PPP and the Indian political class

We are all familiar with the acronym PPP, which has been touted as a solution to raising resources and bringing in operational efficiency in various infrastructure sectors. Alas, in the Indian context, PPP (or public private partnership), has an altogether different connotation. It represents the use of public money for private gains – a partnership that benefits just a few and condemns the many to indifferent public services. PPP, as it has evolved over the past six decades of independent India, stands for something else altogether – Patronage, Procurement and Postings. The fascinating story of this PPP is woven closely into the common man’s social, economic and political life.

The tale begins, as always, in the 1950s with the introduction of the “socialist pattern of society”. Large areas of economic activity were reserved for the public sector; where the private sector was tolerated, it had to beg for scarce licenses. Controls on movement of goods and services, both within and outside the country, were imposed. It was not long before those exercising political power saw the benefits of these arrangements. The public sector became the vehicle for political patronage of various sorts – people from your constituency could be employed in different undertakings without considerations of merit and efficiency coming into the picture and procurement contracts could be awarded to your supporters or to those offering the highest “economic rent” (ER). It was even easier with the private sector: the quid pro quo for granting production licenses could be in direct cash. Controls on scarce items like foreign exchange and consumer goods raised the premiums payable on acquisition of these scarce commodities and the development of thriving black markets.

Forty years passed and the Indian economy developed a severe illness. The treatment involved freeing economic activity of some controls and allowing the entry of the private sector, both Indian and foreign, into sectors hitherto inaccessible to them. This posed new threats and challenges to the Indian political class and others who had benefited from the earlier dispensation. The reduced role of the public sector meant that procurement contracts in certain sectors no longer yielded the sort of ER they had earlier. At the same time, natural resource allocation became a new source of ER, especially since no norms for auctioning these resources in a transparent bidding process were evolved. We are still grappling with the aftermath of this phenomenon in sectors as diverse as coal mining and telecom spectrum allocation. The growing disposable income with a rising middle class and the trend towards rapid urbanization saw land becoming a major source of revenue for politicians and builders. Since decisions on land use are largely vested in state governments, its allocation gave ER access to state-level politicians. But there are also a variety of permissions on use of land that require clearances at the national level, notably on environmental grounds. Land use and land allocation are areas where there has been a long tradition of unwarranted state interference in what ought to have been independent urban planning decisions. It is common knowledge that this sector has contributed in no small measure to the funding of election campaigns.

However, natural resource allocations are still concentrated in a relatively small number of ministries at the national level. Procurements again are much larger in major infrastructure sectors and in areas like defence. The solution worked out around this problem by the political class has been to squarely put its finger into the “procurement pie”. In many ministries and departments at the national and state levels, the tendency has been to centralize purchases at the secretariat level. While the reason ostensibly given has been that these reduce costs through discounts on bulk purchases, actual experience shows that the ER factor kicks in here as well. The problem is compounded by bunching together purchases near the financial year end (March 31) so that there is inadequate financial scrutiny of proposals; a number of purchase decisions also escape audit scrutiny because of the sheer volume of transactions in the last couple of days of the financial year.

A third area of increasing political interference has been in postings and transfers of officers and staff. At the recruitment stage itself, there is substantial evidence of extra-legal considerations playing a role in selection, as witnessed in the number of state public service commission scams that have come to light in recent years. About twenty five years ago, most decisions on transfers of subordinate staff were handled by the head of the department, or District Collectors (and Divisional Commissioners, where they existed). Between 1990 (when I was a District Collector) and 2000 (when I became a Divisional Commissioner) in a state like Maharashtra, the situation saw a sea change. I found I had not even a fraction of the transfer powers I had ten years before, thanks to administrative orders issued in the mid-1990s. This not only led to a breakdown in the chain of command (since employees did not have to meet performance expectations of their superiors to continue in a post), but also led to the extremely damaging phenomena of political proximity of the bureaucracy as well as the pernicious practice of a thriving “black market” transfer industry. While some efforts have been made in a state like Maharashtra to rectify this situation through legislation, there are still enough loopholes for officers and staff to secure postings of their choice. The recent disquiet in the Indian Police Service cadre in Maharashtra is an indication that there is something rotten in the State of Denmark. There is no reason to suspect that the position is better in other states; if anything, it would be far worse.

What is dismaying to any observer is the nonchalant attitude of nearly all political parties to this vicious PPP cycle, which can only result in continued poor public service delivery to the Aam Aadmi. Because of judicial intervention and sustained media pressure, some reform in natural resource allocation processes is slowly taking place. There is still no clear policy on procurements in government. In particular, there are still no clear directives on moving procurement decision-making out of secretariats to independent institutional set ups. The highly belated passing of the Lokpal legislation will hopefully instil some accountability in decision-making processes, though the Lokpal is still to become active. There is also no guarantee that different states will pass the Lok Ayukta legislation in the prescribed time frame – it will probably require further judicial intervention and vigilant public opinion to ensure that effective anti-corruption bodies start functioning at the national and state levels. Finally, the establishment of independent Civil Service Boards, free of political interference, is a must if responsible and accountable governance is to have any meaning.  

Public (and political) discourse needs to move from the short-term “freebie” culture to promoting the institutionalization of responsive, transparent governance systems. Till we realize that our own inaction contributes to our plight and take steps to move our elected representatives in the desired direction, there will be no meaningful growth or development in the country.

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