saywhatyouneedtosay: Secret of Success for Common Wealth

I do not intend to talk of the secrets of success of the athletes at the Commonwealth Games. Nor will I talk of the secrets of the organizing committee of CWG in successfully recruiting langurs for security. Neither will I attempt to mimic the Shiv Khera and his splendid methods to instill success. But I will quote here a simple yet powerful quote

“Start early and begin raising the bar throughout the day.”

-Bruce Jenner (American Athlete, b.1949)

And try and see where it will get us in infrastructure, a common wealth, development .

We all know where the discussion on raising tariff ends when we talk of privatization or PPP. And it is this end that which is quite often discussed in class, of which I wish to elaborate on, today.

The idea is clear, the government or the agency that was responsible for handling the specific service, say water supply, prior to privatization or PPP, will have to begin the process of raising the tariffs before the powers and responsibilities are transferred to the partner (pvt sector).

Let us question this accepted wisdom and let’s begin by asking “Why?” and this question appears first in the form “Why PPP?” when we talk of basic services like water. The answer is in the lines of, government inability in operating the service; which almost always is on account of lack of revenue which in turn is on account of incredibly low tariff. Of course the garnishes like corruption and higher employment cost in lower wage category over industry average, is ever present, when we talk of any government but these are minor issues; after all, governments today have anti-corruption cells and if government agencies can contract hire consultants I see no reason why they can’t contract hire other category of employees and pay them suitably.

So the real reason is coming to light, lack of revenue on account of low tariff is why the government can’t run the service. And low tariff stays so long as the government runs the show; else if the tariff is raised government won’t stay. Political will is perhaps the only reason why the tariffs are remaining low. So our nostrum of starting early and raising tariff is not going to work.

And if that does not work, then I see a lot of reasons for the PPP to not work. The unrest among the masses over anti-private sentiments for essential services may get aggravated by the sudden rise in charges once the private sector takes over.

So, I believe, our cure-all should not be to start early, as it might never work; but to start low and keep rising. And to start with a low tariff, the government should subsidize the private sector heavily and pay to cover the additional cost over and above that which is recoverable from tariff. This subsidy should be gradually reduced over the years and the tariff be raised to compensate. Funny, isn’t it, when you think of it, I am asking the government to subsidize my water with my own tax money. For all you know, I might not know about this and things might just work out fine. Besides the cost I will have to pay for a screwed up PPP or poor water supply may match with/ or fall below the losses through tax inefficiency.

We still have not answered “why PPP?” yet; but as I see it

“Once the people begin to reason, all is lost”

- Voltaire

There is no need for PPP; but things seldom change spontaneously in the world and PPP might be the right reason for the government to make a little change. The government could have very well decided to raise taxes and made things better. Ah, but think of all the pockets that would remain empty.

So, does staring early ever work? Well in the case of the Chad’s Oil Troubles, I believe that things would have been better if a significant portion of the agreed investments were made by the government for public welfare in advance, well before operations began. However the question remains as to who will give the initial funding. Maybe the International Credit Agencies (ICA) could help; with the oil as security. They could satisfy their self interest in getting the companies of the country which they represent to develop Chad and its oil; and Chad in turn may develop. Later these loans could be repaid when the revenue, from the oil, starts flowing; by this way the amount of money with the government to procure arms would be limited, which is vital as we saw.

ICAs have a reason to do this; Chad can be made to this (Pressure from UN and the like) and so this has a reason to work. So take my word, Start Early for the Commonwealth.