New Delhi: As the Narendra Modi government completes four years in power, its flagship schemes like the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Skill India programme, Ujjwala Yojana and Jan Dhan Yojana are struggling to make a difference, while others like Mudra and Housing for All by 2022 spell fresh trouble for the banking sector, which is already reeling under bad loans.

DDUGJY

The government recently announced that it has completed the electrification of 18,452 villages under the DDUGJY. But data show there has not been much impact on the country’s electricity consumption. As per data compiled by the Union power ministry, India saw just 5.66% average annual growth in generation between 2014-15 and 2017-18, compared to 5.9% between 2010-11 and 2013-14. This despite the fact that thermal power plants have been operating at historically low levels in recent years.

Why power consumption is not growing despite an increase in rural electrification remains unanswered.

As per the government, a village is considered electrified if it has basic electrical infrastructure and 10% of its households and public places have power.

If we go by this definition, an electrified village is connected to a power grid, but that does not mean that all its inhabitants have access to electricity.

While no one can dispute the government’s claim, electrification itself might not bring much relief to these villages as there is no assurance of electricity supply. Even if utilities supply power to these villages 24×7, there is no guarantee the villagers can afford it.

Under the Modi government’s ambitious Pradhan Mantri Sahaj Bijli Har Ghar Yojana or the Saubhagya scheme, poor households were to be given free electricity connections, but their consumption is to be metered and they are to be billed accordingly. This may deter economically-weaker consumers from seeking electricity connections.

Ujjwala scheme

On May 1, 2016, the prime minister launched the Pradhan Mantri Ujjwala Yojana (PMUY) with the target to provide five crore LPG connections to women from poor households by the end of March 2019.

While the number of LPG connections has seen a big growth after the rollout of the PMUY, it has not been matched by a commensurate increase in LPG consumption.

While 3.6 crore LPG connections have been issued over last two years under the Ujjwala scheme, this is not reflected in the consumption of cooking fuel. The growth rate of LPG consumption has stayed at the same level as before the scheme was launched.

LPG consumption saw a growth of 10.5% and 9% in 2014-15 and 2015-16, respectively. After the rollout of Ujjwala, LPG consumption recorded a growth rate of 10.1% and 8% in 2016-17 and 2017-18, nearly the same level as before the scheme was implemented.

This is because Ujjwala beneficiaries are not coming for a refill at the same frequency as general LPG consumers.

Even petroleum minister Dharmendra Pradhan has admitted that the average per capita consumption of PMUY beneficiaries who have completed one year from the date of release of connections is just about 4.32 cylinders.

This is not surprising, given that Ujjwala beneficiaries are not required to pay a security deposit or other overhead costs for taking LPG connections. They also have the option of paying for a gas stove and first refill at the time of getting the connection in instalments. However, there is no extra concession from the second refill stage.

Experts say that paying for even one subsidised LPG cylinder refill – which costs over Rs 600 – is not easy for poor households. They find kerosene and firewood to be much cheaper.

If a PMUY beneficiary avails a loan, the cost of LPG stove or cylinder or both are recovered in monthly installments by the OMCs from the subsidy amount due to the beneficiary on purchase of each refill.

According to Indian Oil, about 70% of the PMUY customers have availed interest-free loans provided by OMCs for financing the purchase of LPG stove and first refill. Under the scheme, OMCs are recovering the subsidy provided on subsequent refills from beneficiaries who have taken a loan and adjusting the same towards the repayment of the loan. Hence, 70% Ujjwala beneficiaries purchase refills at the market price until their loan is paid back.

Jan Dhan Yojana

As many as 31.6 crore accounts have been opened under the Modi government’s ambitious scheme for financial inclusion. These accounts have combined deposits of Rs 81,203.59 crore as of May 27.

However, nearly 20% of these accounts are lying inactive and 1.9% have been closed, according to a reply given by the minister of state for finance Shiv Pratap Shukla in parliament recently.

That shows lack of customers’ interest in maintaining their accounts.

An estimated 31.20 crore Jan Dhan accounts with combined deposits of over Rs 75,000 crore were opened till February 2018, out of which only 25.18 crore (or 81%) were operative, Shukla told the Rajya Sabha in a written reply.

The minister added that till February 2018, about 59 lakh Jan Dhan accounts have been closed since the launch of the scheme.

“Jan Dhan accounts are closed as per the request of account holder. Some of the Jan Dhan accounts are closed due to conversion into normal savings account as per request of the account holder,” Shukla explained.

“In some cases, accounts are closed due to account holders having multiple accounts in their name in the same bank,” he added.

Meanwhile, the World Bank has said that almost half of India’s bank users have an account that has remained inactive in the past year. According to the Global Findex Database 2017, Measuring Financial Inclusion and the Fintech Revolution released by the World Bank, “Globally, 13% of adults, or 20% of account owners, reported having what can be considered an inactive account, with no deposit or withdrawal – in digital form or otherwise – in the past 12 months”.

According to the World Bank, in India, the share of inoperative bank accounts is 48% – the highest in the world and about twice the average of 25% for developing economies.

World Bank’s findings run counter to the Modi government’s narrative that the Jan Dhan scheme has been a game-changer in the drive for financial inclusion.

Deposits under these accounts have been rising ever since the prime minister announced the demonetisation of Rs 500 and Rs 1000 currency notes in November 2016. The deposits increased in the later part of November 2016 to over Rs 74,000 crore from about Rs 45,300 in the beginning of the month, according to government data, as people rushed to deposit the scrapped currency notes of Rs 500 and Rs 1000. Thereafter, deposits in the accounts dipped before picking up again in a steady manner from March 2017.

