Understanding social cost benefit

BPR Vithal, one of the most distinguished civil servants who served in the erstwhile composite state of Andhra Pradesh had a wry sense of humor. His caustic wit and biting satire considerably lightened the otherwise drab and dull ambience that normally pervades the corridors of the Secretariat.

The story goes that once when the name of a particular officer was recommended to him for a posting in the Finance department which he was heading, his retort was, “I concede we practice idiocy in this department. But it is the cultivated variety – not the congenital type!”

Given the nature of their duties, those dealing financial matters in the government have occasionally, perforce, to appear somewhat dense. This is understandable but only up to a point. I heard tell that a hospital once wanted an air conditioning plant to be installed in a new operation theatre. The person in the finance department, who at that time suggested the use of an air-cooler instead, surely was over doing the art of penny-pinching?

The stint I had as the Managing Director of the Andhra Pradesh Fisheries Development Corporation (APFDC) was probably the most satisfying posting I had.I was, in 1979, posted as the Managing Director of APFDC a public sector undertaking of the Andhra Pradesh government which was entrusted several functions relating to the fisheries sector.

These include the operation of fishing trawlers, running an ice plant and a prawn processing unit, construction of trawlers in a shipyard and the procurement and sale of fresh water and marine prawns and fish from the operators of mechanized fishing boats operating from the fishing harbors along the cost of the state and from individual fishermen fishing with traditional craft and tackle.

The prospect of being able to contribute to the economic well-being of the traditional fishermen and promoting consumption of fish especially by the in mates of the hostels meant for school and college students belonging to the Schedule Castes, Schedule Tribes and Backward Castes excited me the most. The fishermen inhabiting villages lying along the coast constitute a community that is geographically isolated and excluded from many of the advantages those inland take for granted. The occupation is risky, hazardous and seasonal. Level of illiteracy and superstition are high.

Access to basic minimum needs including drinking water, housing, power, education and health is far less compare to other sections of the population. Needless to say the fishermen is exposed probably to the highest degree of exploitation especially on account of his livelihood depending upon an inaction harvest of a highly perishable commodity.

As soon as the catamaran lands the fishermen has, literally within minutes, to dispose of his catch accepting the best possible price offered to him by the merchant. Since the individual fishermen has no means of access to insulated transport, cold storage and he is unable to demand or obtain a fair price for his commodity and is left at the mercy of the middle man.

Unfortunately the Fishermen Cooperative Societies formed with a view to strengthening the working capital base of the fishermen and providing them the economies of the scale necessary for the establishment of, and ensuring access to, infrastructure facilities such as storage and transport, were a story of failure – once again on account of sabotage on the part of those who stood to lose if the Societies had succeeded in achieving their objectives.

I sensed a great opportunity in the situation. APFDC had the wherewithal to own or operate the necessary infrastructure and provide access thereto to the fishermen. By establishing a sequence of simple linkages the landings of the fishermen could be connected to the best possible markets, and the individual fishermen’s share in the consumer - rupee enhanced substantially, even after allowing for a reasonable commission for the Corporations to cover its expenditure.

Accordingly, a scheme which had been already formulated but not implemented, for internal marketing of marine fish was operationalised. A string of outlets was opened along the coast. Fish catches were procured, loaded on to insulated vans transported to the nearest consumption centers and marketed at a price which was passed on to the fishermen deducting a margin enough to cover the corporations expenses.

As expected the arrangement resulted in fishermen securing, on an average, a rupee (in those days) per kg of fish, more than what the merchants for offering. The merchants naturally refused to be pushed out of their traditional business. They responded by raising the prices offered by them for different varieties of fish, in order to keep they supply chain intact. This, in fact, was what we wanted in APFDC!

Overtime the outlets continued with APFDC’s presence acting as insurance and securing for the fishermen a consistently higher price from the middle man. In the process, naturally, purchases and sale by the APFDC dwindled, and after sometime ground to a halt. While this posed no problem to the fishermen, the finance department of the state government which had sanctioned the project on the assurance by the APFDC that the margins realized from the operations at a certain level would ensure that the activity was financially viable, noticed that losses for mounting steadily as commitments on account of the staff and infrastructure continued although the transactions had stopped. The state government promptly asked APFDC to discontinue the operations!

A closer look at the seemingly ambiguous situation could have revealed that what appeared to be an apparent loss was actually the sum that represented the additional income accruing to the fishermen. Merely by being present at the market place APFDC was able to ensure to the fishermen an income much higher than what they would have earned in its absence.

In the long run, a higher level of economic well being of the fishermen community, should normally have led to a reduction in the commitment, on the part of the government, to that community in terms of supply of subsidized food, provision of scholarships in schools, an free medical facilities in hospitals and such measures meant for the people living below the poverty line – a line the fishermen would hopefully have crossed.

This however, was not an approach which was an integral part of appraising the soundness of socio economic initiatives, at least in those days. Just as in the case activities of other public sector undertakings it is necessary that consideration of social cost benefit inform exercises evaluating the efficacy of initiatives undertaken by then.