governance, political economy, institutional development and economic regulation

Posts tagged ‘Delhi’

Don’t demonise diesel

car jam

photo credit: indiatoday.com. How many 2000 cc plus private diesel cars can you spot in this randomly selected grid lock? Imposing a green cess on large diesel cars is populism at its worst. Less than 5% of private cars fall in this category and they have fairly competitive exhaust parameters because diesel engine technology has come a long way from the 1990s. The real culprit is the dirty fuel supplied in India. 

The practiced ease with which the Supreme Court settled the Uttarakhand political snafu and restored constitutional propriety and federalism there, with President’s Rule being lifted, compares unfavourably with its dilatory proceedings on the use of diesel for fuelling cars in Delhi.

To recap, the Supreme Court banned the registration of diesel cars with engine capacity of and above 2000cc in December 2015 at the height of the smog scare in Delhi. Earlier this month, it tried to enforce its April 1 deadline for all taxis in Delhi to convert from diesel to CNG, but later backed down due to the economic dislocation it would cause.

The court’s association with the micro-management of fuel, technology and urban air pollution in Delhi dates back to 1993, when it acted on a PIL to clean Delhi’s polluted air. Thereafter, the government practically ceded ground to the Supreme Court as the prime mover for preserving clean air in the nation’s capital. Citizens still applaud its historic 1998 order making CNG mandatory for all public transport in Delhi.

The Supreme Court didn’t like diesel as a fuel then, and its views today remain the same, though the technology and circumstance have changed considerably. It is generally accepted that bringing Indian fuel standards on par with Europe is the best option to lower urban pollution from motorised transport. The government has plans to upgrade fuel standards to European levels (Bharat VI) by 2019. But the government lacks credibility in making such promises, given its past record. This implies the need to monitor how well the government is working towards that goal.

Why diesel?

diesel

photo credit: greencarreports.com

Globally, diesel has become the fuel of choice in the past two decades since the Kyoto Protocol on climate change imposed carbon emission targets on developed nations in the 1990s. Diesel cars produce considerably less carbon emissions than petrol cars, but have higher particulate and NO2 emissions. Improving the quality of diesel supplied — along the lines of city diesel, that is low-sulphur, clean diesel developed in Sweden — reduces the particulate and NO2 emissions to acceptable levels. This is what Europe has done. India can and should do the same.

Why ignore the low hanging fruits of rationalising fuel price incentives?

In the short term, the Union government should equalise customs and excise duty on diesel and petrol. The Delhi government should do the same for value added tax. This will remove the artificial retail price advantage of 20 per cent enjoyed by diesel.

The fatal preference for diesel versus petrol goes back to our ersatz socialist past, when the lazy rich drove petrol cars while others used tractors, agricultural pumps, buses and trucks running on diesel, which was thus subsidised.

Today, the rich use large diesel cars while the growing middle class uses petrol-based scooters, motorcycles and cars and small cars running on diesel.

All public transport has converted to CNG and there is negligible agricultural activity in Delhi. These are ideal conditions for scrapping the preferential tax structure on diesel.

Correcting a tax-based market distortion will not attract eyeballs, nor does it appear as high-minded as imposing a “green cess”. But this is the right thing to do. Expenditure on fuel comprises around 25 per cent of the life cycle cost of running a car. So getting the price of fuel right is a key step to change consumer preferences. If a litre of petrol comes at the same retail price as diesel, much of the demand for diesel cars — particularly in the sub 2000cc segment — will simply vanish.

Green cess on large cars- populism at its worst.

The wrong thing to do would be to put a “green cess” on the registration of large, private diesel cars in Delhi as the Supreme Court seems to prefer. First, if a “green cess” is to be imposed, then in the interest of equity, it should be imposed on all “polluting” passenger vehicles that are not fueled by CNG or electricity.

Second, prescribing engine capacity as a metric for punitive taxation encourages gaming. Manufacturers will go marginally under the radar by “cheating” on capacity calibration with no benefit in emissions.

Third, imposing a selective “green cess” on engine capacity rather than emissions, which is a better, albeit easy to cheat metric, can be misread as populism and just bleeding the rich. Large diesel cars are just around five per cent of the car stock in Delhi. The cheapest large diesel car comes at a price of `20 lakhs-plus on the road. Of this, 45 per cent is tax and other government levies collected by the Union and state governments. Budget 2016 imposed an additional cess on large cars on top of the existing high excise duty.

If the intention is to penalise the use of large cars per-se — defensible environmentally on multiple counts — then the green cess should be imposed on all large motorised vehicles and not just diesel cars. The excise duty structure does that already. Excise duty on large cars is three times higher as compared to the duty on small cars. The real question is why make large cars unaffordable? What are the economic consequences thereof on jobs and economic growth versus the environmental benefits?

Going back to ersatz socialism?

