When Private Sector Sucks As Much As Public Sector In India

As an Indian living and working in US, I am interested in the political and economical development in both countries. In the US – since this is election season, there is a lot of rhetoric on the extreme sides of the spectrum. One side wants extreme role for government and another wants minimum possible government intervention. In India – it is different. Large government involvement is still the only agenda irrespective of political party affiliation- with privatization getting attention only since the 90s.

Pro-reform leaders like the Indian Prime Minister are all for privatization. One of the areas where there is significant privatization is in Infrastructure – specifically roads. BOT (Build,Operate,Transfer) is very popular for roads. The general idea is the government designs, and private part does building, collecting tolls for a period, and then transfer back to government.

In general – this is a good model, and I have always thought that is the only way to get India to develop faster. But I did not understand the perils of this approach till very recently. Here are 2 examples to make the point, both of which were brought out by an excellent program called “Asianet Newshour”.

BOT for roads is a scam of epic proportions in some cases. In one case – exposed by Asianet news hour – a private company just opened few other companies under different names ( using same office address)  and won contracts (probably with the required political blessings) for road contracts in Kerala. Next, they do a better version (for them , not for people) of BOT . They get money from government for part of the road, and then inflated the cost by a factor of 3 or 4. And even before roads are completed to specs – and not even putting streetlights – they have started collecting a good chunk of money as tolls. Worst case – there was an MLA on the program on TV- a guy elected by people to watch out for them – trying his best to defend the private company vehemently when he had all the facts thrown at him by rest of the panel.  Remember the 2G  scam ? this one looks to be in that league or worse.

Government had leased many farm/forest acres to private farmers in the past for cultivation, under strict norms. These farmers – including big companies that does farming of cash crops – were not supposed to change crops, sell, sublet or encroach adjacent land. Well, guess what – they did all of that and more. And the regulations are so outdated, that nothing much can be done to penalize their wrong actions. I was shocked to see a sting operation on “Asianet Newshour” that showed a communist party local leader explaining clearly the steps needed to claim acres of forest land in Kerala for private owners.  And another political leader is saying that the leased land should not be taken back by government when lease expires or when terms of lease are violated. And he will probably have his way too, given the coalition government cannot sustain without his party.

It is not that the government is doing something brilliant either.  After all these decades of winning independence from Britain – India is still not self sufficient on power. There was the largest ever power cut last week with hundreds of millions of people affected.  Most National highway stretches have 2 lanes at most.  There are plenty of restaurants that serve food that kills people or make them seiously sick. Very little is done to fix any of this with a long term perspective. Corruption is so common place that people barely complain any more. Look at Olympics – for a country with billion people – we have not even won a gold medal yet in London so far. We are still singing praises of Milkha Singh and PT Usha who came close to winning a bronze decades ago in athletics. We have no planning to make it any better next time either.

Anna Hazare had a huge fan following not that long ago. And where did he end up? He just announced his team will contest elections and reduce corruption. And at this point – hardly anyone is supporting his campaign. Why? simply because his team just bickered on every thing and could not put forward a plan that citizens of India could understand as viable.

So where does that leave India ? If neither private sector not public sector is the answer, what is the answer? is Luck the answer?