You know that I love Andy Mukherjee’s columns in IHT. I had commented on one of his columns here which led to an email exchange that I would like to share with you. I conclude the post with some musings on the limits of privatization and decentralization. Do chime in with your thoughts.
Andy’s email
Dear Sharad,
Thank you so very much for the kind words and for that wonderful discussion that you began on one of my columns. I totally agree with your argument that the state can’t keep retreating from what you call “primary infrastructure.'’
You mentioned health and education. I would add law (judiciary) and order (police), too. In the process of building some infrastructure, the private sector will put some other infrastructure under strain. Maharashtra CM wants private investment to turn Dharavi chawls into affordable low-cost housing. For a commercially built building in Bombay to be affordable to the poor, you are looking at very liberal FSI norms — in short very tall buildings. There won’t be a dearth of builders willing to do it. But will the city of Bombay be able to provide adequate pressure in the water pipes? I guess what I’m trying to say is that, sure, we can’t become a livable, middle-income nation by short-circuiting the government entirely. But our government is not ready and it will never be ready until there’s cascading demand for it to perform at a higher plane. And by creating new imbalances, by pushing cities like Bangalore to the ultimate limit of endurance, private investment will create that pressure on the government to perform. In ordinary course, this pressure should be coming from voters. But that channel is clogged in India, especially at the level of the municipality. People of Bombay don’t even elect their mayor directly. Narayana Murthy has shown no inclination to want to run Bangalore, though one does hear his name as a future President of India. That surely is a problem of incentives! On your blog, Vijay Anand raised an important point when he said that the quagmire is at the level of the state governments.
While political incentives at the state-level may indeed favor myopic decisions such as free power, we must also ascribe some blame to a system that vests most taxation power in the central government and leaves most projects to the states to execute. Anyway, I’m sure I’ve bored you enough with my ramblings. But do keep in touch. Look forward to more discussion on this on your blog.
Thanks once again.
Best regards,
Andy
My reply
Hi Andy,
Good points. I agree with you that relying on the central government to fix the cities is not the answer. As you suggest the policy prescription is clear. Ultimately there is no alternative to revamping the Municipality laws so that we have a directly elected, fully empowered Mayor as the leader of the city. Other things like better disclosure norms, alignment of jurisdictions, etc. will also help. The question really is how to make this change happen.
There is no doubt that we have a committed to set of NGOs active in this space. I can think of Janagraha in Bangalore (Ramesh Ramanathan), Vote Mumbai and Lok Satta (Jayaprakash Narayan) in Hyderabad.
We also have a clear sense of crisis. Last year’s monsoon tragedy in Mumbai is still fresh in people’s mind.
There is pressure from industrialists as well. I like Azim Premji’s comment that “Bangalore is a national calamity in terms of infrastructure”. Nandan Nilekani has tried his bit with BATF.
There is even money available through National Urban Renewal Mission (NURM). Thankfully this comes only if some reforms are undertaken.
Yet it appears that the status quo will prevail for longer. I don’t yet see much momentum towards implementing the model municipal law.
In India unraveling any status quo that involves the central and state government is extra-ordinarily hard. Take VAT as an example. VAT is certainly a big improvement over the cascading tax model and yet it’s been really hard to get it implemented.
So what can help unravel the current status-quo? What can tilt the balance? You suggest President Narayana Murthy as a possibility. Intriguing but unlikely.
Maybe we need an Indian Milton Friedman? After all he had a terrific track record in bringing about fairly big policy changes. But he too needed Reagan, Thatcher and Augusto Pinochet on the other side of the table to make progress.
When it comes to urban reforms, I’d like believe what Arundhati Roy once said… “Not only is another world possible, she is on her way. On a quiet day, I can hear her breathing.” But I am afraid I don’t hear her breathing. Either I am going deaf or she is still pretty far away!
Thanks again for your email. If it’s OK with you I will put some of our conversation on the blog.
Regards,
Sharad
We need a smaller State and one that’s functional
The British colonial legacy left us with an overly powerful State which is incompetent and unaccountable. When there is a crisis, it instinctively gives up some control. That does leads to a cycle of improvement but soon a new status-quo emerges. Gradually as a sense of crisis builds up again, more ground is ceded by the government. Coalition governments of recent years have made this process easier at both the Central and State governments levels. Overall this forced process of decentralization and privatization has been a good one so far. The economy is generally booming and the new small states like Uttaranchal are doing well.
But at some point the solution isn’t just withdrawal by the State. Our cities need more than privatization, they need new Municipality laws. Our primary schools already have decentralization; they now need investment and the NGOs alone can’t solve the problem. Nor can Aravind, Narayana Hrudayalaya, Jaipur Foot and other fine charitable healthcare organizations by themselves fix our primary healthcare crisis. These are problems that we just can’t work out by decentralization and privatization.
I think we need a smaller State and one that’s functional. An atrophied State is not an answer to our problems. I was trying of think of an example where the Central or State government has came up with a good policy prescription that isn’t about government withdrawal and decentralization but about investment and implementation. I haven’t been able to come up with anything so far! Do you have any examples?
I have worked in the infrastructure industry (water supply) for what seems like a century. I believe that government withdrawal, decentralization, investment and implementation are all wrapped up into a three pronged approach. Privatization, strong oversight, and accompanying change in laws. A tall order, which by the way, prompted me to abandon that sector in favor of what I am doing now.
The French have several successful water companies and the British privatized about a decade or so ago.
Cheers,
Tej