Prior to the 1990s, the government used to dictate to industry what to produce and thereby constrain consumer demand. The government abandoned its policy of invasive ersatz socialism for good reasons. Why revisit a model which penalises wealth creation that is rightly dead and buried?

Banning the registration of large diesel cars in Delhi is an avoidable knee-jerk administrative response with unfortunate economic consequences. It disrupts economic activity (car production and consumer choice); puts people (taxi owners, drivers and consumers) in financial jeopardy and creates uncertainty through a rule-by-fiat approach.

There was never much to be gained from this ban in terms of cleaning Delhi’s air even in the short term. The bulk of air pollution is from point sources other than diesel cars. Aggregate pollution from motorcycles and scooters that run on petrol far exceeds the pollution from cars. Dust, agricultural residue, industrial stack emissions and soot from coal comprise the bulk of particulate emissions.

Citizens welcome judicial activism in the supply of public goods like clean air as the government routinely failed to provide them in the past. But all governments are not the same. Should not the principle of “judicial forbearance” prevail till a government fails? Let the government do its job. But keep a sharp eye out for citizen rights. Economic policy is about experimenting with trade offs, across multiple objectives and options, for which the law provides no real answers.

Adapted from the authors article in Asian Age May 17, 2016 http://www.asianage.com/columnists/don-t-demonise-diesel-955

Some more onions please

Onions comprise less than 1% by value of India’s agricultural production. The average Indian consumes less than 800 grams of the stuff per month. Onion is a seasonal fruit. Supply traditionally dips during July to September as only the stored winter crop, harvested around March, is available for consumption.

No dearth of onions

onions

photo credit: http://www.washingtonpost.com

India is the second largest producer of onions after China. We produce more than we need and export around 10% of production unless weather events adversely impact the crop. This year unseasonal rain, during harvesting, damaged the winter crop.

But demand is inelastic

Demand is relatively inelastic. Why don’t consumers say no when prices increase? First, onions are to palates in the North, Central and Western parts of India, what fish is to Bengal and curry patta and coconut is to the South. Food, chips even Uttapams taste better with onions. Onion, like Garlic, is also valued for its therapeutic value. Second, onions give a big bang for the buck. An average family spends around Rs 100 per month on the stuff. If price doubles, the burden is irksome but not a killer. Just economizing on pre-paid phone calls can make up the difference. But onion is the key savory for low income households.

It’s the politics stupid!

The fuss about onions is more about politics than economics. The political footprint of onions was established in the 1980 elections. Mrs. Indira Gandhi, on her comeback trail, after her post-emergency election debacle, shrewdly used the price rise in onions to drive home how uncaring of the ordinary person and how incompetent, the government of then Prime Minister Chaudhary Charan Singh had become. This clicked. The Congress won 67% of the Lok Sabha seats. In 1998, a sharp price rise in onions, dethroned the BJP government of Chief Minister, Madanlal Khurana in Delhi thereby establishing a new metric for good governance – the price of onions.

Delhi CM Kejriwal fingers the BJP for price rise

Delhi Chief Minister, Arvind Kejriwal has fingered the Union government for failing to control hoarding and speculation leading to the current price rise. Delhi government flooded Delhi markets in mid-August with onions at Rs 30 per kg. It plans to hold the price line just below Rs 40 per kg through public sector retail supply versus a market retail price of Rs 70 to 80 per kg.

Union government on the back foot

But the Union government claims this is too little and too late. More nimble footwork by the state government could have prevented the steep rise in onion prices in Delhi. The Union government had made available a Price Stabilization Fund of Rs 500 crore in April 2015 which state governments could use by contributing an equal amount to buy onions for retail supply at reasonable rates.

On July 2, when wholesale prices were still around Rs 20 per kg in Lasalgaon, Maharashtra-India’s largest onion mandi, the Union government brought onion under the Essential Commodities Act, thereby enabling stock limits to be enforced on wholesale agencies. It also enforced a Minimum Export Price of Rs 30 per kg to discourage exports.

In todays’ intensely adversarial, no-holds-barred competitive politics no government can ignore a public challenge. The traditionally business friendly BJP government, at the center, is particular sensitive when “hoarders” are fingered for the price rise. Maharashtra, Madhya Pradesh, Gujarat, Haryana, Andhra Pradesh and Punjab- all BJP/allies governed states – account for more than 60% of national onion production.

Grow more onions, reduce trade margins & transaction costs

Per a NCAER 2014 paper selected productivity enhancement can boost roduction. Three big onion producing states- Maharashtra, MP and AP- account for 50% of production but produce less than 17 kilo gram per Hectare against 27 and 21.5 kg/Ha in Gujarat and Punjab respectively. Again all three are ruled by BJP/NDP. Increasing productivity in just these three states can boost production by 20% ensuring sustained exports and no domestic shortages. Doing more on reducing the trade margin (better storage, faster transportation, lower market fees) can also leave more of the money with farmers whilst lowering domestic prices.

