Tuesday, April 25, 2006

Politics of Subsidy

Tamil Nadu is witnessing a close contest in the 2006 Assembly Elections. In the last four assembly elections, DMK and AIADMK won alternatingly, and with thumping majority each time, thereby killing the democracy in the state.

In the recent legislature, AIADMK Chief Minister Jayalalitha came up with several controversial legislations and ordinances. There was rarely any debate. Opposition parties mostly walked out, or were bundled and thrown out, before bills were put to vote. Opposition leader Karunanidhi of DMK never once went to the assembly, except to sign the register, fearing physical attacks on him within the house. The AIADMK members and ministers started their speech praising the all powerful 'Amma' and constantly attacking and denigrating Karunanidhi and other opposition party leaders. The Speaker ensured that all such attacks stayed in the assembly proceedings but was quick to remove anything said against Jayalalitha.

The politics in general was bad and petty, each side trading charges against the other. People's welfare was given a go by. DMK, far its part, became a close and important ally in the Central Governnment and caused enough problems for the AIADMK State Government.

As the elections neared, Jayalalitha rolled back several of her tough measures and offered a lot of freebies to woo the electorate. Not to be left behind DMK came up with a mother of all manifestos. In the words of Finance Minister P.Chidambaram, "the hero of this year's election was DMK Manifesto". DMK offered the following:
  • Rice to every ration card holder at Rs. 2 a kg. Currently the PDS offers rice at Rs. 3.50
  • Free colour television sets to those who do not have it
Though DMK manifesto offered several other things, Rice at Rs. 2 per kg had somehow captured everybody's imagination. Actor Vijayakanth who has recently started a political outfit called Desiya Murpokku Dravidar Kazhakam (National Progressive Dravidian Party - make what you can of this name) had already promised 15 kg rice free to everyone below the poverty line.

Jayalalitha and her friendly parties first made fun of Karunanidhi's scheme. But seeing the kind of support the scheme had, Jayalalitha suddenly turned around and said she will offer 10 kg rice free to every ration card holder and the remaining 10 kg rice at Rs. 3.50 per kg. Thus if a family needs only 10 kgs, they do not have to pay any money at all and every kg thereafter will cost Rs. 3.50 per kg.

There was no debate in the state on whether such subsidies are needed at all, or if needed, who actually should be provided with such subsidies. Treating all ration card holders alike irrespective of their annual income and offering them rice at such low or no cost has several other ramifications.

The current rice subsidy provided by Tamil Nadu government is close to Rs. 1,500 crore an year. The additional subsidy required for Karunanidhi's scheme could be anywhere from Rs. 680 crore (Karunanidhi has used 1.5 crore ration cards and hence projects an additional outlay of Rs. 540 crore. The actual number of ration cards are 1.88 crore, and hence roughly Rs. 680 crore for an extra Rs. 1.50 subsidy per kg; 20 kg per month, per ration card.) to Rs. 1,500 crores if you look at hidden costs. Rice consumption could go up since it is offered free or at a lower cost. Current subsidy of Rs. 1,500 crore is when the per card consumption is about 170 kg per year. If this goes up to 240 kg that every card is entitled to, the subsidy cost will mount.

The free colour television sets, say 50 lakhs - one each to each family below the poverty line - could cost a lot as well. Karunanidhi proposes to source TVs from China for as low as Rs. 2,000 each. This could therefore cost 1,000 crores further. Then the invisible cost of administering the distribution of the same to the needy. Now, work out the corruption money that would be generated in the process. Already some newspapers reported that DMK cadres were going around collecting names and demanding Rs. 1,000 to include names in the list - of people who would be receiving the colour TV once DMK comes to power.

The politics of largesse will continue as long as people believe that it is perfectly okay for the Government of the day to offer them something for free, and it is okay for them to accept the same. What they do not realise is that it is all coming from their own money. Their collective money.

Do they really want the Government to get them some third rate chinese TV costing Rs. 2,000 or do they want good economic opportunities which will offer them additional revenues of over Rs. 10,000 with which they can decide to buy what TV they want? Do they want to keep buying the dubious quality rice they have been getting in the PDS or do they want to increase their buying capacity and choice of what they can buy?

