Final Project Sasti Roti Scheme 4wa29
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CHAPTER I INTRODUCTION As a result of Depression of 2006, economy of highly developed countries has been affected drastically who impart assistance in the political and economic affairs of the developing countries. Pakistan is one of those countries of whom economy has come under the vicious shadow of inflation and worst price hiking. According to the recent economic survey, approximately 50 million people are living below the poverty line. In such intricate circumstances, the responsibility is imposed on the government to take measurers for the betterment of its people in order to provide basic necessities of life. Punjab is a biggest province of the country in proportion to its population so it is quite obvious that majority of the poor people of the country might be living in this province. In this scenario, the Punjab government took some concrete measures to eliminate poverty. The Punjab government started many schemes for the welfare of the people living below the poverty line. Resultantly, the completion of these schemes would pave the way for the betterment of poor segment of society. Most interesting, Punjab Food Scheme is one of the leading scheme through which more than 1.8m deserving families are getting Rs 1,000 per month. This mega project is running successfully and Rs 22b are being disbursed among the beneficiaries. It is worth mentioning that in 2008 more than 34.5 million people got assistance through programme like food stamp in United States of America. “Sasti Roti Scheme” initiated by Punjab Government in 2008 is unique in its nature as no such food stamp is ever provided in the history of Pakistan. This scheme was initiated by
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Chief Minister of Punjab by ing a bill in Punjab Assembly known as Sasti Roti Bill 2008. This scheme got much allocation in provincial budget. The main objective of this scheme was poverty alleviation and to provide subsidized bread to poor people of the province. To achieve this purpose, subsidy was given to tandoor owners, who were participating in this scheme, on the purchase of flour. Having given subsidized flour by government, these tandoor owners were bound to sell the roti at the price of Rs. 2- each. According to Economic Survey of Pakistan, the “Sasti Roti” initiative was focusing on the urban population of the province. Under the scheme Sasti Roti at the rate of Rs 2 of 100 gm was being provided across the Punjab on about 12,226 enlisted Tandoors with daily consumption of about 70,000 bags. Subsidized atta was being provided to the Tandoor owners at the rate of Rs 250 per bag. (Economic Survey of Pakistan 2008-09, Chapter 13) This scheme was launched during September, 2008. A total of Rs. 1.90 billion was spent on the initiative during the FY 2008/09. Sasti roti at Rs. 2 is being provided under this initiative on 14,226 enlisted tandoors. The above initiative was later converted into Sasti Roti Authority with effect from August 2009. A Chairman was appointed by a competent forum to look after the affairs of the initiative. Food department provided flour bags on subsidized rates to districts as per their actual requirement and flour mills selected on the basis of grinding capacity and quality of flour have been engaged so that target groups can get hygienic and good quality roti at an affordable price.
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Research Problem 1. What is the “Sasti Roti Scheme” subsidy programme? 2. What is the effect of Sasti Roti Scheme on the budget of Punjab? 3. What are the distributive and allocative effects of ‘Sasti Roti Scheme’? Scope of study The report would cover the •
Overview of the ‘sasti roti scheme’ and its working
•
Allegations and negative perceptions of this subsidy
•
Comparison of allocation of this subsidy to other components of provincial budget
•
Analysis of ‘sasti roti scheme’ from the perspective of allocative and distributive effects
Rationale for study Since ‘sasti roti scheme’ has faced many controversies and allegations of corruption etc, our focus in this research would be on economic and financial aspects. Proposed research report would look into the ‘sasti roti scheme’ from the perspective of its impact on provincial budget by using budgetary analysis techniques. We would also focus on the ‘sasti roti scheme’ as an instrument of Punjab Government in fulfilling its distributive and allocative functions.
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CHAPTER II RESEARCH DESIGN AND METHODOLOGY
Research design Qualitative research would be carried out to give description of this scheme on the mentioned lines and to develop an understanding. Data gathering techniques Secondary data would be used for data gathering focusing on the documents / content analysis on Overview of the ‘sasti roti scheme’, its working, its effects on the budget of Punjab and the impact of allocation of ‘sasti roti scheme’ on the provincial budget. Most of the statistical data was obtained from Annual Budget Statement.
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CHAPTER III SASTI ROTI SCHEME: A SUBSIDY PROGRAMME Background of the Scheme Sasti Roti Scheme was first introduced in September 2008 and was meant only for the month of Ramadan. But the authorities decided to continue the scheme till June 30, 2009. The government had earmarked Rs. 7.5 billion to continue the subsidy on flour bags till the end of the financial year 2008-09 for Sasti Roti and other food items. In October, the food department started provision of subsidized atta to ed tandoors (ovens) in five big cities for Sasti Roti and later its supply was extended across the province. The Punjab food department with the help of the district governments identified above 14,500 tandoors to provide subsidized flour bags of 20 kg at the rate of Rs 250 for provision of Roti at Rs 2 to the masses. Under the scheme, the range of 5 to 30 bags was fixed for each tandoor according to sale and baking capacity in all cities of the province. Out of the total ovens, 3,500 were ed in Lahore. The food department had to provide 65,000 bags per month to these enlisted tandoors. The government established the Sasti Roti Authority headed by Hanif Abbasi, a federal lawmaker of Pakistan Muslim League-Nawaz, to supervise and monitor the scheme and make it result-oriented. The government promulgated the Sasti Roti Act in August 2009 to provide legal cover on a permanent basis. Districts of Punjab receiving subsidy Districts of Lahore, Sheikhupura, Okara and Kasur were given subsidy for supply of flour to tandoors at a cheaper rate. Furthermore, districts of Gujranwala, Hafizabad, Sialkot,
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Narowal, Mandi Bahauddin, Gujrat, Rawalpindi, Attock, Jhelum, Chakwal, Sargodha, Khushab, Mianwali, Bhakkar, Faisalabad, Toba Tek Singh, Jhang, Multan, Lodhran, Sahiwal, Pak Pattan, Vehari, Khanewal, Dera Ghazi Khan, Rajanpur, Muzaffargarh and Layyah districts were assisted with subsidy for sasti roti tandoors. The Sasti Roti Authority Act 2010 This Act was ed for the establishment of the Sasti Roti Authority in the Punjab for the provision and distribution of sasti roti to the deserving people of the Province and to provide for the connected matters. This Act defines “sasti roti” as a tandoori roti sold at subsidized rate under the Act at a tandoor; “subsidized flour” means the flour provided to an owner of a tandoor for manufacture and sale of sasti roti; “tandoor” means a tandoor or plant established for making tandoori roti and declared as tandoor by the Authority; By this Act, the Authority developed framework for institutional excellence, service delivery standards and mission statements for provision and fair distribution of sasti roti; formulate policy, objectives, implementation, and monitoring and evaluation procedure for the provision and distribution of sasti roti; develop a strategic action plan relating to sasti roti; monitor, oversee and implement the sasti roti scheme throughout the Province; issue the detailed specifications of sasti roti; declare tandoors and regulate the provision of subsidy to a tandoor; issue directions to owners of tandoors for provision and distribution of sasti roti to the deserving people of the Province; fix the rate of sasti roti and it may fix different rate of sasti roti in different areas of the Province or at different tandoors on the basis of reasonable classification; constitute committees and delegate all or any of its functions to a committee;
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and perform any other function which is ancillary to the above functions or as may be prescribed. SRA (Sasti Roti Authority) may, for maintaining supplies of sasti roti or for securing its equitable distribution and availability at fair prices, weight, quality, by order in writing, provide for regulating or prohibiting the keeping, storage, movement, transport, supply distribution, weight, quality, disposal, acquisition, use, and consumption, trade of sasti roti or subsidized flour. Board of Management of SRA consisted of the following; Chief Minister; Chairman, Sasti Roti Authority; Additional Chief Secretary; Secretary to Government, Food Department; Secretary to Government, Finance Department; Secretary to Government, Industries Department; five persons including at least two females to be nominated by the Government; one member of the Provincial Assembly of the Punjab from each division of the Province to be nominated by the Government. Sasti Roti Scheme and Transparency The provincial government developed a website for the Sasti Roti Scheme to make it more transparent and open to scrutiny by the general public. It was claimed by Sasti Roti Authority (SRA) director general that authority will ensure that all data relevant to the Sasti Roti programme would be made available on the website. Further to this, website was supposed to contain information on the number of ed tandoors, their location and the amount of wheat flour they use per day and all details of the participating flour mills. However, when researcher visited the website, there was no data available. The website merely contained any information about funds allocated, number of tandoors and flour
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distribution. There is absolutely no information available and no feature of transparency is shown from this website.