Clearly the government needs an effective and transparent mechanism, which provides the right price signals and rationalizes expectations for both farmers and consumers.

Killing export or killing farmers

Increasing the Minimum Export Price, as the government has done again this year, is the standard response. But such intervention in the market, even as it helps consumers by diverting supply to the domestic market, robs farmers of the gains from export. It also disrupts any attempt to develop export markets. Similarly, importing onions to keep consumer price low reduces the incentives for farmers to grow onions.

The fall back-leaky public distribution

But both these options are less intrusive than using the public procurement and subsidized retail supply template used for food grain. Such publicly managed mechanisms are invariably highly inefficient and ineffective with cascading losses in procurement, storage, transportation, distribution and retail sale. Sometimes inept government managed imports flood the market after the seasonal supply dip has passed and just as the new crop arrives- with disastrous impact on farmers’ incomes.

Can private distribution agencies do better?

Why not appoint a private trading agency for marginal but politically sensitive food crops, mandated to import, export or arrange for domestic distribution to balance market led demand and supply and keeping retail prices within a pre-defined retail trading band, which meets the twin needs of both farmers and consumers. This is what the RBI does for our currency to avoid excessive volatility.

Private trading agencies would charge a hefty commission for their services but it would be considerably less than the cost of direct administrative action to purchase, stock and supply onions along the Food Corporation of India model.

Onion diplomacy anyone?

Alternatively, use onions as a vehicle for building bridges with our neighbours – particularly Pakistan, which loves the stuff almost as much Punjabis. Why not negotiate a stand- by, bilateral onion supply agreement to meet onion deficits in either country on preferential terms? A similar arrangement is possible with our larger northern neighbor- China whose onion productivity exceeds ours’s. Onions can add a savory flavor to Track 1.5 – B2B- diplomacy.

Say no to expensive onions

Isn’t it high time the government bit the political bullet and said no to being bullied about the price of onions? They are not a necessity, which the sovereign is obliged to supply. The Jains don’t even touch the stuff.

To show that onions are dispensable, the entire cabinet should voluntarily say no to fresh onions during the lean period. PM Modi could launch a social media campaign to entreat well-off folks to substitute fresh onions with dried ones or switch to other seasonings, during the lean period. This can reduce demand and hence prices for those, to whom onions are the only savory they can afford other than salt and chilies.

The core of sustainable living is to adapt to what is seasonally available locally, rather than store, pack, can or transport food compulsively to cater to a menu plan made universally available but at a high cost to the environment.

Politics trumps economics hands down

But the catch is that Bihar is a big consumer of onions. People are unlikely to be amused if they can’t get their daily fix of onion, before they go to vote in November. This is one election the BJP needs to win. Visible, strong, centrally managed administrative action to lower retail prices is therefore likely to win over better options – after all the metric of good governance has to be met.

Adapted from the authors article in Asian Age August 31, 2015

BJP dials 100, Bedi to the rescue

(Reposted from the Asian Age January 21- http://www.asianage.com/columnists/bjp-dials-100-bedi-rescue-021)

bedi_kejriwal

(photocredit: sahilonline.org)

The DNA of Kiran Bedi and the Bharatiya Janata Party seem twinned at birth. Bolly-wood films thrive on the “masala” (formula) of twins separated at birth but reunited after an epic struggle with a happily tear-jerking end. The BJP and Ms Bedi finding each other after so long is real life imitating art.

For both, “discipline” comes with a capital D. They share a strong belief in the ability of large, efficient organisations to provide direction and in the efficacy of formal rules and regulations to manage society.

“Crane” Bedi could as well have been known as “danda” Bedi. Armed only with a wooden baton, she single-handedly charged at a bunch of unruly, sword-wielding Akali protesters in Delhi. The BJP is similarly admired for strong leadership and decisive action.

Kiran Didi mesmerises kids just as Mr Modi does. In both these leaders kids see a strong, stern but clear-headed “parent” with a consistent idea of what to do next and the ability to prescribe, what seems to be, a winning game plan. They have a common bias for acronyms (Kiran Didi’s 6Ps — police, prisons, prosecution, people, parents and press — compete with Mr Modi’s 3Ds — democracy, demography and demand) and a shared communication style of keeping the message simple: Hard work, discipline, steadfast goals and an alert mind ready to grab any opportunity being the mantra for advancement.

Business people, Punjabi refugees, professionals, the “sarkari” middle class and all those with a stake in preserving the status quo form the core urban constituency of the BJP in Delhi. They all look on Kiran Didi with approval. She is a Punjabi herself; a self-made professional who strove to excel at whatever she did and ensured that she got recognised for her achievements. Professional aggression, ambition and, above everything else, success, is what this core constituency adores. These attributes Ms Bedi has in plenty.

