1. IRDAI allows PE funds to invest directly in insurers

Insurance regulator introduces slew of proposals to improve ease-of-doing business, including allowing promoters to dilute up to 26% stake and raise subordinated debt sans approval

Insurance regulator IRDAI has approved a bouquet of proposals, including permitting private equity funds to directly invest in insurers, in a bid to promote ease-of-doing business in the sector.

Other key proposals include allowing promoters to dilute up to 26% stake and dispensing with IRDAI approval for raising capital through subordinated debt and preference shares.

The regulator also green-lighted a proposal for increasing the limit on tie-ups for intermediaries.

Among company-specific proposals that the Insurance Regulatory and Development Authority of India cleared at its board meeting were final approval to Go Digit General Insurance Company for listing; in-principle nod for IndiaFirst Life Insurance Company to list, and clearance for Exide Life Insurance Company’s merger with HDFC Life Insurance Company.

Access to capital

IRDAI also approved reduction in solvency norms for general and life insurers, which is expected to provide them access to an additional ₹3,500 crore.

IRDAI said besides dispensing with a requirement of prior approval to raise subordinated debt and or preference shares, it was also approving an enhancement of the limits for raising such capital – from 25% to 50% of paid up capital and premium, subject to 50% of net worth of company. It is expected to enable insurance companies to raise required capital in a timely manner.

For enabling better access to insurance, the number of tie ups for corporate agents and insurance marketing firms (IMF) was being increased, IRDAI said.

IRDAI: Powers and Functions

IRDAI is responsible for safeguarding the interests of policyholders, controlling, encouraging, and guaranteeing the insurance industry’s orderly expansion.

The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous and statutory body. It is responsible for managing and regulating the insurance and reinsurance industry in India.

The Insurance Regulatory and Development Authority of India (IRDAI), which was established by an act of parliament, specifies the composition of the Authority under section 4 of the IRDAI Act of 1999.

History and Establishment of IRDAI

• Up until the year 2000, the Indian government oversaw the regulation of the insurance sector.
• However, the IRDA was created in 2000 to implement a stand-alone apex body at the advice of the Malhotra Committee report from 1999.
• The IRDA started accepting registration requests through invitations in August 2000 and started allowing foreign businesses to invest up to 26% in the market.
• Section 114A of the Insurance Act of 1938 has a number of rules and regulations that have been set forth by the IRDA.
• Regulations cover everything from safeguarding the rights of policyholders to registering insurance businesses to do business in the nation.
• There are currently 34 general insurance companies active in the country, including the ECGC and the Agriculture Insurance Corporation of India, as well as 24 life insurance companies.
• The main objective of the Insurance Regulatory and Development Authority of India (IRDAI) is to enforce the provisions of the Insurance Act.

Composition of IRDAI

The Insurance Regulatory and Development Authority of India is constituted by an act of parliament. The Authority is a ten-member body, specified in section 4 of the IRDAI Act of 1999, consisting of

• a Chairman;
• five whole-time members;
• four part-time members;

All of the appointments are done by the Government of India.

Aim of IRDAI

• Ensuring fair treatment for policyholders and defending their interests.
• To promote the insurance industry’s rapid and orderly expansion (including annuity and superannuation payments), which will benefit the general public, as well as supply long-term finance for the economy’s rapid expansion.
• To take action when such standards are not sufficient or are not adequately applied.
• To ensure that the industry operates with the appropriate level of self-regulation in accordance with prudential regulation rules.
• To establish, encourage, oversee, and uphold high standards for the competence, moral character, and financial stability of those it regulates.
• To ensure prompt resolution of legitimate claims, to stop insurance fraud and other wrongdoing, and to set up efficient grievance redressal mechanisms.
• To encourage fairness, openness, and lawfulness in financial markets that deal with insurance, and to create a solid management information system to impose strict requirements for the financial soundness of market participants.

Objective of IRDA

The IRDA’s primary goal includes fostering competition to boost consumer choice and lower prices while maintaining the market’s financial stability in order to increase customer satisfaction. The primary objective of the IRDA is:

• to safeguard the policyholder’s interests and ensure fair treatment.
• to effectively regulate the insurance sector and guarantee its healthy financial standing.
• establishing regulations on a regular basis to make sure the sector runs well.