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CHAPTER IV FLAWS OF SASTI ROTI SCHEME The major criticism on Sasti Roti Scheme was the pilferage in subsidized wheat flour, nepotism in grant of quota and lack of a proper mechanism to monitor the self-claimed, propoor scheme during the last two years. Although one may don’t have any solid grounds for questioning the intentions of government in helping the poor, but several questions need to be answered regarding the mechanism and functioning of this scheme. Ill-planning and lack of focus From the economic and management perspective, this subsidy scheme was ill-planned, and unfocused. The scheme was not well planned before its launch and no proper working was being done on the availability of funds required to run this scheme. Similarly this scheme was not much focused so as to meet its goals. The primary objective of this subsidy was to provide cheap bread to poor people of Punjab. To achieve this purpose, scheme should have been well focused and clear in of identification of poor; urban or rural, specific areas of cities or all tandoors, etc. The scheme was not well-thought out and was started in haste owing to which above 70 per cent of tandoors located in posh areas attached with hotels and food outlets were taken into the network by the official concerned for ulterior motives. After five months of subsidized wheat flour, the government came around to the viewpoint of the food and finance departments and discontinued supplies to 20 percent of tandoors attached with eateries frequently visited by well-off segments of society while cancelling their registration. Lack of regulatory mechanism
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The government failed to outline a regulatory mechanism to check and monitor the utilization of a full quantity of provided subsidies of atta because it was not physically possible owing to lack of required infrastructure and manpower. There were no policy/rules and criteria for the issuance of quota, installation and enlistment of tandoors and to make it pro-poor. Nepotism was the hallmark of the scheme, they added. Irregular expenditure According to an audit report of the Director-General of Audit, Punjab, the Sasti Roti (cheap bread) scheme of the Punjab has caused irregular expenditure of Rs. 1.06 billion from the national fund. The Punjab Food Department has conducted financial irregularities of Rs. 514.914 billion in non-budgetary and other matters in FY2008-09 while it also did not settle paras of Rs 60 million of the last financial year. The audit observed that supply of subsidized flour to tandoors in Sasti Roti Scheme was grossly violated, as reference of authority was not given in the sanction orders. In case of Lahore, the Towns Committees officials like naib qasids, electricians, building / tax inspectors received subsidized flour. Also the claims were not ed by the acknowledgements of tandoor operators and owners. The flourmills were paid subsidy on the rates fixed by the DCO instead of Government. Existence of ‘Ghost’ tandoors Another charge on Sasti Roti Scheme was that of ghost tandoors taking subsidized flour but not existing in reality. According to a newspaper report, in Faisalabad district alone, there were 1,300 sasti roti tandoors existed in the district. But when DCO checked them on complaints, 800 bogus or non-functional tandoors were found to be be receiving subsidy in millions.
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Sasti Roti Scheme and financial crisis of Punjab In financial year 2009-10, the finance department on the directions of Chief Minister Punjab allocated Rs 6 billion to provide a subsidy on wheat flour being provided to ed ovens for Sasti Roti. During the same fiscal year, the Punjab government faced severe financial crisis and availed huge overdraft money from the State Bank of Pakistan even beyond the limit to deal with the government’s day to day business and financial affairs. The financial year 2009-10 ended with an overdraft amount of Rs 21 billion. In order to continue the Sasti Roti, the food department accrued a loan of Rs 6.350 billion from commercial banks at an annual interest rate of 16 per cent during financial year 2009-10. But on the other hand the finance department did not release a single penny from the allocated funds – Rs 6 billion – to repay the loan amount used on Sasti Roti subsidy. The finance department earmarked Rs5 billion in the current financial year to provide subsidy on Sasti Roti during 2010-11. But once again the finance department failed to release the required amount and the food department availed Rs 1.496 billion from the commercial banks on the same interest rate to continue Sasti Roti till November 14. End of Sasti Roti Scheme Keeping in view the fiscal deficits of Punjab, there were serious concerns among the government and civil society about the continuation of this scheme. At the same time, worst floods of the history, hit all parts of the country including Punjab. Taking cover behind the flood, the Punjab government on November 14 disbanded Sasti Roti in the province on the pretext that Rs 5 billion allocated for the purpose had been included in the funds diverted for the rehabilitation of flood victims.
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CHAPTER V “SASTI ROTI SCHEME” AND PROVINCIAL BUDGET Having an insight into the sasti roti scheme, its mechanism, legal authority and the allegations and charges faced by this scheme, we would now like to see the actual facts and budgetary allocations to this scheme along with its comparison with some other sectors. Firstly, table below shows the budget estimate provided for sasti roti scheme for years 2009-2010 and 2010-2011. Rs. In million BE 2009-2010 7500
Sasti Roti Programme
Rs. In million BE 2010-2011 5000
Following is the graphical presentation of above data.
Rs.in million
Budget Estimates of Sasti Roti Scheme 8000 7000 6000 5000 4000 3000 2000 1000 0 2009-2010
2010-2011 Years
The figures shows that the estimated budget for year 2009-2010 allocated a subsidy of Rs7500 million for sasti roti scheme whereas the allocated subsidy on this scheme for year 2010-2011 was decreased to Rs5000 million because this scheme did not work as efficiently as
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it was planned to do as well as there were some more pressing needs that needed to be subsidized at an advanced rate such as increased subsidy on wheat. To better understand the budgetary allocation to Sasti Roti Scheme, we would like to analyze all the subsidies given by Punjab Government. Following table shows the comparison of subsidies provided on wheat, public transport, sasti roti and food programs during the years 2009-2010 and 2010-2011.
Subsidy on wheat Subsidy on public transport Sasti Roti Programme Food Programme Ramzan Package
BE 2009-2010 4000 1000 7500 14200 -
BE 2010-2011 13000 1000 5000 2000
The above table shows that the estimated budget allocated for sasti roti for year 20092010 was Rs 7500 million which was far more than that of estimated budget of subsidy given on wheat (Rs4000 million), and public transport (Rs1000 million). This shows that the subsidy allocated was not justified according to the need of the people, as the provision of wheat at more subsidized prices was a potentially more vital affair and a basic need of the people. Moreover, public transport is also an important matter and one of the pressing needs of the people, so it should be available to them at a more subsidized rate. During year 2010-2011, the budget estimate depicts that the subsidy given on wheat was Rs13000 million rupees, on sasti roti scheme was Rs5000 million and on that of public transport, it remained the same as it was in year 2009-2010 i.e. Rs1000 million. We can clearly notice a significant increase in the subsidy given on wheat in year 2010-2011 as compared to the previous year which was an appropriate step towards subsidizing the basic necessity of the people and there was a significant decrease in the amount paid for the sasti roti scheme in year Sasti Roti Scheme
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2010-2011 because of the fact that the scheme was not meeting its targets as efficiently as it was proposed to do and also because of the fiscal problems faced by provincial government. Moreover, the subsidy for public transport must also be increased as that is also an important daily life need of the people that must be provided to them at a more subsidized rate. This is illustrated in the graph below.