Given more time, Ms Bedi could have consolidated the woman vote behind her. She is today a mélange of what many young girls dream to be a mother, a successful government officer, an outspoken social activist, a TV personality, a politician and, implicitly, very much part of the Delhi elite.

But time is scarce with barely three weeks to go for the polls on February 7, 2015. Indeed, the fact that time was running out is what induced the unorthodox induction of a “rank outsider” into the BJP, ostensibly to lead the campaign and, possibly, eventually become the chief minister. Galling as it must be for Mr Modi that his name was not enough to pull in votes in Delhi, the fact is that the BJP must look at systematic dispersal of power and responsibility if they are to win in Bihar and later in Uttar Pradesh.

This, in fact, is the way it has been thus far. BJP chief ministers in Madhya Pradesh, Rajasthan, Chhattisgarh or Maharashtra do not view themselves as subordinate to the Prime Minister, at least not yet and certainly not in the manner the hapless, erstwhile Congress chief ministers were with regard to Sonia Gandhi.

The induction of Kiran Didi should also be read as a sign that Mr Modi is not averse to modernising the BJP and aggressively broad-basing its membership beyond the rather obscure agenda of the Sangh. Mr Modi seems to be working towards reinventing the BJP as a party of the right, committed to small government functioning on the P4S principle of private sector-led growth, security, sustainability, social protection and passive secularism.

Both the BJP and the Aam Aadmi Party have their core support base intact in Delhi. It is the direction of swing in the erstwhile Congress supporters — Poorvanchali migrants, scheduled caste, scheduled tribes and the Muslims which will determine the vote change this time around.

Ms Bedi’s induction into the BJP is a game changer because, first, she has the star appeal and freshness to attract the middle class supporters of the AAP who were disappointed with Arvind Kejriwal’s reluctance to rule in 2013 and in whose eyes Mr Kejriwal became an opportunistic quitter. Many were coming around to the idea of giving him a second chance rather than support a “traditional party” like the BJP. Now they see in Ms Bedi an alternative, the manifestation of a “new” BJP just as AAP was in 2013.

Second, Ms Bedi shall attract the wavering, non-Muslim Congress supporters who are rudderless today with the demise of the Delhi Congress. For aspirational women and the educated professional, Ms Bedi’s BJP seems to be the true inheritor of the Congress’ erstwhile mantle of stability and development which kept it in power for 15 long years (1998-2013).

Third, the BJP’s core base is unlikely to reject the “outsider” Ms Bedi who exudes success and brims with optimism. Too much is made of the disaffection of the old-time Delhi BJP leaders. These are long-term political players, honed in the Sangh’s discipline to never break ranks. In any case, they can easily be assured that Ms Bedi is only “transiting” through Delhi to enter the national government, where she would get more traction. Police, land and housing in Delhi are all dealt with by the Union government. In fact, the Delhi government is more like an empowered metropolitan authority rather that an Indian state.

With the Congress in decline, Delhi elections are a face-off between the BJP and the AAP. The AAP 2013 phenomenon was a unique convergence of the middle class and Delhi’s “underbelly” votes. But even this coalition was not sufficient to get AAP a clear majority. This time around the AAP will be boosted by significant Muslim support which earlier kept the Congress in power. But even within the AAP’s core support base they will have to contend with Ms Bedi attracting women voters.

Ms Bedi is a powerful role model and a convincing administrator to assure the empowerment of women and their protection, not least because of her linkages with the police.

If Kiran Didi can project herself as the “face” of the “new BJP” — forward-looking, effective, gender sensitive, socially progressive, honest and committed to equitable development — she may well nudge the BJP towards forming the government in Delhi.

The Bedi baan (arrow) unleashed by Mr Modi is sure to give sleepless nights to “King Kejriwal” as he trawls the slums of Delhi to keep his flock intact.

Who needs a State Government in Delhi?

flying geese

(photocredit: lakechalice.blogspot.com)

97.5% of Delhi residents live in urban areas, many in slums. All 17 million of them live within an area of 1500 square kilometers. Travelling from end to end, despite the horrendous traffic, takes just two hours on average. There are five Municipalities (including the Delhi Cantonment Board) to look after their comforts. In addition, the Union Government itself directly manages Policing, Jails, Urban Development, Water Supply and the Metro Rail-which is fast becoming the life-line of the city. More than 75% of the available beds are in health facilities owned and managed either by the Municipalities, Union Government or non-state and private care-givers. It is not clear what value the State Government adds.

