India’s policy of privatisation is contrary to the observation of the United Nations and the World Bank. India is bracketed by the WB among the five countries with the largest number of poor and says it is home to 23.88 per cent of the world’s poor. The UN observes that widespread privatisation of public goods is systematically eliminating human rights protections and further marginalising those living in poverty.
Indian policy makers normally take note of UN reports. The ensuing Central budget would be interesting to observe how it is dovetailed into it. More so as the UN report questions the Niti Aayog move to legitimise Public-Private partnerships (PPPs) and private entities charging user fee from the poor.
Now many more infrastructure projects are based on high fees on infrastructural use, including the railways, roads, metro and other transport modes. The move to “privatise” trains run by the Indian Railways (IR) also classify into this segment.
A careful look into the train privatisation indicates that these would be run by the IR subsidiary IRCTC but would charge exorbitant fares and also deny concessions to senior citizens, cancer patients or other needy. The fare structure is deceptive.
The UN questioning discrimination criticises the “user fee” model as it finds infrastructure projects most attractive to private players. The construction cost is relatively low and high “user fee” charged. Such projects include water, sanitation, electricity (even pre-paid meters), roads, transport, health care, social and financial services. The poor are the worst hit as they are unable to pay and cannot afford many services. It means they would have inadequate and not so good services.
There is some improvement in health care after Ayushman Bharat. The PM Kisan pensions give some relief to farmers. But MUDRA loan type schemes have not been found to be as beneficial as major part of it have turned in to NPA.
In a TERI University study, LN Venkatraman says that the State is neither ensuring welfare nor bothers to be a service-regime. He says, “The epitomes of progressive taxations; universal basic income; food bank and social insurance become Robinhood idealism in this complex dualism. Meritocracy as an efficiency argument theoretically justifies the elimination of redistributive policies. This, in turn, dilutes the disposition of “collective bargaining”.
The UN admits that the WB, International Monetary Fund and even the UN itself aggressively promoted widespread privatisation of basic services without regards to the human rights implications or the consequences for the poor. The UN says that privatising social protection, education and other essential public goods cannot be done at the expense of throwing out rights protection.
India followed the prescription rigorously since 1991. It now reflects in severe rural, urban, farmer and working class distress. More so as job losses are reaching record proportions owing to ill economic health of many industrial units though still corporate profits are growing.
The UN observations are significant. Teeming millions are finding high-cost private education unaffordable and also mostly sub-standard. The private universities or institutions are delivering without proper faculty, labs and other necessary basics. It raises the question whether the State should withdraw totally from education. Interestingly, the regulators are suspicious of their quality.
The poor are no more finding the IR trains affordable. Dynamic fares, exclusionary tactics have made travel difficult for the poor. Discriminations have increased the social gulf. It calls for Niti Aayog to institute studies so that the NDA that has been given massive mandate could do necessary course correction.
In this context, it is necessary to review the recent decision to sell the government’s entire stake in the second-largest refiner Bharat Petroleum, Shipping Corporation of India, Container Corporation and privatise railways or trains.
The motivation is simple. Crisis is brewing in the economy. Finance Ministry is finding it difficult to manage the rising costs due to high inflation, now at 7.35 per cent on the back of rising food prices and artificially kept high petroleum prices.
The government advisers are yet to realise that most government introduced price hikes are hitting the government most as its expenses are rising phenomenally and it is forced to divert funds to run daily chores at the cost of development.
Indian exports have also shrunk 2.2 per cent and imports 8.8 per cent on January 15 as WTO observes sharp fall in global trade. Trade deficit narrows to $ 11.25 billion.
Overall it may lead to GDP contraction. But the experts now are in dilemma over the impact of GDP on the poor. A rising GDP is not helping improve lifestyle or create jobs. The slowdown is of course a double whammy.
The UN report quotes a study by the National Audit Office of the UK. It concluded that private finance initiative model had proved to be more expensive and less efficient in providing hospitals, schools and other public infrastructure than public funding. It finds cost of privately financed hospitals are 70 per cent higher than public sector hospitals.
Another study by the European Court of Auditors of the EU found widespread shortcomings in 12 PPPs in France, Greece, Ireland and Spain in road transport and IT and benefits were limited.
The UN prescription looks good but India may not find it easy to stop privatisation, though its benefits have been limited. The government is keen on selling many of its Rs 1.02 trillion assets as its tax collections are less than estimated. The last quarter cut of 25 per cent of budgetary allocations may in theory reduce fiscal deficit but practically it can carry on much of its expenses to the next financial year.
Changing course all of a sudden is not easy. But the government has to ponder whether the much touted benefits of privatisation are real or not. If it accepts the UN prescription, it has to go for an overall alteration of policies, redraft the path and usher in a new economy.
The UN scepticism on privatisation is based on the deprivation the rights and benefits of the poor. It is apprehensive of the growing discrimination and says, “There is a real risk that the waves of privatisation experiences to date will soon be followed by a veritable tsunami”.
It is not clear if it is a warning or not. But developing countries would do well to listen to it and accelerate progress and bring down costs to help people and ensure growth.