It makes sense to offer subsidised foodgrains to people below the poverty line. It can be achieved by offering them subsidy coupons which they can cash in any supermarket or roadside shop. Instead we are running a bloated PDS which is corrupt to the core and offers low quality of service to its customers. Rice is constantly stolen from the PDS godowns for sale in the open market at high prices. Once, the PDS used to offer several products: Rice, Kerosene, Wheat, Sugar, Maida, Rava and so on. Today, it is just Rice and Kerosene - products with high subsidy. People buy the rest in the open markets, and most people buy rice in the open market as well. Cooking gas has replaced kerosene in most middle class and lower middle class houses and this trend will continue. Rather than actively working towards better governance and making better opportunities in education and jobs available, we are forced to hold a begging bowl by the political parties.

Party manifestos do not talk about how many schools they will build, how many kilometers of roads they will build new, how they will improve the existing roads, how they will help in increasing business opportunities, how they will encourage entrepreneurs to start new businesses, how they will work with agricultural labourors and improve their life conditions and so on. Instead what we get is empty promises which are not sustainable.

Whoever wins, the extra subsidies will be offered at best for an year. Then the conditions will become unbearable again for the poor in the subsequent years.

Thursday, April 13, 2006

CBSE withdraws free education to single girl child

Last year (around October 2005), CBSE floated a move to force all private schools affiliated to it to waive off fees to those girls styding from 6th standard onwards provided they were single child for their families.

The schools were asked to fend for themselves, possibly by increasing the fees of other students - boys or girls - who do not fit into the above category.

There was no debate, no discussion. Just a fiat.

The opposition to the above move was mostly muted, barring a few in Chennai which talked about moving to Tamil Nadu Matriculation syllabus.

CBSE (and its boss human resource development ministry) just moved on, without a care in the world, and amended the bylaws in November 2005, making the fee waiver a requirement from the educational year 2006-07.

A Delhi based minority institution Carmel Convent School approached Delhi High Court to quash the circular issued by CBSE stating that it impinged on Article 30 of the Constitution allowing minorities infettered administrative control over their educational institution. The Delhi High Court stayed the circular. No mainstream non-minority private school approached courts, however.

CBSE then seems to have modified its position in the Delhi High Court and suggested that rather than enforcing the fee waiver, they would suggest a scholarship scheme, whereby any school that charges more than Rs. 1,000 per month as fees would offer scholarships to the single girl child, provided she secures more than 60% marks. The court accepted this and dismissed the petition from Carmel Convent School but allowed the school to appeal again if the school thought this policy was also of problem to it.

Then, quietly, prompted by the human resource development ministry, CBSE seems to have withdrawn the circular. The reason stated is a legal opinion obatined by the ministry "in the wake of fierce opposition from private school managements". I missed this news item but heard about it only now. I am blogging it here for completion.

A victory nevertheless for private enterprises from needless meddling by inept governments and their extensions!

If the government really wants to promote low cost, quality education to girl children (or boys!), they can do so by empowering more private enterprises to start schools all over and then regulate the schools to ensure that they provide acceptable quality education.

Friday, April 07, 2006

BCCI's revenue overdrive

The BCCI management, driven primarily by its vice-president Lalit Modi comes up with innovative revenue generation moves.

Until now, cricket boards organized matches in their home countries and generated Television revenue, Tournament and ground sponsorship revenue, ticketing revenue and so on. When they toured abroad, they were paid a guarantee money by the host country.

When ICC started organizing world cups and other tournaments, they paid the particpating countries a decent share of the overall revenue generated.

In between, companies like IMG or CBFS of Sharjah organized tournaments in Toronto and Sharjah. They entered into arrangements with Indian, Pakistani and other cricket boards, paid some monies to the boards and pocketed the rest.

Now, Lalit Modi wants to organize India-Pakistan matches in neutral venues with large expatriate Indian (and Pakistani) population. Besides Pakistan, it looks like other countries may also participate. There are a couple of matches to be held next month in Abu Dhabi between India and Pakistan - back to back.

BCCI has sold the global broadcast rights to these matches to Zee Sports. For a minimum of 25 one-day Internationals, the cost of the global rights comes to a whopping US$ 219.15 million! This number looks like complete madness to me.

But then, all the monies BCCI has been getting in the last few weeks seems to be sheer madness.

Admittedly BCCI will have costs - revenue sharing with other touring teams (or at least some guaranteed money), stadium rentals (which could be offset with the gate collections), cost of creating television footage for the events and so on. Despite all this, BCCI will be left with a sizeable chunk of money.

