Infrastructure Under The NDA - I

A Reality Check

Abhijit Mukhopadhyay

Shantanu De Roy

THE post-liberalisation period has been marked by the withdrawal of the state from various sectors of the economy. Infrastructure, which is a key sector as far as growth and development of the economy is concerned, has also suffered immensely over the past decade. However, in the run-up to the Lok Sabha elections the BJP-led NDA government has claimed credit for various ‘achievements’ through the ‘India Shining’ and ‘India on the Move’ advertisements published by different Union ministries. In this article we take a closer look at those claims as well as the true picture in the infrastructure sector.

Power

An advertisement appeared in the leading national dailies on February 18, 2004 published by the ministry of non-conventional energy sources which claimed that (a) more than 3,000 MW of electricity was generated through non-conventional energy sources during the last 5 years, (b) 2.5 lakh houses were electrified through solar energy, and (c) more than 1,400 remote villages electrified through non-conventional energy sources. In the same advertisement the main objectives of the concerned ministry were put as – electrification of more than 20,000 villages by 2007, generation of additional 10,000 MW electricity from non-conventional energy sources by 2012, and Research and Development in new technology areas like Hydrogen, Fuel Cell, Hybrid vehicles etc. This was followed by another advertisement on February 25, 2004 by the ministry of power with claimed that in the last 5 years 135 lakh households have been given new electricity connections and in the next 2 years, 100 lakh households have been targeted.

It can be easily seen that many of the claims are based on arbitrary projections for the future, which are being disguised as achievements of the present regime. A hard look at the data for power generation and rural electrification show a completely different trend. In terms of addition to the power generation capacity, the record of the Vajpayee government has been disastrous. The central and state governments together added only about 13,500 MW during the 9th Plan period (1997 – 2002) as against 21,000 MW added during the 7th Plan. An additional 5,643 MW added by the private sector during the 9th plan was generated largely through plants which used naptha and diesel as inputs thus producing power at very high costs, imposing unbearable burdens on the State Electricity Boards as well as the consumers. Figures from the Economic Survey show that the trend rates of growth in total power generation as well as generation of hydel and thermal power between 1997-98 and 2001-02 have been negative. This exposes the hollowness of all the claims related to enhanced power generation.

Rural electrification has also slowed down considerably under this regime. During the 9th Plan period only 11,200 villages were electrified as against 1,20,000 during the 6th Plan and 1,00,000 during the 7th Plan. The Vajpayee government has also been promoting (under the guise of a technology mission) a decentralised power generating system for rural areas. This would imply that villages would be denied access to cheaper and better quality grid power and have to rely on standalone systems, which would generate power at much higher cost and of poor reliability.

Privatisation of generation, transmission and distribution of power has been a cornerstone of the Vajpayee government’s power sector policy. The Electricity Bill 2003 was passed by the Lok Sabha on April 9 after being tabled in its current form on April 6 without allowing any debate on this vital issue. The Vajpayee government has allowed various private operators like the Enron to set up high cost units, which sell power at a price which is 2-3 times the price charged by State Electricity Boards. Power sold by the Enron was found to be 3-4 times costlier than the price charged by the Maharashtra State Electricity Board (MSEB), resulting in losses for the MSEB for the first time in its history. After the MSEB and the Maharashtra government scrapped the contract with the Enron, the Vajpayee government put pressure on the state government to settle its ‘dues’ with Enron. Even after the collapse of the Enron, the central government did not initiate any action, despite fully knowing that Indian financial institutions like the IDBI, the IFCI and the SBI had either given loans or guaranteed Enron’s loans to the tune of 2 billion dollars. The spectacle of Enron’s first stage lying idle today and the second stage aborted mid-way speaks volumes of the government’s disastrous power policy.

The privatisation of power distribution in Orissa led to a hike in the price of electricity by 2-3 times for the consumers without any improvement in power supply. After the Kanungo committee termed the privatisation move as a total failure and one of the distribution companies (discoms), AES, quit the scene, the Orissa government had to step in and take over its operations. The record of the other case of privatisation is equally bad. The Delhi government privatised Delhi Vidyut Board (DVB) and handed over its assets to the Tatas and Reliance. In the first year of their operations, the subsidy provided by the government to these discoms amounted to Rs 2,600 crore, which was more than twice the highest loss ever suffered by the state owned DVB. Privatisation of power generation and distribution has become a tool of subsidising the multinational companies like the Enron and domestic monopolies like the Reliance and Tata, by hiking power tariffs for the common people.