Rs. in million
Subsidies for FY 2009 - 2010 16000 14000 12000 10000 8000 6000 4000 2000 0
2009-2010 2010-2011
subsidy on wheat
subsidy on public transport
sasti roti programme
food programme
ramzan package
Now to have an idea of the allocation of this scheme in comparison to other sectors, consider the following table showing the comparison of subsidies provided on sasti roti, social protection and housing and community amenities during the years 2009-2010 and 2010-2011. Sasti Roti Scheme Social Protection Housing and Community Amenities
BE 2009-2010 7500.00 1,451.06 2,271.91
BE 2010-2011 5000.00 1,420.50 3,501.84
The table shows a comparison between the subsidies allocated to sasti roti scheme and budgetary allocation to social protection and housing and community amenities sector in the years 2009-2010 and 2010-2011. During year 2009-2010, it was Rs 7500 million for sasti roti scheme, Rs 1,451.06 million for social protection and Rs2, 271.91 million for housing and Sasti Roti Scheme
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community amenities. Whereas, during year 2010-2011, the subsidies allocated for sasti roti scheme reduced to Rs 5000 million, for social protection reduced to Rs 1, 420.50 million; and that of housing and amenities was provided with an increased subsidy of Rs 3, 501.84 million. This is illustrated in the graph below. Estimated Budget Allocations
Rs. in million
8000 7000 6000
sasti roti programme
5000 4000
Social Protection
3000 2000
Housing and Community Ammenities
1000 0 2009-2010
2010-2011 Years
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CHAPTER VI ALLOCATIVE AND DISTRIBUTION EFFECTS OF “SASTI ROTI SCHEME” Allocation Allocation is he process of distributing resources for the production of goods and services, and of distributing goods and services for consumption by households. This process of allocation is essential to an economy's effort to address the problem of scarcity. An allocation is efficient if the resources, goods, and services are distributed according to the economy's highest valued uses. It is the distribution of resources and revenues among the various sectors of the government/economy. Allocative efficiency Allocative efficiency is a condition wherein all the available resources of an economy are allocated in the best systematic way obtaining the most consumer satisfaction from available resources. Allocative efficiency means that our economy is doing the best job possible of satisfying unlimited wants and needs with limited resources -- that is, of addressing the problem of scarcity. Allocative efficiency, also called as Pareto efficiency, was put forward by Italian economist Vilfredo Pareto. Pareto noticed that 80% of the land and wealth in Italy was owned by 20% of the population. Pareto analyzed other areas and found the same. This theory was also called as 80/20 rule. Another economist, Dr. Joseph M. Juran also found some similar instances and referred to it as a universal principle, which he named as 'Vital Few and Useful Many'. Allocative efficiency can be defined as a condition in the market structure where all of resources are allocated in such a way so as to maximize the net profit achieved through their
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use. This is one of the standard allocative efficiency definitions. Allocative efficiency refers to a situation in which the limited resources of a company/country are allocated according to consumer's wishes. In short, it is all about having more benefits while producing relatively few liabilities. This theory is more or less similar to the law of supply and demand and demand and supply analysis. Allocation Effect A change in the allocation of resources can be caused by placing taxes on economic activity. By creating disincentives to produce, consume, or exchange, taxes generally alter resource allocations. The allocation effect is typically used when governments seek to discourage the production, consumption, or exchange of particular goods or activities that are deemed undesirable (such as tobacco use or pollution). This is one of two effects of taxation. The other (primary) is the revenue effect, which is the generation of revenue used to finance government operations. Governments primarily impose taxes as a means of collecting the revenue needed to pay for the production of public goods and to generally finance operations, this is termed the revenue effect. Taxes, however, also typically alter the allocation of resources. They change how resources are used in production, what goods are produced and who receives the production. This is termed the allocation effect. The allocation effect occurs because a tax drives a wedge between the price buyers are willing to pay for a good (demand price) and the price that sellers are willing to accept (supply price). This tax wedge disrupts a market and consequently reallocates resources. Buyers are less willing to purchase and sellers are less willing to produce the taxed good. Resources are reallocated toward the consumption and production of goods with lower or no taxes.
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While governments might impose taxes either to generate revenue or to change the allocation of resources, all taxes have both effects. A tax intended to generate revenue changes the allocation of resources. A tax intended to change the allocation of resources generates revenue. However, different taxes achieve the two effects to different degrees. Ideally, governments want revenue generated by taxes with little allocation effect. And when governments impose taxes to discourage a particular activity, success entails little revenue effect. The key to generating revenue is to identify taxes that have very little allocation effect. This is best achieved with broad-based taxes that create the same degree of disincentives for all types of goods and activities. Distribution The efficient use of the resource given a prevailing allotment of income and pattern of consumer preferences, within a given sector of the economy is termed as distribution. Distributive effect "Distributive effects" refers to the distribution of income gains and/or losses across individuals in the economy that is more difficult to handle than the allocation. Distribution standards Alternative criteria for distributing the income generated from the production of goods and services to of society. A basic notion in economics is that income is generated through production (circular flow). The amount of income generated each year depends on the value of goods and services produced with the economy's limited resources. But once this income is generated it must be distributed to of society. These criteria determine how total income is divided up across the economy, effectively answering the For Whom? question
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of allocation. The three most important distribution criteria are contributive standard, equality standard, and needs standard. Income is generated through the production of goods and services, and only through production. The total amount of income generated each year depends on the total value of goods and services produced with the economy's limited resources. This income, once generated, is then distributed to of society. The contributive, equality, needs standards are the three primary criteria for distributing available income. A closer look at the three income distribution standards provides the following information •
Contributive Standard: The contributive standard distributes income based on a person's contribution to production. Those who produce more valuable goods receive more income. Suppose, for example, that Alicia Hyfield, a fast food employee, contributes $5 worth of taco production each hour to Waldo's TexMex Taco World. In contrast, Harold "Hair Doo" Dueterman, a professional baseball player, contributes $10 million worth of entertainment production each year for the Shady Valley Primadonnas baseball team. The contributive standard means each receives income equal to their contribution to production. Alicia receives $5 per hour and Hair Doo receives $10 million per year.
•
Equality Standard: The equality standard distributes income equally to every person in society. Everyone--every man, woman, and child--receives exactly the same income-no more, no less. Suppose, for example, that a hypothetical nation like Northwest Queoldiolia has a population of 1 million people and produces $10 billion worth of goods and services (and thus generates $10 billion worth of income). The equality
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standard means that each person in the country receives $10,000 of income ($10 billion divided by 1 million). Everyone receives exactly the same income--no more, no less. •
Needs Standard: The needs standard distributes income based on how many goods and services of society require. Some people need more goods and services, and thus need more income. Others need less. Suppose, for example, that Dan Dreiling spends eight hours a day installing drywall in residential homes, apartments, and office buildings--a physically demanding job, especially for a muscular 6' 4" man like Dan. He burns a lot of calories and needs a lot of food. In contrast, Maryann Mattingly, a petite 4' 10" istrative assistant, spends her working days seated at a desk shuffling papers from one file folder to another. She burns far fewer calories than Dan. The needs standard is in effect if Dan receives proportionally more income that Maryann to purchase the necessary extra food. The needs standard also surfaces in particular circumstances. This, for example, is the
basis for the welfare system of income transfers to the poor. Income is redistributed to families, mothers, and children based on their needs. For example, Lisa Quirkenstone, a single mother of five, receives a larger monthly welfare check than Pollyanna Pumpernickel, a single mother of two. Difference between allocation and distribution The difference is in the delivery of the items being apportioned. When a portion is allocated to a recipient, it is virtually reserved for that recipient - but not necessarily delivered to them and may still be held by the allocator. If the portion is distributed, then the recipient has actually received the portion that was allocated to them.
