The Hindu Business Line : PURA by partnership

The Centre's new model of PURA is more than a plan for "Providing Urban Amenities in Rural Areas" but is a "Partnership of entrepreneurs, government administrators and the local populace for Urban Amenities within Rural Ambience". In the present scheme of PURA, the Government does not proceed alone but lets others have co-ownership. Thus the Government should not fight shy of roping in private investors or trying the profit-seeking model, says P. V. Indiresan.

EVER since he took over, the President, Dr A. P. J. Abdul Kalam, has been propagating his Vision 2020 for making the country a developed nation. In particular, he has repeatedly advocated, on every conceivable occasion, the implementation of the scheme PURA — Providing Urban amenities in Rural Areas.

PURA is a scheme to enhance physical, knowledge, economic, societal and electronic connectivities, of the rural areas starting with the construction of ring roads to link a loop of villages. It is to the credit of Dr Kalam's persistence, and to his persuasive powers, that the Union Cabinet has now approved a proposal for implementing PURA, not as an experiment but nationwide.

The scheme approved by the Cabinet envisages development of over 4,000 rural clusters located in backward areas. A sum of Rs 3 crore has been allotted per cluster; over Rs 12,000 crore in all. That is a huge sum, but from another perspective, it is not large at all: The Tenth Plan envisages an investment of about Rs 20,000 per capita. Typically, rural development blocks have a population of about 1,00,000. Then, on a per capita basis, each block should get an investment of Rs 200 crore, nothing less. Not all that investment will be from the Central or State governments; mainly, it will come from the private sector. Even then, the proposed expenditure of Rs 3 crore is minuscule compared to what urban areas of same size population enjoy.

In confining the PURA scheme to strictly backward areas, the Government has evidently been motivated by political and humanitarian concerns. Such areas are too poor to make any contribution, or manage on their own. Hence, the Government had no option but to make PURA a grant-in-aid scheme to be administered by the District Collector. Unfortunately, district collectors are already overburdened by hundreds of other chores; they cannot pay the amount of attention PURA needs. District Collectors are also liable to be transferred at short notice, and hence, continuity is likely to be a frequent casualty.

Just as it is desirable to bridge the gap between backward rural areas and relatively developed ones, it is equally desirable to bridge the gap between cities and the not-so-backward villages in their vicinity. In the latter case, PURA should aim to restrain rural-urban migration by maximising educated employment. That will help cities too by decongesting them and removing the slums. Creating jobs for educated youth is expensive. Investments will have to be comparable to urban ones, around Rs 100 crore or more per rural block. Then, grant-in-aid schemes will not suffice; private investment will be critical. Such an advanced PURA can be sustained only as a bankable, profit-making business venture. It will usefully complement the barebones scheme that the Planning Commission has initiated, and help those villages that have been left out.

However, there are three major impediments to be overcome. One, businessmen are hard-headed, and will not invest in the rural areas in the hope of long-term benefits; they like to see immediate profit. Two, farmers often get greedy; they demand excessive compensation for the land they surrender, and thereby destroy the only USP they have. Three, the basic problem of rural poverty is not that of inadequate supply, but one of poor demand. It is not difficult to organise production in rural areas, but villagers are too poor to buy what can be produced in villages.

The problem of poor demand can be solved only when high-wage employees of the organised sector shift to reside in the rural areas. In all developed countries, rich people live in far-off suburbs and commute to the city; in India, rich employees reside in cities like Bangalore and commute to industrial estates like Hosur. For India to shine as a developed country this anomaly should be rectified; rich people should be induced to reside in villages.

Private investment will come only where local farmers are hospitable, and not where their demands are excessive. Such excesses can be restricted by forcing farmers to compete among themselves to get a PURA. Towards that end, several possibilities for the ring road may first be identified, and PURA located wherever the farmers offer the most economical package. Then, there will be little incentive for farmers to hike up prices. However, farmers should be guaranteed inflation-protected return substantially higher than what they earn at present; they should, on no account, be exploited.