We do know however that the Delhi Government spent around 2.5% of its revenue expenditure or US$ 68 million (Rs. 1500 per household) in 2013-14, just on feeding its top heavy administrative architecture– the Lt. Governor, Legislature, Council of Ministers, Secretariat administration, District Administration and financing of elections, none of which can be directly traced to tangible outcomes which benefit citizens.  This does not include its expenditure on useful things like jails, police, the judiciary, social sector programs, infrastructure, economic empowerment and some less useful things like spending 4.6% of its revenue budget (US$ 179 million) as subsidy on the supply of electricity to its pampered residents, who buy power at between 4 to 10 cents per kWh.

Delhi became a State Government in 1992. In the two decades since, the government has precious little to show for its efforts beyond a spanking new Secretariat building, stadia, flyovers and roads courtesy the Asian games earlier and more recently, the scam ridden Commonwealth Games. The State Government sits awkwardly between the Union Government, which quite naturally is loath to give up hands-on control and the Municipalities, which remain marginalized. More fundamentally, loading Delhi citizens with three levels of government is just more “babugiri” (bureaucratize) than an average citizen can handle. It is also an extremely wasteful way to govern a city.

Prime Minister Modi’s pet theme is “co-operative federalism”. But federalism must not stop at the level of governments alone. True federalism is the empowerment of local, grass roots, direct democracy where citizens play an active part in governance, especially in a relatively homogenous and rich city-per capita income in Delhi is the highest in India.

Currently the pipe, through which political power and benefits flow from the top to the citizen at the bottom is too leaky. Union Ministers and their babus; MPs, MLAs, Delhi Government Ministers and their babus and Municipal Corporators and their babus all tap into it, leaving very little to trickle down.

PM Modi would do well to articulate the “co-operative federalism” vision as a sharing of prosperity. As a part of this sharing, he should initiate a dialogue with state governments to let loose the Big Five Metros of Delhi, Mumbai, Kolkata, Chennai and Bangalore comprising 6% of India’s population from the “drag” of the underlying state level administration. They must be set free to chart their course independently under the Mayoral system like London or New York.

Urbanisation in India could conform to an adaptation of the “flying geese” model of industrialization in East Asia propounded in the 1960s by a Japanese scholar-Kaname Akamatsu. As a city matures into a metro, it must graduate out of direct state government management and support, which should divert its energies to less developed cities and areas. The logic of cities, particularly megapolises, is that their size and scale makes them supremely viable; generates “agglomeration economies” which is loosely similar to the concept of “network efficiencies”; creates well-paying jobs; provides better facilities for citizens and encourages a plural, meritocratic and modern society.

McKinsey estimates that the Big Five Metros in India together contribute at least 35% of the national GDP. Their share in high value jobs would be even higher. More importantly, the World Bank assesses that better management, infrastructure and facilities in Metros has a significant multiplier/spill-over effect, catalyzing rapid growth in a 300 km radius around each city. Recent data indicates that population growth in the Metros is slower than in the adjacent intermediate cities. Migrants vote with their feet in search for jobs. Whilst cities have significant agglomeration benefits these tend to peter out by the time they become Metros. Rent and wages increase responding to scarcity of land and labour. Land intensive and sunset industries tend to get pushed out. More importantly the returns to realty development lie in turning hitherto peri-urban areas into cities. This is another reason why the “ripple effect” of freeing Metros could be politically attractive for the political elite in state governments.

This means that whilst State Governments would lose direct management control over and revenue from the Metros, they would gain from the additional revenues generated from economic growth and jobs beyond the Metros. Managing large cities is best done by stakeholders who have a direct and permanent interest in the city. These are usually commercial interests who have a locational advantage in being there and home owners. Municipal management allows both groups to be dominant in decision making, via their tax contributions, in a more direct way than is possible under fuzzy state government control.

The fiscal devolution formula determined every five years by the Finance Commission is weighted in favour of poorer states. By hiving-off rich cities from their budgets and their higher levels of development from their score cards, state governments could lower there development ratings and hence benefit through a higher per capita devolution of central finances. The Finance Commission is also veering towards incentivizing states which help themselves by raising incremental revenues and improving performance. This means that states which lower their base level development benchmarks strategically by hiving-off developed cities, would find it easier to earn incentives. All this “gaming” could further dilute the pangs of separation.

How is this proposal likely to pan out politically? The BJP and its allies, like the Shiv Sena, with their strong urban, voter base, are likely to benefit from autonomous Metros. Regional parties, where there is a strong bi-polar power distribution today, as in Tamil Nadu, may also see some value in potentially avoiding the “winner takes all” default option today.  In West Bengal, hiving off Kolkata may appeal to all parties; the CPM, with its rural base, shouldn’t care; nor would the Trinamool, since they seem to be default successors to a dormant Congress. In Karnataka and Delhi, Metro separation can give impetus to “disruptive innovators” like the AAP and other clones, possibly led by the IT kings of Bangalore, which seek to build an alternative “non-political alliance” to the more traditional political parties.

