Core sector subsidies should go — Montek

April 8: Large infrastructure projects would be viable in the country only if the insufficient user charge system and irrational subsidie...

April 8: Large infrastructure projects would be viable in the country only if the insufficient user charge system and irrational subsidies are done away with, Planning Commission member, Montek Singh Ahluwalia said here today.

“The shift from public sector monopolies to competitive private participation in capital intensive infrastructure industries should be complemented by the adoption of reasonable tariff structure,” Ahluwalia said while addressing a conference jointly organised by the Associated Chambers of Commerce and Industry (Assocham) and the Bombay Chamber of Commerce and Industry (BCCI).

The critical need now, warned Ahluwalia is to get out of the inefficient user charge syndrome. Not doing so would only leave the government with the option of bringing in the private sector on a sweetheart deal, leaving the government and the natural monopolies more broke than ever before.

As Ahluwalia sees it, there is really no choice. Consumers will really have to choose between paying for services, orvery poor quality services. Each industry must have tariff regimes structured to sustain competitive suppliers as well as a reasonable level of subsidization for users, he said.

Among his suggestions was immediate reform of user tariff and transferring power from ministries to regulatory authorities. The latter, he warned, would go through a phase where it would be inundated by demands from various interests groups, but this, Ahluwalia feels is a process that must be endured if it is to be a stable transition. He said, "when a change is made, you never get it right in the first go."

All infrastructure segments need to be brought under independent regulatory bodies which would ensure protection of consumer interests as well as help maintain healthy competition, he said.

The Telecom Regulatory Authority of India (TRAI) is an example of the fact that independent regulatory bodies can effect a re-balancing of tariffs, Ahluwalia added.

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“It is a wrong perception that nothing happening in the infrastructuresector. In the last few years, private airlines have captured 35 per cent of the market, private power producers will soon have almost 5000 mw under production and private telephone companies will change the industry in the next couple of years,” Ahluwalia said.

Deepak Parekh, chairman and managing director, IDFC, speaking on the Vision for the Future was also optimistic. He pointed out that people were willing to pay for better services. There was no better indication than the fact that there has been no resistance to the diesel and petrol price hike to create the road fund. Like Ahluwalia he mentioned pricing as a critical factor for the entry of the private sector.

However, Parekh believes that there will be high demand for services which are rationed and a lower demand for services which have so far been subsidised (for instance, people may be consuming more water because it comes practically free).