Reaping the wages of state oligopoly/monopoly

I recently read a lament by India’s 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 (1,50,000 fatalities and over 5,00,000 injured in the calendar year 2015 alone) would have received widespread support and would have passed through both Houses of Parliament in a jiffy . Alas, this bill languishes, like many others, while the God of Death continues to add to his numbers. And 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 transport vehicles. The bare-headed 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, the state road transport authorities are totally averse 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 the issue/renewal of driving licenses. No wonder even the Minister admits that at least 30% of 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 state and you end up paying for the privilege of entering that other state: an amount that varies from ₹ 1000 for Andhra Pradesh to ₹7000 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 marginally better in the sector that fuels the transport sector. In spite of valiant efforts by reform-minded 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 certainly been a welcome step and 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 cylinder  or stove develops a leakage after 6 PM, rest assured that you will receive no response till 9 AM the next morning from your gas agency, presuming that the next day is not the weekly off day for your agency. The three distribution companies have provided contact numbers. The problem is that, when you call those numbers, all you get is a polite message informing you that your complaint will be attended to. Even the agency responds in a leisurely manner, three to four 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 health care. Apart from a few islands of excellence, the public healthcare system falls miserably short of the expected standards of effective, good quality service provision. Especially in 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, like x-ray and scan machines, are, when provided, often out of order, generally because of outmoded bureaucratic procedures that prevent timely supply of spares. I speak from personal 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 extremely poor, with the result that a large proportion of child deaths occur in the first year of birth (of that, a large proportion occurs 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 also suffers from the stultifying effects of bureaucratisation. Low quality, private education empires, run by those with political muscle, have become the norm, rather than the exception. Even more unfortunate has been the tendency of the state, more so in recent years, 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. Above all, 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 that it is possible) in every sector of economic and social activity.

Competition has certainly helped in the telecommunications and automobile sectors. The public sector behemoths, BSNL and MTNL, have lost a lot of ground to private telecom operators but their loss has been the 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 month after month for the supply of an Ambassador or Fiat (Premier Padmini) car, or, later on, a Maruti 800 car. Hyundai, Honda, Ford and Toyota cars are available today 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, 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 health care and education provision, as in the case of charter schools in the USA. Unviable or poorly functioning state institutions could also be entrusted to private management, with accountability for performance and sound management. The fundamental aim should be to ensure that public sector providers compete with private parties for funding for providing services of a specified quality (with designated outcomes) at reasonable prices. Provision of cash vouchers for spending on health and education would provide the consumer with the choice of that provider who best meets her expectations. Of course, this will require a high quality of regulation, with the regulators ensuring a level playing field for both parties and monitoring performance and cost of services to the consumer. In the infrastructure and utility sectors, the same principle of competition will have to be applied, with existing public sector providers having to compete for customers with private participants. An auction route is the best method of attracting the best offers, whether from the public or private sectors.

The state has two major responsibilities in such a competitive set up. Firstly, it has to set up 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. Secondly, the state also 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 “The business of government is not business.”

 

 

 

 

 

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