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DISTRIBUTIVE EFFECTS OF SASTI ROTI SCHEME The Punjab government initiated the sasti roti scheme without taking into the financial conditions of the province and at the end; it was found out that precious resources were wasted. It focused on the urban population of the province. Under the Sasti Roti scheme, the amount of subsidy given to the provincial metropolis, Lahore, was higher than that of any other district during the two fiscal years. The scheme of sasti roti failed because of the distortions in the distribution of the subsidized product intercity and intercity areas. There were cities and districts that were full of rural populations, but they had not been provided any sasti roti tandoor. All the major cities, rather two out of three metropolitans of the country that is Lahore and Faisalabad had been extensively provided with the sasti roti tandoor. They were provided even in posh areas like Johar town, Wapda town etc where people having income slab of above six units and who dine out in hotels, as leisure, at least thrice a week, were buying roti at the subsidized rate of two rupees. This was a major fault and legislators should had monitored the ‘Sasti Roti’ scheme for proper and real purpose accomplishing distribution of the subsidized good and its centers that is tandoors. The official data shows that the government spent Rs 2.026 billion in fiscal year 200910 and Rs 1.08 billion in nine months of fiscal year 2008-09 on Sasti Roti subsidy in Lahore, the highest among the all districts of Punjab. Ironically, the city got higher subsidy amount than any other district of the southern Punjab, the region virtually ignored by the governments, leaving it underdeveloped as compared with the provincial metropolis and the central districts. In the fiscal year 2008-09, the government spent Rs 2.55 billion subsidy in nine months on Sasti Roti project, whereas, in 2009-10, the amount went up to Rs 6.350 billion. According
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to the data, the government spent Rs 2.373 billion subsidies on Sasti Roti project in Lahore division during 2009-10 while it spent only Rs 218 million and Rs 295 million in D G Khan and Bahawalpur divisions respectively. The amount of subsidy on in Lahore, Rs 2.026 billion, is higher than twice the total the amount of subsidy of both D G Khan and Bahawalpur divisions i.e. Rs 513 million. In fiscal year 2008-09, the government spent Rs 1.26 billion in Lahore division and Rs 81 million and Rs 117 million in D G Khan and Bahawalpur divisions respectively. In Rawalpindi division, Rs 1.346 billion was spent during 2009-10 and Rs 412 million in 2008-09. The government provided Rs 615 million subsidy to Gujranwala division during 2009-10 and Rs 177 million in 2008-09. Faisalabad division got Rs 593 million subsidy during the last fiscal year and Rs 223 million in 2008-09. Similarly, the government spent Rs 212 million in Sargodha division on the scheme in 2009-10 and Rs 89 million in 2008-09. The Multan division received Rs 442 million in 200910 and Rs 113 million in 2008-09. The government spent Rs 256 million in Pakpattan division in 2009-10. Though the division did not exist in fiscal year 2008-09, after adding up the subsidy amount of three districts of the division in 2008-09, it received an amount of Rs 102 million as subsidy. ALLOCATIVE EFFECTS OF SASTI ROTI SCHEME Presenting Budget for the fiscal 2009-2010, the minister said an amount of Rs 7.5 billion has been allocated in the next fiscal for the scheme. But the spending on "sasti rotti" project (scheme) in the Punjab had been much criticized. Different figures from different sources were found that around ~50 Lacs they were spending on that project each day. But they were gaining at the end nothing permanent. People were still committing suicides, parents still
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can't afford their children’s education, most people don’t find proper place for living, and they were deprived of basic health facilities. Then what was the function and benefit of spending such large amounts of money on a scheme that was serving not only the poor, but also rich, proportions of whom were even greater than the needy ones. That was for sure not a better use of money. If this money would had been spent in creating job opportunities in different sectors, like in creating small scale industries (like china) many people woukd became able to honorably their families. Not only this, with this spending healthy industry in the country could be developed and that had a strong chance of becoming a continuous source of revenue for the people in long term. Although, the Punjab Govt. was facing awful deficits due to this scheme but still it cut down the funds from its funds, aimed towards development projects that had been approved, planned and initiated in Musharraf era like Ring Road project. Better alternative of sasti roti scheme The government of Punjab’s sasti roti scheme proved to be inadequate and inefficient in delivering its services. First of all, as it was meant to help the destitute, the plan was not developed accordingly. More subsidized tandoors were made in big cities rather than the poor ones and villages. In addition to that, the centers of these subsidized product were located more in developed localities than in under privileged areas. Thirdly, as the government bought all the wheat from the farmers at low price, the market was left with little or no wheat and therefore, the rest of the population faced difficulties in meeting their daily demands of flour. This resulted in import of wheat from other provinces, even from outside the country.
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Poor people were not as much benefitted as if there would be an alternate, and more committed approach towards providing food to the needy. This could be the provision of food stamp to the deserving people, on the basis of their monthly wages, which if lower than 7000 rupees, should be provided with a stamp, with which they could be able to provide cheap priced bread. In this way, the entire subsidy can directly go to the public and the chances of corruption by the flour mills or naan bai could be minimized. The food stamp system is present in many countries, which has distinct rules for the provision of stamp, and thus they are working great for the welfare of the needy and poor people. One such example is given below. SNAP Food Benefits; an example The Texas health and human services commission made SNAP food benefits (used to be called food stamps) that helped people with low incomes and resources buy the food they needed for good health in Texas. It was commonly known as the Food Stamp Program SNAP benefits are given to a single person or family who meets the program’s requirements. HHSC sends a renewal application to a family getting SNAP before the end of each benefit period. Most benefit periods last for 6 months but some can be as short as 1 month or as long as 3 years. For most adults between the ages of 18 and 50 who do not have a child in the home, SNAP benefits are limited to 3 months in a 3-year period. The benefit period can be longer if the adult works at least 20 hours a week or is in a job or training program. Some people may not have to work to get benefits, such as those who have a disability or are pregnant. HHSC gives SNAP benefits through the Lone Star Card. This is a plastic card that is used like a credit card at the cash to pay for purchases. Each month, the family’s approved monthly SNAP amount is placed in the card’s .
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Emergency SNAP Benefits Emergency SNAP benefits are also known as expedited SNAP because the benefits are given faster to those in an emergency situation, such as: •
A family with resources worth $100 or less, and monthly income less than $150.
•
A family with resources and monthly income that are less than the most recent monthly expenses for rent/mortgage and utilities.
•
A family that includes a migrant or seasonal farm worker who has $100 or less in resources and very little income.
Maximum monthly snap amount Monthly SNAP Family Size
Award
1
$200
2 3 4 5 6 7 8
$367 $526 $668 $793 $952 $1,052 $1,202
For each additional person, add:
$150
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Conclusion: “Sasti Roti Scheme” initiated by Punjab Government in 2008 by Chief Minister of Punjab by ing a bill in Punjab Assembly known as Sasti Roti Bill 2008. This scheme got much allocation in provincial budget. The main objective of this scheme was poverty alleviation and to provide subsidized bread to poor people of the province. To achieve this purpose, subsidy was given to tandoor owners, who were participating in this scheme, on the purchase of flour. Having given subsidized flour by government, these tandoor owners were bound to sell the roti at the price of Rs. 2- each is being provided under this initiative on 14,226 enlisted tandoors. A total of Rs. 1.90 billion was spent on the initiative during the FY 2008/09. The Punjab Assembly unanimously ed the 'Sasti Roti (cheap bread) Authority Bill 2009'. The Punjab government has allocated Rs 5 billion in subsidies for this poverty alleviation 'Sasti Roti Scheme' (Cheap bread scheme) in the provincial budget. Food department provided flour bags on subsidized rates to districts as per their actual requirement and flour mills selected on the basis of grinding capacity and quality of flour have been engaged so that target groups can get hygienic and good quality roti at an affordable price. The collected data showed that this scheme did not meet its target as efficiently as it was proposed to do. There was a high magnitude of criticism on this scheme as it was not transparent in its nature, there were charges of pilferage in subsidized wheat flour, nepotism in grant of quota and lack of a proper mechanism to monitor the self-claimed, this subsidy scheme was ill-planned, and unfocused. The scheme was not well planned before its launch and no proper working was being done on the availability of funds required to run this scheme, not much focused so as to meet its goals, was not well-thought out and was started in haste, ) scheme of the Punjab has caused irregular expenditure of Rs1.06 billion from the national
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fund, supply of subsidized flour to tandoors in Sasti Roti Scheme was grossly violated, as reference of authority was not given in the sanction orders, No steps were in sight to recover the embezzled public money from the owners of more than 800 ‘ghost’ sasti roti tandoors detected, and The flourmills were paid subsidy on the rates fixed by the DCO instead of Government. The Punjab government faced severe financial crisis and availed huge overdraft money from the State Bank of Pakistan even beyond the limit to deal with the government’s day to day business and financial affairs. The financial year 2009-10 ended with an overdraft amount of Rs21 billion. In order to continue the Sasti Roti, the food department accrued a loan of Rs 6.350 billion from commercial banks at an annual interest rate of 16 per cent during financial year 2009-10. The finance department earmarked Rs5 billion in the current financial year to provide subsidy on Sasti Roti during 2010-11. allocated a subsidy of Rs7500 million rupees for sasti roti scheme whereas the allocated subsidy on this scheme for year 2010-2011 was decreased to Rs5000 million because this scheme did not work as efficiently as it was planned to do. The Punjab government initiated the sasti roti scheme without taking into the financial conditions of the province and at the end, it was found out that precious resources were wasted. It focused on the urban population of the province. The much publicized Sasti Roti (cheap bread) scheme of the Punjab s chief minister caused irregular expenditure of Rs1.06 billion from the national reserve of revenue. The government of Punjab’s sasti roti scheme proved to be inadequate and inefficient in delivering its services.
