People's Democracy

Violating Constitutional Propriety to Promote PPP

Prabhat Patnaik

PRIME minister Manmohan Singh has lifted a ban, that was in force for more than a year, on the transfer of government land without cabinet approval to private concessionaires in PPP (public-private-partnership) projects in the infrastructure sector. From now on if the PPP Approvals Committee of the government has approved an infrastructure project, then the concerned department can transfer the land either on rent or on a license to the private concessionaire of the project, without the matter having to go to the cabinet for approval.        

The argument advanced for this move is that awaiting cabinet approval meant a delay of almost six months on such projects which the country could ill-afford; this move would hasten the completion of infrastructure projects. But the reason for the ban in the first place was that such land transfers were fraught with irregularities and opened the way for nepotism and corruption. The fact of imposing the ban, which, it was known at the time of its imposition itself, would delay the execution of the projects, meant that the government was willing to pay the price of some delay, in order to eliminate the scope for corruption. By overturning the ban, without putting in place any alternative mechanism to prevent possible corruption in such land transfers, the government is now clearly signalling that it does not mind such corruption.

The point here relates not just to corruption in the narrow sense of some persons in the government department obtaining some illicit gratification. It involves corruption in the larger sense, of the pattern of land use being tilted to the benefit of “real estate developers”, by willing accomplices inside the government, away from alternative uses which have higher social priority. It is well-known that a lot of the PPP-based infrastructure projects are basically real-estate projects of private “developers” who appear in the guise of private concessionaires in order to have access to government land in prime locations.

SYSTEMATIC

CONNIVANCE

Manmohan Singh, and the Planning Commission which he chairs, by insisting on the PPP route for infrastructure projects, act to facilitate such private appropriation of public lands; true, the ownership of such land is not transferred usually to the private concessionaire, but if he has its use for profiteering through some real estate project, for say a period of forty years, then what might happen after that period is a matter only of academic interest.

The government in short has systematically connived in making prime public land available to private real estate “developers” under the guise of infrastructure projects. The typical modus operandi is as follows: suppose a railway line or a metro-rail project, or a fly-over has to be built. The private concessionaire suggests that one way of meeting the cost of the project is to convert the adjacent land into a mall, or a multi-storey block of flats, or some office buildings and hiring out such buildings to potential users. The government agrees on financial grounds. But in the process, prime land in the centre of the city, which would not have been used for such real estate projects, but which might have been used as a public park, or a playground for children, or as a future location of a government school or a government hospital, has been converted to private use.

If the cabinet as a whole had a say in such a matter, then some discordant voices might have been raised against such conversion to private use of prime public land. But if the matter is left entirely to the concerned department, then the private “developer” has a much better chance of “persuading” the department through various means to let the deal go through.

Last year, when the central government had faced some heat on the issue of corruption, and when the 2G spectrum scam had made clear to all the pitfalls of leaving crucial decisions to individual departments without the overall supervision of the cabinet, Manmohan Singh perforce had to put a ban on the transfers of public land to private “developers” without cabinet approval; now that the heat is off, he has promptly overturned the ban.

PRIVATE PROFITEERING

AT PUBLIC EXPENSE

As an illustration of the way that private “developers” get access to prime public land, and of the Planning Commission’s connivance in it, take the case of metro-rail projects. While the Kolkata metro-rail project was developed by the railways, and the Delhi metro-rail project was developed through the DMRC, which was formed through central and state government participation and which took a loan from the JBIC, a Japanese Bank, for implementing the project, the Hyderabad metro-rail project was sought to be developed as a PPP and given to the infamous Satyam group which was chosen as the private concessionaire. All such PPP projects involve the “development” of land on either side of the metro-rail line for commercial purposes, as a means of part-financing the project. The speculative dealings and financial irregularities associated with the operation of the Satyam group, which eventually saw its chief behind bars, exposed the nefarious character of the real estate deal camouflaged as an infrastructure project. But, the Planning Commission, notwithstanding the Satyam fiasco, was so wedded to the idea of PPP that it insisted in the case of Kochi metro too that the PPP route should be followed, even though the LDF government in Kerala was not interested in this route and had made all the arrangements for developing the Kochi metro on the DMRC model.

