[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

REIMAGINING INDIA
then the resource saving should be properly
accounted and used strictly for alleviating
adverse side effects.
Model For delegation
For ease of discussion I will arrange governance
services into three groups. First
are the services for individuals that are
provided on demand. As far as the consumer
is concerned, these are like any
other private good that she or he uses
exclusively. Getting a passport, a driving
licence, a variety of registration, certification
and so on are of this category. The
second group consists of services that are
public goods by nature. Once produced
and in place, any one can dip into their
benefit and it is not possible to deny anyone
access. Hence governance involves
producing these services for whoever is
interested and not for any one in particular.
Examples are roads, bridges, street
lighting and road maintenance and so
on. People are quite aware of the usefulness
of these services, but are prone to
understate how much they would be willing
to pay. The reason is so called ‘free
riding’ – why pay if they can’t stop me
from using it? The third group is a special
class of public goods type services
whose benefit most may not be aware of.
Or, even if they are aware, most people
put a low priority on them because the
benefit appears distant and dispersed. I
will call them pro-active governance
services because the public may not generally
press for them as they do for other
public goods like roads or bridges. Some
of these services may be directed at individuals
but most are not directed to anyone
in particular. When serving individuals,
they produce large scale
externality benefits. An example is a program
of immunisation against a contagious
disease. It saves an immunised
person from the disease even as it reduces
the chance of others getting it.
More generally these services are not
directed and are produced for the benefit
of everyone at present and in the future.
Examples are services like foresta-
Services that are public goods by nature are thought to be an
area where markets would fail to produce the right amount at
the right cost even if markets are competitive to the hilt
tion, dredging and cleaning of rivers,
reforestation of hill sides, creating buffers
at arid zones and so on.
The three groups of services lend
themselves to marketisation in different
degrees and are amenable to different
business models. Their impact on corruption
and the political system vary.
Some have more impact on the political
system while others have more
positive and attending adverse side effects
upon the economy.
Individually Demanded Services
Provision of an individually demanded
service can be most easily transferred to
markets. Unlike for public goods, its demand
is easy to recognise. Because demand
arises from the need of an individual
who benefits from it alone, it can
be priced. Also generally these services
are not free under our present system.
They are either sold at a price or a fee is
charged. Therefore they can be sold like
any item of consumption by private sellers.
However, unlike a consumption item,
some services are conditional on not only
the price but also characteristics of the
applicant or buyer. Suppose a registration
service can not be sold to persons
below 18 years. The selling organisation
has to carry out the necessary verification.
In fact part of the price accounts
for the cost of verification of the applicant.
Like clerks in government offices
who currently provide these services,
sellers are to be provided with relevant
rules. These rules should be made public,
displayed prominently at service
shops and should be mandated to be
available on demand.
What are the potential objections to
this possibility? First, will the price remain
reasonable? Yes, if firms are allowed
to enter this business freely, their
competition should keep price close to
the cost of production and provision. In
the present system government offices
producing these services are over-staffed.
It is easy to see that the cost of providing
them would be significantly lower for private
firms. The government often subsidises
the price, which means that part of
the true cost and whole of the cost of inefficiency
of government offices is passed
to the government budget for the tax
payer to bear. Tax payers would be spared
this in the suggested scenario. What if
38 THE IIPM THINK TANK