EWS Reservation - No Change In Rs 8 Lakhs Gross Annual Income Cut-Off; Residential Asset Criteria Omitted : Centre Tells Supreme Court

The Central Government has told the Supreme Court in an affidavit that it has decided to accept the recommendation made by an expert committee to retain the limit of Rupees 8 lakhs gross annual income for Economically Weaker Section(EWS) reservations.

The Centre has also accepted the recommendation to omit the residential asset criteria for EWS eligibility. However, the ongoing admissions, including the NEET-PG counselling, will proceed as per the existing criteria and the revised criteria will be applied from the next academic year onwards, the Centre further said.

The affidavit has been filed in response to a writ petition challenging the Centre's decision to introduce EWS/OBC reservation in the All India Quota for NEET. The Supreme Court had earlier expressed doubts regarding the reasonableness of Rs 8 lakhs income criteria for EWS, following which the Centre agreed to revisit the same after formulating an expert committee. The Centre also put on hold the NEET-PG counselling process in view of the case pending before the Supreme Court.

NEET-PG Counselling : Centre Decides To Retain Existing EWS Criteria; Files Affidavit In Supreme Court

Committee For Revisiting The Criteria Of The Economically Weaker Sections (EWS) Reservation

The Central Government formulated a Committee for revisiting the criteria of the Economically Weaker Sections (EWS) reservation on November 30, 2021, comprising:

• Shri Ajay Bhusan Pandey- Former Finance Secretary, GOI
• Prof VK Malhotra- Member Secretary, ICSSR
• Shri Sanjeev Sanyal- Principal Economic Advisor to GOI (Member Convenor)

The Committee had to:

1. Revisit the criteria in O.M. dated 17-01-2019 in determining the EWS category keeping in view the observations of the Hon'ble Supreme Court in their Order dated October 21, 2021
2. Examine various approaches so far followed in the country for identifying EWS and
3. Recommend criteria that may be adopted for identifying EWS category in future

Criteria For Determining EWS Reservation Which Existed Prior To The Report

As per OM dated January 17, 201,9 persons who are not covered under the scheme of reservation for SCs, STs and OBCs and whose family has a gross annual income below Rs 8 lakh are to be identified as EWSs for benefit of reservation.

Furthermore, persons whose family owns or possesses any of the following assets were to be excluded from being identified as EWS:

(a) five acres of agricultural land and above;

(b) a residential plot of 100 square yards and above in notified municipalities and 200 square yards and above in areas other than notified municipalities; and

(c) a residential flat of 1000 square feet and above

The word family included the candidate, his/her parents, under-18 siblings, spouse, and his/her under -18 children.

Income also had to include income from all sources i.e., salary, agriculture, business, profession etc. for the financial year prior to the year of application.

Revised Criteria For Determining EWS Reservation

Using a set of indicators that minimized Type I (Minimizing the inclusion of the undeserving ones) and Type II errors (Minimizing the exclusion of deserving ones), the Committee arrived at the revised EWS criteria wherein:

A. Only Those Families Whose Annual Income Is Upto Rs 8 Lakh Would Be Eligible To Get The Benefit Of EWS Reservation

A.1 Though Specific Number Of Rs 8 Lakhs Appears To Be Same As OBC Creamy Layer Cut-Off, Application Of The Cut-Off Is Very Different In EWS & OBC As Two Have Different Contexts

The Supreme Court had prima facie observed that applying the income limit criteria(Rs 8 lakhs annual income) of OBC Creamy lawyer to EWS was unreasonable, as the latter had no concept of social and economic backwardness.

In this regard, the Committee opined :

• EWS's criteria related to the financial year prior to the year of application whereas the income criterion for creamy layer in OBC category was applicable to gross annual income for three consecutive years.
• For deciding the OBC creamy layer, income from salaries, agriculture and traditional artisanal professions was excluded from the consideration whereas Rs 8 lakh criteria for EWS included that from all sources including the farming

"The  Committee found that though the specific number of Rs 8 lakhs appears to be the same as  the OBC creamy layer cut-off, the application of the cut-off is very different in EWS and OBC as the two have different contexts. The income criterion for the EWS is much more stringent than the one for the OBC creamy layer", the report said.

