India’s “policracy” (politicans and bureaucracy) have a love hate relationship with the private sector. Ideally they like the private sector to work as contractors not as competitors. Government actors resist privatization (coal India) but are quite happy to contract private players to do the work for them as franchisees. This unfortunate tendency is reinforced by the false comfort, the Indian consumer derives, from the fig leaf of “reasonably priced publicly managed” service delivery (power and petroleum). Hence the continuance of MTNL and BSNL in an era of liberalised telecom. Similar is the general support for the “Public” Distribution System even though it is riddled with leakages and poor quality. The underlying assumption seems to be that the consumer is unable to deal on an equal basis with suppliers. True to some extent but increasingly doubtful with the constitution of consumer redress tribunals and more importantly competition, induced by liberalization of the “license permit Raj”. Illiteracy remains a major stumbling block to a more equitable relationship. The problem here is that government has no incentive to create a “demand” for good governance….an acknowledged problem across the World. The largest winner from literacy and growth is the private sector. It is they who have an incentive for educating citizen/consumers (an essential link for growth). To take a current example Vedanta (bauxite mining firm in Orissa) would have been well advised to bringing the 8000 potentially displaced tribals into the modern world well before the tribals refused to walk through that door. Now the political lines are sharply drawn and difficult (and more expensive) to resolve. There are 8 million Indian kids (age 5 to 14) who are out of school today. The cost of schooling them is just Rs 1200 crores per year. This is less than 1% of the net profits of the top 50 private firms in India today and is tax deductible. Too much to pay for getting more paying customers tomorrow who trust the private sector? I am not a fan of the legislated CSR route. Industry associations are better placed to lead CSR than the government but the corporate vision needs to be composite and to a scale which matches the might of corporate India today. We are watching.
Who hates the private sector in India?
Published by Sanjeev Ahluwalia
Sanjeev S. Ahluwalia is currently Advisor, Observer Research Foundation, New Delhi and an independent consultant with core skills in economic regulation, institutional development, decentralization, public sector performance management and governance. He is also an Honorary Member of the CIRC Management Committee. He was a Senior Specialist with the Africa Poverty Reduction and Economic Management network of the World Bank for over seven years, 2005-2013. He has over a decade of experience at the national level in the Ministry of Finance, Government of India as Joint Secretary, Disinvestment from 2002 to 2005 and earlier in the Department of Economic Affairs in commercial debt management and Asian Development Bank financed projects and trade development with East Asia in the Ministry of Commerce. He was also the first Secretary of the Central Electricity Regulatory Commission from 1999 to 2000. He worked in TERI as a Senior Fellow from 1995 to 1998 in the areas of governance and regulation of the electricity sector and institutional development for renewable energy growth. Previously he served the Government of Uttar Pradesh, India in various capacities at the District and State level from 1980 onwards as a member of the Indian Administrative Service. His last job was as Secretary Finance (Expenditure management) Government of UP from 2001 to 2002. He has a Masters in Economic Policy Management from Columbia University, New York; a post graduate Diploma in Financial Management from the Faculty of Management Studies, Delhi University and a Masters in History from St. Stephens College, Delhi. View all posts by Sanjeev Ahluwalia