• kewal sethi

freebies?

a free style discussion in now going on about freebies. so why not jump into the arena and contribute my bit to confuse the issue still further. it is not that the proponents of various views are bothered about views of anyone else because their views are guided by political exigencies.

still here they are



freebies

kewal krishan sethi

august 7, 2022


come elections and freebies offered are dime a dozen. it is a bid to seduce the voters. no one calculates what would be the cost of the freebies and where the money will come from.

i am reminded of the story where the leader promised the sheep that they will each get a coat of wool. he won applause till a foolish lamb asked where will the wool come from.

but the voters in india do not want to ask that question. they assume that somebody else will pay. afterwards, they largely depreciate the party in power for not keeping its promise. most of the time the party in power puts a number of riders (after the election) to dilute the promise of freebies.

in this context, it is a welcome comment from supreme court about need for a committee to study freebies.it is to be hoped that it will not mean only employment for some.

anyway, the question arises what are freebies. those who offer it claim that these are to help the downtrodden, the deprived, the backwards, and the poor. those who oppose them describe them as mere gimmicks since ultimately only a small number of people are benefitted.

freebies are defended with the argument that in a welfare state, it is the duty of the government to help the poor, the unemployed and the physically disabled or socially backward sections.

one of the main arguments against subsidies are in the statement "if you give a man a fish to eat, it solves his immediate problem. if you teach him to catch fish, it is lasting solution".

the only problem with this solution is whether you have enough nets to give and have enough places to catch fish. the basic problem with india is that there are too many indians.

another question arises. is the subsidy a freebie? is giving land or loan at a subsidised rate a freebie? is the buying of crops at a pre prescribed rate a freebie?

all these are not easy questions to answer.

i will start with a hypothesis viz. "anything that results in increased production, directly or indirectly, is not freebie but assistance. likewise, anything which does not do it is freebie".

with this definition, most of the freebies have to be discontinued.

it is said that there is a golden rule which has no exception viz. "every rule has an exemption". in the discussions that follow we will keep this golden rule in mind.


let us examine some examples.


1. offering of free laptops, free television sets etc.

a. these do not increase productivity. laptop may be useful for limited purposes especially at the school level and early college years. though the information is available on a click, very often the information provided is not free from distortion, bias, and incompleteness. it can also mean diversion from seeking knowledge and using it for other activities. under a suitable guide, it might be useful. if at all, laptops should be given to the teachers and not to the students.

b. so far as television sets are concerned, they are completely superfluous for the purpose of increasing the productivity. rather the reverse is true. therefore, it is definitely a freebie.


2. mnrega

a. initially limited to earthwork, it was not productive in the true sense of the word. limited component was for the material which rendered it to be of limited use. furthermore, there was no provision for maintenance. the earthwork, once done, was neglected and the whole process was, largely, a waste. considering the corruption that went with identification of beneficiaries, disbursement of wages, fake records, and all that, it was definitely a freebie.

b. later the percentage of material component was raised. also, the earthwork for creating bunds etc. could be done on farmers fields and in that sense, productivity increased, other defects remained. in the light of these it has to be considered a freebie, unless carefully examined and implemented.

c. an alternative was construction of village roads. with increased material component, these could be called productivity increasing measures making transport easier both for men and material. a similar approach could have been made about the elementary schools. built with local materials and local artisans, it could have been productive. (in seventies crash scheme for rural employment provided for this but the drawback was that design (with concrete roofs etc.) was sent by the state government which meant import of building material and artisans which defeated the purpose. such distortions have to be avoided to make the scheme productive.


3. land and loans at subsidised rates to industries and rebate in taxes

a. the self-styled champions of downtrodden have this pet argument – these are freebies for the wealthy while the poor are neglected. the argument is misplaced. the establishment of industries means increased production meant to raise level of living. providing employment to people, it adds to the national product. hence this is not a freebie.

b. same argument applies to reduced rate of interest for loans given to those establishing industries. but there is a rider. it should be for a limited period and progress of establishment of industrial unit should be closely watched. there can be even a penal rate of interest to discourage misdemeanour.

c. same argument applies to rebate in taxes. attracting the entrepreneur and his setting up an industry is economic progress. again, these concessions should be for limited period. if the industry cannot exist in a competitive atmosphere, it is not worth being there. many of public sector establishments suffered from this defect due to misplaced notion that increasing employment (at the cost of productivity) is progress.


