The wages of dereliction

This government has used the global economic crisis to cover up its own mismanagement

Written by Arun Shourie | Published: February 27, 2009 2:38 am

Extraordinary economic circumstances merit extraordinary measures,” declares the finance minister in his new Budget,the last one of this government. “Now is the time to take such measures.” And then proceeds not to take them at all!

“But it is just an interim budget,” apologists suddenly remember. “He has stuck to convention.” I must confess that I was not in the least surprised at the readiness with which so many commentators — both from industry and from media — swallowed and regurgitated this rationalisation.

Is there a Constitutional convention — to say nothing of any other kind — that this government has let stand in the way of what it has wanted done? Is there an agency or office it has hesitated to use as an instrument? The governor’s office? The CBI? How come this sudden fidelity to the “convention” of interim budgets? And how come,given that fidelity,the “convention” has not prevented it from budgeting an additional expenditure of Rs. one lakh forty thousand crore? And just see what has happened since the budget was presented: the share market plunged further down; everyone began grumbling — the government has not given the stimulus that was expected and that is absolutely necessary; as a consequence within a week of not including the stimulus package out of respect for convention,Pranab Mukherjee declares that such a package will be announced if it is needed. Presumably the convention won’t come in the way as it did a week ago!

It is not convention that has kept the government from taking the necessary measures. It is knowledge. Even this government,which has all along refused to recognise how serious is the crisis in which its mismanagement has pushed the country’s economy,has now been awakened — by job losses across the country,by plummeting production indices,by mounting defaults and the consequential pressure on banks — that the economy has been brought to an abyss. As a result,stern measures are now unavoidable. And for these,this non-government hasn’t got the gumption. That knowledge is the reason for its doing nothing,plus the fact,as we shall soon see,that its financial profligacy has left little headroom for the kind of fiscal measures that are required. Not any sudden devotion to convention.

The following sentences show up another trait — using the international economic crisis to cover up the results of its own mismanagement. “Our government decided to relax the FRBM targets,in order to provide much needed demand boost to counter the situation created by the global financial meltdown.”

Really? Is that the reason? Recall budgets of the preceding two years. In his budget speech for 2007-08,Chidambaram was all for the targets that had been fixed under the fiscal responsibility legislation. He told Parliament,“Thanks to the fiscal responsibility legislations,the Central government and the state governments have regained lost fiscal ground… So far as the Central government is concerned,the fiscal consolidation is proceeding according to the FRBM Act. Based on the revised estimates,I am happy to report that the revenue deficit for the current year will be 2.0 per cent (against a BE of 2.1 per cent) and the fiscal deficit will be 3.7 per cent (against a BE of 3.8 per cent).”

In his Budget Speech for 2008-09,delivered in February 2008,Chidambaram declared that the government was pushing back the date by which the fiscal targets under the FRBM legislation would be met. What reason did he give? The “international economic meltdown”? On the contrary,the government had shut its eyes completely to what had commenced. It was insisting,“Our fundamentals are strong… The Indian economy is effectively decoupled” — refrains that were echoed by several in the media and industry. The reason that Chidambram gave was entirely homegrown. “It is widely acknowledged that the fiscal position of the country has improved tremendously,” he said to cheers from the treasury benches. “I am happy to report that the revenue deficit for the current year will be 1.4 per cent (against a BE of 1.5 per cent) and the fiscal deficit will be 3.1 per cent (against a BE of 3.3 per cent). Further progress will be made in 2008-09” — I will come to this progress in a moment,and we shall see how the projected progress was based on cooked up figures. For the moment I am on the requirements of FRBM Act.  “honourable members will note that not only will I achieve the target for fiscal deficit under the FRBM Act,I have also left myself some headroom. In the case of revenue deficit,I will meet the target of annual reduction of 0.5 per cent,” Chidambaram said. “However,because of the conscious shift in expenditure in favour of health,education and the social sector,we may need one more year to eliminate the revenue deficit. In my view,this is an entirely acceptable deferment.”

In a word,the deficit targets had already been set aside in the last budget itself. And what was the reason that was given for doing so? “The conscious shift in expenditure in favour of health,education and the social sector.” Anything to do with the “international economic meltdown”? And yet,this year’s interim budget speech makes out (i) as if fulfillment of the FRBM legislation is being deferred only now,and that (ii) this is being done to counter the effects of the global economic meltdown!

A typical ruse,one to which we shall return. For the moment,let us assess the claims the government makes this time round against the standard that Chidambaram and Manmohan Singh have themselves set repeatedly — outcomes,not allocations.

As the treasury benches applauded his announcements of higher outlays in the 2005-06 budget,Chidambram said,“At the same time,I must caution that outlays do not necessarily mean outcomes. The people of the country are concerned with outcomes. The prime minister has repeatedly emphasised the need to improve the quality of implementation and enhance the efficiency and accountability of the delivery system.”

To ensure this,Chidambaram said,“During the course of the year,together with the planning commission,we shall put in place a mechanism to measure the development outcomes of all major programmes. We shall also ensure that programmes and schemes are not allowed to continue indefinitely from one plan period to the next without an independent and in-depth evaluation.”