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References 1. Government of Punjab, Annual Budget Statement, 2009-2010 2. Government of Punjab, Annual Budget Statement, 2010-2011 3. State Bank of Pakistan FY 2008 4. http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=distribution+standard 5. http://www.buzzle.com/articles/allocative-efficiency.html 6. http://glossary.econguru.com/economic-term/distribution+standards 7. http://finance.gov.pk/poverty/prsp_annual_0809.pdf 8. http://www.lahorimela.com/lahore-news/city-gets-over-rs-3b-subsidy-on-sasti-roti.html 9. http://www.siasat.pk/forum/showthread.php?39863-Sasti-Rotti-Project 10. http://archives.dawn.com/archives/78494 11. http://archives.dawn.com/archives/78496 12. http://www.dailytimes.com.pk/default.asp?page=2010\06\22\story_22-6-2010_pg7_12 13. http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=allocation+effect 14. http://www.onepakistan.com/news/national/20396-sindh-faces-fund-crunch-forlaunching-sasti-roti-scheme.html 15. http://tribune.com.pk/story/82936/bitter-truth-about-sasti-roti/
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Sasti Roti Scheme
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Chief Minister of Punjab by ing a bill in Punjab Assembly known as Sasti Roti Bill 2008. This scheme got much allocation in provincial budget. The main objective of this scheme was poverty alleviation and to provide subsidized bread to poor people of the province. To achieve this purpose, subsidy was given to tandoor owners, who were participating in this scheme, on the purchase of flour. Having given subsidized flour by government, these tandoor owners were bound to sell the roti at the price of Rs. 2- each. According to Economic Survey of Pakistan, the “Sasti Roti” initiative was focusing on the urban population of the province. Under the scheme Sasti Roti at the rate of Rs 2 of 100 gm was being provided across the Punjab on about 12,226 enlisted Tandoors with daily consumption of about 70,000 bags. Subsidized atta was being provided to the Tandoor owners at the rate of Rs 250 per bag. (Economic Survey of Pakistan 2008-09, Chapter 13) This scheme was launched during September, 2008. A total of Rs. 1.90 billion was spent on the initiative during the FY 2008/09. Sasti roti at Rs. 2 is being provided under this initiative on 14,226 enlisted tandoors. The above initiative was later converted into Sasti Roti Authority with effect from August 2009. A Chairman was appointed by a competent forum to look after the affairs of the initiative. Food department provided flour bags on subsidized rates to districts as per their actual requirement and flour mills selected on the basis of grinding capacity and quality of flour have been engaged so that target groups can get hygienic and good quality roti at an affordable price.
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Research Problem 1. What is the “Sasti Roti Scheme” subsidy programme? 2. What is the effect of Sasti Roti Scheme on the budget of Punjab? 3. What are the distributive and allocative effects of ‘Sasti Roti Scheme’? Scope of study The report would cover the •
Overview of the ‘sasti roti scheme’ and its working
•
Allegations and negative perceptions of this subsidy
•
Comparison of allocation of this subsidy to other components of provincial budget
•
Analysis of ‘sasti roti scheme’ from the perspective of allocative and distributive effects
Rationale for study Since ‘sasti roti scheme’ has faced many controversies and allegations of corruption etc, our focus in this research would be on economic and financial aspects. Proposed research report would look into the ‘sasti roti scheme’ from the perspective of its impact on provincial budget by using budgetary analysis techniques. We would also focus on the ‘sasti roti scheme’ as an instrument of Punjab Government in fulfilling its distributive and allocative functions.
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CHAPTER II RESEARCH DESIGN AND METHODOLOGY
Research design Qualitative research would be carried out to give description of this scheme on the mentioned lines and to develop an understanding. Data gathering techniques Secondary data would be used for data gathering focusing on the documents / content analysis on Overview of the ‘sasti roti scheme’, its working, its effects on the budget of Punjab and the impact of allocation of ‘sasti roti scheme’ on the provincial budget. Most of the statistical data was obtained from Annual Budget Statement.
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CHAPTER III SASTI ROTI SCHEME: A SUBSIDY PROGRAMME Background of the Scheme Sasti Roti Scheme was first introduced in September 2008 and was meant only for the month of Ramadan. But the authorities decided to continue the scheme till June 30, 2009. The government had earmarked Rs. 7.5 billion to continue the subsidy on flour bags till the end of the financial year 2008-09 for Sasti Roti and other food items. In October, the food department started provision of subsidized atta to ed tandoors (ovens) in five big cities for Sasti Roti and later its supply was extended across the province. The Punjab food department with the help of the district governments identified above 14,500 tandoors to provide subsidized flour bags of 20 kg at the rate of Rs 250 for provision of Roti at Rs 2 to the masses. Under the scheme, the range of 5 to 30 bags was fixed for each tandoor according to sale and baking capacity in all cities of the province. Out of the total ovens, 3,500 were ed in Lahore. The food department had to provide 65,000 bags per month to these enlisted tandoors. The government established the Sasti Roti Authority headed by Hanif Abbasi, a federal lawmaker of Pakistan Muslim League-Nawaz, to supervise and monitor the scheme and make it result-oriented. The government promulgated the Sasti Roti Act in August 2009 to provide legal cover on a permanent basis. Districts of Punjab receiving subsidy Districts of Lahore, Sheikhupura, Okara and Kasur were given subsidy for supply of flour to tandoors at a cheaper rate. Furthermore, districts of Gujranwala, Hafizabad, Sialkot,
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Narowal, Mandi Bahauddin, Gujrat, Rawalpindi, Attock, Jhelum, Chakwal, Sargodha, Khushab, Mianwali, Bhakkar, Faisalabad, Toba Tek Singh, Jhang, Multan, Lodhran, Sahiwal, Pak Pattan, Vehari, Khanewal, Dera Ghazi Khan, Rajanpur, Muzaffargarh and Layyah districts were assisted with subsidy for sasti roti tandoors. The Sasti Roti Authority Act 2010 This Act was ed for the establishment of the Sasti Roti Authority in the Punjab for the provision and distribution of sasti roti to the deserving people of the Province and to provide for the connected matters. This Act defines “sasti roti” as a tandoori roti sold at subsidized rate under the Act at a tandoor; “subsidized flour” means the flour provided to an owner of a tandoor for manufacture and sale of sasti roti; “tandoor” means a tandoor or plant established for making tandoori roti and declared as tandoor by the Authority; By this Act, the Authority developed framework for institutional excellence, service delivery standards and mission statements for provision and fair distribution of sasti roti; formulate policy, objectives, implementation, and monitoring and evaluation procedure for the provision and distribution of sasti roti; develop a strategic action plan relating to sasti roti; monitor, oversee and implement the sasti roti scheme throughout the Province; issue the detailed specifications of sasti roti; declare tandoors and regulate the provision of subsidy to a tandoor; issue directions to owners of tandoors for provision and distribution of sasti roti to the deserving people of the Province; fix the rate of sasti roti and it may fix different rate of sasti roti in different areas of the Province or at different tandoors on the basis of reasonable classification; constitute committees and delegate all or any of its functions to a committee;
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and perform any other function which is ancillary to the above functions or as may be prescribed. SRA (Sasti Roti Authority) may, for maintaining supplies of sasti roti or for securing its equitable distribution and availability at fair prices, weight, quality, by order in writing, provide for regulating or prohibiting the keeping, storage, movement, transport, supply distribution, weight, quality, disposal, acquisition, use, and consumption, trade of sasti roti or subsidized flour. Board of Management of SRA consisted of the following; Chief Minister; Chairman, Sasti Roti Authority; Additional Chief Secretary; Secretary to Government, Food Department; Secretary to Government, Finance Department; Secretary to Government, Industries Department; five persons including at least two females to be nominated by the Government; one member of the Provincial Assembly of the Punjab from each division of the Province to be nominated by the Government. Sasti Roti Scheme and Transparency The provincial government developed a website for the Sasti Roti Scheme to make it more transparent and open to scrutiny by the general public. It was claimed by Sasti Roti Authority (SRA) director general that authority will ensure that all data relevant to the Sasti Roti programme would be made available on the website. Further to this, website was supposed to contain information on the number of ed tandoors, their location and the amount of wheat flour they use per day and all details of the participating flour mills. However, when researcher visited the website, there was no data available. The website merely contained any information about funds allocated, number of tandoors and flour
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distribution. There is absolutely no information available and no feature of transparency is shown from this website.
