kWh for solar photovoltaic
plants (SPV)59
or Rs. 13 per kWh for solar thermal plants
(STP)59
. This GBI scheme will be available to all qualified
developer for a maximum period of 10 years from the date of
approval provided that the utility continues to purchase
power from that grid interactive solar power project.
GBI schemes for SPV & STP power generation is a
welcome step towards creating a competitive regime among
member states and indicates some progress toward
harnessing solar power. Nevertheless, the scheme is
available to only a total capacity of 50 MW and that also to a
max. of 10 MW in one state. Due to technological deficiency,
the cost associated with such power makes it uneconomical;
hence such scheme only serves the superficial purpose.
Draftnationalsolarmissionundernationalactionplan
on climate change (NAPCC)
Govt. of India60
had formulated NAPCC61
in July 2008 to deal
with the global threat of climate change while maintaining a
sustainable economic growth. The NAPCC essentially
consists of eight diff. missions (National Solar Mission being
one); which the central govt. will be formulating and a
roadmap will be laid down to mitigate these adverse impact of
climate change without having any further negative impact
on economic development.62
As a consensus exists among
the nation states that increased global carbon emission had
led to present state; it becomes imperative for the nation
state to adopt cleaner and zero carbon mode of development.
A developing economy like India which produces a minimal
per capita CO2 emission, nevertheless has attempted to take
initiatives to become zero carbon economy. As solar energy
is characterised as zero carbon fuel of future, any such policy
will have a greater impact on it.
The Draft Mission envisions to make India's economic
development energy efficient & to move from fossil fuels to
non- fossil fuels by depending much upon solar power
generation. It also recognises the importance of
decentralised distribution of energy in rural India which is in
tune with the Electricity Act 200363
, National Electricity
Policy- 2005 (NEP)64
& Integrated Rural Electrification Policy-
2006 (IREP)65
. The draft mission identifies to bring down cost
of solar power generation to Rs. 4-5/Kwh by 2017-2020 taking
2009 as base year as one of its objectives. Although, the
policy is presently in draft version, howsoever, if
implemented, the next phase of revolution in power sector
will be brought by Solar Power Generation. The plan lays
down the following as main objectives:
Solar Power Generation
By 2020 - a capacity of 20,000 MW
By 2030 - a capacity of 1,00,000 MW
By 2050 - a capacity of 2,00,000 MW
1. Cost reduction to achieve grid tariff parity by 2020
2. Achieve parity with coal based thermal power
generation by 2030
3. 4-5 GW of installed Solar manufacturing capacity by
2017.
The draft proposes to create Solar Energy Authority of India
(SEAI) under MNRE as monitoring agency for
implementation of plan. The generation of solar power under
the plan is envisioned into three phases with a clear target to
be achieved.
Phase I (2009 - 12) - This phase will be marked with specific
challenges as it involves initial costs and making any plan
operational is always an exigent task. It has specific
objectives such as driving down cost, spurring domestic
manufacturing and making solar energy technologically &
economically viable. But, year 2009 is almost over & the
mission still in draft phase; thus it seems that plan will have
certainly diff. phase duration.
Phase II (2012 - 17) - The second phase of the plan is critical
because the goal it sets to achieve will mainly depend on the
R&D and availability of technologies. The transfer of
technology under existing climate change regime is certainly

15
going to play an important role. This phase involves the
following aims:
1. Scaling up of various validated applications
2. To roll out rural electrification business model
3. Commercial deployment of solar thermal power plants
with storage facility.
4. Pilot deployment/ dissemination of next generation
technologies
5. Promotion of solar lighting & heating system on large
scale through market mechanism but without subsidies.
6. To reach an installed capacity of 6-7 GW by 2017.
Phase III (2017-20) - The third phase of plan will mainly
depend upon success of first two phases as it mainly seeks
to achieve commercialisation of solar power, through the
following aspects:
1. Achievement of tariff parity with conventional grid power.
2. Commercialisation of storage technologies through
incentives such as subsidies.
3. Commercialisation of indigenously developed PV &
solar thermal technologies.
4. To reach installed capacity of 20 GW by 2020.
Policy & regulatory framework for solar power generation
under draft mission
The regulatory framework and scheme which the draft
mission envisions are similar to the existing one.
Nevertheless, it has some unique mandate to create an
environment which will enable large, rapid capital investment
in solar energy applications which encourages technical
innovations & lowers the cost in solar power generation. The
draft policy envisages following incentives for the
investors66
:
1. A proposed feed- in -tariff for various applications
based on National Tariff Policy & Electricity Act, 200367
.
2. 10 years of tax holiday.
3. Exemption of various duty/ taxes (customs duty &
excise duty) on capital equipment & others.
4. Capital subsidy for solar heating applications & rural
electrification for limited period.
5. Proposes revision of tariff guidelines & subsidy levels
before the beginning of each financial year to facilitate
tariff announcement by the regulators.
6. Feed- in - tariff for solar power will be distributed between
Centre, State & utility, where utility paying Rs. 3-5/Kwh &
the balance by Centre & State in the ratio of (70:30).
7. Mandatory solar power purchase obligation (depending
on state's solar resources) for states. Introduction of
Renewable (Solar) Energy Certificates Mechanism to allow
states to buy & sell certificates to meet this obligation.
8. Single window clearance mechanisms for all required
permissions.
9. Standard lease agreement for Solar installation on govt.
land
10. State transmission utilities (STUs) mandated to
provide connectivity from nearest sub- station to the solar
plant in a prompt and time bound manner.
For successful implementation of the proposed National
Solar Mission, the govt. must speed up the process which
must be reflected into suitable action program. With the 2009
coming to an end, and the policy still in its draft phase, the
vision has become more unrealistic. Anymore delay in
execution of Phase- I plan will significantly affect the success
of Phase II & III.
State policies
"Winningtheopportunitytoreceivethenational
subsidyisonething,selectingawinningstateis
another?"
—Debashish Majumdar, Chairman IREDA68
As discussed earlier, electricity is a subject matter of
concurrent list, both state and centre has legislative and
regulatory power. Many states had formulated respective
policies to attract investment and promote generation of
renewable energy. In general the leading & favourable states
for generation of renewable energy are Karnataka, Tamilnadu,
Maharashtra, Gujarat, Haryana, Punjab, West Bengal and
Rajasthan. As different states in India have different levels of
development & market friendliness and as the scenario keeps
changing constantly, it becomes very important to choose a
right state for solar power generation.69
The study of policies
of five different states undertaken here are nevertheless
champions in generation of renewable energy in last 10
years. Gujarat is the leading state which had prepared an
exclusive policy for generation of solar power. It is also
expected that in the near future many states will follow.
Gujarat
Gujarat is one of the most industrialised states in the India
and hence has an acute demand of power security. In order
to sustain this leadership through preventive and other value
interventions; which aimed to reduce the spread and depth
of externalities and vulnerability in multiple spheres of
economic development, Govt. of Gujarat formulated Solar
Power Policy-2009 which aims at "efficient use of
conventional energy, proactively establish and promote
sustained use of new and non- conventional energy sources
and applications to reduce emissions and related impacts of
climate change70
."
Solar energy being a non- firm power71
mainly depends on
solar radiation as fuel. The state is endowed with a high solar
radiation levels i.e. approx. 5.6 kWh/m2 /day72
with 300 days
of clear sun in a year with arid condition and minimal sun
tracking, especially in the barren wasteland areas. The
renewable energy policy introduced in this state is the first of
its kind, created exclusively for harnessing solar energy.
Solar power policy -2009
The policy seeks to achieve three sets of objective mainly:
Energy Security, Socio-economic transformation &
technological development (R &D).73
The policy aims to
promote generation of clean & green power using solar
energy, to lower its dependence on fossil fuels. It proposes
to be a vehicle of socio- economic change by generating
employment locally, by using wasteland productively, by
spreading environmental awareness and putting up an
appropriate investment regime for CDM projects74
. One of its
objectives is promotion of R & D and facilitation of

16
technology transfer75
. Salient Features of Solar Power Policy
2009
To mitigate the adverse impact of climate change; it
restricts use of any form of fossil fuel in Solar Power
Projects.
Exemption from payment of electricity duty76
Exemption from demand cut77
The wheeling78
of electricity generated from solar power
plants is allowed at a rate of 2% of energy fed into grid.
The electricity generated shall be metered on a monthly
basis & ABT79
compliant meters at the interface point in a
grid connected power project.80
The power by the solar power units shall be injected at 66
KV.
The transmission of power from solar sub-station to grid
Sub-station shall be laid by GETCO.
In case of open access obtained for third party sale the
developer has to pay applicable open access charges and
losses as determined by GERC. Howsoever, if such sale is
within the state then cross subsidy surcharge will not be
applicable.
Imposes penalty for non-fulfilling power purchase
obligation on distribution licensee.
Benefits of solar power policy-2009 will not be available to
projects set up under MNRE incentive scheme81
for solar
power generation. In case of any subsidy/ incentive
received to the project from any source shall be reduced
from the specified tariff except the benefit of accelerated
depreciation
Only new plant & machinery shall be eligible for
installation under this policy
All such projects which are set up under this policy can
claim accelerated depreciation under sec. 32 of Income Tax
Act, 1961.
Solar power project developer has to pass on 50% of the
gross benefits of CDM to the distribution licensee with
whom PPA is signed.
The solar energy shall not be covered under scheduling
procedure for intra- state ABT.
The solar policy -2009 envisages that all solar plants which
are installed and commissioned before 31-03-2014 are eligible
for various incentives for 25 years from date of
commissioning. The minimum capacity of project (either SPV
or ST) shall be 5MW each. The power plant can be set by
any natural or juridical person (in form of Company/ body
corporate/ association/ body of individuals/ artificial person)
for the purpose of captive use82
and /or for selling of
electricity. It is important to note that central govt. (MNRE
GBI scheme) is not available for the captive utilisation. The
proposal has to be submitted to the nodal agency (GEDA &
GPCL) for approval. Howsoever, for grid interactive solar
power projects the evacuation facility from the solar sub-
station to grid shall be laid by GETCO.
The Gujarat govt. policy exclusively for solar power
generation has been received warmly by the renewable
energy sector and developer. Howsoever, the policy remains
silent over certain important issues like land allotment /
acquisition for setting up of solar power plants, banking of
power generated etc. Absence of some specific mechanism
like single window clearance for the project and a time-
bound execution of project can become a hindrance in
realising its goal. Nevertheless, giving due account of solar
power radiation it receives and availability of barren land,
creation of renewable energy SEZ will be a welcome step for
generation of solar power as envisaged by the policy.
Karnataka
Karnataka is a model state in the field of harnessing
renewable energy in India. It is leading in the area of green
energy as till March 2009; total installed capacity from
renewable sources has reached up to 2400 MW. The reason
behind Karnataka being a hot spot for renewable energy
investor is its initiative towards formulating & concretising
comprehensive legal, financial and administrative framework
for this sector. Karnataka has formulated a new renewable
energy policy-2009 which will remain in force till 2014 or until
superseded or modified. The new policy vision is to harness
green and clean renewable energy sources in the state for
environment benefits and energy security.83
The important
mission which it seeks to achieve is to increase the installed
capacity from 2400 MW to 6600 MW by 201484
and make
renewable energy commercially viable. It not only provides
single window service for project clearance but also for
technical consultation and sources of finance. Karnataka
receives relatively a high solar radiation levels i.e. approx. 5.5
kWh/m2 /day85
with more than 300 days; which make it an
attractive destination for development of solar energy. The
policy aims a capacity addition of 100 MW grid connected
power alone from solar energy (including PV/CSP/Thermal)
by 2014 estimating a likely investment of Rs. 1800 crore
investment in the sector.86
The nodal agency for
implementing renewable energy projects in the state is
KREDL, nevertheless the role of various regulatory
authorities related with power sector becomes important for
the purpose of successful execution of renewable energy
(solar power) projects.
Salient features of Karnataka renewable energy policy 2009
(relevant for setting up of solar power generation)
Creation of special fund for renewable energy
:: "Green Energy Cess" of Rs 0.05 (five paise) per kWh on
commercial and industrial consumers to generate about Rs
55 crores annually.
:: Akshaya Shakthi Nidhi (Green Energy Fund) of Rs. 500
Crores to finance the renewable energy projects. Raising
up of govt. renewable energy bonds to the tune of 1000
crores.
:: Akshaya Shakthi Nidhi Trust (a public- private
investment trust) to raise funds through bonds or scheme
out portfolio investment for the purpose of project finance
in renewable energy sector.
:: Consortium of KREDL, Akshaya Shakthi Nidhi Trust and
energy department in collaboration with the Karnataka
State Finance Corporation (KSFC) will raise project
finance from International Finance Corporation (IFC),
Power Finance Corporation (PFC) and External Commercial
Borrowings87
(ECBs).
Land allotment/acquisition

17
:: Land inventory of surplus and unused land will be
undertaken district wise and will be provided for
renewable energy projects in and accordance to section 71
of the Land Revenue Act to KREDL.
:: It proposes a suitable amendment to sec. 109 of
Karnataka Land Reforms Act for facilitating private land
purchase (mainly agricultural land). Provides equity of not
less than 5% to take the land owner farmers as equity
partners in the renewable energy project.
:: Forest land clearance within 4 (four) months.
:: Land development by KREDL to facilitate setting up of
RE projects. The project developers will be leased out for
a period of 30 years and are not allowed to further
mortgage the land to any financial or other agency.
Approval or clearance of project
:: Various statutory clearances within 90 days and 120
days in case of forest land.
:: All SEZs' 10% lands to be reserved for renewable energy
projects and creation of Special Economic Zone
exclusively for renewable energy.
:: Single window clearance mechanism within 90 days of
application being submitted.
:: Renewable energy developer to complete the project and
commission it with grid synchronization within 3 years
from the date of statutory clearance.
Grid connectivity & misc.
:: KPTCL and KREDL to undertake the work of LV, HV and
EHV Substations and required transmission and
distribution lines necessary for the renewable energy
projects. Howsoever, the developer will have to bear the
cost of transmission line from the project site to grid
connectivity.
:: Generation of electricity from renewable energy will be
treated as an 'Industry' and all incentives available under
Industrial Policy-2009 of Karnataka will be made
available.88
:: Renewable purchase obligation- State govt. to procure
20% of the total renewable energy in the state subject to
KERC guidelines.
:: Wheeling89
charges at the rate of 5% will be applicable
whereas banking facility for the power generated shall be
allowed for a period of one year at the rate of 2% of the
energy banked with the KPTCL/ distribution licensee.
:: Roof top grid connected solar power quantum fed to the
grid will also receive additional tariff of Rs. 5 per KWh
along with Net Metering Facility.
:: Exemption of demand cut to the extent of 50% of the
installed capacity assigned for captive use purpose.
Financial incentives (Tax incentives)
:: All the Central govt. incentive and schemes will ipso-
facto continue to be passed by the state govt. to the
project developer through KREDL.
:: Exemption from Entry Tax on energy generation and
renewable energy devices/ machinery/ equipments
:: Exemption from VAT applicable on various renewable
energy equipments/ instruments/appliances under the
provisions of Karnataka State Sales Tax Act.
:: Facility of Letter of credit to the developer by ESCOMs
for realising payment in scheduling period for the
renewable energy power sold to the ESCOMs.
:: All agreements executed in setting up of renewable
energy project are exempted from payment of registration
fee under the relevant provision of Karnataka Stamps &
Registration Act.
:: The renewable energy developer will share 50% gross
benefits of CDM, with the KREDL/ distribution licensee
with whom the PPA is signed.
Besides all these provisions, the Solar Karnataka programme
which focuses on rural solar energy program sets out diff.
approaches and policies based on stand-alone system.90
:: A target of setting up 25000 solar roof tops of 5 to 10 kw
with net metering
:: Use of rural solar technologies like Solar PV/ Solar wind
hybrid system based on stand -alone systems.
:: Mandatory use of solar water heating systems - Local
body by- laws to be amended.
Karnataka Renewable Energy Policy is comprehensively
well crafted and its effect can be witnessed by measuring
the performance of renewable energy generation in the
state.
Rajasthan
Rajasthan is one of the first states to kick-start the solar
based power projects. Recognising the potential of solar
energy, government of Rajasthan had promoted setting up of
the Mathania Integrated solar combined cycle power project
in the early Nineties.91
However, the said project did not
materialize due to various factors. Nevertheless, the recent
shift in policy and regulatory framework in the power sector
has brought the development of renewable energy agenda to
the forefront. The existing policy is known as 'Policy for
promoting generation of Electricity through Non-
conventional Energy Sources -2004. Rajasthan is an
attractive destination for all renewable energy developer
(especially for solar & wind energy) as majority of its area
receives solar radiation as high as i.e. approx. 6.2 kWh/m2 /
day92
while receiving minimum average rainfall. The vast
availability of land (especially western part of Rajasthan)
makes it best suited for solar power generation. It is
estimated that state of Rajasthan is likely to emerge as the
power house of the country with the possibilities of setting
up installed capacity exceeding 100,000 MW from solar
energy alone. It is also estimated that 5% of Thar desert (as
part of Rajasthan & Gujarat) if is covered with solar fields, it
can meet today's energy demand. The policy makes
Rajasthan Renewable Energy Corporation (RREC) the nodal
agency for facilitating and implementing renewable energy
projects.
Salient feature of Rajasthan policy-2004 (relevant for
setting up of solar power generation)
It defines Solar Plant as a power plant or system utilizing
solar thermal energy through solar photovoltaic or

18
concentrated solar thermal devices including its integration
into conventional fossil fuel for generation of electricity.93
The power producers may use the power for captive
consumption or for sale to consumers/ licensee including
distribution licensee.
Renewable purchase obligation- for the state of Rajasthan
has been kept at 12% maximum & 9.5 % as minimum of
total energy consumption by Discoms from non-
conventional energy sources by 2011-12 as per Rajasthan
Electricity Regulatory Commission (RERC's) order dated
29th Sept. 2006
Interfacing arrangements from the points of generation to
the pooling station shall be developed and maintained by
the power producer as per specification and requirements
of other regulatory framework.
No grid connectivity charges shall be paid by solar power
plants up to total installed capacity of 50 MW in the state.
The transmission system from pooling station to the
receiving station shall be developed by power producer at
its own cost.
Execution of Wheeling and Banking Agreement between
power producer and Discom for such banking.
Except in case of power sold to Discoms, the power
producer shall pay wheeling charges at the rate of 10% of
the energy billed into the grid irrespective of the distance
from the generating station and such charges will be
inclusive of the T&D losses.94
The price of power except sell to Discoms will be
determined by the agreement between the seller and the
purchaser.
The power plants commissioned under the Policy would
not be subject to merit order dispatch regulations.95
Exemption from electricity duty at the rate of 50% for a
period of 7 years from commercial operation date for its
captive use or for sale to a third party.
Mechanism of single window clearance on proposals
received for developing the power plants based on
renewable energy sources.
Allotment of govt. land on concessional rates viz., 10% of
DLC rates.96
The project will be treated as an "industry" and all the
incentives available under state industrial policy will be
made available.
The policy imposes an amount of Rs. 50,000/ - per MW
with RREC towards processing fee.
The time frame for completion of solar power projects
shall be determined by concerned committee.
In case of delay of completion of project, the policy
envisages extension of time- framework in lieu of payment
of certain sum/ MW.97
Rajasthan, as discussed above has an enormous potential to
become solar state of India. But, till date it has recorded a
very low rate of success. The non- existence of a concrete
comprehensive and dedicated policy & over regulation like
imposition of fines/ fees are few areas for concern.
Haryana
Haryana is one of the states which has the potential of
becoming the next renewable energy power house (especially
in case of solar energy). It receives an average of approx. 5.8
kWh/m2 /day98
solar radiation with more than 320 clear
sunny days in a year99
. The state has formulated a policy for
promoting generation of electricity through renewable
energy sources -2005. Through this policy the state govt.
aims to add a total generation of 500 MW through renewable
energy by 2012. It identifies promotion of solar energy based
power projects to meet the specific target set by the policy.
Salient feature of Haryana policy-2005 (relevant for setting
up of solar power generation)
The nodal agency i.e. Haryana renewable energy
development agency (HREDA) shall function as a single
window clearing agency for facilitating renewable energy
projects in the state.
The policy does not impose any restriction on legal
structure of entrepreneur in generation of power.
Grid interfacing will be undertaken by the power producer
as per specification and requirements of the utilities at its
own cost.
For grid interfacing the plant should have a capacity of at
least 1 MW or above.
The state transmission utilities (STU) / distribution
licensee will bear the cost of EHV / HV transmission line
up to a distance of 10 km from the point of energy
metering. Beyond the 10 km. distance, the balance cost of
the transmission line shall be shared equally between
developer and STU/ distribution licensee100
.
The wheeling charges shall be levied at the rate of 2 % of
the energy fed to the grid irrespective of the distance from
generating station.101
Banking facility shall be allowed during all times of the
day and night subject to the condition that surplus
energy at the end of the financial year shall not be carried
over to the next year102
Renewable Purchase Obligation - Every distribution
licensee in Haryana will have to procure electricity
generated from renewable source of energy at the minimum
percentage specified below of its total consumption of
electricity within the area of distribution licensee103
:
Year Minimum (%)
2007-08 3%
2008-09 5%
2009-10 & onwards 0%
Exemption from electricity duty on generation and sale of
power from non-conventional sources.
Exemption from local area development tax on plant,
machinery, equipment for generation of power from solar
energy.
Setting up of renewable energy power projects in
agricultural zones will be permitted without land
conversion charges.
All renewable energy power projects to be treated as an
"Industry" in terms of Industrial Policy, 2005 and all the
incentives under the policy will be made available.104

19
Punjab
Punjab one of the more highly developed and prosperous
state of India is also a leader in harnessing renewable energy
from various sources. Recently, it has given a major thrust to
the power generation from solar energy. Punjab had
formulated a New and Renewable source of energy policy -
2006 (hereinafter; NRSE) to develop and promote renewable
energy technologies. The policy targets to achieve an
additional capacity of 1000 MW by the year 2020. The state
receives a rich solar radiation equivalent to 4-7 KWh/m2
.105
The NRSE policy empowers Punjab Energy Development
Agency (PEDA) as nodal agency for the implementation of
projects.
Salient feature of Punjab NRSE policy-2006 (relevant for
setting up of solar power generation)
Govt. land will be provided on nominal lease rent of Rs. 1/
m2
for a period of 33 years.
To promote manufacturing and sale of NRSE devices/
systems/ equipments. Machinery required for NRSE
projects, VAT shall be levied at the rate of 4%.
Octroi on energy generation and NRSE devices/
equipments shall be exempted.
The developer at his own cost shall provide the
evacuation system including transmission lines for
purchase of energy from generation site.
Single window clearance for all NRSE projects within a
period of 60 days.
RPO - Punjab state electricity board (PSEB) will purchase
electricity in whole or part offered by the power producer.
Wheeling charge at the rate of 2% of the energy fed to
the grid.
Banking facility for the power generated shall be allowed
for a period of one year by the licensee.
Exemption from electricity duty for the NRSE power
projects.
The renewable energy power producer will have a option
to sell electricity generated by it to the third party within
the state of Punjab.
Sale of power generation from solar energy - Rs. 7 per unit
(2006-07 as base year) with five annual escalations at the
rate of 5 % up to 2011-12.
Grid interfacing on high transmission side of the
generating station and its subsequent maintenance shall
be undertaken by the renewable energy power producer.
Renewable energy power producer shall be required to
lay its own transmission lines from generation facility to
the grid sub- station.
Renewable energy power producer is required to install
two separate meters one for the export of power to the
Grid and another for import from the grid on the high
transmission side.
In comparison to other states, Punjab receives a relatively
lower amount of solar radiation. But what makes it an
attractive destination to all the developers is the sound
existing policy with regard to land allotment, project
clearance and fiscal incentive provided to them. The solar
policy can make the state even more attractive to the
renewable energy industry by following ABT system. Punjab
The future of renewable energy in India is limitless. India's
leadership in the clean energy program is scaling new heights
which is supported and facilitated by economic & legal policy.
Although, the renewable energy scenario in India is in nascent
stage; the trend keeps growing. The existing laws and policies
have made it easier for this sector to flourish. A developed India
fuelled on solar power will be a model state for the world
community. Howsoever, a dedicated uniform policy like that of
Gujarat for the solar power generation can really help in harnessing
solar energy at massive scale. Majority states in India receive a
considerable amount of solar radiation; therefore there is a scope
for tapping solar energy at the commercial level. Thus, there is a
need to have a uniform national policy for the setting up of solar
power plants in India.
Certainly, India has to walk a mile before it takes a hold.
CONCLUSION
Footnotes
1 For a study on growth and development of Indian power sector refer Rajiv K Mishra, A Report on
Rural Electrification in India "Looming crisis of Indian Power sector" available at
http://www.ic2.utexas.edu/images/faces/mishra-2008-indianpowersector.pdf
2 As on 31 March 2009, India has a total installed capacity of 147. 965 GW. See, Annual Report 2008-
09, Ministry of Power, available at
http://www.powermin.nic.in/reports/pdf/Annual_Report_2008-09_English.pdf
3 ibid
4 The Integrated Energy Policy states that "Access to electricity is very uneven. Around 57% of the rural
households and 12% of the urban households i.e. 84 million households (over 44.2% of total) in the
country did not have electricity in 2000. Even those who have access to electricity suffer from shortages
and poor quality of supply. Unscheduled outages, load shedding, fluctuating voltage and erratic
frequency are common. Consumers and the economy bear a large burden of the consequences of this
poor quality of supply." See also, National Electricity Policy 2005, available at http://www.powermin.nic.in
5 Excluding Hydro- Power Generation which accounts for approximately 24 % of total capacity
6 During X Five year plan a total of additional 27 GW of electricity was achieved, out of which Renewable
Energy accounted almost one-fourth of it. It was mainly due to the scaled installation of wind power
generation in various states supported by good policy framework.
7 The XI five year plan envisages a total addition of 80 GW of electricity to the installed capacity from all
sources.
8 See, CERC Draft explanatory memorandum for tariff norms for Solar Power Projects, available at http://
www.cercind.gov.in/2009/July09/Draft-Explanatory-Memorandum_Solar-Power-Projects.pdf
9 ibid
10 The solar energy can be harnessed mainly through two roots i.e. Heat & Light. The thermal ( heat)
route uses the heat for water heating, cooking, drying, water purification, power generation, and other
applications; the photovoltaic route ( light) converts the light in solar energy into electricity,
11 See, 73rd & 74th Constitutional Amendment Act 1992
12 See, Para 5.1.6, National Electricity Policy 2005
had been one of the leading states in development of other
renewable energy like (small hydro power plants and
harnessing energy from agro- bio waste). Howsoever, in last
two years, the solar power plant of nearly 20 MW had been
setup in state.

20
13 See, Alexandra L Carleton, Mandating Market Access for Renewable Energies in Australia, (2008) 26
JERL 402
14 See, Art. 66.2, TRIPS
15 Ravi Prakash, Reconsidering law relating to Land Acquisition, (2008) 6 MLJ 83(Art.)
16 Federalism is one of the basic features of Indian Constitution. See, Kuldeep Nayar v. Union of India
(2006)7SCC1
17 Entry 37, List III, VII Schedule, Constitution of India
18 See, S.R. Bommai v. Union of India (1994) 3 SCC 1. Also see, Kuldip Nayar v. Union of India
(2006)7SCC1,44 para 37
19 See, Deep Chand v. State of U.P. AIR 1959 SC 648
20 Various policies like National Electricity Policy 2005, National Tariff Policy 2006, National Rural
Electrification Policy 2006, respective Grid Code, and rules, regulations made by CERC and SERC held
in regulating Electricity sector in India.
21 See, Annual Report 2008-09, Ministry of Power, available at http://www.powermin.nic.in/reports/pdf/
Annual_Report_2008-09_English.pdf
22 See, Objects & Reasons of the Electricity Act, 2003
23 The electricity Act, 2003 introduces newer concepts like power trading and open access to overcome
the ills of existing mechanism cross subsidies & sinking financial status of SEB's under previous regime.
Open Access on Transmission and Distribution on payment of charges to the Utility will enable number
of players utilizing these capacities and transmit power from generation to the load centre. This will
mean utilization of existing infrastructure and easing of power shortage. Trading, now a licensed activity
and regulated will also help in innovative pricing which will lead to competition resulting in lowering of
tariffs.
24 See, Electricity Act, 2003, sec. 2 (4) Electricity Act defines 'Appropriate Commission' means the Central
Regulatory Commission referred to in sub sec. (1) of sec. 76 or the State Regulatory Commission
referred to in section 82 or the Joint Commission referred to in sec. 83 as the case may be.
25 See, Objects & Reasons of the Electricity Act, 2003. Sec. 2 (47) defines 'Open Access' means the non-
discriminatory provision for the use of transmission lines or distribution system or associated facilities with
such lines or system by any licensee or consumer or a person engaged in generation in accordance
with the regulations specified by the Appropriate Commission.
26 See, Electricity Act, 2003, sec. 2 (8) defines 'Captive generating plant' means a power plant set up by
any person to generate electricity primarily for his own use and includes a power plant set up by any co-
operative society or association of persons for generating electricity primarily for use of members of such
co-operative society or association.
27 See, Electricity act, 2003, sec. 2 (12) defines 'Cogeneration' means a process which simultaneously
produces two or more forms of useful energy (including electricity).
28 See, Electricity Act, 2003, sec. 2 (63) defines 'Stand alone system' means the electricity system set up to
generate power and distribute electricity in a specified area without connection to the grid.
29 See, Objective, National Electricity Policy-2005.
30 See, National Electricity Policy- 2005, para 5.1.2
31 ibid, para 5.1.2 (d)
32 ibid, para 5.12.1
33 ibid, para 5.6
34 ibid, para 5.12.2
35 See, CERC Draft notification on (Terms and Conditions for Tariff determination from Renewable Energy
Sources) Regulations, 2009 Available at http://www.cercind.gov.in/2009/July09/Consolidated-Draftf-
Regulation_incorporating-Solar-Power-Projects.pdf
36 See, Supra 29, para 5.12.3
37 See, Supra 29
38 See, objective of National Tariff Policy- 2006 available at http://www.powermin.nic.in/acts_notification/
electricity_act2003/pdf/Tariff_Policy.pdf
39 See, Electricity Act 2003, Sec. 2 (4)
40 See, Maharashtra State Electricity Regulatory Commission order dated May 08, 2009 in the matter of
tariff for solar based power generation projects within Maharashtra under MNRE scheme. Available at
http://www.mercindia.org.in/pdf/PubN_13_02_09_Solar_Eng_Draft_Order.pdf
41 Refer part 4 of this paper
42 T.N. Godavarman Thirumulpad Versus Union of India, WP 202/1995 judgment dated (2005.09.26)
43 See, Respective renewable energy policy of Haryana & Karnataka.
44 The Indian Renewable Energy Development Agency was incorporated as a Public Limited Government
Company in 1987 only. The twin objectives are The objectives of IREDA are:
:: To operate a revolving fund for development and deployment of New and Renewable Sources of
Energy.
:: To give financial support to specific projects and schemes for generating energy through new and
renewable sources and conserving energy through energy efficiency.
45 These do not necessarily apply to the renewable energy sector; nevertheless they underline the need
to have a central renewable energy law for India in order to have a clear demarcation of the subject
matter, activities, policies and regulations, particularly in the context of portfolio standards and
obligations.
46 Written down Value means the net value of an asset, i.e. its original cost (its book value) minus
depreciation and amortization. It is also called net book value.
47 Describe rule 5 & sec. 32 of IT Act
49 See, Policies for renewable energies/biomass in India, available at http://www.nri.org/projects/biomass/
conference_papers/policy_material_section_3.pdf
50 See, Guidelines for generation based incentives grid interactive solar thermal power generation
projects, MNRE, No.8/1/2007-08/ST, available at http://mnes.nic.in/pdf/guidelines_stpg.pdf
51 See, Part IX (Sec. 70-75) of Electricity Act, 2003.
52 Such generation of power may be either at single location of may be through modular units.
53 See, Application format for seeking GBI scheme for SPV/ STP. available at http://mnes.nic.in/pdf/
application_format_spg.pdf
54 See, para 3.5, Guidelines for generation based incentives grid interactive solar photovoltaic power
generation projects, MNRE, No.8/1/2007-08/ST, available at http://mnes.nic.in/pdf/guidelines_spvg.pdf
55 See, GBI scheme for Solar Photovoltaic Power Generation projects, available at http://mnes.nic.in/pdf/
guidelines_spg.pdf
56 ibid
57 See, Supra 50
58 See, Supra 55
59 See, Supra 50
60 PM's Council on Climate Change was constituted on 6th June 2008, a committee chaired by the Prime
Minister called Prime Minister's Council on Climate Change will coordinate national action for assessment,
adaptation and mitigation of climate change. Available at http://pmindia.nic.in/pmcommittee.htm
61 Available at http://pmindia.nic.in/climate_change.htm
62 See, Objectives; NAPCC available at http://pmindia.nic.in/climate_change.htm
63 See, Sec. 6, Electricity Act, 2003
64 See. Objectives of the National Electricity Policy 2005. The policy has been formulated by Central Govt.
under sec. 3 of the Electricity Act, 2003
65 Objectives of National Rural Electrification Policy 2006, available at http://www.powermin.nic.in/
acts_notification/electricity_act2003/pdf/RE%20Policy.pdf
66 Howsoever, it is pertinent to note that similar incentives and mechanisms do exist under various central /
state govt. policies for promotion of renewable energy.
67 Many SERC in India had determined the tariff policy for solar power generation.
68 Alexis Ringwald, India Renewable Energy Trends, Centre for social market , Discussion Paper Series,
2008
69 Presently, the Solar Power Generation is a costly affair and any project developer would afford to fail
the plan.
70 See , objectives, Solar Power Policy 2009 available at http://www.indextb.com/solar-policy-09.pdf
71 Non firm power means the power generated from renewable sources, the hourly variation of which is
dependent upon nature's phenomenon like sun, cloud, wind, etc. that cannot be correctly predicted.
72 See, Govt. of India, Booklet on Solar Heat, available at http://mnes.nic.in/booklets/Book3-h.pdf
73 See, Solar Power Policy - 2009 & its Objectives, available at http://www.indextb.com/solar-policy-09.pdf
74 mechanism.
75 Art. 66 of TRIPS facilitate technology transfer under the existing international legal regime. It casts a
duty upon the developed economies to transfer technology to the LDC's and Developing economies.
76 Electricity duty is a charge paid for the consumption or use of electricity by any user.
77 During the peak load hours, the Discoms had a {demand cut}
78 Electricity Act, 2003 Sec. 2 (76) -Wheeling means the operation whereby the distribution system and
associated facilities of a transmission licensee or distribution licensee, as the case may be, are used by
another person for the conveyance of electricity on payment of charges to be determined under sec.
62.
79 'ABT' means availability based tariff. ABT is a three-part tariff comprising of fixed charges, variable
charges, and Unscheduled Interchange charges. The fixed charges would be linked to availability and
variable charges to the scheduled energy. The Unscheduled Interchange (UI) rate shall be applicable
for the deviations from the schedule.
80 Interface Metering shall conform to the Central Electricity Authority (Installation & operation of meters)
Regulation 2006.
81 The MNRE incentive scheme is mainly for solar power plant (SPV & STP) available for a total of 50 MW
and max. 10 MW for a particular state.
82 See, Rule (3), Electricity Rules 2005 which explains captive user as the end user of the electricity
generated in a captive generating plant and the term "captive use" shall be construed accordingly.
83 See, objectives, Karnataka Renewable Energy Policy 2009
84 See, Mission, Karnataka Renewable Energy Policy 2009
85 Govt. of India, Booklet on Solar Heat, available at http://mnes.nic.in/booklets/Book3-h.pdf
86 See, Goals, Karnataka Renewable Energy Policy 2009
87 For ECB's the regulatory authority is the Central bank of India (RBI).
88 See, Karnataka Industrial policy -2009, available at http://www.fkcci.in/fkcci_pdf/industrial_policy.pdf
89 See, Supra 78

21
90 See, Supra 27
91 See, Mathania Solar Hybrid Power project, available at http://www.rajenergy.com/mathania.htm
92 Govt. of India, Booklet on Solar Heat, available at http://mnes.nic.in/booklets/Book3-h.pdf
93 See, Policy for promoting generation of Electricity through Non- conventional Energy Sources -2004, 3.1
(xxix)
94 In case of third party sale or captive use of power, the transmission, wheeling and other charges shall
be as specified by RERC.
95 Merit order Dispatch - It helps in achieving optimal production of electricity from maximum production. It
helps in multiple unit power plant to identify optimum loading for each unit to save on operational costs.
96 The land other than the Govt. land will be procured by the Power Producer/ Developer at his own cost.
97 In case of Solar Power Plant the provision of waiver of extension charges or reduction is possible
considering merit of the case and the circumstances beyond the control of the power producer.
98 Govt. of India, Booklet on Solar Heat, http://mnes.nic.in/booklets/Book3-h.pdf
99 See, Policy for promoting generation of electricity through Renewable Energy Sources -2005.
100 See, HERC order on Renewable Energy Tariff & other Issues for FY 2007-08 to 2012-13 dated 15
May 2007.
101 ibid
102 See, policy for promoting generation of electricity through Renewable Energy Sources -2005
103 See, HERC order on determination of tariff for renewable energy sources in Haryana dated 31st Jan.
2007
104 Haryana Industrial Policy 2005 available at http://haryana.gov.in/ip2005website/IP2005.pdf
105 See, NRSE 2006, IV(6).

22
Dynamic Changes
During Recent Elections
In Urban Citizen of Andhra Pradesh
Kasturi SrinivasaVijaya Sekhar
and R K Bagga
International Institute of Information Technology,
Gachibowli, Hyderabad 500 032,
Andhra Pradesh
Introduction
In democracy, the election process is corner stone for new leadership. ‘Elections’ are to assist
to change the role of citizen from passive to active involvement in country's development. In
recent, 15th Lok Sabha general elections held in India, of total 71 crore eligible voters, 40
crore took part for selecting a genuine government; held in five phases both for parliament
and few other state assemblies including Andhra Pradesh.
Thus, we can see an increase of 4.3 crore voters compared to previous elections held in 2004.
Government of India has invested over Rs.10,000 crore for conduct of general elections, which
is higher than the cost conducting elections in US. This time, several factors helped in citizens
turnout like caste, party agenda, candidate profile and e-Governance etc., This paper highlights
how the election reforms worked in Andhra Pradesh in 2009 and covers how e-Governance
and technology helped this year elections. The objective is to focus on e-Governance impact,
role of a citizen and also covers need of change management in conduct of entire election
process.
Andhra Pradesh General Elections – Verdict 2009 Our previous experience in elections shows
that nearly 60 - 70% of the educated voters were not utilizing their vote in India. People
especially educated youth, college students, professionals, software experts, corporate officials
are not interested in utilizing their votes, only upper class and lower class people were casting
their votes. The lower class people are attracted towards liquor, money and other free offers
given by contestants to misuse their vote. Citizens are making a serious mistake by not casting
their votes and for democracy to work, every citizen in country must cast his vote during the
elections. This message was prominently displayed and shared with the next generation
voters through television channels, print media and online blogs. In India, this time elections
were held in five separate phases and in Andhra Pradesh (AP) in two different phases. In
Andhra Pradesh, election reforms were introduced in the year 2004 and the main objective of
these reforms was to deliver decent services to every citizen in democracy. Andhra Pradesh
with a population of over 7 crore in 2001 is the fifth most populous state of India. In AP alone,
3.12 crore voters in first phase and 2.66 voters crore in second phase utilized their vote for
elections, using 6.80 lakh polling stations, after delimitation by taking Electronic Photo Identity
Card (EPIC). Identifying polling stations which is not beyond 2kms distance from any residential
house was the main target, this time. The election process scheduled between 0700hrs to
1600hrs though the temperature is in between 37o to 42oC went on till late evening to
accommodate latecomers in both the phases. The new eligible voters were given a chance to
GOVERNANCE II Dynamic Changes During Recent Elections – In Urban Citizen of Andhra Pradesh

23
register their names six months prior to the dates. With this, nearly 1.15 lakh between
the age
1 Kasturi Srinivasa Vijaya Sekhar and Dr R K Bagga, International Institute of Information
Technology, Gachibowli, Hyderabad 500 032, Andhra Pradesh
group of 18 – 19 and around 11.00 lakh in the age group of 20 – 29 were registered
alone in city of Hyderabad and received 1.20 lakh more applications thru drop boxes
which were setup in post offices in entire state. A G2C service called eSeva had setup
for submission of Form Nos 6, 7 and 8 for the convenience of citizen by paying a
nominal fee of Rs.10/-, six months prior to the elections. Postal ballot facility was
introduced for those who were on-election duty. This made a significant mark in
increasing number of voters. Voters without voter identity cards had also cast their vote
with the help of other sixteen available identity proofs like electricity bill, PAN card,
passport etc.
The Electronic Voting Machine (EVM), a low cost model machines were setup in all the
polling stations and tested, after training the polling officials. Large size countries like
America, Germany and small size countries like Ireland and Finland are still following
paper ballot system. Using EVMs, where data can be stored up to nearly six months
and can be reused whenever necessary, helped in counting after a month on same day
for entire election process, both for parliament and states. High security initiatives
from local police department helped maintaining law and order and prevented putting
up hoardings, banners and posters on private property. There was no defacing of city
walls, which used to be common sight in previous elections. Sensitive areas were
under complete control under armed police by arranging CCTV cameras, with a view
to avoid any unforeseen incidents during the elections and the result was not a single
violence case. In some areas around four choppers had been setup for reaching hill
areas for providing voting facility to remote villages which will benefit the contestants
from different political parties. Three major parties in the race were Indian National
Congress (INC), Telugu Desam Party (TDP) and Bharatiya Janata Party (BJP). Other
three small parties, a new party called Praja Rajyam Party (PRP) came with a slogan
on Social Justice, but could not reach the audience and the vote share was just 5.6%
of total polled. More than 120 contestants had to forfeit their caution deposit for not
getting their minimum guaranteed votes. The other two parties Telangana Rashtra
Samithi (TRS) and Lok Satta Party (LSP) had also the same experiences.
Role of e-Governance -Rural In Andhra Pradesh, e-Governance schemes are running
successfully and made impact on voters, directly. To state few, the welfare schemes in
rural areas like Pavala Vaddi, which was started by the Congress government in the
year 2004-05 with the objective of providing interest subsidy on the loans taken by the
Self Help Groups (SHG) and for poor farmers, where an amount of Rs.10 crore was
allocated by the government. Schemes like Rs.2/- per kg rice and Rs.115/- for household
groceries per month; and Rajeev Arogya Sri to give medical aid to common citizen
where Rs.680 crores was allocated by the government; National Old Age Pension
Scheme for above 65 years of age had helped nearly 75.00 lakh rural poor women;
Swarnajayanti Grama Swarojgar Yojana (SGSY) and Girl Child Protection Scheme
(GCPS) were few examples for majority turnout. Reforms on irrigation projects also
called Jalayagnam attracted voters, heavily.
Urban
The urban citizens are normally looking
for economic, personal freedom, education
matters and good governance1
. In
previous elections, welfare and
development schemes were not taken in to
account by most of the voters. But this
time some of the urban development
schemes made impact on urban citizen
which helped in getting good turnout from
the cities. A couple of schemes under
Mega Bharat Nirman Program (an
initiative, launched by Prime Minister, Dr
Manmohan Singh, in December 2005 is an
ambitious plan for strengthening India's
rural and urban infrastructure) were also
made reasonable outcome this time. Few
of those are Aam-Aadmi, Indira Jeevitha
Bheema, Jawaharlal Nehru National Urban
Renewal Mission, Sarva Shiksha Abhiyan,
National Rural Health Mission, National
Rural Employment Guarantee Scheme and
Integrated Child Development Services. In
addition to these, Government of Andhra
Pradesh held a Job mela focusing only on
urban poor for those who passed out 7th,
8th and 10th class, in Hyderabad city
three months prior to the elections. This
timely effort had given tremendous benefit
to urban poor, thereby people decided to
cast their vote without fail. The urban
citizen also considered taking issues like
Employment, Inflation, Education,
Corruption, Law and Order, Poverty, Civic
Infrastructure and Health etc., for
selecting their candidates.
Role of Information, Communications &
Technology (ICT) India being IT hub of
the world, produced an innovative
technology for online debates.
Contestants utilized voice mail through e-
mails and SMS through mobile phones
were shown major impact this time. Some
of important happenings during the
recent, past have had impact on India,
where ICT was used in better way during
the electioneering and following are some
of the highlights:
(i) Mr Barack Obama, the current
President, USA used ICT in a way which
swayed the young voter in his favour.
This influenced the Indian citizens during
the recent elections hence the result is
awareness was formed.
(ii) Indian politicians also used ICT
particularly SMS and Blogs for reaching
1 Atanu Dey’s conviction during his recent visit to Indian School of
Business (ISB), Hyderabad during March 2009.

24
the technology savvy citizen.
(iii) ICTs have the potential to make a change
possible in the Indian political culture as was
shown by states like Chattisgarh in
implementing Public Distribution System (PDS)
and e-Procurement applications.
(iv) Shri LK Advani of Bharatiya Janata Party
web site is another example (http://
blog.lkadvani.in), which was regularly updated
to convey his messages to reach citizen. BJP’s
main agenda on delivering ICT to a common
citizen in India and to Panchayats was detailed
in Vision 2020 document.
(v) National Election Watch (NEW),
collaboration with 1200 NGOs led by the
Association for Democratic Reforms (http://
www.adrindia.org). Apart from NEW, ADR had
also launched to view the candidates profile of
their constituency. The candidate profile
includes the party’s name, educational
qualifications, criminal record, details of their
total assets and liabilities etc.
(vi) Vote India (http://www.voteindia.org) is a
non-partisan people’s movement launched
under the aegis of Lok Satta Convenor, Mr
Jayaprakash Narayan where he briefed the
poverty in India can be wiped-out within 5
years which is not happening. (vii) The All
India Peoples Manifesto (http://
allindiapeoplesmanifest.wordpress.com) is a
first of its kind effort made by the Wada Na
Todo Abhiyan (http://www.wadanatodo.net),
which itself is affiliated to the Millennium
Campaign.
(viii) Apart from these initiatives, the Jaago Re!
One Billion Votes (http://www.myobv.org) is
another major initiative taken by Janaagraha
Centre for Citizenship and Democracy (http://
www.janaagraha.org), a Bangalore based NGO
that has been doing pioneering work in the
areas of urban advocacy and governance. The
first step of the campaign has been achieved by
the Jaago Re campaign (http://
www.jaagore.com) in partnership with Tata Tea.
Launched in September 2008, the campaign
started a voter registration drive in colleges and
corporate in 35 cities across the country. The
campaign was driven through an interactive
application on their website and kiosks that
help people identify their constituency and
guide them to the nearest voter registration
centre and send updates to them via SMS when
their names are added to the voting list.
(ix) Lead India (http://
www.lead.timesofindia.com) was launched by
the Times of India in 2007 to identify emerging
leaders for the next generation of India.
Role of Citizen
Government
The Chief Electoral Officer of Andhra Pradesh censored
success stories in all the media channels on government
schemes like Indiramma Housing, Paavala Vaddi, Rajeev
Arogya Sri, Jalayagnam etc, as a part of code-of-conduct
before the elections. The election officials in state were in
regular touch with local police personnel and district
collectors. ECI instructions on following code-of-conduct,
violator’s penalties etc., and even transferring Director
General of Police for his statement in favour of the existing
government before elections and banning all political
campaigns before 48hrs to elections day were good signs of
sincerity maintained this time. Police force seized huge
amount of money and liquor by thorough checking of
vehicles to stop distribution of money and liquor to attract
votes. Voting is compulsory in countries like Australia,
Singapore, Switzerland, Peru, Greece, Cyprus and Finland.
Defaulters are penalized with fines, imprisonment; salary cut
cancellation of licenses etc. This system needs to be
implemented in our country with minimum conditions.
Though, things in large scale countries like India with over
one billion population cannot be changed immediately but
initiatives can take place now. Voting can make a tremendous
difference too, in state, regional, and local elections hence, it
is every citizen’s responsibility to bring such a change for
participating in healthy voting. Citizens are keen to renew
their LPG gas connection, telephone connection, vehicle
registration etc when they relocate but will ignore changing
their electoral identity for no reasons. Criminalisation and
rampant use of money and muscle power in politics have
been corroding our political system. Looking at the figures
posted on election watchdog websites like www.myneta.info,
which contains records of the candidates submitted to the
ECI, a number of candidates have criminal investigations or
cases pending against them. An option of ‘none of the
above’ (NOTA) needs to be included, if no suitable candidate
is justified on ballot paper/EVM, though it is negative but in
this case so positive.
Contestants those who have not qualified for the first two
times, may not be given another chance to contest, to be
implemented, like in USA. To integrate the attributes for
forming up a policy for constructing a beautiful project
namely Unique Identity Authority of India (UIDAI), it is
every one’s responsibility to contribute their share. A few
sectors which must contribute towards building this project
is mainly the youth and particularly,
women, government, industry, academia and other service
sectors are important. Delivering UID to every citizen in next
five years is to be planned and previous learning should help
in further strengthening the project goals. Resolving issues

25
Industry
Many Non Government Organizations encouraged the citizen to vote, had e-
debates with candidates and maintained a database of contestants for
reviews. It helped in better planning and coordination of elections, particularly
in state of Andhra Pradesh. Social campaigns like Jaago re, Let’s Vote, Lead
India ’09 etc have worked efficiently to bring women and youth voters from
corporate and large institutions to cast their votes. The main objective of
these campaigns was to make ‘Vote’ as compulsion for every citizen. e-Vote
using internet/mobile phone option with Universal Identity to be introduced.
A minimum eligible requirement on contestant education, age, previous
conduct record etc would immensely help. e-Campaigning and website
debates using ICT for common citizen must be effectively operated for
interacting with several party candidates. The print and electronic media
needs to be rationalized for delivering their unbiased reporting and also to
highlight corruption, criminal records of the candidates. For example, National
Informatics Centre in collaboration with Door Darshan (a television channel)
had a better technology tie-up, but in recent elections, the other private
channels how fast they declared the results? Income inequality and inclusive
growth needs to be addressed, challenges in reducing poverty and literacy
issues to be well focused.
Change Management model There are various models designed for Change
Management in eGovernance applications but the following change formula
rests on principle of dissatisfaction, new vision and steps for change should
be greater than resistance being offered. It was created by Richard Beckhard
and David Gleicher and is known as Gleicher’s Formula. A sample change
model to be introduced in further strengthening election reforms is given
below2
.
The factors to be present for changes are: D x V x F > R D = Dissatisfaction
with current state V = Vision of what is possible F = First, steps that can be
taken towards the vision.
If the product of these three factors is greater than R = Resistance, thus,
the change is possible. Even if one out of D, V and F, is absent or low, then the
product will be low and therefore not capable of overcoming the resistance.
The resistance to change is also defined as the cost of change. It is then
subdivided into the economic cost of change (monetary cost) and the
psychological cost of change. D x V x F > C (e+p).
Conclusion In democracy, any political party can be registered but no
power to deregister at present. There are nearly 1012 political parties in India
including both National and Regional levels. The Act needs to be amended to
include clear procedure for derecognizing parties, which do not serve any
purpose. ECI has made major efforts by conducting five-phase elections,
spreading over a month’s period, there by it has utilized the police and armed
services and imposed security levels in each state one after the other. This
2009 elections being seen as unique where awareness has been created for the
next generation. It is time to nurture the present climate to ensure that further
election reforms are brought to India in very near future. The message of the
recent elections is very clear that citizen is well aware of their future and will
bring the right type of leaders by using their vote power by making use of the
available technology and other resources.
References
1. K C Suri (2005), “The Dilemma of Democracy: Economic
Reforms and Electoral Politics in Andhra Pradesh” in Jos Mooij
(eds) The Politics of Economic Reforms in India, published by
SAGE Publications India Pvt. Ltd., in 2005. pp 130 – 170.
when photo identity cards were
outsourced to few private agencies some
time back in Andhra Pradesh would
immensely help. A compulsory option of
quoting UID in all citizen-centric services
like banks, passport and telecom
applications forms etc., would help. Huge
investment in conduct of elections needs
to be further slashed in future and, limit
on campaign expenditure by contestants
to be imposed. In a country like India, it is
very difficult to punish those who have
not cast their vote; hence, we need to
implement a stringent policy which will
help future generation. 2011 Census is
used to see that every Indian gets his
long awaited UID and an exclusive toll
free number for India on UID project may
help in better conduct of next elections.
In 2009 elections, voters conveyed their
message by casting their vote to a stable
government, rather than opting for a
change, both in state and centre.
Academia Recently MTech IIT
(Mumbai) students had started a party
named Bharat Punarnirman Dal party and
the members were also alumni of IITs.
Similarly, in Bits-Pilani there was a
movement called ‘Sangharsh, Seva,
Nirman’ where five hundred members
were taking active part from eight
chapters throughout the country. The
prime objective of this organization is to
motivate educated Indian youth to enter
politics and participate in healthy voting
like in 2004 elections, where educated
candidates were higher than previous
years. India contributes maximum share of
annual Gross Domestic Product growth
rate and the main stakeholders are public
sector units, banks, government and
educational institutions. Also the 1/3rd of
the GDP % rate is mobilized from urban
citizen, where e-Governance and
technology is moving bit slowly and
focus on recent global slowdown trends
in Information Technology sector needs
to be well taken care.
2
Eight models of Change Management in eGovernance by Shri Sameer Sachdeva in his working paper, Nov 2008.
2. National Election Survey Report (2009) on “How India Voted”?
3. R K Bagga & Piyush Gupta (eds) (2007), Transforming
eGovernance: eGovernance Initiatives in India, ICFAI
University Press.
4. Ritu Srivastava (2009), “Elections go hi-tech” i4d, first
monthly magazine on ICT4D Vol.VII No.5, May 2009.
5. Sameer Sachdeva (2008), working paper on “Change
Management for e-Governance”.

26
SRISHTI
A GIS Framework for Grass Root Level Planning
G. P. Singh
Technical Director
National Informatics Centre,
U.P. State Unit
Introduction
Inter-regional disparities are one of the most critical issues among the persisting problems in the
development of State. Even after continuous effort by Government, these problems could not be
eradicated. In this context, the Planning Department, U.P., has identified various socio-economic
indicators of development that can help us in finding the quantitative and qualitative changes at
the village level. Directorate of Economic and Statistics of Planning Department of U.P. is publishing
"Sankhyaki Patrika", covering village level amenities and various Socio-Economic indicators
using digitization of data at district level, every year from 1995. These indicators also help in
comparison of disparities among the districts. Multiple tables and graphs provide understanding
of issues involved and accordingly indicate the priority areas for reducing regional imbalance.
These hundreds of table and graph based on indicators are published once in a year and become
basis of analysis to planners and policy makers. Analytical reports are provided in the books that
are based on some pre-defined criteria. Main difficulty in this process is the contents rigidity in
these books, since once it is published cannot be changed and if analysis is required on new
criteria that can be done manually which is a time consuming process. All these hurdles could be
surmounted by a web based GIS (Geographical Information System) framework built-up around
the polygon village boundaries. Various data of different departments can be linked with village
boundaries, so that thematic maps can be generated for viewing whole area at a glance for
appropriate grass root planning. These maps will be available on the fly based on criteria
selected. This will help the planners and policy makers for taking decisions timely by seeing
facilities on the map up to village level. Also, it is very easy to compare various facilities which are
available in different villages of the district on the same screen.
GOVERNANCE II Srishti – A GIS Framework for Grass Root Level Planning

27
ArchitectureandDesignoftheFramework
Web and RDBMS technologies have been used in the
designing and development of the GIS framework. The most
important aspect of the architecture of the framework is to
give facility to link any kind of non-spatial data up to village
level. Design of the framework has been taken in such a way
that existing MIS application can be linked with GIS
framework so that grass root level planning and monitoring
can be done effectively by seeing more and more area at a
glance. Web server, Database server and Map server has
been used for hosting this frame work. This framework has
been hosted on http://gis.up.nic.in use small, cash-intensive
businesses like bars, car washes, strip clubs or check-
cashing stores.
It gives an overview as to how this menace has
developed into transnational business involving various
sophisticated techniques and procedures. The ill-effects
of money laundering are unimaginable and have been
discussed in next section.
DevelopmentApproach
In the GIS application two kinds of data (spatial and non-
spatial) is used. Spatial data creation needs fair experience of
conducting GPS based ground survey, analysis of satellite
imagery apart from expertise in the GIS tools and technology.
Most of the departments in the Government are not capable
of doing such kind of activities but collects non-spatial data
from MIS (Management Information System) in the form of
reports and charts. Most of the planning is based on the
reports available with the departments which may not require
exact location in terms of Latitude and Longitude. Most
important aspect in the development of web based GIS
framework was to make it easy for end-users. Anybody can
use this framework without any prior knowledge of GIS tools,
which has following tremendous features:
1. Seamless maps generation of Districts from Block/Tehsil/
Village level
2. Zoom in, zoom out, panning, etc. of the maps
3. Zoom in up to village boundary level
4. Map generation on the fly based on the parameter
selection
5. Village search on the maps
6. Keeping Spatial Data in the Database (RDBMS)
7. Taking village boundary as the base for generating maps
of any level (District, Tehsil, Block, Village Panchayat,
Division, etc.)
8. Provision of integration of the village layer with non-
spatial data of various schemes running in the village
The geographic area of a State is being divided into Districts, Tehsils,
Blocks, and Revenue & Panchayat Villages etc for various
administrative/development reasons as depicted in Figure below.
Districts
Administrative
Division
Development
Division
Tehsils Block
Revenue Village Panchayat Village
It is observed and analyzed that revenue village, from 2001 Census and
from the village boundary map of Survey of India, can be linked on
Village code fixed in 2001 Census by Registrar General of India. It is also
observed that Revenue Village boundary is the smallest polygon on the
map and that is very rarely divided. Therefore merging village
boundaries, in one system, can create Block or Tehsil boundaries, while
village and block panchayat boundaries can be created in the same way in
other system of Panchayati Raj. Uniform and standard coding pattern
for identification of District, Tehsil, Block and Village has been taken
from Census 2001. Scanning and digitization of all villages of U.P. from
the topology-sheets of the maps obtained from Survey of India and the
ground survey were major works consisting more than 1.07 lakhs villages
and linking those polygons with standard codes of district, tehsil and
block. As above figure depicts that boundaries are different in two
divisions of administration and development of U.P., therefore it leads to
different map requirements for planning and decision making.
ArchitectureandDesignoftheFramework
Web and RDBMS technologies have been used in the
designing and development of the GIS framework. The most
important aspect of the architecture of the framework is to
give facility to link any kind of non-spatial data up to village
level. Design of the framework has been taken in such a way
that existing MIS application can be linked with GIS
framework so that grass root level planning and monitoring
can be done effectively by seeing more and more area at a
glance. Web server, Database server and Map server has
been used for hosting this frame work. This framework has
been hosted on http://gis.up.nic.in use small, cash-intensive
businesses like bars, car washes, strip clubs or check-
cashing stores.
It gives an overview as to how this menace has
developed into transnational business involving various
sophisticated techniques and procedures. The ill-effects
of money laundering are unimaginable and have been
discussed in next section.

28
Availablelayersintheframework:
Data of the following sectors from Census-2001 has been
linked with village level maps for showing Population and
Amenities in the village.
a. Education
b. Health
c. Drinking Water
d. Post & Telecom
e. Communication
f. Banking
g. Recreation
h. Approach to Villages
i. Power Facility
j. Irrigation Facilities
Above sectors are further divided into multiple
classifications, among which some are describe as follows:
Education: It is further categorized into different number of
Secondary, Senior Secondary, Industrial, Adult Literacy and
Primary Schools, Colleges and Other Educational facilities in
the villages.
Health: This sector is further divided into number of Unani
Hospitals, Homeopathic Hospitals, Allopathic Dispensaries,
Ayurvedic Dispensaries, Unani Dispensaries, Homeopathic,
Dispensaries, Maternity Home, Family Welfare Centres, Child
Welfare Centres, Primary Health Sub Centres, Health Centres,
Community Health Workers, Other Medical Facilities, T. B.
Clinic, Subsidized Medical Practitioners, Registered, Medical
Practitioners, Ayurvedic Hospitals, Allopathic Hospitals,
Maternity & Child Welfare Centres, Primary Health Centres
Basic, Primary, Secondary and Higher education facilities
along with technical education, etc in the villages.
Similarly other sectors are also categorized into multiple
classifications based on the facility level which was
surveyed in the Census 2001.
Apart from the above data of Census 2001, this framework
is being used to link 41 grass root level facilities in the form
of distances (in Km) from the Villages from year 2001 to
2008.These facilities are listed in the below table .These
Every year Data has been collected from concerned
departments and published in the book called Sankyaki
Patrika (District level Statistical Book).
1. Agri. Service Centre
2. Allopathic Hospitals
3. Alternative Edu. Centre
4. Animal Care Centre
5. Artificial Breed Centre
6. Ayurvedic Hospitals
7. Bus Stop
8. Cold Storage
9. D Group Animal Hospital
10. Development Office
11. Drinking Water Source
12. Fair Price Shop
13. Family Welfare Centre
14. Fertilizer Store
15. Government Dairy
16. Govt. Agr. & Vill. Dev. Bank
17. Govt. Comm. Bank
18. Govt. Purchase Centre
19. Higher Second. School(B)
20. Higher Second. School(G)
21. Homeopathic Hospitals
22. Letter Box
23. Mandi
24. Market Haat
25. Mother Child Welfare Centre
26. Pesticides Store
27. Post Office
28. Post office Saving Bank
29. Primary Schools
30. Primary Agri. Loan Society
31. Public Telephone
32. Railway Halt
33. Road
34. Sale Purchase Society
35. Second. Schools (Boys)
36. Second. Schools (Girls)
37. Seed Store
38. Telegraph Office
39. Unani Hospitals
40. Veterinary Hospitals
41. VDO Centre

29
GIS is not a newfangled technology in the field of spatial data
analysis and planning. Many departments are already using
this technology for generating geo-referenced data with the
help of costly and cumbersome tools. Development of GIS
application is treated as a very specialized activity, which needs
prior training and expertise. Due to limited resources in the
departments, potential of GIS has not been explored yet, though
it can help in better planning and decision making in the
government departments. It is also observed that many times,
lot of money, time and effort is put by various departments for
generating similar kind of spatial data, while this could be
avoided by putting the data at a common place. There is a need
of some process or method for updating such kind of spatial
data by various departments and some mechanism for sharing
of data so that latest maps can be timely obtained for decision
making.
'Srishti' a GIS framework fulfils all above requirements and
helping in the integration of spatial and non-spatial data for
various departments. During the development of this framework
it was observed in the analysis that spatial data was being
generated in a different projection coordinate system and
geographic coordinate system. This leads to the problem of
overlaying of different maps on each other when a location is
analyzed. Therefore, it is requisite that uniform policy of geo-
referencing should be used in the digitization of the maps so
that multiple spatial data can be integrated and multiple layers
can be overlaid in the analysis of locations. It is significant to
note that most of the departments in the government have
multiple MIS reports which consist of non-spatial data. This
non-spatial data can be linked with different layers (district,
tehsil, block or village) available in the framework and thematic
maps can be generated for analysis and decision making.
Therefore, prior knowledge of GIS, procurement of GIS software
and application development will not be required by most of the
departments initially, since precision of the location is not
important in most of the cases.
CONCLUSIONNaturalResourceInformationSystem(NRIS)
Spatial data prepared under NRIS has been linked with this
framework, which has following layers:
Rail Track
Road
Canal
Forest
Structural Lineament
Drainage Line
Drainage Polygon
Land Category
Ground Water
Lithological
Land Use/Land Cover
Watershed
Geomorphological
Soil
Settlement Area
Advantage of GIS Framework
This framework gives you tremendous ability in terms of data
relevancy which can further leads to much more ease in
planning and decision making:
:: Administration and development get easier for decision-
making authorities when smaller areas need to be handled
such as village polygon. Thematic indicators like Census
parameters, economic indicators can add value and support
decision-making process.
:: As one can observed that accessing developments, growth
and other factors, without the main geographic component,
perception of the data may be difficult. Whereas thematic
maps based on criteria of any socio-economic data can give
better understanding.
:: Developmental activities over period of time can be
observed on thematic maps easily.
:: Comparative depiction of a theme at various administrative
units at a specified level brings forth a healthy competition;
facilitate infrastructure planning and other such positive
reforms.
:: Data from various disciplines can be integrated seamlessly
and cross linked to help monitor the growth of the regions in
various sectors.
:: Overlaying of different layers such as road facility in the
form of distance and road network can give better way of
planning and sanctioning of road scheme in the area.
:: Since performance can be analyzed at various levels on the
same parameter it helps to identify the failure or the negative
impacts of any system/parameter, too.

30
Social Security for
Urban Poor
Jatinder Singh,
Professor,
Rai Business School,
New Delhi
As evident from the table the urban population is on increasing
trend. Such huge influx of people from rural to urban area needs
meticulous planning for their settlement with provisions of social
security to the masses. It is estimated that by 2015 worldwide
there will be more than 60 mega cities. This has to be kept in pace
by marinating the standard of living for the urban poor. The
migrants generally take shelter in slums and a few of them only, by
virtue of their skill and acumen may move to developed part of the
city. In Indian scenario, the mega cities grew faster than its
infrastructure which manifests as high proportion of industrial
overload and the resultant exploitation of the migrants because of
their weak position and bargaining power. Since the major chunk
of urban poor work in informal sector, so, for sustainable and
inclusive development and to appropriate the quality of life of the
urban poor requires concentration of benefits of social security in
the informal sector.
The socio-economic-politico interface has an impact on
the dynamics of social security for the urban poor with
concerns for urban poverty alleviation programs like
affordable housing, slum development, free education, health
and related social paradigm for poor and destitute living in
urbanized areas. The government sponsored initiatives like
Jawaharlal Nehru National Urban Renewal Mission
(JNNURM) which was launched in 2005 has not responded
genuinely to the cause and concern of urban poor. The
critical issues concerning urban poor on above said key
areas require adequate concern and deliberations. The
fundamental services apart from social security that are most
wanted for urban poor and slum dwellers are:
Affordable housing
Provision of potable water
Sanitation
Health
Education for children.
Pension and retirement benefits
Medical benefits
The urban poverty is not only limited to these wants but
cumulative deprivations, where one want is cause of other
want.
Starting with fundamentals, let us extrapolate the meaning of
Social Security for Urban Poor and some of the facets
associated with this by understanding the meaning of all the
closely-related aspects independently.
SocialSecurity
this refers to social programs that provide set of benefits
available from the government or civil society. These meets
social needs of the individual against socially recognized
conditions like infirmity, unemployment, old age and poverty.
These programs may be contributory or non-contributory in
nature.
Urban Poor
these are group of individuals who have constraints to
opportunities who are living in absolute or relative poverty in
urban areas.
Organizedsector
this is the part of economy which works through legal
channels of banking, and tax system which is a determinant
of advanced economies. Presently, organized sector
constitutes roughly eight percent of Indian economic
activity.
Unorganizedsector
this is a part of economic activity which most of the time runs
on hard cash with no accountability and tax liability. This
sector constitutes roughly 92% of Indian economic activity.
Magnitude of urbanization
Year % of urban population
1950 30
2000 47
2007 50
2030 60
GOVERNANCE II Social Security for Urban Poor

31
Informalworkforcevis-à-visformalworkforcein
urban area
Since majority of workers in urban area work in informal
economy; they are not recognized and protected by labour
legislation and enforcements. They have no labour
regulations, compensation plans, fixed hours of work, and
minimum salary rules. Above all, hawkers or daily wagers in
urban areas frequently face harassment from police and other
civic agencies. Moreover, banks and other financial
institutions do not help them and they have poor access to
financial resources because they do not have a permanent
residence proof or a guarantor. Ironically, the formal sector
cannot accommodate employment to the total workforce; in
its absence they are left with no option but to join informal
sector for their subsistence and livelihood.
Nevertheless, the 11th Five Year Plan aims for inclusive
growth by focusing on employment, income generation and
inclusion of the poor to be sustainable, but the goals seems
to be far and unrealistic. The magnitude of urban poverty is
enormous and multifaceted which requires customization of
schemes for effective implementation vis-à-vis social security
schemes.
The Ministry of Housing and Urban Poverty Alleviation,
Government of India jointly with United Nations
Development Programme (UNDP) launched India-Urban
Poverty Report 2009. It reveals that India's urban population
is increasing at a faster rate than its total population and 41%
of its population will live in cities and towns by 2030. The
gap between the urban poverty
and rural poverty is reduced
which tends to be higher in
past.
The resultant is the increase
in slum population which
concentrates on the outskirts of
urban boundaries. This urban-
rural has resulted in increased
informal sector activities which
are devoid of social security
programs. Coupled with slum
intricacies like overcrowding
and poor access to basic amenities like potable drinking
water and sanitation; this has considerably decreased the
quality of life of its inhabitants.
Slums are determinants of urban poverty which makes a
city sick and unattractive. The definition of slum household
according to UN-Habitat is - group of individuals living
under the same roof in an urban area who lack one or more of
the following:
Durable housing of a
permanent nature that
protects against extreme
climate conditions.
Sufficient living space
which means not more
than three people sharing
the same room.
Easy access to safe water
in sufficient amounts at an affordable price.
Access to adequate sanitation in the form of a private or
public toilet shared by a reasonable number of people.
Security of tenure that prevents forced evictions.
MigrationandSocialSecurity
Migration can prove to be beneficial for State economics if
the workers are highly paid and highly skilled and working in
formal sector. In Indian perspective, migration results in
movement of people from backward states to developed
states. This is because of employment crunch in rural areas
where the economy is more agro based. In the last few
decades, there has been phenomenal migration which has
witnessed mushrooming of slums and exploitation of masses.
Majority of migrants work in informal sector, this adds further
vows to the State financial and security programs. Migrants
are diverse in terms of culture with high illiteracy level. They
are normally low-paid workers with negligible contribution to
state exchequer and demanding and vociferous in terms of
availing full benefits for their welfare.
The unorganized marginalized group is socially
discriminated from organized counterparts which increases
the gap of social security. Also, they get low wages; if they
are self-employed, their wages are inadequate to meet their
families physiological, social and security needs. They get
entangled in the vicious cycle of low education-low sills-high
exploitation web and they never get an opportunity to hone
up their skills to secure better jobs in formal sector. They
also move from one improvised area to other urban slum with
no consolidation of their working status and virtually no
increment in spite of long association with their employer.
This further degrades their standard of living and makes
them susceptible to immoral and illegal practices.
With respect to education and health paradigms, urban
poor children are forced to work in dhabas, tea stalls, and do
odd jobs and sometimes resort to begging and stealing to
meet their family basic needs for subsistence. The school
attendance rate of students in the slums always remains
relatively low despite programs like free meals and free
access to primary education. There exists two type of school
in urban area - private and Government owned Municipal or
Corporation Schools. The urban poor cannot dream of
entering a private school which is generally reserved for
urban rich. This urban education reflects a dichotomous
situation where the under privileged have no or meagre
access to quality education making them deprived of their
right to quality education. The data of school going
population in urban areas reveals that 21% of children from
the poorer sections do not get enrolled in the schools.
According to UNESCO Education for All Report 2008, India
caters to over 35 per cent of the world's total illiterate
population with only 66 per cent people literate (76 per cent
men and 54 per cent women). This manifests itself as the
strong relationship between the between urban poor and
social security as illiterate are normally unaware of their
rights. Health indices for urban poor are worsening as the
data reveals that nearly 57% of children under 3 years of age
are malnourished as compared to rural belt where it is less

32
than half. Rural area has a three-tier public healthcare system
as sub-centres, primary health centres, community health
centres, and districts hospitals. On the contrary the urban
poor do not have access to well-designed healthcare system.
Though there is a plethora of public and private medical
institutes catering to multitude of people; urban poor remains
on the mercy of public healthcare services where the quality
of service is always a topic of debate.
The National Commission for Enterprises in the
Unorganized Sector (NCEUS) reports that 47% of all workers
in the organized sector are working as informal workers.
Industry tends to optimize costs by outsourcing work to
unorganized sector like manpower suppliers to save
themselves from legal/employment regulations, which does
not result in additional job creation; thus becoming a
potential deterrent for sustainable development and inclusive
growth. Although, Government organizations like NSEWA
pass on some social security benefits like Minimum Wages
Act, Maternity Benefit Act, Equal Remuneration Act,
Building and Other Construction Workers Act, Workmen's
Compensation Act, and Contract Labour Act, but they are
practically not implemented in totality because of ill-informed
workers and lack of awareness.
The government has passed the Unorganized Workers
Social Security Bill which ensures security of the informal
sector too, wherein it covers ten social security schemes like
pension, maternity insurance, general insurance, welfare
scheme for artisans and weavers and health insurance. There
is an ardent need for unemployment insurance too, which
should also include retirement and old age pension and some
other fringe benefits. Such schemes are prevalent in some of
the advanced economies, even some South American and
African countries too part some of the social welfare for the
marginalized group. This is believed from the fact that the
developed economies spend 15 to 30 percent of their GDP on
social security, but India meagrely spends close to one
percent of GPD on social security. In a step to boost up
social security to the poor, the government has passed The
Unorganized Workers Social Security Bill which aims at
registering 400 million unorganized workers from informal
sectors with a unique national identification number.
Administration and implementation of this Act will be
complex as the registration and keeping a track of migrants
will be difficult because of their frequent mobilization. This is
revealed from Building and Construction Workers Act which
is facing hurdles to register migrant workers for availing
social security benefits.
Trade Unions in India have primarily represented the
workers of organized sector which comprise a merely eight
percent of workforce. The rest of them has labour regulations
and are totally unprotected with no social security.
Moreover, this sector has toothless representation, so any
voice or concern is totally unheard and no collective
bargaining can be initiated under such circumstances. The
initiative by the Government of India to recognize the role of
trade unions in the informal economy has not borne
adequate representation of the informal sector.
With the current global recession, many SMEs, which are
concentrated in urban areas, are under constraints for
downsizing or closing, which has resulted in loss of jobs to
majority of workforce in the urban areas. NSSO's 2002 survey
reveals that 52,000 slums in India have eight million urban
households representing 14% of the total urban population.
This constraint has resulted in depleted social assistance
programs.
The challenges posed by urban poor vis-à-vis social
security are quite knotty and as pernicious as the system is
not geared to adapt the improvised workforce. As per the
report of 10th Five Year Plan out of 400 million workers, only
50-60 million (12%-15%) are covered by some form of social
security. Studies reveal that informal sector where social
security is abysmal accounts for 66.7% of total employment
in Delhi, 60% in Mumbai and 60.6% in Chennai. In most of
these metropolitans, people are self-employed with bare
minimum income, poor living conditions, non-existent labour
regulation and social security apparatus.
ObservationsandRecommendations
The paper deliberates that although urbanization is hailed as
an engine or growth and prosperity, it has not kept its pace
with its expanding borders. The economic and social security
of the inhabitants is worse than the Rural India. The LPG
(liberalization, privatization and globalization) has congested
the urban areas and consequently made the people poor and
vulnerable with deficient or absence of any social security. It
has been felt that rural poverty has been addressed by Central
government schemes like National Employment Rural
Employment Guarantee Scheme (NREGS), but the urban
poverty has been sidelined with a conception that urban poor
have better access to employment. The livelihood of urban
poor is determined by informal employment which has
absolute no place for social security programs. The initiatives
and administrative approach for formulating the social security
plans separately for the urban poor, in fact, requires
stupendous policy planning with pan-nation approach. To
foster inclusive growth so as to cover urban poor too, some
interventions are required to make urban livelihood qualitative.
In the light of this grim scenario, the government should
extend National Rural Employment Guarantee Scheme to urban
areas also to provide job opportunities to the urban poor with
adequate social security coverage.