A.2 Cut-Off Lower Than Rs 8 Lakhs On Family Income Would Be Unduly Restrictive & Lead To Errors Of Exclusion Of Deserving Eligible Persons

The Committee in this regard referred to the definition of family for EWS and the fact of inclusion of agricultural income (that did not attract income tax) in the income criteria. Considering the current income tax reforms wherein effective income tax on individuals was zero for those with annual incomes up to Rs 5 lakhs, the Committee said that after taking advantage of the various provisions for deductions, savings, insurance etc the tax- payer may not need to pay any tax up to an annual income of Rs 7-8 lakhs.

The Committee also remarked that the application of EWS cut off of Rs 8 lakh to just an individual was in the ballpark of income tax requirements for zero tax liability.

In its report, the Committee also stated that the definition of 'family' and income would remain the same as those in the OM dated 17th January 2019.

B. Irrespective Of Income, A Person Whose Family Has 5 Acres Of Agricultural Land & Above Shall Be Excluded From EWS

The Committee justified the exclusion of a person whose family has 5 acres of agricultural land from EWS in its report by stating there was variability and paucity of information on agricultural income since the same was exempted from Income Tax and was thus not ascertainable. It was further stated that ownership of farmland could be used as an exclusion criterion since the same was not captured by income tax or other authorities.

C. Removing Residential Asset Criteria

In this regard, the Committee in its report said that the use of residential plot size and house floor area as an asset criterion for identification of EWS, was complex. It further said that although these criteria also applied to the rural general category, this was more pertinent for those in urban areas. In its report the Committee stated that it had looked into the question of whether the house or plot area thresholds in EWS criteria should factor in the difference in their values based on geographical distributions and recognised that it was not easy to specify a general residential area threshold for the entire country.

"Even if we replace the area thresholds in EWS criteria with residential house or plot values , still it would not solve the problem because it would then require lakhs of candidates every year to get the valuation done of their houses and plots from the notified authorities," the Committee further said.

It was also the Committee's opinion that the correct economic condition of the candidate or his family may not be reflected if the residential house was only used for dwelling and not generating income and thus any EWS exclusion criteria based on owning a house may lead to unwanted exclusion of deserving candidates.

"It is the income of the family which matters and determines the economic conditions of the family and that should be the basis for inclusion or that matter exclusion into EWS," the Committee in its report stated.

Residential criteria was also altogether omitted as it also posed serious complications and burden on EWS families without commensurate benefits.

Opining that disturbing the existing system which is on going since 2019 at the fag end would create more complications than expected both for the beneficiaries as well as for the authorities, the Committee recommended introducing the new criteria from next academic year/ admission cycle.

Data Exchange And Information Technology To Be Used More Actively To Verify Income & Assets, Improve Targeting For EWS Reservations & Across Government Schemes; Three-Year Feedback Loop Cycle To Be Used For Monitoring Actual Outcomes Of The Criteria And Then Be Used To Adjust Them In Future

For managing the process of review of EWS in future, the Committee opined that the traditional approach of ever more detailed multi-dimensional surveys or studies at a frequent interval alone might not be useful for the operation of the EWS reservations. Remarking that the same was expensive, complicated, and irregular the Committee opined that a better approach was to use a feedback loop to examine the actual outcomes from implementation of the criteria, every three years. Proposal was also given by the Committee to prefer an "Agile" approach over a "Waterfall" methodology.

Committee recommendations

The Committee summarized the recommendations as :

(i) The current gross annual family income limit for EWS of Rs. 8.00 lakh or less may be retained. In other words only those families who annual income is upto Rs 8 Lakh would be eligible to get the benefit of EWS reservation. The definition of 'family' and income would remain same as those in the OM dated 17th January 2019.

(ii) EWS may, however exclude, irrespective of income, a person whose family has 5 acres of agricultural land and above.

(iii) The residential asset criteria may altogether be removed.

Revised criteria from next year

The Committee has also opined that disturbing the existing system which is on going since 2019 at the fag end would create more complications than expected both for the beneficiaries as well as for the authorities. In this regard the Committee has recommended introducing the new criteria from the next academic year.