Private sector crutch for public service

When the command-and-control economy was being dismantled through the early nineties, the popular notion propagated by votaries of reform was that India would enjoy the advantages of a division of responsibilities between government and private enterprise. The former would retreat from a mind-boggling array of corporate activity to focus on delivering better health care, education and infrastructure. Indian business, less constrained by licensing restrictions and weird monopoly laws, would create jobs and wealth. Since those heady days a quarter century ago, the roles have morphed in a bizarre way. The government visibly remains a major corporate promoter and the private sector is increasingly being viewed as a crutch for public service delivery.

Whether it is the near-defunct notion of private-public partnerships (PPP) for infrastructure projects, a crackpot corporate social responsibility (CSR) mandate, reservation for poor children in private schools under the Right to Education law or, most recently, the NITI Aayog’s blueprint to co-opt private health providers for rural health care, private participation in what is traditionally considered the government’s domain has been steadily expanding.

The results of this reliance has been less than optimum, showing up the private sector in a venal light (sometimes unfairly) but also exposing the government and bureaucracy as bumbling entities incapable of formulating functional policy. The PPP template, first mooted in 2001, is a good example of these failings. Although the concept worked – after much controversy, it should be said – in some signature airport projects, it has proved a failure in almost everything else (including the first railway PPP between the Delhi Metro and Reliance Infrastructure, now wending its weary way through the courts). 

In roads, for example, the PPP concept was supposed to exponentially expand Atal Bihari Vajpayee’s inspired Golden Quadrilateral programme. Flawed and rigid contract design (principally in estimates of traffic and revenue flows) and delays in land and environmental clearances combined to ensure failure. Private investors found themselves burdened with debt (now a major contributor to the bad load crisis that afflicts the banking system) and no revenue stream, and a disenchanted government is back to the tried and tested EPC, or turnkey, model to revive the roads programme. Stalled PPP projects were a key cause for the accusation of “policy paralysis” levelled at the United Progressive Alliance (UPA) government in its second stint.

The UPA expanded the private sector’s role significantly with the CSR mandate, an idea that grew from the ground-swell of local opposition to land acquisition for large corporate projects. Instead of recognising that compensation packages were fundamentally flawed, the government read into these protests the popular message that corporate activity was inherently deleterious to public interest. If the government could not deliver adequate post-acquisition livelihoods for land losers, corporations would have to step in to fill the gap. From specifying a portion of profits to be sequestered for “developmental” activity in mining projects came the CSR mandate for companies above a certain threshold of turnover and net worth on a “comply or explain” basis.

The dead giveaway in this mandate is that fulfilling it requires investing in a government-specified list of activities — primary education, toilets, hospitals. This has enabled corporations to burnish their image with glossy brochures and publicity but has scarcely made a dent in India’s human development indicators.

In education, an enlightened idea like the school voucher system in private schools built on state-provided/subsidised land has worked less successfully because of the innate prejudices of the rich and upper middle class, and the absence of an enforcement mechanism (recall how President Dwight Eisenhower sent paratroopers to escort Black students to white schools to enforce a famous US Supreme Court ruling on equal rights). The glitzy private hospitals in India that have availed themselves of land subsidies also neglect to reserve beds for low-income people on some spurious excuse or the other. Despite this uninspiring record, NITI Aayog has suggested that district hospitals be leased to private health care services in return for assured referrals and some government funds.

All these experiments fail principally because they rely on profit-making institutions to develop non-commercial social benefits. They cannot disguise the fact that successive governments since 1991 have abdicated their fundamental duties to citizens. The consistently low spending on health and education is one tell-tale sign. World Bank data is a good approximation — though it is unclear whether it combines Centre and state statistics. On health, spending as a percentage of GDP has inched up from 1.05 in 1995 to 1.4 per cent in 2014. On education, it has fallen from a fairly low peak of 4.3 per cent in 1997 to 3.8 per cent in 2013. This trend has not changed appreciably since then. No surprise, then, that India, which is so intrepidly challenging China in a snowbound northern boundary, remains rooted in sub-Sahara when it comes to key health and education indicators.