33
State of e-Governance:
Need for Speed
E-governance, Social Networks and Public Policy
Dr. D. C. Misra
I.A.S.(Retd.). Former Chairman, Task
Force for ICT Policy for Delhi, and
Chief Knowledge Officer, Govern-
ment of Mauritius under the aegis of
the Commonwealth Secretariat,
London, Dr Misra blogs at
http://www.egov-india.blogspot.com/
and is @DrDCMisra on Twitter.
Email: dc_misra [at] hotmail.com. Introduction
It is the social network sites, spearheaded by Facebook, launched in 2004, which have stolen the
march over all other developments in virtual or online life and unleashed an unprecedented
phenomenon of epic proportions. Facebook was ranked third among top ten web sites after
Google and Yahoo! in August 2009 (Compete 2009). Other social network sites include Flicker,
Twitter, You Tube, and Tumblr. (Braiker 2008:10). The evolutionary journey from e-mail in 1972 to
Second Life to Facebook to Posterous may be seen in Figure 1.
The power of the networks can be realised by the
astonishing growth of social networking sites (Table 1).
According to Nielsen, an Internet media and market research
firm, "As theories circulate about the actual dollar value of
sites like Facebook and Myspace-just last week analysts
placed Facebook's worth at $10 billion-there is no question
that people continue to gravitate towards social networking
Figure 1. Evolutionary Journey from Email to Second Life to Facebook to Posterous
and blog sites. In the U.S. alone, total minutes spent on
social networking sites has increased 83 percent year-over-
year. In fact, total minutes spent on Facebook increased
nearly 700 percent year-over-year, growing from 1.7 billion
minutes in April 2008 to 13.9 billion in April 2009, making it
the No. 1 social networking site for the month." (Nielsen
Online 2009)."
Note: Not to scale;
*To be launched by Yahoo! in 2009,
currently in beta version.
Source: Compiled by the Author
The Growth of Social Network Sites (SNS)
GOVERNANCE II State of e-Governance: Need for Speed – E-governance, Social Networks and Public Policy

34
Different types of social network sites exist to meet different
social needs. A comparison of top ten social network sites
may be seen at http://social-networking-websites-
review.toptenreviews.com/. This comparison is based on the
following half a dozen criteria: Profiles, Security, Networking
Features, Search, Help/Support, and Legitimate Friend Focus.
Fifteen social network sites, by way of example, are described
below.
(i)YouTube(www.youtube.com)(VideoSharing)
Founded in February 2005, and acquired by Google in
November 2006, it is a video-sharing site. Any one can, for
example, make a video of a public event and post it online.
This makes it far faster and at times also more accurate than
the work of an official agency. It can make the tasks of official
agencies also difficult when private individuals make video
of a situation highlighting only the negative aspects of a
situation.
(ii)Dopplr(www.dopplr.com)(TravelPlans)
This is a site for travel plans which can be shared with
others. An interesting aspect of this site is that you can
know which of your friends or colleagues will be in a
particular place on particular dates. This can help, for
example, in two people joining and then meeting a third
person on official duty. The site has a "social atlas" which
enables sharing of information about places for stay, eating
places, and other places of interest.
(iii)Flicker(www.flickr.com)(PhotoSharing)
Launched in February 2004, it was acquired by Yahoo! in
March 2005. An online photo management and sharing site,
it enables organisation of photographs including use of tags.
It has more than 3 billion photographs. It provides both
private and public storage of photographs. It can be helpful
in sharing photographs of field visits, say, in case of floods,
droughts, earthquakes and other natural disasters and can
also act as a repository of photographs.
Table 1 Top 10 Social Networking and Blog Sites
S.N. Site Apr-08 Apr-09 Year-over-Year
Total Minutes (000) Total Minutes (000) Percent Growth
1 Facebook 1,735,698 13,872,640 699
2 Myspace.com 7,254,645 4,973,919 -31
3 Blogger 448,710 582,683 30
4 Tagged.com 29,858 327,871 998
5 Twitter.com 7,865 299,836 3712
6 MyYearbook 131,105 268,565 105
7 LiveJournal 54,671 204,121 273
8 LinkedIn 119,636 202,407 69
9 SlashKey N/A 187,687 N/A
10 Gaia Online 173,115 143,909 -17(000)
Note: 1. Data relates to U.S., Home and Work, 2. Ranked by Total Minutes for April 2009 and Their
Year-over-Year Percent Growth Source: Nielsen Online (2009).
Examples of Social Network Sites
(iv)Italki(www.italki.com)(LanguageLearning)
Launched in December 2006 and based in Shanghai, China, it
is a free language learning website which claims to have more
than 450,000 users from over 212 countries speaking more
than 100 languages. It is currently available in 14 languages.
It has a number of resources and can be helpful while
learning a foreign language.
(v)Ning(www.ning.com)(SocialNetworkCreation)
Based in Palo Alto, California, and founded by Gina Bianchini
and Marc Andreessen in October 2004, Ning, apart from
joining existing networks, enables one to set up his own
social network. It claims to have 1.5 million Ning Networks
and 33 million registered users. One can create, for example, a
social network on any aspect of e-government sharing news
about new events, discuss issues of common interest, and
post information about new publications.
(vi)LinkedIn(www.linkedin.com)(Business
Networks)
Formed in May 2003, it is Mountain View, California-based
social networking site promoting creation of business
networks. It claims to have over 47 million members
representing 170 industries in over 200 countries and
territories around the world. Its mission is "to connect the
world's professionals to make them more productive and
successful." It has a number of features like creating
professional profile, a trusted network and asking questions,
apart from searching people.
(vii)TIG(www.tigweb.org)(InformationTechnology
forYouth)
Launched in 2000, TakingITGlobal (TIG) is a "social network
for social good" aimed at youth primarily between the ages
of 13 to 30 years with members from over 200 countries. It
offers "Global online social network and hub for civic
participation, Content and tools for educators to facilitate
rich, interactive learning experiences, Outreach and
Collaboration tools for events, networks, campaigns, and
causes, Research, development, and sharing of best
practices on youth engagement, and Facilitated learning
experiences through workshops, webinars, and e-courses."
(viii)BlogTalkRadio(www.blogtalkradio.com)(Citizen
Radio Broadcast)
Launched in 2006 and claimed to be world's first social radio
network, it "allows anyone, anywhere the ability to host a
live, Internet Talk Radio show, simply by using a telephone
and a computer." It features content in more than 75
categories, with more than 12,000 active hosts, more than
380,000 original shows and more than 25,000 monthly new
shows. It also has Mumbai case study in which Sree
Srinivasan, a citizen broadcaster and a professor of
journalism in Columbia University, covered the terrorist

35
attack on Mumbai on November 26, 2008 (popularly known
as 26/11).
(ix)Ryze(www.ryze.com)(BusinessNetworks)
A business networking site, it has more than 500,000
members in more than 200 countries. One can set up one's
own network or join any of the existing networks having
specific interests. It also has a section for classifieds and a
section for location-specific events. As is typical with many
of such sites, more attractive features like "Who have visited
you? etc. is paid for. Nevertheless free features do meet the
requirements of a member.
(x) Plaxo (www.plaxo.com) (SharedAddress Book)
A shared address book with the remarkable advantage, once
you changed your address, every one sharing the address
book at once comes to know that your address is changed. It
was, and is, thus an excellent tool to keep automatically
acquainted with the movement of your friends, relations and
colleagues. Acquired by Comcast Interactive Media in July
2008, it hosts address books for more than 40 million people.
With its new 'Pulse' feature it has become yet another social
network site.
(xi)Digg(www.digg.com)(NewsSharing)
Launched in 2004, it is forum for sharing news. Members
submit content (news/video/images) to it which uploads it to
"Upcoming Stories." Visitors see the story, and if they like it,
they "digg" it. If sufficient "diggs" are received, the story is
categorized as "popular" and if more "diggs" are received,
the story ultimately makes it to top ten stories, where it is
read by millions of visitors. This way reader selects stories
which they like best.
(xii)Jott(www.jott.com)(PersonalTranscription)
Launched in 2006 and headquartered in Seattle, WA, Jott
Networks claims to be the world leader in mobile voice-to-text
applications. Among other things, Jott enables conversion of
voice message (voice mail) on a cell phone into e-mails and
deliver it to recipients. Known as personal transcription
assistant, this can be an asset to a public servant out on
inspection and giving on-the-spot guidance for corrective
steps to his staff and later on follow it up with recorded e-
mails.
(xiii)Shelfari(www.shelfari.com)(VirtualBookshelf)
Based in Seattle, Shelfari was launched in October 2006 and
acquired by Amazon.com in August 2008. It is useful for
anyone interested, for example, in e-government and makes a
virtual bookshelf by selecting books and keeping them at
one place (shelf). Additionally, the book shelf can be shared
with other members. This way one can keep a track of body
of knowledge on e-government being created which can help
in improving performance of e-government.
(xiv)MySpace(www.myspace.com)(General)
Founded in 2003 and headquartered in Beverly Hills,
California, it is owned by Fox Interactive Media. The site
provides for shared interests like music and politics and has
many international versions including one for India and is
available in 15 languages. It provides a number of attractive
features like forums, groups, and apps. It was No.1 social
network site till it was overtaken by Facebook (see below) in
2008 and has the slogan "A place for friends."
(xv) Facebook (www.facebook.com) (General)
Founded in February 2004, as of September 15, 2009 it had an
astonishing number of members- 300 million including 65
million users on mobile devices. It has typical features of a
social network sites like photo album, groups (including
some on e-government), events, marketplace, links, and
applications. Many official organisations have started
registering their presence on Facebook. The United Nations
Public Administration Network (UNPAN) has a presence on
Facebook as a group with 148 members.
E-governance and E-government Social Networking Sites
The power of social network sites is also being realized in
government. Veen (2008) reports that "Steve Ressler, co-
founder of a professional organization known as Young
Government Leaders, has taken the lead in helping move
government squarely into the age of Web 2.0. Ressler
recently launched a social networking site designed and built
exclusively for public-sector employees." Launched on May
26, 2008, the site GovLoop (http://www.govloop.com), has by
now 19,688 members (as on October 1, 2009).
GovernmentFunctionsinSocialMedia
Drapeu and Wells (2009) describe four functions of
government in social media: 1. Inward sharing (sharing
information within agencies), 2. Outward Sharing (sharing
internal agency's information with entities beyond agency
boundaries), 3. Inward sharing (obtaining input from citizens
and other persons outside the government), and 4.
Outbound Sharing (communicating with and/or empower
people outside the government).
Public Servants and Social Network Sites (SNSs)
Many public servants in the developed world and some
public servants in the developing world have started joining
these social networks. It is not clear as to why should public
servants join social networks as they have their own conduct
rules to follow in this regard or what do they indeed gain
from joining such networks as they have their own clearly
defined responsibilities and career paths. Two extreme
positions are available on this issue. On one hand, there
should be no restriction on the public servants on joining

36
social network sites as at present but it needs to be noted
that this position is by default and not a result of any careful
deliberation or policy decision. On the other extreme is total
ban on public servants on joining social network sites. What
should be the policy in this regard?
Risks in Social Network Sites (SNSs)
The easy availability of personal profile and personal details
like, e-mail address, telephone numbers, address, etc. in
social network sites (SNSs) make these sites risky for
members. The U.S. Federal CIO Council Guidelines provide
advice:
The decision to embrace social media technology is a risk-
References
Braiker, Brian (2008): The Technologist: Curse of the Microbloggers, Newsweek, CLII(5)10, August 4.
CIOC (U.S. Federal CIO Council) (2009): Guidelines for Secure Use of Social Media by Federal
Departments and Agencies, v1.0, http://tinyurl.com/n5agpw (accessed: October 1, 2009)
Compete (2009): Compete's Top 10 Sites Ranked By: Unique Visitors - August 2009, http://
lists.compete.com/ (accessed: October 2, 2009).
Drapeau, Mark and Linton Wells II (2009): Social Software and National Security: An Initial Net
Assessment, Center for Technology and National Security Policy, National Defense University, April,
http://www.ndu.edu/ctnsp/Def_Tech/DTP61_SocialSoftwareandNationalSecurity.pdf (accessed: October
2, 2009).
Johnson, Steven (2009): How Twitter will Change the Way We Live (in 140 characters or less), Time,
Asia edition, June 15, pp 24-29.
(Government Twitter Directory) at http://govtwit.wordpress.com/.
In India, some time back Shashi Tharoor, a former United Nations
diplomat and now Minister of State for External Affairs, got into
controversy by calling economy class air travel as cattle class but
subsequently regained ground in popularity by asking people to
work on Mahatma Gandhi's birthday and not observing it as a
holiday. He had 292,010 followers on Twitter (as on October 6,
2009), probably highest for any public servant in India.
E-governance and Twitter
There are a number of occasions when Twitter can be very useful
to e-governance. Its primary usefulness is that it can help e-
governance in real time. For example, in tracking an epidemic in
real time, like spread of H1N1 virus. Similarly, it can help in disaster
management like road accidents, rail accidents, fires, floods, etc.
Likewise it can help in launching a search in case of missing
persons and receive feedback in real time and scotching rumour-
mongering in cases of communal strife, etc., and keeping in touch
with each other in group action by public officials.
Concluding Remarks
A public policy actively encouraging participation of public servants
in social network sites (SNSs) will go a long way in speeding up e-
governance in India. Additionally it will promote open government
and citizen engagement in e-governance. Developed countries
like the U.S. and U.K. have already come up with suitable guidelines
in this regard opening up new avenues in e-governance and further
speeding up e-governance in their countries. It is now for developing
countries to take due initiatives in this regard. Let India show the
way.
TWITTERSPHERE
Twitter (www.twitter.com) is a social network and microblogging
site launched in August 2006. It also has a mobile site:
m.twitter.com. A tweet is a short message not exceeding 140
characters sent via sms, web, and mobile web. It answers a simple
question: what are you doing? and thus enables people to stay
connected. A tweeter is one who tweets, that is, posts messages
on his site or follows others. Twitter has three types of tweeters:
(a) Following: When a tweeter follows other tweeters (for which
no permission/intimation is required),
(b) Follower: A follower is a tweeter who follows others by
automatically getting tweets of the person being followed (American
actor Ashton Kutcher has more than a million followers!), and
(c) Friend: A tweeter A who follows tweeter B and tweeter B in his
turn follows tweeter A. In such a situation tweeters A and B are
said to be friends.
Third parties have created their own applications as a result of
which twittersphere, also called twitterverse, has become a thriving
space. Tweetdeck (http://tweetdeck.com/beta/about/), for example,
enables one to connect to Twitter, Facebook, MySpace, etc. Twitter
Fan Wiki (http://twitter.pbworks.com/WindowsApps) lists a number
of applications for Windows. Its three key features are social
networks, live searching and link sharing (Johnson 2009: 27)
make Twitter a unique and valuable phenomenon.
Government Response
Some of the governments of the developed countries have been
quick to formally recognize the value of Twitter. Department for
Business, Innovation and Skills (BIS) in United Kingdom, for
example, has come out with a template for Twitter strategy for
government departments (Williams 2009). There is a GovTwit
based decision, not a technology-based decision. It must be
made based on a strong business case, supported at the
appropriate level for each department or agency, considering
its mission space, threats, technical capabilities, and
potential benefits. (CIOC 2009: 6)
The Guidelines identify three major risks: 1. Spear
phishing ("an attack targeting a specific user or group of
users, and attempts to deceive the user into performing an
action that launches an attack, such as opening a document
or clicking a link" (p-9), 2. Social Engineering ("relies on
exploiting the human element of trust," (p-10), and 3. Web
Application Attacks (These subject users to new
vulnerability.
Nielsen Online (2009): Time Spent on Facebook up 700 Percent, but MySpace.com Still Tops for
Video, According to Nielsen, New York, the Author, Dateline: June 2, http://www.nielsen-online.com/pr/
pr_090602.pdf (June 27, 2009)
Veen, Chad Vander (2008): Social Networking Site Targets a Government Audience, Government
Technology, September 21, http://www.govtech.com/gt/articles/
413267?utm_source=newsletter&utm_medium=email&utm_campaign=DC_2008_9_22
(accessed: September 25, 2008).
Williams, Niel (2009): Template Twitter strategy for Government Departments, Cabinet Office, United
Kingdom, Digital Engagement Blog, July 21, Guest post,
http://blogs.cabinetoffice.gov.uk/digitalengagement/file.axd?file=2009%2f7%2f20090724twitter.pdf
(accessed: October 5, 2009).

37
Looking Ahead
for Inclusive Future
for Cities
City-wide poverty reduction strategy approach
Authors
Paramita Datta Dey
Senior Research Officer
National Institute of Urban
Affairs, New Delhi
Introduction
The Urban Poverty Reduction Strategies (UPRSs) revolve around the two moot questions - the
reasons 'why people are poor' and how can they be 'brought out of poverty'. Therefore, it is
important that strategies for poverty alleviation are appropriately targeted, involve community
participation and are innovative.
In partnership with UNDP, the Government of India (Ministry of Housing and Urban Poverty Alleviation)
aimed to strategically address the various dimensions of urban poverty. Under the broad umbrella of
the "National Strategy for Urban Poor (NSUP)", theoretical understanding of urban poverty, statistical
projections and on-ground realities were brought together to arrive at citywide poverty reduction
strategies for urban poor. These are aimed to strengthen the Urban Local Bodies (ULBs) by facilitating
exchange of information at various levels, setting up of urban poverty resource centres and developing
an organized institutional framework within the state and ULBs that will lead to proper implementation
of the 74th CAA.
In addition to the other initiatives under NSUP, Urban Poverty Reduction Strategies were prepared
for eleven Indian Cities (10 of which are 'mission' cities) lead by National Institute of Urban Affairs
(NIUA). City Development Plans (CDPs) have been prepared for all JNNURM cities. It was felt that
CDPs did not adequately promote integrated strategies for the urban poor. In order to address
this lacuna, Urban Poverty Reduction Strategies (UPRSs) for 11 JNNURM cities were prepared.
These cities comprise two mega cities (Kolkata and Chennai) three cities with 4 million plus
population (Ahmedabad, Bangalore and Hyderabad) and five cities with 1 million plus population
(Ludhiana, Chandigarh, Jaipur, Pune and Indore) and Ambala (a non-JNNURM city for an alternative
perspective).
The purpose of the UPRSs' is to improve the living conditions of the urban poor and advance their
quality of life through focus on improved basic services and provision of a broader spectrum of
livelihood options.
This paper presents a synthesis of the status of the access and availability of basic services to the
urban poor in the cities. The data analysis presented is an outcome of the secondary and primary
data collected as part of the study. This paper begins with a snapshot of the socio-economic
profile of slums in the cities studied, followed by a section that attempts to answer questions
related to the access and avaialbility of basic services in the city's slums. Further, a brief profile of
the livelihood aspects is discussed. The concluding section is a summary of the findings and way
forward.
GOVERNANCE II Looking Ahead for Inclusive Future for Cities – City-wide poverty reduction strategy approach

38
According to the Census of India, 2001, about 42.6 million
persons are reported to live in slums of 640 cities/towns
spread over 26 states that constitutes nearly 15% of urban
population of the country. One in three persons in Kolkata is
a slum dweller (about 33% of the urban population).
Bangalore has the lowest slum population of 10%. These are
the highest and lowest among the cities studied. On an
average, in almost all the cities more than one third male slum
dwellers are literate and more than 60% female are literate.
Primary survey of slums was carried out in all the eleven
cities. In some smaller cities, the total number of slums were
lesser. They also comprised fewer households. In such
instances, attempts were made to survey more slums. In
larger and sprawling cities, it was difficult to survey all slums,
due to resource constraints. In such cases, when the case
study of slums were taken up, larger number of household
were surveyed. It may be noted that in Chennai, Hyderabad
and Indore, a large majority of slum dwellers are BPL families.
But in other cities, the proportion of BPL in slums varied from
12% to 39%, the lowest in Kolkata.
Where are most slums located?
Slums are concentrated in some wards in most cities.
Continuous urban growth, prevailing speculative trends in
the urban land market and inadequate formal supply of
housing has perpetuated haphazard and informal growth.
The poor are then perceived as illegal residents of city.
Notification of a slum by local bodies or development
authorities under the slum act is an official recognition and
bestows significant benefits. Mega cities like Kolkata and
Chennai, have reported 80% of notified slums in the city.
Cities like Ludhiana and Chandigarh the number of notified
slums is very less. An aggregate picture of ownership of
slums in the cities surveyed reveals that 53% of land
belonged to public sector, 41% to private and 3% to other
bodies like temples, mosques, etc. In cities like Chennai,
Chandigarh, Pune and Bangalore, most of the slums were
situated on public land.
River margins, seashores, areas adjoining roads and
railway lines, nallahs or drains, valleys, low-lying areas,
forests, waterlogged areas, industrial areas, etc. are
environmentally sensitive. Land areas adjoining low-lying
areas, rivers, waterways and nallahs are prone to frequent
flooding and subsidence. On an overall, across cities, a vast
majority of slums are located in such areas. In Kolkata, about
20% slums are located on waterlogged areas. Around 8%
slums are located on hilltops, along railways lines and are in
industrial areas like in Ahmedabad, Hyderabad, Jaipur and
Ludhiana. In Chennai, a number of them exist along the
seashores.
Whatisthehousingconditioninslums?
Despite the exterior appearance of chaos, slum life is highly
structured with many economic, religious, caste and other
interests expressed in daily life. Living conditions are
extremely difficult and slum dwellers fear a constant threat
and feeling of insecurity in "their home". In Chennai, about
quarter of the total slum housing stock is pucca in nature.
The composition of semi-pucca and kutcha was 52 percent
and 26 percent respectively. Across the city, families with
own houses ranged from 65 percent to 85 percent. Several
house owners (about 84.5 percent) did not enjoy patta
(ownership deed) for their houses but this also varied across
the city. In Kolkata, the dwellings can barely accommodate
the members and most household activities including
cooking and washing are performed in very unhygienic
environs, thus exposing the members to various health
hazards. In Bangalore, those living in kutcha and semi-pucca
houses have a greater tendency to defecate in the open. An
important point to be noted here is that a number of them
realise this and are willing to pay for a new house or
improvement of house, and a toilet. In Chandigarh more than
two third of slums houses are pucca, nearly one fourth are
kutcha and only a slight proportion is semi pucca.
How accessible are services?
Among all the sources of water, individual tap water is the
most preferred. However, due to unreliable and limited
supply, people have to depend on other sources.
Despite the availability of individual taps in a number of
cases, more than 50 percent of the population in slums
across the cities surveyed depend upon public stand posts,
water tankers, bore well etc. This is because the supply is
inadequate, infrequent, erratic and hence unreliable. In most
of the surveyed cities, water is supplied to slum areas for less
than four hours a day.
Among the cities studied, the condition of slum dwellers
in Pune is best of the lot. They receive water daily for 10
hours a day. Ludhiana & Ambala are next with regular supply
of water for 8 to 10 hours a day. In Hyderabad and Bangalore
it's for less than 4 hours a day. Hyderabad is the worst
affected city as supply of water is on alternative days and
there is no fixed time and most of the people depend on
public stand post.
Water supply in some of the slums of Ahmedabad,
Bangalore, Ludhiana, Pune and Ambala is reliable and there
is a daily supply of water to these slums. On an overall,
supply of water is available daily or on alternative days. In
most cities water supply is available for less than four hours
a day. In the case of Kolkata more than half of the slums
population do not have proper supply of water. People spent
as much as 30 minutes to 4 hours to collect the water. There
is a very high rate of wastage of water due to the state of
disrepair of public taps. In fact, most of the residents are
willing to pay for new facilities.
What is the condition of the sewerage system and
toiletfacility?
The sewerage and toilet facilities in slums are very grim.
Most slums across cities are not sewered. In many cases
even if a network exists, it does not connect to the main trunk
line.
Profiling Slums

39
In six out of 11 cities more than fifty percent slums are
connected with city sewerage network system and in four
cities more than 25 percent slums have this facility. Only in
Pune most slum houses have sewer connection. Mostly
slums are not connected with the main network of sewerage
system or are partially connected. Majority of slums in cities
lack sewerage facility and those that exist are not adequate to
cater to these localities.
Our analysis revealed individual toilets facility is a
preferred choice. However, due to lack of access to a reliable
water supply in toilets, people are compelled to defecate in
the open. More than 50 percent slums have individual toilets
in four cities but in rest of the cities less than fifty percent
slums have individual toilets and in the case of Kolkata it is
only 9 percent. Despite its ban in India, dry latrines are still in
use in Kolkata (13 percent of the samples surveyed still have
such toilets in their premises). In most cities, people are
hesitant to use community toilets due to several reasons -
lack of privacy for females, inadequate maintenance due to
lack of water and other management issues. People are also
reluctant to opt for pay and use toilets on a regular basis.
Women expressed a strong need for toilets because of the
perceived risk to personal security and infection for them and
their children. Many slum residents use the riverfront as a
defecation area leading to pollution. Though a large number
of female slum dwellers did realized the convenience of a
personal toilet and risk of open defecation, many felt that
they were constrained by resources - funds, spaces etc.
Whatistheconditionofthedrainagesystem?
A large number of slums in all the cities lack organised
drainage facility. Where the drainage network exists, they are
mostly kutcha or semi pucca. Open drains are mostly used by
children for defecation due to which its chokes and
overflows during rains.
Most slums in the surveyed cities have mixed drains. In
Pune, Kolkata and Ambala (sadar) more than sixty percent
slums have pucca drains as compared to other cities where
10 to 30 percent drains are pucca. On the other hand in
Hyderabad, Ludhiana Jaipur and Ambala (city), more than 50
percent slums had kutcha drains. The drainage networks in
slums are hardly maintained and are often blocked by solid
waste and plastic bags etc. Clogged drains cause flooding
during monsoons, especially in low lying and flood prone
areas where most slums are located. Stagnant water from
drainage becomes the breeding place for mosquitoes & other
vectors.
Is solid waste properly managed?
None of the slums in the cities studied have properly
organized solid waste management system. Only in Pune,
Bangalore and Kolkata 60% to 90% households used
municipal bins for dumping waste. In Ahmedabad nearly 3/
4th slums used private bins for dumping waste. In most city
slums garbage is dumped either in the drains or on adjoining
open spaces / vacant plots.
Though most slum dwellers claimed waste is collected
daily or on alternate days, the culture of disposing off waste
just outside the house is a habit, which needs to change. The
prolonged dumping of garbage in many areas causes rain-
induced choking of drains and consequent flooding in slums,
particularly those located in low-lying areas. Generally,
people felt that the job of keeping the neighbourhood clean
was that of the Municipal Corporation's and not theirs.
Whatistheconditionofthesocialinfrastructure?
The coverage of educational institutions, health facilities and
other necessary social infrastructure facilities are grossly
inadequate in slums.
Larger cities are endowed with a range of educational
facilities - primary, secondary and higher secondary schools,
colleges and other private institutions. Though adult
education centres and vocational training centres are
present, they are not proportionate to the population. They
are also not adequately equipped in terms of infrastructure.
Dropout rates, particularly among girls, are rather high. The
Sarva Shiksha Abhyan and Mid-day meal schemes have not
achieved the targeted level of progress. This is because the
up gradation of infrastructure, human resource and financial
support has not kept pace with the targets set.
In larger cities, the Urban Local Bodies manage general
and some referral hospitals and dispensaries. Distance of
health facility centres from slums and chawls on an average
is 1to 3kms away. Data on disease pattern reflects high
incidence of vector borne diseases like jaundice, typhoid,
diarrhoea, malaria, TB etc. Immunization, which is one of the
key investments towards child health, can be used as one of
the basic indicators to gauge the access and utilization of
health services. Immunisation status in slums reveals, less
than half of slums dwellers in the age group 0 - 6 yrs are
immunized.
Whatarethemajorsourcesoflivelihoodofslum
dwellers?
Since the formal sector is unable to provide employment to
all migrants and local population, people are forced to take
up informal employment activities with nominal earnings.
The livelihood and settlements pattern have close linkages.
Our primary survey in cities revealed, that the most
ubiquitous occupation among slum dwellers is that of
construction workers followed by daily wage labourers. A
substantial number of females and children living in slums
also work as domestic servants. Large groups of people are
seasonally employed. All these activities do not require any
special skills. Since a vast majority of the poor have limited or
no professional skills that urban jobs demand they are
caught in the vicious cycle of limited skills and low wages
and insecure and temporary employment. Those who do not
find employment as semiskilled workers and have some
degree of entrepreneurial abilities and are able to invest a
little more than others, resort to informal activities to earn a
living. In most metro cities, the employment opportunities
available are not in coherence with the skill set or the interest
of the worker. This thus creates another category of
unemployed, the "disguised unemployed" adding them to
the already swelling population of the "openly unemployed".
The problem is aggravated by the high supply of unskilled

40
labour commanding low wages. On the other hand, the
demand for specific skills is very high, and often, unmet. For
instance, in spite of the boom in the construction sector,
simple skills like waterproofing, fencing or scaffolding are in
short supply. It is this mismatch - large amount of unskilled
and unemployable labour where there is a huge demand for
those trained in simple skills that need to be corrected
Finally,whatshouldbetheguidingprinciplesfora
strategy to reduce urban poverty?
The data gathered and feedback received on various
indicators from the slum survey aids in identifying
interventions required to improve the situation. The set of
interventions however has to be customized based on a set
of parameters - the location, socio-economic and cultural
fabric of any city. This holds good both for housing as well
as provision of infrastructure for urban poor, although the
scope and degree of specific interventions would vary from
city to city, as shown by the data. Clearly, to achieve the
ideal situation of a 'slum free' city, it is not possible to have
pan - Indian solutions. But, certain broad guiding principles
have to be kept in mind while formulating and carrying
forward the strategy for poverty reduction of any city in
India.
One, the network of physical infrastructure required in
slums has to be linked with the citywide network. No city
level investment in infrastructure should be considered
unless it is linked with all slums. Only thus can development
of the city be inclusive.
The second important principle is that this improvement
through inclusion in the citywide network has to be demand
driven which means that the citywide infrastructure must
include the demand of all slums. Demand driven signifies
that the service delivery will have to be in response to
requests from consumers rather than targeted by the
Municipal Corporation. The above-mentioned guiding
principles will be rooted in the strategy once the slums have
been alleviated up to a basic minimum level.
Thirdly, the strategy has to be physically and financially
sustainable. Financial sustainability means that the funds
required for operating and maintaining each of the services
shall be based on recovery of costs. This can be undertaken
through a twin approach - on one hand, ensuring cross-
subsidy between the poor and non-poor and on the other
hand, having a system of token payment amongst the poor.
This may be illustrated with the following example - cross
subsidy means, if the cost of operation and maintenance of a
service is Rs.10 per unit, the urban poor may be subsidized
and they may pay Rs. 6 per unit as running cost. Token
payment means, if the cost of providing connection for a
particular service is Rs. 150, it will be Rs.100 for the slum
dwellers and the poorest section of the poor e.g. BPL will be
charged Rs. 50 only. Physical sustainability means as long as
the land tenure issues are resolved between the slum dweller
and the municipality, the municipality should be allowed to
tax the slum dwellers for the services provided.
Fourthly, partnership of the stakeholders will have to be
built in into the strategy. In order to ensure partnership, the
existing institutional structure to deal with slums will have to
be strengthened. Having a formal coordinating body, which
will have suitable powers and community level
representation, can ensure this. This body can then hold
regular meetings to ensure that all partners are working
collectively towards the same objectives. The following
model may be suggested for ensuring community
mobilization for housing and basic services for the slum
dwellers: At the lowest level, there may be a neighbourhood
group at the slum level comprising 20 to 40 women. A team
leader will head the group; the second level may be the ward
level. For every ward, depending on the number of slums in
the ward, there may be a single Community Based
Organization (CBO) for a large slum and a congregation of a
few small slums may create one CBO. The secretaries
heading these CBOs should have a representation in the
ward committees. The CBOs can also act as vehicles to
support cross-community experience sharing and capacity
building; at the third level or municipal level, there may be a
Community Development Society (CDS).

41
e-Governance
Efficiency and Challenges in India
Hemant Mistry
Head - Finance & Accounts
Mahindra Special Services Group
Introduction
"Electronic Governance (e-Governance) is the application of information & communication
technologies to transform the efficiency, effectiveness, transparency and accountability of
informational & transactional exchanges with in government, between govt. & govt. agencies of
National, State, Municipal & Local levels, citizen & businesses, and to empower citizens through
access & use of information"1
e-Governance is the application of Information Technology to the Government functioning in order
to bring about Simple, Moral, Accountable, Responsive and Transparent (SMART) Governance.
e-Governance is a highly complex process requiring provision of hardware, software, networking
and re-engineering of the procedures for:
Improving effectiveness and efficiency of delivery of services by using the information and
communication technologies (ICT) like internet, mobile, etc.;
Increasing the accountability and transparency in informational and transactional exchanges
between various sources (e.g. Government agencies, etc.) and users (e.g. Public, etc.) of
information and transactions;
Empowering the public with easy, speedy, cost efficient and real time information access so
as to increase citizen participation in the democratic process
Curbing the misuse / unauthorized use of information and transactions by filling in the gaps of
availability, access and communication of information
Thus, e-Governance is more than just a Government website on the internet. Political, social,
economic and technological aspects determine the scope and success of existence of e-Governance.
It may include a broad range of services for many segments of society. The most common areas
of e-Governance application are electronic commerce and business regulations, taxation and
revenue, law enforcement and courts, education, health and transport.
Components of e-Governance and requirements for such components
There is a general consensus between government and private sector officials on the main
components of e-Governance:
Government to Government communication (G2G);
Government to Business communication (G2B) and
Government to Citizens communication (G2C)
Key requirements for e-Governance components can be broadly classified into:
Highly efficient, User friendly and Cost economical Infrastructure;
Extensive human capacity development;
Legal, Administrative and Political framework to support ICT environment and
Holistic approach and sustained efforts in implementation and maintenance
within Government agencies, Business communities and Citizens
GOVERNANCE II e-Governance – Efficiency and Challenges in India
1 Source:www.eivc.org

42
Evolutionofe-Governancetechnologies
The global shift towards increased deployment of IT by
governments took place in the nineties, with the advent of
the World Wide Web. Amid an increase in Internet and
mobile phone connections, global citizens started expecting
and accessing more and more information and services
online from governments and corporate organizations to
further their civic, professional and personal lives. This
development provides us with abundant evidence of a new
"e-citizenship".
The concept of e-governance originated in India during
the seventies with a focus on development of in- house
government applications in the areas of defence, economic
monitoring and planning. The deployment of IT was aimed to
manage data intensive functions related to elections, census,
tax administration etc. The efforts of the National Informatics
Centre (NIC) to connect all the district headquarters during
the eighties was a very significant development. Early
nineties onwards, IT technologies were supplemented by
ICT technologies to extend its use for wider sectoral
applications with policy emphasis on reaching out to rural
areas and taking in greater inputs from NGOs and private
sector.
Present Scenario of e-Governance in India
The e-Governance scenario in India has come a long way
since its origin. A large number of initiatives have been taken
by the Union and the State Governments that initiatives can
be broadly classified into the following categories:
Computerisation of Land records and their online delivery
(e.g. Project Bhoomi implemented in Karnataka and
Project CARD implemented in Andhra Pradesh)
Online registration, disposal and monitoring of public
grievances (e.g. Project SETU implemented in
Maharashtra and Project Gramsampark implemented in
Madhya Pradesh)
Online availability of information on administrative
procedures and forms (e.g. Project STAMPS implemented
in Maharashtra and Project WebCITI implemented in
Punjab)
Providing essential, important and useful information of
public interest (e.g. Project Gyandoot implemented in
Madhya Pradesh and Project JAN MITRA implemented in
Rajasthan)
Online facility to pay all statutory dues and taxes as well
as utility payments (e.g. Project FRIENDS implemented in
Kerala and Project MUDRA implemented in Bihar)
Online facility to make applications and avail various
types of services (e.g. Project Vidya Vahini implemented at
national level and Project FAST implemented in Andhra
Pradesh)
Facilitating all procurements by online tenders and
evaluation of bids (e.g. Project Lok Mitra implemented in
Himachal Pradeshand Project Mahiti Shakti implemented
in Gujarat)
Providing easy and secure online access to registry/
compliance related services (e.g. Project MCA21
implemented at national level)
Every state government has taken the initiative to form an
IT task force to outline IT policy document for the state and
the citizen charters have started appearing on government
websites.
Challengesinimplementinge-Governance
A vast geographical landscape, India comprises of 36 states
with population of over one billion. Out of this population,
around 60 percent live in rural areas and rest in semi urban
and urban areas. Literacy and language are immense
challenges, in a multicultural and multilingual country.
Following are the major challenges in implementation of e-
Governance, because of which the speed of implementation
of e-Governance initiatives in India is very slow. This has
negatively affected the use of e-Governance:
Lack of sufficient and proper planning
Leadership failures resulting in slow and patchy progress
of e-Governance initiatives
Financial inhibitors limiting the flow of investment to e-
Governance projects
Digital divides and choices, where socio-economic and
physical inequalities lead to differences in motivations
and competences that constrain and fragment e-
Governance take-up and fail to address particular user
needs.
Poor coordination across jurisdictional, administrative
and geographic boundaries and lack of proper
coordination of between government machineries and
solutions developers that holds back e-Governance
networking benefits.
Workplace and organizational inflexibility impairing
adaptability to new networked forms of information
sharing and service provision.
Lack of trust heightening fears about inadequate security
and privacy safeguards in electronic networks.
Poor technical design leading to incompatibilities between
ICT systems or difficult-to-use e-Governance services
Lack of IT literacy and awareness regarding benefits of e-
Governance
Underutilization of existing ICT infrastructure and lack of
infrastructure for sustaining e-Governance projects on
national level
Strategies/Actionplanforachievementofe-
Governanceobjectives
Government leaders in India are starting to realize that e-
governance is the key to drive today's economy with an
increased citizen participation. Providing services online is
no longer going to remain optional for local and central
government as demand for providing services at internet
speed from the citizens has increased in the recent years.
How do government agencies overcome the obstacles and
build a strategy to facilitate the transition to successful
online or "e" service delivery. If the government waits, it is
perceived as being ignorant or unaware of the citizen needs
and loses an opportunity to realize the tremendous benefits
of online service delivery and larger citizen participation in
overall service delivery. However, if the e-governance
projects are started and implemented in haste, they are
doomed to fail.

43
Following are some of the strategies/action plans for a successful
implementation of an e-Governance system for one billion people
of India:
Create literacy/awareness and commitment to e-Governance at
high level
Conduct usability surveys for assessment of existing e-
Governance projects and act upon the results of such assessment,
wherever required
Start with the implementation of pilot projects and replicate the
successful ones
Follow the best practices in e-Governance
Build nationwide Resource database for e-Governance projects
Have clearly defined objectives and interoperability policies to
achieve such objectives
Effectively manage and continuously update the content efficiently
and regularly
CONCLUSION

44
ICT
To enhance the adaptive capacity of
the community to water affliction
Authors
Sakshi Saini,
Pursuing Ph.D. from
'The Institute of Home
Economics', DU
Background
Water is one of the most essential commodities for the survival of human beings. That is why most
of the civilisations of the world have grown and prospered around perennial rivers. It is the basic
necessity of life, not only for human beings, but also for plants and animals. Life began in water
and it is a basic component of every living cell. Water accounts for 65% of our body weight. It is
required for domestic, irrigational, industrial and other purposes, which are very relevant for
survival and progress of society. We need water in almost every domestic activity, from cooking
and washing to bathing and sanitation.
With rapid growth of population and development of modern technologies in various fields, the
requirement of water has substantially increased. Water availability is neither adequate nor
equitable to all human beings in all regions of the country as well as in the world. The global fresh
water consumption has raised many folds between 1900 and 1995. Decreased availability of
water, as water resources shrink, is adding to the numbers that are living under conditions of
water stress. . In addition to the problems of limited availability of water, there is the problem of
water quality due to the biological and chemical contaminations in water. One such chemical
contaminant present in water is fluoride.
Fluorine is the thirteenth most abundant element found in the Earth's crust and can easily react
with other particles and/or chemicals to form fluoride. It can contaminate ground water when
water percolates through rocks rich in fluorine, absorbing the fluoride. In areas like Rajasthan,
which is mostly composed of desert land and very little annual rainfall, the ground is the main
source of water for rural inhabitants. Here the demand for water exceeds supply and ground
water is overexploited causing water supplies to fall and a subsequent increase in the concentration
of fluoride in the remaining ground water reserve. As a result, inhabitants in many districts of
Rajasthan drink this water daily and, over time, develop permanent illnesses.
Excess fluoride in drinking water causes serious problems. A prolonged intake of high levels of
fluoride can lead to a disease known as fluorosis. Fluorosis manifests itself in three forms i.e.
Dental fluorosis where teeth will develop brown/yellowish horizontal permanent streaks, skeletal
fluorosis includes pain and stiffness in bones and joints and non-skeletal fluorosis affecting the
body's soft tissues. The World Health Organization (WHO) labels up to 1.5 mg/l as a safe limit of
fluoride in drinking water for human consumption (UNICEF). The Bureau of Indian Standards
permits 1.0 mg/l. The illness is irreversible, but can be prevented by proper nutrition and by
drinking fluoride-free water.
GOVERNANCE II ICT – To enhance the adaptive capacity of the community to water affliction

45
Intervention
A survey conducted by the Public Health and Engineering
Department (PHED) of Rajasthan in 2001 identified over
23,000 hamlets with fluoride levels above 1.5 mg/l
(Development Alternatives). Results led to government
discussion over developing piped water supply networks
throughout the state. However, the large-scale infrastructure
project would take years to plan and implement, not to
mention the large amounts of funds it would require to take
on such an endeavour. UNICEF stepped in to take interim
measures by initiating a small-scale project in one district of
Dungarpur where it provided all families, regardless of caste
or economic class, a Domestic Defluoridation Unit (DDU) at
an affordable cost of around 200 Indian Rupees (Rs-).
Description of Domestic
Defluoridation Units
DDUs are designed to have two containers. The containers
are either made of plastic or stainless steel. The bottom
container has a tap to drain out the filtered defluoridated
water. The top container holds about 4 kg of Activated
Alumina, kept in a nylon bag that is used to adsorb fluoride.
Activated alumina is highly porous and has tremendous
surface area to weight ratio. Due to
this it is a good absorbent of arsenic
and fluoride. It is non-toxic and
prolonged use of Activated alumina
in adsorbing fluoride from water can
reduce its adsorbing efficiency. This
happens as more and more fluoride
gets deposited on its surface. Then
it is said to be exhausted. Exhausted
Activated alumina can be
regenerated by chemical treatment
and can be used again.
Regeneration is a process of
treating the exhausted activated alumina by chemicals mainly
sodium hydroxide Na(OH), sulphuric acid and water (Yang).
After the AA granules get saturated with fluoride and get
exhausted, it needs to be regenerated for further use. The
bottom of the upper container has a hole of 25mm diameter
that is fitted by a micro filter assembly to reduce the cost; the
bottom container can be replaced by a clay pot.
The Rajasthan Integrated
Fluorosis Mitigation
Programme (RIFMP)
The pilot project started by UNICEF was formulated in three
phases; the first one was to increase the awareness level and
knowledge of the community regarding fluorosis, convincing
them about the benefits of using the DDUs and motivating
them to use the technology. Training sessions on health and
nutrition management were provided. ICT material such as
banners, street plays, films, posters etc was used to increase
the awareness and knowledge level of the community thus
increasing their adaptive capacity. Adaptive Capacity being a
function of income, wealth, education and awareness needs
to be increased to help the community deal with any problem.
Enhanced knowledge and awareness level created a demand
for the DDUs ensuring active participation of the community
in the pilot project. Community participation towards active
usage of DDUs, health and nutrition management activities
made UNICEF's pilot project a success.
To expand UNICEF efforts, PHED together with support
from UNICEF and non-governmental organizations (NGOs)
launched the Rajasthan Integrated Fluorosis Mitigation
Programme (RIFMP) in 2004 (Development Alternatives, 6).
RIFMP's mission is to provide safe drinking water to the
community through four successive components. First,
animators that represent the local NGOs would carry out
several activities raising awareness about the dangers of
fluorosis and communicating preventative methods.
Secondly, the awareness would be coupled with trainings on
health and nutrition management. Thirdly, animators would
promote alternative/traditional water collection methods such
as rainwater harvesting. Finally, families would then have
DDUs installed into their homes for use. RIFMP provided
free DDUs to families living below the poverty line (BPLs)
and charged a small fee for DDUs to families living above the
poverty line (APLs).
The Programme is being implemented in three phases
based on the levels of fluoride found in the local water
supply. Phase I was ended in February 2008 and included
areas with a level of fluoride in the drinking water above 5.0
mg/l. Phase II, which is now in process, focuses on the
affected villages and hamlets where the concentration of
fluoride ranges from 3.0 to 5.0 mg/l, while Phase III will work
in communities with fluoride levels from 1.5 to 3.0 mg/l.
RIFMP Phase I started in March 2005 by covering 500
hamlets with a population of less than 100, and fluoride level
more than 5 mg/l. In May
2006, the program was
extended to 2,143 villages
(regardless of size) in 12
districts. In Phase II of
RIFMP, an expected number
of 5,056 villages and hamlets
will be covered (Development
Alternatives, 6).
The villages covered
DDU with one plastic
and one clay container
Conducting FGD in
Rathwaloka Kheda

46
during the phase I of the project had proper ICT
interventions before distributing the DDUs to the
community, while the villages covered during the extension
of the Phase I of RIFMP had negligible amount of ICT
activities due to time and economic limitation. Primary
research was conducted in a total of five villages and hamlets
covered during the two phases of the RIFMP including
Rathwalo Ka Kheda, Balapura, Unkhaliya, Prahalad Ka Badia
and Devipura. On an average two days were spent with each
habitation. Semi-structured interviews, focused group
discussions and observation were used as a tool to collect
the data.
BPL families living in hamlets that were covered under
Phase I of the Programme have received DDUs free of cost,
irrespective of caste, colour and creed in both the Phase I
and its extension phase. But, in spite of the fact that people
are having access to the DDUs in few areas they were
reluctant to use them as they fail to understand its
importance. Observations from the field and results from the
surveys conducted lead us to conclude that there is greater
usage and value placed on the DDUs in areas where there are
high levels of social awareness activities. Moreover, we
observed that APL families tend to purchase more DDUs in
areas where there are numerous awareness activities. In
hamlets or villages covered during
the extension of RIFMP Phase I with
few or no awareness activities it was
observed that villagers would rarely
use the DDUs and lack the
understanding about the benefits the
filters bring. For example in Unkhaliya
several households and even in a
discussion with the sub-Sarpanch it
was discovered that many families
felt uncomfortable using the DDUs
because they had a misconception
about its function. People believed that the DDUs were part
of a government scheme to sterilize or decrease the fertility
among women of the community. Other reasons for not
adopting the use of the filters included arguments that by
drinking the fluoride water people would develop a natural
resistance to Fluorosis. Also, people felt that as the animals
are consuming the same water and not getting impacted, so
would they.
Analysis of the data collected lead us to conclude that
there is a direct relationship between the extent of awareness
and the usage of DDUs. There is a positive correlation
between those hamlets and villages that have received high
levels of social awareness activities and use DDUs. Hamlets
such as Rathwalo ka Kheda in
Banera Block and Bhojpur in
Asind Block have had frequent
IEC activities, such as
documentary films, banners,
wall paintings, and puppet
shows. In these villages it was
observed that the beneficiaries
of DDUs use it daily and
moreover, APL families are
Water crisis is one big problem the community is facing at
large. Due to rapid industrialization and urbanisation both the
quantity and quantity of water is deteriorating. Various
programmes and policies have been implemented by the
government to ensure proper access and management of water
resources. However, in order to ensure better success rate of
any project it is quintessential to involve the community to which
the project is targeted. Increasing the knowledge and awareness
level of the community about their unfelt needs, the problems
prevalent in the area and the possible steps that can be taken to
solve the issue ensure the active participation of the community.
Adaptive Capacity being a function of income, wealth, education
and awareness among others can not only be increased by
providing technology or a solution to the community for their
problem. Adaptive capacity needs to be increased by creating
awareness and giving knowledge to people so that they
themselves are aware about the problem motivated enough to
take steps to deal with it. Dissemination of knowledge and
information are essential for people to successfully respond to
the opportunities and challenges of social, economic and
technological changes. ICT is a tool that can be used to identify
problems, encourage participation, invite innovation in problem
solving, and promote adaptation and mitigation.
CONCLUSION
References
Meena, B. and Mistra S.K. (2006). Rajasthan Integrated Fluorosis Mitigation Programme - Policy,
Planning, Strategy and Issues.
Child Environment Programme. (2007). International Learning Exchange: Module D - Madhya
Prahdesh & Rajasthan, Wise Water Management & Fluoride Mitigation. New Delhi: UNICEF India
Country Office/Rajiv Gandhi National Drinking Water Mission.
Development Alternatives. Strategic Support Mission to Rajasthan Integrated Fluorosis Management
Programme (RIFMP) Final Report.
Dr. S. S. Dhindsa. (2004). Ground Water Quality Status of Rajasthan - 2001 (Validated up to 31-03-
2003). Jaipur: Public Health Engineering Department (PHED).
Manish Dhingra. (2001). Fight Fluorosis and Save Our Children. Jaipur: Hindustan Times/UNICEF.
UNICEF. Draft Specifications for Domestic (household) Deflouridation Filter Unit (DDFU/DDU).
UNICEF. Regeneration Manual for Activated Alumina used in Domestic Defluoridation Units.
UNICEF. Mitigating Fluorosis through Safe Drinking Water. (Pamphlet)
UNICEF/PHED Rajasthan. (2007). Rapid Appraisal 1: Rajasthan Integrated Fluorosis Mitigation
Programme - a collaboration between PHED, Rajasthan, 19 NGOs and UNICEF.
UNICEF/PHED Rajasthan. (2007). Second Rapid Appraisal of Rajasthan Integrated Fluorosis
Mitigation Programme.
more willing to buy DDUs.
Thus, it becomes clear that just by providing technology
or a solution to the community the success of a project
cannot be assured. The project needs an active participation
of the community to make it successful. Making the
community realize the unfelt need is the first necessary step
towards the success of any plan. Information communication
and Technology plays a very important role to provide
knowledge to the community, making them aware of the
problem and motivate them towards the action to adapt.
Conducting interview
in Unkhaliya
Wall Painting in Bhojpura

47
Technology Enabled
Super-Ecosystem for
Inclusive Growth
A super-ecosystem to look at inclusion in totality
Srivalsan Ponnachath &
Subhro Mukherjee
Sun Microsystems India Pvt. Ltd.
It's about the "Opportunity Divide"
A typical definition of inclusion has the connotation of "Have's and Have Not's", it is about the
"Divide". There is a "Divide" in almost all ecosystems. Digital ecosystem has the "Digital Divide"
[Only 376 million Mobile subscribers, 5.55 million Broadband subscribers, teledensity at 36%],
Financial ecosystem has the "Financial Divide" [Approximately only 34% of population has bank
account ownership, active banking relationships are still less and best estimated at 20%], Healthcare
ecosystem has the "Healthcare Divide" [Only 11% of the population has access to primary healthcare
within a radius of 8 kms], Education ecosystem has the "Education Divide" [ less than 20% of the
population can read and write beyond their own names, and a smaller percentage can do simple
arithmetic ] and so on,
All in all, there is "Opportunity Divide". Inclusion is about bridging these divides.
Before we began the journey to identify the alternative approaches to bridge the divide, we
started with analyzing the aspirations and needs of the people in the BOP. Our key findings were
as follows:
1. BOP's primary focus is to increase their income. They therefore, aspire for:
a. Financial Services
b. Accesses to affordable education
2. In addition to the above their next big need is access to affordable health care
3. Beyond the above, they are seeking all other services that the rest of us enjoy including,
Entertainment, and other modern facilities
4. Contrary to popular wisdom, BOP is not looking for dole or upliftment. They are highly self
motivated and entrepreneurship is their mantra. They are merely looking for the opportunity
These finding set the context for us as we began to look for alternative approaches to address the
"Opportunity Divide" and facilitate Inclusive Growth. The next big discovery for us was when we
found that there are myriad of initiatives across the country, and that most of them are quite
effective. However, we observed that the different ecosystems are attempting to bridge this divide
in Silos, through various inclusion projects. Our approach is to look at inclusion in totality, across
ecosystems, and build a technology enabled super-ecosystem to bridge the opportunity divide.
GOVERNANCE II Technology Enabled Super-Ecosystem for Inclusive Growth – A super-ecosystem to look at inclusion in totality

48
The key issues hindering
inclusion
We believe the Bottom of the Pyramid (BOP) is deprived of
the common services due to two main reasons:
Accessibility - Service not being available at the right
location at the right time and in a manner desired/understood
by the consumer/community
Affordability - Even if services are accessible they need to be
at an affordable price. In other words it's about the ability to
deliver services at much lower cost
Our approach is to look at inclusion in totality, across
ecosystems, and build a technology enabled super-
ecosystem to bridge the opportunity divide.
We recognize that there are multiple service providers
(NGOs, Government, and other for-profit organisations)
attempting to meet the BOP needs through innovative
means. In our research, we have numerous examples that
substantiate this fact. However, they are unable to achieve
the much needed Reach and Scale. So, at best, these efforts
have remained localised and sometimes restricted in scope.
However, when one looks at the numbers, it's obvious that
there is a business case for going deep in the BOP and
leverage the opportunities presented by the huge proportion
of people in the other side of the divide.
The Solution
Our approach is to evolve an ecosystem for inclusive
growth (or Opportunity Inclusion), powered by business
interests and held together by technology. The picture below
depicts the concept behind the solution. It is a hypothetical
"Bridge".
On one end there is Service Providers (SP) and on the
other end of the bridge are BOP communities. The "bridge"
includes a shared technology platform and core processes
that many of the SPs from different verticals could leverage
to reach the BOP consumers.
The model borrows heavily from the business
correspondent model in Banking to enable the BOP
community reach the "Bridge" and vice-versa. The business
connector here is similar to a business correspondent with a
few additional/modified characteristics. These include:
1. He is a free-agent who can represent one or more services
ranging from Financial Services to any other service
(Insurance, Healthcare, Education, Entertainment)
2. On the flip-side, he represents specific communities to the
Service Providers through the bridge. He accomplishes
this by registering BOP folks on the bridge with their
needs/aspirations
At a broad level, the scope of the bridge backbone starts as
back-end to the Business Connectors and ends as the front-
end for the Service Providers. The bridge will enable:
1. Aggregation of business connectors across the nation
2. Aggregation of demands of BOP, and facilitate Service
Providers to address the same
3. Aggregation of "supply" (Services from the service
providers) and provide choice to the BOP
With the above, we believe the "Bridge" will significantly
transform the existing value chain making it more efficient
and effective resulting in tackling the key issues of access
and affordability while facilitating reach and scale for the
Service Providers. In essence there we see a tomorrow with
More People with accesses to a Service, and More Services
(and choice) available to People.
KeyTechnology
Components
The bridge primarily will support core services such as, user/
business connector registration, user profiling, community
grouping/selection, identity management, content creation
and management, and other fulfilment services to help SPs
and so on. These services will be Open-Source based and
will continuously evolve as the bridge matures and new
verticals participate on the bridge.
Beyond the bridge the business connector will require
front-end technologies such as smart card readers and other
devices to access the bridge remotely to carry out
registration of BOP users and their needs, and par-take in the
fulfilment process.

49
Making it workable
While as a concept, the Bridge appeals to most people, the
key difference lies in ensuring that it is implementable. To
achieve this, we need to start from two ends - (i) the BOP
community and (ii) the Service Providers (SP), with the Open
Source philosophy
On the BOP end, we are urging the different verticals (SPs
serving BOP) to collaborate, and open up the last mile
connection (Business Connector) to be independent and
allow them to represent multiple services across verticals.
Parallely, we set up a common infrastructure at this end
based on open-source where the Business Connectors get
enabled to register and derive the core services.
On the SPs end they should create their bridge or become
part of super ecosystem to accesses target users and
communities in the BOP and leverage the Business
connectors to fulfil their transactions. Note, the bridge will
require additional nuances depending on the needs of the SP
and the vertical it serves. It is expected that these nuances
will be added to the Open-Source Bridge and can then be
leveraged in an integrated fashion to service the BOP.
We believe an Open Source (OS) platform for SPs will
enable them to leverage technology to deliver services at a
much lower cost. Additionally, as we expect this platform to
interact with other OS Platform/Processes that facilitate
registration of BOP individuals/communities and their needs
(and further integration/collation). Through this interaction,
SPs will have the much needed scale and reach.
On the front-end, as alluded to above, the OS platform/
process model which will incorporate independent business
correspondents (BC) as touch points who leverage an OS
platform for registering BOP individuals/communities. The
super ecosystem would seamlessly connect these two sides
through integration capabilities across devices leveraging
different kinds of technology. Thus, different SPs would
leverage the same ecosystem to reach out to BOP
communities.
Clearly, the economies of scale, use of common
infrastructure & resources, and OS philosophy will help
lower cost of delivery and hence make the services
affordable for BOP. Additionally, the ability to add
independent BCs with the ability to interact with the front-
end platform will significantly improve accessibility of the
much desired services by the BOP.

50
Good Governance and
Employment Generation
through NREGA
A case Study of Gram Panchayat in West Bengal
Dipjoy Sen Roy
Industry Analyst with Frost
& Sullivan
Debabrata Samanta
Research Scholar, Humanities and
Social Science Department,
Indian Institute of Technology,
Kharagpur
Introduction
The National Rural Employment Guarantee Act (NREGA), 2005 is landmark legislation in Indian
history of social security legislation after independence. Enacted after a successful struggle for an
employment guarantee legislation, this legislation is a partial victory towards a full-fledged right to
employment in any developing country context. For the first time, right to work has been made a legal
compulsion and entitlement for unemployment allowances in case of non-allotment of employment
assured through this act. What is considered to be crucial is the empowerment of the poor through
the provision of a right-based law, which would act as a strong safety net in the lack of alternative
employment opportunities for poor people. The other key attributes of this scheme are time bound
guarantee, labor-intensive work, decentralized participatory planning, women empowerment, work
site facilities, and above all, transparency and accountability through the provision of social audits
and right to information. NREGA is a unique and unprecedented effort in strengthening grass-root
democracy in India. For the first time, the Indian state has legally mandated the implementation of
mechanism that strengthen transparency and accountability at every step of the delivery chain, by
creating platform for citizens to articulate their voice and directly engage with the state. This legal
mandate has been the catalyst for state government across the country to innovate with different tools
to strengthen accountability (Aiyar & Samji: 2009). In west Bengal, Gram Panchayat is the primary
program implementing agency of NREGA, along with other PRI bodies and line departments. Potential
implementation of NREGA needs adequate capacitated governing body and motivation.
In this backdrop, the paper attempts to examine how the institutional features, which are components
of Good Governance, are being practiced through the institutional framework of grass-root level self
government institution of West Bengal, viz. Gram Panchayat. Along with this, attempts had been
madetoexploretherelationship,ifany,betweenthecomponentsofgoodgovernanceandperformance
of NREGA. Accordingly, the paper has been organized as follows:
Section I: Brief of NREGA
Section II: Explores the role of Gram Panchayat as main implementing agency of NREGA.
Section III: States the concept of Governance and Good Governance.
Section IV: Discusses the methodology and dataset.
Section V: Presents the results and conclusion.
GOVERNANCE II Good Governance and Employment Generation through NREGA – A case Study of Gram Panchayat in West Bengal

51
SectionI
Salient Features of NREGA
Evolving the design of the wage employment programs to
more effectively fight poverty, the Federal Government
formulated the National Rural Employment Guarantee Act
(NREGA) in 2005, a paradigm shift from earlier wage
employment programs. With its legal framework and rights-
based approach, NREGA provides employment to those who
demand it. This is the largest ever public employment
program visualized in human history. The successful
implementation of NREGS can improve the safety nets and
eliminating hardcore poor (Rao: 2007).
Major objectives of NREGA are:
To enhance livelihood securities through the provision of
minimum 100 days of employment to a rural household
based on their demand
To create durable assets and strengthen the livelihood
resource base of the rural poor
Strong social safety net for the vulnerable groups by
providing a fall-back employment source, when other
employment alternatives are scarce or inadequate
Growth engine for sustainable development of an
agricultural economy
Empowerment of rural poor through the processes of a
rights-based law
New ways of doing business, as a model of governance
reform anchored on the principles of transparency and
grass root democracy.
The design of the NREGS program is unique in being
largely demand driven and the introduction of entitlement of
unemployment allowances in case of non-allotment of
employment. Undoubtedly, the NREGA has addressed many
of the weaknesses of the earlier programs through the
introduction of rights-based framework, time bound
accession to fulfill guarantee, incentive and disincentive
structures, demand based resource availability and
accountability.
Section II
Role of Gram Panchayat in
Implementation of NREGS:
As grass roots institution, Gram Panchayat - the lowest tier
of the three-tier system - is closest to the people and the
locality. Section 19 of West Bengal Gram Panchayat Act,
1973, describes that "A Gram Panchayat shall function as a
unit of self-government and, in order to achieve economic
development and secure social justice for all, shall, subject to
such conditions as may be prescribed, or such directions as
may be given by the State Government,"(West Bengal Gram
Panchayat Act, 1973). It is the implementing agency of most
of the development programs and also monitors and
evaluates programs as well as it is the main service providing
agency at the ground level. At this level, Gram Panchayat is a
very powerful and influential body, wielding effective control
over substantial resources and political power (Ghatak &
Ghatak, 2002). Gram Panchayat is also one of the most
responsible stakeholders in successful implementation of
NREGS program. Gram Panchayat is responsible for creating
awareness about the scheme, receiving application, register
names, issue of job cards, provide employment to the job
seeker and also keeping records of the works under NREGS.
Along with this, Gram Panchayat has to prepare self schemes
to provide employment within the stipulated 15 days of
demand, and to provide timely wage. It also has to make
arrangement for enough funds for wage payment. Gram
Panchayat is also responsible for redress complaints lodged
by people. Gram Panchayat has to publish and update the
data related to implementation of NREGA in the specified
hoarding in proactive disclosure format.
The practice of Good Governance is intrinsic in
performances related to NREGA. In the next section, we will
discuss about the concept of Governance and Good
Governance.
Section III
Concept of Governance and
GoodGovernance:
Nowadays, the terms 'Governance' and 'Good governance'
has become catchword in the development discourse.
'Governance' is defined as a process of decision making and
the process by which decisions are implemented. It denotes
both political and administrative functions to ensure moral
behavior and ethical conduct in the task of governing (Singh
and Singh, 2004). Good governance is, among other things,
participatory, transparent and accountable, effective and
equitable, and it promotes the rule of law. It ensures that
political, social and economic priorities are based on broad
consensus in society and that the voices of the poorest and
the most vulnerable are heard in decision-making over the
allocation of development resources (UNDP, 1997). Absence
of good governance acts as a formidable hurdle in the
achievement of proper development. It is necessary to
provide the best benefit to a large number of people (Bagchi).
UNDP recognizes the following 9 core characteristics of
good governance, which are: 1) Participation 2) Rule of law 3)
Transparency 4) Responsiveness 5) Consensus oriented 6)
Equity 7) Effectiveness and Efficiency 8) Accountability and
9) Strategic vision. The implication of good governance is
manifold as good institutions beget good governance.
Institutions matter for both long and short term because they
form the incentive structure of a society and provide the
underlying determinants of economic performance (North:
2005). Sharma (Sharma: 2007) rightly pointed out that, many
of the items listed on the good governance agenda as
preconditions for development are actually consequences of
it. The implications of good governance are profound as
institution building and the promotion of good governance
demand simultaneous commitment to economic development.
Finally, measuring good governance and overall
governmental performance, generally, requires measuring the
"outcomes" not just "inputs" (Rotberg: 2004). This paper

52
attempted to measure the outcome of good governance
practiced by Gram Panchayats of West Bengal through the
employment generated under NREGS. The next section shall
discuss about the methodology regarding the measurement
of good governance practices and explore the relationship, if
any, between characteristics of good governance and
performance of NREGA.
Section-IV
Research Design, Data Set
andMethodology
The study has tried to explore a relation (if any) between the
core characteristics of good governance and performance of
NREGS by considering the case of Gram Panchayats of West
Midnapore district in West Bengal.
Methodology
Following the UNDP measures of good governance, we have
considered the following components of good governance:
1. Participation
2. Transparency
3. Accountability
4. Effectiveness & efficiency
5. Equity
(N.B: out of nine parameters as recognized by UNDP, we
will restrict our study only to the above mentioned
parameters and this is the limitation of our study.)
We have formed a linear regression model by taking average
persondays created per Household (PdcHH) as dependent
variables and above five components of good governance as
independent variables. Following the OLS method (Robust
standard Error), we have run the following regression model
in STATA.
The model is
PdcHHi= ?1+ ?2PrtRTi+ ?3Eqtyi+ ?4Trnspri+ ?5Accncti+
?6Efcncyi+ ui
The variables in the model are defined below:
Variables
The Dependent Variable
Dependent variable measure the average no. of persondays
created, which is the ratio of total persondays created and
number of household provided employment under NREGS in
a Gram Panchayat. Primary objective of NREGS is to provide
100 days of employment to each household on the basis of
their demand. Hence, average number of persondays created
is the most sought-after indicator for reflecting NREGS
performance.
IndependentVariables
Independent variables are classified into five categories
corresponding to various components of good governance.
Sample framework & Data Set:
There are 29 blocks and 290 Gram Panchayats in Paschim
Medinipur district of West Bengal. Following a random
sample methodology we had selected 5 Gram Panchayats per
block with total sample size of 29x5=145, which is 50% of the
total population. But due to unavailability of data, we
Proxy Variable
To measure participation we have taken average
attendance in last half yearly gram sansad1 (village
constituency) meeting held in November-December, 2007.
The arrangement or availability of data and information for
people's inspection, if any, help us to measure the
transparency. We used two different variables to measure
transparency level of a GP. These two variables are:
arrangement for accessing different data and information
at GP and provision of inspection of Muster Roll in the GP
by common people2.
Share of own source revenue utilized in local contingent
development activities related to education, health,
nutrition etc., measure the effectiveness of GP in our
model.
Availability of complain register. (yes=1, no=0)
To measure equity we have taken share of participation of
women in the same gram sansad meetings.
Symbol Used
PrtRT
Trnspr
Efcncy
Accnct
Eqty
Description
All men and women should have a voice in
decision-making, either directly or through
legitimate intermediate institutions that represent
their interests. Such broad participation is built on
freedom of association and speech, as well as
capacities to participate constructively.
Transparency is built on the free flow of
information. Processes, institutions and
information are directly accessible to those
concerned with them, and enough information is
provided to understand and monitor them
Processes and institutions produce results that
meet needs while making the best use of
resources
Decision-makers in government organizations are
accountable to the public.
Equality of men and women in decision making to
improve or maintain their wellbeing
Variable Type
Participation
Transparency
Effectiveness
and efficiency
Accountability
Equity
Table1

53
dropped one block (Keshiyari) and also data for five Gram
Panchayats per block are not available for all the blocks.
Considering this problem, we have taken 5 Gram Panchayats
per block wherever it's available (selecting Gram Panchayat s
which have provided data in all the required fields) and for
other blocks we have taken maximum number of Gram
Panchayat where data are available. Considering the above
constraint, we finally get our sample size of 120, i.e. 41%
(approx) of the total population. Aforementioned data has
been collected from Self Evaluation formats of Gram
Panchayat for the year 2007-083. Corresponding to our
selected Gram Panchayats, data for NREGS performance, i.e.,
average persondays created for the year 2007-08 has been
collected from district NREGS cell, Paschim Medinipur.
Section-V
Details of Some variables:
Before going to measure the relation, if any, between NREGS
performance and components of good governance, we would
like to see the performance of our variables through some
descriptive statistical measure.
As per the Panchayat and Rural Develoment Depertment
Report on the performance of NREGA in 2007-08, the average
number of persondays created per household in West Bengal
was 25; whereas in the study area it is 19 (approx) clearly
shows under performance.
The average Participation rate of 19% with maximum of 40%
and minimum of 5% shows a good performance compared to
13.1% state average rate (WB Human Development Report
2004). Average women participation rate (22%) is slightly
better than the overall participation rate; showing good
equality among genders.
Following the methodology described earlier, we have regressed
persondays created per household on a set of variables. These
variables are described in Table 1, which reflect characteristics of
good governance. R-squared value shows that approximately 17
% of the variability of dependent variable has been explained by
the independent variables. Equity, which states the equality of
men and women in decision making procedure found statistically
significant. Thus participation of women in gram sansad meetings
will increase the persondays created per household, which is in
conformity with our economic logic. Accountability, which we
measure through the presence of complains register, also found
significant and shows positive relation with the NREGS
performance. Utilization of own source revenue in local
developmenthassignificantpositiveimpactonpersondayscreated
per household as per economic logic. This represents Efficiency
and effectiveness of government plays a positive role in successful
implementation of NREGS.
Two most distinct results we got in this regression analysis are
insignificance of participation variable and negative relation
between transparency variable with dependent variable, which is
not consistent with our economical logic. Can we conclude that
participation is not significant in explaining NREGS performance?
AndlessertransparencyofgovernmentwilltendtoimproveNREGS
performance? Possibly no, as from our economic logic we can
justify that more transparency will tend to increase average
persondays creation. Likewise more participation, i.e., the more is
the attendance in gram sansad meeting the more average
persondays will be created. Given that our economic logic is
correct, the anomalous behavior of the regression coefficient can
be justified by considering econometric issues involved in the
estimation methodology. This creates scope for another study.
Other things can be noted that R2 value is low, which can be
justifiedbyomissionofotherrelevantvariables.Fromthefollowing
discussion we can conclude that, though good governance is
important in generating employment under NREGS, but there are
other variables, which are responsible for good performance of
NREGS. Coming back to our hypothesis we can say that there
exists a relationship (though two of our independent variables
show different results) between average persondays created and
components of good governance. Therefore, we can conclude
that increasing the performance of governing body (here Gram
Panchayats) can improve the NREGS performance, hence helps to
reduce the poverty level.
RESULTS & CONCLUSIONS

54
References
1. Aiyar, Y. & S. Samji (2009): Guaranteeing Good Governance: Understanding the Effectiveness of
Accountability Mechanism in NREGA ; NREGA e-Knowledge Network; UNDP, New Delhi.
2. Bagchi, K.K : Good Governance and Sustainable Local Development: A Case Study of Gram
Panchayats in West Bengal; (www.ignou.ac.in)
3. Governance for Sustainable Human Development, A UNDP policy paper UNDP 1997.
4. Islam, Nazrul Md (2004): Decentralised Governance Transparency and Accountability:Empirical Evidence
from West Bengal; ISEC Working Paper144; Institute for Social and Economic Change.
5. Maitreesh Ghatak and Maitreya Ghatak: "Recent Reforms in the Panchayat System in West Bengal:
Toward Greater Participatory Governance?"; Economic and Political Weekly, Vol. 37, No. 1 (Jan. 5-11,
2002).
6. North. Douglass C. (2005) Understanding the Process of Economic Change (Princeton, NJ: Princeton
University Press, 2005).
7. NREGA Sahayika (in Bengali) 2008: State Institute of Panchayat and Rural Development, Panchayats
andRural Development Department, Government of West Bengal.
8. Panchayati Raj (2008): Panchayats and Rural Development Department, Government ofWest Bengal,
May 2008.
9. Rao; V.M (2007): 'Making Safety Nets Effective for Hardcore poor'; Economic and Political Weekly;
August 18, 2007.
10. Report: "The Appraisal of Procedures and Processes of NREGA in ORISSA: A case study of Balasore
and Mayurbhanj District"(2009): HSS Department, IIT Kharagpur, Sponsored by MoRD, Govt. of India
11. Robert Rotberg, "Strengthening Governance," Washington Quarterly 28, no. 1 (Winter 2004): 71-81.
12. Sharma. Shailendra. D (2007): Democracy, Good Governance, and Economic Development; Taiwan
Journal of Democracy, Volume 3, No.1: 29-62
13. Singh and Singh (2004). "Governance and Developmen Deprivation in India", The Indian Journal of
Public Administration, Vol. L, No. 1, January-March, pp.277-284.
14. West Bengal Panchayat Act, 1973, Government of West Bengal, Law Department.
15. West Bengal Human Development Report 2004, (http://data.undp.org.in/shdr/wb/WBHDR.pdf)
Variable Descriptive Statistics
Name Mean Median Mode Standard Deviation Minimum Maximum
PdcHH 18.65367 16.68 17.91 10.14518 3 73.89
PrtRT 0.199644 0.175 0.125 0.087895 0.0545 0.4
Trnspr 3.1 3 4 0.901912 1 4
Efcncy 0.276134 0.25215 0.445 0.171959 0 0.7821
Accnct 0.891667 1 1 0.312104 0 1
Eqty 0.222242 0.175 0.145 0.135582 0.02 0.55
Regression results:
Independent Variable Regression method -OLS (Robust standard Error)
Coefficient t-value
PrtRT 3.341557 0.28
Trnspr -2.195693 -2.58**
Efcncy 12.13276 2.62**
Accnct 7.148823 3.57**
Eqty 18.57024 2.25*
Const 10.94147 2.99**
Total Observations: 120 F(5,114)=4.90 R-squared=0.1713
Prob.>F=0.0004
**,* indicates significance at 1% and 5% level respectively.
Without * represent insignificant.
APENDIX
Descriptive statistics of dependent and independent
variable:
Note:
1: 1: There are two institutions called Gram Sansad (Village Constituency) and
Gram Sabha, which exists below the Gram Panchayat level in West Bengal. All
the voters in a village constituency are members of Gram sansad. Gram sansad
meetings, at the village constituency level are held twice in a year. Objectives of
holding Gram sansad meeting are to select beneficiaries of different schemes,
raise proposal for planning and review the proposed budget and previous
year's performance.
2: The two variables are (X1) whether Gram Panchayat has arrangement to
provide data or information as per RTI act, 2005 and (X2) whether there is
arrangement for inspection of Muster Roll in the Gram Panchayat. Values taken
by the above variables are follows:
X1 = 2; if the arrangement is available and information has been accessed by
people
= 1; if the arrangement is available but no one has accessed any
information
= 0; if no arrangement available.
X2 = 2; if Muster Roll had been inspected by people
= 1; if arrangement for inspection of MR is there but no one inspected.
= 0; if no arrangement available.
Transparency = X1+ X2
3: Self Evaluation format is a format prepared by Panchayats and Rural
Development Department of the Govt. of West Bengal and circulated to each
PRI body every year. The PRI bodies require to put the scores in different
parameters to evaluate their own performance.