Powers and Functions of IRDAI

• Section 14 of the IRDAI Act, 1999 lays down the duties, powers, and functions of IRDAI.
• Issue a certificate of registration to the applicant, renew, alter, withdraw, suspend, or terminate such registration.
• Safeguarding the interests of policyholders in matters pertaining to policy assignment, insurable interest, payment of insurance claims, policy surrender value, and other terms and conditions of insurance contracts.
• Specifying the necessary credentials, moral standards, and practical training for insurance intermediaries and agents.
• Encouraging efficiency in the management of the insurance industry.
• Charging fees and other amounts in order to carry out the objectives of this Act.
• Governing insurance firms’ financial investments.
• Rules governing the preservation of the solvency margin.
• Resolution of conflicts involving intermediaries or insurance intermediaries and insurers.
• Monitoring the activities of the Tariff Advisory Committee.
• Contacting insurers, intermediaries, insurance intermediaries, and other organizations associated with the insurance business to request information, inspect, inquire, and undertake investigations, including audits.
• Control and regulation of the rates, benefits, terms, and conditions that insurers may offer in relation to general insurance business if the Tariff Advisory Committee has not done so in accordance with section 64U of the Insurance Act of 1938 (4 of 1938).

2. Govt. forms panel to look into MGNREGA’s efficacy

Poorer States like Uttar Pradesh, Bihar haven’t been able to use the scheme optimally to alleviate poverty, while economically better-off States like Kerala use it as an asset creation tool, say officials

The Central government has constituted a committee to review the implementation of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme, especially to assess the programme’s efficacy as a poverty alleviation tool.

The committee, headed by former Rural Development secretary Amarjeet Sinha, had its first meeting on Monday, and has been given three months to submit its suggestions.

The Mahatma Gandhi National Rural Employment Guarantee Act was passed in 2005, and the scheme guarantees 100 days of unskilled work per year for every rural household that wants it. Currently, 15.51 crore active workers are enrolled in the scheme.

The Sinha committee has now been tasked to study the various factors behind demand for MGNREGA work, expenditure trends and inter-State variations, and the composition of work. It will suggest what changes in focus and governance structures are required to make MGNREGA more effective.

“MGNREGA was launched as a poverty alleviation instrument for the rural region, providing them with a safety net in the form of guaranteed work and wages. It was felt that States like Uttar Pradesh and Bihar where there is higher level of poverty, haven’t been able to utilise the scheme optimally,” a senior official aware of the developments said.

In 2015, Prime Minister Narendra Modi had termed MGNREGA a “living monument of Congress government’s failure”. In a speech in Parliament, he had said: “After so many years in power, all you were able to deliver is for a poor man to dig ditches a few days a month.” The scheme has also been criticised by economists like Jagdish Bhagwati and Arvind Panagariya as an “inefficient instrument of shifting income to the poor”.

The present committee will also look at the argument that the cost of providing work has also shot up since the scheme first started.

The committee has to review the reasons and recommend ways to bring in a greater focus on poorer areas. “An open-ended scheme such as this will always show sharp contrasts. Bihar, for example, despite its levels of poverty, does not generate enough work to make a concrete difference, and on the other end of spectrum we have Kerala, which is economically better but has been utilising it for asset creation. While Bihar needs MGNREGA more, we cannot deny Kerala the money because of the current structure of the programme,” one of the committee members said.

Asset creation

MGNREGA critics also slam the scheme for the lack of tangible asset creation. The committee will study if the composition of work taken up presently under the scheme should be changed. It will review whether it should focus more on community-based assets or individual works.

With four months more to go for the financial year to end, ₹59,420 crore has already been spent out of the ₹73,000 crore sanctioned for the scheme. The Rural Development Ministry has recently asked for an additional sum of ₹25,000 crore from the Finance Ministry for the anticipated expenditure before the financial year ends.

Regardless of all the criticism, MGNREGA acted as a crucial safety net during the COVID pandemic. In the financial year 2020-21, the number of person days of work provided under the scheme rose drastically to 389 crore, in comparison to the previous year’s figure of 265 crore. In 2021-22 too, the demand for MGNREGA work stood high, and 363 crore person days of work were generated. As per the current statistics, 196 crore person days of work have already been generated this year.

