Farmers, workers and regulators

The government's clumsy handling to TRAI has fortunately come in for near unanimous criticism. It's bad enough for the CSO to tell us tha...

The government8217;s clumsy handling to TRAI has fortunately come in for near unanimous criticism. It8217;s bad enough for the CSO to tell us that infrastructure grew only by 1.6 percent from April 8217;98 to February 8217;99 the worst performance in the last two and a half decades, in the same week a government which had by its own admission toted a revenue deficit of over Rs. 14000 crore, advertised in all our newspapers in all our languages that its infrastructure ministries did very well, at public expense, and not content with that, the prospects of investment are jeopardised by badgering a legally set up authority for doing its job in the best manner it thought fit. What have we done to deserve all this?

All legislations have a clause to save God, Love, Mother and Country in which the government can use its emergency powers to do whatever it wants, but civilised societies run by normal rules and not the exceptions and if exceptions are used normally, where will we go if, Lord forbid, there is a real emergency? Thisof course does not mean that the regulators have absolute powers. Frankly if I was TRAI, I would have worked very differently but I am not TRAI. Now if you are not happy with TRAI, you have the right to appeal against their decision. Finally there is the usual legal recourse. It is not really necessary to erode the institution and confidence in fair play, when other options existed. It needs strength to make institutions work and to play the game fairly. It is easy to flex muscles and fix the adversary, he can only be correct.

I go to a chamber of commerce to speak. So-meone begins by saying that we don8217;t have to pay more for a phone call. He is chastised by everybody else. By now everybody knows that the free lunch is a mirage. It8217;s a game political persons play. They decide that if the increase in phone rates is unfair, it should be appealed against. They know that if a shortrun political fix is settled for, it will mean a decline in service. The country has seen through the game of providing no or lowservice at low prices.The sector has to work on the principle of cost recovery based on efficiency norms. There is no earthly reason for the sector as a whole to be subsidised. It is TRAI8217;s job to try and see this through. Regulation is required. Initial capital and infrastructure costs are high. Wiring, satellite access and digital technologies have initial costs. Once the systems are in position, efficiency unit operating costs are low.

Technological obsolescence is high. One of my friends Ricardo Pettrella used the expression that each new technology is quickly building on the 8220;corpses of earlier methods8221;. The regulation and policy job is complex. My personal view is that TRAI should not have ignored the considerable evidence for cross-subsidising rural telephony. Measurable externalities cannot be ignored in a regulatory exercise. When the first CDOT rural exchange became operational, an independent evaluation gave measures of foregone costs saved like reduction of turnaround time for trucks, betterutilisation of hospital beds in referral clinics and so on. Regulators have to worry about such issues. The structure provided for such issues to be brought up. Instead they were bulldozed.

If the government wants to dispense with the recommendations of autonomous regulators without as much as a by your leave why spend public money on setting them up. The appropriate method would have been to engage the authority. If the government will by itself decide the extent of cross-subsidisation there is no need for regulators. In fact we give the wrong message to investors of a confused policy regime which is suicidal for confidence.

In a village a telephone is not a convenience8221;, or a conversation aid, but it is an aid to production. You contact the fertiliser depot, the taluka agro shop or the tempo. In the last few weeks, outside the affluent North, people were really angry at the bijlee shortages. In the West and the South, rabi entirely depends on irrigation and pumpsets need energy. Thermal plants aretripping. Energy deficits are higher. As the Economic Survey shows PLF of thermal plants this year has gone down. Nobody listens when you tell them that in the last two years, and particularly this year, private investors are coming. You have to manage the system better in addition to giving lollypops to investors. By keeping the public sector to losses in village phones and giving strong incentives to the private sector to get rich by staying out of village telephony, have we kickstarted the sickness of village phones on top of rural electricity?

The notion that the farmer won8217;t pay for any service is wrong. He won8217;t pay for nonexistent service. Energy growth this year is 4.5 percent, down from 7 percent last year. When energy deficits rose the man at the end of the last pole suffers the most. Generally he is a kisan. Amulya Reddy showed through careful measurements that a substantial part of rural distribution loss is pilferage by industry and others to take advantage of rural rates. Writing today fromrural Ahmedabad, I see details within a hundred kilometers of kisans paying the equivalent of four rupees a unit for the diesel equivalent of pumping costs; anyway the private company distributing electricity charges a handsome rate and in the urbanising area they serve, farmers pay. Farmers didn8217;t complain when some states charged high rates for assured power and quick connections, but were angry when the promises of delivery were not kept. Lets engage them in reform.