55
Battling Disasters
through Partnering
Battling Disasters through Partnering
Ltcdr. Pawan Desai
CISA, CISSP, BCCP
Head - Business Continuity
Management
MiteshShah
ISO 27001 LA
Associate Consultant - Business
Continuity Management
Introduction
In this ever changing threat environment, it is imperative for organisations to constantly remain
alert in order to fight new security threats. Challenges may vary from fire to flu but their long term
impact is enormous. The ability of organisations to weather disasters, decides their sustainability
and future. Hence, it is critical for organisations to fight disasters rapidly with the best technological
equipments. The big question arises on the level of investments and preparedness since there is
no certainty of disasters. The best method to deal with challenges is to PARTNER. This paper
focuses on the challenges organisations face while dealing with disasters & how partnering can
help resolve these issues.
Roadblocks for corporate when preparing for contingencies
Operated from multiple locations For organisations with multi site operational facilities, the
biggest challenge is replication of disaster management facilities for all sites, as the threat
prevailing at these locations shall be based on geographical and political stature of the
locations. Currently organisations are operational from multiple locations & also in multi-
tenanted arrangements. The challenge that an organisation faces is to have the same disaster
management arrangements replicated over each of these locations since the threats it might
face would be according to geographical & political stature of the location. Also, while
operational from multi-tenanted scenarios, the entire control is ideally cannot with one party.
It becomes very difficult to replicate all the disaster management arrangements in different
the locations.
Budget constraints Mitigation of these risks involves cost of allocating additional resources,
which acts as a support function without adding any value to the bottom-line of the organisation.
Also it becomes impractical to station these resources at all the locations. The resources that
an organisation requires to mitigate or fight disasters in terms of people, technology, equipments
come with a cost. Also, these resources are virtually acting as support functions and adding
no value to the bottom-line of the organisation. On top of this, organisations operate from
multiple locations so allocating the same budget for all the offices becomes unfeasible.
Scarcity of skilled personnel
Skilled personnel with the expertise to fight or mitigate disasters are inadequate. A person
having special skills in fire fighting specifically or personnel from the armed forces willing to
join corporate sector are rare. Although we can train them but to have personnel who have
had real life experiences in dealing which such scenarios are hard to find.
Practicing real life disasters scenarios
While mock drills and simulation exercises are good ways to practice disasters assuming
ideal conditions. Organisations assume that everything outside would be normal, but in real
life transportation may be affected, communication may be at fault or emergency supplies
DISASTER MANAGEMENT & SECURITY II Battling Disasters through Partnering – Battling Disasters through Partnering

56
might be unavailable. Also sometimes it is difficult to practice real
life scenarios may be due to its affect on the neighbourhood. For
instance, in a manufacturing firm if a plant & corporate office are
together, an evacuation drill might disrupt the floor shop.
Truth behind disasters
Seldom atomic
Organisations always prepare for specific incidents, for instance
organisations prepare for incidents like fire, terrorist attack, bomb
threat or flood in isolation. They have predefined procedures to
respond in such scenarios and they expect everything around would
be in ideal condition. In reality disaster seldom strikes in isolation,
one event may spark another event. Off late it has been observed
that one disaster kicks off the other like a terrorist attack might
sparks a fire in the warehouse of a manufacturing firm.
Complications multi-fold when one disaster gives rise to another.
Disasters are like ripples, one giving rise to other. Organisations
generally prepare for atomic incidents, and forget that these atomic
incidents combine to form a crisis situation. Our disaster recovery
plans fail during such scenarios since they are used to prepare for
only atomic incidents. Hence it is important to have a comprehensive
plan which involves all the parties so that organisations can have
speedy resolution of the incident.
Magnitude unknown until over
The magnitude of disaster is difficult to judge by viewing the scene.
Many times organisation fails to estimate the magnitude of the
disaster due to incomplete information from the sources. Due to
this, they are unable to speculate regarding what disaster
management resources & activities would be required. For
example, during heavy rains it is difficult to predict all areas would
be flooded unless informed by the authentic sources and authorities
and therefore it becomes difficult to take a call on whether to stay
in office or leave outside. Also during such situation, there is a
spur of speculations about disasters from all around making it
difficult to identify what information is correct & reliable. The fact
is that the impact of disaster is unknown until it ends, so the
resources that provide information & emergency supplies have to
be in loop constantly so that they can fight it.
Stressful - Long lasting mental affect
Disaster scenarios are stressful; they take a toll on the mental
state of the people involved, so it becomes critical for the persons
involved in rescue and response operations to have a strong head.
Since while practicing, one cannot have the exact feel of what
actually would happen in a disaster scenario. Decision making is
critical during such situations and disasters leave a long lasting
mental scar which is difficult to heal immediately. To help counter
this problem, organisations should partner with counsel with
medical agencies which would help in curing such problems
Spill over affect
Disaster spills over other channels such as communication and
transportation. The resources one might possess might get affected
during crisis scenarios and therefore it would need support of
other resources. For instance, during floods it might happen that
your organisations communication channels are at fault and
therefore it would require support for other organisations to provide
resources to deal with floods.
The Solution
The corporate world-alone cannot completely fight disaster.
It needs skilled human resources, valuable information and
specialized tools to combat disasters on face. To possess all
the elements is difficult by one organisation, so the best
method is to partner with private and public bodies. By
partnering with public bodies we can have access to
priceless information directly from the source, expensive
equipments and skilled personnel. Partnering makes
partnering units stronger and therefore it helps in better
building of armoury to face disasters.
PartneringwithPUBLICunits
Organisations hesitate to partner with public bodies either
because they treat them unreliable or due to traditional
perception of public bodies. Also sometimes there is a fear of
public agencies using age old conventional approach to
respond during contingencies. But in reality, the public
agencies might be the best equipped with latest tools &
technologies to fight disaster. The liaison has to be build
between public authorities & private firms so that together
they can better fight disaster.
Partnering with PRIVATE units
When partnering with private units, it is important to
understand the nature of business and culture of the
partnering firms. Also trust plays an important role while
partnering. Since the resources would be shared amongst
partnering organisation, it should be made available
whenever required. The fear of critical information getting
leaked also has to be removed and a sense of belongingness
should be present. Ownership is a key issue while partnering
with private units, it is best that organisations themselves
divide resources and take ownership for each one of them.
How to partner?
Identify the organisations that can collaborate
Collect disaster management requirements of each
partnering unit
Analyze the criticality and accordingly plan
Identify and gather resources in terms of which would be
required
Identify Single Point Of Contact which will disseminate
information
Include govt. authorities delegates
Practice together as one unit and discover shortcomings
Work on the shortcomings
Share experiences to improve
Win-WinSituation
Sharing reduces INVESTMENTS
Organisations needs to invest heavily in people, technology
and equipments to fight disasters. Sharing these elements
while partnering will help divide the investments and help
build a structure which is more strong and robust. For
instance, a common ambulance in a SEZ shared amongst ten
organisations, will cut down the investments. Also it would
bring a sense of comfort amongst employees that will get

57
"United we stand, divided we fall" - The proverb aptly justifies the
need for partnering against disasters. The challenges that today's
corporate faces due to disasters are huge but with partnering
organisations can be better prepared to face those challenges.
CONCLUSION
immediate medical attention during time of adversities.
Rapid support
Many times it is the time of the support provided during
disasters that determines the impact of the disaster. Hence it
is important that you the sources that can provide help are in
near vicinity. A next door neighbour can provide you on time
support which can in-turn result drastically reduce the impact
of disaster. Positive assurance can be provided due to the
geographical closeness of one another.
Expertise getting shared
Expertise gets shared as it is not feasible for one organisation
cannot to have all the expertise. Professional technical
support can be sought to whenever required. Also the
partnering units are aware of the arrangements present at
each unit.
Relation building
When you partner, you build relations. Relationship can be
further used for getting business benefits. Also when you
build relation, the level of trust grows and you are better
prepared for such incidents. Brand value also grows once
you partner.
Neutral assessment of strengths & weakness
While partnering organisations get to know each another's
strengths and weakness. Self assessment on areas of
concern can be done and subsequently measures can be
taken for improvement.
Case Study
In July 2009, Bombay Chamber of Commerce and Industry
(BCCI), India's oldest Chamber, in partnership with Mahindra
Special Services Group and Municipal Corporation of Greater
Mumbai (MCGM) unveiled a broad strategy to prepare the
citizens of Mumbai to overcome flood related crisis and
transform Mumbai into a safer place for its citizens and
businesses. The MCGM had indicated the possibility of a
high tide of 5.01m & 5.05m on 23rd and 24th July 2009
respectively that could have caused massive flooding in the
city.
In response to this warning, this Flood Preparedness
Session for Mumbai citizens jointly conducted by public and
private sector aimed to prevent Mumbai from facing a re-
enactment of the catastrophe that devastated life and
property in July 2005. While the severity of the flooding
would probably be unabated, better preparedness was
supposed to help public and private sector employees to
overcome the crisis.
While MCGM had undertaken measures to improve the
city's disaster management capabilities, the training session
showed that it is imperative for individuals & corporate to
review their preparedness for responding effectively.
The Flood Preparedness Session on 16th and 21st July
2009 in Mumbai covered the following:-
Lessons learnt from 2005 floods: Do's and Don'ts during
floods.
Analysis of the current situation in Mumbai and
assessment of risk exposure of the organisation in terms of
physical, personnel and information assets.
How well are you prepared?
Preparations done by Government Agencies and
expectations from Corporate & individuals (especially in
flood prone areas).
At the end of the session, all participants were provided with
a CD of the entire training presentation and flood advisories
with emergency contact numbers and Do's and Don'ts during
floods.
This initiative was highly appreciated by the Mumbai citizens
and helped build a strong partnership between the public
and private sector organisations.

58
Information
Security Threats
Implications for National Security
Dinesh Pillai
CEO,
PriyashreeAndley
Associate Consultant
Public Relations and Marketing
Introduction
Increasing threat of Information Warfare: Implications for National Security
Global interconnectivity is making states vulnerable to new threats. Computer-based assaults or
acts of information warfare, on state's systems such as nuclear establishments, energy grids,
telecommunications and financial facilities could severely disrupt national defense and social
services. Cyber force is a form of intervention that can produce harmful or coercive effects, and
put national security at risk. It is commonly understood as structured intercepting or manipulating
of industrial, military, economic and social data and information systems. Even realizing the new
forms of computer-generated weapons and changing concepts of sovereignty and territory brought
about by global interdependence, international law is likely to rely on UN Charter principles to
define the legal boundaries of cyberspace.
In a growing electronic economy, cyber attacks are increasingly being used for political, financial
and military reasons. States or non-state units can use cyber attacks to extract critical information
about strategic developments. This form of warfare can be highly anonymous and more economical
given the low cost of R&D.
The paper identifies various ways in which states are targeted by cyber warfare. It highlights the
risks states' face in countering this form of warfare. The final section explains how public-private
partnership can neutralize cyber attacks by adopting the suitable techniques.
DISASTER MANAGEMENT & SECURITY II Information Security Threats – Implications for National Security

59
Indian Scenario
There are three trends that make a state or non-state
enterprise transparent and vulnerable. These are: Internet
enabled connectivity, Wireless networking and Mobile
computing. Increasing cases of identity and data theft are
becoming a major cause for concern across state and private
organizations. They're causing financial loss, data loss, and
loss of credibility and reputation. Critical infrastructures such
as telecommunications, transportation, energy and finance
can get affected by attacks on Information infrastructures.
Investigations reveal that attackers are not confined to
geographical boundaries
Exploiting network interconnections and moving easily
through the infrastructure
Becoming more skilled at masking their behaviour
Tracking them is becoming difficult
The common targets of cyber attack include:
1. Military networks
2. Government websites
3. E-Commerce and Financial Institutions
4. Telecommunications
In 2007, Indian police acting on an intelligence lead arrested a
suspected Kashmiri militant near Jalahalli, a village north of
Bangalore. Authorities confiscated an assault rifle and 300
rounds of ammunition from the suspect, Bilal Ahmed Kota, as
well as -- significantly -- a satellite phone, a cell phone,
multiple cell phone SIM cards and a map of Bangalore that
marked the airport, offices of Wipro Technologies Ltd. and
the complex operated by Infosys Technologies. The Kota
case highlighted the increase in incidents and threats to the
high-tech industry, and underscores that militant groups are
paying greater attention to economic target in India and to
this important sector.
However, the danger of attacks by cross border militants,
Maoists or Naxalites is not the only threat that corporations
and state authorities now face in India. These units are
confronting what is effectively a multi-pronged security
threat that also includes growing concerns about personal
security and kidnappings, a greater recognition of risks to
intellectual property that stem from corporate espionage, and
issues related to privacy and the risks of criminals stealing
sensitive customer information. Security managers today
have a very different perception of the risks associated with
doing business in India than they had few years ago.
Significantly, dealing with each of these individual threat
categories brings with it an associated business cost. As the
risk environment -- or perceptions of it — shift, a new
question emerges: At what point will the costs of doing
business in India begin to outweigh the benefits?
The demand for better methods to enforce cyber security
has grown stronger since the 26/11 attacks in Mumbai.1
India
has a dedicated organization, CERT-In — which operates
under the department of communication and information
technology — to tackle cyber crimes. Generating India
Specific Information providing
Threat reports
Impact of major worms and viruses
Current state of security in Indian Industry- Surveys
SPAM - India specific data
Cyber Crime, India as Target/Origin
Proactive action and effective collaboration aimed at
security incident prevention, prediction & protection and
security assurance. However, the agency is not a
prosecuting body as it does not have the legal power to
examine cyber crimes.
CyberSecurityThreats
Organised cyber attacks have been witnessed at the
Pentagon, US in June 2007, Estonia in April 2007, Computer
systems of German Chancellery and three Ministries, E-mail
accounts at National Informatics Centre, India and Highly
classified Govt. computer networks in US, New Zealand &
Australia.
A few of the Indian sites defaced by Pakistani hackers are:
1. Indian Science Congress
2. National Informatics Centre
3. Videsh Sanchar Nigam Limited (State-run international
voice carrier)
4. External Affairs Ministry
6. Ministry of Information Technology
7. Asian Age newspaper
8. Official site of Gujarat Government
9. GlaxoWellcome India
10. Engineering Export Promotion Council, Ministry of
Commerce
Few of the Pakistani sites defaced by Indian hackers are:2
1. The Nation (newspaper)
2. Pakistan Television
3. Pakistan Tourism Development Corporation
4. Official site of Punjab Government
5. Shaheed Zulfiqar Ali Bhutto Institute of Science and
Technology
6. Prime bank
7. Hamdard University
Types of Cyber Weapons
The software used to carry out these attacks indicates that
they were clearly designed & tested with much greater
resources. Increasing use of pendrives, CDs, mobile phones
equipped with Bluetooth technologies make it difficult to
keep a tab on employees and third parties. USB ports are
used to connect devices like Internet data cards. While this
makes it easy for state's mobile workforce to connect to the
corporate network, or use the Internet when on the move to
check important mail, it also makes it easy to leak information.
1. In March 2005, when a police raid in New Delhi turned up evidence of plans for attacks against IT companies in Bangalore, many private security companies and security directors for multinational corporations
assumed the threat was being exaggerated by the Indian press. In March 2006: The police presence around high-tech businesses in Hyderabad was increased, and authorities called for companies to review
their security measures, after Indian authorities said they had received what they characterized as a credible threat against customer service and support centers in that city.
Source: Fred Burton, "Corporate Security: Risk and Cost Tolerance in India,' Jan 10 2007, http://www.stratfor.com/corporate_security_risk_and_cost_tolerance_india
2. Cyber Wars between Pakistan and India," 31 March 2008 http://www.articlesbase.com/internet-articles/cyber-wars-between-pakistan-and-india-373872.html

60
USB ports could be considered as a security threat. If you do
plan to block all USB ports, first look for alternatives. Users
are a key asset for every organization, but they're also the
most vulnerable point of entry. It's easier to cajole a user into
delving important information than breaking through a
firewall. This makes educating users of various security
threats extremely important.
Laptop thefts are at the top of the security incidents list.
Users have to be more careful and stronger focus needs to
be put in training users on how to protect their laptops. Theft
of confidential information could be caused by weak
passwords or authentication, but they could also be caused
by disgruntled employees walking away with confidential
data on USB drives. The fourth one is another direct link to
users-identity theft. Likewise, every user in an organisation
may not go through the security policy every time they want
to check an email or access the Internet. So there is a need to
strike a balance between user expectations and an
organization's security policy. Try to remove the hazard of
leaving it to the user to figure out whether the attachment in
an email is legitimate or not.
In early October 2009, Intelligence agencies have asked
the government to consider blocking Skype as operators of
the popular global VoIP (Voice over Internet Protocol) engine
are refusing to share the encryption code that prevents
Indian investigators from intercepting conversations of
suspected terrorists. The Cabinet Committee on Security has
accepted the recommendation in principle but has not set a
date for initiating action. The urgency to track Skype calls
stems from the fact that terrorists – as the 26/11 attacks in
Mumbai showed – are increasingly using VoIP services. The
shift to VoIP has been prompted by the growing ability of
intelligence agencies to intercept mobile and other calls.
Since Skype is not registered here, Indian authorities have
been forced to mull the drastic option of blocking its
gateways here. This, however, may not be entirely effective
as Skype can route traffic through other service providers.
Need for a Legal Framework: Governments cannot
controltheinternetintheircountry
There is need for modern international law to precisely define
the criteria used to distinguish what state actions are
permissible as normal computer-generated transborder data
theft from those cyber activities that might qualify as an
'armed attack' against a state. Clearer rules are also needed
for what responses are permissible as self-defence by a state
targeted in an information warfare situation and how
international institutions might help to attain these
objectives.
Indian agencies are also keeping their fingers crossed,
not sure whether the department of telecom – with a stake in
sectoral growth – would like to lean on VoIP service
providers on the issue of sharing encryption code. Besides,
there's also a feeling that the government would be wary of
people's response to the snapping of Skype. The free service
is used by a vast majority of urban middle class Indians for
communicating with families and friends spread across the
world.
Trends suggest an increase in safe havens for cyber
criminals and hence the need for International cooperation
arrangements.
It is an inevitable reality that some countries will become
safe havens for cyber criminals and international pressure
to crack down won't work well.
Governments are likely to get aggressive and pursue
action against the specific individuals/groups/companies,
regardless of location
It is also likely that Governments will start putting
pressure on intermediary bodies that have the skills and
resources, such as banks, ISPs and software vendors to
protect the public from malware, hacking and social
engineering.
Compliance regulations will drive upgrades and changes
and also increase system complexity and legal wrangles -
increase in civil suits for security breaches
Trainedinvestigators
To avoid data inaccuracies and the potential for cyber crimes,
there must be a state-corporate awareness of data quality
and recognition of the importance of data. There are three
critical success factors that need to be identified before
moving forward with the issue of data quality:
1. Commitment by senior management to the quality of
corporate data
2. Definition of data quality
3. Quality assurance of data.
Senior management commitment to maintaining the quality of
corporate data can be achieved by instituting a data
administration department that oversees data management
standards, policies, procedures, and guidelines.
Are the Indian police provided with trained cyber crime
investigators and the technology facilities to handle cyber
crimes or cyber warfare? The Cyber Crime Investigation Cell
(CCIC) of Mumbai police arrested a former employee of a
multi-national company for stealing confidential data of the
firm. The company was involved in online trading of NSE and
BSE stocks.3
With growing usage of cyber space to plan and
execute actions against institutions or state, such specialized
units who can gather data and convert it to actionable
intelligence are more in demand.
PublicPrivatePartnership?
In India, private security agencies investigate cyber crimes,
but the Union government has not made full use of their
services as in other countries. The government should seek
the skills of private agencies in select cases. However, these
are often sensitive issues as such cases often involve
national security. We need to bridge this gap and prevent
cyber threats to national security.
Industrial espionage by corporate spies in India is
practiced in the information technology industries, although
the KGB-trained IB and the Indian foreign intelligence
service-RAW also conduct physical surveillance of Western
diplomats and high-profile Western business executives and
foreign companies. Electronic eavesdropping is also
practiced in India. Foreign businesses that partner with
Indian firms are at risk if they do not have full control over
the vetting and hiring process. Additional vulnerability

61
comes when Indian partners outsource tasks to third-party
contractors.
The risks from industrial espionage exist worldwide, but
technology companies can find they are greater in India than
many other regions because of the research and
development (R&D) work that often is conducted there –
and because of the work of the IB and RAW, which are more
aggressive than many intelligence services when it comes to
stealing proprietary information from foreign companies for
domestic purposes.
In addition, there have been several well-publicized cases
in which Indian workers have stolen information – such as
bank account numbers, PIN numbers for automatic teller
machines or birthdates and Social Security numbers (from
American customers) – for criminal purposes. For example, a
worker at an Indian call centre allegedly sold the bank
account information of 1,000 British customers to an
undercover reporter at $7.68 per account. The call worker
boasted that he was able to steal and sell up to 200,000
accounts each month.4
The Indian government is working to
pass laws giving police greater enforcement powers.
Employers can take steps to mitigate these risks – but,
costs are an important consideration. Monitoring employees'
activities is expensive, and conducting background
investigations on potential hires in a place like India can be
very difficult, since public records (such as birth and death
certificates) are not readily accessible or verifiable in many
municipalities. Here, a public-private partnership can be
useful to reduce risks. Hackers eye workers/employees to
steal data from organizations.
Protecting State and Corporate Property and
Investments
Increasing security risks in the environment, particularly
those from targeted intrusions by experienced hackers,
emphasize the requirement to implement effective security
solutions using database assurance technology. Software
security solutions are now available which enable
organizations to re-evaluate their systems to determine the
best methods for protecting assets.
Significantbenefitsofastrongcybersecurity
managementsystem
State and Corporate management needs to have a well-
presented and well-documented business case, spelling out
in detail the key requirements, business considerations and
other elements of the proposal to obtain approval for the
necessary expenditures for the selected security solution.
There are significant benefits to be achieved for an
organization which conducts the proper analysis and
assessment of the risks and develops an appropriate security
solution for database assurance, which takes account of
these risks. These are the steps which have the potential for
putting an organization ahead of any intrusion attempt.
The end goal behind cyber attacks -could be political, to damage
the Indian economy, national interests, or revenge etc. These can
be accomplished, by directly targeting the firms and state units
that drive large business related investments into India. Attacks
must be viewed, reviewed and responded to intelligently.
Standard measures used by public and private corporations --
such as security perimeters around office buildings, access
controls and vehicle inspection points -- can help to mitigate
physical/terrorist threats to individual enterprises, but proactive
measures to influence or change the political environment that
drives the threats are necessary.
There is a need to conduct regular assessments of the security of
your network. Is the state or private sector IT infrastructure static?
If not then how can your security remain the same? Security
threats are increasing, and so is your IT infrastructure. Beyond a
certain point, even policies and re-assessments may not work.
There is a need to start exploring security standards. Today, two
key security standards exist for information security. These are
BS7799 and ISO27000 series out of which the ISO standard seems
to be more popular.
India is an attractive location for multinational IT corporations for
a number of reasons. Notably, it has a large pool of highly trained,
technically competent and workers who are willing to work for
less pay than their counterparts in the United States or Europe.
Furthermore, establishing or outsourcing customer service and
support issues to call centres in India, with the time zone
differences, makes it possible for companies based in the United
States and Europe to offer support virtually around the clock.
However, of all these reasons, the biggest motivator for
multinationals to establish R&D and customer support operations
in India, or to relocate those operations from other countries, has
been cost. To retain this edge over other countries, Indian state
and private enterprises need to successfully manage cyber threats
that hamper national security. A strong public private partnership
can help create an effective cyber defence.
CONCLUSION
3. Source: "Ex-employee steals confidential info held," DNA 10 October 2009
4. Source: Fred Burton, "Corporate Security: Risk and Cost Tolerance in India," Jan 10 2007,
http://www.stratfor.com/corporate_security_risk_and_cost_tolerance_india

62
Information Security
using Genetic Algorithm
and Chaos
A Implications for National Security
Anil Kumar
Reader in Computer Engineering
Department, Sikkim Manipal
University,Sikkim
M. K. Ghose
Head of Department of Computer
Science & Engg, Sikkim Manipal
Institute of Technology, Sikkim
Introduction
In the advent of greater demand in digital signal transmission in recent time, the problem of huge
losses from illegal data access has become a burning issue. Accordingly, the data security has
become a critical and imperative issue in multimedia data transmission applications. In order to
protect valuable information from undesirable users or against illegal reproduction and
modifications, various types of cryptographic schemes are needed. Cryptography "sciences of the
secret" has been reserved strictly to diplomatic and military surroundings (for more than 3000
years). But with the rapid advances in data processing and the evolution of the networks of
communications, cryptography has become a vital process in all domains. Cryptography offers
efficient solutions to protect sensitive information in a large number of applications including
personal data security, medical records, network security, internet security, diplomatic and military
communications security, etc. through the processes of encryption/decryption. Encryption is used
to convert a plaintext (original message) into cipher text (the coded message), which can be
decoded back into the original message. An encryption (or ciphering) algorithm along with a key
is used in the encryption and decryption of data. The degree of security offered by the algorithm
depends on the type and length of the keys utilized.
There are two types of cryptographic schemes: symmetric cryptography [1-2] and asymmetric
cryptography [3]. The symmetric scheme uses the same key for encryption and decryption. Two
keys is used in asymmetrical cryptography , one for encryption, known as the public key, and the
other for decryption, known as the private key. Asymmetric cryptography is often used for key
distribution and digital signature but its processing speed slow. The symmetric cryptography is
normally used to encrypt private data for its high performance. However, there have been various
data encryption techniques [4-6] on multimedia data proposed in the literature. Only few works
has been done exist on genetic algorithm [7-12] based information security.
In Section 2, a brief introduction to cryptography is given. Section 3 gives overview of genetic
algorithms and its general sequence of events such as selection, reproduction and mutation
operators. Section 4 gives overview and generation of the pseudorandom sequence, conventionally
used for generation of encryption/decryption keys. Section 5 covers the various cryptography
techniques based on genetic algorithm as available in the literature in chronological order. In
section 6, a new approach of genetic algorithms (GA) with pseudorandom sequence to encrypt
data stream is proposed. Section 8 represents the analysis of the security. Finally, section 9 gives
the overall conclusions with special emphasis of highlighting the areas of further research.
DISASTER MANAGEMENT & SECURITY II Information Security using Genetic Algorithm and Chaos – A Implications for National Security

63
OverviewofCryptography
Cryptography is a science which is used from thousands of
years. It concerns about the encryption as well as decryption
of secret data in such a way that valuable information will
remain safe from unauthorized users. Earlier the
cryptography used in military and government. Due to
advent of internet technology over the past few years,
people are now using internet as to share information and for
communication purpose. For this reason, secure
communication is main requirement for online trading
because internet is an unsafe channel. Cryptographic
techniques are used to protect individual privacy as well as
commercial secrets. Nowadays security, integrity, non-
repudiation, confidentiality, and authentication services are
the most important factors in the field of the Cryptography.
The main objective of the cryptography is to ensure
secure communication over insecure channel (like Internet).
Figure 1: Basic Encryption and Decryption Model
The message which is normally a plaintext is encrypted
using the encryption key. The encrypted data (Cipher Text) is
sent over the communication channel to the receiver. On the
receiver side the cipher text is decrypted using decryption key.
The cipher text can be generated in the stream or block
form. In stream cipher the plaintext is encrypted bit by bit
while in the block cipher data of the plaintext is divided into
blocks of specific size.
GoalofCryptography
1. Confidentiality means to keep secret the content of
information from all unauthorized users.
2. Data integrity is to deal with the unauthorized modification
of data. In order to assure data integrity, one must have an
ability to detect data manipulation (i.e. insertion, deletion and
substitution) by unauthorized parties.
3. Authentication means identification. It is applicable to both
users and information itself. When two users start
communication then they should identify each other.
Information delivered over a channel should be authenticated
as to origin, date of origin, data content, time sent, etc.
4. Non-repudiation is a service which prevents an entity from
denying previous commitments or actions.
Now a days the cryptography is classified into two
categories, private-key and public-key cryptography. In
private-key cryptography, the encryption and the decryption
are same. In public-key encryption and decryption are
different.
Private-keycryptography
It is referred as symmetric key cryptography because
encryption and decryption are performed using the same key.
The key should keep secret between sender and receiver. A
block diagram is shown below using DES
Figure Taken from Stalling:
Figure 2: Symmetric Encryption and Decryption Model
There are various types of the encryption algorithms.
Block ciphers are now widely used in industry.
Data Encryption Standard (DES) was adopted in 1977 by
National Institute of Standards and Technology. The
architecture of DES is based on Feistel cipher (developed by
IBM), with 16 rounds of identical operations. In each round of
DES, substitution and permutation are performed by S-Boxes
and P-Boxes. It is to provide confusion and diffusion in the
encrypted data. Now DES is no longer a secure encryption
standard because of the short key and various types of attacks.
Advanced Encryption Standard (AES) is issued by
National Institute of Standards and Technology in 2001 to
overcome the problem of the DES. It is intended to replace
DES. It supports key lengths of 128, 192, and 256 bits and a
block size of 128 bits. It does not use Feistel Cipher structure.
Here, each round uses byte substitution, permutation,
arithmetic operations over a finite field, and XOR technique.
Public-KeyCryptography
This concept was introduced by Diffie and Hellman in 1976.
This technique is referred as asymmetric cryptosystem in
which encryption and decryption is done using two different
keys (Public and Private Key). The private is secret and
public key is open which anyone can use. The pair is
selected in such a way that private key determination on the
basis of public key is infeasible.
Figure 3: Asymmetric Encryption and Decryption Model

64
The main advantage of the public-key cryptosystem is
that there is no needs of transmission of secret key because
private key is never transmitted hence there are any chance
of interception because secret key is not transmitted.
The main disadvantage is that the speed of encryption is
very slow compare to private key cryptography. Second the
Certification Authentication is required those who are using
Public key. No public-key encryption has been proven to be
secure. Integer Factorization Problem (IFD), Discrete
Logarithm Problem (DLP) and Elliptic Curve Discrete
Logarithm Problem (ECDLP) are the mathematical tools which
are used in public-key cryptography system.
Rivest, Shamir and Adleman (RSA) uses the IFD concept
for public-key cryptography such as, is equivalent to find the
prime factors p and q given a very large number n. Recently
RSA, depicted by a new hardware implementation.
Diffie and Hellman used the concept of DLP. Digital
Signature Algorithm (DSA) issued by the NIST to provide
the authentication mechanism that enables communication
parties for proving and verifications.
ECDLP concept used in Elliptic Curve Cryptography
(ECC) is an emerging technique alternative of RSA and DSA.
Solving of the elliptic curve discrete logarithm problem is
infeasible.
GeneticAlgorithms
The genetic algorithm is a search algorithm based on the
mechanics of natural selection and natural genetics [13-14].
The genetic algorithm belongs to the family of evolutionary
algorithms, along with genetic programming, evolution
strategies, and evolutionary programming. The set of
operators usually consists of mutation, recombination, and
selection. The main idea is that in order for a population of
individuals to adapt to some environment, it should behave
like a natural system. The survival and reproduction of an
individual being is promoted by the elimination of useless
traits and by growing the useful behaviour. Genetic
algorithms (GAs) consider an optimization problem as the
environment where feasible solutions are the individuals
living in that environment. The degree of adaptation of an
individual to its environment is the counterpart of the fitness
function evaluated on a solution. Similarly, a set of feasible
solutions takes the place of a population of organisms. An
individual is a string of binary digits or some other set of
symbols drawn from a finite set. Each encoded individual in
the population may be viewed as a representation of a
particular solution to a problem. In general, a genetic
algorithm begins with a randomly generated set of
individuals. Once the initial population has been created, the
genetic algorithm enters a loop. At the end of iteration, a new
population has been produced by applying a certain number
of stochastic operators to the previous population. Each
such iteration is known as a generation. A selection operator
is applied first. This creates an intermediate population of n
"parent" individuals. To produce these "parents", n
independent extractions of an individual from the old
population are performed. The probability of each individual
being extracted should be (linearly) proportional to the
fitness of that individual. This means that above average
individuals should have more copies in the new population,
while below average individuals should have few to no
copies present, i.e., a below average individual risks
extinction. Once the intermediate population of "parents"
(those individuals selected for reproduction) has been
produced, the individuals for the next generation will be
created through the application of a number of reproduction
operators. These operators can involve one or more parents.
An operator that involves just one parent, simulating asexual
reproduction, is called a mutation operator. When more than
one parent is involved, sexual reproduction is simulated, and
the operator is called recombination. The genetic algorithm
uses two reproduction operators - crossover and mutation.
To apply a crossover operator, parents are paired together.
There are several different types of crossover operators, and
the types available depend on what representation is used
for the individuals. For binary string individuals, one-point,
and two-point, and uniform crossover are often used. For
permutation or order-based individuals, order, partially
mapped, and cycle crossover are options. The one-point
crossover means that the parent individuals exchange a
random prefix when creating the child individuals. Two-point
crossover is an exchange of a random substring, and uniform
crossover takes each bit in the child arbitrarily from either
parent. Order and partially mapped crossover are similar to
two-point crossover in that two cut points are selected. For
order crossover, the section between the first and second cut
points is copied from the first parent to the child. The
remaining places are filled using elements not occurring in
this section, in the order that they occur in the second parent
starting from the second cut point and wrapping around as
needed. For partially mapped crossover, the section between
the two cut points defines a series of swapping operations to
be performed on the second parent. Cycle crossover satisfies
two conditions - every position of the child must retain a
value found in the corresponding position of a parent, and
the child must be a valid permutation. Each cycle, a random
parent is selected. After crossover, each individual has a
small chance of mutation. The purpose of the mutation
operator is to simulate the effect of transcription errors that
can happen with a very low probability when a chromosome
is mutated. A standard mutation operator for binary strings is
bit inversion. Each bit in an individual has a small chance of
mutating into its complement i.e. a '0' would mutate into a '1'.
In principle, the loop of selection-crossover-mutation is
infinite. However, it is usually stopped when a given
termination condition is met. Some common termination
conditions are:
1. A pre-determined number of generations have passed
2. A satisfactory solution has been found
3. No improvement in solution quality has taken place for a
certain number of generations
The different termination conditions are possible since a
genetic algorithm is not guaranteed to converge to a
solution. The evolutionary cycle can be summarized as
follows:

65
generation = 0
seed population
while not (termination condition) do
generation = generation + 1
calculate fitness
selection
crossover
mutation
end while
Many of these application areas are concerned with
problems which are hard to solve but have easily verifiable
solutions. Another trait common to these application areas is
the equation style of fitness function. Cryptography and
cryptanalysis could be considered to meet these criteria.
However, cryptology is not closely related to the typical GA
application areas and, subsequently, fitness equations are
difficult to generate. This makes the use of a genetic
algorithm approach to cryptology rather unusual.
The crossover is the process in which the strings are able
to mix and match their desirable qualities in a random fashion.
Crossover proceeds in three simple steps:
Two new random strings are selected in Figure 4a.
A random location in both strings is selected in Figure 4b.
The portions of the strings to the right of the randomly
selected location in the two strings are exchanged Figure
4c.
In this way information is exchanged between strings, and
portions of two strings are exchanged and combined.
Figure 4: Illustration of the Crossover Operation
Chaos Theory
Chaos is a pseudo-random process produced in nonlinear dynamical
systems. It is non-periodic in nature, non-convergent and extremely
sensitive to the initial condition.
The chaos theory has been developed, since early 60's from many
research disciplines (such as Mathematics, Physics, Biology, Chemistry
and Engineering). There exists relationship between the chaos and
cryptography [15-16] such as
1) Ergodicity and confusion.
2) Sensitivity to initial condition and diffusion with a small change in
the secret key or plain text.
3) Mixing property and diffusion.
4) Deterministic dynamics and deterministic pseudo-randomness.
5) Structure complexity and Algorithm complexity.
As a result of the above relationships, a good number of chaos-
based cryptosystems has been proposed [17-19]; some of them lack
robustness and security [20-22].
The general chaotic system model is given as below
(1)
where the is a chaotic sequence generated by the nonlinear
is the initial condition.
A simple and well-studied example of 1D map that exhibits
complicated behaviour is the logistic map from the interval [0,1]
into [0,1].
(2)
where and .
The Tent map, sine map, and cubic map are other chaotic map used
by Pareek et al. and Tent map
(3)
Sine map (4)
Cubic map (5)
The control parameters of the above chaotic map are assigned as
respectively.
The PWLCM (piecewise linear chaotic map) denoted as following
equation
(6)
Or
(6a)
where p is the control parameter and .
The PWLCM has uniform invariant density function and correlation. It
can be easily realized by both hardware and software, since its
iterations only involve divisions and additions.

66
Literature Survey
Only few genetic algorithms based encryption have been
proposed. A. Kumar et al [7] in 2004 describe encryption
using the concept of the crossover operator and
pseudorandom sequence generator by NLFFSR (Non-Linear
Feed Forward Shift Register). The crossover point is decided
by the pseudorandom sequence and the fully encrypted data
they are able to achieve. A. Kumar et al [8] in 2005 extend this
work also used the concept of mutation and after encryption.
Encrypted data is further hidden inside the stego-image. A.
Tragha et al.[9, 10], in 2005 & 2006 describe a new
symmetrical block ciphering system named ICIGA (Improved
Cryptography Inspired by Genetic Algorithms) which
generates a session key in a random process. The block sizes
and the key lengths are variable and can be fixed by the user
at the beginning of ciphering. ICIGA is an enhancement of
the system (GIC) "Genetic algorithms Inspired
Cryptography" [10]. ICIGA is a block cipher system whose
secret key is generated during each session using a random
process. The user can fix the size of the blocks as well as the
length of the key. The operation of ICIGA depends on the
length of the secret key selected by the user. ICIGA uses this
length to divide the plaintext into parts of equal size. During
the ciphering, the first part is broken up into blocks of the
same size which are used to generate the secret key. This key
will then be used to cipher the other parts of the message. If
the user did not set the length of the secret key the plaintext
is composed of only one part and ICIGA generates a key of
maximum length. The genetic operations of crossover and
mutation used for ciphering in GIC are improved by the new
system ICIGA as follows:
A left shift is added to each block that is processed, and
Another left shift is added to the part being processed
after the processing of its last block.
The number of bits to be shifted is determined by the
parameters of the genetic operations. The goal of these shifts
is to reinforce resistance to cryptanalysis, and in particular to
techniques of exhaustive search.
M. Husainy [11] in 2006 proposes Image Encryption using
Genetic Algorithm based Image Encryption using mutation
and crossover concept.
A. Tragha [12] at al in 2007, proposed a new encryption
algorithm using genetic algorithm approach. The only related
work is the attack of the asymmetric ciphering "Knapsack
Cipher". This is inspired by the resolution of back bag
problem. Thus efficiency genetic algorithms have been
proven in cryptanalysis. The problem of ciphering a message
M is modelled as a combinatorial optimization problem. Then
a genetic solution based on the method used to solve the
travelling salesman problem (TSP) is also proposed. In the
second system SEC-EX, for scrambling plaintext, they
introduce a new technique, which consists to encode
plaintext in binary, chooses randomly an integer k and cuts
plaintext into blocks of size k. These blocks are treated in the
same way that the characters constituting the plaintext in
SEC.
The Proposed Method
Figure 5: The Block diagram of the proposed Method.
The block diagram of the proposed method is shown in figure 5. It
consists of pseudorandom sequence generator, crossover operator,
and encryption and decryption modules.
The Encryption Process
The encrypting process emulates the working of the crossover operator
using pseudorandom sequence. The steps for the data encryption as
follows:
1. Generate the pseudorandom binary sequence using the chaos as
Yn
.
2. Convert the binary pseudorandom sequence into decimal
pseudorandom sequence ranging from 0 to 7 as Zn
.
3. Read 16 consecutive bytes from the data file.
4. Initialize j=0
5. Initialize i=0
6. Modify the consecutive bytes using byte substitution for creating
confusion, as per AES standard.
7. Take two consecutive bytes of the data stream as A1
and A2
8. Perform crossover on two consecutive bytes of the data stream as
B1
and B2
by using the number Zi
9. Encrypt data as C1
and C2
, where
X1
= ZiØ(zi«4)
7(a)
Xi+1
= Zi+1Ø(zi+1«4)
7(b)
C1
= B1Øxi
7©
C2
= B2Øxi+1
7(d)
10. i=i+2 and j=j+1 repeat steps 6 to 9 until i<16.
11. Repeat steps 5 to 10 until i<5
12. Again perform the byte substitution over the encrypted 16
consecutive bytes for further creating confusion.
13. Repeat steps 3 to 12 until end of the data.
The Decryption Process
The steps for decryption are just reversal of the encryption. First,
generate the pseudorandom sequence using chaos and then use the
pseudorandom sequence and crossover operator to decrypt the data.

67
Experimental Results
In the simulation, ten images are used. As representatives, only the
images of "lena", "it_logo" are shown in figures 6(a) and 6(d),
respectively. The most direct method to decide the disorderly degree
of the encrypted image is by the sense of sight. On the other hand, the
fractal dimension can provide the quantitative measure on the
randomness of the encrypted image.
The encrypted result of the two representative images by this method
is shown in figures 6(b) and 6(e). According to the figure 6, the
encryption results of the method are completely disordered and cannot
be distinguished from the original image. The figures 6(c) and 6(f)
respectively are the decrypted image of "lena", "it_logo". Since the
proposed method is losable, we can find that there would be no
encryption/decryption errors in using the proposed technique.
As an example, we consider two consecutive bytes of the data stream
after byte substitution A1
and A2
as
A1
= 11100010
A2
= 11001001
The pseudorandom sequence is generated as follows:
1. If the value of µ=3.57 and x2
=0.7, and threshold t=0.5 then the
output pseudo random binary sequence generated by chaos is as:
010011..........
2. The decimal value sequence is than calculated using equation 1 as:
Zn = 2,3,1,5,..........
3. The value of Zi
=2and Zi+
1 =3.
Now, perform crossover operation with the generated
pseudorandom sequence, In the operation the various values
generated are
B1
= 11100001
B2
= 11001010
Xj
= 00100010
Xi+1
= 00110011
C1
= 11000011
C2
= 11111001
The values of C1
and C2
are two consecutive encrypted data.
Analysis of Proposed
Approach
It is of interest to know if the proposed technique is easily
decrypted or not. Since there are 8 combinations for
crossover of 2 consecutive data bytes and for XOR (exor) the
number is 64, thus the number of possible encryption result
is (128) (N/2), where N is the total number of the data bytes
to encrypt .
For example, consider a 256 color-image of size 256*256
pixels and color depth of 8 bit per pixel. In this case N equals
65536. All the possibilities are 12832768
=2229376
Statisticalanalysisoftheencryption
An ideal cipher should be robust against any type of
statistical attack; because many ciphers have been
successfully analysed with the statistical analysis and
various types of attacks have been devised on them.
Histogramanalysis
We analysed the histograms of several encrypted as well as
original images. Figure 7(a) original image and its histogram
figure 7(c). Figure 7(b) encrypted image and its histogram
figure 7(b). It is clear from figure 7 histogram of the encrypted
image is nearly uniform and quite different from the original
image and hence it does not provide any clue to employ any
type of statistical attack on the proposed image encryption.
The secret key is μ=3.57 and x0
= 0.7.
Figure. 7. Histogram analysis:
Time analysis of the encryption: The speed of the algorithm
is the important factor for a good encryption algorithm. We
have measured the encryption/decryption rate for several
gray scale images of different size. The average time taken by
the algorithm for different size of images is shown in table
Image size Bits/pixels Average encryption/
(in pixels) decryption time(s)
128x128 8 0.009-0.012
256x256 8 0.036-0.042
512x512 8 0.071-0.108
Average ciphering speed of a few different sized grayscale
images
Without the knowledge of the pseudorandom sequence no
one will be able to extract the message.
Figure 6
(a)Lena Image (b)Encrypted Image (c)Decrypted Image
(d)It Image (e)Encrypted Image (f)Decrypted Image
(a) Original Image (b) Encrypted image
(c) Histogram
of Original
image
(d) Histogram
of Encrypted
image

68
TIn this paper, the various genetic algorithm & chaos based of
information security has been discussed, and a new approach
has been proposed. For transmitting the secured data over the
channel there is requirement of the high throughput, in these
cases the conventional encryption techniques are not a feasible
solution for this reason a high throughput and secure encryption
technique is proposed for real time data transmission like over
the telephone link or video transmission. The concept of Genetic
Algorithms used along with the randomness properties of chaos.
This total way of transferring secret information is highly safe and
reliable. The simulation results have indicated that the encryption
results are (1) completely chaotic by the sense of sight, (2) very
sensitive to the parameter fluctuation. In the future work, we are
planning to design a sophisticated hardware based on this
technique which will be targeted to use in highly secure
multimedia data transmission applications
CONCLUSION
Acknowledgement:
This work is part of the Research Project funded by All India
Council of Technical Education (Government of India) vide
their office order: F.No:8023/BOR/RID/RPS-236/2008-09
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GOVERNANCE II Information Security using Genetic Algorithm and Chaos – A Implications for National Security

69
Technology options for
Financial Inclusion
A Implications for National Security
Dr KG Karmakar
Managing Director, NABARD
NP Mohapatra
Assistant General Manager in
Financial Inclusion Department,
NABARD. The views expressed
here are of Authors and not
necessarily the organisation they
belong to.
Introduction
Recent developments in banking technology have transformed banking from the traditional brick-
and-mortar infrastructure like staffed branches to a system supplemented by other channels like
automated teller machines (ATM), credit / debit cards, Internet banking, online money transfers,
etc. The moot point, however, is that, access to such technology is restricted only to certain
segments of the society. Indeed, some trends, such as increasingly sophisticated customer
segmentation technology - allowing, for example, more accurate targeting of sections of the
market - have led to restricted access to financial services for some groups. A sizeable majority
of the population, particularly the low income groups, continue to remain excluded from the
opportunities and services provided by the financial sector. An immediate need was felt to extend
financial services to these sections of the society and financially include them. Financial inclusion
may be defined as the process of ensuring access to timely and adequate credit and financial
services by vulnerable groups such as weaker sections and low income groups, at affordable
costs.
To address the needs of such sections of society a Committee on Financial Inclusion was set up by
the Government of India (GoI) chaired by Dr. C. Rangarajan. The Committee observed that in the
field technological developments in the recent past have provided the perfect launch pad for
extending banking services to remote locations without having to open costly bank branches. This
can be achieved by leveraging technology to open up channels beyond branch network and
create the required banking footprints to reach the unbanked so as to extend banking services
similar to those dispensed from branches. The Committee in its Interim Report recommended the
establishment of two Funds, namely the Financial Inclusion Fund (FIF) for meeting the cost of
developmental and promotional interventions for ensuring financial inclusion and the Financial
Inclusion Technology Fund (FITF), to meet the cost of technology adoption.
The Hon'ble Union Minister of Finance, in his Union Budget Speech for 2007-08, announced the
constitution of the Financial Inclusion Technology Fund (FITF), with an overall corpus of Rs. 500
crore, to be contributed by the Central Government, RBI and NABARD in the ratio of 40:40:20.
Constitution of Fund
In November 2007, GOI approved the guidelines on the objectives, constitution, contribution,
eligible activities, monitoring of the fund and issued a notification setting up the Advisory Board
of the Fund. Based on these instructions, NABARD has issued guidelines to Commercial Banks,
Regional Rural Banks (RRBs), State Cooperative Banks (SCBs) and State Cooperative Agriculture
and Rural Development Bank (SCARDBs) in 14 May 2008 and to Commercial Banks in June 2008.
FINANCIAL INCLUSION II Technology options for Financial Inclusion – A Implications for National Security

70
Objectives of FITF
The objectives of the FITF are to enhance investment in Information
Communication Technology (ICT) aimed at promoting financial
inclusion, stimulate the transfer of research and technology in financial
inclusion, increase the technological absorption capacity of financial
service providers / users and encourage an environment of innovation
and cooperation among stakeholders.
Corpus and Source of Funds
The Financial Inclusion Technology Fund (FITF) consists of an overall
corpus of Rs. 500 crore, with initial funding to be contributed by the
Central Government, RBI and NABARD in the ratio of 40:40:20. The
funding would be contributed in a phased manner over a maximum
period of five years, depending upon utilisation of funds. As for funds
utilisation, annual replenishments may be made by GoI, RBI and
NABARD and from other stakeholders / institutions as decided by the
Government.
Phasing
The FITF is in operation until financial inclusion to the extent of 100%
of rural families in all districts is achieved, over a period of five years
from the date of commencement of the Fund or for such enhanced
period as may be decided by the Government.
Eligible Activities / Purposes
The FITF would be used for the following activities / purposes:
a. Encouraging user friendly technology solutions;
b. Providing financial support to technological solutions aimed at
providing affordable financial services to the disadvantaged
sections of the society;
c. Creating a common technology infrastructure with comprehensive
credit information;
d. Funding support to technologies facilitating the documentation for
processing of loans; Providing viability gap / pilot project funding
for unproven but potential technological interventions;
e. Conduct of studies, consultancies, research, evaluation studies
relating to technological interventions for financial inclusion;
f. Promoting seminars, conferences and other mechanisms for
discussions, dissemination relating to financial inclusion
technological interventions;
g. Publication of financial inclusion technology literature, publicity
material, etc.;
h. Capacity building of personnel of Banks, Post Offices, State
Government departments, MFIs, NGOs, VAs and other
stakeholders; and
i. Any other activity as may be approved by the Advisory Board.
1.7 Eligible Institutions
j. Financial Institutions, viz., NABARD, Commercial Banks, Regional
Rural Banks and Cooperative Banks;
k. NGOs, MFIs, SHGs, Farmers' Clubs, Local Level Associations (LLA),
etc.;
l. Technology Service providers and other service providers like
Insurance Companies (providing micro insurance services), Post
Offices, Railways, etc.;
m. Any other institution / organisation whose objectives are in
conformity with the overall objectives of the FITF and are approved
by the Advisory Board.
Nature, Quantum and Terms of assistance
The nature, quantum and terms of assistance to eligible institutions /
organisations for various promotional and developmental interventions
for promoting financial inclusion will be decided by the Advisory Board
for the FITF.
Monitoring System
The institutions / organisations will undertake to monitor the
programmes / projects closely with a view to achieving and realising
the objectives and purposes of FITF and keep NABARD informed of
the same. The institutions / organisations seeking assistance under
the FITF may also submit periodic Progress Reports to NABARD, in
the format prescribed for the purpose.
Management of FITF
The programme sanction, implementation, monitoring and
administration of the FITF are vested with NABARD. The interest accrued
/ income earned from the FITF is to be ploughed back into the FITF as
per the investment policy approved by the Advisory Board. The
administering charges incurred in conduct of meetings of the Advisory
Board and other expenses (except salaries / allowances of personnel
involved in the sanction, implementation and monitoring of FITF) of
NABARD in connection with discharge of its functions related to FITF
are to be met out of the FITF as decided by the Advisory Board from
time to time.
Constitution of Advisory Board
An Advisory Board has been constituted by the Government of India
which will guide and render policy advice on various aspects relating
to the FITF. The Advisory Board will determine its own procedures for
day to day functioning in respect of FITF, including constitution of
committees, sub-committees, task forces, etc., for examination,
implementation and monitoring of various issues. The Advisory Board
would meet at such intervals as deemed necessary, but in any case at
least once in six months to review the status and progress of outflow
from the FITF and to render policy advice.

71
Encouraging user friendly
technology solutions;
Funding support to technologies facilitating the
documentation for processing of loans;
One of the fundamental aims of Financial Inclusion is to
increase the outreach of the formal banking system so as to
reach the unreached and bank on the unbanked. The
objectives of financial inclusion are as follows:
i. To mop up micro deposits.
ii. To provide affordable credit.
iii. To provide micro insurance covering not only life and
death but also crops, assets and accidents.
iv. To provide safe money transfers.
v. To provide financial advice and counselling.
vi. To provide add-on services like agriculture-portal, etc.
Though Commercial Banks, RRBs and Cooperatives have
made inroads into the rural areas of our country on account
of their expansion over the years, there is still a vast segment
of the rural population, which are yet to access banking
facilities. There may be many reasons as to why a large
portion of our population has no access to the formal
banking services. These may be on account of geographical
constraints, individual needs, issues relating to the banks,
etc. With the advancement in technology especially in data
processing and communication, these issues have to be
economically addressed. Accordingly, a goal for providing
access to financial services to 50 per cent (56 million) of the
excluded rural cultivator and non-cultivator households
across different States by the year 2012 and 100 per cent
coverage (111.55 million) by the year 2017, has been
stipulated.
The interface between banking and Information
Communication Technology (ICT) has resulted in financial
service providers having access to technologies, which help
them to reach new customers, track their operations to
increase transparency, thereby improving the efficiency of
financial services for the new customers. It has ensured the
need for a paradigm shift in banking business fundamentals
so as to enable implementation of innovative delivery
channels for financial services. Due to availability of a
plethora of technologies, it is essential to select the right
technology so as to get the most out of the investments
made in such technologies.
Till the recent past, the conventional 'brick and mortar'
banking systems adopted information technology to enable
providing better services and products to their existing
clientele. But with the symbiotic amalgamation of Information
Technology and Communication Technology, the
conventional banking system is now equipped with a wide
range of force multipliers. These force multipliers are in the
form of mobile banking, conventional cards, smart cards,
common service centres, low cost ATMs, hand held devices,
etc. Even in this explosion of technology, many a time, there
still exists the problem of the 'Last Mile' connectivity.
Fortunately, there are alternatives which help to overcome
the Last Mile connectivity problem.
Financial Inclusion
TechnologyArchitecture
Based on the current initiatives taken by various
stakeholders, the fundamental architecture for financial
inclusion works out as follows:
CBS: Core Banking Solutions
TBA: Total Banking Application
ASP: Application Services Provider
BC: Banking Correspondent
BF: Business Facilitator
SHG: Self Help Group
The essential elements of this structure are as follows:
FinancialInclusionTechnologyProvider
ICT is the only viable option assisting banks to increase their
outreach at low costs. The various technology options
available range from mobile banking to Smart Cards,
Conventional cards, Hand held devices, Biometric security
tools, etc. Financial Inclusion Technology (FIT) Provider is
that entity that provides the most suited technology solution
to a Bank. The FIT Provider should provide the necessary
technology support to the Bank for implementing the
solutions and ensure its smooth functioning. The FIT
Provider could also function as an Application Service
Provider, providing end to end solutions to a Bank or a group
of Banks.
TransactionProcessingSoftware(TPS)
The software that will maintain the data of the clients
serviced by a Bank is called Transaction Processing Software
(TPS). This could be a Core Banking Solution (high end or
low end), TBA software or any system provided by the FIT
Provider. The database of TPS would either be housed with
the Bank or with the FIT Provider depending on the solution
chosen by the Bank. If the TPS is an existing system in

72
Financial Inclusion
Technology Models
The various models of Financial Inclusion Technology
considered for implementation are:
ApplicationServiceProviderModel
The technological solutions for financial inclusion are
highly technology intensive and therefore, the deployment
of the technology would be appropriate if the Application
Service Provider (ASP) model is adopted. This is mainly on
account of complexities of software / hardware and the costs
in distributing the software / hardware to end-users. Through
this model, the complexities and costs of the software /
hardware can be cut down and it will also take care of timely
upgradation of the system. Through a Public Private
Participation wherein a symbiotic amalgamation can be
brought about between the Banks and ASP, technology
solutions for financial inclusion can be a reality.
The ASP will provide end to end solution to the Banks
so that they could focus on business and servicing clients
rather than on technology details and its implementation. If
multiple Banks have a common ASP there will be tremendous
reduction in costs of software / hardware and in reducing
implementation time. This will ensure maintenance of up to
date services, 24x7 technical support, and security, etc.
However, it is possible that ASP could share data with other
entities identical to the client. It is possible that the
ownership of the data may be with Banks, but the data could
be housed at different locations.
Owned Model
In this model, the Bank has a Transaction Processing
Software (TPS) through which it services its current clients.
The Bank now can increase its outreach so as to provide
services to the unbanked remote clients. This could be
achieved by the usage of FITs. In order to do so, the FIT
Provider would have to integrate the available FITs with the
existing TPS for which modifications to the existing TPS
would be necessary. In case, the Bank already has a CBS
tailor made to suit mobile banking, modifications to the TPS
are not necessary. The Field level functionaries of the Bank
would access the TPS through field level devices provided
by the FIT Provider. The field level devices could either be
owned by the Bank or could be leased out by the FIT
Provider to the Banks. Incidentally, M/s. Zero-mass
Foundation - SBI, M/s. Tecways India, M/s. Samtech
Infotech, M/s. FINO are some of the FIT Providers who can
provide FIT support to Bank.
Advantages/Disadvantages: Optimum utilization of the
investment made by Banks in its hardware and software for
the existing TPS is ensured while the data is under the full
control of Banks. The field level devices could either be
owned by the Banks or could be leased to it by the FIT
Provider. Application Software Providers could function as
FIT Provider for the Bank. They would provide the necessary
field level devices and integrate them with the TPS of the
operation in the Bank or a new system to be put into
operation, then it will have to be customized to synchronize
with the output provided by the FIT Provider. The Banks
should also have the necessary Hardware to host the TPS
with necessary disaster recovery and redundancy so as to
ensure that the clients are serviced without loss of time.
FieldLevelDevice
This is the device that links the Bank with its client. It could
be a Smart Card, Conventional Card, mobile phone, Hand
held devices, Rural ATM, etc. The device should have all
necessary security features to keep the necessary
confidentiality of the client and ensure secure transactions
for the client.
FieldLevelAgents
The Field level Agent could be a Field functionary of the
Bank or a Business Correspondent (BC) who approaches the
client or is approached by the client for conducting
transactions with the Bank. The Field agent will be able to
communicate with the Bank's database through the FIT
Provider. This could be on-line or off-line depending on the
communication channels that are available in the area of
operation.
The following entities could operate as BCs of the Bank,
subject to the guidelines of DBOD, RBI:
S.No. Entity S.No. Entity
1 NGO 7 Corporates
2 Accredited Money Provider 8 PACS
3 Post Office 9 FIT
4 Agri Clinics / Agri Business Centres 10 ASP
5 NBFC 11 Branch Staff
6 MFI 12 Individual
Entrepreneurs

73
Bank. However, the TPS of the Bank will have to be
integrated with the output of the FIT Provider. This is a
crucial element which would determine the success or failure
of the model and the Bank should have a well developed TPS
in operation.
Stand-alone Model (People's e-branch)
Many Regional Rural Banks and Cooperative Banks
have not achieved the desired level of computerization and
hence they would find it difficult to implement either of the
two models indicated above. This is also on account of the
fact that these two models would force them to invest
heavily in software/hardware. Banks with low level of
computer usage do not have CBS or TBA in place and use
information technology for consolidating manual outputs
received from various branches of the Banks. However, even
for these Banks, the basic premise of financial inclusion i.e.
increasing outreach holds true. In order to enable such
Banks to use FIT to increase their outreach, the 'People's e-
branch model' has been evolved. The Banks will be provided
with a TPS and the necessary hardware to implement the
TPS. This would then form the "People's e-branch" and the
clients of this branch would be the remote unbanked clients
of the Banks in its area of operation. These remote clients
could transact business with People's e-branch through FIT
Provider. The field level devices of the FIT Provider would
either be owned by the People's e-branch i.e., the Banks or
would be on lease. The branch staff or agents of the existing
branch network would approach the remote clients with
devices provided by the FIT Provider so that they could
transact business with the People's e-branch. As an
alternative, individual entrepreneurs can become BCs of the
People's e-branch and provide services to the remote clients.
The remote clients of the e-branch could also be serviced
through Common Service Centres (CSC) and PoS units which
are connected to the People's e-branch. Incidentally, M/s.
Zero-mass Foundation-SBI, M/s. Tecways India, M/s.
Samtech Infotech, M/s. FINO are some of the FIT Providers
who can provide FIT support to develop People's e-branch
model.
Advantages/Disadvantages: It is a low-cost model and
could be implemented immediately in those Banks which do
not have CBS / TBA in position. People's e-branch would be
an addition to the existing branch network of the Banks. The
output (Trial Balance, P & L A/c., etc.) obtained from the
People's e-branch could be integrated into the manual
consolidation of such outputs received from the remaining
branches of the Banks. In future, when the Banks are in a
position to implement a fully fledged CBS, the People's e-
branch could be merged with it. However, a reconciliation
mechanism will have to be devised to take care of the
transactions between the People's e-branch, HO of the Bank
and the existing brick and mortar branches. A brief overview
of the various Financial Inclusion Technology Providers and
Last Mile solution Providers is given in paragraphs below:
Choice ofTechnologies
Mobilebanking(embanking)
Since 2002, the availability of mobile phone services has
dramatically increased and services are provided in the
remotest corner of the country. Therefore, it provides an
excellent platform for providing low cost solutions for
increasing outreach of the financial service providers. The
mobile phone is used as a device to connect the village to
the back-office operations of the conventional bank. The
remotely located client is approached by a business
correspondent with a mobile phone. The client can access
their account with the bank through the mobile phone of the
business correspondent. The transactions made by the client
are sent through an encrypted sms via a router to the
solution providers' server. After a process of encryption /
decryption, this transaction is forwarded through a virtual
private network to the core banking solution of the bank. The
response from the bank follows the same path and reaches
the client at the remote location. Every client in this system is
provided with a unique id and password which helps the
client to lock and unlock his account. For additional security,
the server remains at the bank's HO.
Some advantages are
i. The only necessary handle device is a mobile phone with
business correspondent
ii. Clients through their individual mobile phones can
transact business and transfer funds to merchants,
insurance providers who are a part of the mobile network
without carrying cash.
iii. Complexities associated with card based technologies can
be avoided.
iv. An excellent and robust cellular network is needed at the
remotest location.
v. However, a central core banking solution should be in
operation in the bank so as to effectively interact with the
solution provider to handle such transactions.
M/s. Tecways India is one of the solution providers for the
mBanking technology.
Card and MobileTechnology
This is a hi-tech technology consisting of a smart card
and mobile phone. The smart card contains the account
details of the client and it communicates with the bank
through the mobile phone. In order to provide security to the
transaction, biometric security has been put to use by
keeping finger print details of the client in the smart card.
The Business Facilitator (BF) when visiting the account
holder carries three devices viz., a biometric device for
recognising finger prints, a mobile phone with an add-on
circuit and a handheld printer. If an account holder wishes to
deposit or withdraw an amount from the account, the
Business Facilitator will place the mobile phone over the
smart card and the account holder will place the index finger
over the biometric device. The add-on circuit on the mobile
matches the finger prints obtained from the biometric device

74
contained in the smart card and on matching it, unlocks the
account. The amount to be deposited or withdrawn is done
through the mobile and once the transaction is completed,
the details of the transaction are printed and given to the
account holder. The smart card is updated and the mobile
sends an SMS to the Central Server which updates the
account at the Central Server also.
Some advantages are Clients beyond the range of the
cellular service can be accessed and transactions can be
carried out off-line. The smart card can be used for other
add-on services like e-governance, etc. but central core
banking solution should be in operation in the bank so as to
effectively interact with the business correspondent to
handle such transactions. The Bank will have to provide
smart cards to its clients. M/s. Zero-mass-Foundation-SBI is
the solution provider for the Card and Mobile technology.
Handhelddevices-RemoteBankingTerminals
One of the major hindrances faced by biometric cards is the
lack of fingerprints in rural India especially in the Adivasi
belt. This has been overcome by technology comprising of
normal card (similar to credit card / debit card) and a remote
banking terminal. The account holder is provided with a card
containing information of the account holder as also the
Personal Identification Number (PIN) for security. The BC is
provided with a remote banking terminal which is taken to the
remote client. The remote banking terminal will then access
the Central Server through TCP / IP connectivity (Internet).
The client would then swipe the card on the remote terminal
and conduct normal banking services. Some of the remote
banking terminals are preloaded with the data of the client
from the Central Server before it is taken to the remote client.
The client swipes the card and conducts normal banking
transactions with the details stored in the remote terminal. At
the end of the day, the transactions stored in the remote
terminal are loaded up to the Central Server. This
is an off-line banking solution. M/s. Samtech
Infotech is the solution provider for Internet
enabled Remote Banking Terminal. Aurangabad
DCCB has implemented the off-line Remote
Banking Technology. Some advantages are that
problems faced in Biometric cards on account of
lack of proper finger prints are overcome and the
cost of investment in this card is much lesser
than smart cards and hence cheaper. However,
central core banking solution should be in
operation in the bank so as to effectively interact
with the business correspondent to handle such
transactions while on-line remote terminals will
demand, good Internet connectivity at remote
locations.
DistrictTransactionandInformation
Exchange
The banking sector, insurance sector, mutual
funds, etc. currently have their outreach at the
National level, State level right up to the taluka
level and also sparingly at village levels, while
Post Offices, PACS, SHGs have heavy penetration at lower
level i.e. village level. The remote clients have access to
universal financial inclusion hubs such as Post Offices,
PACS, SHGs, etc. These remote clients could be serviced
through smart cards, hand held devices, mobile phones, etc.
The district transaction and information exchange is an
intermediary stage between the financial service providers at
the higher tiers and the universal financial inclusion hubs at
the lower tier. The district information exchange stationed at
the district level provides connectivity to the remote client to
various financial service providers across the platform. It
would be the repository of information for the remote clients
from which institutions of higher tier would source their
information. Some of the advantages are that the district
centre has transaction exchange interfaces with multiple
heterogeneous systems. The current technology
investments and innovations are protected, enhanced
through usage through linkages of all stakeholders.
However, various stakeholders would have to share a
common tech platform at the district and a central core
banking solution should be in operation in the bank so as to
effectively interact with the district exchange to handle such
transactions. M/s. SUUTI TechOptions Ltd. is the solution
provider for the District Transaction and Information
Exchange technology.
Last Mile Solution
Providers
The various technologies discussed earlier have a common
theme i.e. the communication channel. It is this
communication channel which is the proverbial "slip"
between the "cup" and the "lip." However, because of some
of the recent initiatives, these slips can be avoided.
Broadband access is now available through the RailTel

75
network to the nearest railhead and the technology of
providing Broadband through Power Lines ensures the
availability of broad band to the nearest electric pole. If these
technologies are harnessed to the full potential, connectivity
to the remotest location will cease to be an issue. Apart from
these two options, the "Revolutionary Mobile GSM to
villages" technology ensures the availability of GSM
connectivity to the far corners of the country. Wi-Max and
CSCs are expected to provide last-mile connectivity. 7.
NABARD as the nodal agency for FI Technology Fund
As our Commercial Banks are financially sound and have
already invested in core banking solutions, they could also
invest in technologies for financial inclusion on their own.
This cannot be said to be true in the case of SCBs, DCCBs
and RRBs. Many of these Banks are yet to progress into
implementing Core Banking Technology for their daily
banking operations on account of various reasons, one of
which is paucity of funds. Therefore, it would be most
appropriate if the Financial Inclusion Technology Fund is
utilised to take care of the needs of the Cooperative sector
Banks and RRBs and gap funding commercial bank
initiatives. As NABARD is the mentor and supervisor of
these Financial Service Providers, it is most appropriate for
the onus of utilisation of the FI Technology Fund rests with
NABARD. In this connection, it needs to be noted that
NABARD is in the vanguard of implementation of the
Vaidyanathan Committees I & II recommendations, where
computerisation of PACS is one of the cornerstones. The
computerisation of PACS would make them an ideal universal
financial inclusion hub and hence this needs to be dovetailed
along with the financial inclusion initiatives. This once again
strengthens the issue as to why NABARD be the nodal
agency for FI Technology Fund. Besides, placement of the FI
Technology Fund with NABARD also ensures synergy with
operations of FI Fund, being placed with NABARD as per
Hon'ble Finance Minister's announcement in the Union
Budget speech for 2007-08.
NABARD's Strategy for FI
Technology Implementation
Some FIT Providers have already conducted pilots on
technology solutions for financial inclusion, it would be
appropriate if these pilots are first studied thoroughly. Once
we obtain a detailed knowledge of the advantages and
disadvantages of the various pilots being implemented, it
would be possible to zero in on some of the best options. As
these options have been already tested, they can be then
immediately replicated in a manner analogous to the pilot.
For those technologies for which pilots have not been
conducted, but are robust enough to be considered, a test
run of these technologies could be conducted. The outcome
of these test runs after due evaluation, can then be
considered for further roll out across the country. The
implementation strategy will therefore, first focus on
evaluating the plethora of available technologies that could
help in financial inclusion. The best cost-effective
technologies would then be selected so as to have a basket
of implementable solutions. Depending on the area,
implementing bank and the clientele to be covered, suitable
technologies and processes would then be picked from this
solutions' basket and implemented. In order to monitor the
progress of the implementable solutions, various review
committees would be set up at the National, State and
District levels. The National Level Committee could consist
of representatives of GoI, RBI, NABARD, IRDA, Post Office
and representatives from Banks. This Committee will be
entrusted with policy formulation, reviewing and
strategising. The State level committee will be formed for
coordination and review. Constant monitoring of the
implementing strategy would be done and mid course
corrections would be resorted to whenever necessary.
"People's e-branch" -
NABARD's initiative for
implementing Financial
InclusionTechnology
The People's e-branch model is being field tested as a pilot in
various places in India, by NABARD in Andhra Pradesh,
Sikkim, Tripura, Arunachal Pradesh, Tamil Nadu, Madhya
Pradesh, West Bengal and Maharastra. In the places
indicated above, NABARD will select a Bank (RRB or CCB)
with low levels of information technology usage. The
identified Bank would then be provided with a TPS and the
necessary hardware to implement and operate the TPS.
NABARD would then identify a suitable FIT Provider from
the basket of viable solutions and processes as indicated
earlier. NABARD would then develop synergy between the
FIT Provider and the Bank and help in roll out of financial
inclusion solutions to the remote clients of the Bank.

76
Fall-out of implementation
of Financial Inclusion
Technology Solutions
The various Government initiatives with regard to e-
governance could be dove-tailed with the technologies being
used for Financial Inclusion, the smart card that would be
issued to the remote client could also be developed as a
National identity card containing details of the client's land
records, subsidies being received by the remote client
through various government programmes, as a PDS card, etc.
This could be considered as part of a larger canvas of the
Financial Inclusion endeavour. It would be worthwhile to
review the appropriate recommendations of the Dr.
Rangarajan Committee Report on Financial Inclusion
(Annexure 11).
OptimizationofInfrastructure-BusinessMeetof
TechnologyServiceProviders
The Rangarajan Committee has recommended for
optimisation of existing infrastructure. The recommendation
number 126 states that the existing banking infrastructure
and NGOs which have already made extensive inroads in
rural areas should be made optimal use of for enabling
outreach of banking services. The BF / BC models backed by
technology applications should encourage a role for the
small players and integrate them with the national system.
The Committee is of the opinion that the State Governments
should make payments under National Rural Employment
Guarantee Scheme and Social Security Payments thru' such
technology based solutions. Besides, recommendation
number 127 emphasises on building database. The creation
of a national database with sectoral, geographic and
demographic reports, and also a payment system benefiting
the card holders from the under-privileged / unbanked
population will not be possible without the extensive use of
IT. This alone can bring down the costs of the small ticket
transactions of the poor and make nationwide financial
inclusion a reality. Besides, recommendation 128 states that
the technology suppliers and banks should evolve common
minimum standards for ensuring inter-operability between
their systems.
The eligible activities / purposes under FITF are given
below:
1) Providing viability gap / pilot project funds for unproven
but potential technological interventions;
2) Conduct of studies, consultancies, research, evaluation
studies relating to technological interventions for
financial inclusion;
3) Promoting seminars, conferences and other mechanisms
for discussions, dissemination relating to financial
inclusion technological interventions;
4) Publication of financial inclusion technology literature,
publicity material, etc.; and
5) Capacity building of personnel of Banks, Post Offices,
State Government Departments, MFIs, NGOs, VAs and
other stakeholders;
NABARD Initiatives
In order to address the above activities and to create a
common technology infrastructure with comprehensive
credit information system, work has been already been
initiated by convening a Business meet of the Technology
Service providers to explore avenues for financial inclusion
of the vast unserved population through technological
interventions. Some of the possible solutions which emerged
out of the deliberations during the meet are:
There is a need for a national level platform in order to
address the issue of seamless exchange of information
relating to rural financial transactions. The information hub
should be available to all the agencies involved in financial
inclusion.
As Core banking Solution has evolved for Commercial
Banks, a similar concept may be developed for agencies /
institutions / departments like MFIs, Post Offices, Insurance
companies, NGOs, State Government Departments and the
like may be developed so that all these bodies are on
intolerable platform.
A hierarchical integration at the State, Region and
National levels may be well suited for this scale of
networking where regional differences do exist.
Above all the end user should be empowered to use all
related services.
Approach to Financial
Inclusion through ICT -
various options
An eligible activity is to provide financial support to
technological solutions aimed at providing affordable
financial services to the disadvantages sections of the
society, for which, various initiatives have since been taken
to explore the possibilities of launching pilot projects under
FITF. The proposals received for pilot projects from different
Technology Service providers / banks can be categorised
into the following broad categories;
1) DCCB for implementing Smart Card Technology - 'e-
branching' in Maharashtra.
2) PACS as "e-Branch" for inclusive growth in Andhra
Pradesh.
3) Up scaling the Project on Smart Cards from Andhra
Pradesh Gramin Vikas Bank.
4) Mobile Banking Solution for Cooperative Banks in Tamil
Nadu.
5) Broadband enabled Rural and Financial Inclusion in Hill
districts / tribal districts of the country.
6) Financial inclusion in Sunderbans and Darjeeling Hills in
West Bengal through Biometric Cards.
7) Proposals to connect SHGs, NGOs and Banks in Tamil
Nadu.
8) Proposals from North Eastern Region.

