The Hindu Business Line : Non-governmental role models are alternatives

The content of economic and financial reforms is essentially to sell or hand over businesses owned by Government to the private sector. Thereby you get rid of the sloth and inefficiency of the public sector.

In the new paradigm, the privatisation programme extends to utilities, public and social services. Thus the reformers would have electricity generation and supply in the private sector. Lately, there is talk of privatising the ownership and provision of water resources as well.

Health care and education are increasingly going into private hands. At this rate, Governments will soon have nothing to do except twiddle thumbs and swat flies.

Is it what the people want? More important, in our context, is it a desirable goal?

What seems to be sadly lacking in our policy and understanding is distinguishing between competition and efficiency-inherent situations, which will benefit consumers and others. Markets for consumer goods are invariably extremely competitive with little scope for monopolistic behaviour. Studies show that the prices of soft and durable goods have only fallen in real terms over the years.

Obviously, the Government has no business running hotels and making bread (not that the MNC FMCG which bought Modern Bread has done any better - which seems to prove that the belief that anything that Government can do, the private sector can do better is a myth).

Sectors and services where ownership is private but markets, cost compensation and returns are guaranteed by Governments, as in utilities and public services, make a mockery of reforms. Such contracts have done nothing to promote competition and efficiency while causing significant damage to the finances of Governments. Electricity transmission and distribution is a natural monopoly — you cannot have multiple physical delivery channels because of the capital intensity. The challenge is to find innovative solutions in such environments. We are so far hardly up to the task.

The recent Mumbai rain disaster suggests the private sector is not necessarily consumer - friendly in times of dire emergency and need. While the Government - owned insurance companies promptly settled claims, the private insurers dragged their feet. The story also goes that the State Electricity Board restored power much faster than its private counterparts.

To the reformers, one can only point to institutions such as the Cancer Institute, VHS, Sankara Nethralaya and Arvind Eye Hospital. They prove that first-class health services are not at odds with financial viability. The success of Amul shows how even the disdained co-operative can take on and beat MNCs in their own turf. We need more such role models in key sectors of economic and other activities instead of a mindless pursuit of privatisation.

Even a market economy should appeal to the higher instincts of human beings.

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