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

REIMAGINING INDIA
entry tickets or toll stamps to keep account
of the number of uses. But they buy
it for free, and the bill is paid by the government.
A useful improvement is to allow
a market for these businesses, which
lets an investor sell off, say a toll service,
to a buyer with obligations and rights of
the original contract. This facilitates entry
and exit, allow firms to specialise in
specific services by acquiring similar
business in different places. Can we gain
anything for the political system from
marketisation of these services? Since
these services are not individually demanded,
there is no scope for bribes
from individual buyers and hence no effect
on the political system along the
route discussed earlier. These services
however are a source of significant political
corruption. Public goods are often
gifted to a community before elections.
Secondly when a sanctioned service gets
delayed or stopped on the way it can be
started or re-started only with lobbying.
For urgent service local business or communities
often collectively pay into party
funds as part of lobbying. To stop these
occurrences, of course marketisation
alone is not enough. Whether a project
or a service is taken up will continue to
depend on the political system and hence
on lobbying. But stoppage of work and
allied corruption can be avoided to a
large extent. Economic advantage of
marketisation of these services merits
separate mention. First, to match our
current economic growth investment
needed for infrastructure is beyond the
government’s means. If the government
insists on doing by itself the task will be
either delayed or have to be done by borrowing.
The cost of borrowing is raised
from tax payers while in the suggested
alternative it is substituted by toll paying
users. Toll rates can be reduced as much
as possible through competitive bids
Pro-active services are particularly recommended for
delegation to markets. While their impact on the political
system could be marginal, they could help alleviate
deprivation in spite of the political system
from interested firms. Secondly, it is
easier to assure quality of construction
and subsequent maintenance under the
market system. They are to form part of
the deal with the government who should
enforce them strictly with penalty provisions.
Because of the contractual nature
of the obligation, there is no haziness
about accountability when construction
or maintenance is poor. This contrasts
starkly with government provision, where
it is nearly impossible to fi x responsibility
for failure because of multiple agencies,
hierarchical decisions and change
of governments.
Pro-active Services
These tasks are important and urgent
but government organisations do a poor
job. The primary reason is that assigned
organisations do not have to face customers
because there are no identifiable
customers. Neither they nor the government
or political parties are subject to
any pressure for quantum, quality or
speed. These services are particularly
recommended for delegation to markets.
While their impact on the political
system could be marginal, they could
help alleviate deprivation in spite of the
political system. At present markets for
these services exist only in an odd, theoretical
way. There are no private buyers
willing to pay. The government assumes
a dual personality as both buyer and
producer. It does not help because the
government is only a buying agent, not
a true buyer. It is expected to buy on behalf
of a billion people who do not press
for the services and billions more who
are not even born. There is no economic
or political mechanism to keep the
government interested. The result is too
little production and poor quality.
Whatever little is produced is produced
indifferently. Inefficiency of government
services is compounded here because of
buyer apathy.
Inviting private firms creates a group
seriously interested in them--- as hotly
interested as commercial firms are in
their line of business. Firms specialising
in these services take on the job of demand
creation as part of their business
agenda. They produce media campaigns
to generate public awareness of the urgency
of the services and organise special
interest groups that press on the
political system. Some of these services
40 THE IIPM THINK TANK