4. free electricity for tube wells, pumps

a. this would come in the realm of freebie. cost of producing crops includes various components – seed, fertilizer, irrigation, weedicides, and pesticides, harvesting, storing, transport, and others. all these should be taken care of while deciding the minimum support price for the crops. giving subsidy indirectly works for waste, corruption, and neglect.


5. free electricity to consumers

a. this is again a pernicious type of freebie. it encourages waste. very often, the connection to the same premises is two or more names which a modified form of corrupting the consumers

b. more often, it is a form of cross subsidisation. with free electricity up to a number of units per connection, and increased charges for those using more units which means injustice to a section of consumers.

c. very often, with limited resources, the states are unable to reimburse the electrify companies properly and in time leading to difficulties at that level. the usual business practices are adversely affected.


6. free mid-day meals, uniforms, books etc

a. mid-day meals programme (started by sourashtriya society in madurai in 1923, and extended later to tamil nadu and thereafter all over) has been cited as cause of increased enrolment. it is to be considered whether more enrolment means more education (not to speak of quality). for a limited society, with dedicated workers and volunteers, it was a success but as a government programme, it is not in the same category. very often, it is a diversion from serious job of teaching and learning. the success of an educational programme depends upon the pull factor rather than a push factor. if there is no desire to learn, these efforts are, at best, innocuous. rather than spend on these, better schools, better equipment, better trained teachers, more teachers would be far more productive.

b. the argument for free uniforms is even more facile. the students in the rural areas come from similar background, they know each other well enough to be aware of their economic situation, uniforms do not transform them into different beings.

c. the exception to the rule is supply of books and other reading and writing material. there is less chance of its being misused. even in the house if someone else uses them, it is still a gain.

d. another exception is providing cycles to students. this saves time and is, therefore, productive as it leaves time for studies.


7. income supplementing grants

a. it is a dicey situation related to basic question of universal basic income. while the idea is welcome, the categorisation of recipients is difficult. the variation in income from other sources makes it difficult to assess the quantum of payment to take the recipient to the desired level. it will lead to distortion of real information about income. to the extent that this will prove to be disincentive for productivity by limiting the efforts to supplement income by other means, which should be, ideally, the endeavour of every family, it is definitely a freebie not worth pursuing. it would be better to identify such families at local level and identify schemes to supplement their income.


8. ex gratia payments

a. occasionally some unforeseen disaster strikes – may be riots, fire, floods etc. – the immediate need is for relief and later for rehabilitation. immediate financial help is of immense help in restoring the confidence in self. however, this should be commensurate with the situation. presently the rule appears to be 'show me the man and i will decide on the ex-gratia payment'. i recall a case where a criminal running away from police was drowned when he jumped into the lake and the relatives were given ex gratia payment.

b. one special category of ex gratia payments is worth mentioning. these are deaths which are attributed to communal atmosphere. in such cases there is a rush to announce ex gratia payments and other benefits (house, job etc.) in competition with each other. this is most reprehensible.

c. the best way to decide about the quantum of ex gratia payments is through insurance route. the insurance can be on nominal rates (but not free). the compensation then can come on that basis. in special cases mentioned in subclause b, compensation can be doubled but that should be about all.


9. exceptions

a. as stated above, there are exceptions. even if the assistance does not result in increased productivity, it results in something more important - though intangible – viz the dignity of living. the old, the infirm, the incapacitated deserves the best from the society and economic aid is merely a token substitute for this.

b. in this category of exceptions can be included the people, who lose their income because they have to be hospitalised for some disease or accident. even the assistance to the attendants, who have to be there, can be included.


note – there are too many assistance programmes and too many freebies which can be covered in a brief note like this. hopefully the committee established as a consequence of supreme court observations would work on this issue for a reasonable period (say three to five years) and come up with learned response in several volumes on the different situations and appropriate recommendations.

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