Telecom

Claims came galore on the so called ‘achievements’ of the Vajpayee government in the telecom sector. An advertisement published on February 27, 2004 gives the following figures:

• Telephone connections in first 50 years were 2.3 crore and in the last 5 years were 4.75 crore, thus showing an increase of 107 per cent.

• The number of mobile phones was 12 lakhs in April 1999 and it is 2.2 crore in January 2004, showing an increase of 1,733 per cent.

Now the cellular boom is a global phenomenon of middle and late 1990s, driven by rapid technological change worldwide. To compare a government’s achievements with the earlier 50 years on the basis of that boom is as foolish as comparing the British colonial government’s ‘achievement’ in replacing the bullock cart by introducing the railways in India during the mid-19th century. But, what takes the sheen out of this childish boasting is that even with the huge technological leap in telecommunications worldwide, India has lagged much behind the world as well as other developing countries like China, Brazil, Indonesia and Sri Lanka, as is evident from the comparison of teledensity figures.

India’s teledensity has improved from 1995 to 2001, but most of this improvement has come in the urban cellular and WLL sectors, with cheaper fixed technology (most of it still provided by the public sector) being neglected. This is a result of the brazen pro-monopoly bias in the government’s telecom policy.

The Vajpayee government had deliberately foregone license fees to the tune of Rs 50,000 crore from the private telecom operators. Moreover, the government allowed private operators to violate the license terms and conditions with impunity, in areas like rural telephony, network expansion targets etc. While the private operators fulfilled only 10 per cent of their rural commitments, they were let off after paying a very small proportion of the penalty prescribed for this violation. The government sold 45 per cent of its stakes in the VSNL to the Tatas for a sum of Rs 2,591 crore even when VSNL had cash reserves of more than Rs 3,000 crore at the time of disinvestment. The Tatas paid less than the cash reserves of VSNL; and moreover, the Rs 2,591 crore that they spent in acquiring VSNL were actually loaned by government owned financial institutions and banks. The first step that the new Tata Management took was to siphon off Rs 1,200 crore out of VSNL for another Tata company. Thus the government lent to a monopoly house to buy up shares of a profit making public sector Telecom Company for revenue which was less than the cash reserves of that PSU and then allowed it to milk the cash rich PSU for private profiteering. Providing bonanzas to domestic monopoly houses appears to have been the bigger objective of the government’s telecom policy. No wonder that we have lagged behind other developing countries in enjoying the benefits of the telecom boom.

Similar kindness has been showered on the Reliance, which was allowed to introduce fully mobile services under the guise of limited mobility (WLL). The government allowed the Reliance to offer mobile services without a valid cellular license for almost two years. Even after the Telecom Dispute Settlement Tribunal pronounced this illegal, the penalty for this blatant violation of license terms was a meagre Rs 485 crore. In order to appease other private operators, particularly the cellular lobby, the revenue share of the government was reduced by 2 per cent for all cellular licensees and another 2 per cent for the first and second licensee, a concession of nearly a thousand crore from the public exchequer. The cellular operators responded to this favour by almost immediately raising the calling charges for the consumers in a blatant display of cartelisation.

Another major undue favour that the government provided to the private operators was in delaying the launch of MTNL and BSNL’s mobile services. Even after delaying this for more than 4 years, BSNL is poised to become the leading GSM mobile service provider. It is understandable that had the BSNL been allowed to launch its services earlier, the telephone connections would have increased manifolds by now. However, the government’s preoccupation was with the protection of huge monopoly rents accruing to the private operators than having any commitment towards a massive expansion of the telecommunications network across the country. In spite of the promise of the National Telecom Policy (NTP) 1994 (which allows private participation in basic services) that it would lead to connecting all Indian villages by the year 1997, even one third of the Indian villages are not connected to the telecom network today. Even worse, the pace of rural telephony has slowed down and the rural to urban teledensity ratio, which today stands at 1: 10, is rapidly worsening.

The total number of telephones provided by all the basic private service providers till March 2002 was 1.07 million. The BSNL and MTNL have added 22.98 million telephones between 1997-2002, which is more than 20 times the number of telephones added by the private service providers in the same period. Out of this total, the BSNL had provided approximately 2.06 lakh village public telephones as against merely 8,000 by the private service providers. It is obvious therefore, that in order to expand the telecommunications network across the length and breadth of the country, the public sector needs to be strengthened. The Vajpayee government’s policies on the other hand have sought to enhance profits for the private players and privatise the public sector. Moreover, their telecom policies have discriminated against low-end consumers by reducing the pulse rate and number of free calls and increasing the rentals for the landline connections.