77
9) Funds Transfer and Financial Inclusion
A brief write up on these projects is given in Annexure II.
Besides, the highlight of field visits undertaken by the
members of subcommittee of FITF as well as NABARD
officials is given in Annexure III. Besides, NABARD had
organised a seminar on Experience sharing of Commercial
banks on ICT solutions for Financial Inclusion and the
highlights are given in Annexure IV and V.
Inter operability-Issues
In the recent IDRBT-IBA seminar on open standards for
Financial Inclusion and inter operability held in February
2009, certian issues were highlighted;
' Financial services' industry is innovating and ideating at
a fast pace and is leading to many innovations in the form of
Information and Communications Technology (ICT)
interventions in Financial Inclusion space. Many pilots have
been undertaken by public sector banks in the areas of smart
card issuance and mobile payment solutions, etc.
Technology in this area is in the process of evolution and
thus, there is risk of faster obsolescence of technology
innovations. Also, we see different institutions launching
different products and solutions to cater to this market.
The unbanked segment is a huge market and various
players like government, insurance companies, fund houses,
are looking at efficient ways of tapping into this segment for
NREGP, Insurance and fund subscription products. This
effectively means that if not planned, the end customer could
end up receiving six to eight smart cards from each of these
players. Therefore, there is a need to ponder over the issues
of handling of these smart cards, infrastructure duplication
and quality of service delivery.
In view of the diversity and disparity in solutions
currently available and the fact that transaction costs are
high are in the current context, it becomes imperative to
develop open standards through a collaborative and
consensus driven approach amongst the various
stakeholders. As the industry dwells upon developing these
standards, it must keep in mind the following:
Collaborative process - follow a transparent consensus
driven process that is reasonably open to all interested
parties
Service provider neutral - ensure that the process is not
dominated by any particular interest group
Intellectual property rights - respect the rights of
intellectual property owners while ensuring adequate service,
flexibility and freedom to the users.
Quality and level of detail - sufficient to permit the
development of a variety of competing implementations of
interoperable products or services
Publicly available - easily available for implementation
and use
Should discourage free riders - in unequivocal terms, it
should not encourage groups which want all information to
be free, and thus deprive copyright holders of their rights,
including the right to sell their works.
Financial inclusion can facilitate inclusion of various
strata of society from other perspectives. In this context, it
was discussed that there is a strong need to implement the
financial inclusion initiative in an accelerated fashion in the
north - eastern parts of the country. Following is a brief of
discussions on each of the sessions conducted during the
workshop:
InteroperabilityofSmartcardsolutionsforfinancial
inclusion
Key points of discussion: There are constraints of different
institutions launching different products, culminating in
different solutions. It was understood that interoperability
does not even exist within the banks and thus, the same
across geographies and operators is a long way. An
imperative need to develop open standards through a
collaborative and consensus driven approach amongst the
various stakeholders, was agreed upon.
It was discussed and reiterated that common data
standards would not amount to death of innovation in
technology. In fact, this will reduce the overall costs of
operations for banks and solution providers. The challenges
faced by the Indian mobile operator industry were similar on
costs and operations and through coordinated efforts within
the industry outside [there are examples to learn from like
Cellular Operators association of India and NIC who have
handled similar challenges in the Indian context], the cost of
delivery in case of mobile telephony in India, is one of the
lowest in the world. Following key points were discussed:
Existing infrastructure and investments made by the
banks should be leveraged upon. Though the investments
may not be huge in the overall context; writing off the
existing work for new open standards, could form a
hindrance for institutions that have made headway in this
space and made considerable investments.
Need for interdependence in the way standards are
defined, for e.g. how to standardize the smart card will
determine how to standardize the POS machine
The smart cards or modes of product delivery should be
open enough to embrace new products and applications that
are launched to target the segment later.
There was debate on the very need for interoperability
for the target segment in the financial inclusion space.
Does the end customer really demand it across
geographies across products? In view of the same, need
and scope of interoperability needs to be discussed in
detail. The industry may have to follow a modular
approach. Interoperability for mobile payments would be a
strong boost.
Need for a certifying agency that could test the various
components of a financial inclusion solution. These
standards for various components could then be tested and
certified for interoperability and openness. One of the points
of discussion was if an institution of the stature of IDRBT
could play this role of the certifying agency.
The delivery model should aim at delivering not just any
frills savings accounts but credit delivery to the customer,

78
remittances, insurance, pension disbursements, and other
government scheme disbursements.
MultipurposeNationalIdentitycardforfinancial
inclusion
Key points of discussion:
NIC has earlier taken lead in similar initiatives while
drafting standards on Smart card driving licenses. The
banking industry could take a leaf from NIC experience and
work towards its objectives rather than reinventing the wheel
again.
NIC's initiative on unique identification for each citizen
could boost the efforts towards inclusive growth. The
universal national ID could be used by banks as a customer
identifier and satisfy KYC requirements. The same could also
be used as a single reference number for credit reference
agencies or bureaus.
Once the database is in place, that is a national registry,
as a result of this initiative, the same could be shared with
the banks.
InternationalStandardsforFinancialInclusion
Some of the international initiatives like WIZZIT Bank, M-
Pesa and Bankserv were referred to. Leading technologies in
Japan on biometric identification were discussed and
debated. There were discussions on vein authentication
technology in Japan; which is extremely difficult to forge and
is unaffected by the surface of the skin.
InteroperabilityforMobilepaymentsolutions
Need for the solution to be telecom operator agnostic
and bank agnostic.
Having a payment services platform
Non repudiation for payments over mobile
Learning from the ATM revolution over the last 15 years.
Banks had built silos on their own which constrained
interoperability.
BusinessModelsforFinancialInclusion
Need for effectiveness of infrastructure, state support,
skill availability and maturity of distribution channels, is
important to make any business model succeed.
Cost of delivery today is more than cost of capital.
Scalability should not be at the cost of sustainability; the
business model has to make commercial sense.
Regulatory perspective: Need for appointing MFIs and
NBFCs as Business Correspondents and a thought to
encourage branchless banking through regulations.
Credit, savings and insurance to reach the end customer
and increase the overall relationship value.
Securitization of the portfolio of MFIs can help banks
meet their priority sector lending obligations and meet the
overall financial inclusion goal.
SharedInfrastructureandDeliverychannelintegration
An entity that could be trusted to build this shared
infrastructure - IDRBT or IBA could take up this initiative.
Even though service levels are agreed to, there is an element
of mistrust in entrusting this activity to third party vendors.
ASP Models like FINO already exist in the market; there
could be learning from the same.
New technologies like virtualization and cloud
computing could be used to drive down costs.
The core banking solutions already have a common
platform, common protocols; and thus collaboration amongst
the leading core banking solution providers will not be a
hindrance to achieving the objectives of financial inclusion.·
Shared infrastructure not from an IT perspective but from a
facilities perspective like Indian post office, railways
infrastructure, needs to be explored as well.

79
Perspectives
1.It may be mentioned that as part of the capacity building
process, NABARD had organised the State Level Seminar in
Arunachal Pradesh on 30th January 2009, in which,
technology providers were requested to make presentations
on financial inclusion initiatives/ initiative required in North
Eastern region particularly Arunachal Pradesh. One of the
BCs has indicated that it is not possible to handle a single
bank on standalone basis in NER and necessarily a common
source platform has to be created with support from State
Govt., Banks & NABARD. Therefore, there is a need to take
a view to have a common resource platform in NER.
2. Future roadmap to financial inclusion could be on the
following lines:
Need and scope for interoperability needs to be clearly
defined.
No reinventions on the common data standards. There
are benchmarks available in India and abroad.
There should be customizations only for specific new
requirements.
A strong business case needs to be put forth before
these common data standards are defined.
Need for an ongoing working group for testing and
benchmarking new developments
There has to be a modular and step by step approach; so
that interdependencies are taken care of. There is consensus
on mobile banking enabling financial inclusion to a great
extent.
3. Need for certifying agency
There is need for the set up of a certifying agency which
tests and certifies components for these open standards.
This will enable quicker implementation of financial inclusion
using new technologies.
4. Infrastructure and forums
Banking industry must take a leaf from the e-governance
initiatives undertaken by the state governments and leverage
them to the best possible extent. Other initiatives that could
be leveraged are the ones of NIC and COAI. Also, mobile
banking given the reach of telecom infrastructure, could give
the necessary head start to the financial inclusion initiative.
5. Use of existing Infrastructure
There is need to leverage existing infrastructure of banks
and facilities like post offices, etc created for reducing the
cost of delivery to the end customer
References
1. Strategy paper of NABARD for Financial Inclusion Technology Fund, August 2007
2. Concept paper of NABARD on ICT solution for Financial Intervention, February, 2008
3. Field visit Report of Sub Committee of FITF Advisory Board, February 2009
4. Presentation of Commercial Banks on experience sharing on ICT solutions, Feb 2009
5. Proceedings of the IBA-IDRBT workshop on standards of Financial Inclusion, Feb 2009
6. Recommendations of Committee on Financial Inclusion, 2008

80
ANNEXURE - I
RecommendationsoftheDr.RangarajanCommitteeon
TechnologyApplications-Technology-TheDrivingForceforLow-costInclusionInitiatives
Technological developments in the recent past have
provided the perfect launch pad for extending banking
outposts to remote locations without having to open bank
branches. This could be achieved by leveraging technology
to open up channels beyond branch network and create the
required banking footprints to reach the unbanked so as to
extend banking services similar to those dispensed from
branches.
The Committee, while concurring with the RBI's advisory
group for IT-enabled financial inclusion, is of the view that
nearly all pilot models converge on certain essential
components and processes to be followed in technology
application. The essence of a majority of the models under
consideration features the issue of a smart card to the farmer
on which all his transactions are recorded, a hand-held
terminal with the BC at the village level and a Central
Processor Unit (CPU) linking the smart cards and BC
terminals with the banks. There are also other models where
smart cards are dispensed with and mobile telephones, etc.,
are used.
The fundamental outlines of the existing technology-based
models may be examined for application in such manner and
to such extent as may be deemed fit.
The operating costs of the various models are expected to be
minimal and can be easily absorbed by banks as the increase
in business volumes will justify the incremental operating
costs. Also, the costs are substantially lowered if the
infrastructure is shared. It is, therefore, recommended that
shared infrastructure among different banks enabling
nationwide financial inclusion would confer large scale
benefits and also enable effortless transfer of funds between
the card holders of various banks.
Essentially, the starts up costs are the initial investment
costs comprising cost of the smart card, terminals with the
BC and the CPU. The Committee is of the view that the
Financial Inclusion Technology Fund can provide the
necessary support for defraying part of the costs.
Optimisation of Existing Infrastructure
The Committee is of the opinion that the existing banking
infrastructure and NGOs which have already made extensive
inroads in rural areas should be made optimal use of for
enabling outreach of banking services. The BF/BC models
backed by technology applications should encourage a role
for the small players and integrate them with the national
system. The Committee is of the opinion that the State
Governments should make payments under National Rural
Employment Guarantee Scheme and Social Security
Payments thru' such technology based solutions.
Building database
The creation of a national database, sectoral, geographic and
demographic reports, and also a payment system benefiting
the card holders from the under-privileged / unbanked
population will not be possible without the extensive use of
IT. This alone can bring down the costs of the small ticket
transactions of the poor and make nationwide financial
inclusion a reality.
The technology suppliers and banks should evolve common
minimum standards for ensuring inter-operability between
their systems.

81
ANNEXURE - II
1. Project Brief
PilotProject-Implementationofe-Branchbanking
2. Project Brief:
PACSas"e-Branch"forinclusivegrowth
The Committee on Financial Inclusion has recommended
(Recommendation No. 68) Cooperatives as eligible
institutions under the BF / BC model. RBI has already listed
Cooperatives as eligible institutions under the BF / BC
model. Further as per recommendation no. 122, "The essence
of a majority of the models under consideration features the
issue of a smart card to the farmer on which all his
transactions are recorded, a hand-held terminal with the BC
at the village level and a Central Processor Unit (CPU) linking
the smart cards and BC terminals with the banks." The
Committee has also recommended that, "The existing
dispensation of subsidy under SGSY and payouts under
NREGP could be routed thru' bank accounts, with suitable
technology support" as per recommendation no. 88.
A DCCB has submitted a proposal to implement e-Branch
model at two of DCCB Branches, which accommodates all the
above three recommendations. The DCCB had tied up with
the agency to implement the project in all its branches. The
model was tested with the staff members of the bank as a
pilot project during the period of May 2007 to Oct. 2007 and
as on date all the salary accounts and related activities are
being successfully carried out on the technology platform. In
parallel, the bank carried out a retail sales effort and has
issued more than 20000 cards. Efforts are now on to activate
the accounts of over 10000 teachers by tying up with their
schools / organisations for salary administration. With the
help of a magnetic strip card, a PoS (Point of Sale) terminal
and a robust backend system, the model provides the facility
of deposit, withdrawal and money transfer from any of the
branches (ANYWHERE) to the customers. The key objective
of the project is new delivery channels, i.e. Mobile Vans,
ATMs, BCs, PACS, etc., as a means of providing financial
inclusion services in areas, which are remote from the branch
network of the bank, to provide Kissan Credit Card service
and bill payment services using the technology and to tie-up
with and linking into the networks of banks like HDFC bank
so as to offer ATM access and PoS access to Customers.
They have selected two branches for further implementation
of this pilot to achieve the following:
a. Target Milk Societies, Primary and Secondary Schools,
Sugar Factories, Petrol pumps, etc. for quicker adoption
b. Motivate PACS to participate in this exercise. c.Cover 6
villages, which are at least 5 Kms. away from the branch
through a mobile van.
c. Install 1 ATM at the branch and 1 at, the district HQ, to
provide access to cash 24x7.
d. To sign up merchant outlets, this would accept the card.
The duration estimated for the implementation of this
project is estimated to be 12 months.
A field visit was taken up on 05 Feb. 2008 by NABARD.
The service provider is having a data centre at Dhirubai
Ambani Knowledge Centre in New Mumbai, which is having
a mirror server at Head Office of DCCB. The bank has
provided PoS at few branches and these branches cater to
the concept of Anywhere Money. Basically, this is a concept
of e-branching in which, currently, employees as well as
salaried class are serviced. The bank charges Rs. 200/- per
card in which 50 free transactions are allowed. In other
words, per transaction, it costs Rs. 4/-. NABARD has
ascertained a detailed break-up of costing which includes
1 Telephone Charges Re. 1.00
2 Service Charges for the vendor Rs. 1.50
3 Service Charges for Bank Rs. 1.50
If the volume of transactions increases to a considerable
level, with a tie-up of telephone service provider on further
negotiation, costs will come down further.
The Committee on Financial Inclusion has recommended
(Recommendation No. 68) that PACS and other Primary
Cooperatives can be used as Business Correspondents
(BCs). As per recommendation no. 174, "The Committee is
supportive of efforts to establish a chain of authorized
warehouses throughout rural India, to provide such services,
particularly when such warehouses are linked to PACS."
The proposal for PACS has the scope for implementing
the above recommendations. The proposal is to invest in
establishing PACS as e- branch has presented the scope of
work as below:
a. Invest and establish 2000 Financial Inclusion (FI) hubs in
PACS identified by the State in 18-24 months and get 1
Crore rural population under Financial Inclusion.
b. Make every FI hub an e-Branch to enable Credit for
Commercial banks, insurance, etc. through our
Technology Platform.
c. Provide mechanisms for Mobile Banking to integrate into
e-branch located at the PACS. Create a District level and
state level repository of rural borrowers.
The project is to be done in 3 phases. Phase 1 will cover
500 PACS in 4 districts. Phase 2 covers 750 PACS of 8 more
districts. Phase 3 covers the remaining PACS in 12 more. The
total implementation period for this project is over 15-18
months. A field study was undertaken to evaluate the
effectiveness of the project and to study the quality of data

82
warehousing, data transfer from PACS, its security and
disaster management in place, and the role of CCB in the
same and to have first hand assessment of the smart card
project for making payments under the NREGS.
Observations recorded based on the field study:
1 143 PACS have already been computerised and are being
maintained by the agency @ Rs. 3.45 lakhs for five years
per PACS - one PC in four districts. Most of them are
already under AMC with the agency and the AMC cost is
equally shared by DCCB and PACS.
2 The software has been in use for the last 5 years and the
staffs trained to use the software is comfortable with the
usage of the software.
3 Common Accounting System (CAS) has been rolled out
in all of these PACS w.e.f. 01 April 2008. All reports
required by DCCB, the apex bank and PACS are available
in the software. Any demands for new reports are met
immediately by the vendor. Statutory auditors insist upon
maintenance of loan ledgers manually.
4 The concept of ASP (end to end solution provider) has
been a successful model in these PACS and has ensured
a single window solution provider for all problems faced
by PACS with regard to software and hardware. Backup
of the database is being taken every 15 days.
5 A PoS device was linked to a version of the present
software for use in a Fertiliser / Pesticide godown in one
of the PACS. It was observed that PoS were not able to
handle the different combination of purchase made by the
customer.
3. Project Brief
Up scaling of projects on Smart Cards
The smart card provides a Biometric proof of identity so that
bogus claims can be eliminated and payments can be made
by leveraging technology. In addition to making these
payments, the govt. also envisage that the cards can be used
for providing other financial services also to the rural
population with active involvement of banking institutions.
The project for payment to NREGP beneficiaries was
launched in five villages of Warangal on 30 April 2007 and for
Social Security Pensions on 01 July 2007 in five villages of
Karimnagar. The Govt. has proposed to take up the project in
six districts initially and cover the entire State by 2010. Under
pilot project, the cost of a Smart Card issued is Rs. 115 per
beneficiary and Rs. 20000/- per terminal and 29 terminals were
provided at village level. The govt. is reimbursing Rs. 90/- per
card and Rs. 10000/- per terminal and the balance is incurred
by Bank.
Now, the State Govt. has upscaled the project in three
districts for which the cost estimated is Rs. 8.12 crores and
there will not be any reimbursement of expenditure by State
Govt. The entire cost is to be borne by Bank. In addition to
the present services, the bank is planning to open "No Frill
Accounts" for all household system in all 6309 villages of
eight districts under FI. The total cost estimation made by
the bank for implementing this project in 8 districts in area of
operations, would be around Rs. 65 crores.
As per recommendation no. 122, "The essence of a majority
of the models under consideration features the issue of a
smart card to the farmer on which all his transactions are
recorded, a hand-held terminal with the BC at the village level
and a Central Processor Unit (CPU) linking the smart cards
and BC terminals with the banks." The committee has also
recommended that, "The existing dispensation of subsidy
under SGSY and payouts under NREGP could be routed thru'
bank accounts, with suitable technology support" as per
recommendation no. 88. Further, "The Committee endorses
the creative use of the NREGP payments thru' bank accounts
to enhance financial inclusion, as practiced in Andhra
Pradesh. In Andhra Pradesh, the beneficiaries / depositors
will be issued smart cards to enable transactions at several
locations besides the bank branch" as per Recommendation
No. 162. In their recommendation no. 125, "The Committee is
of the view that the Financial Inclusion Technology Fund
can provide the necessary support for defraying part of the
costs."
The project submitted by the RRB supports all the above
recommendations. This project sought support under FITF
for implementing a Technology Project of Smart Cards. This
project is initiated by the State Government of Andhra
Pradesh for making payments to the beneficiaries of NREGP
and pensioners through banks using Smart Card Technology.
4. Project Brief
ProposalonMobileBankingSolutionforCooperativeBanksinTamilnadutoachieveFinancialInclusion
Recommendation No. 37 shows that "Banks may facilitate
easy rollout of this mobile banking model through
simplification and rationalization of back-end processes and
front-end procedures so that banking operations are made
more customer-friendly." Moreover, Reserve Bank of India
has already issued a circular on Mobile Banking.
This proposal leverages the existing mobile telecom
infrastructure in Tamilnadu. With this telecom infrastructure,
the vendor proposes that full connectivity between Head
Office and the branches would be in place on day one
without having to wait for the roll out of the wireless mesh
network and at no additional capital cost for the

83
communication. Using the existing mobile infrastructure, it is
proposed to immediately connect all rural branches with
mobile handsets to a back-end financial processing system.
All banking transactions will be captured with the mobile
handset and via SMS sent to the back-end system. The back-
end financial transaction processing system, will check and
confirm the transaction if found correct, together with a
unique transaction code. This transaction code will be
automatically generated by the back-end system to enable
customers as well as bank staff to uniquely identify each
transaction. Otherwise an error message will be returned to
the branch. All confirmation of transactions can be printed as
a receipt for bank customers to ensure documentary proof of
the transaction.
5. Project Brief
ProposalforPilotProjectforFinancialInclusionunderFITFintribal
andHilldistricthavingconnectivityproblem
The Committee vide its recommendation No. 122 recommends
the use of other technologies, which uses hand-held devices
and connectivity with host computers through General
Packet Radio Service (GPRS) / Global System for Mobile
Communications (GSM) / Code Division Multiple Access
(CDMA) / landline networks. The devices also come in
several forms like Simputers (Simple In-expensive Multi-
lingual Computers) / Personal Digital Assistants (PDA),
programmed mobiles, etc.
This proposal envisages coverage of Common Service
Centres (CSC), ASP based financial inclusion, e-Agriculture,
e-education, Rural Broadband Connectivity are the key areas
where the above consortium has taken up projects over a
period of time. The proposed pilot project is to cover 2
districts, connecting about 14 clusters (Points of Presence)
per district, providing
residual connectivity to the various end points of rural
interest (Banks, FIs, MFI's CSC, GP, Post Office, SHG, etc.)
within the distance ranging from 5-20 km radius. They will
host the Financial Inclusion and other rural applications as a
hosted service out of their Data Centre and these
applications can be accessed by Banks, DCCB, PACS, CSC,
Post Office, MFI's SHG's, etc. via Mobile phones as well as
PC / Laptops / PDAs, etc. The duration taken from the
inception to accomplishment of this project is envisaged as
24 months. The complete rollout will get completed by the
9th Month and operations and Maintenance will begin and
continue till the 24th month as per the implementation plan. It
is proposed to build a district wide Wireless Backbone (Wi-
Fi) and Point to MultiPoint (PMP) connectivity POP's for
both the districts above. Basically, use of wi-fi / wireless
technology in communication integration will be the
innovation in this project. The investment to build wireless
backbone and multiple connectivity hubs is estimated to cost
Rs. 6 crores per district, which does not include costs for the
following in this proposal:
Cost of PC / Laptop / PoS / PDA / Mobile Phones or any
other computing end point that would be required at the rural
/ village point. To be procured by the end users.
Power / UPS at the customer premise.
Any Video / Audio Conferencing equipment
VAT / Service Tax or any other statutory government levies.
6. Project Brief
ProposalforPilotProjectforFinancialInclusionthroughBiometriccards
cards are operated through handheld devices called POD.
This project will be implemented through RRBs.
The total cost estimated for the implementation of this
pilot project would be Rs.15.10 lakhs, which also includes
the Taxes, Lodging and boarding expenses of FINO team
during the implementation period of 6 months. The cost of
5 PC units (a PC unit will compromise of 1 PC with latest
configuration, 1 entry level laser printer, 1 UPS with 500
VA capacity) each for 5 branches of both the Banks may
be provided under the pilot project for internalising the
process.
As per the Recommendation No. 75, "the spread of SHGs in
the hill regions, particularly in the North-Eastern Region, is
poor. One of the reasons for this is the low population
density in hilly areas and weak banking network". Further,
Recommendation No. 122 supports the use of other
technologies available to enhance financial inclusion to the
hilly and sub terrain areas.
A proposal to launch a pilot project to bring 5000 members
in an interior area and 2500 members in Hill areas into formal
banking fold by using "Biometric cards" technology as a
secured device for financial transaction. These Biometric

84
7. Project Brief
ProposalonintegratedICTintervention
As per recommendation no. 32, RBI has permitted banks to
use the services of NGOs / SHGs, MFIs and other civil
society organisations as intermediaries in providing
financial and banking services through the use of BF and
BC Models. Further, recommendation no. 92 states that
Resource centres can be set up by various stakeholders
such as NGOs, banks, Government departments, NABARD
at the State / district level to play an important role in
preparing training modules, developing a cadre of trainers,
conduct of field studies and in promoting interface between
SHG members and service providers. In continuation with
this, the committee in its recommendation no. 126 is of the
opinion that the existing banking infrastructure and NGOs,
which have already made extensive inroads in rural areas,
should be made optimal use of for enabling outreach of
banking services. The BF / BC models backed by
technology applications should encourage a role for the
small players and integrate them with the national system.
Recommendations no. 134, 154, 165 emphasizes that NGOs
will be used for implementing micro insurance, livestock
insurance, asset insurance and for productivity
enhancement.
Technology being used in this project is a web based
solution, which adopts the latest technologies such as
images scan, smart card, biometrics and deployable in both
desktop and handhelds. When a group of rural people wish
to form a SHG, they visit a NGO; the technology application
enrols their personal details, scans their photos and captures
their finger prints in a Biometric template. This data is
secured and stored in a central database and a smart card is
issued to each of the SHG member. A unique registration
number is generated for each SHG member. The Biometric
technology prevents fraudulent registrations during the
registration process itself as it verifies for any existing
registration of the same individual.
The Biometric template is retrieved when an individual
needs to be identified. Depending on the context, a Biometric
system can operate either in verification (authentication) or
an identification mode. Then the SHG shall approach a Bank
as directed by the NGO for
opening a Savings Account. When the SHG approaches
the Bank for availing a loan, SMART CONNECT helps the
bank officials to verify the details of SHG by reading their
Smart Card details and sends an online requisition to
authorize the SHG to the concerned NGO. Based on the
online approval from the NGO, the bank sanctions the
requested loan amount to the SHG.
The budget proposed for this project is Rs.15 lakhs which
includes all software, hardware, the customisation efforts,
implementation efforts and management efforts by the
vendor. All costs associated with INFOTECH customising
the application and the cost of deploying of the application
to make the application live is also included in the budget.
This budget includes the smart card charges, finger print
Biometric devices, image scanners, handheld devices with
printers for 3 NGOs excluding the travel, boarding / lodging
expenses which would be incurred by the implementation
staff online. The duration of the project as proposed is 10 -
12 weeks depending upon the start of the project, efforts and
system requirements study.
Recommendation No. 6 of CFI emphasizes on Financial
Inclusion in NER. It states that per branch annual coverage
under the Plan would be quite high in some of the North-
Eastern, Eastern and Central States, needed support
including financial assistance may be provided to banks
operating in the above regions. In continuation with this, for
the North-Eastern Region, the Committee on Financial Sector
Plan has already identified such centres and branch
expansion plan as indicated therein may be implemented as
per recommendation no. 12. Further, vide recommendation
no. 31; the Committee suggests that NABARD may defray
the cost of technical staff, particularly, in the North-Eastern
Region.
The Committee vide its Recommendation no. 60 suggests
that, "With a view to facilitating the seamless integration of
RRBs with the main payments system, there is a need to
provide computerisation support to them. Banks will be
eligible for support from the Financial Inclusion Funds on a
matching contribution of 50% in regard to districts other than
tribal districts and 75% in case of branches located in tribal
districts under the Tribal Sub Plan.
In view of the above, the proposals received from the
North Eastern States may be considered. Three proposals
have been received from three North Eastern States,
requesting
financial support from NABARD under Financial
Inclusion Technology Fund (FITF). The details of the above
proposals are given as below:
8. Project Brief
Proposals from North Eastern Region

85
9. Project Brief
FundsTransferandFinancialInclusionProject
Rangarajan Committee has recommended that remittance
needs of poor is one of the important areas that needs to be
emphasised for financial inclusion recommendations 129,
130 and 131 advocates a system of low cost anywhere
banking solution, which has a facility of card to card
transfer. Savings / current account holders at all its
branches have a choice to keep their savings bank account
or a part thereof in a separate account at the bank's head
office. Customers can have access to this account from all
the bank branches. It was learnt that the customer is
charged only Rs. 4/- per transaction. Such experiments may
be studied for replication. A low value card linked to a bank
account, which can be encashed at PoS and which allow,
transfer of small amounts from one card to another would
alleviate remittance problems. This would substantially
increase banking outreach as at present there are about 3
lakh PoS as compared to around 70,000 scheduled
commercial bank branches and 22,000 ATMs. However, a
majority of PoS machines are now located in urban and
semi-urban areas. It is expected that as the system takes
root, more PoS will come in rural areas, facilitating such
transfers. The e-kiosks in villages could be yet another
source for operating a remittance system that is accessible
to the poor.
The Project
The agency has proposed to use PCOs as financial
service delivery points in the rural areas. The project
envisages a bouquet of services to be offered at each outlet.
A risk analysis is carried out to identify, manage and control
risk that may arise throughout the project life cycle. The pilot
project is planned to be implemented in 4 states two phases.
Technology to implement services such as E-pin recharge
and distribution, Micro finance and insurance, Banking
access, Money order and Post-office Services, Agri Business
Development, Marine Farming, Disaster Management, Parcel
Services, NREGS payments, Women Emancipation, Tele-
medicine and Health Insurance, Education, Community
Networking, Bill payments, Rail / Bus / Air bookings, E-gov
services, employment services, survey services have been
created and are ready for deployment. All the services have
been deployed on the mobile and cut out the need to retain a
PoS terminal and hence reduce the entry barrier for a
prospective or existing PCO holder. Capacity building, new
product training, monitoring the revenues of the channels,
ensuring that the logistics and supplies are available, liaison
with the service
provider, product suppliers and authorities within the
defined territories and daily MIS generation will be taken care
by the service provider.
Revenue earnings from commissions on transactions that
can be outsourced at these existing outlets are estimated @
0.5% on assets and liabilities; 2 % on govt. Payouts such as
NREGS; 1% as part of BCs, 3% on insurance premium, 3% on
e-recharges of mobile phones; 3-5% on remittances; 2-4% on
microfinance collections, etc.

86
ANNEXURE-III
Extract of FieldVisit of Members of Sub - Committee /Advisory Board of
FIF and FITF to ICT Intervention initiatives of Banks
Visit to Indrakannu village, Smart Card project of Andhra
Pradesh Grameen Vikas Bank (APGVB)
1.1. Technology
Radio Frequency Identification and Near Field
Communication technologies are used in the Smart Card
Operation.
1.2. ZSN Cards
This is based on the new technology operated through
mobile phone. A Zero Serial Number (ZSN) Card is a plain
card that carries a unique nine digit serial number on the Zero
Platform.
The key features of the card are:
" It bears a unique identifier of the customer, allotted at the
time of enrolment.
" This number remains a key identifier for the purpose of
doing transactions and points to the authentication profile of
the customer that is securely stored in the mobile of the CSP.
" This number is additionally bar-coded on the card for ease
and accuracy.
" It results in shorter time for making a transaction
operational on opening of the account at the backend.
" In case of government beneficiaries, this card is given to
customers at the time of enrolment with a provision for the
name and address of the customer.
" Comes at a minimal cost thus reducing the replacement cost
in case of loss.
" Front top part of the card: i) logo of APGVB and ii) logo of
ZERO - Technology Provider.
" A nine digits number is prominently displayed across the
lower part of the card, the corresponding barcode appears
below the number, and the central part has a provision to
capture the name of the beneficiary.
1.3. Process
" Government issues instructions to the Banks / FI
authorising payment.
" List of beneficiaries and authorised amount are given and
individual accounts of beneficiaries are credited.
" Business Correspondent withdraws the cash from the
Branch and delivers it to Customer Service Provider. " BC /
CSP sits at pre-designated government premises usually
Gram Panchayat building etc.
" To perform transaction, the customer is required to undergo
a finger print verification.
" CSP flashes the customer card against the NFC mobile. The
mobile reads the content of the card and verifies if the finger
prints verification status is successful.
" Only if the verification is successful does the NFC mobile
enables the debit transaction options.
" Thus, a fool proof identity authentication is established.
" Based on the balance in the account of the beneficiary, as
displayed on the screen, cash is paid.
" Receipt is generated in duplicate.
" The data in Central Server is automatically updated with the
transaction.
" Alternatively uploading of data can be done at the end of
the day.
" Unspent amount is returned.
1.4. Reporting
A list is generated at the end of the day which includes the
following details:
" List of members
" List of new members
" List of Transactions
" Reconciliation List
1.5. Preparatory Work
Enrolment
a. The department provides the list of identified
beneficiaries under Social Security Pensions and NREGS.
b. The Bank conducts enrolment on campus at village
level.
c. GPs, VOs assist the enrolment teams for identification
and enrolment of beneficiaries.
d. Finger prints, photo and demographic details of the
beneficiary are captured.
e. The banks open S.B. Account (Zero Balance) in respect
of all beneficiaries of the schemes as identified by the
department.
f. Every beneficiary will be issued a Smart card to establish
proof of identity.
Appointment of Business Correspondent / Customer Service
Provider
a. Bank appoints a Business Correspondent (BC) to
deliver service at Gram Panchayat level through CSP. BC is
the extended arm of Bank - logically he is like a Branch
appointed by the Bank.
b. BC appoints CSP at the village level. The CSP can be an
SHG with a literate member leading the group or a Village
Organisation (VO). CSP is the delivery point like an
Extension Counter of a Branch. c. Required hardware like
finger print reader, printer, mobile phone etc., are
positioned in the village.
d. The BC / CSP are also given a card with his / her
biometric information encrypted in it. The terminals are
activated only if it is authenticated with the card of the BC
/ CSP.
e. Adequate training is provided to BC and CSP.
1.6. Role of various stake holders
1.6.1. Role of Government
a. Formation of State and District Implementation

87
Committee for overall coordination & supervision.
b. Orientation to govt. officials and public
representatives.
c. Issue list of beneficiaries under NREGS & SSP to
the banks.
d. Facilitate awareness campaign in all villages
e. Facilitate VOs in identification of customer service
providers
1.6.2. Role of Banks
a. Enter into MoU with Government
b. Identifying and finalising Technology Provider for
grounding the project
c. Appoint Business Correspondent as per RBI
guidelines and provide training.
d. Facilitate BC to appoint, train and enter into
contract with CSPs.
e. Conduct enrolment camps at village level
f. Open SB account and issue Smart Card to
beneficiaries.
g. Credit pensions / wages to the account of the
beneficiaries and disburse cash at village level.
h. Maintaining centralised database and provide MIS
1.6.3. Role of Technology Provider
a. Train the Business Correspondents and CSPs on
technology.
b. Provide a hand held NFC mobile phone based
device fitted with a printer.
c. Biometric identification device and related software.
d. Equipment for connectivity.
1.6.4. Role of Business Correspondent
a. Identify the CSP, appoint and enter into MoU with
CSP.
b. Training and continuous hand-holding of the CSPs
c. Responsible for money evacuation.
d. Payment to the CSPs on behalf of the banks.
e. Coordinate between the bank, technology provider
and CSP.
f. Ensure smooth operation.
1.6.5. Role of Customer Service Provider
a. Operation of the terminal. b. Disbursement
c. The beneficiaries can collect the amount as and
when they require as the CSP is expected to be available in
the village on all working days and make disbursements
throughout the month during the specified dates.
d. Provide status of disbursement to the Business
Correspondent.
e. Upload information on a daily basis.
2. Visit to Shankarpally village, FI project of Corporation
Bank
The Bank provided hand held devices to the Business
Correspondents. Individual customers are provided with
Smart Cards / Radio Frequency Identification Cards (RFID).
The device has optional backup for power source and
communication links in case of power shortage / link failures.
The Business Correspondent card stores the photograph
and the characteristics or transaction parameters of the
Business Correspondent and the Customer Card contains the
photograph and the basic details of the customer on the face
of the card and the chip inside contains the account details
of the customer with the fingerprints of the customer.
In both the devices, there is a provision for day-begin
day-end details of account which could be synchronised and
used for downloading the modified / changed balances on
the card.
The transactions done by the customers are captured by
the device in an off-line mode and then uploaded to the
central server during day end settlement for updating the
various customer accounts.
2.1.AccountMaintenance
2.1.1. Corporation Bank has opened all the accounts in its
Core Banking server and these accounts do not reside with
the Technology Service Providers. The Technology service
providers only maintain the transaction history so as to
serve as routing point for transactions. Presently, the
transactions are received through secure mails for directly
updating the data on to the Core Banking Server. On
completion of the product development process, which is
underway, the server would be interfaced to the Core
Banking Server for direct updation.
2.1.2. Under the system, the detail of the client, the pre-
sanction credit appraisal and the loan sanctioning discretion
lies with the Bank. The Business Correspondent only assists
in filling up the application forms, obtaining photographs
and in recovery of interest or over dues.
Transaction Limit & Risk Mitigation" Per Transaction Limit
(Amount that can be remitted or withdrawn by a cardholder)
" Per Day (Amount that can be remitted or withdrawn
by a cardholder in a day)
" Total Day Limit (The maximum amount the Business
Correspondent can hold before doing a settlement)
" Interval between Settlements (The maximum number
of days the Business Correspondent can transact without
doing settlement) [Presently it is 72 hours or 3 Days]
No transactions are permitted without the presence of the
Business Correspondent's Card and the Customer Card and
their respective fingerprints.
2.2. Devices Characteristics
The Bank has purchased the hand-held devices from two
vendors namely FINO (Financial Information and Network
Operations) Mumbai and from Integra Micro Systems Pvt.
Ltd., Bangalore. Both the devices have a fingerprint scanner,
key pad for entering the information, a display unit for visual
verification, a thermal or impact printer for receipt printing
and connectivity options to upload the data. The printout
given to the customer contains the date and time of the
transaction along with the merchant ID and the Transaction
ID to facilitate reconciliation and dispute resolution.
The connectivity is possible through the PSTN lines,
GPRS, Wi-Fi, WAN or Internet. The device supplied by
Integra has the voice guidance for the users in the local
language. Both the devices work on AC Power supply and
they also have an internal lithium ion battery so as to

88
1. More and more banks are adopting technology and taking
initiatives for Financial Inclusion.
2. It is observed that the cost of cards and other devices
such as handheld device and laptop etc. have reduced
noticeably over a period of time. Besides, these devices used
for financial inclusion have been technologically improved /
upgraded.
3. While bigger banks have aggressively adopted the ICT
solution for Financial Inclusion, smaller banks like UCO bank
operating in difficult areas such as Orissa, Bihar, North
Eastern region are facing difficulties in leveraging
technology to financial services. Some of the banks view the
technology intervention as a financially viable proposition
ANNEXURE - IV
ICTSolutionsforFinancialInclusionExperienceSharingby
CommercialBanks-LearningfromthePresentations
and a business opportunity.
4. In Karnataka, some of the banks have joined hands with
SLBC to float a common tender process for technology
adoption, as a result of which they have been able to adopt
and use the ICT technology in the field in a record time of
two months.
5. While some banks have a plan to establish e-kiosk with V-
Sat connectivity in order to reach last mile clients, some have
adopted the strategy of using its own employees as provider
of financial services instead of BC/BF model.
7. The banks which are yet to adopt technology intervention
for financial inclusion were getting exposed to the initiatives
taken by other banks.
function during power outages. The device provided by
Integra can be connected to a Car battery also for handling
longer power outages.
3. Visit to FI project ofAxis Bank
It was observed that the Bank had availed the services of
FINO for ICT solution. During our visit it was observed that
the enrolment process was going on in which both the laptop
and mobile with hand held device were used. FINO basically
uses a chip based card for access control system. In brief,
the technology specifications are as under:
POS Terminals
" Smart Card Terminal Services
" Providing data upload / download, to FINO's switch and
back-end system, through locally available PSTN network
" Processing of data at Central server and a daily transaction
interchange
" MIS reports as mutually agreed upon
" Dispute resolution of transactions
" Data management services
" Smart Card terminals contain the following features :
" Fingerprint Reader with Built in Smart card reader & printer
" Built in security co-processor
" Min. memory 32 Mb Flash + 8 Mb SDRAM
" EMV compliant Smart Card reader
" SAM (Security Access Module) slots
" Swipe card reader: Track I, II
" Acquisition Time < 1 sec
" Recording < 256 bits
" Power backup through rechargeable batteries
" Terminal Software
The terminals application is a user-friendly menu-driven
interface and can be used for all types of and authentication
of the Smart Card holder through biometrics (fingerprint).
4.Summary
Name of Technology Accessories Access Control Card Cost of Card (Rs.) Business
the Bank Service Provider Correspondent
1. APGVB A Little World 1. Mobile Biometric Non - chip 15 - 25 Zero Mass
2. Hand held device Foundation (Section 25
Company)
2. Corporation Integra Hand held device Biometric Chip based 80 - 100 SHG Members
Bank operatable with
Backup Battery
3. Axis Bank FINO 1. Hand held device Biometric Chip based 100 - 125 FINO FINTECH
2. Lap Top /Mobile Foundation (Section
25 Company)

89
Sr. Name of the Bank Technology Provider (s) Technology Adapted Cost Profile Area / No. of Initiative taken
No. (In Rs.) accounts covered
1 Andhra Bank i) A Little World Pvt. Ltd. Biometric cards 184000
ii) Access Development with mobile connectivity beneficiaries covered.
Services & Atyati Technologies.
iii) FINO
2 Bank of India Biometric smart cards 16.34lakhaccounts a) GCC, KCC cards
opened. b) Rural Mobile ATMs
c) E - grama
3 CorporationBank Biometric cards i)426711-Nofrill a) Survey
SBaccountsopened. b) FLCC has been set up
Automation
ii)19463GCCcards
have been issued.
4 Indian Bank i) FINO i) Biometric smart cards 15lakhNo a) Establishment of Rural Internet Kiosk
ii) Financial Softwares & ii) Biometric ATMs Frills SB Centres to serve sugarcane farmers
Systems Pvt. Ltd. accountsopened. b) 11 Biometric ATMs installed
c) Online commodity price tickers
d) Financial Literacy & Credit
CounselingCentres
5 Punjab National Bank 1)9differenttechnology i) Biometric smart cards i)2510000customers. a) Opened 7 FLCCs in Punjab and 2
providers are being used covered FLCCs in Haryana.
b)KabongramAsaKashungShang
Social Upliftment Society (KAKSSUS),
an NGO appointed as BC in the states of
Assam, Arunachal Pradesh, Mizoram,
Meghalaya and Manipur.
c) Training programme for BC agents.
6 State Bank of India i) A Little World i) Smart Card & POS 18 lakh cards have a) Organise campaigns at village level.
ii) FINO ii) PC-Kiosk beenissued. b)Organising road shows, skits, etc.
iii) EKO iii) Mobile Phone c) Announcements on two wheelers
iv) TCS and other vehicles.
7 State Bank of Mysore i) A Little World i) Simple Plastic Card i) 1.73 lakh No frill accounts a) Live Demos for enlightening the
ii) Integra Micro Systems Pvt. Ltd. ii) Smart Card with chip in Karnataka features of Smart Cards around
15GramaSabhas
8 UCOBank Cardswithmobilephonetechnology
9 UnionBankofIndia Biometric smart cards 18,617,438.00 355700cardsissued a) CBS implemented in 2 RRBs - KGSGB
andRSGB.
b) 200 VKCs, 90 Union Mitr Centres
c) Micro life insurance is provided.
10 Vijaya Bank Integra Micro Systems Pvt. Ltd. Biometric smart Card i) Rs. 90/- i) 600 No Frill SB a) ATM enabled KCC cards
per card. accountsopened. ii) Rs. 3/- per transaction per card per
month with a max. of 3 months.
iii) Rs. 35/- as AMC per active card
per year
iv) Rs. 2600/- per BC per month.
11 Canara Bank Smart Card provided with CostofHHM a) Biometric voice enabled ATM.
(Presentation received magnetic strip card that can b) Mobile voice enabled Biometric ATM
later on) be used in Biometric ATMs. Cost of Smart Card - Rs. 125/-
at predetermined places in Bangalore.
c) Two Financial Literacy Booklets
"Money" and "Savings" have been
published.
d) Three FLCCs have been set up.
ANNEXURE - IV
ICT Intervention - Experience sharing by CBs - 17 Feb 2009

90
Dr KG Karmakar
Managing Director, NABARD
NP Mohapatra
Assistant General Manager in
Financial Inclusion Department,
NABARD. The views expressed
here are of Authors and not
necessarily the organisation they
belong to.
Introduction
India has a rural population of about 780 million with limited or no access to financial services.
The branch banking route apparently is not very practical due to the huge cost of opening the
branches vis-à-vis volumes expected, high costs of operations, limited banking hours, illiteracy,
non-availability of alternate channels in rural centres, etc. Therefore, it is pertinent that for the
banks to move beyond the 'brick and mortar' set up, they have to provide technology driven
products such as, ATMs, internet kiosks for successfully implementing financial inclusion. For the
rural clientele, the stages of financial exclusion are complex with financial illiteracy leading to
financial discrimination, leading to financial exclusion and finally leading to financial exploitation.
The banking needs of the financially excluded people are restricted to limited transactions of low
value in nature. Operating a full-fledged rural branch is not a viable proposition considering the
huge operational costs and limited business volumes initially. The Business Correspondents
(BCs) / Business Facilitators (BFs) model is ideally the alternate viable business model in order
to ensure greater coverage of rural clients in far-flung areas with reduced costs. Under the set-
up, the banks are permitted by RBI to outsource selected banking services through BCs and their
authorized agents. The customers should have the freedom to use branch banking facilities even
though the business correspondents are available in their locality or they were clients initially
sponsored by the BCs.
Issues and Challenges
of BC/BFs in Financial
Inclusion
Business Correspondent and Business Facilitator Outreach
Model for Banks -Issues and Challenges
Requirements for the Business Model
i) A proven and tested software solution to lower operational costs
ii) Robust hardware and other equipment compatible to software application
iii) Financially sound, established, experienced and reputed BCs with adequate expertise and
manpower
iv) Uninterrupted tele-connectivity with solar / battery back-up
v) Sound monitoring of all transactions using ICT solutions
vi) Insurance for cash transactions as per requirements
These are the basic requirements of the BC / BF model which banks would opt for.
FINANCIAL INCLUSION II Issues and Challenges of BC/BFs in Financial Inclusion – Business Correspondent and Business Facilitator Outreach Model for Banks

91
Low operational costs
Scalable quickly
User friendly systems
Secure access and transactions
Inter operable systems
Compliant to legal requirements
Standardised system for
accessibility anywhere
Viable and Profitable operators
Sustainable for banks
depending on savings model
FEATURES OF
THE ICT SOLUTION
Technology
The objective in the present day context is to ensure early financial inclusion. The
important question is increasing rural outreach and deepening customer penetration
to enhance rural business significantly. This can be achieved through outsourcing
all the functions to a Business Correspondent (BC) or Business Facilitators (BF) in a
particular area. Large scale rollout and rapid scaling up again, is not possible without
suitable technology interventions which are easy to use, robust, dependable and, at
the same time, cost efficient. The banking solution to financial inclusion is in simple
terms defined as a "Bank in a Box". The entire set up consists of a cell phone, which
serves as a POS machine, a finger print reader and a tiny printer, all of which can be
packed into a 10-inch box. All these work on rechargeable batteries. No Frills
Accounts are opened with the help of smart cards. There are various types of smart
card depending on their capacity ranging from chip less to 32 KB memory. The 32
KB smart card is akin to an "e-purse" and stores information about the customer, the
account number, finger prints as well as the balance in the account. The smart card
can handle up to 16 accounts including loan accounts. This card works on the Radio
Frequency Identification (RFID) technology. Banks are using this technology in the
smart cards which work in conjunction with a mobile or a hand held connectivity
device which works on Near Field Communication (NFC) Technology. Transactions
are possible both for online and off line mode which permits real time updating of
bank balances in the card. By issuing a smart card to the rural customer, the
transaction cost is reduced as it dispenses with paper based transactions with
savings in transaction costs, both for the bank and the clients and envisages shifting
the actual operation of transacting on the account away from the branch to the
Customer Service Point / Provider (CSP) at the outlet in the location of the rural
customer, Generally, the model has been adopted by most banks as set out at
ANNEXURE - I
Cost Matrix for BC / BF model
As per the analysis of state-wide extent of exclusion in the
country and plans for covering excluded households, by the
Committee on Financial Inclusion, a population of 5,57,77,000
excluded households are to be extended financial services by
the year 2010.
NABARD has since received some proposals from banks,
which have implemented financial inclusion through BC / BF
model, for financial support from the FIF / FITF. Based on
the experience of these two banks and the above essential
cost for covering the 5, 57, 77,000 excluded households,
Rs.8.70 crore will be required. While arriving at the costs, it
has been assumed that
" One Customer service point (CSP) whether of BC or BF
will cover 1000 excluded household in 5 - 10 villages i.e.
55777 BCs and 55,777 BFs will be required
" Each CSP of BC will require one Point of Service (POS)
equipment i.e.55,777 POS will be required
Considering modest cost estimates, per account cost for 5,
55, 77,000 households works out to be Rs.158.37 or, say
Rs.160/-. The support from Financial Inclusion Technology
Fund (FIF) per smart card works out to be Rs.49.52 and
Rs.110.48 from Financial Inclusion Technology Fund (FITF).
This will culminate in an estimated expenditure of Rs.270
crore from FIF and Rs.699 crore from FITF. The component
wise break-up is given in the following table set out below is
based on the State Bank model, set out at

92
ANNEXURE - II
Table : Cost Break-up for smart card (components)
a bank branch and many villages are linked to a specific
branch. The initial but detailed village survey ensures that
the village profile is captured once, with details of all
members of each village household and availability of
infrastructure.
b) Family information
The survey generates a unique number for each family and
facilitates the capture of photographs of each family member
with details for information relating to religion, centre, extent
of land owned and assets owned. Data is captured on-line or
off-line with ability to query the database and safe storage of
data and consolidation and easy access to data from
anywhere. The Corporation Bank surveyed 327 branches
covering 1459 villages with 4, 31,655 households surveyed.
The bank opened 4, 26,711 no-frill SB a/cs while 26,938
persons had applied for the GCC of which 19463 cards have
issued.
c) Technology Initiatives
Sr No. Purpose Factors influencing cost
A
1 Enrolment/SurveyoftheCustomer Dependsonthelocation
2 Personalisationofthecustomerincludingthecardcost Dependsonvolume,specification
3 Maintenancecostofthecard Dependsonvolume,specification
B
1 SelectionoftheBC/BFfor250regions As per RBI guidelines
2 Cost of POS Dependingthesmartcard/datarequirement/biometricrequirement
(oneperagentofBCi.e.oneper1000excludedhousehold)
3 Training cost for BC and BF Locationspecific
(4daysprogramme)(oneagentofBCandoneBFeachfor
1000excludedhousehold)
4 Publicity material to BC and BF Onetimeexpenditure
C Banks / Institution
1 ServerandSwitch(onefor1croreexcludedhousehold) Asperbankspecification
2 Othercost(cabling/wiring/telephoneetc.) Asperbankspecification
(onefor1croreexcludedhousehold)
3 Software(for5.57croreexcludedhousehold) Asperbankspecification/availableexistingsystems
4 Spaceforhousingtheserver/switch Asperbankspecification/availableinfrastructure
(onefor1croreexcludedhousehold)
TOTAL A+B+C
This is an excellent indigenous model, which does not need
funding from any agency and has been inbuilt into the rural
banking model of the bank. The components depend on the
Financial Inclusion survey, depend on branches to open a
large number of small value accounts with computer facility
for branches to upload data and exception reports when the
balance exceeds turnover or exceeds the cut off limits of
Rs.10, 000 per BF. Survey details directly generate an
uploadable file and all accounts maintained in the bank's
server. The details of each district where the bank has been
given Lead Bank Status, has been surveyed for inclusion.
Survey Details
The survey format is segregated in three sections
i) Village information
ii) Family information
iii) Details about family members
a) Village information
The village information ensures that each village is linked to
The Corporation Bank Model

93
The high level of security features built in affords reduced
transaction costs with increased efficiency. Basic banking
services are provided at the village household level,
throughout the day and without hassles as there are
challans/vouchers being generated. Familiarity in dealing
with the service provider enables reduced transaction costs
for both bank and the clients. The bank branches are also
able to handle large volumes of cash with very few staff and
extend good customer services. The basic technology is a
card-level device with support for fingerprint authentication
and battery back-up for continuous operation during power
cuts. The device is light and easy to carry, has vocal
guidance in local languages and support for multiple
communication channels and storage of minimal essential
data with scalable architecture and ability to support multiple
products and services with attached printer for receipt
printing.
d) Available Banking Service
The facilitator enables cash deposits and withdrawals,
balance enquiries + statements, transfer between own
account, loan repayments and withdrawal from GCC a/c, SHG
A/cs (Loan & Savings), Recurring Deposits, Multi-Society
payments, NREG payouts and Social Service Payouts all at
the clients doorstep. Other products and services under
development are (i) person to person remittances using
mobiles, insurance premia collection, utility bill payments,
pre-paid mobile recharges and remittance from one card to
another. These are all user-friendly services and have
enabled the bank to mop up rural deposits suitably.
The transactions are generally off-line and online when it
is foreign card or when there is a balance mismatch. The
client is given a printed receipt using compact printer in local
language at GPS provided for greater comfort.
e) Risk Mitigation Measures
The need for customer security is taken care of with several
innovative measures. Per day transaction limit of Rs.10, 000
is applied with a two-factor authentication (Card +
Fingerprint). There is also a customer limit for daily
withdrawal/receipt as also on number of daily transactions.
The BC agent is generally a middle aged lady member of the
village based SHG or leader of SHG, settled in the village and
individual limits are fixed on a per day basis as also limit on
total number of daily transactions. Branches also have a
computer terminal exclusively for BC/BF transactions.
Customers are also encouraged to insist on impact printer
receipts. Web Access is possible to monitor card balances
and BC balances. Whenever transactions have a balance
mis-match, transactions are faxed on-line. Data storage
policies ensure that account information remains only with
the Bank and only transaction data is routed through the
technology service provider. Periodic reconciliation process
to tally balances is a must. Besides, minimum standards for
identifying and engaging BC are enforced as is the
methodology and standards for data storage as cards.
Fingerprint storage and relevant standards are set as are card
numbering standards and risk mitigation criteria.
f) Spread of Branchless Banking
The model has enabled reduction in transaction costs in 4
States as under:
Sr No. State Village Branches
1 Karnataka 160 99
2 Andhra Pradesh 61 07
3 Tamil Nadu 29 16
4 Goa 02 02
Total 252 123
Several protocols & security transactions have been
developed to ensure technology absorption, at all levels.
(i) Policy framework (Cards issue, BC selection, Services
delivery)
(ii) Legal and statutory framework
(iii) Security framework
(iv)Transaction processing framework
(v) Conveyance with existing technologies is a must
The Corporation Bank opines that financial inclusion
should not be a regulatory directive but a viable business
proposition to facilitate outreach and reduce cost of services
delivery and ensure s credit delivery with low transaction
costs. This enables BC/BF to provide new products/services
and linkage to the economic activity or income generation
activity with functional costs to the branch.
Implementation
Over a period of time the number of banks adopting ICT
solutions and taking initiatives for financial inclusion is
increasing. The BC/ BF model is being implemented with
Government supported NREG programme and Social Security
Pension as well as on Bank's own initiative.
TechnologyArchitecture
The cost of cards and other devices such as handheld
device, Point of Service (POS) and laptop etc. have reduced
noticeably over a period of time. Besides, these devices used
for financial inclusion have technologically been upgraded
over the period. Banks are increasingly adopting technology
intervention for financial inclusion. In order to achieve
economy of scale the State Level Bankers Committee (SLBC)
played role in floating a common tender process for
technology adoption, in Karnataka.
Enhancing outreach - BC/
BF Model
The BC/ BF model helps banks to expand their outreach. BFs
can undertake the following activities on behalf of banks
which will enable reduction of transaction costs for banks /
clients and also enable revenue sharing for BFs.
(i) identification of borrowers and fitment of activities;
(ii) collection and preliminary processing of loan applications
including verification of primary information/data;
(iii) creating awareness about savings and other products
and education and advice on managing money and debt
counselling;
(iv) processing and submission of applications to banks;

94
(v) promotion and nurturing Self Help Groups/ Joint Liability
Groups;
(vi) post-sanction monitoring;
(vii) monitoring and hand holding of Self Help Groups/ Joint
Liability Groups/ Credit Groups/ others; and
(viii) follow-up for recovery.
In addition to activities listed above under the BF Model, BC
can undertake following activities:
(i) disbursal of small value credit,
(ii) recovery of principal / collection of interest
(iii) collection of small value deposits
(iv) sale of micro insurance/ mutual fund products/ pension
products/ other third party products and
(v) receipt and delivery of small value remittances/ other
payment instruments.
All these services can easily be provided using ICT
solutions and enable banks to invest in the BC / BF
model, for greater rural outreach and increasing rural
business levels.
Issues and Challenges
1. As per the Reserve Bank's Working Group Report, the
following issues have been raised by various stakeholders:
(i) Cash handling
As almost all BC transactions are cash based, the flow of
cash with BCs has been highlighted as the biggest issue.
Besides the logistics of handling large volumes of cash, it
leads to increased costs and added operational risks. These
assume greater importance in the context of the North
Eastern region of the country, on account of higher security
risks, vast and difficult terrain and poor connectivity.
(ii) Client Profile
Beneficiaries of BC services are mostly illiterate and
susceptible to misguidance. Further, at times, clients tend to
perceive the BCs themselves as banks and as not
functioning on behalf of the banks. Lack of proper financial
education of the clientele was a barrier to the effective
utilisation of the banking facility provided to the clients
through the BC model.
(iii) Viability issues
(a) The viability of the BC model has remained the most
critical issue which has led to the model not taking off as
envisaged. There have been various factors which have
contributed to this issue. A majority of no-frill accounts
opened by BCs have remained non-operational. As such,
opening of the accounts to provide deposit services to
begin with and subsequently widen the coverage of
activities, with a view to making these accounts
profitable, have not made the desired progress. Retaining
customers after the initial transactions proves to be a big
challenge. The Group has received feedback that there is
a mismatch between the revenues earned and costs
incurred while undertaking the BC operations, resulting in
non-viability of the model.
(b) It has been reported that banks charge interest to BCs for
the temporary accommodation / overdraft provided by
banks to them. This adds to the operating costs of the
BCs. Moreover, the insurance costs as well as security
costs for the cash-in-transit are also passed on to the
BCs, which affect their viability.
(c) Where the BCs have to cover large distances, the
transport cost often becomes prohibitive. Further, where
power supply is a problem, the BCs have to move with
generator kits / batteries.
(d) The commission paid by banks to the BCs is not
considered adequate for a viable business model. There
are costs involved in staff salaries, training, etc for which
the current compensation structure is not at all adequate.
A majority of BCs have reported losses and some of them
have even suspended their operations. This, in turn
affects the banks as it becomes difficult for banks to
substitute these BCs with others.
(e) From the bankers' perspective, it was pointed out that as
the banks were not allowed to pass on to the ultimate
customer / beneficiary the compensation / commission
paid by them to the BCs, they were not able to bear the
various other costs incurred by BCs.
(iv) Regulatory issues
(a) Current regulations mandate BCs to settle cash with bank
branches by the end of the day or next working day.
Given that the area of operation of BCs predominantly
extends to rural areas with erratic connectivity, it becomes
difficult to complete the settlements within the prescribed
timeframe. This issue assumes considerable importance in
the North Eastern Region.
(b) Reaching unbanked areas warrants higher delivery costs.
(v) Multiple risks associated with the BC model
The engagement of BCs by banks for delivery of banking
services exposes banks to multiple types of risks: (i) credit
risk (ii) operational risk (iii) legal risk (iv) liquidity risk and (v)
reputational risk, to mitigate which banks need to take
appropriate action.
2. It is apparent that BC Model can be successful only if
sufficient business is generated and the compensation
structure of BCs has to be reworked.
3. It has been experienced that the banks are using BCs for
opening "No Frills Accounts" through which various
Government payments like NREGA, Pensions and other
social security payments are routed. However, if the BCs
are merely used for these purposes, the income generated
by the BCs will not be sustainable over a period. For a BC
to become viable, the range of services to be delivered by
the BC should include small savings, micro credit, micro
insurance and small valued remittances, etc.

95
Therefore, it is considered necessary to route micro insurance
products through these No Frill Accounts, so that the BCs may
become viable. It may be recalled that the Committee on Financial
Inclusion (CFI, 2008) has recommended that in order to reach the
last mile client various initiatives may be taken to appoint BCs so
CONCLUSION
ANNEXURE - I
AdetailsRegardingNumberofBCsAppointed
andAccounts
that Financial Inclusion can be achieved. Therefore, it is felt that BC
/ BF Model envisaged by Government of India and RBI may be
implemented widely. Other recommendations of the Rangarajan
Committee have also to be examined to address the viability issue
of the BC/BF Model.
ANNEXURE - II
StateBank'ssolutionforFinancialInclusionthrough
BC / BF model
PUBLIC SECTOR BANKS
Sr. Banks No. of BCs No.of accounts
No. appointed opened
1 ALLAHABAD BANK NIL NIL
2 ANDHRA BANK 3 405000
3 BANK OF BARODA 3 33827
4 BANK OF INDIA 10 71000
5 BANK OF MAHARASHTRA NR NR
6 CANARA BANK 1 1603
7 CENTRAL BANK 1 1210
8 CORPN BANK 3 456655
9 DENA BANK 1 14146
10 INDIAN BANK 2 23000
11 I O B 3 1131
12 O B C 3 21433
13 P N B 14 2704345
14 P & S BANK NIL NIL
15 S B I 24 2574139
16 S B B J NIL NIL
17 S B HYD 1 16057
18 S B INDORE 1 61632
19 S B MYSORE 2 2159
20 S B PATIALA 1 1140
21 S B SAURASHTRA NIL NIL
22 S B TRAVANCORE 1 699
23 SYNDICATE BK 5 695
24 UNION BANK 3 1654464
25 UNITED BANK 1 998
26 UCO BANK 1 1048
27 VIJAYA BANK 1 626
Total 85 8047007
PRIVATE SECTOR BANKS
1. The Federal Bank Ltd 2 68
2. ICICI Bank Ltd 38 136659
3. Lakshmi Vilas Bank Ltd NIL NIL
4. Nainital Bank Ltd 1 532
5. Axis Bank Ltd 3 676000
Total 44 813259
Grand Total 129 8860266
Advertisement for recruitment Done at National and
of BC/BF Regional level
Selection of BC/BF at Done after due diligence by
National and Regional level inhouse committee.
Channel Management Advisor
(CMA) comments on qualitative
aspects independently.
This is a contract management
and not an employer-employee
relationship
Agreement with BC / BF Listing of duties / responsibilities
code of conduct/agreement signed
by Chairman of Committee
04 days Training of BC / BF Trainers and in many cases
infrastructure provided by Learning
Centres (LC)
Adoption of BC / BF POS earlier provided by BC, now
they themselves bear the cost.
BC/BFs identity created in the
software
Management of BC / BF Done through Channel
management Advisors (generally
bank's retired officer) support of
special software linked to the CBS
Dispute resolution procedure A procedure from a complaint
register at BC to the Regional
Manager to be formulated

96
Dr. Bijay Kumar Swain;
Professor & Head
Centre for Rural Credit &
Development Banking (CRCDB),
National Institute of Rural
Development (NIRD),
Rajendra Nagar,
Hyderabad - 500 030.
Introduction
No solution to hunger and rural poverty can be found without providing secure and gainful
employment to people, whether on farm, off-farm or urban employment. Developmental studies
focuses largely on the rural areas where the bulk of poverty and hunger persist, despite it is clear
that there are many crucial linkages between urban and rural areas through employment, trade
and migration. In this respect, it is important not to neglect the strategies to empower those who
are forced into the informal sector in both these places. Informal sector employment is a response
to the constraints encountered by the poor, especially and most exclusively in rural areas. However,
informal economy is also situated in the urban localities through activities of squatters or unlicensed
street vendors struggling for survival in environments constrained by extreme poverty and
deprivation.
Credit availability is one of the strategies by which rural poor can be revitalized and change their
living standards faster than any other methods. With few exceptions, experience with rural credit
to the poor has not been very successful. Most banks do not lend to the rural poor, but limit
themselves to the urban, formal sector. State-run development banks have typically been expensive,
loss making, bureaucratic, and accessible only to the non-poor segments of rural society. Foreign
aid funded credit schemes targeted at the poor who have suffered from the same risks of deviation
to the not so poor, and have usually collapsed after the departure of the foreign funds. State-run
credit cooperatives have often left only bitter memories for the poor, as corruption and outright
theft diverted the promised money. In short, for the poor, access to credit has proven to be difficult,
costly, and often ineffective.
Moving one step beyond, some may argue that credit is not as important to many of the rural poor
as is commonly held. For those who hold this view, the issue of credit really distracts attention
from more important questions, related to the retention of surplus production by households and
communities and to the general capacity of the poor to access market and public institutions. Both
these aspects bring us to larger questions of revitalization of rural people for a sustainable living.
Further, given the success of credit as a tool for the organization of the poor, most government-
sponsored programmes are used as entry points for larger social change. Many credit programmes
involve the creation of lenders' organizations and increase the self-confidence and capacity of
mobilization of lenders. Interesting experiences are noted where credit programmes have opened
Financial Inclusion
Through Financial
Revitalization
FINANCIAL INCLUSION II Financial Inclusion Through Financial Revitalization

97
doors to the abolition of dowry, supported the fight against landlords
and promoted improvements in literacy and infant nutrition. As credit
programmes work especially well with women, the revitalization of
women should be one of the explicit objectives.
Similarly, lack of public infrastructure facilities, particularly of roads
and market outlets, may limit income-generating possibilities. As a
result, even if potentially profitable activities are promoted, people
can still be incapable of benefiting from them. The cost of providing
such infrastructures is usually vastly beyond the capacities of poor
communities and local organizations, necessitating state and donor
involvement.
Defining Financial Inclusion:
Financial inclusion is delivery of banking services at an affordable
cost to the vast sections of disadvantaged and low-income groups. As
banking services are in the nature of public-goods, it is essential that
availability of banking and payment services be made to the entire
population without discrimination.
The Scope of Financial Inclusion:
The scope of financial inclusion can be expanded in two ways i.e.
either through state-driven intervention by way of statutory enactments
or through voluntary effort made by the banking community itself for
evolving various strategies to bring large section of population within
the ambit of the banking sector. When bankers do not give the desired
attention to certain areas, the regulators have to step into remedy the
situation. This is the reason why the Reserve Bank of India is placing
a lot of emphasis on financial inclusion.
The focus of the financial inclusion at present is confined to ensuring
a bare minimum access to a savings bank account without frills, to all.
Internationally, the financial exclusion has been viewed in a much
wider perspective. Just having a current account or savings account
on its own, is not regarded as an accurate indicator of financial
inclusion. There could be multiple levels of financial inclusion and
exclusion.
It is the paradox that at one extreme there are customers who are
actively and persistently courted by the financial services industry,
and who have at their disposal a wide range of financial services and
products. At the other extreme, we have the financially excluded, who
are denied access to even the most basic of financial products. In
between are those who use the banking services only for deposits and
withdrawals of money. But these persons also have only restricted
access to the financial system, and do not enjoy the flexibility of access
offered to more affluent customers.
Consequences of Financial Exclusion:
Consequences of financial exclusion will vary depending on the nature
and extent of services denied. It may lead to increased level of
harassment, higher incidence of crime, general decline in investment,
difficulties in gaining access to credit, getting credit from informal
sources at exorbitant rates and increased unemployment, etc. The
small business may suffer due to loss of access to high middle-class
and higher-income consumers, higher cash handling costs and delays
in remittances of money etc. According to some research study,
financial exclusion can lead to social exclusion.
Steps towards Financial Inclusion:
In the context of initiatives taken for extending banking services to the
small customers, the mode of financial sector development until 1990's
was characterized by
an expanded bank branch network, cooperative banks and new
organizational forms like Regional Rural Banks (RRBs);
" a greater focus on rural credit rather than other financial services
like savings, insurance etc. though banks & cooperatives;
" lending targets directed at a wide range of 'priority sectors' such as
agriculture, small business and weaker sections of the population,
etc;
interest rate ceilings, imposed mostly in case of directed lending;
significant government subsidies channelled through cooperatives
and banks in connection with related government programmes;
" based on a perspective that credit for rural poor people was a social
obligation and not a potential business opportunity.
It is absolutely beyond any doubt that the financial access to masses
has significantly improved in the last two and a half decades. But the
basic question still remains, whether it has been good enough. The
quantum of deposit accounts held, as a ratio to the adult population
has not been uniformly encouraging. There is a tremendous scope for
financial coverage to improve the standards of life of those deprived
people.
As a pro-active measure to enhance the financial inclusion, the Reserve
Bank in its Annual Policy Statements, while recognizing the concerns
in regard to the banking practices that tend to exclude rather than
attract vast sections of population, urged banks to review their existing
practices to align them with the objective of financial inclusion. The
Reserve Bank, time and again exhorted the banks to achieve greater
financial inclusion, to make available a basic banking 'no frills' account
either with nil or very minimum balances as well as to take minimum
charges that would make such accounts accessible to vast sections of
the population. The nature and number of transactions in such accounts
would be restricted and made known to customers in advance in a
transparent manner. All banks are urged to give wide publicity to the
facility of such no frills account so as to ensure greater financial
inclusion.
Further, in order to ensure that persons belonging to low income
group both in urban and rural areas do not face difficulty in opening
the bank accounts due to the procedural hassles, the Know Your
Customer (KYC) procedure for opening accounts has been simplified
for those persons who intend to keep balances not exceeding rupees
fifty thousand in all their accounts taken together and the total credit in
all the accounts taken together is not expected to exceed rupees one
lakh in a year.
The Way Forward for Expanding Credit:
The banks should come out of inhibited feeling that very aggressive
competition policy and social inclusion are mutually exclusive. As
demonstrated elsewhere, the mass banking with no-frills accounts
can become a win-win situation for both. Basically banking services
need to be marketed to connect with large population segments and
these may be justifiable for incurring promotional costs. In this regard,
the opportunities are plenty.
" In the context of India becoming one of the largest micro finance
markets in the world especially in the growth of women's savings and
credit groups and the sustaining success of such institutions, which
has been demonstrated by the success of Sewa bank in Gujarat. Thus,
justifying low cost banking is not necessarily an unviable proposition.
" The Indian Banks Association may explore the possibility of a survey
about the coverage in respect of financial inclusion keeping in view
the geographical spread of the banks and extent of financial services

98
available to the population so as to assess the constraints in extension
of financial services available hitherto unbanked sections and for
initiating appropriate policy measures.
It may be useful for banks to consider franchising with other
segments of financial sector such as Cooperatives, NBFCs, and RRBs
etc. so as to extend the scope of financial inclusion with minimal
intermediation cost.
Since large sections of low-income groups transactions are
related to deposits and withdrawals, with a view to containing
transaction costs, 'simple to use' cash dispensing and collecting
machines akin to ATMs, with operating instructions and commands in
vernacular would greatly facilitate financial inclusion of the semi-
urban and rural populace.
It is becoming increasingly apparent that addressing financial
exclusion will require a holistic approach on the part of the banks in
creating awareness about financial products, education, and advice
on money management, debt counselling, savings and affordable
credit. The banks would have to evolve specific strategies to expand
the outreach of their services in order to promote financial inclusion.
One of the ways in which this can be achieved in a cost-effective
manner is through forging linkages with micro-finance institutions
and local communities.
Banks should give wide publicity to the facility of no frills account.
Technology can be a very valuable tool in providing access to banking
products in remote areas. ATMs cash dispensing machines can be
modified suitably to make them user friendly for people who are
illiterate, less educated or do not know English to carry out the
transactions.
Further, banks need to redesign their business strategies to incorporate
specific plans to promote financial inclusion of low-income group
treating it both as a business opportunity as well as a corporate social
responsibility. They have to make use of all available resources including
technology and expertise available with them as well as with the
Micro-finance Institutions (MFIs) and Non-Governmental Organizations
(NGOs). It may appear in the first instance that taking banking to the
sections constituting "the bottom of the pyramid", may not be profitable
but it should always be remembered that even the relatively low
margins on high volumes can be a very profitable proposition. Financial
inclusion can emerge as commercial profitable business.
RevitalizationThroughSelfHelpGroups
In this background, formation of Self-help Groups are one
such process, which consists of members who are poor,
having low savings capacity and generally depending on
moneylenders or private sources for meeting their
consumption and emergent needs. A typical Self Help Group
will comprise like-minded individuals who volunteer to save
small amounts of money in a common pool, out of which,
need based loans are given to members for meeting their
emergent credit requirements based on the priorities decided
by the group members. They exercise close supervision on
utilization of loans and exert peer and moral pressure on
members to continue savings and repay loans promptly on
time. In other words, Self Help Group can be referred to as a
group of poor persons who own, manage and control a micro
level bank of their own, virtually revitalizing themselves to
meet their emergencies.
Micro Finance programme of Self Help Groups does not
by itself provide succour to various deprivations that
obstruct the ability of the poor to lead a dignified life that a
human being is entitled to. Deprivation in terms of education,
nutrition and health-care, electricity, water and sanitation
facilities, roads and communications, all add to the
complexity of struggle of rural poor. The greatest
contribution of Self Help Group in the face of their fight
against deprivation and poverty is that it revitalizes the poor
by their increased self-awareness. This gives them a feeling
of self-confidence, solidarity and social security to control
and guide their own destinies.
The opportunity cost for poor in Self Help Group
mechanism is quite high as they put in their stakes from out
of their hard earned savings. It is, therefore, necessary that
innovative, imaginative and efficient approaches be used to
channelize energies of rural poor to secure all those
conditions that encourage their well being, particularly those
relating to minimum consumption for life, health and
efficiency. An inefficient microfinance system is in fact a tax
novelty on the poor. The idea of isolating best practices in
Self Help Groups and promoting wider appreciation among
various practitioners is to enable them design and structure
micro-finance programmes that conform to high standards of
performance.
RevitalizationThroughParticipatoryApproach
Community participation is endogenous to Self Help Group
approach and must always be consciously encouraged.
Participatory methods are also found to have lasting impact
on long-term group survival and growth. Some of the
important steps in participatory, which may apply to Self
Help Group, include i.e. promoting consensus around group
action among community members, enabling communities
make choices and help prepare their plans, revitalization by
providing control to community over allocation of resources,
and giving responsibility to community for monitoring of
programmes.
A process approach for community development will entail
sequence of events that must be undertaken to realize the
end goal. Considering the cost of time, energy and resources
involved in participatory approach, a high degree of

99
RevitalizationThroughBestPractices
Getting a group formed takes time and skills. Development
workers must pay frequent visits to the community where the
group is to be formed and devote time to talk to the people
and getting to know them. Some sort of investigation into the
problems of people and their response patterns beforehand
will surely help. There is no single best way to form groups.
However, the sequence of events has been found to be
consistent in yielding good results. For example, a meeting
with local opinion leaders and elders to build confidence and
use of rural mass media like street plays, puppet shows, folk
songs, etc. for sensitizing and motivating community
members are quite useful.
RevitalizationThroughGoodGovernance
Strong savings and credit groups, owned and managed by
the community itself, need competent and committed
development facilitators, strong cadre of leaders, and
enlightened and alert members. Hence, the governance of
Self Help Groups that promotes revitalization through
democratic traditions is crucial for overall success. Evolution
of norms or rules and regulations for self governance,
participatory decision making, and diligence and self-
discipline among group members coupled with strong
enforcement mechanism are sufficient conditions for
transparency in group operations. These rules and
regulations are not mere statements but reflect the
understanding of group norms by members through their
conduct in-group activities. Rules and regulations of the
groups, therefore, need to comprehend conflict situation in
day to day functioning of group and provide ready
solutions.
While stability of group membership is strongly
encouraged, it is possible that a few members could be co-
opted into the groups to attain optimality in-group size.
Alternately delinquent members could be expelled, in which
case the groups could undertake a situational analysis and
take appropriate decision. However, core objectives of the
group to revitalize and rule for self-governance should not be
lost sight of.
RevitalizationThroughEffectiveLeadership
It is apt to realize that leadership in Self Help Group is a Verb
and not a Noun. The range of leadership responsibilities
includes providing guidance for group activities, assisting in
information sharing among group members, helping define
problems and identify solutions, facilitating appraisal of
group performance, resolving conflicts and disputes among
group members, organizing, implementing and coordinating
group plans and rendering truthful and correct accounts to
members.
Considering the wide-ranging responsibilities of leaders in
Self Help Groups, responsibility-sharing mechanism by
assigning different leadership roles to several members must
be worked out.
RevitalizationThroughModelObjectives
Self Help Group is a novel revitalization approach in
development economics. Self Help Groups envision human
development perspective in their scheme of things. The
clarity in goals and objectives of Self Help Group determine
the pace and direction of their development. Hence, the
groups among rural poor must be facilitated to achieve
revitalization based on long-term goals rather than for short-
term gains. For example, poor look for saving services from
formal financial institutions. Without a safe place to put their
savings, the poor tend to invest it in "assets" such as gold,
silver, livestock, etc. which can be pawned or sold in times of
need. Thrift contributions by members to the group must be
perceived as a savings product serving long term financial
security needs. As such poor households generate savings
either by refraining from consumption or postponement of
their not so urgent needs. The thrift contributions reflect
confidence of members on the group and are seen as an
index of their stake in the process. Thrift management is,
perhaps, the most important function in a Self Help Groups.
Some of the best practices in this include periodicity and
quantum of thrift decided by group members themselves,
keeping in view the ability of poorest member among them to
pay the agreed amount at predetermined internals and
minimum compulsory thrift contributions to be made by all
members. Members do not permit withdrawals against
compulsory thrift contributions unless the member
withdraws from primary membership hence groups must
insist for on-time contribution. Groups must collect thrift
contribution in the presence of all members and thrift
collections must be utilized for lending to groups members.
Therefore, penal provisions like fines; penalties must be
enforced against late payment.
RevitalizationThroughCreditFacility
Providing credit access to members of poor households on
sustainable basis is the primary objective of a Self Help
Group. A well-conceived loan programme in a Self Help
Group will enhance its attractiveness to the members. These
loans are often given for various purposes without
insistence on collateral but are available at a cost. There is no
compulsion to avail of loan facility. As such those who avail
loans have to make a choice to pay the cost, or have no
credit at all.
Self Help Groups typically offer small, short-term loans for
meeting emergent and consumption requirements only to
their members. So the internal lending must commence from
the date of first pooling of savings. Need based lending is
strongly recommended by active groups. Loans are extended
keeping in view the nature of need of particular member.
Preference in borrower evaluation is, however, given to those
who are regular in attendance at meetings and timely
payment of thrift amounts. So, group must have a system of
giving differential priorities to several purposed for taking
loaning decisions. Here urgency of purpose is given
precedence while selecting a borrowing member.
Similarly, groups must establish a process to assess the
credit requirement for arriving at loan quantum an efficacy of
such system need to be seen in the context of Self Help
Group concerned and all credit decisions must be taken at
the meetings only after giving due consideration to opinion

100
of all members.
Chronic default in on-time loan repayment by members is
generally discouraged by withholding or delaying pecuniary
benefits to members. At times penalties for late or non-
payment include fees, denial of higher loan amounts, or
longer waiting periods for further loans. As continuity of
need based internal lending will strengthen and revitalize Self
Help Group processes, any attempt to obstruct or
discontinue it after receipt of subsidy, grant or even a bank
loan can only be a self-destructive move.
CONCLUDING REMARKS
Facilitating access to productive resources, ranging from
land and water to infrastructure for the poor is not a single
time event, but an institutional process requiring permanent
adaptation to changing circumstances of power, economics
and culture. Without the participation of the rural poor in the
implementation of programmes and without the
establishment of effective organizations of the rural poor that
act as countervailing forces to vested interests, it is unlikely
that much progress will be made in increasing the access of
the poor to productive resources. Throughout the world,
organizations of civil society have initiated promising actions
in this field such as access to land, management of common
property resources, provision of credit and savings facilities,
access to markets, etc. They have clearly demonstrated that
they have the potential to play a crucial and innovative role
in gaining access for the poor to productive resources.
However, their actions have remained limited in impact and
unknown to people elsewhere struggling with the same
problems. There is a need to learn from these experiences to
see if they can be replicated and scaled up to revitalize the
hundreds of millions of poor and hungry people mostly
living in the rural India.
References
Arunachalam. Ramesh: Alternative Technologies in the Indian Micro Finance Industry, Published by
Action Aid, New Delhi, 1999;
Bhatt Nitin, Thorat. Y.S.P: India' Regional Rural Banks: The Institutional Dimension of Reforms, Journal
of Microfinance, Vol. 3, No.1, 2001;
Fisher. Thomas, Sriram. M.S: Beyond Micro-credit: Putting Development back into Micro-finance,
Vistaar Publications, 2000;
Greening. H, Bikki. Randhwa: A Framework for Regulating Microfinance Institutions, Published by the
World bank, 1999;
Joshi. Deepali Pant: Organization of Microfinance, Economic & Political Weekly, April, 2004;
Joshi. V.C, Joshi. V.V: Managing Indian Banks, Published by Response Books, 2002;
Kurum. F, Narayan. Sadagopan: Microfinance Regulation in India, Sadhan Publication, 2001;
Littlefred. E, Martin Hollman: Microfinance overtake their Commercial peers, The banker, 2005;
Robinson. Marguerite.S: Microfinance, the paradigm shift from credit delivery to Financial
intermediation, Ashgate publication, 1998;
Thingalaya. N.K: The Other Side of Rural Banking, BIRD Publication, Lucknow, 2000.