MGNREGA

• The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), also known as Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) is Indian legislation enacted on August 25, 2005.
• The MGNREGA provides a legal guarantee for one hundred days of employment in every financial year to adult members of any rural household willing to do public work-related unskilled manual work at the statutory minimum wage.
• The Ministry of Rural Development (MRD), Govt of India is monitoring the entire implementation of this scheme in association with state governments.
• This act was introduced with an aim of improving the purchasing power of the rural people, primarily semi or un-skilled work to people living below poverty line in rural India.
• It attempts to bridge the gap between the rich and poor in the country.
• Roughly one-third of the stipulated work force must be women.
• Adult members of rural households submit their name, age and address with photo to the Gram Panchayat.
• The Gram Panchayat registers households after making enquiry and issues a job card.
• The job card contains the details of adult member enrolled and his /her photo.
• Registered person can submit an application for work in writing (for at least fourteen days of continuous work) either to Panchayat or to Programme Officer.
• The Panchayat/Programme officer will accept the valid application and issue dated receipt of application, letter providing work will be sent to the applicant and also displayed at Panchayat office.
• The employment will be provided within a radius of 5 km: if it is above 5 km extra wage will be paid.

Eligibility Criteria

• Must be Citizen of India to seek MGNREGA benefits.
• Job seeker has completed 18 years of age at the time of application.
• The applicant must be part of a local household (i.e. application must be made with local Gram Panchayat).
• Applicant must volunteer for unskilled labour.

Key facts

• MGNREGA guarantees hundred days of wage employment in a financial year, to a rural household whose adult members volunteer to do unskilled manual work.
• Individual beneficiary oriented works can be taken up on the cards of Scheduled Castes and Scheduled Tribes, small or marginal farmers or beneficiaries of land reforms or beneficiaries under the Indira Awaas Yojana of the Government of India.
• Within 15 days of submitting the application or from the day work is demanded, wage employment will be provided to the applicant.
• Right to get unemployment allowance in case employment is not provided within fifteen days of submitting the application or from the date when work is sought.
• Receipt of wages within fifteen days of work done.
• Variety of permissible works which can be taken up by the Gram Panchayaths.
• MGNREGA focuses on the economic and social empowerment of women.
• MGNREGA provides “Green” and “Decent” work.
• Social Audit of MGNREGA works is mandatory, which lends to accountability and transparency.
• MGNREGA works address the climate change vulnerability and protect the farmers from such risks and conserve natural resources.
• The Gram Sabha is the principal forum for wage seekers to raise their voices and make demands.
• It is the Gram Sabha and the Gram Panchayat which approves the shelf of works under MGNREGA and fix their priority.

Roles of Gram Panchayat

• Receiving applications for registration
• Verifying registration applications
• Registering households
• Issuing Job Cards (JCs)
• Receiving applications for work
• Issuing dated receipts for these applications for work
• Allotting work within fifteen days of submitting the application or from the date when work is sought in the case of an advance application.
• Identification and planning of works, developing shelf of projects including determination of the order of their priority.

Implementation Status

• The scheme was introduced in 200 districts during financial year 2006-07 and 130 districts during the financial year 2007-08.
• In April 2008 NREGA expanded to entire rural area of the country covering 34 States and Union Territories, 614 Districts, 6,096 Blocks and 2.65 lakhs Gram Panchayat.
• The scheme now covers 648 Districts, 6,849 Blocks and 2,50,441 Gram Panchayats in the financial year 2015-16.

Activities covered under MGNREGA

• Permissible activities as stipulated in Para 1 of Schedule-I of Mahatma Gandhi NREGA are as under:
• Union Rural Development Ministry has notified works under MGNREGA, majority of which are related to agricultural and allied activities, besides the works that will facilitate rural sanitation projects in a major way.
• The works have been divided into 10 broad categories like Watershed, Irrigation and Flood management works, Agricultural and Livestock related works, Fisheries and works in coastal areas and the Rural Drinking water and Sanitation related works.
• Briefing the MGNREGA 2.0 (the second generation reforms for the rural job scheme) the priority of the works will be decided by the Gram Panchayats in meetings of the Gram Sabhas and the Ward Sabhas.
• The Rural development also informed that the 30 new works being added in the Schedule 1 will also help the Rural sanitation projects, as for the first time toilet building, soak pits and solid and liquid waste management have been included under MGNREGA.
• Though the overall 60:40 ratio of labour and material component will be maintained at the Gram Panchayat level but there will be some flexibility in the ratio for certain works based on the practical requirements.
• Construction of AWC building has been included as an approved activity under the MGNREG Act.
• ‘Guidelines for construction of Anganwadi Centres’ under MGNREGS have been issued jointly by Secretary, WCD and Secretary, Ministry of Rural Development, on 13th August, 2015.
• Under MGNREGS, expenditure up to Rs.5 lakh per AWC building for construction will be allowed.
• Expenditure beyond Rs. 5 lakh per AWC including finishing, flooring, painting, plumbing, electrification, wood work, etc. will be met from the ICDS funds.