Two years later,nothing had improved. Chidambaram again returned to the theme: in the 2007-08 budget,he told Parliament,“There is no dearth of schemes,there is no dearth of funds. What needs to be done is to deliver the intended outcomes” — cheerleaders applauded as if,as the minister had said this,the intended outcomes had already been delivered!

Manmohan Singh declared the resolve time and again. “The single biggest concern of our government,” he declared,is to ensure “tangible outcomes.” We have laid “the architecture for inclusive growth,” its “basic elements” are now fully in place,he told the planning commission members as they met for approving the 11th plan. “This is a matter of satisfaction and indeed of pride. For the next few years,the emphasis must be on ensuring that these programmes deliver what they promise.”

Let us start,therefore,with the item in regard to which last year’s budget proclaimed,“action completed”. The prime minister had announced a “special package” for making Mumbai into an international financial centre. For two years,Congressmen in Maharashtra went to town about this. In the document,implementation of budget announcements,2007-2008,that Chidambaram gave out with his budget last year “to,” as he said in his foreword,“promote transparency and accountability,” for this item,Chidambaram declared,“action completed”. As Mumbai was,and remains as far from or as near becoming an international financial centre as it has ever been,how had “action” been “completed”? The report of the expert committee on this subject has been released,he said. It has also been placed on the ministry’s website. Furthermore,a Powerpoint presentation has been made to the prime minister. And so,“action” on the plan to make Mumbai an international financial centre has been “completed”!

He did not say that,of the Rs. 1,000 crore that the prime minister had pledged for this purpose,till July 2007,only Rs. 16 crore and 16 lakh had been released. Since then,my colleague,Kirit Somaya’s inquiries reveal,not one more paisa has been released. The item no longer figures in this year’s budget documents. And why should it? After all,action had already been completed in the preceding document!

We see exactly the same sequence in regard to the promise that was made in the aftermath of the devastating flood that engulfed Mumbai on 26 July 2005. Both Manmohan Singh and Sonia Gandhi announced with much fanfare a “special package” of Rs. 1260 crore to “rejuvenate” the Mithi river. Since then,the Maharashtra government has been told that it must do what it can on its own; the Centre is not going to give a single paisa.

An even larger “special package” was announced to reconstruct the Dharavi slum. This too was trumpeted up and down Mumbai and at every conference on urban infrastructure. The slum is exactly as it was in 2004 — not one single shed of the promised reconstruction and development has gone up. Seeing that absolutely nothing is forthcoming,the Maharashtra government has stopped making even the usual announcements,“We shall start as soon as the plans are approved.” Like the government,those who bid to execute the project just make excuses these days for not even commencing work.

Again,as part of its commitment to improve our crumbling urban infrastructure,the government put it out that it will finance the Metro project of Mumbai as it has done,say,in Delhi. Work was commenced on this understanding. Since then,it has told the Maharashtra government that it will not give a single paisa,that the Maharashtra government must do what it can on its own by roping in private partners. As a result,the first phase has already slowed down. Bids were invited for the second phase in November 2008. The final date had to be extended thrice. Not one bid has been received.

And this outcome is typical across a range of projects. The record of the Railways is much hyped because of the personal showmanship of Lalu Yadav. In fact,the Freight Corridor project,which was discussed during Atal Behari Vajpayee’s visit to Japan several years ago,has become in Japan,as I learnt to my discomfiture two weeks ago,a symbol of the inability of India to move swiftly on projects. There was to be a joint venture for producing electric and diesel locomotives. The bid documents have been hurtling to and fro between offices for two and a half years.

Outcomes? Is that what the prime minister and Chidambaram said were important?

National Highways: The project completion rate,The Indian Express reports,fell from 81 per cent in 2004-05 to 56 per cent in 2007-08. It has fallen even lower since. The rate at which projects are being awarded under this flagship programme fell from 70 per cent in 2005-06 to an abysmal 17 per cent in 2007-08. The miracle is that,on the other side,throughout this period the National Highways Authority has been successfully spending almost the entire amount given to it! The solution to such delays has been typical: another committee was set up to monitor implementation of infrastructure projects. It is headed by the prime minister himself. The net result is evident from another review — this one done by the planning commission — the NHAI is now taking 20 months to award a contract as against the 5 months that have been specified.

Surely the global meltdown is not to blame for this stretching out. The causes are the talk of government corridors. The UPA government announced that the minimum tenure of an officer appointed as the chairman of NHAI shall be two years. The current chairman is the fifth chairman in the last two years!

There have been other changes also,they tell the tale just as well. To ensure expeditious implementation,the NDA government had decided that,while government shall decide the programme that is to be implemented,contracts will be awarded by the NHAI. To further ensure both — adequate scrutiny as well as expeditious decisions — the NHAI board was elevated to secretary-level officers. The UPA government has changed this: no,it has decided,contracts shall be given out by the “government”,and not the NHAI.

The net result has been predictable. Sixty packages of highway stretches were offered recently for bids. For 43 of these,no bid at all was received. Of the 17 for which bids were received,in six there was only one bidder — as a result,none of these six contracts can now be finalised without the approval of the cabinet. In each of the remaining 11,bidders have sought higher grants — up to 35 per cent higher than had been provided. Such is the credibility of the process by now.

(To be continued)

The writer is a BJP MP in the Rajya Sabha

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