| Dabhol: High-level road show
India's elected representatives and bureaucracy get tired of old ideas even if they have become policy. They have not thought through all the difficulties in implementation and have no solutions in advance. Even after much debate and having announced a policy or even passing required legislations, instead of implementing it, they go back to amend it, even jettison it. When they know that a policy is not working, they do not introduce needed changes, even when they know what needs to be done.
The public sector is a good example of a problem waiting to be solved. It is no one's case that a change from government to private ownership is the only way to improve public sector performance. But in India, government ownership has led to government involvement in management, procurement, investment, personnel and staffing decisions and worse. Top management in the public sector almost daily is in discussions with concerned ministries about something or the other. The board rarely has a free hand, even when the company is a navratna. These 'nine jewels' companies are supposed to be autonomous and without government interference. It does not work that way.
The public sector has seen many attempts to give greater autonomy to management. The memorandum of understanding between the concerned ministry representing the government as owner and the management of the company was the most promising attempt. The two were to agree on performance targets and actions for the year. There was to be minimal contact thereafter. But the ministries cannot answer for other ministries which are involved in many of the actions and so do not take responsibility for actions of the government as a whole. Thus, there is a complicated MOU exercise each year, a commitment from the company but with little or no commitment from the government. The objective of distancing the latter from managerial decision-making is not achieved. That is why privatization is the answer.
With subsidies, the government has been fully aware of the huge losses through wastage, theft and wrong recipients. Solutions have been suggested but never has there been an experiment with alternatives.
Kerosene is a heavily subsidized product, with the loss being made up by cross-subsidies, and higher prices for petrol, diesel, aviation fuel. For many years it has been known that around 40 per cent of subsidized kerosene is mixed with diesel for truck operators for lower costs. Not only is the government thus subsidizing prosperous truck operators instead of poor users of kerosene, but also burning this mixture to increase pollution. Colouring subsidized kerosene was a solution but the ingenuity of adulterators ensured it had no impact on the mixing.
Trying to physically distribute a subsidized product or service is inefficient, expensive and leads to misuse. One alternative is to give the subsidy as money or an equivalent voucher to those who are to be helped so that they can buy the product or service in the market. Over the years, cloth, kerosene, food grains, sugar, fertilizers, pesticides, cement, electricity and many other subsidized items have been physically distributed for the target beneficiaries, with huge leakages. Social justice is not achieved while the government increases its deficit. Deficits lead to shortfalls in public investment in agriculture and infrastructure. Yet the government has not abandoned this mechanism for distributing subsidies.
The latest policy paradise of the bureaucracy is the power sector. Many twists and turns in policy have seen poor implementation. But there is no improvement in institutional structures, personnel and procedures for improving implementation. Instead the inference is that the policy is not working. A set of new policies is explored. That also will not be implemented forcefully and will also 'fail'.
In 1995, the government allowed private investment in generation. High-level 'road shows' brought Dabhol-Enron. In 1998, it dawned on the government that investment in generation required reforming transmission and distribution. Private investment was allowed. But both the Power Grid Corporation and the state electricity boards, the incumbent monopolies, ensured that the enabling conditions for private entry were not created. No private investment has taken place, except for two joint ventures. Policymakers saw the need for payment security because of distribution inefficiencies and consequent inability to pay for bought out power.
Vertically integrated monopolies in the SEBs had to be unbundled into generation, transmission and distribution; then corporatized to bring financial disciplines; finally these corporations would be privatized. A programme was planned of substantial incentives to states that improved state-level transmission and distribution and especially metering: the accelerated power reforms and development programme. The Electricity Act 2003 created an enabling environment for substantial private investment by allowing direct sales eliminating fear of non-payments by SEBs since the generators could sell to someone of their choice. The electricity re- gulatory commissions were to pass the rules to implement the new features in the act such as captive generation and open access. The government would monitor the implementation.
But such organizational changes, incentive schemes, new institutions like regulatory commissions, cannot by themselves transform the mismanagement of electricity in the states over 50 years. Full and sincere implementation was needed. It was not there.
Delhi state courageously introduced a privatization programme. It provided government support for vulnerable consumers and against electricity thefts for five years, tariff increases, catching thieves, better metering, bidding for distribution enterprises on the basis of commitment to maximum efficiency improvement. This Central government never publicly supported this. And the politically motivated public agitations against private electricity companies left it silent.
Now, some people in the government are again extolling the virtues of vertically integrated enterprises in electricity, state ownership and state investment in power. They feel payment security is not a hindrance, despite high SEB losses of Rs 28,000 crore this year. 'Securitized' bonds to cover old dues of SEBs of over Rs 40,000 crore are still pending.
The implementation of the package of policies (regulatory commissions, APRDR, Electricity Act) has been slow, spasmodic and not determined. Instead of improving implementation, the attempt is to reverse the policy package.
Policy-making in India is a long and tortuous exercise, beset with many compromises. There is no attempt to change the institutions or their procedures of functioning or their personnel. The same people emerge under different titles to implement policies contrary to what they had implemented earlier. They sabotage the new policies or implement them half-heartedly. They have no vision for transformation, changing mindsets through training, moving from an administrative approach to a managerial, commercial and entrepreneurial one. As Keinchi Ohme said perceptively, if China is a 'can do' economy, India is a 'why' economy with every implementer asking why it should be done. Amartya Sens's 'argumentative Indian' is visible not only as philosopher but also in mundane administration.
Is there any hope for India if policies are formulated and implemented in this time-consuming and half-hearted way' Perhaps we should just let everything alone and let private and public sectors slug it out as they have done in telecommunications. But electricity has many poor and rural consumers and is vital to India's competitiveness in the world. Only the government can introduce and implement the required changes. But this requires clarity and determination. There are few signs that they exist.