Analysis

• For most rural workers dependent on the MGNREGS, their labour does not end at the work site.
• Many of them are forced to make multiple trips to the bank, adding travel costs and income losses, and face repeated rejections of payment, biometric errors and wrong information, just to get their hands on their wages.
• Even in regular times, these last mile challenges make it hard for workers to access their own wages in a timely manner.
• During the COVID-19 pandemic, the situation is exacerbated as transport becomes harder, and there is no question of physical distancing at a rural bank.

3. Editorial-1: COP27 and the ambiguity about responsibility

This year, at COP27 in Egypt, a dizzying array of topics was on the table for discussion — from the more familiar emissions reductions to the more detailed rules to govern carbon markets. But of significance to developing countries, India included, are the stories to do with climate finance. As developing countries have rising energy needs and vulnerable populations, they need financial support for low-carbon transformations, building resilience to inevitable climate impacts, and other steep challenges, important among these being loss and damage (L and D) from climate-induced impacts. Possibly the biggest headline after COP27 was the establishment of a new L and D fund.

The main L and D agendas for developing countries since the Paris Agreement (2015) have been to change the existing narrative of averting L and D to addressing losses that have already occurred, and to start holding developed countries morally responsible and financially liable for the same.

Widespread droughts in Africa, floods in Pakistan, and wildfires globally were the prelude to this COP. Given these climate events are rampant, developing countries have been trying to separate L and D from adaptation. They argue that losses from these events have not and likely cannot be adapted to. And as scientists today are able to attribute these events to climate change, and derivatively, to greenhouse gas emissions, developing countries maintain that developed countries should inherit the resultant responsibility and liability.

L and D in ratified UN texts has mostly entailed prevention and pre-disaster preparation, thus conflating L and D with adaptation. This is in the interest of developed countries that do not want any new responsibilities. The decision text accompanying the Paris Agreement even took liability and compensation for L and D off the table — and developing countries were only able to get L and D on the COP27 agenda by once again foregoing conversation about liability.

The L and D burden and responsibility

Against this backdrop, the new L and D fund introduced at COP27 seems a narrative failure, save the distinction between adaptation and L and D. Following the recommendation of the G77+China, the text finally frames L and D as post-event “rehabilitation, recovery, and reconstruction”. But it excludes mention of historic responsibility and the principle of Common but Differentiated Responsibilities (CBDR). What is more, there is no clear indication that the fund will be paid for by developed countries. The decision explores a “mosaic” of solutions, encouraging a miscellany of actors to contribute, which might simply mean a slow shift of the L and D burden onto the private sector, and perhaps even to richer developing countries such as China.

The ambiguity about responsibility is in fact carefully phrased to dilute the notion that there are distinct victims and perpetrators in the case of L and D. Once liability and CBDR are removed from L and D — in essence, an adversarial notion to hold developed nations morally and financially accountable — it risks becoming toothless: more voluntary reward than recompense.

On climate finance

COP27 also focussed on avenues for increasing finance flows to support positive climate action in developing countries.

In 2009, developed countries had promised developing countries $100 billion in climate finance annually by 2020, which still remains unmet. Developing countries expected this amount to come from public sources, though the sources were never clearly defined. And although it is a fraction of what developing countries need, it is an important symbol of trust. Much deliberation around finance has focused on assessing progress towards this goal, which developed countries now aim to meet by 2023. Lessons learned from this progress should also inform ongoing discussions around a new, enhanced developed country target that is meant to replace this $100 billion commitment by 2025. Meeting the current pledge and developing a meaningful new pledge – based on developing countries’ needs – will be important trust-building exercises encouraging greater cooperation towards climate action.