Developing 100 SMART cities is a good move aligned with the philosophy of “co-operative federalism”. But even smarter is letting loose the Big Five Metros (BFM); Mumbai, to rival Singapore as a financial hub; Chennai to rival Hollywood and Chicago rolled into one as an arts and engineering hub; Kolkata to rival Hong Kong as the entre port for Nepal and China; Bangalore to rival Silicon valley and Delhi to rival Washington. The political fall-out of State protests is manageable and can be diluted with grants, to hold state governments harmless. The growth and jobs consequences are positive. The profiling of the Big Five, as public management innovators, can be rewarding. The “soft power” effect of the consequential reforms strategies can make a compelling story for the rest of India.

Change and reform is best implemented when it can be benchmarked nationally. The BFM, sprinkled across the four main regions of India, can show the way on tax reform; “value for money” investment management; responsive service delivery and performance-oriented human resource management- all of which are key constraints today.  

 

Delhi School Admissions; too much single malt

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Good intentions are never enough to frame good policies. Each new policy generates a host of incentives and therein lies the devil of unintended consequences. The new Lt. Governor in Delhi announced a new admissions policy for private schools in Delhi.

The policy intervenes in the school admissions market in two ways. First it reserves 35% of the available seats (5% for girls, 25% for the poor (ponderously termed in sarkari-hinglish as Economically Weaker Section (EWS) and 5% for the kids of employees).

Second, it prescribes the weights to be used for assessing a kid for admission; 70% is for those living within 6 km of a school; 20% is for a sibling in the same school; 5% is for an alumni parent; 5% for interstate transfer.

Any intervention by the State comes at the cost of distorted markets and efficiency losses. However, the modern State does intervene on grounds of promoting equity. In the case of admissions to private schools, state intervention to determine the rules is a border line case. Ideally, private unaided schools should face no restraints on their ability to manage. However, the State is so overwhelmingly present in India, by providing land to schools at cheap prices and other such goodies and our society so iniquitous, that only a Libertarian fundamentalist will question the need for state intervention.

The dramatic and very welcome change in the new policy is that school management no longer has a quota (earlier 20%) for itself. In effect, this means that the non-meritorious and well-connected or rich kids, who earlier paid-off the management through quid-pro-cos or cash and got admission under the management quota, will now have to look to Gurgaon, NOIDA or even further to get educated.  This courageous blow for merit and transparency, which has got all school managements in a twist, can only be welcomed.

The same cannot however be said for the new “local” kid advantage rule. Good schools, which make parents drool at the mouth, like Modern School, DPS and Sardar Patel Vidyalaya , to name only a few, are all located in rich and babu areas like Barakhamba Road, Humayun Road, Vasant Vihar, RK Puram and Lodhi Estate. The “local” kid advantage at a hefty 70% ensures a total wipe out for other applicants. Ergo the rich and the babus benefit. Nothing new here since privilege is enshrined in our culture.

What about the 25% reservation for EWS? Will not that ensure that rich and poor kids mingle and learn from each other? Certainly this is progressive but when combined with the “local kid advantage” it generates unintended consequences. Here is why.

In the rich and babu localities, for every one person in the house there are two persons in the “servant’s quarters” who generally work for peanuts in exchange for the significant privilege of a decent room in a prime locality. The ESW quota in the “good” schools will directly benefit this segment. One can even envisage people temporarily taking up such residence, at least on paper (as in the case of getting into the Rajya Sabha), just to get their kids admitted. The net result will be to enhance the already existing high premium on houses in these localities and crowd out other poor but meritorious kids in the rest of Delhi.

The LG would be well advised to revisit the “local kid advantage”, at the very least for ESW applicants, to allow the free flow of poor but meritorious kids to “good” schools within Delhi. Since schools in Delhi have no legal obligation to bus students to school, unlike the US, from where this rule seems to have been inspired, ESW applicants should be able to self-select what suits them best.

Similarly mindboggling is why kids, already having a sibling in a school or with alumni parents, should have a combined hefty 30% preference. What does this rule achieve except to encourage kids to free ride on their siblings and make kids complacent because their parents went to good schools? Such preferential treatment only induces rich parents to donate generously to schools, in the hope of a quid- pro-co. This is a blow against merit, against social change and in favour of privilege and must be dropped.

The third mind boggler is a 5% reservation for girls. This is a classic case of mindless gender equity overreach. Surely a better rule would have been to simply require that the admission list in a co-educational school should give preference to achieve a 40% representation of either gender. This would ensure that the co-educational character of the school is preserved (including by getting girls into schools) whilst minimizing the sacrifice of merit for equity. What if a school admission list already has 60% girls on merit? Should there be a further 5% reservation for girls on top of that, even though boys also seeking admission may be more meritorious than the girls seeking admission under the reserved quota? Why is that a social good?

Public policy is all about blending equity with efficiency as the LG knows well. The preference for paying lip service, to the single malt of equity, is not surprising in an election year, but well below par for Najeeb Jung.

