With abuse, intimidation and slander uncontestedly setting the limits of public discourse, debates on economic policy are giving way to personal slanging matches. This is unfortunate since there was much force in the PM’s statement that the reform process, now almost two decades old, is slow but sure. It is also reassuring that the description some of us gave of India as an elephant is still considered relevant: that Ganesha is on the move. I once described Indian reform as a process where you announce a policy, duck as the flak starts flying and then consolidate. Two examples of some of the most significant reforms in the recent past will illustrate. They are the bill which allows private ownership of electricity transmission and the Central Electricity Regulatory Commission (CERC). When I was power minister, the transmission bill was facing a great deal of flak. The parliamentary committee, under Jagmohan and supported by us, met the arguments head on while accepting some of the criticism. This carried conviction in showing that private investment in transmission did not mean privatisation of transmission. The legislation was passed unanimously. As far as the CERC Bill was concerned, my predecessor was not able to introduce it in Parliament. With considerable pleading on its importance, I did introduce it. I believe that it was a mistake by my successor to force it through with an ordinance. Once the flak started, he gave in on the two most critical aspects — namely the mandatory nature of the price rulings and the requirement that the rural power price must reach a minimum in a phased manner and that was a great setback to power reform. A less ordinance raj approach could have saved both advances. Debate and an element of give and take is a sign of strength in an open society. It is, however, useful to draw the lines of an argument. The givens in a discussion on investment are, in fact, clear. First, the government has no business in the services and generally consumer goods sectors. Large investments are locked up and the Tenth Plan wants the resources, but more important is consumer welfare and the need to develop a competitive service and industrial economy. Hotels, airlines, communications, consumer and financial services are obvious targets of disinvestment. Exceptions may be necessary sometimes — as, for example, rural credit or village IT services, but here also strategic partnerships, between coops, NGOs and even corporates may be possible. Transparency and transitional rules may be needed. In some areas the public sector will be a necessity. National security, discriminatory technology access regimes and non-renewable resource constraints may dictate this. These should be strictly defined. Since costs are high, strategic considerations change and, anyway, there are out-sourcing possibilities in a strategic framework. Space, nuclear power, some aspects of biotechnology are candidates. But the core issue remains. The public sector cannot be wished away. The difficult area is large enterprises where the public sector is doing well. As, for example, central power producers, transmitters, some fertiliser companies and some heavy industries. Of course, some champions of yesterday are sick today like steel, non-ferrous metals or machine tools. Again in some of these industries, behemoths are being replaced by more flexible groups globally. Partnerships and strategic arrangements on technology, commercial deals and even capital may be the answer in some cases and sale in others. There are no universal rules here. The argument that the public sector cannot ever be run well is an red herring. Each case needs to be reasoned out. I once described reform as a process where you announce a policy, duck and then consolidate There is the need to make the process more socially acceptable. When the Germans had offered a special deal to India in the power sector, I set up an eminent persons group of exceptional Indians who would help the power ministry negotiate these deals. Parliament accepted the arrangement which ran into thousands of crores. The privatisation method is a genuinely difficult problem. I personally support the strategic sale route adopted but a professional economist cannot rule out other more market determined methods. But there is no denying that privatisation has to be a part of a reform process. Also there has to be coordination with trade and monetary policy. Finally, we need a road map of privatisation. Otherwise, in the name of privatisation, all investment, modernisation and PSU reform will be stopped, which is a real disaster for some of them will never be privatised and others most likely not in the next few years. It is not wise to hang a dog by giving it a bad name. If the state can’t do this thinking, other think tanks should. The country deserves a good policy debate as a basis for action.