101
Nupur Tiwari
Faculty member, Centre for
Federal Studies, Jamia Hamdard
University, New Delhi
(The views expressed in the write up are
personal and do not reflect the official
policy or position of the organization.)
Reconciling
‘Accelerated Growth
With Inclusive Growth’
Through Panchayati Raj
Introduction
NIndia stands at a crucial juncture in its quest for inclusive growth. India represents a paradox
where on the one hand the GDP growth rate have been rising to 7-8 per cent in the last four years,
rural-urban divide, regional divide and rich-poor divide has became glaring,. While the world
and its financial hubs applaud the countries impressive annual GDP growth, other indicators such
as poverty reduction, employment growth, health and education are less encouraging. The latest
UNDP Human Development Report 2009 highlights the very large gaps in well-being and life
chances that continue to divide our increasingly interconnected world and the HDI for India is
0.612, which gives the country a rank of 134th out of 182 countries. According to the Report of the
National Commission for Enterprises in the Unorganized sectors , August 2007on "Conditions of
work and promotion of livelihood in the unorganized sector," the stark fact is that 836 million
people in India live on less than Rs. 20 a day; yet we have the second richest billionaires in the
world in dollars and we have the fourth largest number of billionaires on the planet1
.The state of food
insecurity in the world report of the FAO of the United Nations shows us that in less than five years
leading to the turn of the century, India added more newly hungry millions than the rest of the world
taken together. Hunger grew at a time when it declined in Ethiopia1
.
Long before planning commission endorsed the HCR approach, Amartya Sen, after examining
the theoretical and practical problems of conceptualization and measuring poverty, held that the
head count measure is "quite unacceptable as an indicator of poverty". Family getting less than
two meals a day is probably the most important criterion of poverty. We in India have more than
300 million people still living in deep poverty at less than a dollar a day, while another 350 million
live on less than two dollars a day. Nearly two-third of the population is still dependant on
agriculture activities and, about 67 percent of the total crop land is rain fed, hence subject of the
vagaries of climate.
FINANCIAL INCLUSION II Reconciling ‘Accelerated Growth With Inclusive Growth’ – Through Panchayati Raj
1.http//www.forbes.com/fdc/welcome_mjx.shtm
2. World Food Programme 2008 www.wfp.org

102
In Bihar, Orissa, M.P where poverty is acute, growth is not
located neither in sectors like Agriculture, where labour is
concentrated. Despite impressive advances in human and
economic development, regional and inter-state disparities
are increasing and natural calamities such as floods,
earthquakes, and droughts reverse the development process
to a great extent and worsen the situation of the
disadvantaged and vulnerable groups.
Among the states, the North-Eastern and the Central
regions, which have large tribal populations, are lagging
behind. Among sectors, agriculture has fallen behind
industry and the service sector. Although some of the
poorest states are rich in natural and forest resources, the
predominantly tribal population is unable to take advantage
of this. Religious minorities, large sections of Scheduled
Castes (SC) and Scheduled Tribal (ST) groups, and women
still do not have access to many job opportunities and
human development. The informal sector has emerged as
the largest job creator, characterized by low wages and
income insecurity while wage growth is concentrated only at
the top end. India's educational inequality is one of the worst
in the world.
India stands at a crucial juncture in its quest for inclusive
growth that will bring prosperity across the spectrum. Large
amounts of public funds are spent to address these issues
but their implementation and the quality of services delivered
leave much to be desired. It is well recognized that the
programmes to solve these problems are not performing well.
They are too centralized, fragmented in concept as in
implementation, insufficiently responsive to varying local
needs or accountable to ensure efficient service delivery. The
existing mechanism for the delivery of services is not
effective, efficient or economical
Long before planning commission endorsed the HCR
approach, Amartya sen, after examining the theoretical and
practical problems of conceptualization and measuring
poverty, held that the head count measure is "quite
unacceptable as an indicator of poverty".Family getting less
than two meals a day is probably the most important criterion
of poverty.3
We in India have more than 300 million people
still living in deep poverty at less than a dollar a day, while
another 350 million live on less than two dollars a day. Nearly
two-third of the population is still dependant on agriculture
activities and, about 67 percent of the total crop land is
rainfed, hence subject of the vagaries of climate.
In Bihar, Orissa, M.P where poverty is acute, growth is not
located neither in sectors like Agriculture, where labour is
concentrated. Despite impressive advances in human and
economic development, regional and inter-state disparities
are increasing and natural calamities such as floods,
earthquakes, and droughts reverse the development process
to a great extent and worsen the situation of the
disadvantaged and vulnerable groups.
Among the states, the North-Eastern and the Central
regions, which have large tribal populations, are lagging
behind. Among sectors, agriculture has fallen behind
industry and the service sector. Although some of the
poorest states are rich in natural and forest resources, the
predominantly tribal population is unable to take advantage
of this. Religious minorities, large sections of Scheduled
Castes (SC) and Scheduled Tribal (ST) groups, and women
still do not have access to many job opportunities and
human development. The informal sector has emerged as
the largest job creator, characterized by low wages and
income insecurity while wage growth is concentrated only at
the top end. Such unequal opportunity structure weakens
the positive role of growth in reducing poverty and making
growth inclusive.
Local self-government, as elaborated in our Constitution,
provides the essential means of reconciling 'accelerated
growth' with 'inclusive growth' Article 243-G endow the
Panchayats with such powers and authority as may be
necessary to enable them to function as institutions of self-
government for preparation of plans and the implementation
of schemes for economic development and social justice. It is
the effective empowerment of the disadvantaged through the
effective devolution of Functions, Finances and
Functionaries to representative institutions of local self-
government such as Panchayats (where part IX of the
Constitution applies) and Village Councils, Village
Development Boards and similar such institutions elsewhere,
on the principle of subsidiarity, which states that anything
which can be done at a lower level should be done at that
level and no higher level, that will pave the way to the
effective implementation of other measures of inclusive
growth .
However, the constitutional provisions have not been an
effective trigger for the Panchayats to function as
institutions of local self-government. It is important that
Panchayat Raj be brought centre-stage as the principal
governance reform to reinforce economic reform in such a
manner as to secure inclusive growth.
That this should be so is an anomaly caused by:
(i) Inadequate effective devolution of functions,
finances and functions by State legislatures/governments to
the Panchayati Raj Institutions; and
(ii) Inadequate provisions for planning and
implementation by PRIs in the guidelines issued by Central
Ministries for Centrally Sponsored and Central Sector
schemes that directly impinge on inclusive growth.
New schemes launched by the UPA government, such as
the Backward Regions Grant Fund and the Planning
Commission's guidelines for the Eleventh Five-Year Plan
make Panchayati Raj the sine qua non of planning and
implementation of economic development and social justice
at the grassroots. The National Rural Employment Guarantee
Act not only designates the Panchayats as the "principal
authority" for the planning and implementation of the
National Rural Employment Gurantee Programme (NREGP),
the Act itself spells out the specific duties of the Panchayats
at each level with respect to the Programme, thus rendering
the provisions of the Act itself the Activity Map for the
Programme.
Equally, the Rural Electrification Policy, the Rajiv Gandhi
Vidyutikaran Yojana, the National Rural Health Mission and
the Jan Kerosene Yojana have a significant and central
3. The Farm Crisis: why have over one lakh farmers killed themselves in the past decades by P. Sainath,
Rural Affairs Editor, the Hindu)

103
Panchayati Raj component. There are also some pre-UPA
programmes which have now introduced the most telling
amendments to bring Panchayati Raj centre-stage, such as
the Sarva Shiksha Abhiyan, the Mid-Day Meal Scheme, the
National Literacy Mission, the Rajiv Gandhi Drinking Water
Mission and the Total Sanitation Campaign.
The question of Panchayats and agriculture, particularly
agricultural extension services which, by and large, have
fallen into disarray and without which a Second Green
Revolution will be difficult to attain, especially bearing in
mind the great significance of extension to the success of the
first Green Revolution. There also remains considerable
scope for increasing the involvement of Panchayats in
Bharat Nirman programmes Disaster Management is yet
another area where Panchayats could be more fully utilized
and trained to meet emergencies.
Slowly but surely, Panchayats appear to be accepted in the
implementation of schemes of line ministries .New
programmes such as the Rashtriya Madhyamik Shiksha
Abhiyan, a programme which aims to do for secondary
education what SSA has done for primary education and a
basket of three programmes aimed at comprehensive
agricultural development, namely, the National Food
Security Mission, the Rashtriya Krishi Vikas Yojana and
the Planning Commission driven Comprehensive
Agricultural Development Programme are all based on the
concept of grassroots level planning through Panchayats,
culminating in the dovetailing of the agricultural plan into
the district plan developed by the District Planning
Committee
Undoubtedly, these Sector-specific approaches are
demonstrating considerable success, at least as evidenced in
the accelerated progress in bridging the rural infrastructure
gap. However, there is another important dimension to rapid
local development that must be kept in mind. Unless we
strengthen local governance by addressing the need for
cross-cutting systems of participatory planning and
decision-making, local taxation, audit, financial management
and procurement, these impressive gains will begin to rapidly
fall away. We will build expensive roads, water supply
schemes and irrigation systems, but in the absence of strong
Panchayats that can maintain and protect them, they will
inevitably deteriorate and a few years later, we will be
rebuilding them at considerable expense. Similar would be the
case with programmes that focus on soft inputs rather than
on infrastructure, such as the ICDS, the Sarva Shiksa
Abhiyan
Since implementation of Panchayati Raj is dependent on
policies that cut across several sectors of economic
development and social justice, the Government of India will
now need to look at how its fiscal relationships with States
through CSSs and regulatory interventions pertaining to
these sectors can be used to encourage a progress on
strengthening Panchayats, across the range of differing state
contexts.
The most important issue and the area of concern is how
to ensure the CSSs and ACA relating to functions in the
realm of PRIs are actually implemented by them In order to
ensure that the vast resources that GOI is making available to
the CSSs would be correctly used, the responsibility of
recognizing the beneficiaries must be allocated to PRIs. The
broad activities that pertain to the involvement of PRIs could
be as follows: Identification of beneficiaries; Enumeration of
the target group using household registers of Village
Panchayats; Verification of data collected from other sources
against data available with PRIs; PRIs/Gram Sabhas as nodal
agencies for building data bases and constant revision for
maintaining updated database; Determination of optimal sites
for construction through PRIs; Distribution of publicity
material to PRIs and use of PRIs functionaries for awareness
campaigns; Selection of projects by PRIs where micro level
solutions are required; Operations, future maintenance and
management (post project) by PRIs; Monitoring and
vigilance should be the responsibility of PRIs; Periodical
reporting of implementation officer to PRIs; Recommendation
of PRIs to be considered for training purposes; Devolution
of funds through PRIs.
If each CSS clarifies what lies within the domain of local
government, and if this is supported with appropriate
devolution of the 3 Fs, there will be significantly less
infirmity in the outcomes and impacts of the CSS. It is
important to leverage the Centrally Sponsored Schemes to
demarcate the tasks, responsibilities and activities that lie
within the domain of local governments (rural and urban).
This will encourage and motivate state governments to
systematically engage in appropriate devolution of
functions, finances and functionaries. More significantly,
CSSs will then serve to further strengthen (for their own
implementation and oversight) the third tier of elected local
bodies with reference to the 73rd & 74th Constitutional
amendment.
A key instrument available to Gol is thus to provide fiscal
incentives to state governments that can encourage them to
strengthen local governance, in pursuance of the national
strategy. The Panchayat Empowerment and Accountability
Incentive Scheme have been proposed as such an
instrument. The outputs of the proposed Panchayat
Empowerment and Accountability Incentive Scheme are to
provide a well-designed system of incentives, which is
hoped, would provide an effective mechanism for the
Government of India to undertake the following measures:
Incentivise and support States to effectively devolve
more functions, functionaries and finances to the
Panchayats, apart from constituting effectively empowered
District Planning Committees to fulfil their Constitutional
functions.
Encourage and facilitate States to restructure the system
of self-government at the Panchayat level to achieve the
Constitutional objective of making them 'institutions of self-
government'.
Incentivise Panchayats to be transparent in their
transactions and accountable to their respective Gram
Sabhas and then to motivate and assist Panchayats to use
their newly enlarged responsibilities in an efficient, honest,
focused and productive manner so that a much larger share
than at present of the vast resources being made available

104
for rural development and welfare reaches the targeted
beneficiaries and attains the targeted objectives, including,
particularly the Bharat Nirman targets and the National
Millennium Development Goals.
Ensure that Panchayats achieve standards that meet
norms set out for public accountability including public
financial accountability, both upward as well as downward to
the people. This would particularly cover responsibilities and
obligations under various legislations such as those relating
to Right to Information, Social Audit, and Fiscal
Responsibility.
The Outcomes of the Scheme would be the greater
effective devolution of, functionaries and finances by the
States to the Panchayati Raj Institutions and making the
DPCs and PRIs the fulcrum for the planning and
implementation of economic development and social justice.
Moreover, the Scheme aims at empowering Gram Sabhas to
effectively monitor and exercise vigilance over the work of
their elected representatives to secure both effectively gains
in service delivery by the Panchayats and promote
transparent, responsive and accountable grassroots
development through grassroots democracy.
There can be an overall incentive based grant to states
linked to their movement along a panchayat empowerment
index. Operating and monitoring, a competitive CSS approach
could be a main activity of the central ministry of PR.
The present pattern of growth has the potential of
widening the inequality. Such unequal opportunity structure
References
(April 2008) Fifteenth Anniversary Charter on Panchayati Raj.
Ministry of Panchayati Raj. (December 2004) Compendium of resolutions of the Seven Round Tables
of Ministers in-charge of Panchayati Raj;
MoPR (December 2004). Report of the Task force of officials in charge of Panchayati Raj in States to
examine the Centrally Sponsored Schemes,
"MoPR (November 2006) The State of Panchayats Report; 2006-07:
MoPR, IRMA (April 2008). The State of Panchayats Report 2007-08, An Independent Assessment;
MoPR. (March 2006) Report of the Expert Group on Grassroots level planning;
MoPR (August 2007) Report of the Expert Committee on Grassroots level planning in areas not
covered by Parts IX and IXA of the Constitution;
MoPR, Planning Commission. (November 2008) Report of the Empowered sub Committee of NDC on
Financial and Administrative Strengthening of PRIs;
MoRD (August 2001) Report of the Task Force on Devolution of Powers & Functions upon Panchayati
Raj Institutions.
MoPR-GoI (2008). Note on Devolution of Powers to Standing Committee on Rural Development. New
Delhi, Ministry of Panchayati Raj.
MoPR (November 2006) Guidelines for the Backward Regions Grant Fund
MoPR (August 2006) National Capability Building Framework
MoPR, Planning Commission. (January 2009) Manual on District Planning,
Planning Commission. (August 2007) Report of the Committee to review modifications to be made in
the existing guidelines of Centrally Sponsored Schemes on identifying a domain for the Panchayati
Raj Institutions
PC-MoPR (2006). Report of the Working Group on Democratic Decentralisation & PRIs. New Delhi,
Planning Commission - Ministry of Panchayati Raj.
Planning Commission: Eleventh Five year Plan, Ch-10 (Decentralization and Strengthening of PRIs
Rao, M.G. and U.A. Vasanth Rao (2008) Expanding the Resource Base of Panchayats: Augmenting
Own Revenues, Economic and Political Weekly, January.
Sethi, Geeta (2004) Fiscal Decentralisation to Rural Governments in India, The World Bank, OUP, New
Delhi.
Second-ARC (2007). Local Governance: An inspiring journey into the future. New Delhi, Second
Administrative Reforms Commission, Govt of India.
weakens the positive role of growth in reducing poverty and
making growth inclusive. If this inequality increases further,
social displacement will result and it will be a major
obstruction to higher growth .Active participation of people
in grassroots planning and implementation is bringing about
the desired transformation of the region by establishing
peace and setting in motion the wheels of progress towards
prosperity. So to achieve inclusive growth, it is crucial that
the poor are integrated with the dynamic sectors of growth.
These are not easy tasks but by no means impossible. The
solutions are also well-known; however, problems lie in their
implementation. So, moving from a model of central provision
to that of decentralization to local governments will introduce
a new relationship between national and local policy makers,
while altering several existing relationships; such as that
between the citizens, elected politicians and the local
bureaucracy.
Such inclusive governance, besides ensuring political
empowerment, through enabling people to control their own
destiny, would also yield significant inclusive growths.
When grass-roots planning processes strikes deep roots,
economic empowerment is both strong and sustainable.
Social empowerment through inclusive governance would
help safeguard social, ethnic and cultural values of people,
which in turn would lead to building trust of their
governments in tribal communities. Active participation of
people in the political processes and in grassroots planning
will bring about the desired transformation of the region by
establishing peace and setting in motion the wheels of
progress towards prosperity.

105
David Louey GUNG
Director Justice & Public Safety
Industry Business Unit Asia
Pacific
Oracle Corporation,Australia
Universal Citizen
Identity (UID)
Introduction
Worldwide, citizens are demanding from government greater efficiency, shared services, and a
single way to view personal identification information. Yet, such demand is offset by the need for
privacy and the need for appropriate access rights to personal data.
In a similar way to how governments have minimised the cost of maintaining address or location
descriptions for a parcel of land by establishing a Land Information System that has created a
unique identifier (geospatial coordinates) for each parcel, and a central agency responsible for
its maintenance and dissemination to other agencies. A unique or universal identifier for each
citizen managed through a similar process can generate the same substantial savings or
expenditure avoidance for governments and taxpayers
This paper examines the challenges and solutions for governments implementing electronic
identification (e-ID) technology. It high-lights the importance of incorporating governance, business
processes, and a service-oriented architecture (SOA) into this technology-transforming second-
generation e-ID-based government approaches into the next generation of government solutions
To address the provisions of the privacy laws and concerns from Civil Liberties groups, the
Universal Citizen identifier (UID) has to be managed in a secure and trusted environment. The
same technology and security solutions that are being used in the sharing of highly secret
intelligence data across network infrastructures to ensure a trusted environment and access by
legitimate users only can also be adopted for this purpose.
Driven by citizens' rising expectations and fluid movement of goods, services, and citizens across
regional and even global borders, governments are being challenged to boost efficiency, share
services, and provide a single view across government departments via joined-up portals. Where
consolidated core services exist within and across government departments, there remains the
need for an information sharing and management framework. This framework must allow everyone
to access services to the maximum extent appropriately yet dynamically set -and it's here that the
identity issue arises. If government is serious about offering citizens, businesses, and employees
shared services; each participant needs to have an identity to access the services they are entitled
to. Consequently, the drive for shared or joined-up services also becomes a need to authenticate
and authorize users for specific services as a function of the UID role provided.
This drive for new technology places UID management at the centre of a new wave of
Transformational Government. UID management is a collection of processes, procedures, policies,
and technology that together provide services and features that include:
Registration
Enrolment
Simple single sign-on
Provisioning
DIGITAL INCLUSION II Universal Citizen Identity (UID)

106
Authentication and Authorization
Identity propagation
Audit and Governance
UID Management offers a secure and trusted environment within which
citizens, businesses, and employees are registered against a single
identity for dealing with government and, likewise, for government
employees in their roles with respect to these constituencies. A
common, enterprise-wide approach to UID management supports wider
access to public and private services; moreover, it enables
authentication and single sign-on (SSO), access management, and
directory services in support of joined-up government and breaks
down technical silos which may hinder the transition to eGovernment.
UID management in the new wave of eGovernment services takes this
endeavour a step further: it collects the necessary information about
an individual's identity and role from multiple data steward's
repositories, scattered across multiple agencies, builds a composite
identity and role, federates it, and then propagates that role across
the various agencies involved in delivery of services to that individual.
This effort is facilitated by the proper up-front inspection and tailoring
of the business process during service construction and the
establishment of the proper governance model to ensure policy
adherence. Once the service is deployed, identity federation is
supported within the orchestrated process by embedding security and
governance into the run-time, identity-driven service delivery.
One of the key drivers for government to adopt UID management
strategies is e-ID. Up until now, citizens have identified themselves
with an official visual document, such as a passport or driver's license,
entitling them to government services. With e-ID, users are identified
and authenticated using digital documents. Depending on the
application, e-ID can be used for identification, authentication,
electronic signature, and data storage and retrieval.
Among a plethora of electronic IDs that e-ID can encompass, here are
a few examples:
eHealth records and ePrescriptions
ePassports
eNational ID
eVehicle Registration
eDriver's License
eResident Card
eVisa
eCitizen ID
Historically, the issue with these examples is that they only elevate
UID management from the issued official visual document-to the
generation, an e-ID on-ramp to the silo services associated with that
e-ID card. For example, not much is gained with an e-ID that acts as an
eHealth card that just gives access to insurance details. After all, how
many e-ID cards would you want in your purse or wallet?
However, today's technology enables much more in a single UID. It
supports tighter border security, protection for the vulnerable and
enhanced crime detection. Moreover, UID is effective in combating
financial and social benefit fraud and in offering citizens access to
additional public services. Belgium-a country at the cutting-edge of
UID-provides a barometer for the demand for UID in government. The
Belgian government estimates that by the end of 2009, 8.2 million
citizens age 12 years and older will have Belgian UID cards. But, for
UID to become a key part of 21st century eGovernment transformation,
it must support joining up services as an on-ramp for the new-wave
scenarios described above.
Benefitsof UIDtoGovernments
Benefits of UID to governments include the following:
UID smart chip technology protects the individual's
privacy while securely assuring their identity with PIN
codes or biometrics-further strengthening authentication
UID proven security increases confidence in any national
credentialing system
UID cards are extremely difficult to counterfeit, thereby
providing a strong countermeasure against identity theft
UID digital signatures will contribute to the
accountability of government officials and employees
UIDs enable citizen authentication and accountability
UID can reduce government expenses by eliminating
multiclaim benefit fraud
UID in combination with digital signatures can streamline
and speed services delivered
Benefitsof UIDtoCitizens
Benefits of UID to citizens include the following:
The smart chips within an UID card act as a secure vault
that protects the personal information of the citizen,
thereby ensuring the owner is in control of their e-identity
In a transaction environment, UID can quickly verify and
authenticate a citizen so that travelling is easier and safer
and so that citizens can securely access government
online services
The solution enhances citizens' privacy by allowing
access only to specific authorized e-identity information
Smart chip technology prevents unauthorized hijacking of
an UID when lost or stolen
Simplified processes and procedures-citizen verification
and identity authentication can be done off-line
In the event that the card is stolen or hacked, information
residing on the chip can be kept to minimum and
requirements can be put in place for this "on-ramp"
information to be used in tandem with other information
prior to divulging any additional information or delivery
of services

107
UID or e-ID for Transformational Services in Government
UID is a key to transforming government services. There are
a number of drivers behind this:
PublicSafety&EmergencyResponse
The U.S. Homeland Presidential Directive No. 12 (HSPD-
12), for example, is a policy to develop a common
identification standard for federal employees and
contractors. Its primary objective is to enhance security,
increase government efficiency, reduce identity fraud, and
protect personal privacy. Not only will the directive allow
users to instantly access the physical identity of federal
employees and contractors, but it will also cater to
emergency situations, where an individual may need
access to services that would not normally be available to
them. However, the impact of the directive extends far
beyond its effect on the 1.8 million federal government
employees or its extension to the millions of military
personnel and contractors: the directive has accelerated a
convergence of demand for e-ID with that for physical and
logical security in the commercial sector as much in as the
government sector.
Shared Services
Driven by the need for efficiency and modernization,
government organizations are extending the shared services
concept: instead of merely consolidating services on the
back end, they are seeking to join front-end services across
multiple organizations to create new and improved end user-
facing services.
With shared services, they can address issues such as
how to share information among law enforcement, public
safety, and intelligence communities; how to affordably
deliver new government services; or how to deliver
employment, welfare, and other citizen services.
Governments are now becoming federated digital
communities that share information and offer 24/7 self-
service. They have to support applications, directories and
data repositories for services that are delivered across
multiple government and private enterprise boundaries.
Clearly, all of this requires the correct identification,
authorization, administration and lifecycle management of
user identity.
RegulatoryCompliance
Government agencies are required to comply with evolving
regulatory and privacy movements-particularly those that
monitor cross-agency or inter-border processes and service
agreements. As a result, UID or e-ID is a key to government
agencies' ability to track and audit all user and administrative
activity across multiple organizations enabling them to
satisfy regulatory and legal mandates.
FraudPrevention
Fraud costs governments worldwide millions. For example, in
the U.K., the Department for Work and Pensions (DWP)
estimates that £20 - £50 million of benefit fraud arises as a
result of identity fraud. The U.K. government estimates that
the use of false identity information currently costs the U.K.
more than £1.7 billion per year.
Although much is debated regarding the relative cost
benefits of introducing e-ID cards, or even whether e-ID
cards would solve the identity fraud issue (more than likely,
the highest resolution to this problem would need to couple
e-ID with Business Intelligence software to analyze
anomalies and pinpoint fraudulent transactions and
behaviour and visibility into process orchestration with the
appropriate business process management and activity
monitoring to define process fixes to avoid future fraud),
there is no escaping the fact that identity fraud is a
significant national cost.
Technology Challenges
in the Journey to
e-ID-Driven Services
There are many challenges surrounding the
technology requirements for e-ID. In order for a
government to transform the way it delivers
services, the following challenges need to be
taken into account:
Figure 1. Challenges
facing a build-out of
services based

108
SecuringIdentity
Firstly, there is the issue of authenticating and authorizing
users for access to shared services. The security and
reliability of authentication mechanisms may vary, depending
upon the desired authentication level. Further, the stronger
the authentication, the greater a government's confidence
will be that an entity corresponds with the claimed set of
attributes.
Authentication is typically subdivided into two separate
classes. Data authentication is the e-ID technical process of
verifying that a claimed attribute corresponds to the actual
attribute held by an entity. Entity authentication can be
identified by factors, including knowledge (such as a
password), possession (such as a token), a personal
characteristic (biometrics), location (network address or
phone number), or a combination of these factors, often
referred to as strong multifactor authentication.
The use of PIN numbers is the most common means of
securing identity, although biometrics is increasingly used as
an additional security feature to the PIN. Where biometrics is
not available or insufficient, one would want to use software
like Oracle Adaptive Access Manager to provide real-time
risk scoring to identify potential fraud or identity theft.
SecuringServices
The challenges in securing services are related to ensuring
compliance with laws, and deploying travel and border
control tools for improving national security. A further
challenge concerns how to maintain up-to-date, secure e-IDs
in a climate of potential theft and fraud.
The difficulty of securing services is compounded
because applications within government organizations are
frequently built using distributed architectures, which makes
it a challenge to manage security consistently across multiple
government organizations. Governments need to manage
security in many different places, where data is often stored
in multiple, independent-security silos. In order to foster
reuse of existing information and encourage transactional
resources as services, they must resolve the issue that most
existing services are built in a different application
environment and may utilize different security technologies.
DataPrivacy
Who should get access and across which multiple services?
Citizens and businesses require full control of their data with
select access to specific data. They also need to be educated
regarding their personal data for example, who, how, when
and to what extent they should delegate control and view of
their personal data. Government organizations as stewards of
their citizens' personal data would then need to build policy
and automate processes. This would support granular
sharing of pieces of their citizens' personal data for
eGovernment services across organizations and even across
borders.
More specifically, e-ID requires Role Based Access
Control (RBAC)-connecting users to resources while
controlling access to those resources-determining who can
access what. However, it gets more complicated when the
system must also control who can access what from where
(when they are in a different country) or with which e-ID
(when they are requesting information with an e-ID card for a
siloed government service). For example, could an electronic
driver's license be used to access electronic health records
when a citizen is abroad-either for routine health care or in an
emergency scenario such as a vehicle accident with a
critically injured driver?
Although an e-ID may remove some of the technical
challenges in accessing disparate sets of data, government
policies will still determine how securely and efficiently
information will flow across governmental data silos. While
data sharing challenges across silos have always existed, e-
ID combined with SOA will enable joined-up service
scenarios that force policy decisions in the near-term.
Examples of these policy decisions include the following:
" From an organizational perspective, governments
need to decide which authorizations are required in the
system, who may give and hold them, and what they mean-
based on how and when they are propagated to additional
government and commercial entities;
" From a technical perspective, governments need to
decide how to model this into their systems. Do they create a
central authorizations database? Or do they send referrals to
related, trusted systems? Who may manage the
authorizations? How should their validity be checked before
an authorization is exercised?
" From a governance perspective, governments need
to be aware of the legal requirements for authorization. For
example, does it require a written contract, signature, or
acceptance of the receiver? What are the legal issues for
cross-border activity? For example, is the authorization valid
in the country where it is given, where it is received, or where
it is exercised?
Shared Services Interoperation
The fact that governments across the globe are striving to
have a single sign-on (SSO) for their online services for each
citizen and business demonstrates how e-ID needs to be a
shared, integrated cross-government service. While
software components for SSO provide unified SSO and
authentication across multiple government agencies and
departments, they are the tip of the integration iceberg;
several other components necessary for e-ID-driven shared
services interoperability are required and must also take an
SOA approach for Identity as much as SOA is currently
thought of for the underlying infrastructure
e-ID-DrivenServicesPortfolioOrchestration
Within the brave new world of shared services, government
IT has increased its value but also has a higher profile. IT is
now in charge of delivering a scalable, adaptable architecture
for the delivery of government services to meet the ultimate
demand of having to do more with less.
Doing more with less isn't just about less expensive new
infrastructure; it is about securely reusing and aggregating
legacy data and leveraging the existing infrastructure. Just as
there is a need to build composite applications that reuse
existing application infrastructure as a cost-effective means

109
of building shared services, e-ID and its
associated single sign-on will require
composite records that are dynamically
created and altered based on the specific set
of services delivered to an individual citizen or
private business.
ServiceManagementandGovernance
As mentioned above, the key to successful
sharing of services based on an e-ID will be
agreement and coordination among several
government organizations. Again, the
technology will provide the basis for a
minimum set of information about an
individual to be stored in electronic format
and for this information to be dynamically
aggregated and filtered for various disparate
data records-to ultimately determine how
and what services to deliver to that
individual. However, this cannot be done
without strictly adhering to existing
regulations that each organization must
follow or without complying with the
guidelines of their respective data stewards.
In some cases, laws will need to be rewritten
to allow the information to be shared and for
new auditing routines to ensure compliance.
While e-ID is indeed a cultural,
organizational, and political issue, there are
still elements of business process
management (BPM) and SOA that can
facilitate efforts. These technologies can align
stakeholders within each government's line of
business operations, within IT organizations,
and across multiple organizations, and help
build service level agreements (SLAs) among
them.
Service-orientedArchitecture-the
Heart Of Service Delivery
The fundamental issue for government agencies considering e-ID is to
look at it as the 'on-ramp' to delivering shared services. So what does 'on-
ramp' mean? In essence, once Role base Access Control (RBAC) has been
achieved, e-ID can act as the secure gateway to providing online citizens,
businesses, and other communities with a wealth of services. Unlock the
authorization and access issue, and online communities have a ramp into
federated portals and services.
Service Oriented Architecture (SOA) enables government agencies to
bridge the gap and make e-ID a type of on-ramp to next-generation
eGovernment services. It represents an IT strategy that encourages the
creation of loosely coupled government services that are interoperable
and technology-agnostic. These can be combined and reused quickly to
flexibly meet citizens' and businesses' needs. The 'service' part of the SOA
acronym relates to government services, such as authenticating the
identity of an individual, making a tax payment online, or updating a
record in a database.
SOA isn't a new strategy, but the advent of emerging standard
technologies-such as Web Services-makes it significantly easier to
implement. An SOA solution consists of a composite set of services that
comprise an end-to-end business process. Each service provides an
interface-based service description to support flexible and dynamically re-
configurable processes. SOAs provide general, reusable interfaces at the
business level rather than at the component level. Within this scenario,
the public sector IT manager becomes less like a plumber racing to fix a
leaky pipe and more like an orchestra conductor, composing free-standing
services into smoothly flowing workflows that model business processes.
The secure and appropriate exchange of identity-related information
between users, applications, and service providers (both internal and
external) is the basis of providing deeper and richer functionality for SOA.
SOA enables e-ID to deliver the next generation of eGovernment
services as it
Provides a single, shared view of services
Allows communities access to legacy and multiple heterogeneous
platforms across different government departments
Enables government to build secure, host-based e-ID services
Removes security from the application to the service level
Applies governance to services
Manages the lifecycle of the services
Figure 2. SOA makes e-ID the on-ramp to next-
generation eGovernment services
Citizen-centricOnlineServices
SOA requires a new set of technical standards and design
patterns as well as new strategies for design, implementation,
testing, operation, and governance. In fact, the definition of
what comprises an application changes too. It requires a shift
from a standard programming model based on application-
specific APIs to a higher-level integration model closely
aligned with joint business process analysis by government
management.
In some cases, these processes might be generic core
services, identical to those in the commercial space.
Government agencies have the same needs for document
management, e-mail, enterprise resource planning (ERP), and
other more generic functions. In other cases, public sector IT
managers must deal with stricter e-ID security requirements,

110
the need to deliver actionable real-time information, or the
need to provide public access to government services to
allow citizens to, for example, vote, register as a driver, or pay
taxes.
CentralizedSecurityinaService-Oriented
ArchitectureEnvironment
Organizations can no longer hard code security inside their
applications. They need to leverage security as a service and
extract security out of their applications. Why is it so critical
to manage security as a service?
When implementing an e-ID approach, government needs
to enforce a common security policy across a whole
community. Therefore, if security remains at the application
level, it will not be possible to have a common and consistent
approach. Solutions such as Oracle Access Management
Suite enable government to centralize security as a service
and remove the need for security at the application level.
TService-OrientedArchitectureimproveshowe-IDcardsaremanaged
and used, offering the following benefits:
Single view of services:
e-ID delivers federated portals and identity services to
users of the e-ID.
Leveraging of existing services:
Using SOA to leverage existing applications and data as
reusable building blocks, new business processes and
applications can quickly and easily be combined.
Identity propagation:
e-ID can be used as a federated ID mechanism by
threading ID and associated privileges and restrictions on
use through to and between each service entity and
government organization.
Centralized policy management:
Ensure compliance with regulations for cross-border,
cross-organization, and other multi-party agreements
around services delivered to e-ID credentialed end users.
Managed service growth:
Service governance and lifecycle management to optimize
CONCLUSION
identification, collection, publishing, and subscription to a
set of public and privately built shared services.
Increased return on investment (ROI):
Leverage BPM into SOA planning and execution to ensure
all policies are properly implemented and the underlying
processes to execute these policies are optimized.
In the central and local government spheres, trust will be the
necessary foundation for secure interoperability, and will be central
to the successful realization of what's possible with online services.
From the user perspective as well as that of the deploying
organization, it's an issue of who is trusted with what. Ensuring trust
in the system requires the proper organizational culture, policy,
business, technology, and infrastructure that can adapt to changing
needs and improve understanding of requirements. Sharing and
interoperating among agencies and government departments
creates opportunities to simplify processes and unify work, as well
as improve the overall transparency and efficiency of government.
Secure interoperability, based on identity management solutions,
enables substantial cost savings, streamlined processes, and faster
communication of vital information to the benefit of governments
and citizens of all nations.

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Finland-Katso
Finland is spearheading work on SOA-driven shared services delivery. The
Finnishgovernmentwaschallengedwiththeneedtocreateaflexiblemeans
ofissuingandauthenticatingidentitiestocustomers,organizations,orcitizens.
Italsoneededtoreducethecostofsupportingcustomersatthepoint-of-service
andimplementasolutionforRBACandorganizationalauthentication.
TheoutcomeisKatso.Katsoisanationwideidentitymanagement,authentication,
and authorization system, and it is already used by the Finnish Tax
AdministrationandTheSocialInsuranceInstitution.Aspartofthedevelopment
ofeGovernmentservices,bothoftheseinstitutionsrequiredasolutionforrole-
basedidentitymanagementandorganizationalauthentication.
TheKatsosystemwillbecomethedefactoauthenticationandauthorization
solutionforeGovernmentservicesinFinland.Newgovernmentagenciesand
services are joining Katso in growing numbers and more than 300,000
organizationswillbeusingKatsowhenfullydeployed.Itisalsoestimatedthat
upto30large-scaleeGovernmentserviceswillbeusingKatsobytheendof
2008. Katso will undoubtedly be in the forefront of standard adoption in the
worldamonglarge-scalegovernmentinfrastructureservices.
Belgium-BELPICe-IDCard
TheBelgianPersonalIdentityCard(BELPIC)isahighlysecure,easy-to-use
andaffordabledigitalidentitysystemforallcitizenstousetofiletaxes,open
bank accounts, and make purchases online. Citizens can use their e-ID
throughtheBeliganeGovernmentportal(runsonOracleWebLogicPortal)and
theOracleServiceBusprovidestheunderlyingservicesorchestrationbusto
back-endplatformsacrossthevariousgovernmentagencies.
Belgian citizens can already use the new e-ID card for identification,
authentication,andauthorizationformanypublicservices,includingsecure
onlinetaxformdeclaration,officialdocumentrequests(includingmaritalstatus
andbirthcertificate),electronicsubmissionofcourtcaseconclusions,aswell
asaccesstothepubliclibrary,swimmingpool,andothercommunityservices.
TheBelgiangovernmentestimatesthatbytheendof2009,8.2millioncitizens
age 12 years and older will have national e-ID cards.
Germany-eHealthcard
Germany has begun trialing an electronic healthcare card (the
'Gesundheitskarte'),whichwillcontainbasicpatientdatasuchasname,age,
next of kin, and insurance details, as well as electronic prescriptions. The
conceptisbasedondistributedbrokerservices,whichguaranteemessage
switchingonthebasisofrequestchainsbetweenthetelematicinfrastructure
andconnectors,professionalservices,andotherservices-includingidentity
verification.
e-ID in the Real World
e-IDhasbeenimplementedinvariousformsbygovernmentsaroundtheworld:
France-GIE SESAM-Vitale eHealth Insurance Card
The Groupement d'Intérêt Economique (Economic Interest Group) SESAM-
Vitaleisaserviceproviderwhosemissionistoprovidethetechnicalexpertise,
to develop and promote the SESAM-Vitale program. The GIE SESAM-Vitale
wascreatedbythepartnersoftheFrenchHealthInsurancetodevelopcommon
solutions to meet the needs of all its members-whether they are part of the
compulsorysystemsorthecomplementaryinsuranceorganizations.SESAM-
Vitalecurrentlylinksmorethan223,000healthcareprofessionalsinFrancewith
thehealthinsurancesystem,forthebenefitofmillionsofinsuredpersonswho
havetheVitalecard.Itisaninnovativeprojectcomprisedofnewtechnologiesto
simplifyandaccelerateexchanges,therebydoingawaywithanypaperwork.
OracleWebLogicServerisbeingusedwithinthisproject,named'FrontalChaine
d'AdministrationdesCartes'(FRONTALCAC),tomanagethemainfunctionality
ontheVitalecard.ThesmartcardisthemostusedinFrance(andiscirculatedto
allinsuredpersonsandbeneficiariesage16andabove).Theapplicationserver
helpsprocessmorethan900millionclaimreimbursementformsperyearandhas
reducedthetimetakentoreimburseinsuredindividualsfromthreeweeksusing
thepaper-basedsystemtofivedays.
Italy-MinistryoftheInterioreIDCard
ThechallengesfacingtheItalianMinistryoftheInteriorweretodevelopanational
identitycard,theCartad'IdentitàElettronica-orCIE.Thesolutionneededtooffera
greaterdegreeofsecurityandavailabilitythanthepreviousmethodsofidentification.
Simultaneously,thesolutionalsoneededtocombinepreviousidentificationandsocial
servicescards.
Thesolutionsupports,integrates,certifies,andtracksmorethan70millionnational
identity cards. To obtain the CIE, Italian residents in the municipalities simply
provideidentityinformationthatischeckedagainstacentralinfrastructureatthe
MinistryoftheInterior,whichauthenticatestheinformation,generatesasignature
anddigitalcertification,andthenthemunicipalityproducestheactuale-IDcard.
TheItalianInteriorMinistryisnowabletoidentifyandauthenticateallcitizenson
theWebusingdigitalcertificates.Initiallydeliveredby80municipalities,thee-ID
cardcannowberequestedinanyItaliancity.Localmunicipalitieswillbeableto
installservicesonmicrochipsandofferthemtoallcitizens.
Italy-MinistryoftheInteriorResidencyPermit
The Italian Ministry of the Interior initiated a project to deliver a new electronic
versionofresidencypermitscalledPermessodiSoggiornoElettronico,orPSE.
TheobjectiveofthenewPSEistoprovideastandarddocumentthatconformsto
EuropeanUniondirectives,toenhancesecurityintheprocessofproductionand
deliveryofthePSE,andtoprovidetheindividualwithaclearandsecuredocument.
PSEworksviaaninfrastructuresimilartoCIE,althoughextrachecksarecompleted
automatically-forexampleconnectionforcheckingwiththeAutomaticFingerprint
IdentificationSystem(AFIS).PSEwentliveinJuly2006acrosssixpoliceforces
andacrossItalyinDecember2006.

112
Dr. L.R.Yadav
Senior Technical Director
R.S. Singh
Senior SystemsAnalyst
National Informatics Centre,
Department of Information
Technology, MCIT,
Government of India,
Yojana Bhawan,
Lucknow - 226001
Introduction
Digital technologies developments have generated a period of extraordinary social and cultural
change. They can improve how we work, how we are entertained, how we communicate with
each other, the healthcare, education available to us, how information and knowledge can be
brought together and used for our benefits. There is a strong correlation between digital exclusion
and social exclusion. It is worth mentioning here, what Sood (2002) had said about the preliminary
experience of rural connectivity projects in different parts of rural India. He concludes that non-
elite, rural, artisan, downtrodden and adivasi communities do not, and will not, use ICT in the
same way as urban elite do elsewhere in the country. Therefore, Sood emphasizes that far from
replicating the online behaviour of highly connected and cosmopolitan societies, digital
development in India warrants the design of products, services and technologies that solve local
problems and ameliorate local socio-economic conditions. Digital inclusion has two strands.
Firstly, it is about ensuring that all citizens have the opportunity to enjoy the direct benefits which
digital technology has to offer, through both accesses to technology and the skills, motivation and
confidence to use it to improve the quality of their lives. Secondly, it is about ensuring that the
indirect benefits of technology to improve all aspects of service planning and delivery are fully
exploited.
Over the past two decades, there have been islands of e-Inclusion initiatives in India at the
national, state, district, block and even gram panchayat level. Some of them have been highly
successful. Experiences from successes as well as the failures of the various initiatives played an
important role in shaping the e-Inclusion strategy of the country. The basic lessons learnt are;
need for political ownership at the highest level, a dedicated team with a stable tenure, Public-
Private Partnership (PPP), defined architecture, standards and policies, to develop the basic core
and support infrastructure, start with small pilots before scaling-up and issues of re-engineering
and management of change.
Hence, there is a need for taking a holistic view towards the entire e-Inclusion initiative across
the country. Increasingly , it was perceived that if e-Inclusion has to be speeded up across the
various arms of government at the national , state and local government level, a programme
approach would need to be adopted, which must be guided by a common vision, strategy and
approach to objectives. This approach would add the advantage of enabling savings in cost, in
terms of sharing the core and support infrastructure, enable interoperability and the citizen will
have a seamless view of government.
Digital Inclusion at
Grassroots Level for
Achieving Millennium Development Goals
DIGITAL INCLUSION II Digital Inclusion at Grassroots Level for Achieving Millennium Development Goals

113
and catalyst for the implementation of NeGP and is tasked
with providing assistance to the Departments & also serves
as the secretariat to the Apex NeGP Committee and assists it
in managing the programme. The vision of NeGP is to make
all government services accessible to the common citizen in
his locality, through common service delivery outlets and
ensure efficiency, transparency & reliability of such services
at affordable costs to realise the basic needs of the common
citizen. NeGP components are; Common Services Centre
(CSC), State Wide Area Networks (SWAN), State Data
Centres (SDC), Capacity Building, Standards, Awareness &
Communication and Assessment. Indian Government has
approved a CSC Scheme for providing support for
establishing 100,000 CSCs in 6,00,000 villages of the country.
CSCs will function as the front-end delivery points for
government, private and social sector services to rural
citizens of India, in an integrated manner. The CSC Scheme
has a 3-tier implementation framework:
Village Level Entrepreneur (VLE), to service the rural
consumer in a cluster of 5-6 villages at the 1st level.
Service Centre Agency (SCA) to operate, manage and
build the VLE network and business at the 2nd level.
State Designated Agency - to facilitate implementation of
the Scheme within the State and to provide requisite
policy, content and other support to the SCAs at the 3rd
level.
The SWAN Scheme for 29 States & 6 UTs, at an estimated
outlay of Rs. 3334 Crores, has been approved by GOI, in
March 2005 to set up SWAN, interconnecting each State/UT
Head Quarter with District Head Quarter and below each
District Head Quarter with the Tehsil/Block Head Quarters
with minimum 2 Mbps leased line. The objective of the
Scheme is to create a secure close user group government
network for the purpose of delivering G2G and G2C services.
State Data Centre (SDC) has been identified as one of the
important element of the core infrastructure of NeGP. SDCs
are being created for the States to consolidate services,
applications and infrastructure to provide efficient electronic
delivery of G2G, G2C and G2B services. These services can
be rendered by the States through common delivery platform
seamlessly supported by SWAN and CSC connectivity
extended up to the village level.
Mission Mode Projects and
Development Impact
The need for efficiency in government processes and service
delivery mechanism is a long-felt one. GOI has recognized
this need and hence included the same as a core Mission
Mode Project (MMP) under the NeGP. It has targeted that
more than 2 lakh users will be benefited trough MMPs. This
project will significantly improve the operational efficiency of
the government by transitioning to a less paper office within
next five years. States have been given flexibility to identify a
few additional state-specific projects, which are very relevant
for the socio-economic development of the State. NeGP is
being promoted as a Centralised Initiative to the extent
necessary, to ensure citizen service orientation, to realise the
Millennium Development
Goals
The eight Millennium Development Goals (MDGs) of the
United Nations, September 2000 reaffirmed its commitment to
the right to development, peace, security and gender
equality, to the eradication of many dimensions of poverty
and to overall sustainable development. The MDGs are;
eradicate extreme poverty and hunger, achieve universal
primary education, promote gender equality and empower
women, reduce child mortality, improve maternal health,
combat HIV/ AIDS and other diseases and ensure
environmental sustainability and develop a global
partnership.
India's First Country Report on MDGs captures
achievements, challenges and policies with reference to the
goals and targets and reveals that there have been
substantial improvements in the lives of people of the
countries over the years. This has been possible due to the
planned implementation of programmes despite the
enormous, complex and diversified problems of our nation.
Our country has already undertaken measures towards
globalization, liberalization and decentralization at grassroots
level to achieve vibrant economy, growth and development.
The benefits of digital technology revolution need to
permeate at grassroots level, which calls for a Bottom-Up
approach. The on-going decentralization process initiated by
the 73rd & 74th Amendments of the Indian Constitution
which gives greater responsibilities and powers to the
Panchayats and Nagar Palikas as a third-tier of governance,
offers a new era of opportunity for local planning, effective
implementation, monitoring of various socio-economic
development programmes and services. This will in turn help
the weaker sections of the society to share the responsibility
of governance at least at the lower level and to achieve
MDGs by the year 2015.
Digital Inclusion Framework
and Drivers
Inequality in the use and application of digital technologies
is a new driver of social, regional and economic exclusion in
the 21st century, which risks accelerating existing social,
regional and economic divides and creating new ones. The
drivers of digital inclusion varies from state to state, region
to region and across different segments of market, but most
commercial and government market research suggests that
the three key factors which drive people first to become
digitally engaged and subsequently to become more
sophisticated in their digital engagement are: Access to ICT,
Confidence and Motivation.
Considering the multiplicity of agencies involved in the
implementation of digital inclusion project and the need for
overall aggregation and integration at the national level.
Department of Information Technology (DIT) is the facilitator

114
objective of interoperability of various e-Governance
applications and to ensure optimal utilisation of ICT
resources. However, the actual implementation of the various
MMPs is decentralised, with the line ministries concerned
being responsible for its implementation. PPP would be
promoted wherever feasible to enlarge the resource pool
without compromising on the security aspects. MMPs have
been classified in the following 3 categories; Central MMPs,
State MMPs and Integrated MMPs. Some important projects
such as PRERNA, NLRMP, e-District, e-Scholarship, e-
Pension, SPIDER, Road Transport, Treasuries, e-
Procurements, e-Courts, e-Trade, e-Police, e-Panchayats, e-
Agriculture, e-Municipalities bringing the transparency in
the local governance.
PropertyEvaluation&RegistrationApplication
(PRERNA)System
Property Registration has been taken as a State Level MMP
under NeGP and PRERNA System was designed and
developed to eliminate the maladies affecting the
conventional registration system by introducing electronic
delivery of all registration services through a client- server
based technology. It has become very easy and has reduced
the registry time to 30 minutes. There are 355 Sub-Registrar
Offices (SROs), 305 Tehsils, 71 Districts in the State. More
than 1.50 crore persons visit the SROs and nearly 23 lakhs
documents are registered every year. PRERNA features are;
circle rate list district, ward/pargana, mohalla/village wise, on-
line market valuation of property, calculation of stamp duty &
registration fee and downloadable deed formats.
Sankhyikiya Patrika : Internet-based Data Entry &
Retrieval(SPIDER)System
SP having information on more than 3500 parameters of
village, block, district and divisional levels in the form having
more than 100 tables and sub-tables are updated and
published annually. It covers information related to major
sectors like Agriculture and Allied Activities, Industry, Social
Sector, Power, Transport and Communication, Banking,
Urban Facilities, Rural Infrastructural Facilities etc. A web
enabled SPIDER system has been implemented for data
feeding/updating directly from the districts from the year
2004 and dissemination of information from the year 2000 on
24x7x365 basis. More than 2-3 MB data is being generated
per year per district and till today more than 3 GB data is
available in digital form for the years 1995-2007 and update
for the year 2008 is in progress. After its implementation,
there is a saving of about Rs.1.5 crore per year of the state
government.
e-Scholarship
e-Scholarship is a web based solution implemented by the
Government of Uttar Pradesh to streamline the distribution of
Scholarships to more than two crore students belonging to
OBC, SC/ST, Minority and weaker section of the society. The
project also provides a comprehensive MIS to the State
Government for monitoring and analysis of the Scholarship
distribution in the state with an annual budget of about 2000
crore. It assigns a unique identification to each student
getting scholarship, tracks the performance of the student till
he/she gets proper employment opportunity. Different
processes have been simplified as students do not need to
fill form every year and are assured of timely transfer of
funds into their bank accounts, chances of fraudulent
schools/ colleges claiming scholarships has been reduced
considerably, timely and accurate information is available to
the decision makers and planners & chances of under
utilization of funds reduced.
NationalLandRecordsModernisationProgramme
(NLRMP)
Maintenance of land records has now become more vital for
administrators and creation of a land information system is
one of the key issues facing governance today. Land records
itself is a generic expression and could include records such
as the register of lands, records of rights, tenancy and crop
inspection register, mutation register, disputed cases register
etc. It also includes primary information about land presented
in terms of its geological information like the shape, size,
landforms, soils; economic information related to land use
irrigation and crops and the information pertaining to the
legal rights, registration and taxation. For modernization of
land records system in the country, a modified programme,
NLRMP has been formulated by merging two centrally-
sponsored schemes of computerization of land records and
strengthening of revenue administration and updating of
land records. The ultimate goal of the NLRMP is to usher in
the conclusive titling system with title guarantee, to replace
the current presumptive title system in the country during
the eleventh five year plan.
e-District
Districts are the de facto front-end of government where
most G2C interaction and bulk of citizen centric services are
delivered. As such, there was a felt need to improve this
experience and enhance efficiencies of the various
departments at the district level to enable seamless service
delivery to the citizen. The project scope is to integrate
various departments of the districts to provide seamless
services to the citizens. For successful implementation of e-
districts, the redesigning of the existing processes and
delivery mechanism to facilitate an efficient and effective
service delivery structure, has been identified as a key
activity. The objectives of the MMP include backend
computerization to enable efficient delivery of government
services and to proactively provide a system of spreading
information on the government schemes, planned
developmental activities and status of current activities.
Front ends under the scheme are only to be built at District,
Tehsil and block level, in the form of citizen facilitation
counters. Village level linkage would be established through
CSC and issuance of Certificates, Licenses, Ration Cards, old
age pensions, family pensions, widow pensions etc

115
References
1. Department of Land Resources, GoI website http://dolr.nic.in/.
2. Directorate of Economics and Statistics website http://updes.up.nic.in/.
3. Knowledge Economy : The Indian Challenge (2009) edited by Ashoka Chandra and M.K. Khanijo.
4. National e-Governance Plan of India available online at http://www.mit.gov.in/ .
5. Planning Department, Government of Uttar Pradesh website http://planning.up.nic.in/.
6. Sood, A.D.(2002) : "Towards a Knowledge Society". Available on line at sttp://
www.indiatogether.org/openions/ictdiary.htm.
7. Stamps & Registration Department, Government of Uttar Pradesh website http://
registryoffice.up.nic.in/.
8. The United Provinces Panchayat Raj Adhiniyam, 1947, 1994 Sanskaran.
9. Uttar Pradesh Kshettra Panchayats and Zila Panchayats Adhiniyam, 1961, 1994 Bilingual
Sanskaran.
10. Yojana : September 2009, Published by Ministry of Information & Broadcasting, GoI.
Acknowledgement
We are thankful to Dr. B.K. Gairola, Director General, NIC and Shri S.B. Singh,
State Informatics Officer, NIC Uttar Pradesh for their constant support and encouragement.
Digital Inclusion is the growth mantra for policy-makers today, not
just in India but the world over. The concept of digital divide is
frequently employed to discuss and analyze the socio-economic
inequities that exist in relation to the use of ICT. These disparities
occur across local, regional, state and national levels of society
and consequences include the reduction of people's ability to
participate in the knowledge economy. This exclusion limits the
ability of people to participate economically, politically,
educationally, socially and therefore presents an obstacle to the
maximization of human wellbeing.
The Framework for inquiry into the digital divide is a socio-
economic framework for understanding the ICT divide that employs
different levels to show that digital exclusion is both socio-
economically generated and has socio-economical and individual
consequences. The vision of NeGP is to make all government
services accessible to the common citizen in his locality, through
common service delivery outlets and ensure efficiency,
transparency & reliability of such services at affordable costs to
realize the basic needs of the common citizen.
CONCLUSION

116
ShreyGoyal
Student - Indian Institute of
Technology, Kharagpur, India
Varun Singh
Student - Indian Institute of
Technology, Kharagpur, India
The results from a sample survey carried out by the National Sample Survey
Organisation (NSSO), showed that out of the total workforce of 397 million in India,
only 28 million workers are employed in the organised sector, and the remaining 93 %
in the unorganised sector. It reveals that over a decade, the employment in the
organised sector has been almost stagnant or slightly declined. The informal sector in
India, found to be generating upwards of 60% of the total NDP, is broadly
characterized as consisting of units engaged in the production of goods and services
typically operating at low level of organisation, with little or no division between
labour and capital as factors of production and on a small scale. Labour relations,
where they exist, are based mostly on casual employment, kinship or personal or
social relations rather than contractual arrangements with formal guarantees.
Notwithstanding its impressive share in the total employment and increasing
prominence in terms of national income generation, it may be pointed out that this
impressive growth is without any corresponding increase in productivity, real wages,
or improvement in working or living conditions. Further, the sector is characterised by
excessive seasonality of employment (especially in the farm sector), preponderance
of casual and contractual employment, atypical production organisations and work
relations, absence of social security measures and welfare legislations, negation of
social standards and worker rights, denial of minimum wages and so on. Poor human
capital base (in terms of education, skill and training) as well as lower mobilisation
status of the workforce further add to the vulnerability and weaken the bargaining
strength of workers in the informal sector. Thus, the sector has become a competitive
and low cost device to absorb labour, which cannot be absorbed elsewhere, whereas
any attempt to regulate and bring it into more effective legal and institutional
framework is perceived to be impairing the labour absorbing capacity of the sector.
Workers in the informal sector are generally not unionised, have low earnings and
poor working conditions, and are characterised by absence of any form of social
protection, whether it be employment security, pension, or coverage for risks such as
ill health, accidents or death. In fact, for most of these the most basic protection, that
is minimum wage, is also not ensured. Rough estimates shows that less than 3 per
cent of informal sector workers are covered by any social security measures.
Liberalisation reforms, while being hailed for benefitting the economy, have
actually been found to hit the informal sector workers negatively, and it is being
Social Security for the
Informal Sector in India
Achieving Millennium Development Goals
DIGITAL INCLUSION II Social Security for the Informal Sector in India – Achieving Millennium Development Goals

117
realised that there is a need for social security programmes
particularly for neutralising some of those negative
consequences. Minimum security needs to be ensured for
those unable to gain from the post-liberalisation economic
growth process. Besides, the case for any changes to labour
laws can be strengthened if all workers have at least a
minimum of social security. The process of development in
India
become more socially and economically inclusive if it is
not to generate severe social tensions that can lead to
disruption and violence.
The social security problems of workers in the
unorganised/informal sector may be divided into two sets of
problems. The first category arises out of capability
deprivation in terms of inadequate employment, low
earnings, low health and educational status, among other
factors, that are related to the generalised deprivation of the
poorer sections of the population. The second category
arises out of adversity in the sense of an absence of
adequate fallback mechanisms (safety nets) to meet
contingencies such as ill-health, accident, death, and old age.
The fact that a majority of workers from the socially
backward communities find themselves in the unorganised/
informal sector imparts a certain social dimension to the
characteristics of these workers. In this context, the social
security needed to be offered to these workers should also
be seen as a force of social upliftment.
In addition, there is the economic argument in favour of
such protection - a consensus has arisen internationally that
the absence of social security debilitates workers, affects
labour productivity and thus has implications that extend far
beyond the workers and their families themselves. The
indirect costs of the absence of social security might as well
be expressed in the greater social costs of policing and
management of illegal and criminal activities, widespread ill-
health and various other social and economic problems.
Studies by agencies such as the Ministry of Labour and
Employment show that implementation of measures to bring
the informal sector workers under regulatory and social
protection instruments requires huge infrastructural and
institutional arrangements involving financial implications
beyond the capacity of the Government. The state has
already faced much criticism for the enormous burden placed
by the ambitious National Rural Employment Guarantee
Scheme (NREGS) on the exchequer, besides the wide
condemnation of the reprehensible implementation and
limited effectiveness of the scheme. Thus, besides the
financial implications, effective implementation and actual
benefits reaching the poor are also issues of contingency as
far as government schemes for social security of the working
poor are concerned. Hence, while provision of very basic
social security, essentially covering health insurance,
maternity benefits, life insurance and old age pension, which
can go a long way in improving the conditions of the
informal sector workers, not only has huge financial
implications, the scale of the formalisation process also
poses challenges for implementation.
As noted earlier, the absence of a meaningful social
security arrangement does not merely pose problems for
individual workers and their families. It also has wider
ramifications for the economy and society. From an
economic point of view, it debilitates the worker's efficiency
and his/her ability to contribute meaningfully to increasing
production and productivity. The informal sector in India has
widely been reported to suffer from a "low productivity
syndrome", compared to the formal sector. Provision of
social security benefits to workers can be expected to act as
an incentive for them to improve their skills and hence
productivity.
Thus, formalisation of workers can generate greater profits
for their employers. Hence, while the involvement of the state
is unavoidable at present in India, the informal employers can
give a hand in the process by facilitating social security
implementation for their own employees. Such a speedy
formalisation process may be implemented by their
collaborating with the government, possible under a hybrid
model consisting of state-sponsored benefits to workers
coupled with incentives to informal enterprises. This helps
limit the cost to the state as the enterprises assume the role
of welfare providers.
Essentially, the problem of formalisation of 300 million
informal workers can be reduced to a relatively simpler,
quicker and lesser expensive process of converting informal
enterprises to formal employers.
The financial implications of the minimum basic social
security scheme, as described above, amount to Rs.1,095 per
worker per year, as calculated by the National Commission
for Enterprises in the Unorganised Sector. Of this, Rs. 380 will
go as premium for health insurance, Rs. 150 for life insurance
and Rs. 565 towards old age security. Thus, basic social
security can be provided at a cost of Rs.3 per day per worker.
Since this provision would have direct as well as indirect
benefits in the form of increased productivity and
profitability for the employer, they can be expected to bear
the major of the financial brunt of the scheme for their own
employees.
Besides that, much of the institutional burden of the
scheme can be eased by partnering with the Unique
Identification Development Authority of India (UIDAI) to
access a reliable database of informal workers equipped with
Unique Identification numbers, which has already been
sought after to improve effectiveness of NREGS. Thus, the
proposed scheme need not waste substantial institutional
and financial resources on smart cards and biometric
identifiers as the NREGS did.
Several barriers to participation by enterprises and
employers do exist. Additional transaction costs and
harassment by officials, resulting in lower profitability, can be

118
expected to be the major discouraging factors for enterprises,
who may seek workarounds and loopholes in the scheme. It
might thus limit the applicability of the programme, falling in
the same trap as the NREGS. However, this can be overcome
by undertaking policy initiatives to reduce red-tapism in the
process. Once again, provision of UID numbers to workers
shall be helpful in reducing bureaucratic hassles. Keeping
the large positive implications of the successful
implementation of the scheme on the economy, a reduction
on tax rates and employing other measures that can help
reduce transaction costs on the employer should be feasible
for the state, and can further enhance implementation efforts.
The fact that provision of Social Security benefits to workers
incentivises them to improve their skills and productivity,
thus enhancing the employer's profitability, needs be
highlighted amongst informal enterprises.
Lessons learnt from the NREGS implementation illustrate
the need of continuous monitoring of the scheme. For this
purpose, civil society organizations and professional
institutions having technical competence and resources can
be identified and roped in for the same purpose. Involvement
of Panchayati raj institutions may also enhance feasibility.
Special emphasis has to be laid on prevention of corruption
and targeting errors, for which strict law-enforcement and
penalizing structures shall need to be created.
Legislation alone would not be enough for effective
implementation. Unless adequate infrastructure is present to
actually deliver the promised benefits from the scheme, most
of the provisions will end up being essentially useless.
Spending needs to be increased at the grassroots level,
especially in critical areas such as rural healthcare facilities,
to enhance infrastructure and ensure availability of proposed
social security benefits.
The experiences of previous attempts by state
governments and welfare boards need to be studied and
lessons learnt for implementation of social security measures
in the future. Kerala's stint with social security for the
informal sector provides many valuable lessons. Kerala has
made considerable progress in extending Social Security
coverage through the mechanism of tripartite welfare fund
boards. However, a lack of clear perspective has been felt, for
which the schemes are being restructured. Delivery
mechanisms have been found to be inefficient and expensive.
The fund management of the welfare fund boards has shown
a need for improvement, for which deployment of
professional expertise has been suggested. Most
importantly, it has been concluded that the expenditure by
the Government to support the Social Service system needs
to be limited to ensure sustainability, and community and
non-governmental organizations have been seen as
important resources.
To conclude, 93 per cent of the workers in the
unorganised sector do not have any social security in India.
It should be an important concern of public policy to ensure
that a certain minimum measure of social security in the
unorganised sector is ensured, which can be done by
collaborating with employers in the informal space, and by
giving them the necessary incentives to encourage
participation. For successful implementation, lessons need to
be learnt from past experiences of similar schemes such as
NREGS and those by state governments. The further
challenge is to extend social security to 300 million workers
covering all States and all groups of workers. As India has
not implemented protective social security schemes on a
large scale, more debate and discussions are needed for
better implementation.
References and Bibliography
1. Chandrasekhar, C. P. and Ghosh, J. (2006), "Providing social security to unorganised workers",
The Hindu Business Line, 27 June 2006
2. Choudhury, C. (2009), "India's success story bypasses its unorganised sector", Hindustan
Times, 14 May 2009
3. Dev, S. M. (2005), "Social security for unorganised workers", The Hindu, 26 September 2005
4. Government of Kerala (2009), "Labour Policy", available at: http://www.kerala.gov.in/annualprofile/
lab.htm (accessed 9 October 2009)
5. Kannan, K.P (2002), "The Welfare Fund Model of Social Security for Informal Sector Workers: The
Kerala Experience", The Indian Journal of Labour Economics, Vol. 45, No.2.
6. Ministry of Labour and Employment, Government of India (2007), "INFORMAL SECTOR IN INDIA:
Approaches for Social Security", available at: http://labour.nic.in/ss/INFORMALSECTORININDIA-
ApproachesforSocialSecurity.pdf (accessed 9 October 2009)
7. Naaraayana, N. (2005), "Indian Govt tightens monitoring NREGA works", Microfinance Focus, 15
September 2009
8. Narayan, D. (2009), "Let's Get Organised About It", Forbes India Magazine, 28 August 2009
9. National Commission for Enterprises in the Unorganized Sector, Ministry of Small Scale
Industries, Government of India (2006), "SOCIAL SECURITY FOR UNORGANISED WORKERS", May
2006
10. National Commission for Enterprises in the Unorganized Sector, Ministry of Small Scale
Industries, Government of India (2007), "Report on Comprehensive Legislation for Minimum
Conditions of Work and Social Security for Unorganised Workers", July 2007
11. Remesh, B. P. (2007), "Social Security for Unorganised Sector Workers in India: Alternative
Approaches and New Initiatives", Proceedings of the 5th International Research Conference on
Social Security, Warsaw, 5-7 March 2007
12. The Hindu: Special Correspondent (2009), "Unique ID numbers will help target benefits better:
Nilekani", The Hindu, 29 September 2009

119
Dr. R. Ramakrishnan
PhD Scholar, under the guidance
of Dr. R Perumal, Reader in
Management, DDE,
Alagappa University,
Karaikudi India
CRM and Stakeholder
Management
A fundamental truth for any venture is that people are ultimately our only means to
the end. Taking a stakeholder focus to any business ensures a higher probability of
completion and success of such a venture.
A stakeholder is anybody who has a claim, stake or vested interest in the issue at
hand, or in an organisation, or in his or her relationship with a product, service or
brand. Obviously the 'importance' of a stakeholder is directly associated with his or
her ability to influence the project through their network of relationships; the
difference in the analysis is in the way this is assessed.
Customers are one of most important type of stakeholders. They hold the key to
the value in the company and in fact, the company itself.
There is a momentum-gaining awareness of the importance of effective stakeholder
engagement, be it at the level of social/community participation, corporate reputation
management, or at the level of marketing, branding and engaging with the consumer.
Organisations cater to different sets of people with different needs and demands.
They market their products based on the demands of the customers to maximize their
satisfaction. An organisation will succeed only when customer needs are satisfied.
The focus of every organisation has gradually shifted from customer satisfaction to
customer delight.
Business and society are interrelated. They both need each other to advance
current corporate social responsibility thinking and execution. The interdependence
of business and society implies that both business decisions and social policies must
follow the practices of shared value exchange. A business must integrate social
perspectives into its business and competitive strategy to put these principles into
practice.
Almost in every activity a business's value changes, touches on the community in
which it operates. This interaction can create a positive or negative social
consequence though the consequences may vary by location and other factors.
Good stakeholder management is fundamental to the ability of a business to
deliver enduring change. But there are different groups that need to be
accommodated in a stakeholder management plan.
Engaging with a number of individuals and organisations about multiple initiatives
and issues can be a complex process for a company to undertake.
Communication is the key to successful stakeholder relationships. Communication
with the right people at the right time can improve a valuable relationship, minimize an
issue, or ensure a sale. A transparent engagement process can ensure accountability
and justification for decisions, which will strengthen trust within the community. The
resulting benefit is a community where citizens have a sense of empowerment
because they are directly engaged in the decision making process and share
ownership on the decisions that are made.
From an operational perspective, Stakeholder Engagement entails the creation of
DIGITAL INCLUSION II CRM and Stakeholder Management

