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Badal's business case

The era of governance by committees and low-priced resources is over, says the Punjab deputy chief minister

A K Bhattacharya  |  New Delhi 

A K Bhattacharya

Last week, Punjab Deputy Chief Minister shared his government's ideas on with industrialists at a Business Standard conference in Chandigarh. Remember that Badal effectively runs the state government, deputising for his chief minister-father. Therefore, it is useful to note what he told the industrialists and assess how significant those ideas could be in the national context.

Three points stood out for their clarity, freshness of approach and pragmatic thinking. First, Badal decried what he called the "committee raj". Committee after committee, he said, would review the same proposal and broadly endorse the same view that the first committee had taken, raising doubts about whether the several committees that examined the proposal had any value to add to the evaluation process, or they merely delayed the final decision. His solution to the problem was to make the rules and procedures transparently available, and let the approvals for projects and proposals accorded online, once they fulfilled the outlined criteria.

There is nothing strikingly new in this thinking. Several other states have tried to reduce the red tape arising out of the committee-based process for approving projects and proposals. A few have made some progress and others are trying hard. But if a state that prides itself for its agriculture and tourism has decided to provide online clearances to projects as part of its new industrial policy - to be unveiled before the end of this month - it shows how technology-led streamlining of policies has made inroads into different parts of the country. And the Centre, too, could move on to embrace the spirit of such thinking, instead of allowing decisions to be held hostage to committees.

Badal's second point was about finances. He declared that the problem with industry, or even the state government, was not about paucity of funds. The more critical problem was the generation of ideas for new projects and schemes to deliver better governance and promote economic growth. Once the ideas were in place, funds could be found without much difficulty. This, too, is a reflection of Badal's bullish approach towards development. Indeed, no good idea has been defeated or sacrificed just because there were not enough funds to execute it.

His third point was about power tariffs in the state. Confronted with some industrialists pleading for a reduction in the power tariffs that were raised recently, Badal gave a long lecture on basic economic reforms. First, he dwelt on how the quality of power was as important as the tariff at which it was sold to consumers. Some states, he noted, had not raised the power tariffs but were not able to meet the entire demand, resulting in long periods of power outage. As a result, industries were compelled to use diesel-run generating sets to meet the power shortfall, resulting in a substantial increase in their total cost of power supply.

But a state like Punjab, he argued, had raised tariffs, but was providing power without any outage. His suggestion, therefore, was that it was better for industry to accept an increase in power tariffs because the cost of using diesel-run generating sets to meet power shortfall was much higher. Indeed, Badal was talking like a CEO and turned down industry's demand for reviewing the recent power tariff increase, citing reasons that made business sense. At the same time, he established a causal connection between a well-run power utilities network with remunerative tariffs and overall efficiency gains for industry. Lower tariffs are likely to result in poorly-run power utilities and eventually raise the cost of power for industry. On the other hand, higher tariffs would mean better supplies, reducing or even eliminating industry's dependence on costlier sources of power like generating sets.

The good news is that Badal is not alone in bringing about a changed outlook towards Several other chief ministers have now realised the importance of sensible pricing strategies for all services offered by the state governments to industry or to even consumers. Subsidies can hide costs up to a point, but they also breed inefficiencies leading to higher costs for the end-consumer. This realisation has dawned on almost all the states, which raised power tariffs in the last year-and-a-half to reduce their losses and improve the power utilities' ability to generate or buy more power to meet the demand.

If states like Punjab, Haryana, Madhya Pradesh, Bihar and West Bengal (to name just a few) have internalised this message and begun implementing them through policy action, the Centre should also, perhaps, understand that the so-called political resistance to tough measures on raising prices of subsidised commodities is not difficult to overcome. Increasingly, consumers are preferring to pay for the assured quality of service they get, as long as the increases are in small doses and there are no sudden shocks. The 50-paise monthly increase in diesel price to reduce the oil marketing companies' losses met with no resistance in the three months ended March. The monthly increase was not allowed in April because the Union government feared adverse consequences of such a move in view of the Karnataka polls on May 5. It seems the central ministers have not read the Indian consumers' mood correctly. They would do well to take a leaf out of Badal's book.

First Published: Sun, May 05 2013. 21:27 IST