The Election Commission has emerged as a robust feature of the institutional landscape in modern India. It has achieved that ultimate nirvana of collective achievement whereby the names of the individuals directing operations are not as well known as the Commission itself. It has moved seamlessly through controversies over a few appointments here and there, and has become a lighthouse for other countries in the developing world looking to hold free and fair elections under equivalently rough conditions. Co-ordination with the law and order machinery has been remarkable. Booth capturing, which inspired terror among voters who had the misfortune to confront it over the years, has a quaint ring today.
The success of the Commission has had a great deal to do with its early embrace of modern technology. Electronic machines were used for the first time on an experimental basis in the elections of 1982. Between 1999 and 2002, electronic voting moved quickly from partial to full coverage of general and state elections.
At the same time, the Commission did not discard some features of the old technology package used in elections. To supplement voter identity cards, it chose to retain the indelible ink marker, as a physical safeguard against duplicate voting. This has developed an international following. Countries in West Asia, in their post-revolutionary task of actually having to elect public officials, are interested in buying that same indelible ink from Mysore Paints and Varnish (MPVL), a state-government-owned public sector undertaking (PSU).
A company like MPVL manufacturing decorative and industrial paints, polishes, varnishes and sealing wax should have been privatised long ago, by all tenets of reform. Its owner, the state government of Karnataka, should have vacated that space for the private sector. But in one of those delicious bits of resistance one finds only in India, it remained stubbornly under government ownership. And it has earned profits for its owner, due in no small part of course to its monopoly status as a provider of indelible ink, granted by exclusive licence in 1962. Critics of Indian resistance to total reform will say that MPVL thrived on that monopoly status. But it is unlikely that a national body could have been motivated in its decision to stay with the indelible ink marker by the need to keep a state-government PSU going. At the end of the day, MPVL survived on the quality of its indelible ink. They guaranteed three weeks, and by gum, it does last that long. MPVL delivered.
Those electronic voting machines also come out of two (centrally-owned) PSUs, Bharat Electronics (BEL), and Electronics Corporation of India (ECIL). They work pretty well too, although the one in my booth in the 2009 elections did look a bit rickety.
The recommendation to privatise ownership of PSUs is based on a number of assumptions, which equate ownership to destiny. Perhaps the most recent and lucid statement of the downsides to public ownership is in the 2009 report of an official Committee set up to design the liberalisation of the financial sector in India. The chairman was Raghuram Rajan, subsequently appointed economic advisor to the prime minister. Making a case for bank privatisation, the report says (p.78) : “Public sector entities do exactly what private sector entities do, though less well because they have more constraints, a poorer skill pool, and poorer incentives… the skill deficit will make public sector firms less effective at pricing risk. And the costs will partially have to be borne by the government when the under-priced risk eventually hits public sector balance sheets.”
There is a string of assumptions there, of which the weakest is about public sector entities having a skill deficit. That is simply not true at all. New private sector entrants in most fields in India are able to survive only by poaching on the rich skill pool within the public sector. It should not be surprising that talented young people gravitated, and still do, to the public sector. Its trump card is the offer of tenured employment, in a country where employment risk is a huge turn-off. The talent that the public sector in India has attracted and nurtured over the years is huge. Ravi Shankar was a salaried employee of the Delhi station of All India Radio in the fifties, as a conductor of one of its two orchestras (there was another one for Carnatic music conducted by violinist T K Jayaraman). The work was light because they mostly did signature tunes for various programmes. The income was not spectacular, but it was steady. The job freed Ravi Shankar to put in long hours on his sitar, but could not retain him when George Harrison beckoned.
So yes, there is a retention problem, but incentives are a matter as much of the work environment as of compensation packages. These things can improve automatically when there is competition, and it really does not matter if the competition is from public or private players. There are 27 public sector banks out of a total of 81 commercial banks in India. Even within the publicly owned subset of the Indian banking sector, there is keen competition. In an empirical exercise I did ten years ago with Garima Vasishtha, we found that while public sector banks performed worse on average than private sector banks, individual banks in the PSU category handily outperformed individual banks in the private sector. In the private sector as well, as the global crisis has shown, incentives can be seriously distorted when employee remuneration is tied to short-term enhancement in shareholder value.
A few years ago, three PSU vaccine manufacturing units were closed down. After several cases came to light of children paying the cost for poor quality vaccine sourced from private manufacturers, that decision has now been reversed. Policy must never be predicated on untested assumptions.
The author is the honorary visiting professor, Indian Statistical Institute, Delhi