120
effective linkages between the management of the
stakeholders and the business objectives in order to achieve
cumulative benefits.
This means there has to be strategic synergy not only
between costs and business objectives, but that synergy
also has to include the company or organisation's
relationships with its various stakeholders. Creating
meaningful interactions between various stakeholders enable
the identification of shared objectives, design of solutions
that account for various perspectives, and creation of
representative program strategies required to scale up
important high-impact capacity development strategies.
The key objective therefore in Stakeholder Management,
is to identify stakeholders, measure their relative and
absolute influence on organisational or project performance
and on one another and then to manage the linkages
between these influential relationships. It is an important
discipline that successful organisations use to win, measure
and manage support. It helps them ensure that they and their
projects succeed where others fail.
There are three basic approaches used to visualize map and
understand stakeholders
(1) CRM
(2) Influence and social networks and
(3) Techniques for listing and mapping stakeholders
Customer relationship is based on experiences. Customer
Relationship Management (CRM) is a process or
methodology used to learn more about customers' needs and
behaviours in order to develop stronger relationships with
them. It helps businesses use technology and human
resources to gain insight into the behaviour of customers
and the value of those customers.
CRM approach requires substantial data sets to be
gathered about a key segment of the business stakeholder
community( typically customers) followed by the use of data
mining techniques that allow trends and opportunities to be
identified graphed and communicated. These reports help the
business to prosper as it helps the management to take the
right decisions.
CRM works effectively in situations where the business is
relatively stable and there is a large class of stakeholders
interacting with the business in a reasonably consistent way.
Its focus is to build and maintain a customer centred
enterprise cost effectively and generate a good ROI (Bligh
2004)1
. Running a successful CRM project requires a high
degree of stakeholder management. For projects to be
successful, it is vital to understand the stakeholders' values
and issues, in order to address them and keep everyone on
board for the duration of the project.
Today and in the future, CSR oriented Financial
Institutions (FI) will have robust stakeholder engagement
programs to solve complex sustainability challenges, provide
input into business strategy, and keep abreast of stakeholder
concerns.
Organisations would want customers to trust them. The
organisations need to be fair and open with the customers,
and empower them to make informed financial decisions. The
staffs are to be trained to determine the individual needs of
the customers and communicate clearly with them. They
must strive to offer helpful, professional service and offer
them relevant, simple-to-understand products that they can
trust.
Responsible selling starts with clear, open and honest
dialogue with customers, hence every interaction with a
customer is as an opportunity to deliver the best customer
experience. Organisations must consistently aim to offer
customers a range of sustainable products and services that
meet real needs.
In order to have a better stakeholder management
especially in the rural areas which is the bottom of the
pyramid, there is a necessity for corporates to work towards
financial inclusion for the same technology and
communication are the prime moves.
The seven C's of Stakeholder Management are very much
relevant in this case:
Concern
Communicate
Contribute
Connect
Compound
Co-Create
Complete
Financial access was the most frequent mention of the
social issues, with many commenting upon the role of
Financial Institutions to help close the growing gap between
the rich and the poor. Depending on the region, this is
referred to as financial exclusion/social inclusion; serving the
underserved, community development, etc.
Typically, financial inclusion in India is characterized by
the following:
Lower outreach by financial institutions/MFIs/SHG Bank
Linkage Programme in comparison to below poverty line
(BPL) and low income population.
Priority Sector Lending norm of 18% advances to
agriculture is not met in many states. Also, agriculture's
share in Priority Sector Lending has been declining in
some states.
Financial inclusion is characterized primarily as either
general access to loans (mostly consumption or
consumer loans rather than livelihood loans) or access to
savings accounts. Very few risk management and
vulnerability reducing products are available to small
holder producers.
Access to finance is primarily a bridging resource for
many low income groups.
A majority of the poor are engaged in agriculture and
allied activities. Market imperfections and other factors (like
poor infrastructure and production practices) severely
constrain them in their effort to build sustainable livelihoods,
This results in their often falling into a cycle of being
financially included and excluded at various times.
These market imperfections and related aspects have
impacted the livelihoods of the poor in several ways,
1 Bligh, P & Turk D. (2004) "CRM unplugged: Releasing CRM's strategic Value" Joh Wiley & Sons, New York

121
including:
(1) Increased vulnerability and reduction in livelihood
security
(2) Forced movement towards other types of livelihoods
including migration to urban areas where they neither have
the survival skills not a distinctive competence
(3) Entry into perpetual debt traps, which they cannot come
out of even when assisted by well meaning SHGs/MFIs, and
(4) At the extreme, in a few cases, bondage and/or suicide.
According to Ms. Usha Thorat (2007)2
on an all India
basis, only 59% of adult population in the country has bank
accounts which leave the 41% of the population as
unbanked. In rural areas, the coverage is 39% against 60% in
urban areas." Thus a majority are excluded from the
payments system, which means not having access to a bank
account and formal credit markets, forcing them to approach
informal and exploitative financial markets.
"Small farmers are forced to borrow money from money-
lenders at high rates of interest, since less than 60% of the
credit requirement of farmers is met by institutional sources."
(Dr M S Swaminathan, Chairperson, National Commission on
Farmers, 2006).
These financially excluded sections largely comprise
marginal farmers, landless labourers; those engaged in self
employed unorganized sector enterprises, urban slum
dwellers, migrants, ethnic minorities, socially excluded
groups, senior citizens and women- all the vulnerable
sections of the society.
The barriers to access to formal banking system have
been identified as relating to
Culture,
Education (Especially Financial Literacy),
Gender,
Income and Assets,
Proof of Identity,
Remoteness of Residence etc.
Efforts are being made by the authorities- especially
banking regulators to improve access to affordable financial
services through financial education, leveraging technology,
and generating awareness.
Microfinance has enhanced their outreach over the period
2001-2007 in India. This growth is visible not just in terms of
the number of active borrowers but also gross loan portfolio
and total assets. While performance in terms of outreach and
financial performance has been spectacular, the following
three factors require attention
1. There is still a paucity of accurate data with regard to the
absolute number of clients and poor women served.
2. While institutions have done well in terms of extending
access to financial services to low income women clients, the
focus has largely been in terms of delivery of credit. And
within credit, at least over the last few years, the emphasis
has been on consumption or consumer loans and very small
production loans. In reality, several critical financial needs
are yet to be satisfied. Hence, the gap in terms of access to
other financial services like formal/flexible voluntary savings
(the most basic insurance product), health, asset, accident
and life insurance, larger production and livelihood credit etc.
remains to be addressed for a large majority of clients.
3. Low income clients everywhere have a range of evolving
needs as they are more vulnerable and face a large number of
risks. They need continued access to the wide range of
financial services to counter the vulnerabilities that they and
their families face in their daily struggle for survival.
This is where CRM can play an active role. Indeed, there
is a great business opportunity and social obligation in
facilitating ongoing delivery of these risk mitigating financial
services for low income clients at the required scale. Access
to a wide range of risk mitigating financial services at
affordable cost is very critical especially as it enlarges
livelihood opportunities and empowers the poor to take
charge of their lives.
While several models to promote financial access exist, the
three major ones are:
The SHG Bank Linkage Programme (SHGBLP) and its
variants These are supported by NABARD and Public Sector
Commercial Banks. Self Help Group (SHGs) represents a
unique approach to financial intermediation. The approach
combines access to low cost financial services with a
process of self management and development for the women
who are SHG members. SHGs are informal associations of up
to 20 women who meet regularly, at least once a month, to
save small amounts. They are formed and supported usually
by NGOs or government agencies. SHGs are seen to confer
many benefits, both economic and social. They enable
women to grow their savings and to access credit, which
would otherwise not be easily accessible to them. SHGs can
also be community platforms from which women become
active in village affairs, stand for local election or take action
to address social or community issues (abuse of women,
alcohol, dowry system, schools, water supply etc). As the
group consolidates and matures over time, the banks step in
to lend money to the SHG through the SHGBLP.
The Institutional MFI Model of SIDBI, commercial banks
and other stakeholders; This model has its origins in the
work of SIDBI/SFMC in 1997, which pioneered term lending
to MFIs with many banks following suit. The growth story of
the MFI model has been greatly facilitated by the sharp
increase in bank credit to MFIs. Apart from SIDBI, a larger
number of private sector banks are now financing the sector,
with the private sector banks lending mostly to the MFIs
while the public sector banks and RRBs of rural branches
financing the SHGs through their wide network. While the
initial lending to the MFIs by the private sector banks was
mostly to meet the central bank requirement of PSL, of late
the banks have also recognized MFIs as good credit risk - a
compelling business reason to look at this sector. Under the
MFI model, the MFIs borrow money from banks and then on-
lend to their end customers. Even under the MFI model, most
2 Thorat, Usha, 'Financial Inclusion - the Indian Experience', HMT-DFID Financial Inclusion Conference,
London 19 June 2007

122
MFIs ask the borrowers to form groups of 5-10 members and
lending is done to the individual member with group
guarantee (Joint Liability Group - JLG). While the MFI tracks
individual loans, the JLG ensures that the group dynamics
and peer pressure from group members result in regular and
timely repayment of loan amounts by all members. As of
March 2007, there are an estimated 900 MFIs of various sizes
operating all over India with over 10 million borrowers with a
loan book size in excess of Rs. 3000 crores.
The Partnership Model of ICICI and other private
commercial banks: Since banks face substantial priority
sector targets and microfinance is beginning to be
recognized as a good business opportunity for institutions, a
variety of models have been tested between banks and
MFIs. All types of banks - international, domestic, national
and regional - have become involved at the forefront of some
of the following innovations:
Lending wholesale loan funds directly and based on
guarantees.
Assessing and buying out microfinance debt
(securitization).
Testing and rolling out specific products such as the
Kisan Credit Card.
Engaging microfinance institutions as agents, which are
paid for loan origination and recovery, with loans being
held on the books of banks.
Equity investments into newly emerging MFIs.
Banks and NGOs jointly promoting MFIs.
Adopting new technological solutions to enable speedy
and cost efficient delivery of services - Biometric ATMs,
computerization of book keeping activities of MFIs/SHGs
etc.
With the initial success of these pilots, more banks are
now keen to explore this area. However given that only a
handful of MFIs have achieved scale and reach, competition
is increasing amongst banks reaching out to same set of
MFIs. This could lead to over exposure and its resultant fall
outs.
The use of IT is inevitable to improve the usage of
existing branch infrastructure. Increasing outreach and up
scaling number of accounts at each branch will require
bankers to move out of their branches and source clients
and then look at low cost delivery alternatives once the
account relationship is established.
Opening a no frills account with a small overdraft or GCC
is only the first step in building the relationship which would
require sustained efforts to ensure that the banking
relationship with the customer is fashioned to meet his
needs. IT can reduce cost and time in processing of
applications, maintaining and reconciliation of accounts and
enable banks to use their staff at branches for making that
critical minimum effort in sustaining relationship especially
with new accountholders.
In rural areas customers cannot be expected to come to
branches in view of opportunity cost and time and hence
banks will have to reach out through a variety of devices
such as weekly banking, mobile banking, satellite offices,
rural ATMs and use of Post offices.
In urban and even in rural areas where mobile phones
have penetrated, banks could use mobile technology for
facilitating banking transactions. Mobile phones can be used
to transfer funds real time from and to bank accounts and
could make remittances and payments at very low cost.
Once the data base and track record is established, a
multitude of financial services can be offered including
savings, remittance, and transaction banking such as receipt
of salaries, pensions and payments for utilities, loan
including home loans, insurance and MF products. Here the
branches can render more business and variety of products
to existing clientele as also source new customers within the
area of operation.
Financial inclusion offers a huge potential for business in
terms of resources and assets and banks therefore need to
take aggressive steps to use technology, business processes
and personnel to be able to exploit this potential in
innovative and creative ways. Use of technology is critical in
building up a reliable credit information system, build up data
base on customers for a variety of purposes, thereby
reducing the transaction cost involved in checking
encumbrances and collaterals and also facilitating better
pricing of risk.
In India, branchless banking has to be able to ensure
effective penetration into underserved cc areas -an example
of this is the SHG-Bank linkage program. Up-scaling this
program for financing productive activities and synergizing
local entities for providing ancillary and collective services
required for improving bankability of activities has to be the
focus. While up scaling the SHG -bank linkage program, care
must be taken to ensure integrity of accounting and
protection of member's interest.
In addition up scaling requires knowledge enhancement
and capacity building. For example Village knowledge centres
set up by a public sector bank at some of its rural branches
has enabled more productive lending and increased good
business at such branches.
Banks should focus on relatively unbanked and
underserved areas rather than competing aggressively in
already well served areas. There is a clear need to vastly
increase the numbers served by existing branches for
savings loan and remittances.
Financial inclusion should be led by understanding the
needs of the customer rather than achieving targets. The
focus for rural areas should reach out rather than the
number. Delivery of financial products must be preceded by
improving financial literacy and credit counselling. The focus
should be on customizing products for transactions,
remittances, savings, loans and insurance. Instead of having
a single size fit for all, a localized approach is required.
Communication should be in local language and in tune with
local culture to remove barriers.
Technologies like mobile phones, internet etc can be
leveraged to increase delivery channels at lower cost, and
have better internal control systems. A reliable credit
information system that will enhance the efficiency safety
and integrity of the payments and remittances system can be
developed using CRM. It would also provide all the required
MIS reports. A well functioning payments system itself

123
improves economic activity and its efficiency.
Further financial services need to be supplemented by
organizing support for ancillary activities and knowledge
dissemination. Farmers training centres, village knowledge
centres for ensuring sustainable development.
The SHG program has become quite widespread, There is
need for up scaling to cover productive loans while ensuring
that the process of group formation and capacity building is
given sufficient time to allow social capital and democratic
processes to take root. Transparency in accounting and
book keeping and financial education of members should be
part of due diligence undertaken by banks.
The real value of NGOs and MFIs lie in their role as
providing "credit plus" services and not just functioning as
an intermediary for on lending. Banks with their resources
and scale have greater cost advantages but linking with
community based organisations and local persons /entities
would help them get over the information gap and access
barriers.
Last but not the least, the role of the State Governments in
facilitating financial inclusion is critical. Land settlement
rights, computerization of land records, and providing
economic and social infrastructure with pro-active
agricultural extension machinery will greatly help in using
financial inclusion for sustainable development.

124
Dr. Sumanjeet Singh
Assistant Professor
Department of Commerce
Ramjas College
University of Delhi
Delhi-7, India
Digital Divide in India
Measurement, Determinants and Policy for Addressing
the Challenges in Bridging the Digital Divide
Introduction
The Information and Communication Technology (ICT1
) is one of the important driving forces for
modern civilization. The rapid development and proliferation of ICTs has accelerated the economic
and social change (Nandi, 2002), across all areas of human activity worldwide-and continues to
do at the rapid pace. ICTs enable interactive communication unhindered by distance, volume,
medium or time and also reduce the cost of co-ordination (Fletcher et al, 2000), communication
and information processing (Dean, 2002; Gordon, 2000). ICTs hold great promise in derive for
development and poverty reduction in global south. In many instances, poor people have
experienced benefits in the form of increased income; better health care; improved education and
training; access to job opportunities (Kuhn and Skuterud, 2000; Sumanjeet, 2008; Hecker, 2001;
Motohashi, 2001); engagement with government services; contacts with family and friends;
enterprise development opportunities; increased agricultural productivity (Poole, 2001; Hooker
et al, 2001), and so on (Sumanjeet, 2009). The issue of transparency is easier to manage with
ICTs, which may result in monetary savings in addition to stakeholder confidence in the development
process and system (Jesus, 2003). ICTs have radically changed the way of doing business.
Internet and its enabled business technologies like e-commerce have opened up vast business
avenues and transformed the whole business world into a global village. Further, it is expected
that ICTs will play a crucial role in the socio-economic development process, and change the
pattern of people's economic models and lives. But, the potential to exploits the benefits of ICTs
largely depends on the access and adoption of these technologies. In fact, the status of ICT
adoption of an economy is an indicator of its potentiality to exploit the economic opportunities
affordable by the new technologies-more generally, its prospects for the transition to the 'new
economy'. But, as expected the adoption of ICTs vary significantly across countries.
Table 1: Status of ICTs Adoption among Different Regions (Per 100 Inhabitants)
Regions Fixed Telephone Cellular Subscribers Internet Users Broadband Subscribers
ESCAP2
16.2 31.5 11.9 2.9
LLDC 6.6 13.3 4.0 0.1
LDC 0.9 9.3 0.5 11.8
SIDS 15.4 39.5 15.0 0.5
ASEAN 8.6 33.8 10.2 0.2
SAARC 3.3 15.3 5.0 0.1
Central Asia 11.1 20.1 6.3 --
Low Income 4.0 14.5 5.4 2.8
Middle Income 23.5 40.2 11.4 22.0
High Income 46.7 84.6 68.4 --
Africa 3.1 20.9 4.7 --
Latin America & Carib. 17.7 54.2 18.2 2.7
North America 57.8 75.0 69.0 19.7
Europe 45.0 101.4 43.1 15.6
Other Asia Pacific 22.5 51.2 19.3 7.1
World 19.4 40.9 17.4 4.3
Notes: Data for year 2006, complied by researcher; LLDC (Least
Developed Countries); LDC (Least Developing Countries); SIDS
(Small Island Developing States)
Source: Statistical Yearbook for Asia and the Pacific, 2007;
DIGITAL INCLUSION II CRM and Stakeholder Management – Measurement, Determinants and Policy for Addressing the Challenges in Bridging the Digital Divide

125
Table 1 indicates that high-
income economies have twice as
many fixed telephone lines per
capita as middle-income
economies, and 11 times the
number in low-income
economies. In the low-income
countries and SAARC member
countries-the number of fixed
telephone lines per 100 people was just 4.0 and 3.3, respectively. In
the least developed countries the number did not even reach 1 in
2006. At the same time, the number of mobile phone per 100 people
was 14.5, 15.3 and 9.3, respectively, in low-income economies, SAARC
member countries and least developed countries. In high-income
economies in the region, there are, on average 68 Internet users per
100 inhabitants, compared with 0.5 in LDC, 11 in middle-income
economies and 5 in low-income economies. In 2006, there were 3
broadband subscribers per 100 inhabitants in low-income economies,
compared with 20 in North America and 16 in Europe.
The global disparities in the access to these technologies are more
clear with figure 1and 2. As illustrated above the adoption level of
ICTs is highest among the developed countries. In these countries,
Graph 2: Internet Users per 100 Inhabitants 1997-2007Graph 1: Mobile Phone Users per 100 Inhabitants 1997-2007
From the above discussion it is clear that the concept of digital
divide has many dimensions. Many technological and non-
technological gaps can be considered. Added to this, there are
many ways to measure the gap of digital divide. The present
paper is focused on India and tries to explore the macro aspect
of digital divide in India. The paper tries to explore the problem
of digital divide within India. Thus, in the context of the present
paper digital divide essentially means teledensity, mobile and
Internet divide between the rural and urban areas. The main
objective of the present paper is to study the problem of digital
divide in the Indian context and address the challenges in bridging
the gap of digital divide. The study also makes an attempt to
identify the causes of digital divide in India. Further, in the end,
an attempt has been made to suggest the policies to address the
challenges of bridging the gap of digital divide in India. The
present paper has been divided into five sections. Section 1
deals with the concept of digital divide. Section 2 discusses the
present status of digital divide in India. In section 3, an attempt
has been made to study the causes of digital divide in India.
Section 4 tries to address the problem of digital divide by
suggesting some policy options. Section 5 deals with the
concluding remarks.
METHODOLOGY
more people have access to
Internet and at a higher speed,
many more have mobile
phones. Developing countries
are trying to keep pace with the
changing technologies and
adopting ICTs at faster rate;
however the overall adoption
rate is much lower than the
developed world. Asian countries have experienced a rise in the use
of ICTs in the recent years, though the degree of expansion has varied
among the countries. Internet adoption rate is very slow among
developing countries.
From the above analysis, it is clear that there are millions of peoples
in this world who do not have access to Internet, telephone, mobile
phone etc. due to various reasons. Their inability to access ICTs deprives
them to reap the benefits of ICTs. This has led to a serious issue
'Digital Divide' between those who are participating in information
technology revolution and those who are not (United Nations, 2006).
In the recent past, the digital divide has attracted the attention of both
scholars and policy makers for its economic, social and political
consequences.
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126
Concept and Measurement
of Digital Divide
There has been much discussion and debate about the
concept of digital divide3
and of the empirical analyses of its
components (Chen and Wellman, 2004; Companies, 20014
;
Cooper, 2002; Dewan and Riggins, 2005; Norris, 2001; Nohan,
2000). The notion of a digital divide gained attention in the
1990s with recognition that some people and institutions
were not going online or were not going onto broadband.
The concept of a "digital divide" between technological
"haves" and "have-nots" has been a useful tool in efforts to
bring greater, more equal access to powerful new information
and communication technologies like the Internet. The term
'Digital Divide' is used to describe situations in which there is
a market gap5
in access to the use of ICT devices measured
by, for example the number of fixed line phones per
inhabitants, or the number of mobile users or the internet
connections in the population. According to OECD (2001)
the term 'digital divide' refers to "the gap between
individuals, households, businesses and geographic areas at
the different socio-economic levels with regard to their
opportunities to access information and communication
technologies (ICTs) and their use of Internet. It reflects
differences among and within countries". This definition is
exclusively focused at national and international level.
Nevertheless, digital divide exists in variety of other levels;
sector, community, and individual level. For example many
communities within nation-states are far removed from the
rest of the country with regard to information and
communication technologies access and use. Such
communities reshape ICT to their culture and norms
(Barziliani and Barziliani, 2005). Further, digital divide is also
referred to as "the spiral of uneven access to and usage of
information and communication technologies and the socio-
economic rebound causes that have caused the emergence
of information inequality throughout the world, both in and
between the countries and also locally in communities.
Hanimann and Ruedin (2007) the term 'digital divide'
essentially describes three distinctive divides: a geographical
digital divide (between regions and countries), a social digital
divide (between social classes), and an upgraded digital
divide (between technology and humans). Norris (2001);
Mark, (2003) and Branko (2005) suggest that there are at least
three major divides:
A global divide between the developed and undeveloped
worlds
A social divide between the information rich and the
information poor
A democratic divide between those who do and those
who do not use the new technologies to further political
participation
Thus digital divide can be defined as economic, social or
cultural deprivation generated by missing ICT access and
skills. This definition goes beyond conventional definitions
and it has a number of practically important characteristics.
First, it explicitly spells out the three different dimensions
where digital divides are important and where ICTs make a
difference. In the modern knowledge- and information-based
world, economic opportunities, such as employability,
depend on ICT access and skills. ICTs, however, also play an
increasingly important role in all social relationships, ranging
from political participation to connecting local communities,
friends and the family. Second, in the global and culturally
diversified world, ICTs are also increasingly important for
access to cultural resources and expression. Third, the
definition also replaces traditional technology-focused
characterizations of digital divide, noting that lack of
technology, per se, is not always a problem. It is clear that
technology remains inert and useless with knowledge and
capabilities to use them, and when they are embedded in
social without necessary human skills and competences.
Technologies become real when they are combined practices.
Figure 1: Measurement of Gap Elements for 'Digital Divide'
Element 1
A gap in access to use ICT: Measured by the number and
spread of ICTs (first order digital divide)
Element 2
A gap in the ability to use ICTs: measured by skills base
and presence of numerous complementary assets (second
order digital divide)
Element 3
A gap in actual use: measured by the telecommunications
for various purpose, the number and time of online users,
the number of internet hosts and the level of e-commerce,
e-business and e-governance
Element 4
A gap in the impact of use: measured by financial and
economic returns.
Based on these four elements, many international
organizations have defined development policies aimed to
reduce the digital divide. However, in spite of the evolution
in the concept, these principally emphasize development of a
technological infrastructure. National investments and
policies for the reduction of the digital divide continue to
principally target connectivity development.
Digital Divide in India:
The State ofArt
ICT infrastructure is the backbone of modern society. It is the
biggest enabler of change and process reforms with minimum
resistance. Various studies (Lawrence and Lee, 1999; Leizero,
2000; Pastor et al, 2004; Norris, 2000; Sumanjeet, 2006)
revealed that good governance is not possible without the
ICTs. The information and communication technologies are
being increasingly used by the governments to deliver its
services at the locations convenient to the citizens. Further, it
brings effectiveness, efficiency and transparency is the
system. Therefore, the governments around the world are
busy in developing the ICTs infrastructure. India is one of
the countries where telecommunication development
activities have gained momentum in the past decade or so7
.
Efforts have been made from both governmental and non-

127
governmental platforms to enhance the telecommunication
infrastructure. The idea is to help modern telecommunication
technologies to serve all segments of India's cultural diverse
society, and to transform it into a country of technologically
savvies
Various studies (Huberman, 2001; DiMaggio et al, 2001;
Guillen, 2006; Servon, 2002) showed that the problem of
digital divide is starker in the developing countries like India.
The gap of digital divide is significant between the rural and
urban India (Dasgupta et al, 2002;, Nath, 2001; Singh, 2007;
Mahajan, 2003; Dutta, 2003). The major metropolises are at
par with some of the developed countries, but rural areas in
states like eastern Bihar and Orissa are worse off than several
of the least developed countries. The problem can be more
understood by studying it under three sub-sections:
Teledensity divide, mobile phone divide and Internet divide
between rural and urban India.
Teledensity Divide8
Teledensity is low throughout the countries of the South
Asia. Pakistan has highest teledensity in Asia and
Bangladesh has lowest. India is by far the largest South
Asian country, in terms of population, economy and
telecommunication network. However, there are huge
disparities extant within the country, and this is evidenced in
the uneven distribution of telecommunication access. The
recent extraordinary growth in telecommunication
connections in India9
, which topped 15 million per month in
January 2009, has understandably grabbed the headlines.
These huge numbers, however, disguise a disturbing reality,
which is the enormous variation within India. Many of the
less developed states have state-wise average penetration
rates of below 20 per cent, including Bihar (12.13), Assam
(13.67), Andaman & Nicobar Islands (17.94), Uttar Pradesh
(15.58), West Bengal (13.78) Orissa (14.28), Madhya Pradesh
(19.54) Uttranchal (10.37) and Bihar (12.13). Teledensity in
some states like Jharkhand (3.49), Chhattisgarh (4.18) and
North East-II (8.71) are less that 10 per cent (Table 2)
Table 2: State-Wise Urban and Rural Teledensity in India (In %)
(As on 29/02/2009)
Circle/StatesTeledensity Rural Urban Overall
Andaman & Nicobar Islands 13.89 24.77 17.94
Andhra Pradesh 10.15 72.44 27.34
Assam 3.85 72.46 13.67
Bihar 3.1 89.13 12.13
Chhattisgarh 1.31 14.27 4.18
Gujarat 15.57 58.15 32.34
Haryana 16.06 57.67 29.45
Himachal Pradesh 30.5 118.64 39.9
Jammu & Kashmir 7.35 59.4 20.99
Jharkhand 1.14 11.38 3.49
Karnataka 11.14 73.38 33.68
Kerala 25.5 97.46 43.98
Madhya Pradesh 4.96 58.34 19.54
Maharashtra (-) Mumbai 11.66 55.16 26.18
North East -I 6.65 89.45 26.32
North East - II 3.06 27.47 8.71
Orissa 6.66 53.64 14.28
Punjab 24.83 80.63 46.85
Rajasthan 12.07 57.98 22.98
Tamilnadu (-) Chennai 15.37 56.8 34.01
Uttaranchal 5.03 24.43 10.37
Uttar Pradesh 6 50.36 15.58
West Bengal (-) Kolkata 7.02 55.43 13.78
Kolkatta # 57.43 62.3
Chennai # 100.13 101.62
Delhi # 107.96 107.96
Mumbai # 81.41 81.41
India 9.03 64.48 25.34
Source: TRAI, 2009
Graph 3: Urban & Rural Teledensity (Per 100 Inhabitants 1997-2008)
Source: ICRA
More perilous, however, is the inequality between rural and urban India (Graph 3). Despite several policy initiatives to promote rural
penetration, growth in teledensity continues to be skewed in favour of urban India. In fact, the rural population is much worse than it was, a
few years ago compared to its urban counterpart.

128
InternetDivide
Internet came to India in the early 1990. Videsh Sanchar
Nigam Limited (VSNL) introduces Internet in India via dial up
in the 6 cities on August 14, 1995. At that time, there was
limited Internet access only in a few major cities, all in the
hands of the government. VSNL, the agency responsible for
Internet activities, and the DOT (Department of
Telecommunications) provided an agonizingly erratic
connectivity, with miserly bandwidth and far too few phone
lines. Connection rates ran as low as 5% (for every 20
dialups you might get connected once) and users were
frequently cut off. And the rates for this pathetic level of
service were among the highest in the world. Domestic users
paid about $2 per hour, and lease lines, for the few companies
that could afford them, ranged over $2000 per month for a 64
Kpbs line. By the end of 1998, after three years of
government monopoly, there were barely 150,000 Internet
connections in India. But, today the government monopoly
is largely over. Many small to large Internet Service
Providers have set up shop, triggering a price war and an
improvement of service. Users are now estimated (57 Million
claimed users) at over 49 million (42 Million as on September
2008) and, with a growth predicted to reach 1 billion in the
next five years (Graph 4 and 5).
Graph 5: Claimed Internet Users in India
Graph 4: Active10
Internet Users in India
Note: Figures in Millions
Source: IAMAI
Note: Figures in Millions
Source: IAMAI
Small Internet kiosks have set up even in small towns, and
the governments, both State and Central are pushing for
growth in the Internet sector. Internet is the new buzzword.
But data shows that Internet seems to be on a move in the
metros of India and not the buzzword for small towns too.
Today almost 70% of the total Internet users in India are
coming in from the top 7 cities-Mumbai, Delhi, Bangalore,
Hyderabad, Chennai, Kolkata and Pune. Only 30% access is
happening from all other cities put together. Added to this
disparity among the rural and urban Internet users is also
very high (Table 3).
Table 3: Urban-Rural Internet Users in India (In Millions)
Internet User-ship in India (Rural-Urban)2005 2006 2007 2008
Urban individuals Regular 17.63 21.95 25.17 30.03
Urban individuals Occasional 5.20 1.65* 5.15 10.31
Urban-Internet individuals Total 22.83 23.60 30.32 40.34
Rural-Internet using individuals
Regular 5.06
Occasional 4.00
Regular+Occasional Total 9.06
All India-Internet using individuals
Regular 35.09
Occasional 14.34
Regular+Occasional Total 49.40
All Urban internet users (% of Indian Population) 7% 7% 9% 12%
All Rural internet users (% of Indian Population) 1.2%
All India internet users (% of Indian Population) 4.5%
Note:*May have been underestimated because of relatively less deeper coverage of SEC 'D' and 'E'in
the land survey.
Source: Juxtconsult India Online, 2008
In rural India only 1.2 per cent people have Internet access
whereas it is 12 per cent in the urban India. Urban users
continue to dominate Internet use contributing to 40.34
million of the 49.40 million odd users. 30.3 million urban
people are using Internet on regular basis where only 5
millions are in rural areas. In September last 2007, the number
of active Internet users in urban India was 30 million.
Disparities within the Indian states are huge. State like Delhi,
Maharashra and Tamilnadu have highest number of Internet
subscribers followed by Kerala, Karnataka and West Bengal.
Assam, North East-II, Orrisa, Andaman and Nicobar and
Uttranchal have lowest Internet subscribers States of India.
MobileDivide
Far from being a lifestyle product, Mobiles have now become
a necessity. India has seen a huge spur in mobiles in the past
5 years and it has penetrated even to the rural areas of India
to a good extent. With entrants of CDMA11
(Code Division
Multiple Access) like Reliance communications and Tata
Indicom the call rates have been reduced and usability has
been increased. The launch of the revolutionary offer of a
mobile phone along with a connection by Reliance for Rs.500
boosted the mobile sales to sky soaring limits. Over and
above with the STD rates and the call rates reducing day-by-
day and new competitors entering, the mobile market has

129
From the above discussion it is clear that there is huge gap of
digital divide between rural and urban India. However, this gap
varies from State-to-State. In some States like North East,
Uttaranchal, Bihar, Jharkhand, Orissa and Andaman and
Nicobar Island the gap of digital divide is really very
significant, in some other states it is narrow like Punjab,
Maharashtra and Kerala. Added to this, the gap also varies
from technology-to-technology. Some States are not able to
adopt even one technology but others have adopted very
efficiently. In some states overall adoption of technology is
high, but, adoption rate is rural areas is very low. In some cities
like Delhi, Mumbai, Kolkata, Bangalore, Hyderabad, Noida etc,
ICTs adoption rate is very high, whereas in some other cities
flung open high growth prospects.
Globally in terms of mobile subscriptions, India is the
world's second largest wireless market after China. At the end
of June 2008, the total wireless subscribers (GSM12
, CDMA &
WLL (F)) base was 286.86 million (Graph 6).
Figure 6: All India Mobile Subscriber Base
Note: QE stands for Quarter End; E stands for Estimated; Figures in Millions
Source: TRAI
A total of 8.94 million wireless subscribers were added
during the month of June 2008 as against 8.62 million wireless
subscribers added during the month of May 2008. As a result
the overall tele-density rose to 28.33% by end of June 2008
as against 27.59% in May 2008. This growth of the sector can
be clearly attributed to the favourable and improved
regulatory structure, declining handset prices and innovative
pre paid tariff structure. It is expected that by the end of the
year 2010, India will have 500 million mobile phone
subscribers and the break up could be: out of the 500 million
subscribers, 60 million would have video capabilities, 10
million music, 200 million radios, 250 million camera
capabilities, while 250 million will have net connections.
Thus, India has become the fastest growing mobile market
in the world. The only country with more mobile phones than
India is China. But, there is huge divide between mobile
phone users in urban and rural areas. Still, rural mobile
penetration is pretty low-just 4.92 percent (Table 4), though it
has touched double digits in some prosperous states like
Punjab, Kerala and even Himachal Pradesh. However, overall
rural penetration remains far away below the 43.88 percent
mobile density in urban areas.
Table 4: State Wise Mobile Users (Urban and Rural) in India
Top 15 States in Rural Mobile Total Rural Penetration
Terms of Rural Connections Population in Rural Areas
Mobility (in Millions) (in Millions) (in %)
Punjab 2.24 10.83 20.69
Himachal Pradesh 1.0 5.85 17.09
Kerala 2.66 25.03 10.63
Haryana 1.66 16.27 10.20
Gujarat 3.20 34.42 9.31
Tamil Nadu 2.8 32.86 8.52
Andaman & Nicobar Islands 0.02 0.27 8.27
Rajasthan 3.27 48.66 6.72
Maharashtra 3.79 59.67 6.35
Karnataka 2.25 36.56 6.15
Andhra Pradesh 3.27 59.27 5.52
Jammu & Kashmir 0.43 8.24 5.21
West Bengal 3.01 62.48 4.81
Orissa 1.28 33.06 3.88
Uttar Pradesh 4.60 147.00 3.13
Total 35.51 580.47 6.12
All India (Total) 39.46 802.00 4.92
Source: Voice and Data, 2008
But, it is expected that the gap will narrow down in the
coming years. Mobile industry players are eyeing rural India
as their new area of opportunity. Cellular service providers
seem to be answering the call of the wild as they are entering
the so far ignored rural market. Although a huge market in the
urban segment remains tapped, most of the cellular operators
have turned towards Rural India to broaden their base and
reach. So the real growth is expected from this geography in
near future. The low population density in rural areas has
necessitated more towers of higher altitudes raising the costs
further. Rural India, experts say, that the next phase of mobile
phone growth would come from the hinterland.
Determinants of Digital Divide in India
like, Patna, Lucknow, Ahmadabad (even these are the capital of
States)etc, adoption rate is very low. The undeniable fact is
that there is noticeably problem of digital divide in India. It is a
massive problem and a very complex problem too. It is not just
about people who have access and those that do not; it is not
just about haves and have-nots. It is about people becoming
knowers and know-nots; and doers and do-nots; those who
can communicate with the rest of the world and those that
cannot. In this light it is also important to find out some of the
important reasons behind the digital divide in India. There are
many reasons, which can be held responsible for digital divide
in India. Compared to many developing and developed
countries, India's capacity to bridge the digital divide is very

130
poor. Table 5 clearly indicates India's ICTs adoption capacity
at international level.
Table 5: India's ICTs Adoption Capacity among Different Countries (Ranking)
Countries Internet Broadband Computers Communication IT Computers
Users* Subscribers** In Use* Technology Skills Per Capita
India 55 51 12 31 10 55
China 52 41 2 47 54 51
Singapore 13 21 41 1 2 19
Hong Kong - - 29 3 - -
Japan 7 14 3 17 22 21
Korea 12 3 7 20 18 18
Malaysia 29 42 21 30 23 32
USA 10 17 1 12 4 2
UK 14 12 5 24 25 10
Israel 15 15 31 15 3 17
Germany 19 20 4 6 24 13
France 13 6 22 - 20 -
Denmark 28 1 - - - -
Sweden 1 - - - 1 1
Finland - - - - 13 -
Note:*Rank for 2007; **2006; Internet Users and Broadband Subscribers per 1000 inhabitants)
Source: Voice and Data; IMD World Competitiveness Yearbook, Various Issues
It is clear with the table 5 that where India stand at
international level as far as various capabilities to measure
the gap of digital divide is concerned. In case of broadband
subscriber, India has lowest rank of 51 among the selected
countries, same in the case of computer per capita and
Internet users.
As India is a multicultural, multi-language and multi-
religion country with complex socio-economic conditions,
there are six main difficulties in serving rural communities,
each one of which has appeared insurmountable: poverty,
unemployment, age and education.
A Nation Online Survey (NTIA, 2002) found computer and
Internet use correlate with poverty13
(family income),
employment status, and educational attainment. Even age14
is
also a major factor (Lenhart, 2000). Rural India has more than
70 per cent of Indian population. 75% of the poor are in rural
areas, most of them are daily wages, self-employed
householders and landless labourers.
Graph 7: People Below Poverty Line in Rural-Urban India
Note: Percent of population living below poverty line, which is 356.35 rupees or around $7 a month in rural
areas.
The Planning Commission of India uses its own criteria
and has estimated that 27.5% of the population was living
below the poverty line in 2004-2005, down from 51.3% in
1977-1978, and 36% in 1993-1994. Again unemployment rate
is high in the rural India than the urban. Unemployment rate
in agriculture sector is 62 per cent (Planning Commission,
2007) whereas it is only 16 per cent in manufacturing sector,
10 per cent in the services sector and 12 percent in other job
sectors.
The better educated are statistically more likely to have
and use connected PCs. In particular those with college
degrees or higher, are ten times more likely to have access.
Literacy rate is high in the urban India (79.9 percent) whereas
it is only 58.7 percent in the rural India. Overall literacy rate
in India is 64.8 percent. There is also huge difference in male
(75.3 percent) and female literacy rate (53.7 percent).
Another important reason of digital divide in India is
knowledge divide15
. Knowledge divide is directly related with
digital divide. More educated people16
with computer
knowledge and English language are able to access new
technologies. Rural India had 368 million literate people out
of whom only 63 million were found to be English-speaking
as on March 2008. Given the high levels of literacy in rural
India and very low levels of English speaking population and
computer savvy population17
, IMAI , 2008 made a clear case
of content and applications in local languages in order to
ensure higher and faster adoption of internet in rural. Internet
use is primarily associated with a large section of the
English-knowing urban population-though they account for
only 31 per cent of the total urban population of 250 million-
as many, as 84 per cent of them are PC literate. Internet
penetration extended to only 0.6 per cent of the population in
rural areas, with the number of active Internet users
estimated at 3.3 million.
Electricity is the most basic condition for using ICTs and
many studies established that relationship between the level
of electrification and digital divide. Rural India has low
electricity coverage (Table 6). Almost 10 per cent villages of
India have no electricity. Some areas may get 'agricultural
power- two hours in the morning and evening-but even this
is the exceptional. Added to this the cost of electricity is very
high. In this situation, one cannot even think about using
computers and Internet.
Table 6: Reported Status of Rural Electrification (As on March 2004)
States Electrified Electrified States Electrified (%) Electrified
Villages(%) Households(%) Villages(%) Households(%)
Punjab 100.00 91.90 Madhya Pradesh 97.43 70.00
Haryana 100.00 82.90 Rajasthan 98.38 54.70
Gujarat 100.00 80.40 Chhattisgarh 94.00 53.10
Maharashtra 100.00 77.50 WestBengal 83.63 37.50
TamilNadu 100.00 78.20 Orissa 80.15 26.90
Kerala 100.00 70.20 North-East 75.32 33.20
Andhra Pradesh 100.00 67.30 Uttar Pradesh 58.73 31.90
Himachal Pradesh 99.38 94.80 Bihar 50.00 10.30
Karnataka 98.91 78.50 Jharkhand 26.00 24.30
Source: Planning Commission, 2005

131
The digital divide is not simply an issue of access, but
also of obstacles to use ICTs. Various studies (Tracy et al,
2003; Winter and Huff; 1996; Spender, 1997; MacKenzie and
Wajcman, 1985) revealed that even when women and men
have equal access to the internet either through home, work
or school, they may not have the opportunity to access the
Internet or engage in a wide variety of uses. Women have
been online less than men (Kennedy et al, 2003). They have
been online for fewer months and when they do go online,
they spend less time. The gender issue is highly relevant in
the developing countries like India. Women have less
access than men in India due to various social and personal
factors.
Added to these, the growing population, insufficient
funds, affordability18
, and delays in implementation of
government policies and programmes have been some of the
challenges that have lead to unequal development in the
society, which is responsible for digital divide.
Despite India taking significant steps towards acquiring
competence in information and technology, the country is
increasingly getting divided between people who have
access to technology and those who do not. India has
around half a million software developers and is second only
to the US, but 300,000 Indian villages do not have a phone
connection, 70 per cent of the Indian population have no
access to any form of technology, 26 per cent of the
population lies below the poverty line and 35 per cent
illiterate. There are only 5 PCs per 1000 people, 9 mobile lines
per 1000 and 37 fixed lines per 1000 people in India, which is
extremely low when compared to China. The challenge in
front of the Indian government is to bring down this digital
divide and ensure development and adoption of technology.
The government has made encouraging steps to bridge the
gap of digital divide in India. Most of the initiatives19
are
directed towards bridging the gap of rural and urban digital
divide. The Indian government has passed Information
Technology Act, 2000 to make to e-commerce and e-
governance a success story in India. Recognizing the
potential of ubiquitous Broadband service in growth of GDP
and enhancement in quality of life through societal
applications including tele-education, tele-medicine, e-
governance, entertainment as well as employment generation
by way of high-speed access to information and web based
communication. The government has announced Broadband
Policy in October 2004. In the field of international telephony,
India had agreed under the GATS to review its opening up in
2004. In an effort to strike a balance between a purely market
driven system of allocation which would tend to concentrate
on main cities and on the largest and wealthiest customers)
and a social consideration reducing the rural-urban disparity
and improve teledensity in rural areas, the Government of
India had designed a Universal Service Obligation (USO)20
fund . The 'USO' facilitates redistribution of resources to
'unprofitable' rural areas. Complementing this is the access
deficit charge21
(ADC) regime put in place by the Telecom
Regulatory Authority of India to help service-providers
Bridge the gap between cost of supply and provision of
access, especially in rural areas. Since the costs of expansion
Policy forAddressing the Challenges in
Bridging the Digital Divide
and maintenance of rural networks are high compared with
dense urban areas, the USO funding was extended for mobile
services and rural infrastructure in 2006. This was expected
to provide incentives for private operators to break into the
rural market. Recently, the regulator Telecom Regulatory
Authority of India22
(TRAI), in its recommendations on
growth of telecom services in rural India, had prescribed
infrastructure sharing as the solution for improving rural tele-
density. In 2007, the Telecom Regulatory Authority of India
(TRAI) further lowered the Access Deficit Charge (ADC)
rates to push mobile growth in rural areas. With all these
development in place, the ministry of telecommunication
went ahead with a bid call for subsidy for rolling out the
mobile networks in 2.5 lakh villages. Recently Indian
government has decided to push WiMAX technology23
especially for broadband connectivity in rural areas.
The Government has announced the guidelines for Mobile
Number Portability24
(MNP) Service Licence in the country
on 1st August 2008 and has issued a separate Licence for
MNP service w.e.f. 20.03.2009. The government has in a
pioneering decision, decided to auction 3G & BWA spectrum
25
. The broad policy guidelines for 3G & BWA have already
been issued on 1st August 2008 and allotment of spectrum
has been planned through simultaneously ascending e-
auction process by a specialized agency. Apart from the
123.51million fixed and WLL connections on March 2009
provided in the rural areas, 57167 uncovered VPTs have been
provided as on March 2009. Thus, 85% of the villages in
India have been covered by the VPTs. More than 3 lakh
PCOs are also providing community access in the rural areas.
Further, Mobile Gramin Sanchar Sewak Scheme (GSS) - a
mobile Public Call Office (PCO) service is provided at the
doorstep of villagers. At present, 2772 GSSs are covering
12043 villages. Also, to provide Internet service, Sanchar
Dhabas (Internet Kiosks) have been provided in more than
3500 Block Headquarters out of the total 6337 Blocks in the
country. The target of 80 million rural connections by 2010
has already met during year 2008 itself. USOF subsidy
support scheme is also being utilized for sharing wireless
infrastructure in rural areas with about 19,000 towers by 2010.

132
From the above discussion it is revealed that most of the
government initiatives are directed towards developing the
sound telecom infrastructure in the rural area. But, this is
only aspect of addressing the problem of digital divide in
India. Added to this, government should adopt the following
policy to bridge the gap of digital divide in India:
First, as our earlier analysis suggests that relationship
between education and ICT is critical. International evidence
suggest (Pluss, 2004; Rheingold, 2000; Smith, 1998) that
education is strong complement to use of technologies like
Internet and that the relevant education levels are secondary
and tertiary levels as they are expected to upgrade the
national capacity for adaptation and innovation26
. Like many
other developing countries, the main emphasis of Indian
government is boost primary education that yields the higher
rate of social returns. But, to bridge the gap of digital divide
government should introduce some innovative policy
measures to encourage students to go for further education
in the rural areas. The expenditure, which Indian government
is doing for rural education, is far below the level of
satisfaction (Table 7).
Table 7: Expenditure on Education (Rural vs. Urban)
Components Monthly Household Expenditure
of Education (In Rs. At 2004-05 Prices)
Rural Urban
1993-94 2004-05 1993-94 2004-05
Books and Journals 8.9 12.6 21.3 21.7
Newspapers & Periodicals 1.7 2.9 16.7 20.5
Library Charges 0.2 0.1 0.6 0.1
Stationary Articles 7.2 14.9 15.5 21.8
Tuition Fees 7.5 29.1 67.7 118.3
Private Tutor 5.4 10.3 25.8 41.7
Others 6.1 2.8 13.7 5.5
Total Education 37.0 72.7 161.3 227.7
Source: Consumption Expenditure Data from 50th and 61st Rounds of NSS
Table indicates that there is huge difference between
expenditure on education for rural India and urban India.
Prime Minister of India also realized the need to increase the
level of investment in education in rural India. Nevertheless,
one does not need to rely exclusively on the government for
promoting secondary and tertiary education. Many
individuals who would like to take advantage of ICT
opportunities are economically well off and may not need
government financial assistance. For others, improve
availability of education loans from the financial institutions
can be a major held in financing their educational expenses.
In addition to formal education, there is need to promote
technical education in rural India and among the women of
India. Information technologies should be introduced when
(and only when) they constitute the most effective available
way of meeting basic human needs and fulfilling fundamental
human rights. ICT's can have a positive role in development.
But ICT's are neither a panacea nor necessarily the first line
of attack in combating poverty, misery, and injustice. The
utility of ICT's must always be judged against the role they
can play in meeting core human needs.
There is need to promote technologies which are best
suited for the rural India. For example to bridge the gap of
digital divide in its real sense there is need to increase PC
penetration. The reason is very simple; mobile cannot do
everything a PC can. But, mobile are cheaper, more portal and
their extended battery life is suited to regions where access
to electricity is lacking or non-existent. The infrastructure
needed to connect wireless devices to the Internet is easier
and less expensive to build. There are also no learning curve,
no literacy barrier and no technical-support challenges to
overcome. There are no costly and burdensome applications
to load, maintain and update. Thus, mobile is best suited for
the rural people. Therefore, not only government but also
private players should encourage mobile penetration in India.
The main barrier in Indian rural society is the fact that
people do not associate the benefits of the Internet and other
communication technologies with their personal needs,
believing that "computers are not for them". As a result they
behave very passively towards the ICTs. In order to bring
'passive people' to the Internet and ICTs, a broader
understanding of the 'ICTs for everyone' notion has to be
promoted, the motivational barriers being the main barrier to
passive people. To remove this barriers, media productions
such as T.V. serials etc. enjoying great popularity among
'passive people' to be exploited. Only after the broad social
barriers have been removed, more specific services will
become more attractive to the current non-users.
There is need to develop innovative strategies to
address constraints the world's women face in their access to
and use of ICTs. For women, content is directly linked to use.
If women are to be able to make use of the Internet for
income-generation, education or advocacy, there must be
more relevant content. This includes both substance and
languages. Women are producers as well as consumers of
information and knowledge and this is an important area of
support.
Like many other developing countries, in India as well
great attention has been paid to ICT training in the recent
years. Government schools across the country are making
use of the computer literacy programmes funded by giant
transnational companies like Microsoft Corporation and
IBM. In an ironical twist, it is the world's largest technology
companies who have taken it upon themselves to help bridge
the "digital divide" in India. Microsoft Corp, the world's
largest software maker, has signed MoUs with nine
governments around the country, and has committed $20
million to promote computer literacy among disadvantaged
kids in rural areas. The Confederation of Indian Industry
(CII), and the Global Leaders Of Tomorrow (GLT) of the
World Economic Forum (WEF), have launched an initiative
called 'Shiksha India' in December 2001 during the India
Economic Summit primarily to bridge the digital divide and
promote better quality education in Indian Schools. There are
many more examples. It is expected that these project will
undoubtedly play a great role in overcoming the lack of
interest and will help in bridging digital divide. However, the
problem that is likely to arise with the elderly population is
that the newly emerged interest may wane if one sees barriers
rapidly appear, particularly if the language problems inhibits

133
coping with the user interfaces of computers and one's
relatively poorer ability to memorize hampers learning the
necessary operations. Psychological obstacles may be the
unwillingness "to reveal one's lack of skills". Therefore the
effectiveness of the training programmes will have to be
evaluated (to make sure that the trainees have become
convinced Internet users) and improvements made where
necessary.
Promotion of telecommunication infrastructure in the
rural India is the most important condition for bridging the
rural-urban digital divide and Indian government can play a
very significant role in creating the IT infrastructure in the
rural India. A special expenditure should be marked for
bridging the digital divide among the regions. It is clear for
international experience (Rowan et al, 1998; Wahid, 2006;
Mwesige, 2004; Mosse and Sahay, 2003) that bridging the
digital divide is impossible without additional expenditure
from the national budget. India should learn from China. In
China, government has not only invested heavily in the
creation of IT infrastructure, but also in the universal
telecommunication access in rural and remote areas. To
bridge the widening Internet connections gap between rural
and urban areas, the Chinese government has launched
'every village has a phone, 2004' and 'Gold Farm Engineering,
1994' projects which promoted telephone access and Internet
applications in the rural areas.
Linguistic issues are of major policy importance in India,
given the dominance of English language in software and
Internet. The desire to promote cultural diversity is one
reason behind interest in linguistic issues, but so is the
avoidance of social exclusion among non-English speaking
population of India. Hence, these matters are critical to
various aspects of digital divide. How can they be
addressed? One roundtable example came from New Zealand,
where language especially Maori-is a prominent feature of
political, cultural and educational life. The New Zealand web
portal for teachers is bi-lingual, with the Maori contents
presented before the English version. As far as provision for
early childhood learning is concerned, there is Maori ICT
network across different centres, characterized by strong
focus on family and inter-generational learning. It would be
useful to compile similar examples from other communities
and countries in policy framework.
Further, there is need for greater resources and investment
by the private sector; as funds from governments and
developed countries in implementing the ICT projects have
been on the decline due to budget constraints and global
economic slowdown. Last but not the least, with the effective
deployment of ICT applications in the core areas of
education, healthcare, and connectivity for redressing the
grievances of the people in the countryside, the digital divide
can be narrowed as wireless and satellite links have made
them economical and affordable.
ConcludingRemarks
The explosive development of ICT, its applications, and the
emergence of a global information society are changing the
way people live, learn, work and interact. Enhanced access to
knowledge is rapidly becoming a potent tool for empowering
the people and communities in their quest for new
opportunities, dignity and a better life. The divide between
technology's haves and have-nots threatens to exacerbate the
gaps between the rich and poor, within and among countries.
Unfortunately, in India all people have access to the Internet
and ICT, and an amazingly large number of people especially
from the rural areas does not have abilities to use the ICTs in a
proper way and, therefore cannot draw the advantages from its
usage. The issues of "digital divide is posing a herculean task
before the Government of India to provide the maximum
benefits to the stake holders. However, some IT experts
believe that digital divide is vanishing myth from India. But,
the present paper clearly highlights the problems of digital
divide in rural India. Added to this, the paper revealed that the
problems of digital divide also exist within and among the
various States of India. While some people are rich and have
many resources, others do not. The educational system of
India also has been slow to achieve the set target framed by
various commissions and committees and schemes launched
from time to time. The lack of sound ICT strategies and
policies in India is the main cause of these troubles. Added to
this, Inadequate Internet and telephone connectivity to India's
rural areas, where more than 70 percent of India's population
lives, is a key challenge for a number of government agencies,
NGOs (non-government organizations), and multilateral aid
agencies. The corporate sector too is discovering that
bridging this digital divide could translate into new market
opportunities. Therefore, obstacles such as illiteracy, lack of
skills, and infrastructures in rural areas must be tackled if India
is to diminish the gap of digital divide. At the government
front, it should put thrust towards: connectivity provision,
content creation, capacity augmentation, core technologies
creation and exploitation, cost reduction, competence building,
community participation and commitment to the deprived and
disadvantaged would definitely help in bridging digital divide.
It is evident that many projects have failed to address to
bridge of the gap between rural and urban India. In order to
increase the benefits of its projects for women, who constitute
a huge mass of people; efforts have to be made by the
Government to bridge the "gender digital divide". There is
also need to strengthen the capabilities of local communities
and organizations to create, communicate and exchange their
knowledge, through the use of ICTs.
As far as future of digital divide is concerned in India, it is
really very difficult to predict it. But, it is true that the present
situation in India is not alarming (if not highly satisfactory).
The gap of digital divide is getting narrower. It is expected
the government policies and public private partnership will
help in bridging the digital divide. But, it is not possible to
completely bridge the gap of digital divide in India, as
gender, age; culture, language, sex, etc. are all fundamental
components that often affect daily activities and experiences
including the virtual world.

134
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Acknowledgment
While bearing full responsibility for any mistakes, I wish to thank Prof.
L. N. Dahiya; Prof. S. D. Vashistha and Richard Nyangosi for reading
the earlier versions of this paper and making a number of helpful
comments and constructive criticisms. I also thank the comments and
suggestions of anonymous referees, which were also of great
importance. However, I am solely responsible for all the remaining
errors and inadequacy.

135
Internet, while only 22 percent of British retirees' surf the Web. All youngsters, whether or not they are
numerate or illiterate, appear capable to access the Internet. Professor Richard Rose, the lead
researcher on the project, indicates that the idea of wealth-based divide is wrong. It is all about age
and not so much about social class. Rose's observed pattern of Internet usage is similar across
Western Europe. Russians under 30, for example, are 10 times more likely to surf the Web regularly
than Russians over 60.
15. Usually the concept of digital divide is used to relate the technological aspect of knowledge gap.
16. Literacy rate (2001) in Kerala was 90.86 per cent against 47.00 per cent in Bihar. Life expectancy
at birth (2001-2006) is 71.61 for males and 75 for females in Kerala. In Bihar, it is 65.66 for males
and 64.79 for females. Infant mortality (per 1,000 live births, 2002 provisional data) was only 10 in
Kerala against 61 in Bihar. Birth rate (per 1,000, provisional) is 16.9 in Kerala against 30.9 in Bihar.
Death rate (per 1,000, provisional) is 6.4 in Kerala against 7.9 in Bihar. The differences clearly
indicate that literacy is the key to improvement in quality of life
17. According to I-Cube 2008, a survey jointly undertaken by IMRB International and Internet and
Mobile Association of India, there were 3.3 million active internet users in rural India as on March
2008.
18. "Unfortunately telecom networks are designed for people who can afford to pay around US$35 in
monthly bills, and very few people in the rural areas can afford that," said Ashok Jhunjhunwalla, a
professor at the prestigious Indian Institute of Technology (IIT).
19. For example Microsoft has announced a slew of initiatives to accelerate IT literacy and enable e-
governance to bridge the digital divide in the country. The low-cost device, developed jointly by the
Indian Institute of Technology (IIT), Chennai, and Indian Institute of Science (IISc), Bangalore, for the
human resource development (HRD) ministry, is aimed at bridging the digital divide and making
access to computer literacy affordable to the masses.
20. The Universal Service Support Policy came into effect from 01.04.2002. The guidelines for
universal service support policy were issued by DoT and were placed on the DoT website
www.dot.gov.in on 27th March 2002. Subsequently, the Indian Telegraph (Amendment) Act, 2003
giving statutory status to the Universal Service Obligation Fund (USOF) was passed in December
2003. The Fund is to be utilized exclusively for meeting the Universal Service Obligation by providing
access to telegraph services to people in the rural and remote areas at affordable and reasonable
prices. The USO Fund was established with the fundamental objective of providing access to 'basic'
telegraph services. Subsequently, an Act has been passed on 29.12.2006 as the Indian Telegraph
(Amendment) Act 2006 to amend the Indian Telegraph Act, 1885 to enable provision of all types of
telegraph services.
21. The Telecom Regulatory Authority of India (TRAI) has phased out Access Deficit Charges (ADC)
on domestic calls and slashed ADC on international calls to 50 paise from the present Re 1, effective
April.
22. TRAI's mission is to create and nurture conditions for growth of telecommunications in the
country in a manner and at a pace, which will enable India to play a leading role in emerging global
information society. One of the main objectives of TRAI is to provide a fair and transparent policy
environment, which promotes a level playing field and facilitates fair competition. In pursuance of
above objective TRAI has issued from time to time a large number of regulations, orders and
directives to deal with issues coming before it and provided the required direction to the evolution of
Indian telecom market from a Government owned monopoly to a multi operator multi service open
competitive market.
23. WiMAX stands for Worldwide Interoperability for Microwave Access. It is a telecommunications
technology providing wireless data over long distances in a variety of ways, from point-to-point links
to full mobile cellular type access. It is based on the WirelessMAN (IEEE 802.16) standard. WiMAX is
a highly scalable, long-range system, covering many kilometers using licensed spectrum to deliver a
point-to-point connection to the Internet from an ISP to an end user. WiMAX can be used to provide a
wireless alternative to cable and DSL for broadband access, and to provide high-speed data and
telecommunications services. WiMAX can also be used to Connect many Wi-Fi hotspots with each
other and also to other parts of the Internet.
24. The Department of Telecommunication (DoT) has already issued licences to two global
companies (M/s Syniverse Technologies Pvt. Ltd. and M/s MNP Interconnection Telecom Solutions
India Pvt. Ltd.) for implementing the service. MNP is to be implemented in Delhi, Mumbai,
Maharashtra & Gujarat service areas of Zone - 1 and Kolkata, Tamil Nadu including Chennai, Andhra
Pradesh & Karnataka service areas of Zone - 2 within six months of the award of the licence i.e. by
20.09.2009 and in rest of the service areas within one year of the award of the licence i.e. by
20.03.2010.
25. The 3G will allow telecom companies to offer additional value added services such as high-
resolution video and multimedia services in addition to voice, fax and conventional data services with
high data rate transmission capabilities. BWA will become a predominant platform for broadband roll
out services. It is also an effective tool for undertaking social initiatives of the Government such as e-
education, telemedicine, e-health and e-Governance. Providing affordable broadband, especially to
the suburban and rural communities is the next focus area of the Department. BSNL & MTNL have
already been allotted 3G & BWA spectrum with a view to ensuring early roll out of 3G & WiMax
services in the country. They will pay the same price for the spectrum as discovered through the
auction. While, Honbl'e Prime Minister launched the MTNL's 3G mobile services on the inaugural
function of 'India Telecom 2008' held on 11th December 2008, BSNL launched its countrywide 3G
services from Chennai, in the southern Tamil Nadu state on 22nd February 2009.
26. Much of the Internet based information is textual and in English. In India, significant portion of the
rural population is either illiterate or has an education no higher than the elementary level. Therefore,
a large segment of the Indian rural population may not be able to access and comprehend the web-
based information.
Endnotes
1. Information and communication technologies in an umbrella term which is currently used to refer
to a wide ranges of services (telephony, FAX, Internet etc.), applications (such as distance education
and management information systems etc.), and technologies (anything from old technologies such
as Television to new technologies such a cellular phones), using various types of equipment and
software, often running over telecoms networks.
2. The United Nations the Economic and Social Commission for Asia and Pacific (ESCAP) is the
regional development arm of the United Nations for the Asia-Pacific region. With a membership of 62
Governments, 58 of which are in the region, and a geographical scope that stretches from Turkey in
the west to the Pacific island nation of Kiribati in the east, and from the Russian Federation in the
north to New Zealand in the south, ESCAP is the most comprehensive of the United Nations five
regional commissions.
3. Just about a year prior to the turn of the century, the concept of the digital divide was dramatically
catapulted onto the world stage with disturbingly striking statements such as: "80 percent of the
world's population have never made a phone call;" "There are more telephones in Manhattan than in
all of rural Asia;" and "There are more Internet accounts in London than in all of Africa." About almost
the same time that the dotcom frenzy had reached its height, concern was also being expressed in
different circles that the information revolution was in fact bypassing the vast majority of people
inhabiting planet Earth.
4. According to Ccompaine "the digital divide refers to the perceived gap between those who have
access to the latest information technologies and those who do not".
5. Such gaps have narrowed and in some cases, even reversed over time, but other disparities have
risen. This suggests that: the digital divide is a dynamic concept, which evolves over time; older
technologies tend to be more evenly diffused than newer ones. For example, TV sets are more evenly
distributed than 3G mobile phones; there is not a single divide, but multiple divides: for instance,
within countries, between men and women, between the young and elderly, different regions etc, and
the main factor underlying these divides is differences in wealth, between countries and between
individuals. While disparities in wealth continue to exist, the digital divide will persist.
6. As one can deduce, the concept of the digital divide has changed over time. In the beginning, it
basically referred to connectivity problems (gap in access to use of ICTs). Later, it began to introduce
the concern for the development of capacities and skills required to use ICTs (capacity-building and
education), and finally, there is also reference to the use of integrated resources in the technology.
Thus, the concept of the digital divide basically focuses on three areas: Infrastructure, capacity
building and focus on resource usage.
7. After 1995, the government set up TRAI (Telecom Regulatory Authority of India) which reduced the
interference of Government in deciding tariffs and policy making. The DoT opposed this. The political
powers changed in 1999 and the new government under the leadership of A.B Vajpayee was more
pro-reforms and introduced better liberalization policies. They split DoT in two- one policy maker and
the other service provider (DTS) which was later renamed as BSNL. The proposal of raising the stake
of foreign investors from 49% to 74% was rejected by the opposite political party and leftist thinkers.
Domestic business groups wanted the government to privatize VSNL. Finally in April 2002, the
government decided to cut its stake of 53% to 26% in VSNL and to throw it open for sale to private
enterprises. TATA finally took 25% stake in VSNL. This was a gateway to many foreign investors to get
entry into the Indian Telecom Markets. After March 2000, the government became more liberal in
making policies and issuing licenses to private operators. The government further reduced license
fees for cellular service providers and increased the allowable stake to 74% for foreign companies.
Because of all these factors, the service fees finally reduced and the call costs were cut greatly
enabling every common middle class family in India to afford a cell phone.
8. The number of landline telephones in use for every 100 individuals living within an area. A
teledensity greater than 100 means there are more telephones than people.
9. Whether the country has adequate teledensity commensurate with its development can be best
judged by reference to a table prepared by the United Nations some years ago in which the co-
relation between the per capita income and teledensity was worked out. According to the table, for a
per capita income of $1000 an annum, a teledensity of 3 per cent is considered adequate. So, India
has adequate teledensity, as we have not reached the per capita GDP of $1000 (it is about US$ 400).
10. Active Internet users are those who have used the Internet at least once in the last one month-this
is an internationally accepted benchmark for enumerating Internet users.
11. Short for Code-Division Multiple Access, a digital cellular technology that uses spread-spectrum
techniques. Unlike competing systems, such as GSM, that use TDMA, CDMA does not assign a
specific frequency to each user. Instead, every channel uses the full available spectrum. Individual
conversations are encoded with a pseudo-random digital sequence. CDMA consistently provides
better capacity for voice and data communications than other commercial mobile technologies,
allowing more subscribers to connect at any given time, and it is the common platform on which 3G
technologies are built.
12. Short for Global System for Mobile Communications, one of the leading digital cellular systems.
GSM uses narrowband TDMA, which allows eight simultaneous, calls on the same radio frequency.
GSM was first introduced in 1991. As of the end of 1997, GSM service was available in more than 100
countries and has become the de facto standard in Europe and Asia.
13. Although Indian economy has grown steadily over the last two decades, its growth has been
uneven when comparing different social groups, economic groups, geographic regions, and rural and
urban areas. Between 1999 and 2008, the annualized growth rates for Gujarat (8.8%), Haryana
(8.7%), or Delhi (7.4%) were much higher than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya
Pradesh (3.5%).Poverty rates in rural Orissa (43%) and rural Bihar (41%) are among the world's most
extreme. 80% of Indians live on less than half a dollar a day.
14. The Oxford's research finds that age is the primary factor determining Internet usage patterns in
developed Western countries, not money. Almost 98 percent of students in Britain regularly use the

136
SudhirAggarwal
Senior Vice President and Head
Government initiatives, Sify
What is UID
(Unique Identification)?
In simple terms, it is about allocating a UID number to each Citizen in India. It can be
extended to allocate the UID to each legal migrant at the time of entry into the
Country till the person resides in India.
UID (with whatever the name) is used by the governments of many countries and
it is issued as per their own respective thought process & purposes. Each of them
envisaged and conceptualised UID with a purpose and could extend the same for
other purposes as well. Each Country has developed their own algorithm and
strategy to generate, allocate & maintain their respective UID. Some Countries have
been able to implement successfully, while some have been able to achieve partially.
In fact, partially achieved is as good as not achieved.
Few Countries to name, who have implemented their UID: USA (Social Security
number), People's Republic of China, Republic of China (Taiwan), Singapore (National
Registration Identity Card [NRIC]), Hong Kong, Indonesia, Iran, Islamic Republic of
Iran, Israel, Macau, Malaysia (Identification Card number [IC]), South Korea
(Resident's Registration Number), Thailand, Turkey.
The ways in which such a system is implemented is dependent on the country, but
in most cases, a citizen is issued a number at birth or when they reach a legal age
(typically the age of 18). Noncitizens are issued such numbers when they enter the
country.
Many countries issued such numbers ostensibly for a singular purpose, but over
time, they become a de facto national identification number.
Purpose of UID
The primary purpose of creating and allocating the UID/ Citizen ID is twofold:
Identification of Citizens (also legal migrants, if applicable) against the illegal
migrants into the Country
Using UID for passing-on social and/or economical benefits under various
schemes of GoI (Government of India) to the entitled citizens/ beneficiaries
This can further help identifying Citizens Vs legal migrants on term basis Vs illegal
migrants For some, it might be patriotic reason to hold National-id. In small way, we
need to value and respect the emotions of them.
Government can also, in a small way, track their citizens in terms of their socio-
economic patterns like Taxation. Citizens can use UID to avail various benefits like
healthcare, banking and financial transactions, availing utility services…
In the current context, UID of residents (Citizen Vs Legal Migrants Vs Illegal
Migrants) has become more significant & relevant. Lately, there have been series of
challenges being faced by India like Border security, internal security, Terrorism,
socio-economic benefits to entitled Citizens by Government of India under various
schemes, exercising constitutional right like right to vote; hence, the identification of
citizen has become most significant to effective manage all such acts.
DIGITAL INCLUSION II What is UID (Unique Identification)?

137
Background
There have been series of initiatives tried in the past to
allocate UID for each Citizen. These initiatives and pilots
have been undertaken by different agencies & bodies, using
multiple tools & technologies, with varied objectives &
purposes, basis different databases.
All these initiatives have not been conclusive as they
were conceived and perceived with limited scope,
perspective, and objective. Also possibly these initiatives
were undertaken with select leadership support and
commitment of individuals.
Government of India has recently launched UIDAI
(Unique Identification Authority of India) under the
leadership of Industry legend Shri Nandan Nilekani. Mr.
Nandan has accepted the responsibility to envisage and
conceptualize UID.
UIDAI was set up on 27 January 2009. The initial phase of
the project is expected to cover nine States and four Union
Territories. The UID will be issued to people living in the
coastal villages of Gujarat, Maharashtra, Goa, Karnataka,
Kerala, Tamil Nadu, Andhra Pradesh, Orissa and West
Bengal. The Union Territories of Dadar and Nagar Haveli,
Lakshadweep, Puducherry and Andaman & Nicobar Islands
shall also be covered in this first phase expected to deliver
the identity cards by early 2010. UIDAI is expected to
provide UID to around 60 crores people in 4 to 5 years.
Potential Challenges
'Easier said than done' is quite relevant and applicable in case
of UID. It is a huge task but not because of number of people
involved or geographical spread across the Country or
selection of codification scheme for UID; but it is a marathon
task due some of the reasons like
First and foremost to clearly demystify that challenge of
creating and allocating UID is more of a socio-political
(may be >90%), and technology role is in single digit (<
10%). All the earlier half-hearted attempts on UID
collapsed not due technology, but as they were initiated
without proper background work.
As of date, there are multiple databases (manual or digital
or combination of two) exists in the Country like Passport,
Census, Election Commission, BPL (Below Poverty Line),
Ration card, Driving License, Border area id card, …).
Each of these databases have been created over time with
certain perspective, hence each database is influenced by
certain factors. Hence one of the challenges is to decide
the base database to build UID.
Creating onetime UID database is one challenge, but
managing such a database on continuous basis will be yet
another challenge.
As India has border conditions with various neighbor
countries right from North to South and East to West,
India has a challenge and history of illegal migrants and
pseudo citizens living in India from these countries over
the years. One of the main reasons for illegal migrants
into India is 'India's better socio-economic' status Vs
these Nations.
Yet another challenge and big question: Should the
process of allocating Unique Id be
Centralized or Decentralized?
Top-Down or Bottom-Up?
Different people in the system have their own strong
views and reasons wrt. pros and cons to each model &
approach.
It has been a long standing debate, should Unique Id
card be just Unique Id card or multipurpose ID card? Over
time, there has been opinion to have multi-purpose ID
card covering various identity factors of citizens.
How to identify current illegal migrants and how continue
to track illegal migrants? Identification and isolation of
illegal migrants onetime and on continuous basis will
continue to be a challenge from Border security and
political perspective.
How to allocate and maintain the Unique Id card to the
people, who do not even have roof for themselves; there
is a large population in this category in India. This is a
huge challenge from the perspective of being misused,
accused & abused by power centres. Even in the current
context, there is a massive mafia in the Country managing
the system to mismanage the socio-economic benefits.
One of the challenges would be to control issue of
duplicate/ multiple UID for same individual, esp. in the
current scenario where practically every identity
document (even currency) is duplicated.
UID is expected and envisaged to be the core database to
establish the identity of Citizens (Vs legal/ illegal
migrants). Will UIDAI stand accountable wrt. legality and
authenticity of its data, esp. if some data is found
fraudulent and the said database was created basis
UIDAI database.
As UIDAI database is not expected to be SINGLE
database at Country level for all purposes and rightly so,
i.e. various departments (like passport, transport, BPL,…)
are expected to have their respective databases.
What will be the mechanism to keep UID database and other
databases up-to-date and in sync?
There will be situations, where Citizen Details will be
differential across various databases, hence one of the
challenges would be to establish 'which is the latest data' and
it may differ from citizen to citizen.
The above-mentioned challenges are non-technology.
Tools and Technology will not be a major challenge and
limiting factor in conceptualization of UID; however there
would be few potential Technology challenges as well. Some
of them are articulated as mentioned below:
De-duplication of data as the records of same citizen may
appear differently across databases of same and/or
across departments (like Brahm Prakash Gupta, Brahm P
Gupta, BP Gupta is same name represented differently). At
times, even the name and details of a citizen may exist
differently across databases of same department
(assuming person had stayed in different States at two
point of times)
Existing databases may be available in different template
& formats.

