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| A V Rajwade: Giant gravy train | |
| Reducing the colossal waste of funds in public sector is the real challenge | | A V Rajwade / New Delhi June 29, 2009, 0:02 IST | |
Whether it is Air India or various social welfare schemes, reducing the colossal waste of funds is the real challenge.
In a way, the timing of Nitish Sengupta’s article on the public sector published in this paper on June 21, was unfortunate. Just as he was singing paeans to the virtues of the public sector (how “companies did not go in for retrenchment and reduction of emoluments”; how “the public sector…has scaled glorious heights in recent times”), the Air India story started attracting headlines. It needs Rs 15,000 crore of taxpayers’ money. The Indian Express quoted Civil Aviation Minister Praful Patel as saying, “There is excess flab on the entire body of Air India, not only of manpower but due to salaries and the internal functioning style. The airline will have to improve its on-time performance, aircraft engineering, commercial operations, especially in the face of competition and choice (available to customers).”
Earlier, The Wall Street Journal quoted Dalbir Singh, the Congress party’s head of election logistic as saying, “Bureaucrats last forever. That is the problem.” He wants to “overhaul an entrenched, unresponsive bureaucracy that rewards mediocrity” and “pave the way for greater specialisation in the civil service”. Unfortunately, many employees in the public sector have become bureaucrats, in their mentality and attitudes, and Major Singh’s comments are perhaps equally applicable to them: Their “owners”, as represented by the netas and babus, are also much more comfortable with that culture, than with “a culture of enterprise and innovation” which the President lauded in her recent address to Parliament.
Apart from this, I tried to locate Air India’s balance sheet on its website. Unfortunately, the latest balance sheets available are those of March 2006 (Air India), and March 2007 (Indian Airlines). (Obviously, things have not improved since the time when Arun Shourie was disinvestment minister.) Newspaper reports suggest that the airline has about 50,000 employees, 60 per cent of whom are permanent; it has a debt of Rs 30,000 crore, a carried-forward loss of something like Rs 12,000 crore, and a hundred aircraft on order, which would doubtlessly need further public support. (Incidentally, American Airlines, which is no paragon of efficiency, has about 60,000 employees but seven times the number of aircraft, and services eight times the number of passengers.) As Shyamal Majumdar wrote in an article (What productivity?) in this paper on June 24, the productivity-linked incentives were “never linked to productivity from the start”; that every base-performance-level was so fixed that it could be easily exceeded, without any improvement in productivity or performance! Has Air India become a gigantic welfare state for its 50,000 employees, on whom it spends an average of Rs 600,000 per annum? (General Motors had become like this and its fate is well-known.)
This is not to condemn the public sector in general. It has some great companies, with highly committed and capable managers who are doing excellent work. Their problem is the bureaucratic, neta/babu stranglehold within which they are required to operate. There is of course a bigger issue: In terms of the priorities of the government, should its monetary and managerial resources be spent on bailing out Air Indias — or use them for high-on-priority social welfare of the truly poor?
Sonia Gandhi, the Congress party president, has recently written a letter to the Prime Minister recommending the passing of a National Food Security Act(NFSA) “to ensure food security for the poor and vulnerable sections of the society”. While nobody can question the worthy objective, does the government have the fiscal and, more importantly, administrative resources to meet this? In a prepared talk titled “Is India a Flailing State?” Lant Pritchett, who recently spent four years in India with the World Bank, argued that India is today “a nation-state in which the head, that is the elite institutions at the national level remain sound and functional but that this head is no longer reliably connected via nerves and sinews to its own limbs. In many parts of India in many sectors, the everyday actions of the field level agents of the state — policemen, engineers, teachers, health workers — are increasingly beyond the control of the administration at the national or state level ….. In police, tax collection, education, health, power, water supply — in nearly every routine service — there is rampant absenteeism, indifference, incompetence, and corruption. As this is true of even relatively routine services, even more so for more sophisticated ones like networked irrigation or groundwater management.” Mr Pritchett goes on to claim that, if you ask an official about India’s health system “you will get an elaborate and intriguing story about how many of this type of facility per that type of population, how each of those is staffed … all backed … with data and reports. Travel to any part of India … and you will realise that this description of India’s actual health system … is … a complete fiction.” Any comment is superfluous!
Unless delivery of the basic services to the poor improves quite significantly, whatever legislation the government may pass, an ever larger part of the country could come under the sway of the extreme left. For future historians, Lalgarh may turn out to be just a trailer, with the big picture still to unfold!
avrajwade@gmail.com
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