Himachal: PPP as a solution for efficiency and performance?

The ardent of neo liberalism argue for free market and for the privatization of public sector. The formula is public private partnership (PPP). But all those who ridicule the public sector do it in the garb of ‘shifting away from the stranglehold’, and for efficiency’, ‘performance’ etc. Let me place the facts historically. Why the same bunch of ideologues i.e their predecessors did not  recommend for a vibrant private sector or why the state was made an instrument for the development course in post independent India and further  for the accumulation of capital in private hands?

To their disappointment , the role of the state in putting in place an infrastructure network or development was emphasized by the National planning committee (1938) and the ‘Bombay Plan’ also known as ‘Tata plan’ of 1944. Imagine who were the members of Bombay plan; i.Jehangir Ratanji Dadabhoy Tata, ii. Ghanshyam das Birla, iii. Ardeshir Dalal, iv. Sri Ram, v. Kasturibhai Lallabhai, vi. Ardeshir Darabshaw, & vii. John Mathai. The focus of this plan was private capital being small, more of government intervention and regulation since the private capital will not be able to compete in a free market economy. This along with the Mahalanobis plan became the basis of capitalist development through ‘state’s intervention’ in post independent India.

Era post 1990

By four decades of state support the private capital swelled enormously . the total assets of  the private sector in 1947 was merely some 357 crore rupees conjointly whichppp reached a whopping Rs 1.5 lac crore by 1990. Now the private players wanted the intervention of the state in the reverse order, i.e the state to shelve from infrastructure , social services and such other sectors. Thus came the ideological warfare on the public sector (which never was public in the genesis in the truest sense and was generated to compound the private capital in the country) from all corners. Only the working class parties were left to defend it. Thus came a new approach or phenomenon in development ; the PPP model. Internationally also the volume of private capital in infrastructure rose phenomenally. According to World Bank figures the private investment rose from negligible levels from mid 1980 to US$ 750 billion (Rs 37,500 crores )by 1997-98. Thus the PPP became the hallmark of private investment which actually is a step towards wholesale privatization.

PPP in Himachal Pradesh

The Built Operate transfer (BOT) is also a form of PPP. The hydro power projects like JP’s Wangtoo Karcham, Malana etc fall in this category. The road network’s presently under the Public Works department(PWD) and the National Highway Authority of India (NHAI), are also being put under the PPP. Under such private provisioning the service users will have to pay a ‘price’ for the services. This is a big departure from conventional norms where certain facilities are often provided free.

The severest hit is the health and education sector in the state . The state budget is a pointer towards it. Its direction can be gauged from the fact that overemphasis is laid on PPP. It states, quote, “ we will improve the diagnostic facilities in 10 hospitals by installing CT scans in the PPP mode”. Interestingly just recently the government has announced to open in 12 hospitals instead of 10 and tenders would be floated for the same. In the succeeding para i.e 67 of the budget further gives a direction, “government proposes to expedite opening of medical colleges in Mandi, Hamirpur, Sirmour and Una districts with Private sector participation” .

Another notification from the health secretary’s office stated, the private parties opening medical colleges in Hamirpur, Mandi and Una can attach the district government hospitals to their colleges as part of the green field projects under the PPP. In the tourism sector the PPP is the guideline. “himachali cuisine, handicrafts and culture…………., propose to establish a ‘Himachali Hat’ in the PPP mode”.

What has been the experiences?

1. At the international level this process of PPP drew criticisms as cases of failures started giving rise to a general uneasiness’ about the whole issue. East Asia witnessed the Thai governments seizure of an elevated private expressway in Bangkok1993 (Gaush, Jose-Luis (2004) Granting and Renegotiating Infrastructure concessions: doing it right, The World bank.). In Latin America the bankruptcy of roughly two dozen private toll roads in Mexico after the devaluation of Peso in late 1994; violent rioting that stopped planned water and electricity privatizations in Cochabamba, Bolivia (2000) and Arequipa, Peru (2002) the list is long.

2. In India cancellation of Enron’s Dabhol power plant in 1994 is one and a half decade old reality. Number of violent protests on the toll being charged at various highways has also increased significantly.

3. In HP the proposal of private medical colleges in the 3 districts under the PPP and attaching the government hospitals to them have seem wider protests with cross section of the society joining the cause. The PPP scheme in state transport buses was an absolute failure and had to be withdrawn.

Private sector works on profit incentives. No private investment would take place unless profitable remunerations are guaranteed.

The long drawn experience with the PPP shows that when a government gets into a contract with the private sector under the PPP, it often becomes binding on the government to compensate the private sector for market failure or for various reasons. “The experiences of low project allotment due to lower private responses in the case of NHDP project are the most glaring example. Then lobbying of the developers starts for changes in the tolling structure. the subsequent new tolling policy being contemplated by the state is a proof of the fact that the state once committed to PPP has very little options later but to yield to the private sectors demands” (Morris , Sebastin(2001) Issues in infrastructure development today: the interlink ages , Chapter 2, India Infrastructure report).

In conclusion, the hallmark of neo liberalism is privatization and liberalization. PPP is a step towards privatization. This is being done with a veneer for efficiency and performance of public utilities. But in fact this is a different form of state intervention for private players. They, under the garb of PPP demand tax concessions, permission to hike the charges or the tolls etc. thus putting enormous burden on the common people. Hence this paradigm shift under the PPP needs to be exposed thoroughly.

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2 Responses to "Himachal: PPP as a solution for efficiency and performance?"

  1. Bonjour   June 21, 2010 at 9:51 am

    PPP is the way for quality infrastructure development provided the loopholes of manupulation by PSP is tapped well on time and are inbuilt in the contract agreement being signed with state govts. Despite the above mentioned PPP failure projects by author, various Ports acroos Indian coast line, Airports like Delhi, Hyderabad, Bangalore etc. and perhaps, Golden Quadrilateral, are few major successes on PPP. Perhaps, i persoanlly feel, HP has not yet grown to handle PPP, considereing the diversity of projects and the wave of development changes it can bring in. Oberio's Wildflower is an example of failure of HP Govt., which is still not able to digest it.

    Reply
  2. Bonjour   June 21, 2010 at 9:51 am

    PPP is the way for quality infrastructure development provided the loopholes of manupulation by PSP is tapped well on time and are inbuilt in the contract agreement being signed with state govts. Despite the above mentioned PPP failure projects by author, various Ports acroos Indian coast line, Airports like Delhi, Hyderabad, Bangalore etc. and perhaps, Golden Quadrilateral, are few major successes on PPP. Perhaps, i persoanlly feel, HP has not yet grown to handle PPP, considereing the diversity of projects and the wave of development changes it can bring in. Oberio's Wildflower is an example of failure of HP Govt., which is still not able to digest it.

    Reply

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