Inducing businesses to invest in rural areas, even in those that are close to cities, is a tough challenge. The following steps may be tried for that purpose:

An autonomous corporation, which we may describe as Rurbaniser, having equity from government, local administration and private enterprise, identifies a selection of ring road alignments in the vicinity of an expanding city and propose the same to local farmers with a proposal that they offer their land for development on long lease of, say, 99 years. (Getting land on lease instead of by purchase minimises initial capital outlay and risk too.) After identifying the best offer received from the farmers, Rurbanisers secure the support of the state government to build the ring road (with scope for future widening) using central funds. The State government's help is also sought for zoning the space on either side of the ring road, and for the simplification of real estate transactions.

Once support from local farmers and the state government is assured, the Rurbaniser approaches venture capitalists to underwrite the interest costs of connectivity for the gestation period (around three years).

With funds for connectivity in place, the Rurbaniser holds a road show for prospective employers in the organised sector inviting them to shift any expansion of their business from the crowded city to PURA in return for lower prices and superior environment.

However, employers should agree to house their employees inside PURA.

Banks help by offering low-cost credit (a) to venture capitalists for developing connectivity, (b) to employers for starting their business, and (c) to employees to construct their houses.

The Centre minimises investment risk by sharing interest costs during the gestation period.

This modified PURA will be a useful supplement to the model of PURA that the government has launched. This model of PURA is more than a plan for "Providing Urban Amenities in Rural Areas"; it is a "Partnership of entrepreneurs, government administrators and the local populace for Urban Amenities within Rural Ambience". In contrast, in the present scheme of PURA, the government proceeds alone; it does not let others have co-ownership.

Connectivity of PURA is its driving force, and organised sector employment is the primary force multiplier. The goods and services high-wage employees consume create a secondary force multiplier that will multiply the employment created by the initial investment.

That is, villages are transformed in two steps: One, organised business creates high-wage educated employment by producing goods and services for sale outside PURA; two, the local goods and services high-wage employees consume multiplies such employment locally.

With both steps in place, PURA is expected to become commercially profitable, self-supporting and as regenerative as cities are. This, form of PURA is export-oriented whereas conventional methods of rural development mostly aim at import-substitution. Thus, this advanced PURA will enjoy all the benefits that export trade confers.

This modified scheme casts least burden on the cash-strapped State and Central governments, and gives maximum scope for private initiative. In particular, the State government's responsibility is confined to help in acquiring enough land for development and in zoning it. It would be nice if State governments minimise also the obstructionism of their procedures.

However, one stipulation is crucial: Businesses should organise housing for all their employees, and get them to reside inside PURA and not let them to commute from outside.

Only then will PURA grow rapidly, and not languish the way most satellite towns have. The driving force of connectivity is not enough; force multiplier of commercial investment too is limited in scope. Only when high-wage employees start residing inside PURA, and create a market for locally produced goods and services, will PURA grow rapidly, its development will be comprehensive, and investment in it profitable.

With the induction of both organised businesses and their employees, PURA will see not marginal growth but total transformation, a transformation that will create educated employment within rural areas, curb rural-urban migration and prevent the satanic growth of slum-infested cities. Admittedly, this kind of PURA will succeed best when located not far from fast expanding cities. That is quite appropriate because, such villages need to grow as much as those in backward areas.

Grant-in-aid schemes offer little scope for rapid growth particularly when the government is as cash strapped as it is. For profit making schemes, the sky is the limit. That is why, the government should not fight shy of roping in private investors and try the profit-seeking model suggested here.Let us hope that this alternative Vision will materialise, and make our villages look like those in Europe.

(The author is former Director, IIT Madras. He can be contacted at indresan@vsnl.com)

This is 116th in the Vision 2020 series. The previous article was published on January 26.

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