The Telegraph
Since 1st March, 1999
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- It is not morality that holds private business on leash in India

Am'd'e, one of Eugene Ionesco's contributions to the theatre of the absurd, is a play about a couple living with a corpse concealed in their bedroom. The cadaver, alarmingly enough, has been growing physically with time. And now that its arms are poking through windows and the feet struggling out of the bedroom door, the living characters are faced with a crisis. While wisdom dictates speedy removal of the body, it is unfeasible to do so without dismantling the very building which houses it.

Since the early Nineties, when the trade winds of change wafted across for the first time, successive governments in India, both at the Centre and in the states, have had to struggle under a threat that is reminiscent of Ionesco's creation. The absurdity in question arises from the professed need for the governments to reduce themselves in size by ushering in free-playing markets. The first ripples of liberalization magnified over the years, the latest crescendo having been witnessed in as unlikely a venue as the state of West Bengal where free competition is normally treated with contempt. Yet the march of large-scale capitalist funds has now been flagged off to help the state gather speed along highways of economic progress. Whether this will turn out to be a mere dialectical pause in our progress towards classless bliss, only the future can tell.

Looking backwards into the misty past, India has craved for economic emancipation ever since the proclamation of independence. As with all other nations ravaged by colonial rule, liberty arrived at our door in tatters, in the shape, that is, of a capital-hungry, labour-surplus economy. Scarcity of indigenous sources of private capital and the dire need to keep foreign capitalist powers out of the fray made it incumbent on the early rulers to accept the yoke of public-sector enterprises. Capital accumulation and growth were territories reserved for the state and the planning commission was entrusted with the task of leading the nation out of the woods into sun-filled valleys loaded with milk and honey, all industrially produced.

By its very nature, however, investment of scarce resources is a form of economic activity whose results are riddled with uncertainties, even under the benevolent control of a government. Some projects meet with success, others do not. A crucial difference, though, between schemes supervised by the government and those driven by private endeavour is that while private owners discard loss-making concerns, the government is scarcely able to do so, if nothing else, in the interest of the so-called human face. And there, in fact, lies the rub.

A government-run organization is expected to defy laws of mortality and continue to be the provider of daily sustenance for all that are dependent on it, as well as their progeny, till kingdom come. This feature, more than any other, is ultimately responsible for their much-condemned inefficiency. Workers in government units are likely to lack the incentive to perform, the link between performance and rewards being, at best, tenuous. This does not preclude the existence of successfully run government undertakings, but statistics suggest that few have been able to rise to the occasion. The much flaunted Navaratna enterprises bring cold comfort in this context. The number 9 is miserably small to be quoted as evidence of success during a period that stretches over half a century. It is, alas, not even a two-digit figure!

Uncontrolled growth of government undertakings for many years with little regard for accounting realities has now led us to a situation where they fail to generate minimal funds necessary for their own continuation. They have turned into cancers which can survive only at the expense of healthy growth elsewhere. Yet, the government is scarcely in a position to wield the surgeon's knife to cleanse the system, without raising questions relating to its own credibility.

One could describe the problem, market enthusiasts explain, as a mishandling of the government's asset portfolio. The PSUs are national assets held by the government itself. However, the government, being ill-equipped to manage these, should reorganize its portfolio profile, substituting the ones that are best kept under private management by those that private business is not in a position to develop, but which it needs for its own growth.

The fashionable word in this context is infrastructure, an everyday example of which is street lighting. It is a service that benefits everyone in the neighbourhood, but which nobody might be easily charged for. One enjoys the facility, so long as it exists, whether or not one pays for it. Not exactly the commodity that the shop-owner across the street would be dying to supply. The government, though, is in a unique position to provide the service, since it is not worried about direct sales proceeds. Let us list a few more areas that cry out for the soothing government touch. Power supply, road maintenance, health services, ports, telecommunications, education, water supply, housing for the poor. The catalogue is literally endless. All these will benefit the layman, and indirectly the private entrepreneurs also, since business calls for supporting infrastructure services, most of which share, to a greater or lesser degree, the features of street lighting. They are vitally useful, yet difficult to put a price upon. Consequently, it is the government alone that can supply them.

However, the creation of infrastructure is costly. How will it be financed' Initial investment costs, as recent thinking goes, could be supported by the proceeds from the sale of PSUs, just as the purchase of one asset is covered by the sale of another. Subsequent maintenance costs would be borne from general tax revenues, since the latter will presumably no longer be necessary to subsidize the loss-making entities.

Although the idea makes eminent sense, sagacity dictates that we ask ourselves if governments have a glorious history of handling non-market projects in India. What has the people-friendly government of this state done to clear important street junctions of hawkers' Have the streets of our cities ever been rid of accumulated garbage' Haven't encephalitis and dengue reached epidemic proportions under the indolent management of the governments in Uttar Pradesh and West Bengal' Hasn't industry ground to a painful halt to create space for labour movements and political protests organized in the interest of vote-banks' Have governments ensured speedy court proceedings' Do custodians of law and order invariably instil confidence in our minds'

Past experience unfortunately inspires little trust in these respects. Ours is a society where ministries are peddled away like jagirs to hang on to the seat of power. Politicians' offspring, without any proven record whatsoever of market performance, are promoted as the future hope of an emerging market society. It may be na've therefore to view the efforts to sell off public enterprises as signals that the government is slimming itself down to levels of athletic efficiency and playing the role of a vigorous public partner for private enterprise. Standing as we do now at the crossroads, it is well to remind ourselves that the logical complement of the profit motive is a desperate search for ways to reduce costs. It is not morality that holds private business on leash when it is tempted to compromise on quality to save expenses, but a true commitment on the part of the government.

How bright are our prospects' To the extent that the sales proceeds of existing public assets will finance new ones, the size of the government will remain substantially unchanged. Public amenities in this country are mostly reserved for the chosen few. A government spends thousands of crores on lavish aircraft for ministers, when children die of hunger and disease. Is there reason to believe that the much-hyped exercise will not amount to replacing one bloated carcass by another'

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