Public RelationsT N Ninan: Failing capitalism
T N Ninan / New Delhi August 22, 2009, 0:58 IST
- T N Ninan: Pointing fingers">T N Ninan: Pointing fingers - T N Ninan: VIPs & development">T N Ninan: VIPs & development - T N Ninan: Auction mining rights">T N Ninan: Auction mining rights - A roof over one"s head - V V: Galbraith on unfettered capitalism">V V: Galbraith on unfettered capitalism - V V: Marx - Prophet of capitalism">V V: Marx - Prophet of capitalism
The collapse of a part of the new airport terminal in Delhi, coming quickly after the collapse of a pillar put up for the Delhi metro system, is disastrous PR for the country in every context imaginable (eg Indians can’t build anything right, compared to the Chinese). And even though the Delhi metro is a public sector project, contractors like Gammon who did the work were from the private sector. That is why the disaster at the Delhi airport terminal is bad news for the idea of privatisation and the notion that the private sector brings with it superior standards. Add the many charges being hurled back and forth over Reliance’s Krishna-Godavari gas (the company had no business signing supply contracts without government permission, the company is reneging on a price contract with a public sector power company, the company is inflating capital expenditure to deny returns to the government, etc), and the private sector’s role in oil-gas exploration/production will have already come under a cloud.
The way in which privatisation is being done is part of the problem. The Delhi airport case has its own history, with the project being bagged by GMR on the basis of an unsustainable bid (to give the government 46 per cent of all revenue). When that realisation hit home, the terms were amended to allow GMR to charge passengers an airport fee that the initial contract did not provide for—so the passenger was now paying for a defective/unrealistic bid. Also in Delhi, the privatisation of electricity distribution won general approval despite some initial controversies, because everyone could see that efficiency levels were improving—as a result of which tariffs have been held steady for quite a few years. To his credit, the power regulator in the capital has repeatedly rejected the power companies’ demands for tariff hikes, and in one case exposed the bid by BSES to get away with inflated purchase costs, achieved through intra-group transfer pricing.
That is a case where the sector regulator did his work, but there is no shortage of cases where regulators in the different fields where they have been appointed (telecom, electricity, ports, etc) have handed out manifestly indefensible decisions—suggestive in at least some cases of regulatory capture. In a country where almost all of the political class and large parts of the general population are still fundamentally suspicious of market-oriented policies, all it takes is for such examples to multiply and the whole idea of a greater role for the private sector comes under a cloud.
Time was when the poster-boys of a new Indian capitalism, post-1991, were NR Narayana Murthy, Azim Premji and others like them, admired not just for their business success and transparent integrity but also for their modest lifestyles. There were others too who became icons, like Parvinder Singh of Ranbaxy for his research-driven drive to take his company to new heights. Firms like Suzlon and Moser Baer were seen as world leaders in their fields. Now, some of the sheen has worn off those names. Parvinder Singh’s sons have sold Ranbaxy to the Japanese after the company ran into regulatory issues, Suzlon has run into major quality problems, and Moser Baer faces a massive tax suit. Then there is Satyam.
Meanwhile, the old talk of crony capitalism has started giving way to comparisons with Russia’s oligarchs—suggesting an alarming change of roles where it is not the politician who does favours for preferred businessmen, but businessmen who control the government and what it does. It used to be said that the communists failed communism. It should not become the case that India’s capitalists fail the market system.