People's Democracy

CPI(M) Comments On The Approach Paper To The Eleventh Five Year Plan --- II

ON PUBLIC-PRIVATE PARTNERSHIPS

The Approach Paper advocates an “aggressive effort” to promote Public Private Partnerships in infrastructure projects. The justification for favouring PPPs over public investments is given in terms of scarcity of public resources. It is also argued that PPPs improve efficiencies in the provision of services to users and also enable governments to transfer construction and commercial risks to the private sector, “which is best suited to manage them”. These arguments are more in the nature of articles of faith. 

The fact is that under PPPs, the private players always concentrate on the more profitable operations undermining the capacity of the public sector to cross-subsidise its loss-making but socially necessary operations. Entry of private players into infrastructure projects also invariably lead to increases in user charges, to the detriment of the poor. Moreover, in almost all cases of PPP, the state has to provide subsidies or concessions, and in many cases such subsidies are seriously misused as in the case of the Dabhol plant of ENRON. While PPPs may be found to be an advantageous mode of developing infrastructure in certain cases, a shift from public investment to PPP as a preferred mode for the development of infrastructure projects in general, cannot be acceptable since it affects the basic structure of the economy. It cannot occur without a national debate and the emergence of a national consensus. For this there have to be valid and basic arguments. The financial argument on the basis of which PPP is justified is neither basic, nor valid: the central government can never be considered to be intrinsically devoid of investible resources. Government investment is never constrained by government savings, just as the investment of a private corporation is never constrained by its own savings. Private corporations mostly undertake investment by borrowing from the market. Similarly the government or a PSE can also raise capital in order to finance its investments. If the government could not raise finance externally then the matter would be different; but this obviously is not the case. 

If the case for PPP is being made on the supposedly better management or greater efficiency of privately run units, then those grounds have to be established rigorously. The Approach Paper does not do so and instead advances a spurious argument based upon scarcity of public resources. This spuriousness is evident not only from the theoretical argument given above, but also from the fact that even when public enterprises have had financial resources they have nonetheless been forced to take the PPP route, the case of modernisation of Delhi and Mumbai airports being the latest example. The Airports Authority of India, despite having the investible resources for modernising the airports was prevented from doing so and the management of the two profit-making airports was handed over to private players. Such privatisation under the garb of PPPs is neither in the interest of overall infrastructure development nor the health of the PSEs. 

ON SOCIAL SECTOR INITIATIVES

The “strategic initiatives for inclusive development” in the spheres of education, health and rural infrastructure contained in the Approach Paper are welcome. Expansion of education at all levels and health facilities have been envisaged and it has been correctly noted that these initiatives would require enhanced levels of public spending. The thrust on improving the quality of these public services, increasing the number of teachers and doctors and making them more accountable through the supervision of Panchayati Raj Institutions are indeed laudable. 

However, areas of concern remain. Raising user charges for education and health services, which has been suggested in the Approach Paper would be inimical to the objective of inclusive development. High fees for school education and primary healthcare would militate against bulk of the poor, especially the socially deprived sections, for whom school education and healthcare continue to remain inaccessible. In the case of expanding secondary education under the proposed SSA-2, voucher schemes for private schools have been suggested as an alternative to the expansion of public schools. Contrary to the claim made in the Approach Paper, the Indian experience suggest that the problem of exclusion of the poor and socially deprived sections from schooling has not been addressed by the private schools despite their proliferation. Voucher schemes would only turn out to be another form of subsidy for the private schools, which have in most cases already benefited from the government through land and other infrastructure support at concessional rates, but have not fulfilled their social responsibility by enrolling students from poor and deprived sections. Therefore, the primacy of public responsibility needs to be emphasised unequivocally in this regard, if the objective of inclusive development is to be met. A mandatory quota for admitting students from poor and deprived sections for private schools receiving financial aid and other forms of support from the government may be considered. Moreover, the important objective of universalising the ICDS, which has been ignored in the Approach Paper, needs to be reaffirmed. 

There is a suggestion to co-opt the large number of institutionally qualified practitioners of Indian Systems of Medicine in the public healthcare system under the National Rural Health Mission in order to meet the shortage of trained doctors. Experimentation with combining of Modern and Indian Systems of Medicine cannot be done with an understanding that the latter can either replace or converge with the former. There can be no alternative to recruiting more trained doctors in order to provide an effective healthcare system.

The Plan outlays for Bharat Nirman continue to be non-transparent. While the target outcomes for irrigation, rural roads, water supply, housing, electrification and telecommunication connectivity are reiterated in the Approach Paper, there is no discussion either on the outlays or the outcomes achieved so far. The XI Plan should make a proper evaluation of the outlays and outcomes of the projects under Bharat Nirman in a transparent manner.

