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Old Sunday, January 14, 2007
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The fate of the pro-poor schemes

By Ashfak Bokhari

THE great sugar scam which catapulted this essential commodity’s price as high as Rs70 per kg, in some areas at one point of time early this year and contributed to distortions in the price structure of many other commodities making them inaccessible for the common man saw the regime’s confidence in the free market shaken for a while. Reason: the profiteers had exceeded the limits of acceptable manipulation.

The regime’s instant reaction was to fall back on the state-run supply paradigm, which the state has been gradually withdrawing from over the years, to neutralise people’s widespread anger by meeting their immediate needs at affordable prices and to prevent the recurrence of a critical crisis which could hurt its legitimacy to govern the country and also damage the IMF-designed neo-liberal order.

This is so for among those who had upset the free market apple cart many belonged to the ruling coalition and some sat in the cabinet, making the incumbent regime an accomplice in their act of market abuse in the eyes of hapless consumers.

The state-run welfare arrangement, currently in place since 1971, is an effort to answer, though unconvincingly, the allegation that the state has gradually drifted to pro-rich and anti-poor strategy in devising its long-term policies. The arrangement consists of a network of utility stores, about 560 so far, serving many but not all cities.

Being added to it is now “sasta ration” scheme which was to be launched by the Punjab government from August 1 but has been delayed. This scheme, which could inspire other provinces as well, is a pleasant echo of the food rationing system the British established in undivided India for the urban population in the early 1940s to meet wartime exigencies.

The British system remained in vogue after the war and even after the birth of Pakistan for long time. It was used as a family (household) ration for grains, sugar and cooking oil at lower-than-market prices and was a boon to disadvantaged families. This system was abolished in the mid-1980s.

Its major beneficiaries were low-income government employees, owners of flour mills, traders and processors. It, however, discriminated against rural population. Gradually, on the pressure of pro-market lobbies, governments reduced the general subsidy on food items and then virtually abandoned it.

Later on the advice of the IMF, subsidies available to the consumers in the prices of utilities were also withdrawn. Since the concept of subsidies is strongly despised by the IMF and World Bank, it was done away with in toto. Instead, the free market forces were encouraged to meet the day-to-day needs of all segments of the population in at competitive prices.

This is despite the fact that free trade is hardly a fair trade as the great sugar scam, which has now been skillfully put on the back burner, had convincingly proved.

The scam, which came as a great shock to the power wielders in Islamabad, compelled the latter to revive the bygone system of subsidies and rationing of food commodities as the free market operators could not be wholly relied upon for doing the sensitive task in a fair manner.

On June 14, the Economic Coordination Committee of the cabinet decided to pay within a week an amount of Rs233.50 million to the Utility Stores Corporation as grant-in-aid for immediate opening of another 100 stores, 16 warehouses to sell essential food commodities at subsidized rates.

The purpose was to do it on a much vast scale as the corporation is already engaged in subsidising food prices. In all, another 440 stores are to be added to the existing network in a phased manner, taking the total number to 1,000.

A hyper media campaign ran for several weeks in June-July period to build an impression that the discarded food rationing system was being brought back to help the people living below poverty line. At many stores, sugar, which had triggered the crisis, was offered at much reduced price and beeline queues were formed in front of them. Similarly, pulses of all varieties, which were disappearing from the open market, were made available at the stores at below market rates.

However, utility stores are not frequently visited by a majority of the urban middle-class for various reasons, including quality and distance factors. Nor are they a boon for all low-income groups, for they cover less than 200 out of 6,000 union councils (82 tehsils out of 380 tehsils). The absolute poor, nearly 30 per cent of the population, remain irrelevant in any pro-poor scheme.

Punjab’s “sasta ration” scheme is at its nascent stage and many of its details remain to be worked out. One million poor families, under this scheme, are to get 10kg flour bags at the rate of Rs100 each, two kg each of two pulses at Rs10 per kg cheaper than market rates, through coupons.

The subsidy, the chief minister says, amounts to Rs2 billion The nazims are to draw up lists of the beneficiaries. Is it a genuine effort to rescue the poor from starvation or simply another device to hoodwink under-hand distribution of money and favours among the cronies of the incumbent regime, remains to be seen.

In general, the pro-poor schemes in Pakistan have been a failure for various reasons, the foremost being rampant corruption in sections of bureaucracy responsible for their execution. Poverty reduction, a buzzword in today’s lexicon of pro-establishment economists and statesmen, has not specifically been a goal of Pakistan’s long-term development plans, nor can it be necessarily achieved if the country registers a higher growth rate.

To confuse the aware citizens, the neo-liberal philosophy describes every free market activity, be it investment or trade, leading to reduction in poverty simply because such an activity could and would offer employment to some poor or semi-poor citizens. This is done by corporate sector to win favour of anti-capitalism activists who happen to enjoy social approval.

In Pakistan, although less than 50 per cent of the population was deemed as poor in 1970, the poverty level was slow to fall until the late 1980s. During the 1990s, poverty increased from 22 per cent in 1990 to 34 per cent in 1999 and now it is claimed to be 24 per cent which is not accepted by all the economists.

The first nation-wide safety net was established in 1983 after the promulgation of Zakat and Ushr Ordinance in 1980. The purpose was to collect a fixed portion of the personal wealth and agricultural output of Sunni Muslims at the end of the year and then distribute it among the needy co-religionists. The annual collections since 1998 have been Rs4 billion and by 2000 the total collection had reached a sum of Rs20 billion.

About 2.4 million needy Muslims were claimed to have benefited from this pro-poor scheme. But this institution’s performance in alleviating poverty has always been unconvincing and its effectiveness held in doubt for lack of transparency, substantial waste, misuse of funds, leakages and cumbersome procedures.

In 1992, the government established the Pakistan Bait-ul-Maal as a safety net for those not covered by the Zakat system. It provides assistance to the poor in cash and wheat subsidy. It gets funds from Islamabad and Central Zakat Fund but failed to perform during 1996-1999 period for slow supply of funds but was revitalised in 2000 and now gets funds from general sales tax collection.

The successive governments (according to IMF working paper No. WP/02/5 of 2002)undertook several rural development programmes in the past which were aimed at providing physical infrastructure and employment to the landless peasants but a common feature of these programmes has been the domination of bureaucracy, with almost no involvement of the targeted rural population.

The rural elite and the government officials were the major participants, activists and beneficiaries in these programmes, notable among them being Village Aid Programme, Rural Works Programme (later People’s Works Programme) and Integrated Rural Development Programme. An evaluation of these programmes shows that they had left little impact on the rural poor.

In 1990s, the elected governments undertook several programmes claiming the rural and urban poor as their targets. These included People’s Programme, Youth Investment Promotion Society, People’s Tractor Scheme, Tameer-i-Watan Programme and Self-employment Scheme.

All these schemes initiated in the name of the poor and disadvantaged segments of the population had ended up in enriching the already rich. There was gross misuse of money and plunder of allocated funds. Most of the pro-poor schemes had been distinct for their effective role in creating a new class of parasites fed on easy money.

Reference: 14 August, 2006. EBR DAWN
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Last edited by I M Possible; Sunday, January 14, 2007 at 02:15 PM.
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