Manmohan Singh and the Planning Commission in short are not dispassionate judges weighing carefully the pros and cons of implementing a project in a particular manner in order to serve best the nation’s interest. They are PPP ideologues, hell bent on promoting this mode of project implementation, which even honest non-Left economists like the Nobel Laureate Joseph Stiglitz have dubbed as “private profiteering at public expense”.

It is quite another matter that in the context of the current capitalist crisis, when the “state of confidence” of the capitalists, including even of the fly-by-night operators who act as private “developers” under the guise of concessionaires of PPP projects, is so low, that there are not enough takers for such projects. Private “developers” might perhaps be tempted, if the government provided them with guaranteed rates of return (which would make the phrase “private profiteering at public expense” even more apposite), as had been done by the colonial government for British capital in the days before independence. But the government till now has not dared to offer such guarantees, given the public ire and the demand for resources that would be generated by such guarantees. Notwithstanding such reluctance on the part of the private “developers” to take up PPP projects, however, Manmohan Singh and his neo-liberal cohorts are indefatigable in their pursuit of PPP. And the latest move is an indication of this fact.

But there is another issue that this move raises, and that relates to the collective responsibility of the cabinet. Collective responsibility of the cabinet requires that cabinet members should defend all major decisions of the government; and this is usually ensured by the fact that all such decisions come before the cabinet before they are finalised. Now, if the UPA-2 government as a whole had a clear and agreed position on the transfer of public land to private concessionaires on PPP projects, then it could be argued that in view of this general agreement on principles, each and every case involving such transfers did not need to come before the cabinet, and that time could be saved by giving departments some autonomy in decision-making on this issue.

But that is not the case; the UPA-2 government has no agreed position on the issue of transferring public land to private concessionaires. The Trinamool Congress, as is well-known, has a very different position on this question from that of Manmohan Singh, which is one reason why the government still has not been able to come forward with appropriate legislation on the issue. Manmohan Singh’s directive therefore is motivated not because the cabinet is agreed on the issue, but precisely because the cabinet is not agreed on it. It is this which is the cause for delay when PPP projects involving transfer of public land have to come before the cabinet. Manmohan Singh wants to cut through this process precisely because the cabinet has differences within it, and no settlement, he knows, will be reached in time on such transfers.

JEOPARDISING COLLECTIVE

RESPONSIBILITY OF CABINET

Precisely for that very reason, however, what he is doing goes against the principle of collective responsibility of the cabinet. Collective responsibility requires that there should not be any such short-cuts. If there are differences then they have to be sorted out, and until they are sorted out, no action should be unilaterally taken by anyone, not even the prime minister, that lacks general sanction within the cabinet. Otherwise there will be the absurd spectacle of one cabinet minister dissociating himself or herself from the decisions taken by another, of different members of the cabinet speaking in discordant voices, making the government into a laughing stock, making a mockery of the constitution, and causing the people to be disillusioned with the system.

The Manmohan Singh government has already had occasion to violate the constitution in this manner. When the Telecom minister A Raja chose to violate the directive of the prime minister to follow the auction route for making 2G spectrum available, the prime minister turned a blind eye to his transgression, offering the lame excuse that coalition compulsions made it necessary for him to do so, as if coalition compulsions over-ride constitutional correctness. In the present instance he is doing something exactly similar: because he cannot get his way within a coalition government, he is allowing his cohorts to by-pass the cabinet, and thereby jeopardising the constitutional requirement of collective responsibility of the cabinet.

It is a gross error to believe that infrastructure projects require PPP, or that they are better operated under PPP. On the contrary, government-owned infrastructure projects like the DMRC or CIAL (of the Kerala government earlier) are some of the shining examples of successful completion and operation of infrastructure projects, while a large number of the PPP projects have either not taken off at all or have got mired in controversy, as in the case of Satyam. There is no reason to believe that raising finances for an infrastructure project through the PPP route is any easier than if it is fully government-owned and implemented through a Special Purpose Vehicle. There is no reason to believe that a concessionaire runs an infrastructure project any better than a government SPV (unless there is deliberate sabotage from within the government to create the conditions for bringing in the private sector). Manmohan Singh’s protestation about the “country” needing an overturning of the ban on the transfer of public land is baseless. Playing with constitutional propriety because of ideological predilections, as he is doing, can do great damage.