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Tuesday, March 09, 2010

An overwhelming case for Privatisation

The following are a compilation of my posts on the subject on - check

* The per capita energy consumption of a country is generally considered a good indicator of its state of development, leaving aside for the moment arguments questioning this idea of development itself. For India, the figure stands currently @ 682 (in Kwhr per annum), while for Brazil it is @ 1422; UK @ 5218; USA @ 10,381.

Now, if India has to improve this by even a 100 units, it has to add generation capacity to the extent of 12,016 MW (assuming 95% efficiency & capacity utilisation), meaning an investment of Rs 54,072 cr at Rs 4.5 cr per MW (for thermal; for hydel and nuclear, it's much higher).

This is the kind of capital required by just one sector, for a marginal capacity addition, taking the macro view into consideration. Imagine then the kind of capital required collectively by all the infrastructure sectors put together that you want the government to handle - water supply, roads, sewage systems, drainage systems, bus services, AIR-INDIA, railways, sea-ports, air-ports, banking, insurance, hotels, etc, etc, and of course, defence.

Well, that was exactly what the Soviet Union was doing, and look where they have landed.

* Everything that is in the domain of private India is getting cheaper - from mobile phones to cars to anything that is manufactured. Everything with a government interface is costlier by the day. This apathetic state of affairs is best symbolised by the raging prices of essential commodities.

* A section of the public has an opinion that public bus services can never be profitable, or rather, it should not be profit-making, which in essence means the government retaining its monopoly over such functions. Like-wise, this section, comprising largely of people with a Socialistic bent of mind, also believes that the same should apply to roti, kapda, makaan, bijli, sadak, paani, healthcare, education, etc, etc, besides of course railways, defence. If they could have their way, they would also like the the government to push out the private sector from hospitality, telecom, banking, insurance, civil aviation, etc, even though the freeing of these has largely been responsible for the faster growth of the economy of recent leading to most of them becoming gainfully employed.

The important question is how much can the government do? And, how much more public is the public sector, where the decisions are taken by a coterie comprising largely the minister-in-charge, a few bureaucrats, the employees (largely controlled by politician-led unions), compared to say a Reliance, which is answerable to a million share-holders (who rate their performance on a daily basis through stock valuations), apart from having to compete against the equally powerful TATAs, all under the oversight of a duly constitued regulator? And, answerability of the public sector to the Parliament is the most celebrated joke, as we all know.

And, then there's the case of the USSR, where everything our Socialist friends wanted was tried out. Only, it doesn't exist any more.

* It's nobody's case that privatisation is the panacea to all of the country's problems. There will continue to be problems. But, like the late Sri C Subramaniam had once stated, atleast these will be new problems, and not the same old ones for which we have not been able to find solutions for over half a century.

There never was and there never can be bigger Socialists (in its true spirit) than Dr Ambedkar, Nehru, etc, the founding fathers of the Indian constitution. However, they themselves opted out of listing the word 'Socialism' under the 'directive principles' of the Constitution. It was not an oversight, it was deliberate; since they had very clearly foreseen how it could be misused.

And, the irony of it all is that Nehru's own daughter, using emergency powers, brought about the amendment to the Constitution to include the S-word in the directive principles, in order to pursue her own nefarious agenda, justifying it with her infamous quote 'corruption is a global phenomenon'. This is the legacy we are now having difficulty living down.

* The most important question today is how urgent is the need for efficient public transport services. In my opinion, we can't wait even a day longer. If you accept that, can we then afford to wait in eternity for the BMTC to get its act together, with or without the help of a Prof Ashwin Mahesh? No - we have to bring in the TVS's and TATA's today. And, when approached that way, the route becomes very clear.

Because of the prevailing 'license-permit raaj', so far, it's been only the Blue-line (of Delhi) kind of operators that have generally been in the picture, in turn earning the private sector a bad name. For that to change, the raaj has to be dismantled and the entry of reputed players like TVS facilitated, all under the oversight of a duly constituted and empowered regulatory body.

And, the TATA's and TVS's are also equally desperately looking for avenues for growth, particularly with the conventional ones based largely on exports, becoming less and less attractive or even closed.

So, it's a win-win for everyone involved, particularly the aam aadmi.

This is also the case with our other infrastructure service sectors (power distribution, water supply, railway operations).

* If there's been a lowering of the quality of life, it's largely because of the state's and its agencies' failures, more specifically in its key role as the regulator, instead of concentrating on which, it has been messing around with the services and manufacturing sectors.

When Socialism rules, you have to content with the mafia's; when Capitalism rules, you have to content with lobbies. Mafia's don't play by rules. Lobbies generally play by rules, but after using their clout to re-write them to suit their designs. I would like to believe that the Indian democracy is sufficiently deep-rooted to manage lobbies better than mafia's.

And, what I am rooting for is not hard-core Capitalism of the US Conservative party kind, but a version more in line with the Democrats and British Labour party (I am actually not too sure of my grounds here), where the government's role as the facilitator and regulator is paramount. But, when it becomes a player, in addition, its key role as the regulator gets compromised, as we have been seeing time and again.

And, for this still rooting for Socialism, would perhaps also like to subscribe to what I have put at


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