 

 

Kejriwal’s Governance Debut

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Kejriwal combines Gandhian social skills with canny street fighting ability, backed by a solid record of social activism. In today’s Delhi, this is an unbeatable combination. If we followed a Presidential system, Kejriwal could well have been the Chief Minister of Delhi, instead of having to get into the muck of party politics.

However, India follows the parliamentary democracy model, in which the party vote share matters. Delhi is near equally split between BJP, AAP and Congress in terms of party vote share. This illustrates that Kejriwal is taller than his party, as is the case with Modi. Both candidates would do better than their parties, as Presidential candidates.

What this calls for is some clear thinking from Kejriwal. His supporters have rallied around his plank of a corruption-free government. No one takes his electoral promises of free water and cheap electricity seriously. What everyone is enamored by, is his Gandhian rectitude and sense of propriety. His supporters want to believe that it is still possible, six decades on since 1947, for an honest man to set government right. Modi’s supporters have a similar belief, despite his rough edges, based on his performance in Gujarat. Kejriwal has a huge advantage over Modi. He evokes no antipathy, unlike Modi and has demonstrated this by drawing support across caste, class and religion. He embodies the urban aspirations of modern India.

Kejriwal should not buy into the bogey propounded by his supporters that they cannot “morally” accept support from a “tainted” BJP or Congress. The AAP is not a revolutionary movement. It has sworn to work within the constitution. Our constitution provides for multi-party rule. Parties with a national presence and recognized by the Election Commission, can hardly be termed “tainted”. Leaders may be tainted but a political party cannot. The BJP and the Congress, combined, have more than two thirds of the vote share in Delhi. More than 6 out of 10 voters in Delhi support the “traditional parties”; BJP and Congress. Kejriwal needs to recognize this and work to win over these votes through his performance in government.

Kejriwal must not fall into the social revolutionary’s trap of the zero-sum game. All or nothing is not envisaged in the Indian Constitution and in fact is never a desirable social outcome. This desire for an over whelming mandate is similar to what Presidents of Banana Republics seek. Such mandates often become the root of the social evils of fascism and perpetuate the politics of exclusion of minorities. Neither of these are objectives of the AAP.

Finally a government is known more by its deeds than its composition. UPA 1 was a broader and more unstable coalition, but achieved much more than UPA 2. An AAP government formed with outside Congress support completely insulates the AAP from “external” influence in the day-to day management of the government. A majority is necessary in the Assembly only for new legislation and getting the budget approved.

What is far more important, than new legislation is the efficient day-to-day functioning of the government. The Delhi government is in fact only a glorified Municipal Government. Getting road projects completed, drains built and cleaned, preserving the green areas, improving water and sanitation, education, health and transport facilities is its remit. The AAPs manifesto sought to democratize governance though the wide participation of stakeholders. None of these need a majority in the assembly. Just giving the face of government a new “inclusive” feel and implementing the available instruments of direct democracy, can be a long term, game changing achievement. Delhi Government has never been known for simple living and high thinking. Time to start now.

Political parties need supporters, even in babudom, to be effective. Our babudom is not and has never been an apolitical Weberian artifice. The “golden age” of apolitical babudom, oft cited during the Nehruvian period, dominated by the Congress, never gave babus an option to align with someone else. Both the Congress and the BJP have years of administrative experience. More importantly, they have sympathetic babus. Unless AAP chooses to rule, Kejriwal’s colleagues will never get the experience of hands-on governance nor will they develop a sympathetic cadre of babus to support them. Time to get real.

Kejriwal cannot be daunted by the potential failure of a minority government after having stared “reality” in the face time and again and created his own reality. He is the “Lawrence” of India, for whom nothing is written and who determines his own destiny.

Kejriwal must not be lulled into the reassuring drone of political logisticians, who peddle their own tired theories of how to succeed in politics. Otherwise, the topi he wears, will start to resemble the one worn by the Congress and the BJP.

 

AAP can’t buck the muck

Delhi voters are in search of a government. The BJP only has 32 and can at best reach 34 with the two “others” elected. To go further and get 36 it needs to break off two-thirds of the Congress or the Aam Admi Party (AAP) MLAs. Neither option seems viable.

The AAP has been offered support from the Congress. With its 28 MLAs and 8 from the Congress, it can form a government. In fact it is duty bound to do so and has no choice in the matter.

Kejriwal’s dictat that the AAP will form a government only if it is in majority and shall not seek support from any other party, runs completely against the grain of parliamentary democracy.

Forming a government is a duty of political parties which either have the numbers or can coalesce to get them. It is not an option.

To extend this absurdity further, imagine if even a majority party should choose to sit in the opposition on the grounds that it is not “ready” to run a government or too busy fighting elections elsewhere to dirty its hands with governance in Delhi. Where does it leave citizens and their supporters? Did they press the AAP button by mistake instead of the NOTA button?

