Reaping the wages of state oligopoly

We need to introduce competition, to the extent possible, in every sector of economic and social activity

Irecently read a lament by surface transport minister Nitin Gadkari on how vested interests were thwarting the passage of the Road Transport and Safety Bill in Parliament. One would have thought that legislation aimed at reducing India’s horrendous record of road fatalities/injuries (1.5 lakh deaths and over 5 lakh injured in calendar year 2015 alone) would receive widespread support and would be passed by both Houses in a jiffy. Alas, the Bill languishes, like many others. The sneaking suspicion lingers that powerful lobbies are at work to forestall the coming of this law.

The commercial road transport lobby is against any measures that would require them to invest in new, safer vehicles. The bareheaded idiot wants to ride his scooter/motorcycle without the impediment of protective headgear, blissfully oblivious to the implications for his life and the future of his family. Above all, state road transport authoritiesarea verse to what they see as this encroachment on their divine right to extract economic rent from the licensing and operation of motor vehicles, which is why the transport portfolio is one of the most sought after by politicians.

This huge state oligopoly (actually a monopoly in any one state) has been responsible for a large part of the mess in India’s road transport sector. Visit any state road transport office and you can hardly miss the ubiquitous tout peddling his wares in full public view. Every service has a price, whether it is the registration of a new vehicle, the transfer of vehicle registration from one state to another, or issuance/renewal of driving licences. No wonder, even the minister admits that at least 30% driving licenses (almost certainly an underestimate) are wrongly issued.

The road transport imbroglio goes even further. A mobile, globalised economy requires frequent labour movements. But move to another state with your vehicle and the authorities are after you to pay your lifetime road tax afresh in the new state. Take a private taxi from one state to another and you end up paying for the privilege of entering that state—an amount that varies from R1,000 for Andhra Pradesh to R7,000 for Maharashtra. Road transport checkpoints (along with other state monopoly agencies extracting their pound of flesh) are responsible for interminable delays in shipments to other countries and adversely affect India’s export competitiveness. But who cares? Certainly not state governments, which are interested only in short-term revenue collection.

Things are only margin ally better in the sector that fuels the transport sector. In spite of valiant efforts by reformminded administrators to introduce free markets in this sector, supply of petroleum products has remained the preserve mostly of the three public sector marketing giants. Political patronage played a significant role in the allotment of dealerships in petrol pumps and cooking gas, a fact which attracted adverse attention of the higher courts about two decades ago. Politically powerful owners of these distribution agencies consider themselves immune to punitive action even when they supply adulterated fuel or indulge in black marketing of cooking gas cylinders. Booking of gas cylinders on phone has reduced retail consumer uncertainty on when their supply will be replenished. But there are still areas where service falls woefully short, including the crucial one of safety. If your gas cylinderor stove develops a leak age after 6 PM, rest assured that you will receive no response till 9 AM the next day from the gas agency, presuming that the next day is not a holiday. The three distribution companies have provided contact numbers. The problem is that, when you make a call, all you get is a polite message that your complaint will be attended to. Even the agency responds in a leisurely manner, 3-4 hours after they are informed.

The two sectors that meet basic requirements of the citizen—health and education— are prime examples of how state monopoly has impeded the process of economic development and, more importantly, meeting customer needs. The public health system is the only avenue for a large section of the population which cannot afford private healthcare. Apart from a few islands of excellence, the public healthcare system falls miserably short of the expected standards of effective, good quality service provision. Especiallyin remote tribal areas (but also elsewhere), doctors just do not turn up for duty; when they do, attention to patients is often perfunctory, if not dismissive. Diagnostic equipment are, when provided, often out of order, generally because of outmoded bureaucratic procedures that prevent timely supply of spares. I speak from experience: antenatal care in primary health centres is generally routinely and superficially carried out, with no clear focus on mothers who face high risks at delivery time. Post-delivery, neonatal follow up is poor, with the result that a large proportion of child deaths occur in the first year of birth( of that, a large proportionoccurs in the first four weeks after birth). The public health machinery also takes no responsibility for severely malnourished children, disregarding the dictum that prevention is better than cure.

Education is an even more unfortunate example of the malevolent effects of state monopoly. Oligarchies have taken root in this system—the state education bureaucracy and the teachers’ unions. State schools are tightly controlled by the bureaucracy, which decides every aspect from school location and curricula to teacher remuneration and career progression. Unions have resisted efforts to enforce accountability, leading to the phenomena of absent teachers, poor quality instruction, high dropout rates and unemployable students with limited language and arithmetic skills. Growth of private schools is stifled by the system of recognition by the education department, with its inbuilt tendencies towards patronage and corruption. Higher education suffers from the stultifying effects of bureaucrat is at ion. Low quality, private education empires, run by those with political muscle, have become the norm. Even more unfortunate has been the tendency of the state to encroach on the autonomy of once reputed public institutions of higher learning by stacking their managements with pliable, political appointees and, increasingly, seeking to dictate the content and pedagogy to be followed by these institutions.

Public service can be efficient and effective only if it adheres to the three basic principles of integrity, professionalism and empathy. Integrity implies both financial probity and a commitment to the outcomes that are sought from the provision of the service. Professionalism requires a clear understanding by those in the system of their tasks and a willingness to discharge their duties honestly and to the best of their abilities. Public service requires the very human quality of empathy, of placing oneself in the shoes of one’s less privileged brothers and sisters, and understanding what difference the access to high quality public service can make to their lives—as a government functionary, one needs to look behind the file/statistic and visualise the face of the person you are dealing with. Since these attributes are becoming increasingly difficult to inculcate in a bureaucracy that is influenced by the prevailing social values of consumerism and self-centredness, what is required is the introduction of competition( to the extent it is possible) in every sector of economic and social activity.

Competition has helped in the telecommunications and automobile sectors. Public sector behemoths BSNL and MTNL have lost a lot of ground to private telecom operators,but their loss has been consumers’ gain, leading to an explosive growth in mobile communications. Gone are the days when one waited for days for a telephone connection. Nor does one wait patiently for the delivery of an Ambassador or a Fiat (Premier Padmini) car or, later on, a Maruti 800. Now, Hyundai, Honda, Ford and Toyota cars are available virtually off the shelf. Of course, there are sectors like utilities (energy and transport) and public goods (education and health) where, because of heavy, long gestation investments, the nature of technology or the impact on human capabilities, and some regulations on entry and on quality/price, will have to be implemented.

Competition in sectors like health and education can be introduced by providing options, in addition to state-provided ones, to the consumer. These could take the forms of private healthcare and educationprovision, as in the case of charter schools in the US. Unviable or poorly functioning state institutions could be entrusted to private management, with accountability for performance and sound management.The aim should be to ensure that public sector providers compete with private parties for funding for providing services of a specified quality at reasonable prices. Cash vouchers for spending on health and education would provide the consumer with the choice of that provider who best meets her expectations. In the infrastructure and utility sectors, the same principle of competition has to be applied, with existing public sector providers having to compete for customers with private participants.

The state has two major responsibilities in such a competitive set-up. One, it has to setup autonomous regulatory systems in different sectors that discharge their duties in a fair, impartial manner and ensure the provision of reliable, reasonably priced goods and services to consumers. Two, the state has to work towards providing an environment to public sector providers which gives them the freedom and flexibility to compete in the marketplace, with the clear understanding that there is no guarantee of their survival if they do not perform. It would be in the best interests of all for the state to abide by the maxim “Thebusinessof government is not business.”

ILLUSTRATION: ROHNIT PHORE