Rs 8 lakh income criterion for EWS more stringent than one for OBC creamy layer: Centre to Supreme Court

The Centre has told the Supreme Court that the Rs 8 lakh income criterion for determining the Economical Weaker Section (EWS) is much more stringent than the one for the OBC creamy layer. The government, which has accepted the report of a three-member panel constituted to revisit the EWS criteria, said that firstly, the EWS’ criteria relates to the financial year prior to the year of application whereas the income criterion for the creamy layer in the Other Backward Classes (OBC) category is applicable to gross annual income for three consecutive years.

“The committee, therefore, concludes that the two sets of criteria are significantly different despite both using the Rs 8 lakh cut-off and that the criteria for the EWS are much more stringent than those for the OBC creamy layer,” the panel said.

The report of the panel has been submitted to the top court which is hearing a batch of pleas of students challenging the decision of the government to implement EWS quota in NEET-PG admissions from the current academic year.

The report of the panel said, “Secondly, in case of deciding the OBC creamy layer, income from salaries, agriculture and traditional artisanal professions are excluded from the consideration whereas the Rs 8 lakh criteria for EWS include that from all sources including farming.”

“So, despite being the same cut-off number, their composition is different and hence, the two cannot be equated,” it said.

The report said that there is indeed a link between the EWS and the OBC creamy layer criteria but it relates to the history of how the debate on these two issues co-evolved.

“Nonetheless, the way in which the income criterion is actually defined is very different in the two contexts. Focusing solely on the Rs 8 lakh number, therefore, is misleading,” it said.

Mentioning the important differences in how income is defined for EWS and OBC creamy layer, the panel said that to be qualified under the “creamy layer” among OBC, the household gross income should be above Rs 8 lakh per annum for three consecutive years, whereas to be eligible for EWS reservation, the beneficiary household income has to be below Rs 8 lakh in the preceding financial year.

“This means that the EWS income criterion is much tighter, especially in the context of large sections of society with volatile non-salary incomes (shopkeepers, artists, farmers, micro-entrepreneurs etc),” it said.

“Merely one year of windfall income earned by the household by way of a mandatory MBBS internship or a good harvest etc. can push him/her over the income threshold. Thus, setting a lower income threshold for EWS can significantly increase the risk of Type II error by excluding many deserving candidates,” the panel explained.

Similarly, the panel said, the definition of ‘family’ in EWS is different from that in creamy layer for OBC as in case of EWS, family includes the candidate, his/her parents, under-18 siblings, spouse, and his/her under-18 children, whereas for creamy the family includes the candidate and his parents and minor children.

It added that Rs 8 lakh cut off also has a link with the income tax exemption limit and in the past, the Supreme Court, central government and state governments have also been specifying different income criteria for their various welfare schemes.

“Many times, income criteria from one scheme or income tax are used as a basis for determining the criteria for another scheme,” it said, adding that the committee is, therefore, of the view that the income limit for EWS should broadly be linked to the income tax limit with appropriate additions for agriculture income and other deductions.

“If the EWS limit is kept too low compared to the effective income tax exemption limit, there will be a large number of people, who though may be considered vulnerable and not required to pay income tax, may get excluded from the ambit of EWS. We do not want this to happen. Similarly, if we keep the EWS limit too high, it may result in those who are not considered vulnerable from the income tax point of view may get the benefit of EWS,” the panel said.

It said that therefore, a fine balance has to be struck between the two ends to arrive at a figure which will ensure that most low-income people who are not required to pay income tax are not excluded and are covered in EWS and at the same time it should not be so high that it becomes over-inclusive by including many incomes tax-paying middle- and high-income families into EWS.

“Therefore, considering that the currently effective income tax exemption limit is around Rs 8 lakh for individuals, the Committee is of the view that the gross annual income limit of Rs 8 lakh for the entire family would be reasonable for inclusion into EWS”, it said.

Justifying an uniform criterion for determining EWS, the Committee said that it is of the view that there should not be different income limits for different states or areas based on purchasing power or State Gross Domestic Product (SGDP).

“Having different income limits for different geographies – rural, urban, metro or states will create complications, especially considering people have become more mobile and increasingly moving from one part of the country to another for jobs, studies, business etc. Having different income limits for different areas will be an implementation nightmare both for government authorities and applicants”, it said.