<b>T N Ninan: </b>Be careful what you wish for

It isn't enough to say the public sector can't deliver, so let the private sector handle it

The India of the 1980s and 1990s had many dreams: private TV by satellite or cable, instead of drab old Doordarshan with its government propaganda; modern corporate hospitals that looked like hotels, just like those in America; world-class highways built by private construction companies and not by the CPWD (central public works department); and efficient, privately-run power stations that would give the state electricity boards a run for their money. We also wanted private phone services, and flight services that were better than what Indian Airlines could offer. We wondered why we couldn’t get passports in days, rather than weeks and months. And we wanted private insurance companies, instead of the painfully bureaucratic Life Insurance Corporation. I am sure you could add to this list—like quality housing from private developers, instead of sand-in-your-face flats built by the DDA (Delhi Development Authority) or MHADA (Maharashtra Housing and Area Development Authority).

Well, we have got a lot of what we wished for — and then some. But do we really prefer R-nub to ol’ Doordarshan? At least DD was/is staid and restrained, not like an attack dog barking in your drawing room. We mouthed the public-private-partnership mantra, but the private infrastructure companies that have been building power stations and highways are neck deep in debt, some of them plain bankrupt. They have pulled banks into the mess, undermining credit growth and destroying hopes of an economic recovery. And (how can we forget?), permitting the private sector access to natural resources led to scandalous asset grabs.

Meanwhile, private insurance companies resorted to mis-selling policies, duping many unsuspecting customers. And how many have been left in the lurch by private builders — with delivery deadlines long forgotten, quality promises honoured in the breach, and building regulations violated? Still, disillusionment can be slow to set in. We go in large numbers to the private hospitals, even though we know that we are being hopelessly over-charged and made to undergo procedures that are not needed — because doctors get their cut on the bills. It should not surprise that doctors have lost their haloed status, so we have a new trend of patients attacking them physically when things go wrong. Some doctors recently took to wearing helmets, as a mark of protest!

In fairness, there is the brighter side, and some of it has turned out exactly how we might have envisioned it. No more queues for phones, for instance; and the phone services are highly affordable. Also, a choice of airlines with much greater frequency of flights, vastly improved airport terminals and, once again, affordable tariffs — though even the best operators treat you like cattle sometimes. The metro networks sprouting in various cities are middle-class dreams come true (Why only middle-class? Because the rich don’t use them and the poor can’t afford them; they walk or cycle).

So why have some things worked out well, and others not? The two-word answer is: Proper oversight. Markets need to be regulated. Businesses need freedom to operate but also careful monitoring of everything from quality and safety to environmental practices. And customer protection laws have to be effective. The insurance regulator took its sweet time before it cracked down on mis-selling in the insurance business. In the media, the sector regulator (such as it is) is asleep when there is border-line hate speech being broadcast, along with rampant war-mongering. Key customer-centric components of power sector reforms have been sabotaged by private vendors. And while everyone knows of rampant hospital malpractice, the government has not looked beyond the price of stents!

Short point: There is no escape from building state capacity. It is not enough to say the public sector can’t deliver, so let the private sector handle it. Because the private sector needs to be regulated, and proper regulation needs state capacity too, lest you run the twin risks of poorly-framed rules and regulatory capture. Ignore this, and you will end up rapping along with Eminem, “This is what I wished for…Just isn't how I envisioned it.”