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CHAPTER IV FLAWS OF SASTI ROTI SCHEME The major criticism on Sasti Roti Scheme was the pilferage in subsidized wheat flour, nepotism in grant of quota and lack of a proper mechanism to monitor the self-claimed, propoor scheme during the last two years. Although one may don’t have any solid grounds for questioning the intentions of government in helping the poor, but several questions need to be answered regarding the mechanism and functioning of this scheme. Ill-planning and lack of focus From the economic and management perspective, this subsidy scheme was ill-planned, and unfocused. The scheme was not well planned before its launch and no proper working was being done on the availability of funds required to run this scheme. Similarly this scheme was not much focused so as to meet its goals. The primary objective of this subsidy was to provide cheap bread to poor people of Punjab. To achieve this purpose, scheme should have been well focused and clear in of identification of poor; urban or rural, specific areas of cities or all tandoors, etc. The scheme was not well-thought out and was started in haste owing to which above 70 per cent of tandoors located in posh areas attached with hotels and food outlets were taken into the network by the official concerned for ulterior motives. After five months of subsidized wheat flour, the government came around to the viewpoint of the food and finance departments and discontinued supplies to 20 percent of tandoors attached with eateries frequently visited by well-off segments of society while cancelling their registration. Lack of regulatory mechanism
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The government failed to outline a regulatory mechanism to check and monitor the utilization of a full quantity of provided subsidies of atta because it was not physically possible owing to lack of required infrastructure and manpower. There were no policy/rules and criteria for the issuance of quota, installation and enlistment of tandoors and to make it pro-poor. Nepotism was the hallmark of the scheme, they added. Irregular expenditure According to an audit report of the Director-General of Audit, Punjab, the Sasti Roti (cheap bread) scheme of the Punjab has caused irregular expenditure of Rs. 1.06 billion from the national fund. The Punjab Food Department has conducted financial irregularities of Rs. 514.914 billion in non-budgetary and other matters in FY2008-09 while it also did not settle paras of Rs 60 million of the last financial year. The audit observed that supply of subsidized flour to tandoors in Sasti Roti Scheme was grossly violated, as reference of authority was not given in the sanction orders. In case of Lahore, the Towns Committees officials like naib qasids, electricians, building / tax inspectors received subsidized flour. Also the claims were not ed by the acknowledgements of tandoor operators and owners. The flourmills were paid subsidy on the rates fixed by the DCO instead of Government. Existence of ‘Ghost’ tandoors Another charge on Sasti Roti Scheme was that of ghost tandoors taking subsidized flour but not existing in reality. According to a newspaper report, in Faisalabad district alone, there were 1,300 sasti roti tandoors existed in the district. But when DCO checked them on complaints, 800 bogus or non-functional tandoors were found to be be receiving subsidy in millions.
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Sasti Roti Scheme and financial crisis of Punjab In financial year 2009-10, the finance department on the directions of Chief Minister Punjab allocated Rs 6 billion to provide a subsidy on wheat flour being provided to ed ovens for Sasti Roti. During the same fiscal year, the Punjab government faced severe financial crisis and availed huge overdraft money from the State Bank of Pakistan even beyond the limit to deal with the government’s day to day business and financial affairs. The financial year 2009-10 ended with an overdraft amount of Rs 21 billion. In order to continue the Sasti Roti, the food department accrued a loan of Rs 6.350 billion from commercial banks at an annual interest rate of 16 per cent during financial year 2009-10. But on the other hand the finance department did not release a single penny from the allocated funds – Rs 6 billion – to repay the loan amount used on Sasti Roti subsidy. The finance department earmarked Rs5 billion in the current financial year to provide subsidy on Sasti Roti during 2010-11. But once again the finance department failed to release the required amount and the food department availed Rs 1.496 billion from the commercial banks on the same interest rate to continue Sasti Roti till November 14. End of Sasti Roti Scheme Keeping in view the fiscal deficits of Punjab, there were serious concerns among the government and civil society about the continuation of this scheme. At the same time, worst floods of the history, hit all parts of the country including Punjab. Taking cover behind the flood, the Punjab government on November 14 disbanded Sasti Roti in the province on the pretext that Rs 5 billion allocated for the purpose had been included in the funds diverted for the rehabilitation of flood victims.
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CHAPTER V “SASTI ROTI SCHEME” AND PROVINCIAL BUDGET Having an insight into the sasti roti scheme, its mechanism, legal authority and the allegations and charges faced by this scheme, we would now like to see the actual facts and budgetary allocations to this scheme along with its comparison with some other sectors. Firstly, table below shows the budget estimate provided for sasti roti scheme for years 2009-2010 and 2010-2011. Rs. In million BE 2009-2010 7500
Sasti Roti Programme
Rs. In million BE 2010-2011 5000
Following is the graphical presentation of above data.
Rs.in million
Budget Estimates of Sasti Roti Scheme 8000 7000 6000 5000 4000 3000 2000 1000 0 2009-2010
2010-2011 Years
The figures shows that the estimated budget for year 2009-2010 allocated a subsidy of Rs7500 million for sasti roti scheme whereas the allocated subsidy on this scheme for year 2010-2011 was decreased to Rs5000 million because this scheme did not work as efficiently as
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it was planned to do as well as there were some more pressing needs that needed to be subsidized at an advanced rate such as increased subsidy on wheat. To better understand the budgetary allocation to Sasti Roti Scheme, we would like to analyze all the subsidies given by Punjab Government. Following table shows the comparison of subsidies provided on wheat, public transport, sasti roti and food programs during the years 2009-2010 and 2010-2011.
Subsidy on wheat Subsidy on public transport Sasti Roti Programme Food Programme Ramzan Package
BE 2009-2010 4000 1000 7500 14200 -
BE 2010-2011 13000 1000 5000 2000
The above table shows that the estimated budget allocated for sasti roti for year 20092010 was Rs 7500 million which was far more than that of estimated budget of subsidy given on wheat (Rs4000 million), and public transport (Rs1000 million). This shows that the subsidy allocated was not justified according to the need of the people, as the provision of wheat at more subsidized prices was a potentially more vital affair and a basic need of the people. Moreover, public transport is also an important matter and one of the pressing needs of the people, so it should be available to them at a more subsidized rate. During year 2010-2011, the budget estimate depicts that the subsidy given on wheat was Rs13000 million rupees, on sasti roti scheme was Rs5000 million and on that of public transport, it remained the same as it was in year 2009-2010 i.e. Rs1000 million. We can clearly notice a significant increase in the subsidy given on wheat in year 2010-2011 as compared to the previous year which was an appropriate step towards subsidizing the basic necessity of the people and there was a significant decrease in the amount paid for the sasti roti scheme in year Sasti Roti Scheme
13
2010-2011 because of the fact that the scheme was not meeting its targets as efficiently as it was proposed to do and also because of the fiscal problems faced by provincial government. Moreover, the subsidy for public transport must also be increased as that is also an important daily life need of the people that must be provided to them at a more subsidized rate. This is illustrated in the graph below.