138
Indian language support.
Some of the perceived technology challenges like
managing database size, scalability to suit the growth,
replication requirements, multi-purpose UID card,
Centralized Vs Decentralized databases, … will not be
challenges with current set of available tools and
technologies.
The debate on open source Vs commercial products may
exist for some time; however this shall primarily get
addressed by the choice of final solution selected by UIDAI.
The factors mentioned above primarily depend upon the
solution architecture and other technical aspects.
Implementation Model
There could be two models for creating and allocating
Unique Id, i.e. Evolutionary or revolutionary. In case of
India, it has to be revolutionary, yet evolutionary in
nature as it will evolve over time through various
iterations; Had this task been done immediately post
independence, it could have been evolutionary; but in
current times, it has to revolutionary still evolutionary.
Another critical discussion point is should the process of
allocating Unique Id be Top down or Bottom up. There
are merits and limitations of both models, but it needs to
be evaluated very carefully and be monitored closely.
Some of the CSF (Critical Success Factors)
As mentioned above, 'easier said than done' is quite much
applicable here, on the same lines, there are set of things
which must go right to ensure the success. In another words,
if some of these factors are taken care of pro-actively during
evolution of UIDAI, certain challenges can be minimized (if
not eliminated).
First and foremost, UIDAI (Unique Identification
Authority of India) must run as an independent
autonomous body and be independent of political
structure. It must have endorsement and support of
political setup beyond party in power, but outside the
clutches of political system. Even the required political
involvement shall be on merit and qualification, and not
basis current position/ portfolio.
At times active support of political setup can certainly
ensure the required push, but it would be significantly
important to draw thin line between support and
intervention/ influence. The political support shall not touch
with the independence and autonomy of UIDAI.
As it would be required for UIDAI to operate in
revolutionary manner and still be evolutionary in nature,
one of the most critical success factors would be to
regularly and periodically review the provisions and
progress. It may require changes, amendments, course
correction during evolutionary process; it must be
deliberated and supported within required timeframe to
ensure implementation with minimum limitations and
challenges. UIDAI must setup an effective feedback
mechanism such that UIDAI do incorporate feedback, but
does not get carried away by varied inputs. UIDAI may
face the situations of contradictions and clash of
interests, but those would be test situations for UIDAI.
Continuous effective & meaningful legislative and
judiciary support would be among the key critical success
factors. In current context, judiciary system itself is
overdue for reforms for its effectiveness and result-
oriented. Legislative steps have been triggered, but
effective judiciary support will be a BIG MUST!
The process to keep UID database up-to-date and the
process of implementing UID as the mother database of
all databases across various agencies would be yet
another challenges. Even one time synchronisation of
departmental databases with UID would be a huge
challenge. Subsequently on-going synchronisation of
various databases with UID and vis-versa would be yet
another challenge.
Not too sure, but UIDAI may require to interact and
interface closely with various industry representative
institutions like Assocham, CII. This could be one
mechanism to bring Industry on board with the caution to
restrict the influence and interests of the specific industry
players.
There is one factor little outside the scope of allocating
and managing Unique Id, but very critical to make UID
meaningful, i.e. mandating accumulation of funds across
socioeconomic schemes into one fund and disbursement
around UID
In the current form UID database is expected to serve the
disbursement of socio-economic benefits (other than
identity for the Citizens) and serve other political agenda.
If so, the interested parties will be too many and
complications for creating UID number could be too
many. Right at conceptualisation, there will too many
interested parties to ensure that their interest is served in
basic design.
One thought: would it be a good idea to implement creating
& issuing UID in two phases:
Step I: Create and allocate UID for each Citizen with the
sole objective to identify each citizen
Step II: Link socio-economic benefits to UID in gradual
and/or revolutionary manner
This is to ensure that the job of identifying and allocating
UID for citizens can be completed without too many
interested parties influencing right in the beginning. This will
also give breathing time for other socio-economic schemes to
align with UID database.
It would be quite critical to implement and rollout the
project within given timelines, but the entire process shall
not be hurried up to meet the deadlines and compromise
on fundamentals as any error & omission would have far-
reaching implications. All throughout, it would be
absolutely critical to remember that UID has impact and
implications from Internal and Border security
perspective.
Last but certainly not the least in any manner, UID has to
be declared under ZERO tolerance Zone. Again easier
than done, but this will be one the most difficult, but
significant and equally critical requirements. This cannot
be achieved without absolute commitment of top

139
leadership and till it is run like an absolutely independent
autonomous body in all respects and free from any kind
of FUD (Fear, Uncertainty, Doubt).
The word 'absolutely' is used here repeatedly, just to reiterate
absolutely means 100%.
Backgroundandsupporting
information
Legalamendmentsmadetofacilitatetheproject
The Citizenship Act, 1955, has been amended and now a
specific section on registration of citizens & issuing cards
has been included.
In addition the Citizenship (Registration of Citizens and
Issue of National Identity Cards) Rules, 2003 has been
notified in the Government of India Gazette Vide GSR No.
937(E) dated:-10 December, 2003.
Important amendments to the provisions of the
Citizenship Act, 1955
Section14A
(1) The Central Government may compulsorily register every
citizen of India and issue national identity card to him.
(2) The Central Government may maintain a National Register
of Indian Citizens and for that purpose establish a
National Registration Authority.
(3) On and from the date of commencement of the Citizenship
(Amendment) Act, 2003, the Registrar General, India,
appointed under sub-section (1) of section 3 of the
Registration of Births and Deaths Act, 1969 shall act as
the National Registration Authority and he shall function
as the Registrar General of Citizen Registration.
(4) The Central Government may appoint such other officers
and staff as may be required to assist the Registrar
General of Citizen Registration in discharging his
functions and responsibilities.
(5) The procedure to be followed in compulsory registration
of the citizens of India shall be such as may be
prescribed.
In sub-section(2) of section 18 (ia) has been inserted after
clause (i) the procedure to be followed in compulsory
registration of the citizens of India under sub-section (5) of
section 14A;
In sub-section (3) of section 18 the following proviso has
been inserted "PROVIDED that any rule made in respect of a
matter specified in clause (ia) of sub-section (2) may provide
that a breach thereof shall be punishable with imprisonment
for a term which may extend to three months, or with fine
which may extend to five thousand rupees, or with
both".DDWDW
Source: http://en.wikipedia.org/wiki/Multipurpose_National_Identity_CardMultipurpose National
Identity Card
Source: http://en.wikipedia.org/wiki/Multipurpose_National_Identity_Card http://en.wikipedia.org/wiki/
File:Linking-NIN.gif

140
Rajesh Kumar
Scientist, DSIR
Ministry. of Science &Technology
Anusandhan Bhawan, 2 Rafi
Marg
New Delhi 110001
Scientific Infrastructure
for Inclusive Growth
Globalisation of trade and investment demands that countries upgrade their
technological capabilities as a source of competitive advantage. The era in which
country like India's development was defined largely as a matter for discourse is
coming to an end. The traditional focus on relief and emergency activities is being
replaced by new focus on competence-building to enable India transition from
developing to developed country. With intervention of science, more attention is
being paid to investment in people and infrastructure rather than simply provide
short-term palliatives aimed at reducing the visible symptoms of low levels of
economic productivity.
Globalisation, with the intervention of information communication technology
(ICT), is connecting the hither to unconnected Geographies, Nations and
Communities. Internationally, awareness levels are now much higher about natural
foods, organically cultivated and processed fruit products and the market has grown
23 times in the past 5 years. Western countries are enthusiastic to give fair trade to
the primary producers through fair trade buyer seller linkage with premium that
should help the primary producers better their quality of lives.
The major objective of Indian scientific infrastructure deployment is to providing
opportunities to motivated scientists and field level workers to take up action
oriented and location specific projects aiming towards socio-economic upliftment of
poor and disadvantaged sections of the society through appropriate science and
technology interventions especially in the rural areas. The Indian government plan
scheme namely Bharat Nirman and National Rural Employment guarantee Act
(NREGA) are the flagship programme for the inclusive growth. Bharat Nirman plan is
time bound for 4 financial years 2005-2009 in the areas of irrigation, road, rural
housing, rural water supply, rural electrification and rural telecommunication
connectivity with specific targets.
These flagship schemes are mainly for creation of infrastructure in the rural
network with integration of other plan schemes run by other ministries. Department of
Science & Technology has been working under its plan scheme 'Science For Equity
Empowerment and Development (SEED)' with target mission on "Working for
technological empowerment and sustainable livelihoods at the grass root levels".
Council of Scientific and Industrial Research (CSIR) have recently launched CSIR-800
to provide "scientific & industrial R&D that maximises the economic, environmental
and societal benefits for the 800 Million people of India, who are at the bottom of the
pyramid of quality of life". The ministry of health, rural development and agriculture
are also working on collaborative projects by their scientist with other agencies for
diffusion of technologies. In the following pages, the efforts are to explore the steps
initiated by Indian government, specifically to strengthen scientific infrastructure as
to reach out masses for benefit sharing on technologies.
Indian science main emphasis science, technology and innovation capacity in
order to make demonstrable progress in achieving the Millennium Development Goals
(MDGs) and also target through India vision 2020. These programmes attention to
The Author, Rajesh Kumar, is Scientist with Department of
Scientific & Industrial Research (DSIR) and Ph.D student of
IIT Delhi. The author is associated with Soleckshaw project
and responsible for commercialization inclusive financial
intervention for societal impact. The author sincerely
acknowledge CSIR and CMERI particularly Prof. Samir
K.Brahmachari, DG, CSIR for his genesis & continuous
encouragement and Prof. Biswas, Director CMERI, who
encouraged the development of different variant of
Soleckshaw provide sustainable vehicle to different
segment of people, to fulfill implied need of transport
system. This article is the result of the experience gained
during development of Soleckshaw and transfers the
technology to the people domain. The author is thankful to
Dr. Arun Agarwal and Dr. Saravanan for sharing their work to
include in the article.
DIGITAL INCLUSION II Scientific Infrastructure for Inclusive Growth

141
achieve through raise productivity, wealth, and standard of
living by developing new; competitive economic activities to
serve local regional, and global markets; and address social,
economic, and ecological problems specific to India.
Through implementation of Indian science policy- 2003, the
government achieved more investment resources into
targeted science development programme reflecting inclusive
growth. Indian Government is in process to release
Innovation policy for more inclusion and benefit sharing for
the unrewarded citizen. The innovation policy will target
building of local science, technology and innovation
capacity, developing Indian for better absorb and adopt
technologies along with developing social solutions for local
problems
Scientific infrastructure for inclusive growth enables one
and all to share the benefit from scientific and industrial
growth, which may results from the national laboratories,
academic & research institute and traditional science
throughout the geographical map. The main deliverables in
implementing this infrastructure are improved life style, better
healthcare, equalization of education, water & food security,
road, electricity and economic empowerment through
entrepreneurship.
The countries resources deployment intention reflected
from the percentage of gross national product (GNP), which
has risen above 0.9% for research & development, during
financial year 2007-08, total amounting Rs. 377779 million.
The R&D expenditure figure indicate the growth of science
among formal set up in India and for inclusive growth of
country through scientific intervention need multifold
expenditure on conversion of science in technologies and
diffusion among the end user.
The country has different approach to develop capacity
around specific problem. Take the example of 'Soleckshaw' ,
solar power assisted motorized rickshaw which reduced the
drudgery to puller, exploiting green energy. To make this
happen, S&T capacity is needed at various points; scientists
to develop technologies, engineer to manufacture vehicle
and rickshaw driver to ride new technology vehicle. The
Soleckshaw business plan is under preparation at Indian
school of Business, Hyderabad with and without
intervention from government and spread of technology for
inclusive growth.
InitiativeoninclusionfromCouncilofScientific&
IndustrialResearch(CSIR)
CSIR-800 is a flagship programme of CSIR launched to
provide scientific & industrial R&D that maximises the
economic, environmental and societal benefits for the 800
Million people of India, who are at the bottom of the pyramid
of quality of life. S&T Inclusion Mission of CSIR -800 to
increase per capita income by Rs. 15/- per day
(Approximately US$ 110 per year) through S&T
interventions. The indicator for Indian economy to target
family of 5 members Rs 75/- per day per family. The initiatives
taken in this direction are -
Affordable Health
Potable Water
Sustainable Energy
Secondary Agro & Food Processing
Low-cost Housing
Waste to Wealth
IT Intervention for Improving Quality Life
The following contents give insight into CSIR success to
implement of 'Soleckshaw' programme for inclusive growth.
Soleckshaw -Sustainable Energy and Affordable Health
The survey conducted by Indian Council of Medical
Research (ICMR) on rickshaw puller to study tuberculosis
(TB) disease, highlights shady picture of the spread of
disease due to high drudgery and low intake calories. CSIR
recognized that the rickshaws in use leave much to be
desired in terms of efficiency, ergonomics and aesthetics.
This is hardly amazing considering that the design has
scarcely changed since it was introduced in India, without
sharing the benefit scientific research. CMERI, Durgapur
organized a workshop with participants from local city, plying
rickshaw to fulfil there daily needs. Therefore actual rickshaw
pullers were invited to submit their wish list for a better
rickshaw.
The following common points emerged:
Provision for motorized assistance for haulage,
Brakes on both front and rear wheel
Larger tread width with better tyre
Reduction of rickshaw deadweight
Protective cover above the puller's head
Energy efficiency through better designs of controllers
The existing rickshaws design results from low scientific
input and without considerations of design engineering on
mechanical propulsion system, driver seat, wheel alignment,
load sharing on front and rear wheel, pulling /pushing force
and the drudgery bear by the rickshaw puller. The
conventional poorly design impact on life style of a rickshaw
puller and takes a heavy toll on the health of a rickshaw
puller.
Indian rickshaw era, start with the invention of Kolkata
model in 1920 by fixing cycle wheel in the front with a pedal,
in place of human pull and the existing cycle rickshaw has
hardly changed. The present design without any gearing and
the mechanical advantage of the pedal is very poor. Hence
the rickshaw puller has to work very hard while climbing
even a slight slope and this is very common sight is of the
rickshaw puller getting down and pulling on foot the
rickshaw with passengers. The braking system is also very
poor with only front brakes on the rickshaw. Thus when
going downhill at high speeds sudden braking produces a
catapult affects which results in overturning of the rickshaw.
Similarly the seating arrangement is very uncomfortable and
the aerodynamic drag of the system is very high. It is
therefore humanly degrading to pull the existing inefficient
cycle rickshaw. Yet because of poverty and no other source
of income, migrant labourers do become rickshaw pullers and
suffer adverse consequences to their health.
In India, presently the rickshaw manufacturing is an
unorganized and low technology industry segment, without
quality standard. The rickshaw design is available in different
variants and these design changes with every city.
Soleckshaw Era eminence after assessing needs to improve

142
the existing rickshaw to make it user friendly and bring
quality control in its manufacture.
The rickshaw to Soleckshaw Era started in India in the
start of 21st century and many scientist, technologist are
working on improved design of rickshaw. The major work is
undertaken by different IITs, engineering laboratory,
engineering college and many NGO like NARI. The cycle's
maximus emerge as one of the world leader in innovation on
rickshaw for different variant covering the different
application. The modular designs are highly manoeuvrable,
large and variant capacity, powerful braking on all wheel,
extremely reliable heavy duty tyres, excellent rider visibility
and safety of driver & passenger.
CSIR Soleckshaw vision and achievement:
High Science for deprived 800M Indians
To reduce human drudgery
Mass popularization of zero carbon vehicles
Business Model for Designer, Manufacturer, Driver, VC
Value engineering for
Affordable and
Sustainable 'Soleckshaw'
SensitizationaboutSocietalneedfor'Soleckshaw'
Excessive levels of pollution manifest in most of cities and
towns in India. It primarily owes its origin to air and noise
pollution caused by transport vehicles, a large majority of
which are two and three-wheelers powered by diesel or
petrol. A conservative estimate puts their number close to 25
million, and even this is growing annually at an alarming rate
of about 18%. These vehicles are not only affecting
adversely people's health through the emission of noxious
fumes, but are also consuming huge quantity of petrol and
diesel, thereby negatively influencing the nation's foreign
exchange balance.
In order to obviate these detrimental factors, it is essential
that India devises a policy and means to contain this through
at first partial, and then total replacement of the offending
vehicles with environmentally sound means of transport. The
common 'rickshaw', which is found in large numbers in any
part of the country, perhaps constitutes the ideal choice for
providing this solution. Systematic introduction of
'rickshaws' or their various human powered variants
(Pedicabs) is expected to have four major societal impacts as
under:
1. Systematic Introduction of dual powered (human & solar)
vehicles will help in conserving huge quantities of petroleum
based fuels,
2. Being non-polluting, these will help in controlling
pollution,
3. Widespread dispersion of human powered vehicles will
ensure large scale livelihood for the urban and rural poor, and
4. The measure will help elevating the dignity of human
labour and generate employment for millions of Indian.
However, present design of rickshaws leave much to be
desired in terms of efficiency, ergonomics, ease of driving
and aesthetics. In fact, the design of the existing cycle
rickshaw has hardly changed since it was introduced in
India. In the absence of proper design attention, the present
models remain as inefficient as it was in the early 1920´s. As a
result, the average rickshaw puller suffers from a number of
diseases caused by continued usage.
With the increasing cost of petroleum fuel, interest in
using renewable energy including human power without
drudgery and exhaustion has been renewed, and with it has
been rekindled the interest in developing efficient rickshaws,
or pedicabs as they are currently called, for urban micro
transportation. This scenario has prompted CSIR to design
and promotion of efficient pedal powered, motor assisted
machines through benchmarking, design iterations and on
road trial for introducing these systems in the urban
transportation ecosystem of the nation. The new means of
downtown urban transportation is also being proposed by
CMERI for pollution mitigation and promotion of renewable
energy usage in India. This means, designated 'Soleckshaw',
is basically an optimally designed pedal operated and motor
assisted three-wheeler that is expected to find wide
application in downtown urban transportation and freight.
GenesisonSoleckshaw
To change the lives of pedicab (rickshaw) puller, by reducing
drudgery, with improved design of the vehicle, with
technology intervention. The assignment was given to
country one of the excellent mechanical engineering research
laboratory, Central Mechanical Engineering Research
Institute (CMERI) and the prototype was designed in record
time of less than 6 month by August, 2008. The goal was
given to develop an optimally-designed, pedal-operated and
motor assisted, zero-carbon emission, urban and rural
transport vehicle. Soleckshaw is the flagship program of
CSIR-800 initiative focused on improving the quality of life of
800 million Indians who are at the bottom of the quality of life
pyramid.
CommonFacilityCentrecreateScientific
InfrastructurethroughSelfHelpGroupinNagaland
Nagaland state has its geographical advantage of rich in
natural resources and forest with highest per capita growth
of fruit. The latecomer advantage needs to be captured by

143
developing
states through
target
strategies. The
potential
advantage
consists of
this: a state
arriving late on
industrial
scene is able
to access
advanced
technologies
that have been
developed
elsewhere and put them to business use at lower cost than
advanced firms themselves- sometime at lower cost, and
faster, than the very firms that developed the technologies in
the first place.
Nagaland State is emerging as a force in SHG movement in
NER due to sustained effort by society in rural areas. There
is need to consolidate the gains and the people need a
Resource Centre with common facilities where they can walk
in and find solutions for their livelihoods, social and health
issues.
With this vision, Block level SHG Resource Centre is
planned in every block of total 52 blocks in Nagaland State in
3 years period. The Resource Centre is governed by the
Federation of SHGs in the Block and administered by the line
functionaries and para professionals. The Resources Centre
is proposed to be supported for one year with a sustainable
plan to ultimately self-support by the Federation from the
second year onwards. In three years progressively all the 52
blocks in the State are covered. The activities and services
encompass, capacity building, livelihoods, health services,
processing and marketing. In addition, an amount of Rs.25,
000/- is envisaged as revolving fund grant for each SHG for
livelihood promotion activities. Community Mobilisers will be
the grassroots facilitators involved in formation and
stabilization of groups.
The activities are monitored through carefully designed
CBMS (Community Based Monitoring Systems) and base
line and performance impact studies.
Critical Rating Index will be
developed to select the best
performing centres and will be
awarded. Each centre will develop its
own community centric micro
strategic business plan with
sustainability projections by the end.
India equally is becoming popular
destination very fast for processed
fruits. The fruit production in India
has recorded a growth rate of 3.9%,
whereas the fruit processing sector
has grown at about 20% per annum.
However, the growth rates have been
extensively higher for frozen fruits &
vegetables (121%) and dehydrated fruits & vegetables
(24%).
Block level Canning and Processing centre will be the
common facility centre where the following equipment will be
made available for processing and packaging. The equipment
and hardware are sourced through Government Planned
allocations.
1. Slice cutters and knives
2. Air circulation driers
3. Testers and Brix meters
4. Packaging machinery
5. Pulverisers
6. Grinders
7. Juicers
8. Boiling and cooling equipment
9. Refrigerators
10. Cutting tables and furniture, cup boards
It is common facility centre wherein processing, grading
quality control and packaging activities will be carried out. In
due course mobile training centres shall be introduced
keeping in mind the difficult terrain of the Hill State
Non Governmental Organisation (NGO) support for
InclusiveGrowth-Uttaranchal
Small states like Uttaranchal, with little domestic demand for
technology, developed unique approaches exporting
knowledge creation with excellent outcomes. Developing
states NGO in partnership with government and local
community are working to create technology capacity and
ensure their future in a knowledge- based economy.
Rural women of the hill region are employed in different
activities in crops and livestock enterprise such as sowing,
weeding and hoeing, harvesting, threshing and winnowing,
grass cutting, feeding and mulching of animals, etc. Faming
in the region is regarded as a subsistence activity and use of
purchased input is very low. The major share of farm input is
contributed by family labour (almost exclusively by women
workers) using locally made traditional implements and tools,
household seed and farm yard manure.
This project, supported by department of scientific &
Canning the processed pine apple in the
Processing centre (courtesy Nandi
foundation)
Preparation of tomato puree by beneficiary
group (Courtesy SEED, Uttrakashi)
Shield winning sale by beneficiaries in
Magh Mela (Courtesy SEED)

144
industrial research (DSIR), is implemented for the technology
transfer through training for the development of fruit
processing activities among the selected beneficiaries from
their horticultural produce for market. A total of three
hundred beneficiaries were trained through technology
transfer in semi-processing and preservation of produce for
selling their produce during lean period when fruits are not
available in the market to fetch good prices and for
producing final products like jam, squash, syrups, pickles
etc. for their own consumption and for the market during
tourist season. The beneficiaries of the project have
established one semi and final processing unit in their own
area for processing their own horticultural produce.
The unit established by the beneficiaries providing direct
employment to 25 people and indirect benefits to whole area
as surplus fruits, that left after marketing as raw, are utilized
by this unit and all are getting benefits of it.
During last three fruiting seasons, the beneficiaries
process a total 1500 kg apple, 2500 kg tomato and 500 kg
Rhododendron and produce apple pulp, tomato puree and
rhododendron juice for the supply to other final processing
units and generate the additional economy worth Rs.
1,25,000/-. The income generated from final processed fruit
products amounting to Rs. 45,000/-. Thus, a total of Rs.
1,70,000/- additional income was generated by the beneficiary
group.
A total of 25 person got direct employment through
processing and marketing of the material. Average additional
income was amounting to Rs. 2500/- per season per
beneficiary. By selling the fruits, the farmers, who supply
their produce got additional income and save their resource
from spoilage.
Now another group of 25 beneficiaries is establishing
another small scale semi-processing unit to supply their
horticultural produce for other final processing units already
working in nearby areas.
The inclusive growth of beneficiaries includes additional
income, employment generation and living standard
upliftment through project activities. They are generating
additional income and employment of Rs. 2500/- - 3000/- in
one month fruiting season and through final processing,
round the year employment and income generation. The
entrepreneurship was also developed among the
beneficiaries for marketing. Their living standard is also
uplifted through this activity.
Now organization is trying to link these interested
beneficiaries with small industry department to setup their
own small units and showroom development along the
tourist line for marketing.
ICTApplicationsinArunachalPradesh
India's North-East is endowed with rich natural resources for
development. The average rainfall in the region is the highest
in the country. However, the region has exhibited most
backwardness. The economic upliftment of the entire region
depends, to a large extent, on the progress of agriculture
sector. The non-income poverty in terms of inadequate
information on advanced farm technologies, market
intelligence and rural development schemes produces the
income poverty in
the region. The
limited technical
manpower, lack of
transport and
communication
facilities,
inadequate
financial support
to the technology
transfer and less
infrastructure
facility creates
huge technological
gap among rural
tribal farming
community.
Further, difficult
terrain,
mountainous
periphery and
frequent natural
disasters hinder
the development of
the region. Due to
non-availability of
improved
technological information to the tribal farmers, agriculture
exhibits low unstable productivity, which makes agriculture
become less remunerative and also creates food insecurity
problem. In this existing scenario, it is expected that
application of Information and Communication Technologies
(ICTs) in agricultural information provision to the tribal
farming community of Arunachal Pradesh State of North -
East India will helps to foster the socio economic
empowerment of tribal farming community.
Hence, e-Arik ("Arik" means "Agriculture" in the Adi
tribal dialect of Arunachal Pradesh State), a research project
supported by DSIR to experiment the application of ICTs in
agricultural extension services provision and also to measure
its impact on the tribal farmers has been implemented in
"Yagrung" village of East Siang District of Arunachal
Pradesh State. This two years research project is funded by
the Department of Scientific and Industrial Research (DSIR),
Ministry of Science and Technology, Government of India to
Central Agriculture University (CAU), Imphal. The project
proposes single window system for the improved agricultural
information and technology delivery to the tribal farmers by
using computer, internet, phone, radio and television. The
project also aims to provide all time expert consultation on
agriculture production, protection and marketing aspects
through ICTs. The project also promises to provide the
training on ICTs and capacity building among the rural tribal
children, youth, women and others.
Farmer facilitator sharing crop
condition using mobile phone
Computer trainees at e-Arik village
knowledge centre at Yagrung village

145
Summary
The government mechanism has been initiated to exploit the natural
resources and tradition knowledge of different community across the
map, as scientific tool for the inclusive growth. Indian conservationists,
scientists and rural communities have joined hands to promote
conservation through science and technology. The scientist and
government institution hold discussion at various platforms about the
impact of using ICTs such as cell phones, global information system
(GIS), global positioning system (GPS), cameras, and two way radio
to promote conservation and development. The flagship programme
like Bharat Nirman and NREGA has been engineered for the sharing
of scientific infrastructure and R&D outcome in the national
laboratories.
Reference
1. Technology Review: a MIT magazine on Innovation, July, 2009
2. Infrastructure Development, 'Yojana', Vol. 53, July, 2009
3. Agenda for inclusive growth, 'Yojana' Vol. 53, August, 2009
4. Research and Development statistics at a glance 2007-08, DST, GOI
5. India Development Policy Review: Inclusive Growth and Service delivery:
Building on India's Success
http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/DPR_overview.pdf
6. Development Outreach, January, 2007, published by World Bank Institute
7. World Bank, Inclusive Growth Consultations - India, New Delhi, 29 August, 2007
http://go.worldbank.org/DKVN94JT50
8. Project proposal on 'Soleckshaw'by CMERI, Durgapur to CSIR
9. Annual report 2007-08 of Nandi Foundation, Hyderabad

146
SNMukhopadhyay,
Chief Operating officer,
Infrastructure Leasing &
Financial Services,
PhD Student, IIT Kanpur.
Prof. Jayanta Chatterjee
Industrial & Management
Engineering Department
IIT Kanpur
Introduction
The challenges faced by the government of India today are quite steep. The dependency of a very
high proportion (about 60%) of people on agriculture, which is even today dependent on the
monsoons, world's highest number of illiterates, poor health infrastructure, widely spread corruption
with 170 or more districts having only a token presence of government are just to name a few.
India being the largest democracy in the world faces growing difficulty in making its democracy
inclusive and transparent. India, with people from diverse language, caste and creed, rich and
poor, rural and urban, literate and illiterate, makes it a formidable task to make the democracy all-
inclusive.
All these challenges at the backdrop of growing recognition of India as a potential superpower,
makes it imperative for the government and its services to be effective, efficient, transparent and
reliable to really live up to the expectations. These are the objectives arrived in this paper based
on literature review, past research and case study in the area of good Governance. There is no
argument about the fact that Information and Communication Technology (ICT) can really change
the way the government provides its services to its citizens. There is no denying the fact that use
of ICT can really enhance and improve the functioning of the government making it more efficient
and transparent. But can using the technology alone, really make the government services reach
the masses that have remained un-served until now? In other words, can the technology really
make the government services effective? Can the technology alone make the people trust and
make them rely on the government services? In other words, can technology make the government
services reliable? These are some of the questions being addressed in this report. The objective
of this paper is to find out the importance of the three pillars- People, Process and Technology -
for the realisation of the goal of e-Governance using the ICT.
The goal of e-Governance as defined by the Government of India is:
"Make all Government services accessible to the common man in his locality, through common
service delivery outlets and ensure efficiency, transparency & reliability of such services at
affordable costs to realise the basic needs of the common man".
A hierarchy of the goal, objectives and implementation steps for each objective of e-Governance
was created based on literature study and field study and then a survey was conducted among the
various stakeholders to assign importance to each objective and implementation steps. The
survey results were then incorporated and calculations were made to arrive at the final priorities
for People, Process and Technology.
Assessment of
Citizen Empowerment
Under E-governance Using
Analytical Hierarchy Process
Case Study ‘Jankari’ A RTI Call Centre In Bihar
DIGITAL INCLUSION II Assessment of Citizen Empowerment – Under E-governance Using Analytical Hierarchy Process

147
Literature Review
Within the past few years, there has been much debate (e.g.
Accenture 2009, Asgarkhani 2004, Heeks 1999, Nath 2003 and
Reschenthaler et al 1996) over the effectiveness of e-Service
in the public sector. Technology is undoubtedly the
backbone of the infrastructure that is required to support
electronic government initiatives. Yet there is a danger in
placing too much emphasis on the technology aspect of e-
Services. What's more, political and financial support for e-
Service projects can be accompanied by political rhetoric and
hype. The potential benefits of e-Technologies in the public
sector can only materialise when they are introduced as part
of a well-planned and properly supported social, cultural and
political environment (Asgarkhani M 2005).Just placing a
technological infrastructure in place without the required
support will never result in realisation of the benefits and the
cost of such setups could never be justified.
Further, to fulfil the development needs of ICT projects,
those involved in the design, implementation and
management of IT-related projects and systems in the
developing countries must improve their capacity to address
the specific contextual characteristics of the organisation,
sector, country or region within which their work is located
(Avgerou and Walsham 2000). Without the specific
contextual characteristics, such ICT projects will fail to gain
the confidence of the beneficiaries and will not be reliable
enough to gain the popularity to accrue the true benefits of
such projects. So, clearly the literature suggests that though
it is relatively easy to make the government services efficient
and transparent using e- Technologies, but clearly without
the services being effective and reliable the true benefits e-
Services could never be realised. Gupta &Jana (2003)
suggested a flexible framework to select appropriate strategy
to measure the tangible and intangible benefits of e-
Government.' When the e-Government literature is reviewed,
it is understood that a numerical tool for the evaluation of the
criteria and the strategies is needed' (Kahraman et al 2006).
CASE STUDY
Jankari-RTI Call Center In
Bihar, India
Bihar government's e-Governance 'Jankari' project has
bagged the National award for e-Governance. This Jankari
project envisages Call Centre facility under Right to
Information Act (RTI). This award has been given away on
February 12, 2009 at the national conference on e-
Governance in Goa, by the Department of Administrative
Reforms and Public Grievances, Ministry of Personnel, Public
Grievances and Pensions, Government of India.
Bihar is the first state to start the Jankari type citizen
facilitation centre, which enables people living in remote
corners of the state to make applications under RTI through a
telephone call. The operators receiving the calls in call
centres draft the applications under RTI and send it to the
public authorities for providing requisite information to
applicants.
RighttoInformation-generalPerspective
Since early 1990's, civil society and grassroots level Non
Governmental Organisations (NGOs) in India have been
demanding a legislative framework for right to information.
Such movement resulted in Government of India passing the
Freedom of Information Act, 2002(FOI Act).It was rather
unfortunate that the Act never came into force and
consequently citizens could not exercise their rights under
this new law. By 2004 the United Progressive Alliance (UPA)
Government came into power with promise to make the right
to information more "progressive, participatory and
meaningful". The National Advisory Council (NAC) set up
by the UPA Government for oversight of its promises
included prominent personalities of the National Campaign
for People's Right to Information (NCPRI).
By August 2004, NAC tabled a set of recommendations to
Government of India with due consideration of submissions
received from Commonwealth Human Rights Initiative
(CHRI), NCPRI and some active civil society groups, seeking
amendment to FOI Act. By end December, 2004 the Right to
Information Bill 2004 introduced in the Parliament
incorporated many of the recommendations of NAC. The Bill
sailed through rather quickly from Lok Sabha to Rajya Sabha
before the Right to Information Act, 2005 received
presidential assent on June15, 2005. While some provisions
came into force immediately, the RTI Act became fully
operational and effective from October 12, 2005.
The RTI Act has incorporated penal provision for not
providing Government held information to the public within
stipulated time from receiving the request. In fact, imposition
of such penalty for non-performance of civil servants has
become quite common under the RTI Act.
Challenges Of Rti Service
Provisioning
Service Provider Perspective
InformationArchive and Retrieval
-Under the RTI Act, the citizens can seek information on
functioning of all government bodies in India. From service
organisation perspective, the challenge is to meet citizen-
expectation on a diverse and non-standard query that in
most cases evoke non-standard response on a large canvas
of both service and geographical coverage.
-The RTI Act enables citizens to access diverse range of
information held by public authorities in various forms.
Citizens have recourse under the Act to get hold of 'records'
including any document, manuscript and file; microfilm,
microfiche and facsimile copy of a document; any
reproduction of image or images embodied in such microfilm
and any other material produced by a computer or any other
device. Information under this Act means any material in any
form while deliverables under RTI Act service provisioning is
immensely diverse, non-standard and heterogeneous in
nature the required information archive is equally diverse in
terms of storage medium and the data format
-The Act has been broad based to an extent that the Citizens

148
have right to obtain information in the form of diskettes,
floppies, tapes, video cassettes or in any other electronic
mode or through printouts where such information is stored
in a computer or in any other device. Hence, the service
offering need to provide for multiple media capability.
- RTI service is designed to provide for response on non-
deliverable information because the Act stipulates the
following type of information exempt from disclosure.
SupervisoryIntervention
The aforesaid exemptions are not absolute. In case the
information requested by a citizen is covered in the exempted
list, a public authority may allow access to information, if
public interest in disclosure outweighs the harm to the
protected interests.
Consequently, RTI service organisation to be 'citizen-
centric' needs to provide for 'supervisory intervention' to
meet 'public interest override'.
The RTI Act stipulates all Public Authorities covered
under the law to routinely publish 17 categories of
information on proactive basis on their own, even if no one
has specifically requested such information.
Consequently, while processing service request, the
designated Public Information Officer (PIO) / Assistant
Public Information Officer (APIO) need to determine and
categorise whether the information requested
(i) is available in the office or else transfer the request to
concerned public authority and notify the citizen of such
transfer;
(ii) is in the nature of confidential third party information that
would require consultation with the concerned party before a
decision can be taken; and
(iii) falls under the exempted category and whether there is a
'public interest override'.
Payment Processing
A citizen has to pay the prescribed fees along with the
application. Different fees have been prescribed by the
Centre and the States. Payment of fees can be made by cash
while submitting the application in person to the designated
PIO/ APIO or to the counter directed by the PIO/APIO. In
case the application is sent by post the requisite fees can be
paid by demand drafts, bankers' cheque or money order.
Hence, the service needs to be organised to accept various
modes of payment.
The Act further stipulates that citizens below poverty
line (BPL) do not have to pay any fees against production /
submission of copy of BPL card as a proof. The designated
PIO has to put on record BPL status of the applicant in case
the application is submitted in person.
Citizen Perspective
Transparency
Due to lack of transparency, citizens often are oblivious
or ignorant of the Government decision making process
.Such lack of transparency prevents large section of citizens
and business community to actively participate in the
process of Government functioning leading to tacit
acceptance of ill-advised or impaired decisions. An
appropriate implementation of e- Governance project can
bring higher transparency in Government policy and
processes.-Non - transparency facilitates official graft and
favouritism
User-friendliness
Many citizens cannot fill the requisite form or draft
application. Due to illiteracy, RTI cannot be used by a large
number of citizens.
Many citizens are not aware which Department to
approach for his matter and consequently it is all the more
difficult to file an RTI application. Even if one knows the
Department, there are multiple Public Information Officers
(PIOs) in a Department and it is indeed quite difficult for a
common citizen to know the relevant PIO for his matter.
For an illiterate citizen in remote areas of a state like
Bihar, where many variations of different languages like
Maithili, Bhojpuri, Magahi, Angika etc. are spoken, there was
a need to have an interpreter/ intermediary to facilitate such
applicants in drafting the application in Hindi, Bihar's official
language.
Logistics
Meeting government officials face -to-face and ask for
information in most cases is not an easy experience.
Introducing an opaque level, that of a Facilitation centre,
provides comfort level to the applicants. Sending the
application by post is not always a convenient option as the
applicant is not sure if it would reach its destination in time.
Seeking acknowledgement would mean extra cost
implications.
Payment of Fees
Depositing application fee of Rs.10 is another nightmare.
One has to either go in person to the concerned office to
deposit cash, make a Demand Draft or a postal order. Apart
from a financial implication, it also involves time consuming
process in Bank or post office
With a population of approximately 85 million, Bihar is
spread over an area of 94163 sq km. Many district
headquarters are located more than 200 kilometres away from
the state headquarter, at Patna, which has a repository of
State held Information. Travelling to Patna for submitting an
application also involves money & time.
FilingAppeal
If one does not get "right" information, filling an appeal
is even more complicated and tiring process.

149
Need For Service Innovation RTI Act to be effective
Government and Public Administration (G&PA) need to
promote e-literacy, especially among the poor and
disadvantaged sections of the civil society. To achieve this
objective the issue of accessibility to citizen and civil society
is the first move forward. G&PA as service provider need to
be sensitive to the special requirements of poor physically
challenged and disabled citizens.
To overcome the digital divide and illiteracy incapacities,
Government of Bihar decided to extend the reach of the
service through voice communication over phone line for
generating the service request (RTI applications)..
Appropriate provisioning for monitoring and qualitative
analysis were also put in place.
Bihar Government's RTI Facilitation Centre "JANKARI"
for filing RTI application with the concerned State
government Department works on premium rate (PRI)
services of BSNL.
System designed to enable a citizen wishing to file an
application for seeking any information under RTI Act,
without any hassles of physical movement for purchase of
postal order ( for the requisite RTI application fee of Rs.10/-)
or going to the designated RTI Officer of the concerned
department. The primary and mandatory requirement was to
charge RTI application fee (Rs.10/-) from the citizen without
physical transaction of money. This could be fulfilled with
the help of Bharat Sanchar Nigam Limited's (BSNL) - the
telecom operator- Premium Rate Services. BSNL's Premium
Rate Service is basically a special offering for subscribing
premium services like Doctor's Advice, Fortune Telling, and
Examination Results etc over telephone, on payment of
higher than the normal Call tariff. Later the Premium Service
Provider gets his share of revenue from BSNL consolidated
over a month
QualityAnd Performance Of
GovernmentAnd Public
Administration
RegulatoryChange
The State Government promptly initiated and put in
place the relevant rules to lower the fees for filing first and
second appeal to Rs. 10/- each, to enable e-transactions, to
receive payments through phone call. Executive Orders were
issued and the Facilitation Centre "JAANKARI" was
designated and authorised to receive phone calls from public
at the pre arranged premium rate of Rs. 10/per call (Rupees
ten per call) to take care of the prescribed application fee and
generate RTI application on behalf of the caller.
StateDesignatedAgency
State Government designated agency Beltron facilitated
to have such premium lines of BSNL dial code (155311)
terminated at the Facilitation Centre. In addition to premium
rate call number, another dial code (155310) was assigned as
help line on normal tariff for general enquiry on RTI and
application status etc. Both these numbers have been widely
publicized for public knowledge and awareness building.
AssignmentofFacilitator
Since information requested is likely to vary with each
request it is not easy to identify the relevant PIOs dealing
with the issue, one senior administrative officer was made
available to Facilitation centre to facilitate co-ordination with
PIOs and departmental heads. The official is well versed with
the governmental system and its "Rules of executive
Business" which assigns specific work to a department and
also mentions its delegated powers. This is the first and
unique experiment aimed at RTI empowerment of people.
QualityAnd Performance Of
Technology Infrastructure
To make the RTI Facilitation Centre facility accessible to
every citizen of Bihar from all telephones, special 6 digit code
of level 1 i.e. Dial 155311 has been allotted. A special protocol
was evolved for extending the premium rate services without
involving IN Platform. Premium Rate charge was generated
by the Local/ Trunk Automatic Exchange (TAX) itself. This
required a huge effort in enabling the "RTI Call Centre Code"
in all the main exchanges of Bihar.
In the present network architecture, the RTI Facilitation
Centre Dial Code 155311 (and also the RTI enquiry dial code
155310) has been routed to Patna Tandem Exchange. From
Patna Tandem Exchange all Calls originated throughout
Bihar, are routed to EWSD local exchange, Patna from where
a PRI (Premium Rate Interface) line has been terminated in
RTI Facilitation Centre EPABX,
For all the RTI application filing Calls CDRs (Call Detail
Records) for code dial 155311 are being generated at EWSD
exchange Patna. The Facilitation Centre executives were
trained and sensitized. They were to receive calls and
convert the voice demands into "electronic format",
compatible with RTI, Act.
Key Lessons
1. The variety, scope, complexity and size of e-Governance
projects are very large. Consequently, it is not possible to
develop a single e-Governance service quality assessment
tool that would be applicable to all e-Governance services. It
is therefore imperative to classify e-Governance service
designing into appropriate categories / clusters.
2. Management of Services offering modular outcome /
response to non standard input / query would require a set
of specialised organisational capabilities for providing
comprehensive response or output. Services under this
category would mean delivering value to citizens by
facilitating outcomes citizens want to achieve without the
ownership of costs and risks. e-Governance services like
Right to Information (RTI), Grievance redressal would fall
under this category.

150
The Hierarchy forAnalytical
Hierarchy Process (AHP)
Based on the literature review and the case study the
following hierarchy was created for applying AHP:
Fig -1: Hierarchy for determining priority of People, Process
and Technology for achieving goal of e-Governance
Effective Efficient Transparent Reliable Objectives Priority FinalPriority
People 0.469351346 0.519358973 0.504849075 0.380992816 Effective 0.427226 People 0.464150636
Process 0.275323195 0.249441155 0.256064086 0.319338138 X Efficient 0.221644 = Process 0.277511013
Technology 0.255325459 0.231199872 0.239086839 0.299669047 Transparent 0.119015 Technology 0.258338351
Reliable 0.232115
Table 2: Final calculation of Relative priority of
People, Process and
Technology for
realising the goal
References
1. Asgarkhani, M. (2004) "Digital Government: From Vision to the Reality of Strategy Implementation", Proceedings of the International Conference on e-Governance, Sri Lanka, pp36-46
2. Nath, V. (2003) "Digital Governance", [online] www.cddc.vt.edu/digitalgov/gov-cases.html.
3. Reschenthaler, G.B. and Thompson F. (1996) "The Information Revolution and the New Public Management", Journal of Public Administration Research and Theory, Vol 6, No. 1, pp125-143., 1996.
4. Heeks, R. (1999) Reinventing Government in the Information age: International Practice in IT-enabled Public Sector Reform, Routledge, London, 1999.
5. Accenture (2009) Leadership in Customer Service: Creating Shared Responsibility for Better Outcome
Within past few years there has been a lot of debate over whether
the use of ICT in the public enterprises or government will really
work as it has for the private enterprises. The research done by
many in different countries and the results by some of the recent
government initiatives taken with respect to using ICT for
Governance, clearly establishes this as major challenge. However,
the lesson to be learnt from failure of some of the recent initiatives
clearly is, not to over-rely on technology for solving all the problems.
The fact that people are most important for the success of e-
Technologies in the government stands vindicated by the results
CONCLUSION
SurveyAmong Stakeholders
AHP requires pair-wise comparison among the factors and
then derivation of priority scales. The priority scales are then
synthesised step by step to arrive at the final prioritisation of
the alternatives. The pair-wise comparison and derivation of
the priority scales requires the judgment of all the
stakeholders who are involved. The challenge here was to
get the opinion of the experts as well as any citizen, on the
importance of various objectives and implementation steps
and then to derive the priority scale based on the results. A
survey was created which was distributed using the online
channel and also the manual channel. Based on survey
responses the results were collated to get the final relative
importance of each pair of factors. The pair-wise relative
importance arrived was in turn used to derive the priority
scales for all the factors involved which was used for further
calculation. Following table shows the priority of the
objectives w.r.t. the goal as calculated using the survey
results.
Effective Efficient Transparent Reliable Priorities
Effective 64 123.3622261 229.7396191 117.7970087 0.427226068
Efficient 33.20303248 64 119.188313 61.11277978 0.221643766
Transparent 17.82887957 34.3657855 64 32.81544815 0.119015033
Reliable 34.77168092 67.02362443 124.8192614 64 0.232115133
Table 1: Relative Importance of Objectives w.r.t. Goal
Final Evaluation of Priorities
The table below shows the final synthesis to get the priority
of people, process and technology w.r.t the goal of e-
Governance. After the synthesis the final priority of People,
Process and Technology was arrived.
arrived at by the application of AHP. The result of the AHP distinctly
establishes the domination of people for the success of e-
Governance. People are by far the most important factor and should
be given the due importance for realising the true benefits of e-
technologies. Without giving proper emphasis to the people related
activities and designing them keeping in mind the social, cultural
and political aspects of the country, state, or community involved,
the success of ICT in government sector will remain an illusion.
The example of the ICT initiatives taken by the Government of Bihar
in 'Jankari' is a clear testimony of this conclusion.

151
NithyaV. Raman &
Kalpana Karunakaran
Centre for Development Finance,
IFMR
Chennai, India
Data Gaps in Urban
Informality
Introduction
There has been a recent push to think about how India can create more inclusive cities. As a
result, urban policymakers have begun to think more deeply about urban informality. They have
done so by necessity because so many of the urban poor work in what is known as the informal
economy and live in informal settlements. By some estimates, close to 70% of urban workers work
in the informal sector,1
and 22% of urban residents live in slums,2
which are usually informal
settlements on which residents do not have land tenure. Yet, attempting to plan for urban informality
leaves planners in a difficult situation: a lack of useful data to make decisions.
This is no insignificant or surmountable problem, but a problem that systematically plagues city
planning agencies and planners. Despite a new attention among planners to the importance of
the informal sector,3
the lack of official data leads to an extremely superficial treatment of urban
informality in plan documents.4
Clearly, understanding and documenting informality is a key to
improving the lives and opportunities of a large section of urban residents in India.5
But exactly what
kind of data would help planners to better plan for urban informality?
Re-conceptualizing Urban Informality
Informality is a loosely defined term.6
It refers to different things depending on the
context in which the term is used. In the literature, the conceptualization of urban
informality focuses on one of two things, either the informal economy or informal
residential settlements.7
The first strand, which looks at the informal economy, uses
the nature of the work and size of the workplace or unit to determine formality or
informality. Work that is labour intensive, takes place in unregulated markets and
characterized by low barriers to entry, reliance on indigenous resources and low
levels of capital investment is usually classified as informal sector work.8
Since
informal sector enterprises are usually unregistered, they are not covered by national
enterprise surveys, and household surveys do not ask questions about production.
As a result, researchers continue to grapple with the question of how to accurately
measure the informal sector economy using available statistics and how to classify
and count informal sector workers and enterprises.9
Literature on informality also looks at the question of informal or 'slum'
settlements. Much of this research is concerned with how to define and identify a
slum, how to accurately count numbers of slum residents, and how to improve slum
residents' access to basic services. The lack of a consistent definition of what
constitutes a slum across countries has made it difficult to compare trends over time
and across the world.10
Although informal work and informal settlements closely
overlap - residents who work in the informal sector often live in informal settlements
and vice versa - debates on urban informality rarely make any explicit connections
URBAN DEVELOPMENT II Data Gaps in Urban Informality

152
between the two.11
There is currently inadequate basic data collected about
urban informality in the Indian context, both about informal
sector work and workers and about informal settlements. In
India, as in many other countries, different surveys use
different definitions of informal sector work, which can make
aggregating and comparing data very difficult. For example,
the National Sample Survey Organization counts all
manufacturing units not covered by the Annual Survey of
Industries and all non-public sector service enterprises as
unorganized, while the Directorate General of Employment
and Training counts all establishments employing less than
10 workers as unorganized.12
As for informal settlements in
India, there is no consistent definition of what constitutes a
slum across cities or states, nor is there systematic collection
of this information at the state or city level.13
The Census
began counting slum-dwellers in all Indian cities since 2001,
but these numbers suffer from a number of problems,14
and
sometimes do not tally with city level counts of slum-
dwellers because of definitional differences.15
Thus, the basic
enumeration of urban informal sector workers and of informal
settlements remains inadequate and inconsistent across
India.
It is important to note two things here about data on
urban informality. Firstly, no systematic collection of spatial
data on informal settlements currently takes place in Indian
cities. Secondly, and perhaps more importantly for this paper,
no spatial data, either within India or elsewhere, is
systematically collected on informal workspaces, even
permanent or semi-permanent ones like street vendor stalls in
established market places or neighbourhood based
industries.
Whither Urban Informality
in City Planning?
The paucity of data on the informal sector is reflected in
urban planning, which tends to privilege the needs and
aspirations of the formal economy. According to the Chennai
Master Plan, "the process of modern city planning seeks to
steer market forces in the city…towards citizen welfare and
public good16
." The National Commission on Enterprises in
the Unorganized Sector has estimated that 50% of the
country's GDP comes from the informal sector as a whole,
including agricultural work17
. If planning seeks to improve
the economic development of cities, clearly the informal
economy must be fore grounded.
The primary tools of urban planners to affect economic
development are spatial interventions like zoning laws and
the provision and planning of transportation networks.
These interventions seek to re-configure city spaces with a
view to improving the productivity of formal sector
industries and economic activities. The new Chennai Master
Plan, for example, suggests creating exclusive freight
corridors connecting the port to the central business districts
of Chennai as well as to the National Highway system,18
among other interventions.
Yet, unlike in the case of the formal sector, there are no
spatial interventions planned by city authorities that aim to
enhance the growth, productivity and livelihood-related
requirements of the informal sector. However, cities across
India are making interventions into the informal sector,
primarily by eliminating its traces in the heart of cities. In
Chennai, recent headlines have suggested a crop of
evictions of hutments and street hawkers with more planned
in the coming months.19
The Centre for Development Finance
organized a public consultation for informal sector workers in
the city of Chennai in February 2009 to understand their
needs for a new city development plan. The most emphatic
demand among informal sector workers was an end to
evictions of workers' homes, industries, and shops, a plea to
stay put in informal settlements and workspaces throughout
the city - a spatial demand fuelled by livelihood compulsions.
The research question:
Interfaces between people,
economic activities, and
urban spaces
Our experiences with planning practice at the Centre for
Development Finance suggested that supplementing existing
data about urban informality is a necessary, but not sufficient
condition, to incorporate the informal sector's needs and
aspirations within city planning. While the literature on
informality - both conceptual and empirical - has focused on
the size of the informal economy and workforce and the
nature of informal settlements, as already discussed, it has
not sufficiently engaged with the challenge of documenting
the organization and movement of informal sector workers
across city spaces, even though such documentation exists
in some form for the formal sector. This paper argues that we
need data that capture the dynamic interfaces between city
spaces and informal sector workers, interfaces that are
shown to be central to the economics and conditions of
informal sector work.
This paper makes this argument by using detailed
interviews with key organizers of informal sector workers in
Chennai from the Centre of Indian Trade Unions (CITU) to
delineate some of the deep-rooted spatial relationships
between the urban working poor, their residences, and their
work-spaces in the city.20
We argue that these relationships
are integral to preserving the availability of informal sector
work and to maintaining and improving working conditions
in the informal economy.
Currently, urban planning - decisions about transport,
infrastructure, basic services, housing, and the design of city
spaces - happens in a vacuum of information about the
informal sector. We also document in this paper the severe
disruptions in lives and livelihoods caused by city planning
decisions which have not taken cognizance of the
importance of spatial relationships in the informal economy.
While urban planners and city authorities have called for
more data about the informal sector, they have not called for
URBAN DEVELOPMENT II Assessment of Citizen Empowerment – Under E-governance Using Analytical Hierarchy Process

153
the sort of spatial data needed to adequately redress urban
planners' existing systemic blindness towards the informal
sector.
An important caveat - our study does not
comprehensively map the informal workforce. All we aim to
do is to identify some patterns in the city in terms of organic
linkages between work spaces and residences of workers.
Our aim is to use this data to impress upon planners and
policy-makers that we need to: (a) gather this data on a more
extensive scale, be more systematic fashion and (b) feed the
key learning / insights from this data into urban planning.
The paper calls for collective deliberation on creative
methodologies that can document these inter-linkages and
capture data that has historically proven difficult to map.
Spatial Patterns among
Informal SectorWorkers
This study sought to understand whether specific economic
activities or worker groups were spatially concentrated in
certain parts of the city,21
and whether the location of worker
residences, work spaces or the relationship between the two
was central to the economics of particular livelihoods. Table
1 provides this information for the worker groups as
provided by our interviewees.
Table 1: Workers and space in the city
Sl Work Type Spatial Work space Is location
No concentration - residence central to
of workers in overlap?(within work?
the city? home or
neighbourhood)
1 Loading & Unloading Yes Yes Yes
2 Appalam making Yes Yes Yes
3 Petty mechanical work / Yes Yes Yes
scrap metal recycling
4 Domestic work No Yes Yes
5 Construction work Yes Sometimes Often
6 Fishing Yes No Yes
7 Fish vending Yes Sometimes Yes
8 Street vending Yes Sometimes Sometimes
(fixed & mobile over
short distance)
9 Heavy vehicle driving No No No
The above table shows that several economic activities in
the informal sector were indeed concentrated in specific parts
of the city. Since the majority of professions about which we
received information had an overlap between residence and
work locations (both were usually located in the same
neighbourhood) we noted this as well in the chart. Nearly all
the union organizers of informal sector workers to whom we
spoke claimed that the location of the workplace, the
residence, or both was central to the success of the informal
economic activity, as the last column notes.
Two interesting points emerged through our research.
Firstly, that location was integral to different aspects of work
for each occupation. Secondly, that in some forms of
informal economic activity, relationships between city
spaces, economic activities, and / or residences changed
over periods of time, sometimes even over the course of a
single day. These changes are noted below, if relevant.
For most informal sector workers, proximity between
workplace and residence was essential to their work. A case
in point is the appalam-making industry which is
concentrated in certain neighbourhoods of Chennai in which
the Malayali community, which introduced appalam making
to the city, initially settled. Today, large appalam companies
like Popular, Radha or Ambika have large stores in parts of
the city, each of which is surrounded by a cluster of informal,
neighbourhood based appalam making units to whom all
appalam making is subcontracted by the large companies.
These informal units are usually owned by Malayalis, who
also work there with their families, and staffed by Tamilians
who live in the surrounding neighbourhood. Since appalam
making requires at least 6 - 8 months of training, workers tend
to be those who learn the trade when they are young when
they can afford the time to learn. These units have few
amenities, and workers bring their own drinking water and
food, and often rely on private sanitation infrastructure (i.e.
in their nearby homes). Thus, in this neighbourhood based
industry with low profit margins, employers rely on the
neighbourhood to provide skilled workers, and workers rely
on the workplace's proximity to their homes to maintain
minimum working conditions (i.e. access to water and
sanitation, as well as child care) that their employers cannot
afford to provide.
Proximity between workplace and residence also
characterizes work at the petty mechanical shops and scrap
metal dealerships that line the banks of the Cooum in
Pudupet. Workers in these units were largely concentrated in
the same neighbourhood as their workplaces till a recent
eviction drive. This work is highly irregular for the least
skilled workers; workers may be employed one out of three
days a week depending on the amount of business the dealer
gets, and resort to coolie labour or stay at home the days
they do not get work from the dealers. Similar to the appalam
units, scrap metal and petty mechanical units in Pudupet with
low margins depend on the availability of flexible labour to
maintain low costs and sustain their businesses. Workers are
dependent on the co-location of their workplaces and
residences and lack of travel costs to make such irregular
work into a viable livelihood.
Proximity between workplace and residence also makes
domestic work viable. Domestic workers, estimated to be the
second largest sector of urban informal sector workers after
construction workers, are not concentrated in any one part of
the city. Rather, they are found in any low-income
neighbourhood which abuts or is walking distance from a
middle-income neighbourhood. Women are able to take up
domestic work near their own homes because proximity
allows for a schedule that gives them the time and flexibility
to take care of their own children and household demands.
The majority of domestic workers walk to work, and workers
are able to provide such cheap services because of their own
minimal travel costs and because of the flexibility of work
timings. Indeed, the existence of this form of employment
opportunity for poor women is contingent on the cheek-by-

154
jowl existence of slums and middle-class neighbourhoods. In
all of the three professions detailed above, we were told that
such work disappears when slums are resettled far from the
city, i.e., that proximity is central to the existence of such
work.
The relationship between fish vendors and city spaces is
somewhat different. Fish are sold primarily by women from
the fishing community. Fishing community homes are
concentrated in coastal villages near the harbour where
catches are brought in from the sea and auctioned off to
vendors, usually in the morning. From here, fish vendors
usually travel, either by train or by private, rented mini-
lorries, to the places where they regularly sell their wares.
Most vendors go to regular fish markets, or travel to
neighbourhoods where they have regular routes along which
they sell fish. Thus, according to our interviews, fish
vending depends on residential proximity to the harbour for
buying high quality fish in the mornings, depends on access
to public or cheap private transport to reach market areas,
and depends on the existence of market areas or
neighbourhood routes where fish is known to be in demand
and where vendors can sell their wares without being
hassled. Other street-vendors similarly depend on access to
regular public transport and access to market areas for their
livelihoods. However, all street vendors, including fish
vendors, reported facing high levels of police harassment at
market places and on their vending routes, a consequence of
using public spaces for economic activities for which they
were not legally zoned.
In the case of construction workers, overlap between
workspace and residence is sometimes present, but it is
neither constant nor as essential to the work itself. While
construction workers are spread throughout slums in the
city, large concentrations of construction workers do exist in
places like MGR Nagar and Ambattur. This is because
workers were brought into Chennai to work on large-scale
Tamil Nadu Housing Board projects, and settled in cheap
land near the construction sites. Construction workers are all
in the informal sector. A contractor will employ engineers
who maintain relationships with masons (maistry) who, in
turn, command teams of workers, usually gathered from a
neighbourhood. An engineer will contact a mason, who will
bring his workers as needed for a project. Some construction
sites have workers living on the site during the period of
construction activity, meaning that workplaces and homes
overlap for the period of the construction project. However,
most local construction workers use either public transport
or private non-motorized transport to travel to construction
sites. For these workers, their neighbourhoods are important
for accessing regular work through relationships with
masons, and they require access to timely and cheap public
transport or safe routes for bicycles and pedestrians to
maintain their livelihoods.
The situation of workers in Parry's Corner, long the centre
of the city's wholesale trading, presents an extremely
interesting case for how space, economic activities, and
residences are related. Many workers who work as cleaners,
shop-assistants, and loading and unloading workers in the
shops along certain streets in the area also live on the streets
in front of the shops, often with their entire families.
According to our informants, these workers carry ration
cards with the address of the shop as their home address,
and cook and sleep at night in the area in front of the shop.
For these workers, only the passage of time over the course
of a day separates their work spaces and residences.
While discussions of informal sector work often evoke
images of home-based work, our interviews revealed that
informal sector workers are actually enmeshed in complex,
organic, neighbourhood-based networks that support the
viability of informal sector businesses and help to maintain
minimum working conditions. Having suggested the
existence of strong linkages between the urban working poor,
informal sector livelihoods and city spaces, linkages that
change over time, we review in the following section the
consequences of development and city planning initiatives
that have ignored the implications of these linkages.
City Policies that Disrupt
Informal SectorWork
Our interviews revealed that informal sector workers in the
city faced severe disruptions to their work from city policies
and decisions that had likely been crafted without thought to
their impacts on workers' lives and livelihoods. We list some
of these below to highlight the disastrous impact of making
spatial policies without taking into account linkages between
spaces and economic activities.
DisplacementofResidences
Our interviewees discussed several instances of
displacement of slum dwellers. Re-settlement, if provided by
the government, was in areas at considerable distance from
their original places of residence. A total of 12 fishing villages
located between Kasimedu and Ennore are slated for eviction
by the construction of a highway that aims to enable greater
connectivity between the Ennore port and the National
Highway network. Evictions have taken place on the
Ambattur lake-banks where large numbers of construction
workers lived, as part of a lakebed-cleaning project. Re-
settlement has been promised, but not given, in a rural and
remote location without access to public transport
connections to the rest of Chennai. A settlement of 1,500
families along the banks of the Coovum river in Pudupet was
cleared by the Public Works Department, and residents were
moved to Kannagi Nagar, also on the outskirts of the city,
resulting in the near elimination of informal sector work in the
scrap metal industry and domestic work. Residents have
organized repeatedly to block impending evictions in the city,
and have occasionally succeeded, such as in the fishing
communities south of Marina beach after the tsunami.
DisplacementofWorkplaces
Our interviewees mentioned numerous locations in the city in
which street vendors faced eviction or threats of eviction.22
Organizers spoke about a class bias in enforcement of laws
that govern public spaces. For example, hawkers and auto

155
drivers are frequently evicted from streets while private cars
are permitted to park in the same places. The eviction of
street vendors and petty hawkers from central market places
in the city has evoked strong protests from street vendor
organizations that have engaged the courts in their battle to
re-claim city spaces. In response to an appeal by street
vendors, the Madras High Court passed a judgment in
September 1997 directing the Chennai Municipal Corporation
to identify hawking and non-hawking zones in the city and to
grant licenses to hawkers. While the Court decision
legitimized hawkers' legal claims to public spaces, the
implementation of the court order has been unsatisfactory.
However, street vendors who have been issued licenses by
the Chennai Corporation have been able to protect
themselves to a greater extent than before from police
harassment and extortion.
TrafficRules
Changes in traffic rules to ensure the smoother flow of traffic
have negatively impacted conditions of work and livelihoods
in the informal sector. Rickshaw pullers and bullock cart
drivers, who are largely drawn from the most socio-
economically vulnerable communities, are banned from
plying their vehicles in several parts of the city, although
they provide a critical low-cost transport service that
continues to be in demand. The banning of heavy vehicles
within the city between 5 AM and 11 PM has resulted in
longer working hours for lorry-drivers, and night work for
loading and unloading workers, which renders them
vulnerable to extortion from the police.
NeglectingWorkers' Basic
Needs
Our interviews revealed that the neglect by city planners of
critical links between the informal economy and city spaces
is also reflected in the inadequate or skewed provision of
transport, infrastructure and services. Most basically,
planners have not legally allocated spaces in the city for
informal economic activities. Although the National Policy on
Urban Street Vendors demands it, few cities have actually
demarcated spaces for legal street vending.23
There are few
authorized parking spaces for heavy vehicles or auto
rickshaws, leaving individual heavy vehicle and auto drivers
to negotiate regular police harassment. Zoning laws also
largely do not permit mixed-use areas, which would legally
permit residential, commercial and industrial functions to take
place in the same location, as it often does in the informal
economy.
The absence of adequate sanitation and solid waste
management facilities in market places is another instance of
how city planning can remain impervious to existing patterns
of worker use of city spaces. Our interviews revealed that
women workers who worked outside the home or
neighbourhood relied heavily on public conveniences built
and maintained by the Chennai Corporation. Increasing the
numbers of public toilets in the city, particularly in places
known to be fish, vegetable and fruit markets, would
considerably improve working conditions for women
workers.
Policy priorities have also been skewed in the absence of
good data. For example, our interviewees claimed that the
majority of informal economy workers use private non-
motorized forms of transport (i.e., they walk or cycle to work).
However, the bulk of new transport spending in cities that
has not gone for roads or flyovers has gone towards
improving motorized public transport like Metro rails and bus
fleets.24
A transport policy which took into account the
informal economy might instead prioritize pedestrian and
bicyclists' needs in cities.
More Data, But How?
We have tried to argue in this paper that more and better data
needs to be gathered about urban informality to improve
urban planning practices. Certainly, existing measures of
enumerating informality need to be improved. At a minimum,
all informal residential settlements in the city, identified
according to a consistent and globally accepted definition
(such as the one used in the Millennium Development
Goals), should be mapped on a regular basis. But simply
mapping slum settlements does not do justice to the complex
ways in which space, time, and economic activity are related
in the informal economy. We argue here that data needs to go
further than that; it needs to represents the links between
workers, homes, and workspaces, data that reveals more
about the way in which these residents use city spaces and
how these relationships between workers, city spaces and
economic activity change over time.
Creating such data presents three real challenges for
researchers. The example of Parry's Corner is illustrative:
Between the hours of 5 am and 10 am, the streets are
populated by fruit and vegetable vendors. After 10, these
vendors leave, and the shops that line the streets open for
the day's business. At night, these shops close, and shop
employees live with their families on streets in front of the
shops, cooking meals and setting up tarpaulins for sleeping.
The case of Parry's Corner underscores important challenges
about this sort of data. Firstly, how do you gather
information about how people use city spaces for informal
economic activities in a systematic manner? Secondly, how
do you represent this level of fluctuation in land use over the
course of a single day? This is a major challenge for people
who collect and map data, particularly because such
fluctuations are common in the informal economy.
The third challenge may actually be the most important.
How do you make this data speak to the way in which
planners and city authorities currently make decisions? This
is an important question because the reason why the formal
sector's needs are frequently addressed directly by planners
may not be because of the availability of good data. It may
be because they make their demands known to planners and
put pressure on them through lobbyists. In this situation, an
increase in data about informal economic activity may not
make much of a change in policy without simultaneous
advocacy efforts.

156
One example of professionals who have grappled with
informal uses of city spaces are urban designers, particularly
a group of urban design firms who have emphasized a
concern for informal uses of city spaces. Collectively, the
groups that share these concerns have been termed the
"Ditch School of Urban Design," and their work has spanned
countries from Latin America to East Asia.25
One such firm,
Atelier Bow Wow, has made detailed drawings of buildings
that have responded in unusual ways to Tokyo's hyper-
density, by defying conventional notions about building
shapes, sizes, and uses. They have used this documentation
of informal architectural solutions to inform their projects,
including constructions for street vendor clients such as a
vegetable kiosk and a food stall.26
The Urban Think Tank has
mapped and analyzed informal uses of city spaces in
Caracas, Venezuela, and has used this information to inform
their projects. One such project is a community centre built
on a field previously used for playing football. The
community centre contains space for a wide range of offices
1. Srivastava, Rahul, “The informal sector and urban poverty,” Urban India Backgrounder, Infochange
India, January 2005, available at: http://infochangeindia.org/200502056108/Urban-India/
Backgrounder/The-informal-sector-and-urban-poverty.html
2. This figure is taken from Census figures on slum populations, and reported in “Factsheet on the
India Urban Poverty Report 2009,” available on the UNDP website at http://data.undp.org.in/
poverty_reduction/Factsheet_IUPR_09a.pdf
3. JNNURM documents repeatedly mention the need to get more information about the informal
sector.
4. In the final Master Plan for Chennai 2026, informality is only mentioned in a handful of places,
twice to give the same definition but there are no specific projects or provisions to improve the
functioning of the informal sector economy. I visited with a deputy planner at the Chennai
Metropolitan Development Authority in 2007, when the agency was still finalizing their new
Master Plan, finally approved in 2008. When I asked the planner about the kinds of information
they used to make policy for the urban informal sector, she leaned forward and asked me whether
I had any useful data that she could use.
5. Srinivas, Smita, “One in six globally, but is India counting its own workers?,” India in Transition,
Centre for the Advanced Study of India, University of Pennsylvania, February 2008, available at
http://casi.ssc.upenn.edu/node/129
6. For an excellent discussion on why the definition of informality has continued to remain loosely
defined, see Lisa Peattie's paper "The Informal Sector: An Idea in Good Currency and How it
Grew," World Development, (Vol. 15, No. 7, 1987).
7. This point is well articulated by Karen Tranberg Hansen and Mariken Vaa in their book on urban
Africa entitled Reconsidering Informality: Perspectives from Urban Africa, published by the
Nordiska Afrikainstitutet (2004).
8. This comes from early ILO classifications of the informal sector taken from the introduction to
Reconsidering Informality, by Hansen and Vaa.
8. For example, an upcoming conference at the South Asian Institute of Management, Kathmandu,
Nepal organized jointly by them and the International Association for Research on Income and
Wealth in September 2009 takes as its topic "Measuring Informal Sector in Developing
Countries."
10. "Metadata on Series: Slum population as percentage of urban, percentage," Millennium
Development Goals Indicators: The official UN Site for the MDG Indicators, available at: http://
mdgs.un.org/unsd/mdg/Metadata.aspx?IndicatorId=0&SeriesId=710
11. Reconsidering Informality, 8.
12. These definitions come from the discussion on "Re-defining of Unorganized Sector in India," by
G. Raveendran, SVR Murthy, and Ajaya Kumar Naik, National Commission on Enterprises in the
Unorganized / Informal Sector, May 2006.
13. Chandramouli, C, "Slums in Chennai: A profile," in Martin J. Bunch, V. Madha Suresh and T.
Vasantha Kumaran, eds., Proceedings of the Third International Conference on Environment and
Health, Chennai, India, 15-17 December, 2003. Chennai: Department of Geography, University of
Madras and Faculty of Environmental Studies, York University. pps 82.
and uses, including a health centre, space for hosting
entertainment events, and a rooftop soccer field, echoing the
multiplicity of uses for which city spaces are frequently
informally used. The strategies that these urban design firms
have used to map urban informality and city spaces are still
nascent and relatively untested. However, they do highlight
an important point, namely, the need for creative thinking
about how to gather data about urban informality. Even low
income urban residents have access to telecommunications
technology, which means that new means of counting people
and tracking their movement across space exist that were not
previously available to researchers. Access to such
technology means that workers themselves could provide
researchers information with negligible costs. Indeed, it
could be the case that such data could be collected not
through top-down projects or government agencies, but by
the collective efforts of workers themselves, who will use the
existence of such data to more effectively lobby the
government for better policies and directed services.
14. Tewari, Vinod, Usha Raghupathi, and Jamal Husain Ansari, "Improving Housing and Basic
Services for the Urban Poor in India," in The Inclusive City, Aprodicio A. Laquian, Vinod Tewari and
Lisa M. Hanley (eds.), Baltimore: The Johns Hopkins University Press, 2007. pp 45- 6
15. For example, in Chennai, the definition of a slum comes from the Slum Areas (Improvement and
Clearance) Act, which states that buildings are slums if they are "unfit for human habitation, [or]
are by reason of dilapidation, overcrowding, faulty arrangement and design of such buildings,
narrowness or faulty arrangement of streets, lack of ventilation, light, sanitation facilities, or any
combination of these factors which are detrimental to safety, health and morals." In contrast, the
Census counted all areas notified as slums by the city or state government, all areas recognized
as slums by the city or state governments, and a "compact area of at least 300 population or
about 60 - 70 households of poorly built, congested tenements, in unhygienic environment
usually with inadequate infrastructure and lacking in proper sanitary and drinking water facilities"
(from http://www.censusindia.gov.in/Metadata/Metada.htm#3). This results in a difference in
counts. The census counted 1,079,414 slum dwellers in Chennai, while the Chennai Master
Plan, using numbers provided by the Tamil Nadu Slum Clearance Board, lists a slum population
of 819, 872, a difference of more than 200,000 people.
16. Master Plan for Chennai 2026, i.
17. National Commission for Enterprises in the Unorganized Sector, "Contribution of the Unorganized
Sector to GDP Report of the Sub Committee of a NCEUS Task Force," Working Paper No 2, June
2008.
18. Master Plan for Chennai 2026, 36.
19. For example, Vidya Venkat at The Hindu quotes a Public Works Department official as saying that
"A total of 9,000 encroachments have been identified on the Ambattur Lake, and we will remove
them gradually." Venkat, Vidya, "Encroachments along water bodies being removed," The Hindu,
1 Dec 2008. A Frontline states that approximately 75,000 families who live in "objectionable
slums" will be removed. Dorairaj, S, "On the Margins," Frontline, Vol 26, 10, May 9 - 22, 2009.
20. A list of interviewees and their names and positions has been appended.
21. The appended map of Chennai city shows the spatial clustering of these economic activities in
specific parts of the city.
22. This includes places like NSC Bose Road in Parry's Corner, along market areas in Pursawalkam,
Connur High Road, and CSIR Road in Taramani.
23. Srivathsan, A, "New Policy for Street Vendors," The Hindu, 11 Jun 2009.
24. For example, the Jawaharlal Nehru National Urban Renewal Mission, which has provided a great
deal of funding for cities for infrastructure improvements, focuses on improving and increasing
the bus fleet.
25. Provoost, Michelle and Wouter Vanstiphout, "Facts on the Ground," in Urban Design by Alex
Krieger and William S. Saunders (eds.), St. Paul: University of Minnesota Press, 2009.
26. McGuirk, Justin, "Atelier Bow-Wow," Icon Magazine, 022, April 2005, available at http://
www.iconeye.com/
index.php?view=article&catid=324%3Aicon+022&layout=default&id=2634%3Aatelier-bow-
wow--icon-022--april-2005&option=com_content
27. Urban Design, 192.
References

157
Surinder Pal Singh
Professor, Rai Business School
Introduction
Delhi, the capital city of India, is one of the fastest growing cities in the world with a population of
13 million as reported in the Census of India Report for the year 2000. Until recently, it was
perhaps the only city of its size in the world depending almost entirely on roads as the sole mode
of mass transport. The total length of the road network in Delhi has increased from a mere 652 km
in 1981 to 1122 km in 2001 and it is expected to grow to 1340 km in the year 2021. This increase
in road length is not at par with the phenomenal growth in the number of vehicles on these roads
in Delhi. The cumulative figure of registered private and government buses, the main means of
public transport, is 41,872 in 1990 and it is expected to increase to 81,603 by the year 2011. The
number of personal motor vehicles has increased from 5.4 lakhs in 1981 to 30 lakhs in 1998 and
is projected to go up to 35 lakhs by 2011. With gradual horizontal expansion of the city, the
average trip length of buses has gone up to 13 km and the increased congestion on roads has
made the corresponding journey time of about one hour. Delhi has now become the fourth most
polluted city in the world, with automobiles contributing more than two thirds of the total atmospheric
pollution. In this context, the decision of the Government of India to develop a mass transport
system for Delhi providing alternative modes of transport to the passengers was most appropriate.
The first concrete step in the launching of an Integrated Multi Mode Mass Rapid Transport System
(MRTS) for Delhi was taken when a feasibility study for developing a multi-modal MRTS system
was commissioned by the Government of the National Capital Territory of Delhi (GNCTD) at the
instance of the Government of India in 1989 and completed by Rail India Technical and Economic
Services Limited in 1995 (RITES, 1995a, 1995b). The Delhi Metro (DM) planned in four phases is
part of the MRTS. The work of Phase I and part of Phase II is now complete while that of phase III
is in progress. The first phase of DM consists of 3 corridors divided in to eight sections with a total
route of 65.1 kms, of which 13.17 kms has been planned as an underground corridor, 47.43 kms
as elevated corridors and 4.5 kms as a grade rail corridor. The second phase covers 53.02
kilometers of which the underground portion, grade and elevated section are expected to be 8.93
kilometers, 1.85 kilometres and 42.24 kilometres respectively. The construction of the first phase
of DM was spread over 10 years during 1995-96 to 2004-05 while that of the second phase, which
started in 2005-2006 is expected to be complete by 2010-11. The total capital cost of DM at 2004
prices for Phase I and Phase II are estimated as Rs. 64,060 and Rs. 80,260 million, respectively.
Phases III and IV of DM will cover most of the remaining parts of Delhi and even extend its services
to some areas such as Noida and Gurgaon belonging to the neighbouring states of Delhi. Table 1
provides some of these details.
Promoting Public
Transportation System
For Sustainable
Urban Development
The Case of Delhi's Mass Rapid Transit System
URBAN DEVELOPMENT II Promoting Public Transportation System For Sustainable Urban Development – The Case of Delhi's Mass Rapid Transit System

158
Findings &
Discussion
Evaluation
When RITES recommended a rail-
based system, comprising a network
of underground, elevated and
surface corridors, aggregating to
198.5 kms, to meet the traffic demand
up to the year 2021, the whole
project, was estimated to cost Rs.
15000 Crores at 1996 price level and
expected to handle 12.6 million
commuter trips. First two phases of
metro are almost on the verge of
completion. DMRC web site
indicates a number of benefits to
metro. These are: Time saving for
commuters, Reliable and safe
journey, Reduction in atmospheric pollution, Reduction in
accident, Reduced fuel consumption, Reduced vehicle
operating costs, Increase in the average speed of road
vehicles, etc.
The following section presents analyses of Delhi metro
system.
a) Influence zone
Public transport service has to meet the needs of commuters.
This includes accessible stations, minimum affordable time
loss at interchanges, safer and reliable services. Since 500 m.
is an ideal walking distance, population residing along the
metro within walking distance has the highest accessibility to
metro. The area within 500 m from the metro corridor is 31%
(198.5 sq.km. out of the 640 sq.km. of total urban area) of
Delhi thus, after the implementation of the complete system
69% area of Delhi will remain beyond walking distance of
metro. Expansion of metro influence zone beyond 31% will
have to rely on feeder system. This is not easy because of
the inherent transfer costs and wait times at interchanges.
Limit of access to metro is based on the assumption of most
comfortable walking distance as 0.5 km. When this distance
increases passengers have to use feeder system, which
requires a transfer. A transfer has major impact on passenger
journey. Generally, simple long trip is preferred over short
journeys involving transfers because each transfer implies
added impedance in terms of time, cost, inconvenience and
uncertainty. Transfer requires a good coordinated scheduling
The Methodology
This paper is an exploratory case study to evaluate
Delhi Metro in terms of capacity, travel time and
accessibility to the system and evaluation indices
reflecting commuter's perspective.
The Problem
Transport situation in most Indian metropolitan cities is
rapidly deteriorating because of the increasing travel demand
and inadequate transportation system. Indian cities of all
sizes are facing the crisis of urban transport. Despite
investments in road infrastructure and plans for land use and
transport development, all face the problem of congestion
traffic accidents and air pollution and the problems continue
to grow. Large cities are facing an unprecedented growth of
personal vehicles (two wheelers and cars) and in medium and
small cities different forms of intermediate public transport
provided by informal sector are struggling to meet the
mobility demands of city resident. In Delhi, number of two
wheelers and cars continue to rise. Despite construction of
flyovers and roads, the roads continue to face congestion at
peak hours. In spite of the roads occupying 21 per cent of
the total city area, this large number of motor vehicles causes
extreme congestion on roads, ever slowing speed, fuel
wastage, environmental pollution and an unacceptable level
of road accidents. Delhi metro has been planning to reduce
congestion on Delhi roads and augment the current public
transport, which are primarily buses.