With this track record, developing countries have been keen to maintain focus on developed country obligations. Consequently, there was no discussion on Article 2.1c of the Paris Agreement, which seeks to make all finance flows compatible with low-carbon development. Developing countries feared a dilution of attention to developed country obligations, while developed countries argue that this Article can play a transformative role in mobilising the trillions actually needed to respond to climate change. Consequently, this element of the finance agenda was deferred, but is likely to be raised next year. With a growing sign that developed country public finance will, in reality, fall very short of meeting developing country needs, COP27 also saw momentum build towards encouraging finance through other channels.

Multilateral system and carbon markets

For the first time, the COP27 decision text included a call for reforming the global financial system, particularly multilateral development banks (MDBs), to make them more supportive of climate action. This, importantly, entreated MDBs to reduce the costs of borrowing for climate projects, increase finance for adaptation, and better align their operations with the Paris Agreement. In parallel, carbon markets emerged as more prominent vehicles for channelling private finance. In carbon markets, some entities sell credits by reducing their emissions below a threshold, while others buy these credits to offset emissions they are unable to reduce. Under Article 6 of the Paris Agreement, two types of markets will allow countries and companies to trade in emissions reductions. Although many questions regarding the design of these markets were addressed at COP26, discussions on unresolved issues raised concerns about whether these markets would be transparent, lead to actual emissions reductions, and risk reductions being counted twice — by the buyers and the sellers of credits. Such lack of transparency and double-counting can open the door to greenwashing.

Carbon markets are also increasingly featuring in just energy transition partnerships (JETP), which are emerging as avenues for developed countries to quickly channel finance to developing countries transitioning towards clean energy systems. As India explores such partnerships for its own energy transition, plans for using carbon credits to enable private investments raise similar risks about the sufficiency and predictability of finance; whether it can reach sectors that need more support, and whether this is an attempt by developed countries to offload responsibility.

While developing countries at COP27 wanted to focus on the public finance that developed countries should provide, the finance conversation is becoming multi-stranded and spreading to arenas outside formal negotiating channels. India will need to carefully watch these trends, and what they might imply for amounts, sources, predictability, impacts, and equity.

With the new L and D fund, the line between victim and perpetrator has been blurred. But given that all the practical mechanisms of the fund are yet to be decided, it will be interesting to see if developing countries can, in future negotiations, redraw the lines of responsibility, and perhaps even liability.

4. Editorial-2: The Constitution of India deserves better

The Constitution of India was adopted by the Constituent Assembly on November 26, 1949 for ‘We the people of India’. After being unnoticed for long, the day began to be celebrated as Constitution Day since 2015. This day is indeed a historic day for the nation, with the framing of a Constitution for the governance of independent India.

But it is imperative to go beyond the celebrations and look at the substantive issues relating to the primary parchment of the nation. For example, if we pose a question about the level of awareness about the Constitution among ‘we the people’, the answer may not be encouraging. It is understandable if unlettered people are not aware of the Constitution. But the situation is not much different among the educated sections either, despite the fact that the Constitution is an integral part of our life.

The Constitution has a clear imprint on day-to-day life, though we may not be really conscious of it. If we ask a policeman why he is stopping us, it is because the Constitution has given us that right. The newspaper we read, the TV channels we watch; our travel by bus, train or in our own car every time; getting a passport and flying; taking up a profession we like; eating the food we relish in a restaurant; and buying fashionable outfits in malls — it is the Constitution which made this possible through fundamental rights. The freedom of movement, freedom of expression, freedom to choose a calling of our liking, freedom to buy, sell and carry-on any trade, freedom to wear garments of our choice; all these freedoms emanate from the Constitution in the form of fundamental rights. These freedoms were never available to us before we won independence from the British.

When we were on the verge of Independence, our freedom fighters wanted to make a clean break with the past and build a brave new society through the Constitution. Thus, the Constitution declared with the stroke of a pen that all Indians are equal citizens irrespective of caste, creed, colour, gender, estate, education, etc. This is, indeed, heady stuff for a nation steeped in religion, rituals, ignorance and poverty which gave rise to unacceptable inequalities between men and women, the rich and the poor, the literate and the illiterate, and the learned and the laity. Setting aside all these aberrations, the Constitution put everyone on an even keel, even while providing a level playing field for the weak and the meek.

