Economic Highlights

New Delhi, 27 December 2014

Rlys & Postal Services

NEW ECONOMY JUNKING REFORM?

By Shivaji Sarkar

The economic agenda of Prime Minister Narendra Modi is getting clearer but it needs a holistic look. His averment on the Railways not being privatised along with the Economic Advisor’s pronouncement that the public sector would get a better role in ‘Make in India’ and development sounds reassuring to a country. This is in the backdrop where the private sector though prospering has lived in a cocoon for having more profits and subsidies (incentives).

Modi has to evolve a new economy. So far the economic debate veers round what is euphemistically called “poverty management programme” (PMP). The Prime Minister is obviously under pressure of looking for funds to pep up the economy. So an obsession with foreign investment or for that matter any kind of investment is but natural.

This is where the Government needs caution. The 23 years of Manmohanomics had emphasized on private corporate growth, shrinking Government, higher cost, tax on tax, cess on cess and toll on toll. A free moving country hit too many speed breakers. This resulted in a wider rich-poor gap and increased poverty. Slow growth and loss of jobs were natural.

Therefore the new Government has to have a new economic vision combining agriculture, farm land, growing urbanisation, road construction, low power-energy cost, industrialization and rising taxes. Today, VAT is to be replaced with GST. The VAT is 25 per cent of the price of a product. The proposed GST may be pegged around 27 per cent. This doesn’t hurt the industry. But it hurts the Government, the largest consumer, and the common man who bear the brunt of industrial profits.

The latest proposal of the Road Transport Ministry to increase road cess on petrol is a classic way of stating that Manmohonomics is not dead yet. Even now one pays Rs 2 per litre as cess which should have built up over Rs 60,000 crore corpus. The principle of fleecing the people as in Manmohanomics must not be the base of the new economy.

No country goes on building roads in perpetuity. “Connectivity” is meaningless if people cannot travel. When people are paying high cess, road tax, city toll – none of which are to be subsumed by GST – why should they pay toll on highways or expressways built with their money? It only fattens the pocket of the so-called developer, who thrives on public money.

As a first, the NDA Government should allow toll-free movement of all private vehicles, taxis and farm goods. Lowering of toll, if at all to be levied, for larger commercial vehicles also needs to be considered. The levy for any stretch should not exceed 30 months, the period which gives back the investment made by anyone. The 30-year lease to a concessionaire, mostly large business Houses, only makes the people and economy poorer.

In such a scenario, Modi’s renewed fancy for the Railways raises new hopes. It is nice to learn that it would be the central focus of development and would not be a minister-centric activity that has been the bane of Indian Railways.

Over the past many decades, each minister ended up using the Railways to “develop” his/her own constituencies, get political mileage and increase popularity by introducing trains that lose sheen no sooner another new minister took over.

The Prime Minister now wishes well for the Railways and the postal services -- to be developed as the crucial infrastructure. And, this is the right approach. However, it is also true that an ordinary post now does not reach its destination. Most of it goes into “raddi” (waste paper). The private courier does not take mail to hinterland, as it is not profitable. Sadly, a vital communication link built by the colonial rulers and thriving till about two decades ago is in a mess, jeopardizing growth. Postal communication and telephone costs are becoming exorbitant. It hurts the poor, farmers and those in remote rural areas.

The new Government would earn kudos if the credibility of the postal services and Indian Railways is brought back. Contrary to the views of “experts” none of the two need heavy investments. These only need to get back their old management culture that functioned efficiently enough. The new management concept that any improvement (often called reforms) needs investment – because it increases profits or commissions of some - is a misnomer.

The Railways despite many problems remains one of the better-managed institutions. Spick and span trains emanating from Varanasi such as Shiv Ganga Express or ViswaBharati fast passenger from Shantiniketan could be cited as instances of the capability of the Railways. These have the cleanest toilets and cheapest food!

True, the Railways functions against many odds. Its prioritisation of trains has to change. An older train-- may be a Janata, Lal Quila or Gomati-- has to be restored its original speed of the 1950s or 1970s, when these were introduced, if these cannot be speeded up. The reservation system has to improve and must do away with Tatkal, (Instant) as suggested by the parliamentary standing committee. The speed of goods train at 20 km an hour, as pointed out by the Comptroller and Auditor General, has to increase. These simple steps don’t cost a paisa. What is required is only a change in attitude of looking down upon heritage.

Yes, it needs Plan investment of Rs 63,000 crore for quadrupling of tracks and some other improvements. But if the Railways could be slightly put back in time to restore its basic management culture, upkeep and schedule, much of the cost could be reduced. 

Similar is the situation with the postal department. It needs infusion of manpower to keep it the most efficient communication network. It suffers from what could be termed as the “blueline bus” syndrome, which overtook the green Delhi Transport Corporation (DTC) buses. Unmistakably, the private courier services are sabotaging it. It requires minimum investment – not the huge amount that is often projected as prohibitive.

Modi has raised hopes. He has to fulfill the promises made by ensuring low-cost high- governance syndrome. The Union Budget is not far away. However, it is difficult to do all things in one go. If he can start with the Railways and postal services and branch out to other areas for improving these, no reform is needed. Yet, it would still be a new beginning. The nation can have a new economy if the public sector is allowed to take centre stage. The private sector can always help and coexist. --- INFA

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