Private government

The headline may sound like a contradiction in terms, but such contradictions are increasingly defining the Indian nation. For years now, we have seen an interventionist judiciary compel an ineffective executive to perform its basic functions. Purists of democracy may lament this, asserting that the roles of each branch of government are well-defined and bounded, and nothing good will come of judicial intrusion into the executive domain. Pragmatists, on the other hand, argue that executive failure will invite judicial intervention, through litigation by the citizen. In fact, many officials admit that compulsion by the courts is the only way they can get their job done; without it, the clash between vested interests creates gridlock.

Now, another boundary, that between the state and private enterprise, is about to be challenged. With the enactment of the Special Economic Zones Act of 2005, large tracts of land will be made available to private developers to set up infrastructure and facilities. Many of these zones will be small, but the bigger ones will cover areas equal to large towns, even small cities. The first question relates to the terms on which tens of thousands of acres of often fertile agricultural land are being taken from farmers and given to companies, in a country where rich soil is not universal, and where governments have always found it difficult to give land to the landless. The prices at which these transactions are done therefore become crucial, for judging whether the public good is being served""and there is room for concern, as states feel the need to compete so as to attract the big developers.

The next question concerns the management of facilities and services within these zones (more correctly, company towns), as this becomes the responsibility of the developer-company. This is the big departure as these functions used to be in the hands of the state. While private provision may well yield substantial quality improvements, and contribute to increased competitiveness, troubling questions arise over how wide the developer's writ runs. In theory, the basic functions of governance""law and order, contract enforcement and so on""remain with the state; in practice, the line between the authority and jurisdiction of the developer is quite likely to be blurred. For example, if a riot were to break out within the zone, internal security services will be first on the scene; since there is unlikely to be a significant police presence, official response will take time to organise. Obviously, private security services have no mandate to deal with law and order issues, but given the way in which SEZs will operate, they will begin to take on police functions, with an unavoidable bias towards those who pay their salaries.

Some would argue that this is a small price to pay for the efficiency improvements that the SEZs promise. Perhaps, but it is a price, nevertheless. To the extent that it reflects a substitution of the private sector for the state in the provision of governance, it does come into conflict with the fundamental principles of a democratic state. The "social contract" between the state and the citizen is replaced by a commercial contract between the management and the client of the zone. The bigger the zone and the larger the number of people whose livelihoods and quality of life depend on it, the greater is the concern with this substitution. The challenge before the government now is to find a reasonable balance between the efficiency of private management and the inherent rights of the citizen. One possible solution is to require zones to set up internal governance structures that provide adequate representation to all stakeholders, including systems of participatory local governments. Privatisation is a desirable solution in many sectors, but not of governance itself.