There is no denying the fact that the law is a weak source to bring about change in human thinking and behaviour. Just because the Constitution declared all Indians as equals, equality does not prevail from the day of such a declaration. But, if we inculcate it in our offspring, social change is distinctly possible. We all teach our children not to tell lies and not to steal. Cannot we teach them to treat their classmates without bias? And, that is what the Constitution says too. But, we are hardly conscious of the constitutional ideals enshrined in the Preamble.

Explaining the indifference

How do we explain this indifference to the Constitution? We pay great respect to religious books and treat them as sacred doctrines, while we are oblivious to the Constitution which has changed our lives. It is unlikely that even those who are well educated and well-placed have a copy of the Constitution in their houses unless they are advocates. While educated people broadly know that there is a thing like fundamental rights, we are largely unaware of the fundamental duties enshrined in the Constitution. The Constitution is a holistic doctrine. Rights bring responsibilities with them. There is a chapter on Fundamental Duties in Part IVA of the Constitution.

But, how do we know the Constitution unless we have a copy and bother to open it even occasionally? Hardly any parent thinks of gifting the Constitution to their child in their birthday, while every parent wants their offspring to grow up as a responsible adult with mature minds and restrained manners. It is a vague ideal unless we inculcate values such as respect for women, empathy towards the weak and the meek, and reject dowry, caste and creed as the basis to measure the values of a person. And, where do we find these values? In the Constitution.

Article 15 says: “The state shall not discriminate against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them.” How beautiful this sentence would have read had “The state” been replaced by society. Has any parent thought along these lines while raising their child and teaching them good manners and values? The values we teach are essentially damaging to the mind, such as ‘become a doctor or an engineer and get a hefty dowry’.

As part of the curriculum

Unfortunately, there is hardly any focus on the Constitution at the school level, not to speak of tertiary education. The Constitution should get due recognition across the educational system. Celebrating November 26 as Constitution Day is fine, but we should not restrict ourselves to symbolism. We should look at the substantive issues dealt with by the Constitution, thereby enriching our life.

Our ancient texts teach us that Vasudhaiva Kutumbakam, which means the entire humanity, is one large family. Every man is related to every other person. We should first learn to treat fellow Indians as a fraternity. We will know this only if we care to open the first page of the Constitution. For this we need a copy of the Constitution. And it costs less than a movie ticket these days.

5. Editorial-3: An uphill struggle in Sri Lanka’s tea country

Sathish Sumithra’s son, barely two years old, is too young to make sense of Sri Lanka’s unrelenting economic crisis, but not to escape it. He must cope with the drastic dietary and lifestyle changes it has brought about. His formula milk intake has halved, he is fed an occasional egg — his parents cannot afford fish or meat — and he wears old, washed diapers at night.

“An egg costs 70 rupees (₹16) now,” says Sumithra, breaking down what the country’s 70% inflation and over 80% food inflation means in her working-class household. “A formula milk tin was 800 rupees (₹177) some months ago; it is now 1,400 (₹310). Diaper packs are more than 4,000 rupees (₹886). We just can’t afford to eat and live like we did before. Surviving each day is a struggle.”

Sumithra lives in a poky line room in a tea estate in Kandy district of the Central Province. Several thousand families across Sri Lanka’s plantation districts still live in the colonial-era accommodation. Her husband is employed at a bar in a nearby town and makes 35,000 rupees a month (roughly ₹7,760) — that too only during a good sales month. Tracking the ever-changing prices of essentials is now a mandatory and daunting exercise for families, especially those who are rationing even the most basic items to survive. Everyone talks prices.

“A pack of 10 sanitary pads costs more than 400 rupees (₹88) now; it used to be 110 (₹24). Many girls can’t afford that, so they are using cloth [napkins]. They end up missing school when they get their period,” Sumithra notes. Children walk up to two hours to get to their secondary school in this estate. The roads are not motorable, and buses do not run here.

In the last three months alone, a dozen students have dropped out of schools in Atabage, barely 30 km from the bustling city of Kandy, the centre of Sri Lanka’s last kingdom and now a popular tourist spot showcasing the island nation’s Buddhist heritage. The rising cost of sanitary products is not the only reason girls are dropping out. Families are pulling their children out of school to save on education-related expenses. “A notebook costs 410 rupees (₹90); one pencil is 40 (₹9),” says an estate worker whose daughter stopped going to school this year.