It increased to Rs 73,878.73 crore in December 2017 and further to Rs 75,572 crore in February 2018 and have now crossed Rs 80,000 crore. The number of people joining the financial inclusion programme is on rise, too.

The number of account holders has increased to 31.45 crore as on April 11 from 26.5 crore at the beginning of 2017. The number of such account holders was 25.51 crore as on November 9, 2016, the day demonetisation kicked in.

Affordable housing: Pradhan Mantri Awas Yojana (PMAY)

The government has set a target of constructing five crore new housing units by 2022 under the PMAY, of which three crore are to be built in rural areas and the balance in cities.

But work on both the schemes is proceeding at a tardy pace.

Against the target to build two crore houses for the urban poor by 2022, only 4.13 lakh houses have been constructed as at the end of December 2017 while work is underway on 15.65 lakh units.

The urban housing ministry plans to construct 26 lakh houses in 2018-19, 26 lakh in 2019-20, 30 lakh in 2020-21 and 29.8 lakh in 2021-22. However, targets look challenging given the slow progress till now. For example, in 2016-17 only 1.49 lakh houses were constructed against the target of 32.6 lakh units.

Under the rural scheme, construction of only 16 lakh houses has been completed.

Experts said a significant pick-up in the implementation of both the schemes is required for the government to meet respective targets.

Rising loan defaults

Meanwhile, international credit rating agency Moody’s has flagged growing loan defaults by affordable home buyers, a trend that it said could continue in 2018 too.

Competitive pressures and larger exposure to the self-employed are the prime reasons for the build-up of stress in the segment, a joint report by Moody’s and its India affiliate ICRA said recently.

“While asset quality is expected to remain stable in the traditional housing segment, delinquencies could further build up in the affordable segment in the calendar year of 2018,” ICRA’s structured finances head Vibhor Mittal said.

In a note on asset-backed securities (ABS) co-written with its parent Moody’s, the report said gross-nonperforming assets in the affordable housing segment have inched up to 1.8% as of September 2017.

Going into the reasons for the higher stress in the low ticket size loans, Mittal said, “this would be driven by factors like intensifying competition – resulting in some easing in lending standards – and a higher share of lending to the self-employed segment.”

Noting that for housing finance companies, loans to self-employed borrowers have increased to 30% of their overall home loan portfolio compared with 20% four years ago, primarily driven by government impetus to affordable housing, Crisil, another rating agency, has warned of rising delinquencies.

Mudra scheme

The Mudra scheme, which focuses on meeting the capital requirement of first-time women and Dalit entrepreneurs, has been advertised as a big job creator by the Modi government. However, a close scrutiny of average loan size reveals that Mudra’s optics is more attractive than its reality.

Loans of up to Rs 50,000, up to Rs 5 lakh and of between Rs 5 lakh and Rs 10 lakh are given under the scheme, which was launched in 2015.

Nearly Rs 6 lakh crore has been disbursed to over 12 crore beneficiaries under the Pradhan Mantri Mudra Yojana, which was launched in 2015. As reported by The Wire recently, the number of larger-sized loans – of more than Rs 5 lakh – that can create real jobs are just a tiny percentage, or 1.3% of total loans disbursed under the scheme.

The balance loans are in sizes of less than Rs 50,000 and of between Rs 50,000 and Rs 5 lakh.

The average size of Mudra loans in 2017-18 was Rs 52,700, an amount that could hardly be expected to generate jobs.

Modi had promised to create jobs on the campaign trail for 2014 general elections. But he has largely changed tack after coming to power, saying that he wants to turn job-seeking youth into job-creators.

But economists are not convinced by the Modi government’s U-turn, which they see as a diversionary tactic. Such loans can at best provide underemployment, not full-time employment.

Loans under the Mudra scheme are considered risky as they have been given by banks without any collateral. In case of default, banks cannot do much to recover loans. Public sector banks account for 55% of loans given under the scheme.

PSBs are already reeling under bad loans. If Mudra loans too start turning sour, they could add to PSBs’ non-performing assets (NPAs).

Skill India

The prime minister launched the scheme in July 2015, with the aim to train 24 lakh youth in the first phase. However, marred by overlaps in roles and responsibilities across departments, the scheme failed to take off, costing Rajiv Pratap Rudy his ministerial berth. He had to resign as minister for skill development and entrepreneurship last September.

The first phase of the scheme was easy as each trainee had to be given Rs 5000-12,000. No surprise, the National Skill Development Council (NSDC) overshot its first phase target. It trained 18 lakh people and certified another 12 lakh.

However, the targets of the second phase, which was launched in 2016 with the target to skill one crore youth by 2020, proved too difficult for the government to achieve.

Under the second phase, 60 lakh youth were to be provided fresh training and 40 lakh to be certified for the Recognition of Prior Learning (RPL) programme.

A five-member committee headed by Sharda Prasad, former director general of general employment and training in the ministry of labour and employment, found that scheme was poorly implemented, with unrealistic targets.

The committee, in its report made public in April last year, added that everybody was chasing numbers without providing employment to the youth or meeting sectoral industry needs.

Data shows that the National Skill Development Council managed to skill about 600,000 youth till September 1, 2017, and could place only 72,858 trained youth, achieving a placement rate of around 12%. Under PMKYV 1, the placement rate stood at 18%.

The Prasad-led panel observed that India’s goal of skilling 40 crore people under the National Skills Development Programme 2015 is too large, unnecessary and unattainable.