A sponsor for these tamasha matches will pour further monies in. There will be other merchandising opportunities.

One can't appreciate the smartness of Mr. Modi enough, but for his arrogant attitude. From all accounts I hear, the man is a thorough pest and unmanageable. He throws temper tantrums and acts in the most despicable manner. Even in the recent Zee's winning bid, Zee is talking about filing a defamation suit against Lalit Modi for using intemperate and abusive language at Zee's CEO.

I am glad that I got out of the cricket business before coming face to face with Mr. Modi!

At least on the inter-personal relationship angle, Lalit Modi makes Dalmiya look like an angel.

Thursday, April 06, 2006

Deemed Universities vs AICTE

Tamil Nadu is the haven for private, self-financed engineering colleges. There are over 275 of them.

The demand for engineering seats was so high at a certain point in time in the 1990s, engineering colleges were sprouting all over the place. Students went to these colleges even though the quality of education was abysmal, because all that mattered to them was their degree certificate. These colleges demanded exorbitant bribe - called it capitation fee, donation and various other names - and used at least part of the proceeds to build up their infrastructure.

While a few of these colleges were run by good people, most who jumped into this field were dirty politicians and rowdies. A lot of them grabbed poramboke land and built colleges there. (Recently one such college built by ex-TN minister AC Shanmugam was bulldozed as it was found to impede water flow in Cooum River.) Over time, thatched huts became grandiose buildings. I have visted a few of these colleges and the buildings at least are impressive. The faculty are, however, mostly pathetic.

These colleges were affiliated to various universities in the state. Entrance into the colleges was controlled by entrance examination run by Department of Technical Education (DOTE). Then the colleges were shifted to the administration of Anna University (AU) - a university dedicated to managing the Engineering colleges in the state. AU also started handling the entrance examination.

All engineering colleges in the coutry had to satisfy AICTE norms on infrastructure, teaching faculty etc. and had to get prior permission for starting a course and enrolling a certain number of students. This was a major problem for most of the private engineering colleges.

One day, the private engineering colleges discovered a concept called Deemed Universities. Exactly what a deemed university is and under what conditions UGC will grant deemed university status to a college is unclear. But these engineering colleges figured that they could escape AICTE norms (or so they thought), if they obtained deemed university status. They started approaching UGC and started getting deemed status. Quoting from Satya's blog
Between 1956 and 1990, in 35 years, only 29 institutions were granted the deemed university status. In the last 15 years, 63 institutions were declared deemed universities and particularly in the last 5 years, 36 institutions excluding RECs have been notified as deemed universities.
When in 2003, AICTE tried contacting these engineering colleges turned deemed universities for some information, the DUs refused giving out information and went to court and obtained a stay. AICTE took several months and then eventually vacated the stay in October 2005, and followed that up with a further notice to these DUs.

One of the deemed university - Vinayaka Mission based in Salem - went to Chennai High Court again. Looking at the observations of the High Court Bench, this DU must be a big fraud. The bench observed:
Citing the "blatant" and "glaring example" of Vinayaka Mission Research Foundation's management of its Arupadaiveedu Institute of Technology, the Bench said the interpretation by the deemed universities that the AICTE should be kept out completely could lead to such a situation.
AICTE explained to the Court that while they agree that UGC controls the DUs, it still has the rights to investigate whether the engineering colleges have sufficient infrastructure to enrol the students for specific courses. DUs claim AICTE has no such locus standi and only UGC can verify this. UGC is so short-staffed, and probably doesn't care much about this issue. That is quite convenient for the DUs.

With AICTE officials making some public comments about unapproved courses and institutions, students who were enrolled in several DUs started getting jittery. Trouble broke out in SRM DU in Chennai when some students in the college felt that they may not get AICTE approved degrees. Whether there is any truth in this or not, the college administration did not handle the problem properly. This resulted in the students causing a mini riot; police were called in and arrests ensued. The problem spread out to Sathyabama DU and a few other DUs in the state.

Tamil Nadu Government did not get involved in clearing this mess. AICTE and UGC officials did not talk to each other (it appears). Finally the students took it upon themselves and went to court. There were a bunch of writ petitions and PILs in Chennai High Court. UGC, AICTE, students as well as a bunch of DUs are pleading their cases, and the case continues.

I have been tracking this in my Tamil blog, but may not do the same here. I may summarise what is going on once in a while here.