biting that silver bullet
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Publication: The Economic Times Mumbai;Date: Jan 3, 2014;Section: Editorial;Page: 12
Biting That Silver Bullet
Replacing infrastructure ministries with independent regulatoryinstitutions is the way forwardSanjeev Aga
Even by the standards of a poor country, India’s record on infrastructure, hard and soft, is wretched. This is no accident.Global governance best practices have striking similarities across infrastructure sectors, but are fundamentally dissimilar toother sectors.
Indian infrastructure is characterised by symptoms of one single disease: shortage. And no remedy can put Indianinfrastructure back on its feet without the silver bullet of governance overhaul.
Shortage blinds. When shortages extend over generations, as in India, they impair faculties of perception. Illustratively, exceptfor parts of Mumbai, no resident of India below the age of 40 years has known 24×7 power supply with specified voltage,aminimum international standard. The total cost paid for power is not just the monthly bill, but also the tangible or intangible costof backup power or no power, plus the cost of stabilisers and accelerated wear and tear of electrical equipment.
That Old Dirty Plot
Similarly, not having assured 24×7 water supply direct from source adds to the cost of storage, adds 25% to transmission loss,adds water purification costs, and the cost of waterborne diseases. But what our citizens cannot imagine, they do not miss! So,rural and urban dwellers remain lured by crumbs like reduction in monthly bills, unmindful of the much higher total cost actuallyextracted from them.
Shortage breeds corruption. Pick any infrastructure sector: land, power, oil and natural gas, coal, water, telecom, health,education. The underlying plot in any scam — some uncovered but most forever concealed — is to first create an artificialshortage, and then feast upon the arbitrage.
So, we profess high principles and eliminate for-profit private investments in education, create a shortage, only to reservemonopoly profits for ostensibly not-for-profit education trusts. The script changes from sector to sector, but the plot isunchanged.
Light, After the Tunnel
Shortage begets shortage. Only abundance can improve quality and slash prices. Archaic floor space index rules in cities, theabsence of transport in the peripheries and the impossibility of change in land use have propelled urban land prices toastronomical heights. To police this resultant shortage comes an army of functionaries. The sanction of a new building canrequire up to 30 sequential approvals, breeding a human ecosystem where only mutant species survive.
Meanwhile, we actually have national-scale real-life experiments in the telecom sector to learn from. In the last 20 years,telecom has seen the shortages and high prices delivered by a state monopoly. It has seen contrived resource shortages andcrony capitalism that have shamed our nation. Between these poles, telecom has also seen epochal societal benefits when truemarket competition has prevailed. The telecom sector provides a tantalising glimpse of what can be achieved in every otherinfrastructure sector if the energies of our nation are unlocked and harnessed.
To start, abolish 15 infrastructure ministries and related government departments. This need not shock. Most advancedcountries did away with these two decades ago. We have had in India a self-serving belief that if you are elected, you have thedivine right to manage highly-specialised sectors, irrespective of fitness.
Five years ago, the very thought of abolishing ATM ministries would have caused a revolt. But in this season of glasnost, with
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political parties competing to renounce the illegal bounties of power, there is no better time than now to press home theadvantage.
The Best Regulation
Replace those with 10 top-notch independent regulatory institutions. The 15-odd ministries can be crunched into about 10institutions, e.g., the energy and transport sectors would fall under a single energy and transport regulator respectively.
There are enough international best practices to pick from. Some regulators exist in name, some will need to be created. Butwithout exception, the remit and the bar for such institutions will have to be raised much higher.
These institutions must attract the best, must provide sector expertise and quality output, involve the public, and pick the rightmix of state and private resources to drive the long-term vision for the sector. The acid test would be the thought leadership andmoral authority exerted by regulatory institutions. Capital, financial and human, chases returns. If conditions are conducive,unimagined energies flow in to create unimaginable outcomes.
This may seem a gross oversimplification of a complex subject by recycling an old idea. But that would miss the point. Acentral idea must necessarily be distilled to its purest form. Only that pure insight must shape subsequent steps.
India must bite this silver bullet. Half-measures will leave us with half-infrastructure.
The writer is a former corporate CEO
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