Poverty Premium in Hyderabad

Shitiz Modi

An average middle-class family can get a loan in India for as less as 8-10% per annum. Slum dwellers for example pay 7-8 times more interest on credit than their so called better-off counterparts. This paradox is called a “poverty premium”. This “premium” that the urban poor pay for basic services, all too often because of the high – cost eco-systems (slums, shanties) that they reside in, is termed as “poverty premium” or “poverty penalty”. C.K. Prahalad’s seminal work “The Fortune at the Bottom of the Pyramid” talks about the slum dwellers of Dharavi, Mumbai paying as much as 53 times more money for credit and 37 times more for water. The premium ranges across diverse services like electricity, phone calls and even rice.

A study conducted at Indirammanagar, a slum in Rasoolpura, Hyderabad was to ascertain, qualitatively and quantitatively, the premium that its residents pay. A huge slum settlement in the locality of Rasoolpura with more than two lakh people is totally illegal with no claim to property rights. The slums though have been almost regularized in that the government provides power through meters, houses have been assigned numbers and water is supplied through pipes in some houses. The area is under the Cantonment Board and close to the Hyderabad Airport. A look at the basic services and the premiums paid by poor living here is a glaring example of illegality and its massive implications.

One high school and about five other primary schools of the government exist in the area. The high school has no furniture, no toilets, compound wall (leading to encroachment), no library and faces a severe lack of teachers. This has resulted in an extremely low pass percentage rate, dropouts and lack of functional learning. Free admission and mid-day meals are not incentive enough as the very purpose that of education, is lost. There are maids, carpenters and families who can barely afford a living who are sending their children to private school precisely because the government schools cannot fulfill the aspirations of parents who want their children to study and rise out of poverty. Donations of as much of Rs 1500-2000 are paid to gain admission and a monthly fee of Rs 100-150, is charged. The costs of not having good educational facilities are child labour, stagnation and most importantly the girl child who is denied the benefits of education.

The slum dwellers have not heard about ambulance facilities and government health centre. Private Doctors with small clinics, limited facilities and doubtful credentials are the only option left for these slum dwellers. This is the pathetic state of affairs in an area where health problems due to the hostile surroundings are exponentially higher. The biggest indictment is the lack of any kind of health support for the huge high-risk population by the government by means of a functional health care centre.

The scarcity of water, the biggest problem in the slums means that water supply commands a premium. The truck drivers who provide water to the slum dwellers demand bribe (Rs 20 approx per family) to just stop in the desired places. Additional bribes are also paid to get access to water first. Some residents also pay a bribe to have water released through the government pipe lines. Shortage of water means that water is sold at much higher rates of Rs 1 for two pots. The ordeal of standing in queues, fighting to get a fair share and carrying water means that water is a huge inconvenience. Some families don’t send children to school so that they can assist the mother in carrying the pots. Thus the premium, qualitative and quantitative for water supply is substantial. 80% of the respondents do not have access to a bank and a higher percentage relies on the system of daily finance. Its truly surprising that slum dwellers pay a whopping 65% rate of interest for loans while average middle class homes pay as less as 10%. As a result they also lose out on the interest and other services that a bank would have provided to them.

The slums have a very rudimentary drain system. Each house has a septic tank that filters the sewerage and lets it into the main road open drains. These drains overflow almost every month and water enters into homes. The residents have to pay for cleaning the drains (Rs 400) and also for maintaining them. The “safai karamacharis” are very irregular and the whole area is full of rubbish at various points. The local “leader” makes a 10% cut in every land transaction from both the seller and buyer as no property rights exist and his word is law around the area.

The premium paid on basic services is a reality, quantitative or qualitative. The idea that slum dwellers pay more for these facilities than the middle class might have sounded absurd, but it has proven to be true. Some of the main reasons for this anomaly are poor resource base for creating and constantly maintaining infrastructure, lack of accountability of the cantonment board, the deep distrust for institutions like banks and government offices and a failure to get their voices to the authorities. Due to all these reasons, the services provision for the poor becomes a sporadic activity rather than a regular service delivery system. It is important to acknowledge that markets exist at these levels but the illegality makes it unaffordable. The anomaly does not lie in the slums and its markets but the system that tries to regulate it .