159
of feeder and main service, combined ticketing and waiting
time. A journey made without any transfer and a journey with
one or more transfers always plays an important role in modal
choice. To compare bus and metro as a transit service, both
are considered without any transfers and in that case
influence zone is the area within the distance of 0.5 km
(walking distance) is taken. Shukla (2004) has estimated that
population residing within a distance of 0.5 km, 1 km and 2.5
km from the metro station and trips originating from these
regions for phase 1, Shahadara - Barwala metro line of length
23.8 km. Population residing within 0.5 km can reach metro by
walking but people residing at more than this distance have
to use rickshaw or feeder bus. Population residing within the
area of walking distance is 346560 for the corridor length of
23.8 km. Total length of metro line is 198.5 km, applying the
same methodology for accessible population as line 1, total
population residing within the distance of 0.5 km is 2890426.
This is approximately 2.2 % of the total population of Delhi.
Figure 2 shows total number of trips originating in the region
for different catchments radius.
A trip originating in the region of 0.5 km distance i.e. walking
distance is approximately 374939 for metro length of 23.8 km.
Applying same weight to the total length of 198.5 km, number
of trips originating in the region of 0.5 km distance is
3127117. This shows that only 3127117 trips can be shifted to
metro if all the persons have destination along the metro
corridor. This may not be true.
b) Feeder service and an integrated ticket
If a very good, coordinated, well-organized feeder system is
provided to the Metro, accessibility of metro will increase.
DMRC is planning for an integrated ticket. If the integration
works out, the same ticket will be valid in metro trains as well
as buses. However, this will translate to higher rider-ship
only if commuters are willing to accept the added transfer
time and transfer costs.
c) Luggage
One of the Metro stop is Sahadra railway station, it is at
walking distance from Sahadra railway station and Sahadra
bus terminal but people travelling through this may not take
benefit of metro due to restrictions on carrying luggage in
metro trains. Many passengers coming and going through
railway station and bus terminal have a luggage with them as
it is connected to long distance travel. Metro is not available
to them.
d) Parking
Parking place outside the Metro station has been provided
but non-metro user can also use it. To encourage people to
use Metro there should be a separate parking place for the
monthly pass holders.
Initial and Maintenance Cost of Metro
American Dream Coalition fact sheet presents that a myth is
'pay no attention to the high construction cost, because
once rail lines are built they will last forever' and the reality is
'Rail lines must be rebuilt and equipment replaced every 20 to
30 years. Reconstruction often costs much as the original
construction.'
The Washington, DC, metro rail system was built at a cost
of $12.5 billion. Today, its managers say that over next ten
years they will need to spend another $12.5 billion
renovating roadbed, replacing cars, and refurbishing
stations. (americanderamcoalition.org). The federal transit
administration calls these "capital costs" but really they are
maintenance costs, and as such they make rail much costlier
to maintain than buses. Total length of 198.5 km of metro rail
will cost Rs.10751/- Crores (excluding taxes and duties) and
metro has not mentioned anything about the maintenance
cost. As mentioned above, maintenance cost of metro rail is
as much as the original cost. It should have been considered
in the cost evaluation, as it needs a large amount. Already
100% cost overrun is estimated for first phase of the metro
(Rs. 12000 crores instead of Rs. 6000 crores estimated for first
phase in 1996).
Table 2 evaluates DMRC statements, which are published
in different newspapers articles. DMRC officials have often
used these statements for justifying and highlighting the
benefits of metro system. Therefore it is important to analyze
these statements. The analysis questions the basis of benefit
assessment methodology for metro.
Table 2: Evaluation of DMRC statements
Wendell (1998) presents that Roadway Congestion Index
(RCI) i.e. Ratio of number of vehicles per lane and capacity of
lane) doesn't get affected much more by the metro
implementation. Figure 3 indicates that RCI is not reduced in
most cities of the world, except a marginal reduction at
Washington D.C. after introduction of metros.

160
There are other important issues, which should be
considered while evaluating and comparing services
provided by metros and buses.
1. Flexibility
In any case if demand of route pattern changes it is very
difficult to change the Metro route accordingly. But in case
of bus, it is very easy to change the route in a short time and
at low cost.
2. Convenience to reach stop/station
Generally, people living within walking distance of metro
stations or bus stops can reach the system conveniently.
This requires high-density residential areas near the metro
stations. When 198.5 km corridor of metro is completed, 31%
area of total urban area of Delhi will be within walking
distance of the metro corridor, however only 2.2% of the total
population will reside in this area. Since bus stops are on all
arterial roads, which are about 1000 km long. Therefore bus
stops will serve higher accessibility compared to metro
stations.
3. Speed
Metro has stops at average distance of 1.0 km and average
distance between bus stops is 500 m. Because of more stops,
buses run at lower speed. If distance between bus stops is
increased and a
separate lane is provided to run the buses, speed of buses
also can go up. If metro has to stop at every 500 m, average
speed of metro will go down.
Whowillusethemetro?
When DMRC expects that in 2021, 12.6 million commuter
trips will be handled by metro, it means some passengers
travelling by other modes at present will be shifted to metro.
Who are these people - do they use cars or buses or they
use two-wheeler?
Percentage of trips by mode and length wise
As per ORG-MARG survey (table 3), 62% trips are by buses
with an average trip length of 10 km (table 3). About 18%
trips are by two wheelers, which have similar average trip
length. Remaining 20% trips are by other modes like cars, taxi
and three wheelers. Since cars provide door-to-door service,
car users are not likely to shift to metros. Therefore in the
following section we analyze trip profile of bus and two
wheeler users to understand the probability of these trips
changing to metro.
Bus users
A home to work trip is considered as presented by figure
4(a). If direct bus is available one has to
walk up to bus stop, which generally lies at less than 500
m and takes bus to reach the bus stop near the work place
and again walks for less than 500 m and reaches work. In
case of metro, person living within the 500 m distance from
metro walks up to metro station and take ride in metro and
again walks little to reach work. However, for person who
lives away from the metro station trip by cycle rickshaw or
auto-rickshaw or by a feeder bus is required to reach the
metro station. Each type of transfer has its own
characteristics and impact on the person. Possibility of
person to shift the mode includes all these transfer impacts.
Figure 4(b) presents a trip from home to work which needs a
transfer in-between.
A person has to change a bus to reach his destination
area if it is not covered by any direct route. In that case the
waiting time at transfer bus stop and the distance and
convenience from bus stop where one has alighted to the
bus stop from which one can get the next connecting bus is
important. In the case of metro, time at transfer points and
convenience of changing trains is an important factor which

161
will influence modal shift. Thus, instead of just comparing
available travel options by total time, fare, distance, etc. one
should consider this influence of
transfer activity (waiting time at
transfer point, convinces at of
changing trains) for the total trip
comparison.
Two - wheeler users
If two-wheeler users want to use
the public transport then the
question is why they have not
used
Buses, when metro was not
started and what will attract them
to shift to the metro?
Table 4 presents different
issues affecting two wheeler
users for mode shifting.
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CONCLUSION
Metro systems have been planned
to reduce congestion on the roads.
However systems planned in India
show cost overrunning and under
utilization of capacity. Methodology
and arguments used to justify these
systems need careful analysis. High
capacity system does not necessarily
generate high demand. Estimation
of passenger demand for transit
services should consider complete
journey of commuters including
access time.
Moreover, the success of the Delhi
Metro has encouraged other Indian
cities to seriously attempt to
introduce Metro systems. DMRC has
already been appointed the Prime
Consultant for Hyderabad and Kochi
Metro and is the in-house consultant
for Mumbai Metro. DMRC has also
submitted Detailed Project Reports
(DPRs) for Metro systems in
Bangalore, Kolkata (East-West
Line), Mumbai, Ahmedabad and
Chennai. DPRs are being prepared
for Pune and Ludhiana. In fact, work
has already begun on the Bangalore
and Hyderabad Metros. However,
perhaps the greatest achievement of
DMRC is that it has given Indians the
confidence to believe in themselves
and trust that they can efficiently
build the most challenging and
technically complex projects.
Table 4: Issues affecting two wheeler users for mode shifting

162
Ramakrishna Nallathiga
Knowledge Manager
Centre for Good Governance
Dr MCR HRD Institute Campus
Road No. 25, Jubilee Hills
Hyderabad
Introduction
TIndia has been moving towards becoming a predominantly urban nation. The share of urban to
total population has been steadily rising from around 10% at the beginning of 20th century to 28%
by 2001 (which would have crossed 30% by now). Figure 1 shows the rise of total population,
urban population and urban to total population in India during 1901-2001. The rise in urban
population is much more than the rural population throughout this period (except during first
decade), which is evident from the annual growth rates of the two shown in Table 1.
Table 1: Growth in Population of Urban Agglomerations/Towns: 1901-2001
CensusDecade Average Annual Exponential Growth in Population of UAs/Towns
Total Rural Urban
1901-11 0.6 0.6 0.0
1911-21 0.0 -0.1 0.8
1921-31 1.0 1.0 1.7
1931-41 1.3 1.1 2.8
1941-51 1.2 0.8 3.5
1951-61 2.0 1.9 2.3
1961-71 2.2 2.0 3.2
1971-81 2.2 1.8 3.8
1981-91 2.1 1.8 3.1
1991-2001 1.9 1.7 2.7
Source: Census of India 2001
Apart from sheer rise in population, the number of urban agglomerations/ towns has also been on
rise. Table 2 shows a steady growth in number of urban areas and their share of urban population
in total population. A significant feature of Indian urbanisation scenario has been an increasing
concentration of urban population in large towns i.e., Class I towns or 'cities' (with 100,000 or
more), whose share has steadily risen from about 50% to 70% of total urban population.
Resource Mobilisation
for Urban Infrastructure
Development
Instruments and their Potential
Source: Based on Census of India (2001)
URBAN DEVELOPMENT II Resource Mobilisation for Urban Infrastructure Development – Instruments and their Potential

163
Resource Requirements of
Urban Infrastructure
EstimatesofResourceRequirements
The resource requirements for the development of urban
infrastructure in India are colossal, when urban population
keeps growing at such pace. Estimates of fund requirements
for urban infrastructure are available from several varied
sources based on the estimates made from time to time.
(a) Rakesh Mohan Committee Report
The Rakesh Mohan Committee Report (1996) had estimated
the total fund requirements of urban infrastructure are in the
range of Rs.79,300 crores to Rs.94,000 crores for the period
1996-2001. The fund requirement of water supply and toilet
facilities in urban areas was estimated at Rs.21,000 crores for
2001-2011 and Rs 22,800 crores for 2011-21. It had assessed
the total annual investment needs of water supply, sanitation
and road sectors in urban area at Rs.28,036 crores per year
for the period 1996-2006.
(b) XI Five Year Plan estimates
The XI five year plan (2007-12) estimated the urban
infrastructure requirements based on the norm of 100%
population coverage of services like water supply, drainage,
sewerage and solid waste management, which are as follows:
S. No. Sub-sector Estimated Amount (Rs crores)
1 Urban water supply 53,666
2 Urban sewerage and sanitation 53,168
3 Solid Waste Management 20,173
4 Drainage 2,212
5 Management Information Systems 8.5
6 R&D and PHE training 10
TOTAL 1,29,237.5
Source: Report of Steering Committee on Urban Development for Eleventh Five Year Plan (2007-12)
(c) Other Estimates
Table 2: Class-wise Number of Towns and their share of Urban Population
Class No. of Towns Percentage of Urban Population (%)
of Town 1961 1971 1981 1991 2001 1961 1971 1981 1991 2001
Class I 102 148 218 300 393 51.42 57.24 60.32 64.89 68.67
Class II 129 173 270 345 401 11.23 10.92 11.63 10.96 9.67
Class III 437 558 743 947 1151 16.94 16.01 14.30 13.33 12.23
Class IV 719 827 1059 1167 1344 12.77 10.94 9.47 7.89 6.84
Class V 711 623 758 740 888 6.87 4.45 3.66 2.62 2.36
Class VI 172 147 253 197 191 0.77 0.44 0.62 0.31 0.23
Source: Kundu, A. (2005)
Accompanying the growth of the number of cities, many cities are
joining the league of metro cities i.e., cities with more than a million
population. The data on metro cities reveal that 32.5 per cent of the
urban population lived in metropolitan urban agglomeration/towns in
1991 and by 2001 the figure went up to 38.6 per cent; also, the
population increased at 3.25% annual growth during 1981-91 and
2.83% during 1991-2001 (Kundu 2005). Table 3 shows a steady growth
in number and percentage of urban population living in metro cities.
The mega cities i.e., cities with more than 10 million population, have
also been rising from about 24.61 % of total urban population in 1981
to 32.54% in 1991 and 37.81% in 2001 (ibid).
Table 3: Growth in number and share of Urban Population of Metro
Cities
Census Number Population Population per Percentage of
Year (in millions) Metro City Urban
(in millions) Population
1901 1 1.51 1.51 5.84
1911 2 2.76 1.38 10.65
1921 2 3.13 1.56 11.14
1931 2 3.41 1.70 10.18
1941 2 5.31 2.65 12.23
1951 5 11.75 2.35 18.81
1961 7 18.10 2.58 22.93
1971 9 27.83 3.09 25.51
1981 12 42.12 3.51 26.41
1991 23 70.66 3.07 32.54
2001 35 107.88 3.08 38.60
Source: Census of India 2001
The emerging trends and patterns of urbanization and urban
population growth depicted above have some important implications
and challenges to urban development in India, especially with respect
to provision of urban infrastructure. Although urbanisation is the sign
of economic growth and large cities contribute to national economic
development, the large variations in population concentration,
particularly in larger cities, pose greater challenges to civic managers.
This phenomenon has led to a tremendous pressure on civic
infrastructure systems. There is inadequate provision of civic services
like water supply, sewerage and drainage, roads, solid waste
management, parks and open spaces, transport, etc. In several cities,
the problems of traffic congestion, pollution, poverty, slums, crime,
and social unrest are leading to deterioration in the quality of city
environments.
An important reason for the poor state of urban infrastructure
development is the low importance given to it in three-tiered system
of government. Urban Local Governments (ULGs) in India have greater
number of functions but inadequate financial resources to meet the
requirements of urban infrastructure. At less than 1% of country's GDP1
, the revenue base of ULGs in India (as a whole) is negligible when
compared to that of State and Central governments; the expenditure
incurred by them is far less than service delivery norms (Mathur and
Thakur 2004). The 74th amendment to constitution contributed to the
rise in mismatch of revenue resources and expenditure, as it specified
only functional base (expanded the list) but remained silent on the
fiscal resources to meet the same (Mohanty 1995).

164
The Central Public Health Engineering Organisation (CPHEO)
estimated the requirement of funds for 100 per cent coverage
of urban population under safe water supply and sanitation
services by the year 2021 at Rs 1,72,905 crores. Estimates by
Rail India Technical and Economic Services (RITES) indicate
that the amount required for urban transport infrastructure
investment in cities with a population of 1,00,000 or more
during the next 20 years would be of the order of Rs 2,07,000
crores (RBI-DRG 2008).
ResourceraisingcapacityofULGs
The resources of the above magnitudes cannot be easily
mobilised within the budgetary resources of Urban Local
Governments (ULG). The total receipts and expenditure of
ULGs in India itself was Rs 15,149 Crores and Rs 15, 914
Crores in 2001, and less than 25% of it i.e., Rs 3,710 Crores
were capital expenditure. Most of the ULGs use taxes,
charges and fees (apart from grants of Central and State
government) to provide and manage the civic infrastructure
services2
. The fixation of rates of these taxes and charges
was done long time ago and is under the control of State
governments.
The finances of Urban Local Governments reflect a sorry
state of affairs - the revenue receipts grow at a slow pace
with a declining contribution of own sources, whereas the
total expenditure grows at the rate equal or more than
revenue. Much of the expenditure goes towards staff salaries
and O&M expenses.3
Several ULBs do not have any revenue
account surplus to transfer to capital account. This situation
needs to be corrected through augmentation of resources at
ULB level using alternate sources of finance. The move
towards 'off-budget instruments' that provide financial flows
from unconventional sources is now considered to be a
worldwide phenomenon (Wegelin 2005).
Resource Mobilisation
Options for Financing Urban
Infrastructure
The following major 'off-budget' approaches have been
emerging towards mobilising financial resources for urban
infrastructure in India.
(a) Inter-governmental Partnerships
The Central Government, having observed the large
resources requirements associated with providing civic
urban infrastructure, has worked out a partnership based
funding arrangement, with a majority coming from it. This
change in approach has come not only in the wake of
seriousness of urbanization pressures but also after having
understood the importance of urban areas in promoting
economic growth. This was started with setting up National
Urban Renewal Mission (NURM) with a modest size of Rs
4,000 crores to assist ULGs, which was later renamed as
Jawaharlal Nehru National Urban Renewal Mission
(JNNURM) while augmenting the size to Rs 50,000 crores
over 7 years.
(b) Non-Conventional Resource Mobilisation at ULG level
The recently concluded RBI-DRG Study (2008) pointed to
several inadequacies in raising resources by ULGs. Tax and
non-tax resources have not been tapped up to their potential
by several Indian cities, which requires some major reforms.
As these sources have been stagnant over time and are not
subject to revision and levy to the discretion of ULGs, it has
become imperative that they make special efforts to mobilize
the resources within their jurisdiction using non-
conventional instruments and channel them effectively
towards laying down the urban infrastructure services and
their maintenance. Table 4 shows some non-conventional
resources that can be tapped by the ULGs.
Table 4 Non-conventional revenue sources for ULGs
S. No Service Category Non-Conventional Revenue Sources
1 Property Vacant Land Tax, Service Taxes, Surcharge
on Land Registration Duty
2 Water Supply Water Supply Deposits, Water Supply
Connection Charges, Water Benefit Tax
Cess, Water Betterment Charges
3 Sewerage Sewerage Deposits, Sewerage Connection
Charges, Sewerage Benefit Tax/Cess,
Sewerage Betterment Charges
4 Solid Waste Bulk Garbage Collection Charges; Domestic
Management waste collection charges
5 Town Planning Betterment Charges; Land and Space
Contribution; Impact fee; Transferable
Development Right; Sub-division charges;
Planning Permission Charges
6 Engineering Road Cutting Charges, Frontage Tax, Motor
Vehicle Tax/Surcharge on Petrol/ Diesel
7 Trade Licensing Business License Fee
8 Advertisement Hoarding Charges, Advertisement
Placement Fees, Cable TV Registration Fee
Source: Mohanty (2003)
(c) Public Private Partnerships
Public-private partnerships (PPP) are potentially important
means of involving private sector in the provision of civic
infrastructure services. The partnership model ensures
leveraging public sector strengths with those that of private
sector. PPP refers to a spectrum of possible relationships
between public and private sectors for a cooperative or joint
provision of infrastructure services. Private sector may
include private businesses/firms, non-government
organizations (NGOs) and community based organizations
(CBOs). Table 5 shows sharing of various aspects of service
generation between public and private sectors.
Table 5: Salient features of key variants of public-private partnerships
PPPOption Asset Operation Capital Commercial Risk
Ownership &Maintenance Investment Duration
Management Public Private Public Public 3-5
Contract
Lease Contract Public Private Public Shared 8-15
Concession/ BOT Public Private Private Private 25-30
BOOT/BOO Public/Private Private Private Private 20-30
Source: World Bank (2006)
Private sector participation in civic service delivery could

165
help to bring technical and managerial expertise, improving
operating efficiency, large scale injection of capital, greater
efficiency in using the capital, rationalization/ cost based
tariffs for services, better responsiveness to consumer needs
and satisfaction . Table 6 provides an account of how these
strengths are built into various PPP models/options
discussed above.
Table 6: Levers of Partnerships under different PPP options
PPP Option Technical Managerial Operating Invest Invest in
Expertise Expertise Efficiency in Bulk Distribution
Service Contract Yes No No No No
Management Yes Yes Some No No
Contract
Lease Contract Yes Yes Some No No
Concession/ BOT Yes Some Some Yes No
BOOT/BOO Yes Yes Yes Yes Yes
Source: Kumar and Prasad (2004)
The relevance and importance of PPPs in infrastructure is
well documented5
. Their application in the context of
municipal services in the US, in particular, led to not only
investment inflow in capital intensive projects but also flow
of cost-effective services that would have been very difficult
to provide (Greene 2002). The experience of services under
PPPs has been satisfactory in a majority of local
governments, which perceptibly feel gained from improved
technology and management services that came together in
the PPP contractual model (ibid). Indian cities have also
started making use of them successfully but more and more
ULGs should explore the possibilities of PPP in the provision
of municipal services.
(d) Accessing Market Finance
It was held earlier that there was a need for massive funds to
create urban infrastructure. Urban local bodies could resort
to borrowing from financial markets including banks to
finance the infrastructure projects. Although it is the
legitimate reason to resort to borrowings, considering the
sustainability of local finances, it should be ensured that
these borrowed funds are devoted to projects which have
adequate, explicit and identifiable revenue stream to service
these borrowings. Invariably the projects undertaken by
local bodies are such where user charges are inadequate.
Under these circumstances, State government should fill in
the gap by providing the equivalent grants.
In the context of borrowings, the instruments are important.
A limited number of Municipalities have issued Municipal
Bonds to raise finances. There is a need to promote this
channel as it can be an effective instrument of fiscal reforms
and will induce credit-rating. Bangalore Municipal
Corporation was the first local government in India to access
debt market through non-convertible bonds (private
placement) in 1997 with the State Government guarantee and
the Ahmedabad Municipal Corporation (AMC) became the
first ULG in Asia to issue bonds without government
guarantee in 1998 (Vaidya & Vaidya 2004). However, thereafter
it has been very nascent with no issuers after 2005.
Summary
In India, with the rising urban population and growth of urban
areas, the development pressure on cities is increasing and metros
are particularly sharing more burden. The development of cities
itself is critically dependent upon the availability and delivery of
good urban infrastructure services. However, the resource
requirements of urban infrastructure services are quite large and
hence pose a great challenge. Also, the creation of urban
infrastructure - basic civic amenities and other support services -
is itself expensive and time consuming; in other words,
infrastructural investments are essentially lumpy in nature that
require investments primarily by government.
The Central government has allocated one time support by
creating JNNURM, which provides a substantial funding. The State
and Urban local governments have to take a lead role so as to
sustain the resource flow from the new assets and from their
sources. The cities have to show a resolve to increase the resources
for urban infrastructure development by exploiting the potential
non-conventional means of resource mobilisation and using PPPs
for service delivery arrangements. Given that most of the cities
show little or no revenue surplus to match the capital expenditure
required for providing basic infrastructure services, they may resort
to accessing finance from market through floatation of bonds.
References
Greene, J. D., (2002), Cities and Privatisation: Prospects for the New Century, Pearson Education Inc.,
New Jersey.
Kumar, S. and Prasad, C. J., "Public-private partnerships in urban infrastructure", Kerala Calling,
February, (2004), pp 36-37.
Kundu, A., (2005) Handbook of Urbansation in India, Oxford University Press, New Delhi.
Mathur, M. P., (2004), "Municipal Finance and Municipal Services in India: Present Status and Future
Prospectus", Second International Conference on Financing Municipalities & Sub-National
Governments, Washington DC, September 29-October 2.
Mathur, O. P. and S. Thakur (2004), India's Municipal Sector, A Study for the Twelfth Finance
Commission, National Institute of Public Finance and Policy, New Delhi.
Mohanty, P. K. (1995), 'Defining the functional domain of Urban Local Bodies: Some Suggestions in
the context of India's Decentralisation Initiative', Urban India XV(1) (January-June).
Mohanty, P. K. (2003), 'Financing Urban Infrastructure: Some Innovative Practices of Resource
Mobilisation', CGG Working Paper, June 2003.
Nallathiga, Ramakrishna (2007), 'Off-budget approaches to the delivery of urban services: the
potential of public-private partnerships', ICFAI Journal of Public Finance, Volume V (2): 53-64.
Rakeshmohan Committee Report (1996): Report of Expert Committee on Infrastructure, Government
of India, New Delhi.
RBI-DRG (2008), Municipal Finance in India- An Assessment, Development Research Group,
Reserve Bank of India, Delhi.
Wegelin, E., (2005), "Off-Budget Financing Strategies for Urban Development", Urbanicity.
World Bank (2006), Reforming infrastructure: Privatization, regulation and competition, World Bank,
Washington DC.
Endnotes
1. In other countries they account for about 5% of the national GDP
2 Composition of revenue sources can vary across ULGs. Some of the conventional sources
include: (a) Property Tax (b) Water Charges (c) Sewerage Charges (d) Conservancy Charges
(e) Building Permit Fee (f) Trade Licensing Fee (g) Advertisement Tax (f) Shop Room Rent
3 This was revealed in the RBI-DRG (2008) study.
4 Detailed discussion is made in Nallathiga (2007)
5 World Bank (2006) provides a good review of the same

166
Jatinder Singh
Professor,
Rai Business School,
New Delhi.
Urban Renewal and
Infrastructure
Spotlight on Housing for the Urban Poor
Introduction
The urban sector has been facing critical challenges with regard to affordable shelter, growth of
slums, and disparity between demand and supply for the provision of basic services to the urban
poor. The urban housing shortage upsets the socio-cultural aspirations of people hampering
inclusive growth. Reports reveal that by 2051, the urban rural population will be approximately
same with disproportionate load on major and metro cities; escalating the problem of urban
housing further. In this grim scenario, the urban poor are the major sufferers. According to the
Ministry of Housing and Poverty Alleviation the urban population in year 2001 was 286.1 million
(27.8% of total population of country) while the land occupied by urban India is only 6%.
Disarrayed urbanization has focused more on the larger cities with less attention to medium and
small towns. The process of migration resulting from urban pull and rural push is estimated to
occur unevenly and so is the growth of urban areas. This has resulted in reactive planning
resulting in congestion and spread of slums. Slums degrade the social fabric of our nation
because of its subhuman conditions and lack of basic and essential services. Services like potable
water, sanitation, sewerage and waste disposal mechanism are either poorly maintained or do
not exist in these areas. This results in abound infirmities and degrades the health and social life
of inhabitants.
Rising income signifies urbanization but that is not visible profoundly in India. The islands of
prosperity in the sea of poverty are quite visible in urban areas because of social and demographic
stratification everywhere. On one side of road we can see sprawling malls with all major brands
trying to make their mark and on the other side one can see rows of unauthorized crammed
structures with the people living sub humanly. Also, Indian cities have the unplanned infrastructure
and poor public services as compared to the world.
This all has resulted in urbanisation of poverty which is a grave issue highlighting cruel disparity
and inequality within the society. Needless to say that infrastructure is the key constraint for
economic growth, but it always has got lopsided treatment from the Government with more doles
to the rural areas. The Government is under sclerotic notion that urban poor have better employment
opportunities and steady income, but most of the urban poor work in informal sector with paltry or
non-existent social security.
Notwithstanding, sixty percent of India's GDP is contributed by urban population,
but the Government is more inclined for the development of rural areas. The
data of 2001 census counts Indian population to be 1,027 million of which 28%
live in cities. By 2021, it is expected that this would increase to 39% and by 2051
it is estimated that half of Indian population is expected to live in cities. This
rapid pace of urbanization does not commensurate with the urban economy and
its development thus putting spotlight on the urban sector development.
Percentage of poor in different classes of cities/towns
City/Town Size 1993-94 1999-2000
Large towns/cities 18.4 14.2
Medium towns/cities 27.6 20.4
Small towns 33.2 24.2
All urban areas 27.4 19.9
Rural areas 35.7 23.9
Source: UNDP - India Urban Poverty Report, 2009

167
Government Initiatives
Government has launched the most prestigious scheme for
the concern of Housing the Urban Poor - National Urban
Housing and Habitat Policy 2007 (NUHHP) which has been
integrated into the objectives of Jawaharlal Nehru Urban
Renewal Mission (JNNURM). The focus of this scheme is
for sustainable development of habitat in the country to
ensure equitable supply of land, shelter and services at
affordable prices to all sections of society. Keeping in mind
the housing and financial constraints, the NUHHP 2007 relies
on multiple stake-holders - private sector, cooperative sector
and industrial sector in its zeal to actualize its goal
"Affordable Housing for All".
To attain its objectives the NUHHP 2007 emphasizes on
urban planning, increasing floor area ratio (FAR),
Transferable Development Rights (TDRs), increased flow of
funds, effective solid waste management and use of
renewable sources of energy. For furtherance of its goals,
NUHHP 2007 has conceptualized the idea of micro finance to
be promoted at state level to expedite flow of finances to
urban poor. It also encourages integrated townships and
special economic zone in which 10-15 per cent of land in
every new public/private housing projects or 20-25 per cent
FAR whichever is greater, will be reserved for EWS/LIG
Housing through suitable spatial incentives.
The Jawaharlal Nehru Urban Renewal Mission (JNNURM)
was launched by Government in 2005 for catering to the
provision of housing and basic services to urban poor in 65
specified cities and towns. JNNURM has two programmes -
Basic Services to the Urban Poor (BSUP) and Integrated
Housing & Slum Development Programme (IHSDP) which is
aimed at the integrated provision of basic amenities and
services to the urban poor and slum-dwellers like:
Security of tenure at affordable prices
Improved housing
Water supply
Sanitation
Education
Health
Social security
The aim of this programme is to create economically
productive, efficient, equitable and responsive cities.
JNNURM is planned to operate on a mission mode,
facilitating large scale investments in the urban sector with
goal for sustainable socio-economic growth in the urban
areas.
Along with JNNURM the Government has initiated some
other urban poverty alleviation programmes like Swarna
Jayanti Shahari Rozgar Yojana is implemented in
convergence with other Government initiatives. Delivery of
quality healthcare, primary education and social security for
the urban poor will be go along with converging programmes
with the schemes of Health Mission, Sarva Siksha Abhiyan,
Aam Aadmi Bima Yojana, Rashtriya Swasthya Bima Yojana
and Prime Minister's Employment Generation Programme.
One of important organization for the urban housing is
Housing and Urban Development Corporation Limited
(HUDCO). This finances housing and urban development
projects, finance building material industries and setup new
townships. HUDCO finances development projects which are
formulated by State Housing Boards, Development
authorities, Improvement Trusts and Co-operative Housing
Societies. The other organizations that have a vital role in
providing housing are National Housing Bank, Building
Materials and Technology Promotion Council (BMTPC).
Urban housing trends
According Urban Poverty Report 2009, fifty per cent of
India's population is expected to be urban-based by 2030.
This projection is based on the assumption that growth rate
of 8 and 9 per cent of the population over the next decade
and also anticipated shifts from agro-based to non-
agricultural jobs and from rural to non-rural employment. The
urban poor are trapped in urban poverty due to irregular
income, deplorable housing conditions and absence of social
security which has resulted in mismanagement of slums.
Although many large areas of habitation are occupied by
Government and transferred to private corporate for making
commercial complexes and development of residential areas.
According to ASSOCHAM report, India's urban poor need
40 million houses. The Ministry of Housing and Poverty
Alleviation has estimated that total housing requirement
during the 11th Plan period (2007-2012) stands at 26.53
million. Out of this shortage of dwelling units, 21.78 million
pertains to EWS and 2.89 million to LIG. Collectively, these
two groups accounted for 99% of the deficit.
QualityHousing
A good quality and sustainable housing development should
be customized to the needs and habits of the inhabitants.
Moreover, the dwelling type and size should adequately
support social and environmental sustainability objectives.
The primary emphasis should be the affordability. It is
envisaged that the houses should be built and maintained at
a reasonable cost with an adequate funding mechanism
substantiated with microfinance schemes. The design of the
housing infrastructure should corroborate with safety and
security of its people. Proper provision for vehicular
circulation and service lanes should be made to make people
and vehicular movement easy and safe.
The emphasis should be on making 'green' and 'intelligent'
buildings. To reach these objectives there should be
optimum use of infrastructure with full exploitation of solar
energy. The architectural design of dwellings should optimize
the benefits of sunlight and solar energy use. This will
facilitate mobility and improve the quality of air and water
thus making the city smarter which will enhance the social
and security status of the community at large. Furthermore,
this will envisage more prosperity with inclusive and
sustainable growth.

168
Current Challenges
The Government initiatives like JNNURM covers only 65
cities; contrary to this India has numerous small cities and
town where the urban population resides. So there is an
imperative need to concentrate on these small cities and
towns where the most of the Urban India resides. The
primary predicament for urban housing policy planners is
that land is a State subject. Secondly, there is lack of credible
statistics. The housing shortage calculated is not actually
State specific. Moreover, Government is infested by
bureaucratic hurdles or red tapism that has critically dwarfed
the endeavour of private players to start new projects
enthusiastically. The current challenges of housing in urban
India are poor financing mechanism, lack of strategic
planning and unfriendly Government regulations.
Most of the urban poor migrate for search of decent
livelihood, but they land up in a system of irregular and
informal sector employment with total absence or marginal
social security cover. This further compounds the problem
and they get entangled in the vicious cycle of poverty as
cost of living is substantially higher in urban areas than rural
areas. They are also subjected to pay for every petty thing,
like cot, quilts during winters, even for water and toilet
facilities which are relatively free in rural areas. In order to
save the money they mostly defecate in open and bath less
frequently. This unhygienic practice coupled with nutrition
deficient diet weakens their immune system, particularly of
old people and children. They become easy victim for many
infectious diseases one after the other. Homeless people
constantly come across antisocial and immoral behaviour
from civic authorities or the antisocial elements; they are
more likely to become the victims of crime. They
continuously face threats from robbers and the vulnerable
section like old people; children and women are affected
most.
Furthermore, many housing schemes are plagued by land
scams or building scams where the poor pay the money to
the promoter, and some of them become victims of deception.
The housing and land corruption is rampant and the
situation has not become better over the years. The recent
scam of Delhi Development Authority (DDA) which is the
city's largest land owner is the example of corrupt practices.
DDA has announced the draw of 5,238 flats under the 2008
Housing Scheme; the flat owners have yet to see the light of
the day to get a house for them. Many urban poor who have
sold their land in their native villages have applied in this
scheme. The delay in getting allotment is causing undue
harassment for the successful allottees, as many of them are
paying interest to banks for the loan they have taken to pay
the Rs 1 lakh registration money. If such examples are quoted
from the Government organizations, one can make
assumption that the private players can go to any extent for
the miscarriage of Housing Schemes for the poor.
References
www.undp.org.in/index.php?option=com_content
data.undp.org.in/poverty_reduction/Factsheet_IUPR_09a.pdf
urbanhealthupdates.wordpress.com/2009/
planning.up.nic.in/landuseboard/lub_main.htm
mhupa.gov.in/programs/upa/nsdp/sjsry/Nodal-Officers-SJSRY
mhupa.gov.in/
www.pib.nic.in/release/release.asp?relid=52587
Conclusion and Recommendations
The Government should not delay in granting industry status to
the real estate development activity as real estate is nothing but
infrastructure. The real estate activity should be included in the
category of industry so as to ease financial inflow to the
developers. From last many years, the Government has been
making efforts to provide shelter to people belonging to
Economically Weaker Sections (EWS) and Low Income Group
(LIG) group of families, but the gap has steadily widened year
after year as more people migrate to urban areas. Apart from
the suggestions mentioned in the paper the major
recommendation is for microfinance of housing as it can support
the incremental building process and support the low income
population. Microfinance of housing has a potential for scope
that is far beyond providing shelter to the urban poor and also a
determinant for social engineering and inclusive growth.

169
Prof. K K Pandey
Chairman,
Centre for Urban Studies,
Indian Institute of Public
Administration
Fiscal Decentralisation and
Resource Mobilisation for
Urban Infrastructure
Summary
This paper examines the adequacy of fiscal decentralisation and resource mobilisation for urban
infrastructure to suggest actions for expansion and up gradation of urban infrastructure in India. In the
light of accelerated flow of funds now available for urban infrastructure ( due to economic liberalisation,
specific government. schemes, bi-lateral and multi-lateral funding.) , this paper is confined to non plan
municipal income which is expected to fund O&M and debt servicing /depreciation on municipal assets. It
is also a determinant of borrowing capacity to take up capital projects or investments. It is particularly
important in the context that despite accelerated flow of funds city governments are not in a position to
seek funds for investments.
It is observed that the fiscal gap for both the investments and operation and maintenance requirements
is fairly wide and has serious implication on (i) quality of life, (ii) urban environment and (iii) productivity
(iv) income and employment generation. It is also observed that Urban Infrastructure has multiplier effect
on each of these four indicators of urban livelihood. Thus, sky is the limit for investments in the sector
which is stated to be in a range of Rs 73000 Crore per annum at 2004-5 prices for utility infrastructure only
not including distributive functions such as environmental protection , poverty alleviation etc.
The benefits of urban infrastructure, on the other hand accrue to local community/ direct users, city as
a whole, state (province) and national economy as well. At the same time, it is also noted that most of the
items of urban infrastructure are also in the form of Public Good, not directly priced and non excludable in
terms of users. However, there is a high degree of vertical and horizontal imbalance caused by mismatch
between municipal functions and funds and (2) municipal inability to tap local economy to fund urban
infrastructure. At the same time it is also noted that national and state economies have high potential to
fund urban infrastructure provided fiscal decentralisation is promoted in the true spirit of fiscal federalism.
Similarly empirical evidence suggests that city economy also have untapped potential to significantly
bridge the gap in the funding of urban infrastructure.
Therefore, suitable instruments need to be devised to promote fiscal decentralisation and resource
mobilisation to generate accelerated flow of investment funds and O & M funds for urban infrastructure. It
needs to be noted and underlined that city governments hold the key to develop sustainable and equitable
delivery of urban infrastructure. In line with the true spirit of decentralisation and subsidiarity, as envisaged
by 74 CA Act of 1992, the empowerment of local governments in terms of fiscal, functional & political
decentralisation should be completed on a priority bases.
Devolution of funds from centre and state, access to loan finance, powers to levy and decide municipal
taxes and levies, and autonomy to decide partnerships and institutional arrangements need to be streamlined
as per requirements at municipal level. In this regard (i) Quantum jump is needed in the fiscal devolution,
(ii) local fiscal instruments need to be devised to improve liquidity, (iii) local institutions dealing with
services of land and services need to be made accountable to city government to link their accountability
with the grass root level and develop a transparent system of transfer of assets and functions to local
government for equitable and sustainable delivery of urban infrastructure.
Finally, it appears that municipal finance in India is suffering from vertical and horizontal imbalance.
At the same time innovations are also emerging to promote vertical and horizontal balance. Institutional
authority of central finance commission and state finance commissions need to devote more attention to
induce fiscal decentralisation in the municipal system. It should also generate municipal actions to raise
more resources at local level. This is particularly important in the context of local potential and elasticity
available for municipal finance. In the light of local democracy and increasing emphases on local solutions
for national issues of poverty, productivity, environment and quality of life, fiscal decentralisation is
emerging as a necessary tool to promote overall welfare and socio economic development in India.
URBAN DEVELOPMENT II Fiscal Decentralisation and Resource Mobilisation for Urban Infrastructure

170
MagnitudeofFiscalgap
The fiscal backlog, up gradation and expansion needs of
urban infrastructure covering the core municipal functions in
cities and towns in India far exceed the resources at the
disposal of Urban Local Bodies (ULBs). The additional
requirement of funds by ULBs to meet the challenges of
urbanisation, congestion, service deficiency and
environmental degradation and to discharge redistributive
functions like poverty alleviation and slum development as
envisaged in the Constitution (74th Amendment) Act, is huge.
Strategic fiscal gap in the municipal sector covering the
difference between demand and supply of funds to provide
and operate mandated services is substantially high. As per a
recent study by RBI (2007), the projected investment
requirement of funds for urban infrastructure in the country
is estimated at about Rs. 63,000 crore per annum for the next
ten year period at 2004-5 prices. This does not include the
needs for redistributive functions like urban poverty
alleviation. The figure constitutes about 1.5 per cent of the
country's GDP only. It is also estimated that assuming a
status quo in the federal fiscal relationships in the country,
municipal bodies can at best be able to raise up to about
Rs.27, 285 crore per annum or about 0.5 per cent of the
country's GDP in 2008-9. Within this, the resources available
for asset creation after meeting current expenditure would at
best be of the order of Rs 17,736 core, implying an annual
shortfall of at least Rs 10,000 crore (2004-05 prices) even for
providing core urban services.
On the other hand, given the size of urban sector, 3-5 per
cent share of GDP, can be spared for urban infrastructure as
experienced among other forward looking developing nations
such as Brazil, Colombia and countries in South East Asia.
This means that Indian economy has a potential for a quantum
jump in the size of funds available for urban infrastructure.
As the investment requirements, the gap for O&M
requirements is also increasing at a faster rate. Analysis of
municipal budgets indicates wide variations in the estimates,
revised estimates and actual which specially affect O&M
commitments as payment of salaries is non-discretionary
(Pandey, DFC 2007). After implementation of VIth pay
commission implementations the gap would increase nearly
by 100 percent which is already significantly high. The
symptoms of O&M gap are commonly visible in the
municipal inability to meet financial and functional
commitments covering a constant decline in the normative
base of services and municipal inability to clear dues and
payment of contractual savings on time.
Nature of Fiscal Stress
Devolving of a formidable list of mandatory functions
notwithstanding, the institutions of urban local government in
India are not very different from their counterparts in south
Asia, Africa and Latin America. They are in a position to
"manage (only) a fraction of the tasks assigned to them" (Guru-
Gharana and Adhikari 1999). They, as well, lack in institutional
capacity to perform the functions entrusted to them. The
literature on municipal capacity building suggests that capacity
building is driven by addressing three important dimensions viz.
(i) human resource development; (ii) organizational development
and (iii) institutional and legal framework (Pellenburg et al 1996).
Fiscal capabilities and financial wherewithal are critically
important for addressing all the three dimensions mentioned
above. Putting in place a sustainable financing system calls
for strengthening local democracy through fiscal
decentralisation that has several useful spin-offs. It improves
over-all revenue mobilisation by broadening the tax-net,
enables the sub-national governments to capture tax base,
which is below the thresholds of taxes of higher levels of
government, and it enhances efficiency in terms of improved
level of services, accountability, willingness to pay and
overall development of jurisdictions (Bahl 1999;Musgrave
1983). There is now an increasing realisation in several
countries that have gone for decentralisation that it needs to
be reinforced by fiscal decentralisation (Bird 1994). Further,
one common feature of urban local finance across the
developing countries is inadequate own sources of revenue.
The devolved sources of revenue do not match with wide
range of functions required to be performed by them. This
has led to increasing dependence of ULGs on higher levels
of government (central government in a unitary system and
provincial or state governments in federal countries). Bahl
and Linn found that in the cities studied by them, the median
share of local revenues in financing local expenditures was
as low as 30 percent in the Caribbean countries (Bahl and
Linn 1992). This, including shared taxes, was around 63
percent in the transitional countries (Bird and Wallich 1993).
This is an anathema and needs to be addressed by
devolution of tax instruments, which have a direct nexus with
the urban economies. One of the contradictions characterising
urban local finance in less developed countries is that even
though urban economies keep on growing, the city
governments are becoming impoverished. Taxes to be
devolved to the ULGs therefore have to be related to the
economic base of cities and towns. Buoyancy of local tax
instruments depends on their nexus with city economies.
Reasons for the Fiscal Gap
Reasons of the fiscal gap are attributed to a host of
indigenous and exogenous factors. Vertical imbalance, fiscal
dependency, borrowing constraints and inefficiency in
municipal management are affecting the functioning of urban
local bodies. Whereas the municipal governments. Do not
have adequate autonomy to fix the rates and base of fiscal
instruments available with them; they also do not have
adequate institutional capacity to raise resources within the
given framework. At the same time many areas of revenue
generation such as land and town planning etc are still not
assigned to municipal governments at various states.
Secondly, municipal bodies do not receive suitable amount of
fiscal transfers from higher levels of governments. Who have
better resources and relatively low level of expenditure? These
two factors lead to a regular addition to the strategic fiscal gap.
VerticalImbalance
Urban local bodies in India are yet to find suitable place on
the public finance map of the country, which is needed to
facilitate inclusive economic growth and equitable
development. The size of the municipal fiscal sector in India

171
is very small compared to that in many developed and
developing countries and in relation to the public services
that the urban local bodies are mandated to deliver
There is mismatch between functions and finances of
ULBs, which primarily explains the vertical imbalance. Out of
18 functions to be performed by the municipal bodies in India
less than half have a corresponding financing source. The
12th Schedule in the Constitution 74th Amendment Act also
envisages that functions like 'safeguarding the interests of
weaker sections of society, including the handicapped and
the mentally retarded', 'slum improvement and up gradation'
and 'urban poverty alleviation' belong to the legitimate
functional domain of urban local bodies. However, there are
no commensurate resources with these institutions to
discharge these functions.
Urban local finance register a marginal presence in the
overall public finance in India and is declining due to
relatively low growth and at times decrease in its size in real
terms. The total municipal revenue in India accounts for
about 0.75 per cent of the country's GDP as against a figure
of 4.5 per cent for Poland, 5 per cent for Brazil and 6 per cent
for South Africa. In terms of both revenue and expenditure
the urban local bodies account for little above 2 per cent of
the combined revenue and expenditure of Central
Government, State Governments and ULBs. (O P Mathur)
This is in contrast to the situation obtaining in advanced
countries, where local bodies normally account for 20-35 per
cent of the total government expenditure and the principle of
'subsidiary' is regarded as a cornerstone of fiscal federalism.
Recent data on municipal finances reveal that the total
revenue of ULBs is growing at a lower rate compared to the
growth of combined Central and State Government revenues.
(RBI 2007) Therefore, national and state economies are
capable of sparing additional funds for municipal
infrastructure provided suitable mechanism is devised.
HorizontalImbalance
Horizontal Imbalance is reflected in the municipal inability to
tap local economy to raise requisite funds. There are direct
benefits to local economy as a result of municipal
infrastructure which are not adequately charged through
suitable instruments. Secondly, Municipal infrastructure also
has a value added role. Land value gains are also not
adequately used to fund municipal requirements.
Empirical evidences suggest that Economic Rate of Return
on Urban Infrastructure is fairly high in a range of 28-30.
Similarly Value Added Role of Urban Infrastructure is also
leading to high amount of Land Value Gains. Thirdly
infrastructure enables cities to have economies of scale.
These three factors confirm that city economy benefit to a
great deal of additions as a result of municipal/ urban
infrastructure. However, returns from the city economy are
substantially lower than the potential. The share of municipal
own sources in the total municipal revenue is recorded in a
range of 20-50 percent only. This confirms magnitude of
horizontal fiscal imbalance
Urbanization-ImplicationsforUrbanInfrastructure
India is undergoing a transition from rural to semi-urban
society. Around 30-35% of population is now living in urban
areas. It is clearly evident from urbanization pattern that high
the rate of development, higher is the rate of urbanization.
States with higher gross domestic product have higher levels
of population living in urban areas. Gujarat, Maharashtra,
Tamilnadu, Karnataka etc. have a significantly high level of
urbanization than Utter Pradesh, Bihar and Orissa.
It is estimated that during the next 16 years - by the year
2025 - well over 40% population will be living in the urban
areas. The magnitude of urban divide, as among other
developing countries, in India also is fairly wide. India has 286
million people living in over 5000 cities and towns out of which
61.7 million or nearly 22 percent urban population is living in
slums and squatter settlements. Incidence of poverty and
slums are closely linked with each other and nearly 26 percent
of urban population is estimated to be living below poverty
line. The incidence of poverty is associated with inadequate
access to shelter, sanitation, employment opportunities and
income generation. Key concerns include:
The rapid pace of urbanization associated with faster rate
of growth of slums, concentration of migration among
million plus cities, disparities in the income and access to
services, large size of informal sector, backlog in shelter
and infrastructure in the urban areas pose a challenge to
meet the requirements of inclusive growth.
Access to water and sanitation is also fairly inadequate with
a particular reference to low income and poor segments in
terms of availability of in-house connections, connectivity to
sewer/underground drainage, availability of toilets within the
house and adequacy of community toilets.
Garbage collection is another area of equal concern
wherein almost 1/4th to ½ garbage remains on the road;
disposal is largely in the form of open dumping, causing a
range of environmental concerns.
Maintenance and upkeep of roads is also lacking in terms
of road widening, flyovers, under-bridges, over-bridges,
regular maintenance, etc., leading to noise pollution, air
pollution and congestion, affecting the economic
activities, health status and intra-city movement.
Community and social service, public convenience,
market place, shopping centres, etc. are also either not
available or lacking various services and amenities .
RoadmapForMunicipalFiscalReforms
It should be obvious form the above discussion that fiscal
decentralization has to be at the top of the agenda for
municipal fiscal reforms. Other equally important aspect of
the strategy and the issues involved relate to the very
revenue sources of the urban local self-government. These
are (i) tax sources; (ii) non-tax sources; (iii) fiscal transfers;
and (iv) borrowings. Whereas fiscal transfer depends on
discretion of the higher levels of governments, other element
in the revenue structure are within the competence of the
ULBs who can use them effectively for generation of
financial resources. Other residual spheres of intervention for
enhancing revenue are municipal asset management,
accounting and budgeting and political risk management. In
sum reform should be taken up under (i) Intergovernmental
Action plan and (ii) Municipal Action plan.

172
IntergovernmentalActionplan
It should be explicitly recognized and noted that urbanization
and economic development are closely interlinked and cities
contribute far more to the nation's economic growth than their
share in total population. They contribute significantly to the
country's national income and exchequer. Urban policy,
therefore, needs to enable cities to contribute to national
development through the effective provision of infrastructure
and services. This, however, cannot be viewed in isolation
from broader economic and social policies. These policies lead
to unintended spatial consequences, which may sometimes be
far more profound than those intended or envisaged originally.
Thus fiscal transfers and assignment of fiscal powers to city
governments need to be done very carefully.
India being a three-tier federal system, inter-governmental
fiscal transfers is bound to remain an integral mechanism for
solving the problems of vertical imbalance in the assignment
of responsibilities and fiscal powers between the Centre,
State and local bodies. These transfers could be an effective
tool to correct such vertical imbalance, reduce the
inequalities amongst ULBs due to a variety of factors
including fiscal power, cost disabilities, revenue effort, etc.
and promote public spending in desired sectors like water
supply, education, health etc. In addition to the factors of
vertical balance, equalization principle and externalities,
administrative justification in terms of economies of scale in
tax collection at the Central or State level also make a case for
inter-governmental transfers to local bodies.
CFC and SFC Devolution
It is in this context that article 280 (c) has been added to
streamline a dedicated flow of central funds for urban
infrastructure. Similarly State funds are now transferred on
some scientific bases. However, quantum of funds under two
types of devolution is far below the potential that already
exists at higher levels of governments in India. Norms for
sub-national expenditures may be evolved and depending on
the normative estimates of expenditures to be incurred by
State Governments and local bodies, a share in the central
divisible pool of resources may be considered for the local
bodies in lieu of ad hoc grants. As urban poverty issues are
going to assume critical proportions, the CFC (Central
Finance Commission) may consider revenue assignment for
'redistributive' functions such as urban poverty alleviation
and slum development and linking such functions to a share
in 'redistributive' taxes like personal income tax, corporation
tax and service tax. The patterns of urban public finance in
India are based on the model of Anglo-Saxon countries like
United Kingdom and Australia, which have an elaborate
system of intergovernmental transfers. In addition to 'own'
and 'shared' revenues, grants-in-aid received from the
concerned State Governments constitute a major resource of
ULBs. However, the fiscal position of the States themselves
has been weak with high level of deficits and outstanding
liabilities. Hence, the State Governments have not been in a
position to provide sufficient funds to their ULBs as per the
recommendations of the SFCs (State Finance Commissions).
The SFCs may follow the suggestions made by the
Twelfth Central Finance Commission regarding approach to
be adopted to study the finances of local bodies, identifying
problems and making recommendations. The SFCs, which
need to have eminent experts with knowledge of local public
finance or local administration as members, may make
specific recommendations that are implementable. Definite
time-frames for implementing the SFC recommendations by
State Governments may also be fixed statutorily. SFCs may
accord priority to 'measures' for improving municipal finances
and financial management to address the fundamental factors
leading to vertical imbalance rather than adopting a gap-
filling approach.
Further, most of the ULBs are committed to reducing fiscal
deficit, as per their newly enacted Fiscal Responsibility and
Budget Management Acts. While there is a need for
empowering ULBs with 'own' taxes and non-taxes, the
intergovernmental transfer system, especially transfers from
States to ULBs, need restructuring. The present system in
States is ad hoc, with very little incentive to ULBs to prompt
efforts for bridging the fiscal gap and rendering performance.
The design of inter-governmental transfers from State
Governments must be based on the principles of objectivity,
transparency and predictability which may include : (a) the
transfers must imply a hard budget constraint for the
municipalities and there should be no soft options at the
margin; (b) the quantum and frequency of transfers must be
predictable; (c) they must be transparent through explicit and
identifiable entries in government budgets; (d) they must be
pre-determined rather than open-ended and (e) they must
have in-built incentives for promoting local resource
mobilization and effective public service delivery. A simple
distributive formula that gives due weights to needs, rights
to minimum basic services, incentives to performance and
inter-jurisdictional equity may be designed
Therefore a devolution index needs to be devised to
streamline devolution in terms of equalization and promotion
of distributional and jurisdictional equity. XIIIth Central
Finance omission therefore tries to promote a devolution
index along with bottom up assessment of gap so that State
Finance Commissions and CFC can take appropriate actions
to minimize vertical gap.
DecentralizeFiscalControl
Fiscal control in terms of devolution of fiscal powers to levy
taxes and fee/charges etc. and borrowing powers along with
rationalization of expenditure assignment should be liberalized
to enable municipalities to become centre for self governance.
Most of these actions are due on part of state governments.
The Constitution (74th Amendment) Act 1992 identifies 18
functions in the 12th Schedule as belonging to the legitimate
domain of urban local bodies. A study of amendments to
municipal acts by the State Governments following the 74th
Amendment reveals that there is inadequate clarity regarding
the assignment of functions to ULBs. Some municipal Acts
mention functions 'as may be assigned from time to time' by
the concerned State Governments. In the absence of activity
mapping and clarity regarding the levels at which component
of functions such as policy-making, planning, formulation of
programmes and projects, implementation, monitoring, quality
assurance, assessment and evaluation are to be performed in

173
connection with the delivery of particular public services,
overlap between the functional domains of ULBs, State and
Central Governments will continue. Functions of various tiers
of government need to be clear and without any ambiguity.
Assignmentoffiscalpowers
Inadequate assignment of tax and non-tax resources including
inter-governmental transfers, incomplete delegation of
revenue-raising powers, inappropriate user charges,
inefficiency in tax administration and under-exploitation of
assigned revenues are some major factors that have
contributed to the resource crunch of ULBs. The ULBs must
be made an integral part of revenue mobilization in as much as
they share responsibilities. Studies recommend a combination
of benefit taxes, user fees, development charges and
borrowings for long gestation capital works as appropriate for
meeting civic expenditures. User charges should be based on
the marginal cost of additional units of services from the
infrastructure and development charges on the marginal cost
of extending infrastructure to new developments, levied on a
development-by-development basis.
BorrowingPowers
Adequate fiscal powers should be allocated/devolved to
ULBs. In the Changing framework of reforms under JNNURM
( Jawaharlal Nehru National Urban Renewal Mission)
covering accounting and budgeting reforms ,
creditworthiness is gradually emerging .It is suggested that
borrowing restrictions on ULBs may be relaxed and guided
by pre-specified principles and not by case to case
examination at the State level A critical issue to be addressed
in the context of debt-financing as a key instrument of
municipal finance is that practically all Municipal Acts in the
country impose restrictions on the power of Municipalities to
borrow funds. Examples are: Section 86 of Karnataka
Municipalities Act, 1964 as amended by Act No. 24 of 1995;
Section 154 of Karnataka Municipal Corporation Act, 1976 as
amended by Act No. 25 of 1995; Section 154 of the Uttar
Pradesh Municipal Corporations Act 1959 as amended by
U.P. Act No.12 of 1994; Section 185 of Delhi Municipal
Corporation Act 1957; Section 149 of Hyderabad Municipal
Corporation Act 1955 and Section 142 of Madras City
Municipal Corporation Act 1919.
All these laws make the previous sanction of the State
Government (Central Government in the case of Delhi)
mandatory before any borrowing is resorted to by an ULB.
While stipulating that such borrowings would be on the
basis of security of all or any of the taxes, duties, fees and
dues authorized under municipal and other laws, the State
Governments prescribe conditions regarding security, rate of
interest, repayment of principal and interest, date of
floatation and time schedule for loan repayment. They also
specify the purposes for which borrowing can be resorted to.
These generally include: (a) construction of permanent
works, (b) acquisition of lands and buildings, (c) paying off
any debt due to government and (d) repaying loan
previously rose under municipal and other laws.
Thus, vertical imbalance is constitutionally in-built and
correction to the same needs to be achieved through reforms
in the structure of fiscal federalism, including revenue
assignment and inter-governmental transfers through the
Central and State Finance Commissions. There is a need for
function-finance mapping to ensure that each function to be
performed by the ULBs is backed by a corresponding
financing source. The revenue instruments assigned to a tier
of government should match, as far as possible, the
expenditure requirements to induce fiscal responsibility.
Owing to the fact that ULBs, which have better
delegation of revenue powers and less dependency on upper
tiers of Government, perform well in terms of provision of
core services or lower under spending. Thus, the
restructuring of revenue powers to ULBs needs to be given
top priority by State Governments, if urban services are to be
improved. Simultaneously, the quality of expenditure by
ULBs needs to be enhanced with a rationalization of the work
force and reduction in spending on establishment and
administration. There is considerable scope for the ULBs to
recourse to borrowed funds for improving civic infrastructure
as their current level of indebtedness is perceived to be low.
Thus, several ULBs would be in a position to access the
capital market if borrowing constraints are eased and tax-free
bonds are facilitated. However, strong revenue reforms,
covering both general revenues and user charge revenues,
are a pre-condition for accessing market funds. There is a
significant scope to raise the user charges which are
abysmally low across the States.
ExpenditureAssignment
The Constitution (74th Amendment) Act 1992 identifies 18
functions in the 12th Schedule as belonging to the legitimate
domain of urban local bodies. A study of amendments to
municipal acts by the State Governments following the 74th
Amendment reveals that there is inadequate clarity regarding
the assignment of functions to ULBs. Some municipal acts
mention of functions 'as may be assigned from time to time'
by the concerned State Governments. In the absence of
activity mapping and clarity regarding the levels at which
component of functions such as policy-making, planning,
formulation of programmes and projects, implementation,
monitoring, quality assurance, assessment and evaluation
are to be performed in connection with the delivery of
particular public services, overlap between the functional
domains of ULBs, State and Central Governments will
continue. Functions of various tiers of government need to
be clear and without any ambiguity.
MunicipalActionPlan
One common feature of urban local finance across the
developing countries is inadequate own sources of revenue.
India too is no exception. The devolved sources of revenue
do not match with wide range of functions required to be
performed by them. This has led to increasing dependence of
ULBs on higher levels of government (central government in
a unitary system and provincial or state governments in
federal countries). Bahl and Linn found that in the cities
studied by them, the median share of local revenues in
financing local expenditures was as low as 30 percent in the
Caribbean countries (Bahl and Linn 1992). This, including

174
shared taxes, was around 63 percent in the transitional
countries (Bird and Wallich 1993). While the huge resource
gaps of the ULBs require major structural reforms that take
time, there are no two opinions that ULBs should exploit the
revenue sources already assigned to them more effectively.
There is a particular need for focusing on maximization of
revenues from property taxes, user charges and the use of
urban land as a resource. 'Users pay', 'beneficiaries pay' and
'polluters pay' are the cornerstones of local public finance as
suggested by theory as well as practice. They must be fully
made use of through scientific ways of identifying tax base
and revenue potential at local level.
Own sources from city economy, value added role of
services and sale of assets and services
Therefore, Municipal Action plan is needed to minimize
horizontal imbalance to bring resources from city economy,
value added role of municipal infrastructure and sale of
municipal assets and services. The international experience
shows that the range of resources available to urban local
bodies in federal countries such as United States, Canada,
Brazil, China, etc., is very broad compared to that in India.
'Own' taxes and user charges of ULBs in India is grossly
inadequate to meet the expenditure needs of ULBs. Abolition
of Octroi has seriously affected municipal fiscal autonomy.
Besides, elaborate State Government controls on the
municipal authority to levy taxes and user charges, set rates,
grant exemptions, etc. and on the design, quantum and
timing of inter-governmental transfers are constraining ability
of the ULBs in mobilizing resources.
The issues of lack of clarity, consistency and predictability
in expenditure assignment and revenue assignment should be
addressed. In particular, the system of taxes, user charges,
inter-governmental transfers and borrowings in respect of
ULBs need to be reviewed for their adequacy and suitability to
match the expenditure needs. Resources are required to be
aligned with expenditures so that the delivery of services most
required by citizens can take place effectively. Reforms need to
focus on the basic issues of fiscal federalism, namely, revenue
assignment must be clear and revenue assignment must
correspond to expenditure assignment. There is also a need to
address the issues of service delivery management as in the
ultimate analysis outlays will have to translate into outcomes
valued by the public.
TappingLocalEconomyPotential
Local economy potential can be tapped by Direct Taxes/
levies or using municipal money as seed capital to motivate
city community to come forward to join municipal efforts.
Octroi used to be mot elastic and liquid municipal source.
However due to pressure for transport efficiency and
business efficiency of octroi has taken place across the
country (except for Mumbai).
Assigning an alternative in the place of Octroi to ULBs is
a critical reform, which is pending since long. The Twelfth
Finance Commission has recommended that a tax, preferably
linked to the consumption characteristic of good and hence
also buoyant, would be a suitable alternative to Octroi. The
search for a substitute for Octroi may perhaps end with a
reasonable formulae-based share for the ULBs in the Value
Added Tax in the state of Madhya Pradesh, which has been
thinking. Also a Niryat Kar (Tax on Export from local area) is
imposed to generate additional revenue. Lately to bring back
Octroi, few municipal governments levy a Paryavaran Kar
(Tax on Environment) on the lorries, which unload
consignments in the city (Raipur) at Chhattisgarh. (Box !)
Innovative local revenue instruments
Several new instruments have emerged to raise funds from
local economy. These include alternate instruments which
have higher compliance. Capital value taxation is recognized
as a desirable way to enhance the yield from property taxes.
However, the process to move to such a system is bound to
be slow given the view that tax-payers in cities in India are
'property-rich', but 'cash-poor'. Moreover, most ULBs do not
have a cadre of trained assessors to evaluate property values
and update them regularly. Experiences of cities like
Hyderabad and Bangalore suggest that area-based property
tax systems, linked to self-assessment schemes, have
considerable scope for enhancing property tax revenue.
The Pune Municipal Corporation in Maharashtra levies a
Street Tax at the rate of 5 per cent of ARV as a piggybacking
on Property Tax for part financing an elaborate scheme of
improving traffic and transportation (Jha 1998). In the state of
Haryana in India, the state government has introduced an
elaborate scheme of taxation to moblise revenue for ULGs
after the abolition of Octroi (boxes-l and ll).
Navi Mumbai Municipal Corporation has given a lead in
this regards. It is using CESS on goods coming to city for
consumption, production and sale and getting highest amount
of own sources from this instrument .Encouraged by this
innovation Government. of Maharashtra has introduced Local
Body Tax to be levied by all the municipal governments in the
state. This has potential to emerge as alternative to Octroi.
TappingLocalElasticity
There are several innovations among different states to
motivate local community to provide resources for provision
of urban infrastructure. Janambhumi, (Andhra) amaknamme
Thettam (Tamil Nadu), Community support for social forestry,
road construction, public conveniences, footpath etc at Indore
and other towns of Madhya Pradesh are examples of local
elasticity coming for municipal resources. There are several
other examples of local elasticity which need to be followed by
ULBs. Suitable mechanism to document, award, adapt and
replicate these innovations is needed at local levels.
LinkingServiceswithUserCharges
Property tax is collected under various Municipal Acts with
components such as water tax, drainage tax, lighting tax,
conservancy tax and general tax. It is desirable that services
like water supply, which can be measured and for which
beneficiaries can be identified without incurring a huge cost,
are financed through user charges. This however requires
pricing and costing for the supply of water. After a reform
process presently undergoing under JNNURM, it should be
possible for several such cities to have scientific costing and
pricing. It will also require complete metering and continuity
in supply of water.
ULBs in India need to be enabled to levy user charges for

175
individual services with the goal of full cost recovery. Benefit
taxes should be levied when the levy of user charges is not
possible. Strengthening the creditworthiness of ULBs requires
that they be given autonomous authority to set realistic tax-
rates and user-charges for the basic services provided by them
and also for pursuing right-sizing of staff. Services provided
by a public organisation are grouped as (i) public-goods and
(ii) merit goods or non-public goods. The latter is fit for
application of principle of exclusion. Consumers are
identifiable and quantum of services consumed is possible to
be measured. In case the consumers do not pay for the
services consumed, the service can be disconnected.
Water supply, sewerage, urban transport, solid waste
collection and parks qualify for imposition of user charges.
The economic rationale of cost recovery entails that the user
charges have to be based on the unit cost of providing a
service. In actual practice, however, the municipal
governments are not recovering even the maintenance cost.
In India, the maintenance cost recovery through user
charges is hardly one-third of the total operations and
maintenance cost (NIUA 1993, TRF 1997).
Many municipal bodies are, however, levying user
charges in quite inefficient manner. Most of them adhere to
piggybacking of user charges on PT which itself has
depressed base and suffers from a number of infirmities. This
makes the service delivery inefficient and inadequate.
Efficiency requires to charge "wherever possible "(Bird
1994). Besides being an important tool of cost recovery, User
Charges have commendable attributes. User charges
enhance efficiency. Like price in a market economy, it
provides a signal about the demand for the services to
municipal bodies. It ensures economical use of the service by
preventing misuse and abuse of the services provided. It
disciplines both the users and the abusers and fits into the
very economic rationale of local government to improve
efficiency, "to ensure that local citizens get in local services
what they want, and are willing to pay for" (Bird 1994).
All the directly chargeable services have therefore to be
charged on the basis of costs. In any scheme of user charge,
the needs of lower income groups can be taken care of by
working out an innovative cross-subsidy structure based on
subsidy from one land use to another, from one income
group to another and from one account to another. The
Mumbai Municipal Corporation's Bombay Electric Supply
and Transport (BEST) which provides electricity and
transport, electricity account gives subsidy to the transport
account, which incurs deficit.
DevelopingPublic-PrivatePartnerships(P3)
P-3 has come handy in recent years in the municipal sector due
to its several spin-offs. It facilitates financing of urban
services, augments the level of services, enhances efficiency
of service delivery system, and brings in new technology. P-3
is pushed through either by way of privatisation or by
contracting out of services to private operators and providers.
Interesting forms of privatization have immerged like BOT,
BOOT, BOO, BOLT and others. However, in order to enhance
efficiency and effectiveness of the delivery system, municipal
government and the urban infrastructure agencies are going
for management contract. Privatisation has not yet materialised
on a scale as required in less developed economies. There are
only sporadic examples of privatisation. Water supply is
privatised in Manila. Interestingly, two private providers were
granted concession for eastern and western parts of the city to
promote competition. After privatisation, the efficiency of the
delivery system increased and the tariffs decreased (Dumol
2000). Other examples are Buenos Aires, and Macao. France
has had a long history a privatisation of water supply, which is
also being practiced in U.K.
Indian cities have applied a large number of P3 cases in
the area of water supply ( o&m at Navi Mumbai),Solid waste
management ( Rajkot,Hyderabad ),Street Lighting ( Hubli
Dharwad,Towns of TamilNadu),Parking and Public
Conveniences ( New Delhi).These type of best practices
need wider Replicability to improve efficiency, mobilise
additional resources and promote healthy competition in the
delivery of services. At the same time city governments
should also perform the task of regulator for these P3
projects to ensure equity.
EffectiveTaxAdministration
Maladies in tax administration relate to lack of proper
assessment of demand, billing and collection. In the state of
Gujarat in India, which is amongst some of the progressive
states with respect of urban administration, average collection
Box-ll: New Fiscal Tools Innovated in Haryana
Local Area development Tax @ 4 per cent of the value of goods
moving from one area to another within the state
Tax on Profession, Trade and Callings
Fire Tax @ one per cent of ARV
Rs. 100 tax on Driving License
Five paise per unit on power consumption
Rs 2,500 per year on hotels, restaurants, banquet halls, petrol
pumps, nursing homes, gas agencies, private schools and
colleges, furniture show rooms, milk dairies, industrial units.
Rs. 1,500 per year on private laboratories, commercial colleges,
computer centres and show rooms of big companies.
Rs. 1,000 per year on workshops, service stations, ice
factories, flour mills
BOX-l: New fiscal Tools Innovated by Cities
PUNE: Street Tax @5 per cent of ARV
Use of Land as resource
Transfer of Development rights
Marketing of FSI
RAIPUR: Niryat Kar (Export Tax)
Paryavaran Kar (Environment Tax)
Municipal Corporation of Delhi
Toll Tax on Commercial Vehicles, Including government Vehicles
(a) Tempos and Taxies: Rs. 25 per entrymonthly coupon, Rs. 500)
(b) Buses and mini trucks: Rs 50 per entry (monthly coupon, Rs. 1000)
(c) Six wheeler trucks: Rs. 50 per entry(monthly coupon Rs. 1500)
(d) Ten wheeler trucks and trawlers: Rs. 200 per entry (Monthly coupon Rs. 3000)
(e) Sixteen wheeler trawlers: Rs. 500 per entry (Monthly coupon Rs. 5,000

176
ratio was only about 40 per cent (NIUA 1993). A study for the
Eleventh Central Finance Commission in India revealed that 47
per cent of the sample municipal bodies were collecting only
up to 50 percent of PT demand. Statistics for other municipal
bodies as well depict poor tax collection (Jha 1998).
Non-realisation of potential of revenue from tax sources
due to poor tax-administration is a major reason for low
revenue mobilisation. To give only one example, the first
State Finance Commission (SFC) in Rajasthan State in India
believed that there was a potential for additional revenue
generation of about Rs. 1544 million against the actual
generation of Rs. 2129 billion (Rajasthan 1995).
Tax collection and generation of additional revenue could be
ensured through (i) a scheme of incentives and penalties for
municipal staff and the taxpayers and (ii) by profitably adopting
the ABC Analysis, which is usually applied in management of
inventory in an organisation or a project. An innovative scheme
of incentives and penalties tried in Delhi in the recent past led to
three times increase in PT revenue in five years (Sharma 1991).
Using Land as the Resource
Land is emerging as a resource for revenue enhancement.
ULBs have started using it in innovative ways. Amongst
several innovative use of land as a resource in India, two
innovative practices deserve special mention. The City and
Industrial Development Corporation (CIDCO) in Navi
Mumbai has generated massive funds to finance
development of New Mumbai by providing the entire needed
urban infrastructure including its connectivity by rail and
road over the creek with the island city of Mumbai. The
funds generated by using land were used even for providing
shelter for the economically weaker sections of the society.
CIDCO did not have to spend huge funds for development of
New Mumbai. The second example pertains to Delhi. The
cost of acquisition and development of land is met from the
funds thus generated and the entire sale proceeds of the
developed land were credited to the fund.
Other Land Based Tools
In India, Chennai Municipal Corporation levies a Tax on
Vacant Land (VLT) at the rate of Rs. 104 per ground (290 sq.
ft.). The Municipal Corporations of Delhi, Kolkata and
Mumbai as well levy this tax on the capital value (CV) of
land. MCD levies it at the rate of 5 per cent of CV. Mumbai
Municipal Corporation levies the same at the rate of 12 per
cent of CV. More than generating the resources, VLT is used
to regulate the use and development of vacant land, which
will add to the housing stock.
A number of countries in Latin America, Australia, Syria,
Turkey and other Afro-Asian countries have taken recourse
to VLT. Peru taxes vacant land on an increasing scale. The
rate of tax is doubled every year till the vacant land is
developed. In case one owns additional plot of land, it
attracts additional tax burden (Smith 1979). In Ecuador, it is
levied at the rate of 10 per cent. In Chile, it is levied at the rate
of 3 percent, which graduates to 6 percent of land value over
a period of three years, and frozen at this. In Buenos Aires
(Argentina), Vacant Land Tax is levied at 5 to 10 percent. In
Syria, it is levied at a graduated rate on the basis of land
values. In Australia, a surcharge of up to 5 percent is levied
on unimproved urban land. Vacant land is taxed in Taiwan,
Turkey, Senegal, and Korea and even in Pakistan.
TaxonLandValueIncrement
Land values appreciate largely due to improvements brought
about by the city governments through city development
initiatives. Land Value Increment Tax (LVIT) is used with the
basic objective of mopping up some of the land value
increment for the use and benefit of the community at large.
There are two varieties of LVIT. It is imposed in some
countries on the realized increased in land value. In others, it
is levied on unrealized value increments. Israel and Malaysia
impose this tax on the realized value. Italy, Taiwan levies it on
unrealized value. In Sydney (Australia), land value increment
is recovered partly through tax at the time of change in
zoning from rural to urban at the rate of 30 percent.
LVIT, however, is a tax imposed by the central governmental
and is not very productive largely due to problems confronted
in assessment of land value increments. There are ways,
however, to get over the assessment problems and share the
proceeds of this tax with the municipal authorities.
A popular tax for sharing in the land value increment is
Stamp Duty used extensively in India. Municipal
Governments in UP and Haryana have access to this
instrument; though imposed and administered by the state
governments, the proceeds are shared with municipal bodies.
As the land value increments are brought about by local
development initiatives of municipal governments, there
exists a rationale and justification for its devolving to ULGs.
BettermentLevy
Betterment levy is levied to recover increase in urban land values
resulting from implementation of specific urban development
project. The proceeds from this levy are used to meet capital cost
of the project. It is levied on the project beneficiaries and
continues till the full capital cost of the project is recovered. It has,
however, been constrained by two problems. First is the element
of arbitrariness in assessing the extent of land value increments in
quantitative terms. The second is the physical distance of
properties from the implemented project up to which the
properties are supposed to have benefited. Additionally, how
does one distinguish which part of the land value increment is
due to natural increase (scarcity value) and which is due to the
impact of the project in question?
ValorizationCharges
Practiced in Columbia, it is similar to SAD. Valorisation charges
have been used to finance street improvements, sewer
extension and similar projects through a system of charging.
The cost of public works is allocated to properties that benefit
from projects directly. The cost is allocated in direct proportion
to benefits conferred (Doebele, Grimes and Linn; Bird 1994) as
a cost recovery mechanism; Valorisation Charges are allocated
on the basis of assignment of prescribed benefits to properties
in the demarcated series of equally wide parallel zones along
the project. Adjustments are made to take account of variation
in the lot size and frontage.

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