Besides, as families are eating fewer meals, packing lunch for school is not an option. Jesudasan Nikalasmary, a pre-school teacher, maintains a flower-shaped, colour-coded diagram in her small classroom to record the weight of children. “See the red petal,” she points out. “The names written on it are of children who are underweight for their age. In the last few months, more children in our class have moved to the red zone.”

According to the United Nation’s World Food Programme (WFP), more than six million people (about 30% of the country’s population) face food insecurity and require humanitarian assistance. The WFP recently found that 86% of families are “buying cheaper, less nutritious food, eating less and in some cases skipping meals altogether”.

Waning protests

How Sri Lanka got here is now a well-known story. Earlier this year, the island nation found itself in a dire balance of payments problem, consequent to mega development-fuelled borrowing and a chronic shortfall of foreign exchange revenue as against expenditure over the years. The dollar crunch resulted in acute shortages of imported food items, fuel and medicines, and forced the government to default on its $51 billion foreign debt in April. The shortages made daily life precarious in the estates where infrastructure is abysmal and connectivity is usually poor. “I walked 18 km a day in these mountains to deliver letters,” says a postman in Atabage, recalling the days of severe fuel shortages.

The painful economic crash brought people to the streets across the island — first to line up for essentials and then to protest the government’s poor response to their misery. The historic street protests in Colombo forced the Rajapaksa administration out of power and led to the election of President Ranil Wickremesinghe through a parliamentary vote. The new government’s provisional agreement with the International Monetary Fund (IMF) and the prospect of a bailout offered a semblance of stability for observers outside the country and relief to many, mostly affluent, Sri Lankans. The government introduced a fuel rationing system using QR codes, restricted imports and tried to save scarce dollars. With India pledging close to $4 billion assistance this year and some repurposed funds, Sri Lanka was able to import fuel and energy, fertilizer, and pharma goods. “No more queues. No more street protests,” government interlocutors were quick to boast.

The queues did disappear. The protests have splintered and visibly waned. Many middle-class citizens who were regulars at protests not long ago do not wish to resist any more as life is returning to normal for them. Their petrol tanks are full. They drive their children to school every day. Price rise does not strain their pockets as much as it does their poorer compatriots’. They criticise the residual agitations and are silent about the recent crackdown on protesters. The business chambers, which were supportive of the popular uprising at the height of the crisis, are now asking protesters not to “destabilise” the country. They are desperate to put the crisis behind them and are pinning their hopes on an economic revival in 2023.

But the crisis, in its most excruciating form, is not over for many Sri Lankans. The World Bank estimates that national poverty levels doubled from 13.1% in 2021 to 25.6% in 2022. Urban poverty rates have tripled, to 15%. In effect, about 2.7 million additional people have fallen into poverty in the last year alone. The Bank highlighted an “immense setback” in its update this October, noting that “more than half the population living in estate areas is now below the poverty line”.

The past is present

The economic crisis is trapping millions of Sri Lankans in joblessness and poverty, but Malaiyaha Tamils are not among the “newly poor”. Their economic distress predates this slump and will likely outlast it. Deprivation has been a running theme for this community, whose south Indian ancestors were brought across the Palk Strait two centuries ago as labourers to clear land, build roads and railways, grow and pluck coffee, and later tea, on the British-run plantations. They have since faced structural oppression and exploitation by the colonial rulers, the post-colonial state, and the private plantation companies. Following their long struggle for citizenship until 2003, the Malaiyaha Tamils continue to fight for land, housing rights, and decent wages.

Some of the Malaiyaha Tamils who are bilingual and speak Sinhala also point to rampant, modern-day racism in the predominantly Sinhalese-employed government offices. “You are made to feel like an outsider in your own area,” says S. Bhuvaneshwari, a young home-maker who lives on a tea estate. The everyday discrimination faced by the community, which is distinct from the Tamils of Sri Lanka’s north and east, is less known though it has drawn more attention in recent times. In his visit to Sri Lanka in December 2021, United Nations Special Rapporteur Tomoya Obokata noted that “contemporary forms of slavery have an ethnic dimension” and that Malaiyaha Tamils continue to face “multiple forms of discrimination based on their origin”.

An estimated 1.5 lakh workers are employed in the tea estates. About twice as many Malaiyaha Tamils, who live in the estates, work outside the plantation economy — on vegetable farms, tea smallholdings, in small shops, eateries, and as domestic workers. Scores from the million-strong community also work as professionals or run businesses across the island and abroad.