Rs. in million
Subsidies for FY 2009 - 2010 16000 14000 12000 10000 8000 6000 4000 2000 0
2009-2010 2010-2011
subsidy on wheat
subsidy on public transport
sasti roti programme
food programme
ramzan package
Now to have an idea of the allocation of this scheme in comparison to other sectors, consider the following table showing the comparison of subsidies provided on sasti roti, social protection and housing and community amenities during the years 2009-2010 and 2010-2011. Sasti Roti Scheme Social Protection Housing and Community Amenities
BE 2009-2010 7500.00 1,451.06 2,271.91
BE 2010-2011 5000.00 1,420.50 3,501.84
The table shows a comparison between the subsidies allocated to sasti roti scheme and budgetary allocation to social protection and housing and community amenities sector in the years 2009-2010 and 2010-2011. During year 2009-2010, it was Rs 7500 million for sasti roti scheme, Rs 1,451.06 million for social protection and Rs2, 271.91 million for housing and Sasti Roti Scheme
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community amenities. Whereas, during year 2010-2011, the subsidies allocated for sasti roti scheme reduced to Rs 5000 million, for social protection reduced to Rs 1, 420.50 million; and that of housing and amenities was provided with an increased subsidy of Rs 3, 501.84 million. This is illustrated in the graph below. Estimated Budget Allocations
Rs. in million
8000 7000 6000
sasti roti programme
5000 4000
Social Protection
3000 2000
Housing and Community Ammenities
1000 0 2009-2010
2010-2011 Years
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CHAPTER VI ALLOCATIVE AND DISTRIBUTION EFFECTS OF “SASTI ROTI SCHEME” Allocation Allocation is he process of distributing resources for the production of goods and services, and of distributing goods and services for consumption by households. This process of allocation is essential to an economy's effort to address the problem of scarcity. An allocation is efficient if the resources, goods, and services are distributed according to the economy's highest valued uses. It is the distribution of resources and revenues among the various sectors of the government/economy. Allocative efficiency Allocative efficiency is a condition wherein all the available resources of an economy are allocated in the best systematic way obtaining the most consumer satisfaction from available resources. Allocative efficiency means that our economy is doing the best job possible of satisfying unlimited wants and needs with limited resources -- that is, of addressing the problem of scarcity. Allocative efficiency, also called as Pareto efficiency, was put forward by Italian economist Vilfredo Pareto. Pareto noticed that 80% of the land and wealth in Italy was owned by 20% of the population. Pareto analyzed other areas and found the same. This theory was also called as 80/20 rule. Another economist, Dr. Joseph M. Juran also found some similar instances and referred to it as a universal principle, which he named as 'Vital Few and Useful Many'. Allocative efficiency can be defined as a condition in the market structure where all of resources are allocated in such a way so as to maximize the net profit achieved through their
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use. This is one of the standard allocative efficiency definitions. Allocative efficiency refers to a situation in which the limited resources of a company/country are allocated according to consumer's wishes. In short, it is all about having more benefits while producing relatively few liabilities. This theory is more or less similar to the law of supply and demand and demand and supply analysis. Allocation Effect A change in the allocation of resources can be caused by placing taxes on economic activity. By creating disincentives to produce, consume, or exchange, taxes generally alter resource allocations. The allocation effect is typically used when governments seek to discourage the production, consumption, or exchange of particular goods or activities that are deemed undesirable (such as tobacco use or pollution). This is one of two effects of taxation. The other (primary) is the revenue effect, which is the generation of revenue used to finance government operations. Governments primarily impose taxes as a means of collecting the revenue needed to pay for the production of public goods and to generally finance operations, this is termed the revenue effect. Taxes, however, also typically alter the allocation of resources. They change how resources are used in production, what goods are produced and who receives the production. This is termed the allocation effect. The allocation effect occurs because a tax drives a wedge between the price buyers are willing to pay for a good (demand price) and the price that sellers are willing to accept (supply price). This tax wedge disrupts a market and consequently reallocates resources. Buyers are less willing to purchase and sellers are less willing to produce the taxed good. Resources are reallocated toward the consumption and production of goods with lower or no taxes.
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While governments might impose taxes either to generate revenue or to change the allocation of resources, all taxes have both effects. A tax intended to generate revenue changes the allocation of resources. A tax intended to change the allocation of resources generates revenue. However, different taxes achieve the two effects to different degrees. Ideally, governments want revenue generated by taxes with little allocation effect. And when governments impose taxes to discourage a particular activity, success entails little revenue effect. The key to generating revenue is to identify taxes that have very little allocation effect. This is best achieved with broad-based taxes that create the same degree of disincentives for all types of goods and activities. Distribution The efficient use of the resource given a prevailing allotment of income and pattern of consumer preferences, within a given sector of the economy is termed as distribution. Distributive effect "Distributive effects" refers to the distribution of income gains and/or losses across individuals in the economy that is more difficult to handle than the allocation. Distribution standards Alternative criteria for distributing the income generated from the production of goods and services to of society. A basic notion in economics is that income is generated through production (circular flow). The amount of income generated each year depends on the value of goods and services produced with the economy's limited resources. But once this income is generated it must be distributed to of society. These criteria determine how total income is divided up across the economy, effectively answering the For Whom? question
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of allocation. The three most important distribution criteria are contributive standard, equality standard, and needs standard. Income is generated through the production of goods and services, and only through production. The total amount of income generated each year depends on the total value of goods and services produced with the economy's limited resources. This income, once generated, is then distributed to of society. The contributive, equality, needs standards are the three primary criteria for distributing available income. A closer look at the three income distribution standards provides the following information •
Contributive Standard: The contributive standard distributes income based on a person's contribution to production. Those who produce more valuable goods receive more income. Suppose, for example, that Alicia Hyfield, a fast food employee, contributes $5 worth of taco production each hour to Waldo's TexMex Taco World. In contrast, Harold "Hair Doo" Dueterman, a professional baseball player, contributes $10 million worth of entertainment production each year for the Shady Valley Primadonnas baseball team. The contributive standard means each receives income equal to their contribution to production. Alicia receives $5 per hour and Hair Doo receives $10 million per year.
•
Equality Standard: The equality standard distributes income equally to every person in society. Everyone--every man, woman, and child--receives exactly the same income-no more, no less. Suppose, for example, that a hypothetical nation like Northwest Queoldiolia has a population of 1 million people and produces $10 billion worth of goods and services (and thus generates $10 billion worth of income). The equality
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standard means that each person in the country receives $10,000 of income ($10 billion divided by 1 million). Everyone receives exactly the same income--no more, no less. •
Needs Standard: The needs standard distributes income based on how many goods and services of society require. Some people need more goods and services, and thus need more income. Others need less. Suppose, for example, that Dan Dreiling spends eight hours a day installing drywall in residential homes, apartments, and office buildings--a physically demanding job, especially for a muscular 6' 4" man like Dan. He burns a lot of calories and needs a lot of food. In contrast, Maryann Mattingly, a petite 4' 10" istrative assistant, spends her working days seated at a desk shuffling papers from one file folder to another. She burns far fewer calories than Dan. The needs standard is in effect if Dan receives proportionally more income that Maryann to purchase the necessary extra food. The needs standard also surfaces in particular circumstances. This, for example, is the
basis for the welfare system of income transfers to the poor. Income is redistributed to families, mothers, and children based on their needs. For example, Lisa Quirkenstone, a single mother of five, receives a larger monthly welfare check than Pollyanna Pumpernickel, a single mother of two. Difference between allocation and distribution The difference is in the delivery of the items being apportioned. When a portion is allocated to a recipient, it is virtually reserved for that recipient - but not necessarily delivered to them and may still be held by the allocator. If the portion is distributed, then the recipient has actually received the portion that was allocated to them.
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DISTRIBUTIVE EFFECTS OF SASTI ROTI SCHEME The Punjab government initiated the sasti roti scheme without taking into the financial conditions of the province and at the end; it was found out that precious resources were wasted. It focused on the urban population of the province. Under the Sasti Roti scheme, the amount of subsidy given to the provincial metropolis, Lahore, was higher than that of any other district during the two fiscal years. The scheme of sasti roti failed because of the distortions in the distribution of the subsidized product intercity and intercity areas. There were cities and districts that were full of rural populations, but they had not been provided any sasti roti tandoor. All the major cities, rather two out of three metropolitans of the country that is Lahore and Faisalabad had been extensively provided with the sasti roti tandoor. They were provided even in posh areas like Johar town, Wapda town etc where people having income slab of above six units and who dine out in hotels, as leisure, at least thrice a week, were buying roti at the subsidized rate of two rupees. This was a major fault and legislators should had monitored the ‘Sasti Roti’ scheme for proper and real purpose accomplishing distribution of the subsidized good and its centers that is tandoors. The official data shows that the government spent Rs 2.026 billion in fiscal year 200910 and Rs 1.08 billion in nine months of fiscal year 2008-09 on Sasti Roti subsidy in Lahore, the highest among the all districts of Punjab. Ironically, the city got higher subsidy amount than any other district of the southern Punjab, the region virtually ignored by the governments, leaving it underdeveloped as compared with the provincial metropolis and the central districts. In the fiscal year 2008-09, the government spent Rs 2.55 billion subsidy in nine months on Sasti Roti project, whereas, in 2009-10, the amount went up to Rs 6.350 billion. According
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to the data, the government spent Rs 2.373 billion subsidies on Sasti Roti project in Lahore division during 2009-10 while it spent only Rs 218 million and Rs 295 million in D G Khan and Bahawalpur divisions respectively. The amount of subsidy on in Lahore, Rs 2.026 billion, is higher than twice the total the amount of subsidy of both D G Khan and Bahawalpur divisions i.e. Rs 513 million. In fiscal year 2008-09, the government spent Rs 1.26 billion in Lahore division and Rs 81 million and Rs 117 million in D G Khan and Bahawalpur divisions respectively. In Rawalpindi division, Rs 1.346 billion was spent during 2009-10 and Rs 412 million in 2008-09. The government provided Rs 615 million subsidy to Gujranwala division during 2009-10 and Rs 177 million in 2008-09. Faisalabad division got Rs 593 million subsidy during the last fiscal year and Rs 223 million in 2008-09. Similarly, the government spent Rs 212 million in Sargodha division on the scheme in 2009-10 and Rs 89 million in 2008-09. The Multan division received Rs 442 million in 200910 and Rs 113 million in 2008-09. The government spent Rs 256 million in Pakpattan division in 2009-10. Though the division did not exist in fiscal year 2008-09, after adding up the subsidy amount of three districts of the division in 2008-09, it received an amount of Rs 102 million as subsidy. ALLOCATIVE EFFECTS OF SASTI ROTI SCHEME Presenting Budget for the fiscal 2009-2010, the minister said an amount of Rs 7.5 billion has been allocated in the next fiscal for the scheme. But the spending on "sasti rotti" project (scheme) in the Punjab had been much criticized. Different figures from different sources were found that around ~50 Lacs they were spending on that project each day. But they were gaining at the end nothing permanent. People were still committing suicides, parents still
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can't afford their children’s education, most people don’t find proper place for living, and they were deprived of basic health facilities. Then what was the function and benefit of spending such large amounts of money on a scheme that was serving not only the poor, but also rich, proportions of whom were even greater than the needy ones. That was for sure not a better use of money. If this money would had been spent in creating job opportunities in different sectors, like in creating small scale industries (like china) many people woukd became able to honorably their families. Not only this, with this spending healthy industry in the country could be developed and that had a strong chance of becoming a continuous source of revenue for the people in long term. Although, the Punjab Govt. was facing awful deficits due to this scheme but still it cut down the funds from its funds, aimed towards development projects that had been approved, planned and initiated in Musharraf era like Ring Road project. Better alternative of sasti roti scheme The government of Punjab’s sasti roti scheme proved to be inadequate and inefficient in delivering its services. First of all, as it was meant to help the destitute, the plan was not developed accordingly. More subsidized tandoors were made in big cities rather than the poor ones and villages. In addition to that, the centers of these subsidized product were located more in developed localities than in under privileged areas. Thirdly, as the government bought all the wheat from the farmers at low price, the market was left with little or no wheat and therefore, the rest of the population faced difficulties in meeting their daily demands of flour. This resulted in import of wheat from other provinces, even from outside the country.