ON MINING SECTOR

The Approach Paper hints at further liberalisation of the laws and rules governing the mineral sector, in order to attract more private capital, including foreign capital. A recent report by a Planning Commission panel has also recommended granting of captive mines to private parties virtually free of cost and further liberalisation of controls on export of minerals. These steps are inimical to the national interest. Since minerals are scarce and exhaustible natural resources, their rate of extraction, the prices charged for them, the conditions under which they are extracted and the uses to which the extracted minerals as well as the proceeds from their extraction are put, are matters that should be socially determined. Export of minerals should be discouraged. The Approach Paper wants this entire approach to be given up in the name of bringing the mineral policy “in line with contemporary realities”. This cannot be accepted.

Moreover, the Approach Paper has also noted the absence of an appropriate Rehabilitation Policy and has admitted that unduly high costs of displacement has been borne by the tribal population due to the “development projects”. While the suggestion for the framing of a proper Rehabilitation and Resettlement Policy is welcome, it needs to be noted that unbridled entry of private players in the mining sector has the potential of destabilising very large sections of the tribal population and lead to violent conflicts, as was observed during the Kalinganagar incident in Orissa.

ON FINANCIAL SECTOR LIBERALISATION

Further liberalisation of the financial sector has been advocated by the Approach Paper including an increased role for foreign financial institutions and moving towards capital account convertibility. It has been argued that such liberalisation would enhance competition and facilitate innovations and entrepreneurship in the economy by providing greater options for managing risks. These arguments are fundamentally flawed. Greater competition and innovation in the financial sector essentially implies enhanced levels of speculation. Far from increasing productive investments, encouragement to speculative activities in the markets would deter real capital formation and increase the volatility of the capital market. The recent crash experienced in the stock market which was caused by massive fund pull out by FIIs and the volatility being experienced since then has shown the speculative nature of such investments and their unreliability. Moving towards capital account convertibility, by making it possible for domestic citizens, not just foreigners, to take out or bring in funds freely, would only enhance such volatility and open up the possibility of a sudden capital flight and currency meltdown. In fact the XI Plan should heed the views expressed by the RBI in this regard and suggest means to effectively regulate the speculative entities and mobilise higher taxes from them. 

ON GENDER ISSUES

The Approach Paper has devoted very little attention and space to gender issues. It has used a concept of “Gender Balancing” instead of Gender Equality, which is questionable. Moreover, while violence against women, economic empowerment of women and women’s health have been mentioned as focus areas, the means to achieve them have not been categorically outlined. Statements of intent have replaced concrete policy proposals. 

Possible improvements in legislation in order to prevent female foeticide, domestic violence and sexual assault and steps to improve upon their effective implementation needs to be worked out by the XI Plan. Targets need to be set for providing employment to women in all centrally sponsored schemes. The XI Plan should also fix targets for improving social indicators like the sex ratio and maternal mortality rate, especially in states where they have deteriorated during the X Plan period. Policies for achieving these targets should be specified. The Approach Paper does not specify the need for a gender component in the budgets and government schemes, which is a step backward from the earlier Plans. A gender component of a minimum of one-third for all government programmes should be specified by the XI Plan.

ON THE POLICY ON ENVIRONMENT

The policy on Environment envisaged in the Approach Paper relies primarily on the market mechanism to solve environmental problems. The contradictions of the approach are glaring. It starts by saying, “Rapid economic growth can intensify environmental degradation”. Then it says, “The solution does not lie in slowing growth since slow growth also leads to its own form of environmental deterioration.” Then it continues, “With rapid growth we can have the resources to prevent and deal with environmental problems, but we must also ensure that rapid growth is environmentally benign. This can be achieved through greater awareness, starting with school children, and appropriate policies”. While spreading awareness about the environment among schoolchildren is desirable, what is urgently required is a policy framework which strikes the right balance between economic growth and the environment in order to make the development process a sustainable one. What needs to be realised in this context is that the needs of a private profit driven trajectory of economic growth and sustainability of the environment are not easily reconcilable. It is therefore necessary to strengthen the laws and regulations meant to safeguard the environment. However, the Approach Paper suggests just the opposite when it calls for a dilution of the existing procedures of environmental clearances in order to facilitate large investments in order to accelerate growth. 

ON INVOLVEMENT OF CIVIL SOCIETY ORGANISATIONS

The Approach Paper encourages “partnerships” between civil society organisations and panchayati raj institutions, and also calls for associating civil society organisations in the implementation and evaluation of Plan programmes. While a number of civil society organisations have done admirable work in helping PRIs and in raising the level of consciousness of the people regarding Plan programmes and their rights, one cannot ignore the fact that civil society organisations are of various kinds. Many are funded by foreign governments and agencies and carry over into their work the concerns, the outlook and the predilections of their donor agencies. Many are simply the external arms of foreign governments and agencies. There is a need for monitoring the role of these CSOs themselves. To confer on them indiscriminately a monitoring role over the work of the elected bodies of the state in implementing Plan programmes, is therefore questionable. This is especially so since these organisations are themselves not in any way accountable to the people. While the PRIs should be free to take the help of CSOs if they so wish, to make them do so constitutes an abridgement of their freedom and autonomy. 

(Concluded)