After a determined struggle for three years, estate workers won a daily wage of 1,000 rupees (about ₹225) last year. The profit-making plantation companies grudgingly agreed to the rate, only after tying it to unrealistic targets of productivity and the number of days of labour. Workers have little control over these, for monsoons and the year-long maintenance of the estates determine the quantity and quality of produce — that too if leaders do not resort to rash decisions such as the abrupt chemical fertilizer ban imposed by then President Gotabaya Rajapaksa last year that led to a 40% drop in yield.

The hard-won wage of 1,000 rupees is not only difficult to earn, but also grossly inadequate, argues a 2022 study by the Kandy-based NGO Institute of Social Development. Factoring in prevailing costs of living, the study led by University of Peradeniya economist S. Vijesandiran showed that a worker needs at least 2,577.91 rupees (about ₹571) a day, with assured work for 21 days, to support a family of four.

The predominantly female workforce in the estates knows that even their best effort, braving blood-sucking leeches and exhaustion from endless housework, can only fetch them less than half of that. “I couldn’t cope. I stopped working as a tea plucker,” says Agnes, who has four daughters. She is now trying to find a job in West Asia, a common recourse for many workers, to make both ends meet. In opting for domestic work far away, the women often face the risk of continued exploitation. Back home, they are blamed for abandoning their families.

Everyone is seeking a coping mechanism. Some are converting to a different religion for relief. Some are taking high-interest loans from microfinance companies that are notorious for targeting poor women. Some, like Agnes, cannot wait to fly out for a new job. “I have no other option. My husband does not work any more. I cannot feed my family if I continue working here. I have already stopped sending two of my daughters to school,” she says. Like most others, she would find it hard to say which part of her family’s suffering is induced by the downturn.

Eroding hope

In fact, many families living in the estates are yet to recover from the joblessness of the COVID-19 years. Thousands of domestic workers returned from West Asia, while scores of young people lost their jobs in Colombo and returned to their villages. Two years and a debilitating crisis later, finding a new job is proving to be nearly impossible.

“I have been trying to get a job that pays a decent salary, and that will let me live in Colombo and send some money to my family here. But the wages are too low. I can’t save even a few thousands,” says G. Liegendiran, 20, who used to work in Colombo and is now back in the estates.

Economic hardships are not new for him, but there is a new sense of hopelessness. “Seeing all that happened this year, I thought our country was about to change for the better. But here we are, left with the same political class. They are all protecting each other. They don’t care about people like us,” he says. Like many other young people on the plantations, Liegendiran is exploring job opportunities abroad as “it is hard to imagine a future here.”

If the young are giving up, it is not for the want of trying. From the time she cleared her advance-level, school-leaving examination a couple of years ago, Danushiya Ramkumar has been desperately applying for jobs and training programmes. “Some employers say our line room address is invalid without a door number and street name. It is almost like we don’t have an identity. It is frustrating,” she says. The courses she wanted to attend were not available in Tamil. “The vocational institutes offer classes only in Sinhala. When I asked them if they could at least translate key sections to English, they refused. I don’t know if those who were protesting in the Aragalaya (struggle) against the crisis know how some of us have lived and continue to live. This is our reality.”

Last month, President Wickremesinghe announced that the government will appoint a committee to study “how best to integrate the Tamils of Hill Country Origin” further into Sri Lankan society. It was seen as an admission that the community had been left behind. It is one of many committees set up by the Wickremesinghe administration that faces a serious challenge in the coming year.

The Sri Lankan economy is expected to contract by 9.2% this year and a further 4.2% in 2023. The government hoped to receive a $2.9 billion IMF package by the end of the year. But the Fund has only conditionally agreed to provide the facility, depending on assurances from Sri Lanka’s diverse creditors. While the government is talking to its lenders on restructuring its loans, it has some distance to go before securing IMF support.

Meanwhile, as the cost of living soars and discontent grows among the people, especially the poor, all eyes are on the government for urgent relief. The last time the economic pain of ordinary citizens was ignored, it did not end well for those in power. Sections of the population who were already vulnerable, like the Malaiyaha Tamils, have been pushed to the edge with this crisis. “An entire generation’s health, education and future is in question,” says Nikalasmary. “For years and years, we have been talking about how bad things are for our community. Can we not break free from this reality?”