The economics of owning and running a Ration Shop, the familiar name for the outlets in our Public Distribution System (PDS), are such that under normal business terms, the shop-owner could never make a profit. Yet, whenever the government announces that new permits for ration shops will be given out, there is a frenzy in the market to grab one of these. Why? The answer is obvious: the business is not for the honest and if one knows the ropes, there is a fortune to be made.

What are these tricks of this trade?

  • Getting fake names into the user list is the most obvious option; the State seems to be waging a losing battle against this practice, judging by the endless efforts to weeding out bogus ration cards.

  • The next is to get the 'right customers' on the list, not just more customers. These are people who are registered but who do not have any interest in drawing on their entitlements. In a system where caste and income certificates are for sale, it is not difficult to 'produce' these documents for mutual benefit. Receipts are duly made in their names, and the rations thus 'drawn' are siphoned off into the open market. The sale price of an item like rice makes clear the underlying economics - it costs Rs.8 in a ration shop while in the latter it is Rs.30 or above. There are also customers who would rather exchange their entitlements for hard cash at the beginning of the month.

  • As the degradation progresses, the shop keeper, in collusion with the official machinery, manages to withhold effectively the entitlements from even the genuine beneficiaries, and diverts them to the open market. The targeted group is usually not in a position to assert itself to get its due.

And thus one has all the 'ingredients' of a good PDS business. Now let us turn to the public schools. The first thing to notice is that in education too, like in distribution of food grains, the State has devised a piece of legislation, whose course may run very closely to the above - incontrovertible for its intent and equally liable for exploitation at the hands of those who hold the strings.

In education too, like in distribution of food grains, the State has devised a piece of legislation whose course may run very closely to that of the PDS - incontrovertible for its intent and equally liable for exploitation at the hands of those who hold the strings.

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To begin with, it is clear in today's societal conditions that running an educational institution could be (and often is) a very remunerative venture, undertaken for profit. There are very honorable exceptions to this rule, and I have the deepest regard for them, but that does not make the above statement any less true. This truth that has set in deeply at the level of college-level education, and in my opinion, is poised to infiltrate primary and high Schools through the Right to Education law.

A windfall for many schools

The Act provides for 25 per cent reservation of seats as State Quota in private schools at the cost of the public exchequer. On the face of it, it does look very attractive; one gets a vision of kids from 'deprived sections of the society' trooping into private schools in the neighborhood to avail of quality education that has so far been denied to them. However the reality is very different. The 'aspirational' school found in many urban settings is in fact in a small minority. Instead, the typical private school is usually a teaching shop that employs grossly unqualified and untrained teachers.

Still, such schools are able to wean away students from the public education system (PES). There are two reasons for this: the packaging/marketing of the product, and the lack of discerning ability on the part of the parents. The latter becomes more relevant in rural areas where parents totally lack the ability to judge a school, and therefore succumb to display of superficial frills, or to peer pressure. A detailed study of the pattern of choice among the High Schools in the School District in which Sikshana operates proves the validity of this assessment. Parents have, more often than not, opted for private schools with a distinctly poorer academic record than government schools in the same vicinity.

We need to examine the implications of the RTE Act in the context of this ground reality. To start with, an announcement that the parents are free to admit their kids in a neighborhood private school can create a rush which is neither justified nor sustainable; this will have serious detrimental impact on the PES in the short term with a major drop in new enrollments. The system can live with this, but not with the distortions that all such public interventions bring in - which is essentially the theme of this article.

Look at the mushrooming 'grey market' private schools to find out the enormous damage that the Act is likely to cause to the PES. The RTE Act provides for reservation of seats as above, with a mandated reimbursement for these admissions at a rate equivalent to that incurred by the PES. In most rural private schools, however, the cost of 'educating' a child is however far less than that incurred by the State.

While good data is hard to come by, I have observed that many of the private schools charge Rs.200 per month or even less. Compare this with the PES, in which the State spends Rs.800 or more per child each month. Inducting students on State Quota into these schools with reimbursements as above will actually prove to be a windfall income for these schools at State expense.

The PDS future for schools

What else will this parallel system do now, apart from availing the above windfall? The answers are not dissimilar to the ration shop scenario. Shady ventures will aggressively market their goods based on aspirational or perceptional choices and draw away students who would otherwise have opted for public schools. The State will in effect be funding the education of these students - and indirectly the private school system - at the cost of the public exchequer and to this extent, its own schools will be deprived of badly needed funds. These private schools will also inevitably increase their sanctioned intake of students over a period of time in order to avail of the state handout.

Further down the road come all the other distortions that afflict the PDS today; fake entries, absentee students and parents cashing in upfront the subsidy offered to the schools. The incentives being what they are, the day will not be far off when the enrollment in the schools increase and the actual number of students in the class room decline. Does it all look familiar now?

The focus is not on the poor kids who rarely occupy the neighbourhood space; it is the bureaucracy and the middle classes who will usurp these seats in premium schools in a metropolitan environment, notwithstanding all the conditional clauses in the Act. In a country where birth and caste certificates are up for sale, the fine print is not going to be a great deterrent.

It is unfortunate that the significant debate about RTE thus far in the public domain has had little to do with the path-breaking recommendations for the PES; instead it is centered on the above proposal to reserve a percentage of seats in private schools for underprivileged kids. The chief argument against it is based on a scenario where the elitist private schools are swamped by the unwashed from the streets.

To get at the truth, one has only to follow the money trail. The cost incurred by a typical premium school is bound to be far in excess of the Rs.800 under the PES and hence any reservation at state expense will be highly unattractive for them; this accounts for much of the furore. As far as educating the children of the country is concerned, this is strictly a non-issue as the number of seats feasible under the scheme will be minuscule compared to the millions of kids knocking at the doors of the system every year.

Over-centralised legislation

We are indeed paying a heavy price for making Education a concurrent subject under the Constitution. The vision of the Ministry of Human Resources Development, who drafted this legislation, does not seem to extend far beyond the Model Schools and the Kendriya Vidyalayas; and the children in Delhi schools. The conditions of the millions of kids under the State Systems do not appear to figure under their radar. Ironically, it is the latter that form the backbone of the educational system in our country.

It would be far wiser, and more practical to allow the States to set the legal and operational norms for educating their children. Different models would emerge, and their successes and failures could be learned from. An overarching, single scheme that is tailored for the Delhi environment is bound to fail in other parts of the country.

How many times have we heard the refrain under the erstwhile SSA, that funds remain unspent year after year because the States are unable to raise their share of the amount needed under the Center/State sharing formula? This is only going to get immensely worse with the huge budgets envisaged under RTE; State governments are already demanding that the Center bear the costs of this law fully. And without the capacity for absorbing these funds in the PES, the chances are that they will now get spent towards funding private schools instead. After all, that is where the action is right now, and the power of the lobbies too.