Of bread, cakes and yellow cabs

“If the people can’t have bread, why don’t they eat cakes instead”? These remarks have been popularly attributed, though without any historical evidence, to Marie Antoinette, the Queen of France at the time of the French Revolution. Chief Minister Sharif seemed to be saying much the same thing. “If the people can’t afford to ride in auto-rickshaws, why not offer them taxi service,” as he launched the Yellow Cab Scheme. In Punjab budget 2011-12, Rs4.5 billion have been allocated to the scheme mentioned above. Under this dispensation, twenty thousand Mehrans and Bolans can be purchased for use as taxis by unemployed youth. Financing, on interest-free basis, will be provided by The Bank of Punjab. The borrower will be required to make down payment of twenty per cent of the price of the vehicle as a precondition. However, the period of the loan and the repayment schedule have not yet been specified.
Mehran and Bolan may be the cheapest car/van in the domestic market, but they are much more expensive than auto-rickshaws. Therefore, cabs will have to charge much higher fares than the three-wheelers in order to operate in profit. It appears that these fares will be prohibitively high if we look at the prevailing situation as depicted below. Since the auto-rickshaw tariff is just about bearable for certain sections of the middle class, the three-wheelers are a common sight in the cities. But taxis are nowhere to be seen, except at airports and railway stations, hidden by the fare-wall. Under the yellow cab project of the nineties, Habib Bank, United Bank and National Bank suffered losses of Rs8 billion, Rs3 billion and Rs1 billion respectively, which of course had to be borne by the poor, ultimately. This loss has been generally attributed to improper documentation of the advances, and easy terms, which allowed the defaulters free rein; and to import of expensive sedans. But the main cause of failure of the scheme was lack of demand of this service for the one reason given above.
The government expects employment to be boosted as twenty thousand young men become owners-cum-drivers of cabs. However, the catch is: where will they get passengers from? Has a sufficiently large upper middle class been created overnight? Since the answer to the second question is no, so what scenario is expected to emerge? There will be defaults. The bank will seize the hypothecated vehicles of the defaulters, and make forced sales. But in most instances borrowers themselves will sell the cars/vans to moneyed buyers surreptitiously, who will make payments on behalf of the borrowers, and use the vehicles for private purposes. Loss of interest (assuming that the loans will expire in five years, and the bank rate will remain at 14 per cent), loss because of the defaults and high cost of recovery, will result in the bank incurring liabilities of at least Rs5 billion which the Government of Punjab will have to take over at the expense of the poor.
Though the government has taken the wrong approach to job creation, it can still change direction. In the case of Punjab, the best way to boost employment is to enhance agricultural incomes. The government can help the farmers in raising productivity; in ensuring that farmers get quality inputs at reasonable rates, and within time; by preventing wastage through proper and sufficient storage; and in ensuring that the farmers get good prices for their produce. Rise in incomes will raise the demand for consumer goods and agricultural implements and machinery in the rural economy. This will result in factories being expanded as well as being set up. Employment will thus be generated through the increase in the number of farm and factory workers. The French royalty did not care two hoots about the problems being faced by the commoners, and when the revolution erupted, members of the royal family lost their heads at the guillotine. In modern times, Chief Minister Sharif will certainly not lose his head, but he will definitely lose face, and the province a lot more, if he does not give up his quixotic enterprise.