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PLAYING PIED PIPER

- The AAP’s ability to use power for India’s good is suspect

Arvind Kejriwal and Prasant Bhushan, and many of the others climbing the Aam Aadmi Party bandwagon, are typical examples of the breed of do-gooders without experience of governance and management. They are steeped in their own version of democratic governance. They believe that the “common man” must be consulted on all government decisions, including ones that concern national security. They prefer State-ownership and control over private enterprise. It might be inefficient but they believe it is honest, unlike the private sector. They believe that it is the duty of the State to give essential services like water, power, transport, roads and so on for free or well below cost to the millions of poor. They are blind to the misuse, abuse and outright theft, demonstrated by the many thousands of crores of rupees spent by the United Progressive Alliance governments on cheap kerosene to the poor, the rural employment guarantee scheme, and many other social schemes. Their touching faith that honesty in politics is matched by the honest citizen demonstrates a simplistic view of governance and human nature.

The AAP brought the national parties to earth. Corruption, lavish spending, and the hubris of politicians in national and regional parties, persistent inflation of the last two years, almost zero employment growth, declining infrastructure and declining investment growth have added to the disgust felt for the UPA government and for politicians generally. Life has become difficult, especially for the urban poor and the middle class. They want this waste to stop. The AAP seemed an answer to their prayers.

The AAP emerged out of India Against Corruption, the body that brought out huge crowds in support of the anti-corruption movement organized by Kejiriwal and led by Anna Hazare. IAC has now disassociated from the AAP, though the ideology remains common. AAP’s leaders just now are apparently ordinary people. Their electoral successes in Delhi and saturated television coverage have attracted millions in the cities and towns. The AAP (like Narendra Modi) follows the example set by the election campaigns for Barack Obama that used the social media, young volunteers and personal contacts, along with small financial contributions from millions. The Bharatiya Janata Party, the Congress, and to a much lesser extent the regional parties, are rushing to imitate the AAP’s methods.

Kejriwal’s approach is that of the man on the street. So are his solutions. Power and water are too expensive and so rates must be cut. Report all corruption cases to a government help line and that will solve the problem. The Metro railway is the common man’s transport, so for short distances it must be free. All this is done promptly. Retail employs millions of small traders and must be protected from the rich foreign companies. So, earlier approval to foreign direct investment in retail is quickly withdrawn. All problems faced by the common man can be solved by an honest government and its representatives. Consulting millions on every policy is the way forward.

The disaster for the economy lies not so much in the half-baked and hurried announcements by the AAP. The party has suddenly become the Pied Piper, leading other established political parties to India’s doom. The Congress and the BJP are discarding years of experience in governance to imitate the AAP. Thus, Haryana is considering reduction in power tariffs by 30 per cent. Sanjay Nirupam, a Congress national spokesman, is agitating in Maharashtra that his party should follow the AAP’s example in reducing electricity tariffs.

The AAP has also made a fetish of simplicity among government functionaries. The princess of Gwalior, after winning an overwhelming majority in Rajasthan and becoming chief minister, is now showing that she can also be a ‘common’ person. Manohar Parrikar of Goa has lived the ‘common’ life without the Kejriwal fanfare. But a more modest and humble demeanour among political leaders is welcome.

It is the imitation of the AAP’s simplistic economics that is dangerous. Pricing of capital intensive services like electricity, water or public transport (and other services), requires complex calculations, especially when richer users have to be asked to pay more to support the poorer ones. Thoughtless reductions must be condemned. Kejriwal is doing to the infrastructure services what G.R. Gopinath did by ruining his own airline and its buyer, and bringing others on the verge of ruin by pricing below the cost. Indigo is now the largest airline in India by attending to details of management, not by emotional price reductions. The AAP is doing to Delhi’s infrastructure services (and soon to the country) what Gopinath did to the airline industry. Neither had an understanding of complex issues or plans to improve efficiency, reduce cost or improve services delivery.

The law authorizes only the statutory state electricity regulators to determine electricity tariffs. Governments that want to reduce power tariffs can do so only if they pay the difference to service providers. These subsidies by state governments come out of their budgets. Already fund-starved state governments have had to reduce their funding of physical and social infrastructure and security. The Delhi electricity regulatory commission determines electricity tariffs in Delhi. It scrutinizes expenses of power companies carefully before determining tariffs. With rising coal and gas costs, of plant, equipment and wages, and dependency on power purchases from other state governments or Central government-owned undertakings, there is little scope for cheating, and certainly no scope to reduce tariffs by 50 per cent. An earlier electricity regulator had had AAP’s ideas. He kept aside approved expenses as “regulatory assets” to avoid tariff increases. Kejriwal had wanted to use these regulatory assets to reduce Delhi electricity tariffs. This would be official theft of money that belongs to the companies and was held back. The appellate tribunal on electricity has ruled that there shall be no more such regulatory assets and that legitimate expenses must find their place in tariff increases. Kejriwal has no plans for reducing electricity costs by more efficient working methods or a disciplined work force.

He might be learning the reality. His promise of water for all is now a guarantee only to the 50 per cent or so of the better-off users who have water metres. He had not bothered to find this out before making the promise. He has no plans to increase the supply of water for Delhi by improving quantity and quality of underground water, introducing compulsory rain water harvesting, stopping leaks and waste, or cleaning the Yamuna so that it could be a water source.

The AAP’s founder, IAC, had other such ideas that will no doubt be announced by the AAP as well. Hostility to rural migration to urban areas because it reduces employment in agriculture, to putting more private banks and foreign banks under strict regulation are a sample of the half-baked leftist ideas that are copied from fringe movements in the West.

Kejriwal is a former bureaucrat brought up in a socialist mindset that is viscerally against the private sector and the making of profits. He does not condemn state ownership in key sectors like coal, oil and gas, telecom, railways, roads and so on that have been a disaster in delivery, costs and finances. These sectors are holding back the growth of the Indian economy.

The AAP must be welcomed for waking politicians to the widespread disgust for corruption and the culture of entitlement. It might even change our politics and politicians, as mainstream parties are compelled to imitate AAP’s integrity. But the AAP’s simplistic policies will cause bankruptcy, prevent growth and therefore the welfare of many. That it has been in government only for a few days is no excuse. When the AAP became a political party, it should have had a portfolio of ideas on the economy and security. Its ability to use political power for the good of India is very suspect.