It now becomes incumbent on the Lt. Governor of Delhi (LG) to ask the AAP to form the government since BJP, neither has the numbers, nor can it get additional support. The interesting issue is what the LG should do in case AAP refuses or pleads lack of numbers. How should the LG treat the offer of support to the AAP from the Congress?

The LG can break new grounds by “requiring” the AAP to form the government on the back of the Congress promise of support. This will bring a degree of responsibility into electoral practices. A party must not be allowed to escape the consequences of its public actions or destroy the very fabric of representative democracy, by casually spurning the mandate to govern.

Are there sanctions which could apply in case AAP refuses to govern? Should the Election Commission withhold recognition on grounds of the frivolous approach of the AAP to governance?

The Delhi conundrum is exactly what is sought to be avoided in other systems, where a runoff between the two candidates getting the largest vote share is prescribed, till one of them gets a clear majority. We don’t have that useful system in India, precisely with the intention of not disadvantaging new parties or those with less than majority support, since their electability is low. This positive feature of our electoral system should not translate into a potential political vacuum.  

Even purely strategically, it boggles the mind as to why AAP should refuse an offer of support, from the Congress, to form the government. Accepting unconditional support from any party cannot reduce the “clean image” of the AAP. What is far more important than merely forming a government is running it cleanly and here the AAP would have a free hand.

The AAP can go ahead and form its Council of Ministers and Kejriwal can realize Anna’s recent prediction of becoming CM. Thereafter, they will face the challenge of passing the Annual Budget. They could formulate the kind of budget which they have promised, using the best brains in the business and they are not likely to be short of support on this ground.

If the budget is sensibly formulated, the Congress will find it very difficult to withdraw support. Wilful withdrawal of support will injure the credibility of the Congress and build the credibility of the AAP. Even just going through the exercise of formulating the budget is likely to be highly productive for the AAP and will build its capacity, as a party.

Kejriwal’s knee jerk rejection of Congress support needs to be reviewed. The LG, is known for his congeniality and diplomatic skills, and hopefully shall be able to convince Kejriwal that the interest of Delhi and the AAP, as a political party, lies in getting into the muck of governance.

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Alternative governance systems

We subscribe to the myth of complete symmetry in governance systems across India. The British, Sardar Patel and todays “eliterati” believe this is a good thing leading to uniformity in development opportunities, thought and circumstance. The unpleasant fact is that this not a good model for a country the plurality and size of India. Unity yes but only through diversity. Till now the “diversity” permitted to us by the State has been of language, religion, culture and caste. Sardar Patel’s view of a “steel frame” and common governance systems, as a necessary skeleton for diversity is no longer critical. The Durga Shakti case is yet another illustration of the potential for conflict with overlapping functions between the center and the state. Delhi simply does too much and often it meddles in a biased manner…. turning a blind eye to the misdemenours of its own party at the state level. Delhi needs to give up power and responsibility to the state government, which must in turn devolve powers and finance to block and village panchayats. The central government must (a) devolve more finances to states for developing their own schemes and priorities (b) merge the IAS, IPS and Indian Forest Service, since they are no longer needed to “bind” the country together, with the parallel cadres in each state, We have other and better  “binders” in place. The glue for making India a “sticky” concept is the political parties; the private sector and empowered citizens. All these drivers of unity are already kicking in. Many may apprehend that the withdrawal of central remote management of the state government will mean more corruption and mismanagement in the states. This is a myth. Through all the 20 years of Lalau’s rule the “bureaucratic steel frame”  could do nothing to blunt his destructive disruption of institutions, the economy and the rule of law. The long periods of left rule in West Bengal and Kerala did not result in corruption or poor management. Better then to let the states manage their matters in their own way. Devolve all funds to them except the 40% needed for defense and diplomacy; federal security; fiscal management; financial sector regulation; network backbone development (grid connectivity; inter operability in telecom; rail track development and management; civil aviation facility regulation; interstate roads etc); space and atomic energy.  Currently the central government keeps 70% and devolves the rest to states. It is moot whether inequality across states would increase, beyond what it already is today (per capita income in Bihar is less than 25% of Maharashtra and Harayana), if this ratio is reversed.  Higher fiscal resources for state governments could lead to better cash flow for projects and higher growth and better social development, aligned to the needs of the states. More importantly, the discretion with Delhi to bend finance to politics will diminish and states will be responsible for what they decide. China devolves around 75% of its central revenue collection to states. Of course with the Party in control everywhere it does not need to play fiscal politics, in the manner that Delhi does, to remain relevant. Also China is not as plural as India. Admittedly these differences are real but more than six decades after independence the only sustainable way to hang together is to acknowledge diversity and cater to it, rather than continue with the tired template of  uniform governance systems for development.

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