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Poor people were not as much benefitted as if there would be an alternate, and more committed approach towards providing food to the needy. This could be the provision of food stamp to the deserving people, on the basis of their monthly wages, which if lower than 7000 rupees, should be provided with a stamp, with which they could be able to provide cheap priced bread. In this way, the entire subsidy can directly go to the public and the chances of corruption by the flour mills or naan bai could be minimized. The food stamp system is present in many countries, which has distinct rules for the provision of stamp, and thus they are working great for the welfare of the needy and poor people. One such example is given below. SNAP Food Benefits; an example The Texas health and human services commission made SNAP food benefits (used to be called food stamps) that helped people with low incomes and resources buy the food they needed for good health in Texas. It was commonly known as the Food Stamp Program SNAP benefits are given to a single person or family who meets the program’s requirements. HHSC sends a renewal application to a family getting SNAP before the end of each benefit period. Most benefit periods last for 6 months but some can be as short as 1 month or as long as 3 years. For most adults between the ages of 18 and 50 who do not have a child in the home, SNAP benefits are limited to 3 months in a 3-year period. The benefit period can be longer if the adult works at least 20 hours a week or is in a job or training program. Some people may not have to work to get benefits, such as those who have a disability or are pregnant. HHSC gives SNAP benefits through the Lone Star Card. This is a plastic card that is used like a credit card at the cash to pay for purchases. Each month, the family’s approved monthly SNAP amount is placed in the card’s .
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Emergency SNAP Benefits Emergency SNAP benefits are also known as expedited SNAP because the benefits are given faster to those in an emergency situation, such as: •
A family with resources worth $100 or less, and monthly income less than $150.
•
A family with resources and monthly income that are less than the most recent monthly expenses for rent/mortgage and utilities.
•
A family that includes a migrant or seasonal farm worker who has $100 or less in resources and very little income.
Maximum monthly snap amount Monthly SNAP Family Size
Award
1
$200
2 3 4 5 6 7 8
$367 $526 $668 $793 $952 $1,052 $1,202
For each additional person, add:
$150
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Conclusion: “Sasti Roti Scheme” initiated by Punjab Government in 2008 by Chief Minister of Punjab by ing a bill in Punjab Assembly known as Sasti Roti Bill 2008. This scheme got much allocation in provincial budget. The main objective of this scheme was poverty alleviation and to provide subsidized bread to poor people of the province. To achieve this purpose, subsidy was given to tandoor owners, who were participating in this scheme, on the purchase of flour. Having given subsidized flour by government, these tandoor owners were bound to sell the roti at the price of Rs. 2- each is being provided under this initiative on 14,226 enlisted tandoors. A total of Rs. 1.90 billion was spent on the initiative during the FY 2008/09. The Punjab Assembly unanimously ed the 'Sasti Roti (cheap bread) Authority Bill 2009'. The Punjab government has allocated Rs 5 billion in subsidies for this poverty alleviation 'Sasti Roti Scheme' (Cheap bread scheme) in the provincial budget. Food department provided flour bags on subsidized rates to districts as per their actual requirement and flour mills selected on the basis of grinding capacity and quality of flour have been engaged so that target groups can get hygienic and good quality roti at an affordable price. The collected data showed that this scheme did not meet its target as efficiently as it was proposed to do. There was a high magnitude of criticism on this scheme as it was not transparent in its nature, there were charges of pilferage in subsidized wheat flour, nepotism in grant of quota and lack of a proper mechanism to monitor the self-claimed, this subsidy scheme was ill-planned, and unfocused. The scheme was not well planned before its launch and no proper working was being done on the availability of funds required to run this scheme, not much focused so as to meet its goals, was not well-thought out and was started in haste, ) scheme of the Punjab has caused irregular expenditure of Rs1.06 billion from the national
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fund, supply of subsidized flour to tandoors in Sasti Roti Scheme was grossly violated, as reference of authority was not given in the sanction orders, No steps were in sight to recover the embezzled public money from the owners of more than 800 ‘ghost’ sasti roti tandoors detected, and The flourmills were paid subsidy on the rates fixed by the DCO instead of Government. The Punjab government faced severe financial crisis and availed huge overdraft money from the State Bank of Pakistan even beyond the limit to deal with the government’s day to day business and financial affairs. The financial year 2009-10 ended with an overdraft amount of Rs21 billion. In order to continue the Sasti Roti, the food department accrued a loan of Rs 6.350 billion from commercial banks at an annual interest rate of 16 per cent during financial year 2009-10. The finance department earmarked Rs5 billion in the current financial year to provide subsidy on Sasti Roti during 2010-11. allocated a subsidy of Rs7500 million rupees for sasti roti scheme whereas the allocated subsidy on this scheme for year 2010-2011 was decreased to Rs5000 million because this scheme did not work as efficiently as it was planned to do. The Punjab government initiated the sasti roti scheme without taking into the financial conditions of the province and at the end, it was found out that precious resources were wasted. It focused on the urban population of the province. The much publicized Sasti Roti (cheap bread) scheme of the Punjab s chief minister caused irregular expenditure of Rs1.06 billion from the national reserve of revenue. The government of Punjab’s sasti roti scheme proved to be inadequate and inefficient in delivering its services.
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References 1. Government of Punjab, Annual Budget Statement, 2009-2010 2. Government of Punjab, Annual Budget Statement, 2010-2011 3. State Bank of Pakistan FY 2008 4. http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=distribution+standard 5. http://www.buzzle.com/articles/allocative-efficiency.html 6. http://glossary.econguru.com/economic-term/distribution+standards 7. http://finance.gov.pk/poverty/prsp_annual_0809.pdf 8. http://www.lahorimela.com/lahore-news/city-gets-over-rs-3b-subsidy-on-sasti-roti.html 9. http://www.siasat.pk/forum/showthread.php?39863-Sasti-Rotti-Project 10. http://archives.dawn.com/archives/78494 11. http://archives.dawn.com/archives/78496 12. http://www.dailytimes.com.pk/default.asp?page=2010\06\22\story_22-6-2010_pg7_12 13. http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=allocation+effect 14. http://www.onepakistan.com/news/national/20396-sindh-faces-fund-crunch-forlaunching-sasti-roti-scheme.html 15. http://tribune.com.pk/story/82936/bitter-truth-about-sasti-roti/
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