Wednesday, May 28, 2008

An Extreme Case is not an Exception

Arun Shourie

That an area as large as Bihar should sink into quicksand is alarming enough by itself. But one of our problems is that collapse in Bihar no longer shakes us: "O, that is Bihar," we shrug.

Bihar is an extreme case, yes. But the point about an extreme case is that it is but one end of a continuum. Bihar is far from being an exception. Even the most prosperous states today exhibit the same symptoms. Not just Bihar, but Punjab too is having difficulty paying just the salaries of government staff. Not just Bihar, but state after state -- Rajasthan is the example of the month -- has defaulted on the repayments it has to make to the Centre. In Assam�s case, all financial transactions had to be halted, and the treasury had to be closed last week, as the state had no funds to meet even the day�s liabilities. It isn�t just that almost all of plan expenditure of Bihar is now financed through central funds, that is so in the case of most states: Rakesh Mohan, the director of the NCAER, draws attention to a telling figure -- as recently as the Sixth Plan, balances from current revenues financed 40 per cent of state plans, in the Eighth Plan their contribution was zero, today it is a substantial negative. It isn�t just that state enterprises in Bihar are in a woeful condition, they are in more or less that condition across the country: another figure that Rakesh Mohan mentions -- state enterprises were projected to contribute Rs 4,000 crore to the financing of the Eighth Plan, their actual contribution was minus Rs 2,723 crore.

All sorts of devices have been contrived by the Centre and states to camouflage defaults by state governments, all sorts of devices have been fabricated by states to divert central funds meant for capital expenditure to pay wages and salaries. A senior functionary was educating me the other day to the mystery behind plan projects remaining incomplete for years and years on end in state after state. There is more than lethargy, he explained. Under our system of accounting, so long as the project is a continuing one, salaries and wages of the staff working on it can be paid out of plan funds; once it is completed, these have to be paid out of the state�s own funds. Unable to pay even salary and wage bills of its employees, state after state keeps that last mile of the road incomplete...

And finances themselves are but a symptom. Entire systems have fallen apart. A former deputy comptroller and auditor general, C.B. Kumar, points out that of the 992 state government companies, the accounts of 783 companies are in arrears -- up to 10 years. In the case of many of them, accounts have not been finalised for even one year since their inception.

And the finances of states, the evaporation of control and supervision mechanisms in state owned companies -- these too are but symptoms. The malaise extends far beyond states, far beyond governments. "Non-performing assets" -- a euphemism to cover up moneys which have been given, handed out on collateral considerations -- now exceed Rs 43,000 crore: that feat has been accomplished not by state governments but by our "commercial" banks. The companies that have vanished with over Rs 20,000 crore belonging to small depositors are not government companies, they are companies floated by private entrepreneurs. Similarly, while the securities scam showed up the degree of morality and vigilance in our banks and financial institutions, could it have remained undetected if a profession wholly outside the state structure -- chartered accountants -- had been doing its job?

In a word, unless we wake up, Bihar is not just an extreme case, it is the future. And the condition to which Pakistan has sunk is a live warning of what happens when such problems are neglected.

Everything else points to the same urgency. Time does not stop just because we are preoccupied with our problems: we talk of the "21st century;" it is five weeks away. The world does not stop because we are busy battling the next caste: technologies continue to replace each other every two-three years; per capita income in China is already double that of India, but with China growing at 10-11 per cent, and us stuck at 6 per cent, the gap between us and them doubles every 14 years -- and the per capita income is just an indicator: military capability, and much else is subsumed in it.

Nor do our problems abate because we are busy sorting out our politics. In the last three-and-a-half years when our politicians were busy bringing down and installing governments, our population increased by over five crore. Even in the six months between the ouster of the Vajpayee government and the installation of the present Vajpayee government, our numbers would have increased by over 70 lakh. We must, therefore, act, as the Buddha would say, "with the urgency of a man whose hair is on fire". The allied point is just as obvious: there is no discord on these issues. Indeed, I believe there is consensus on almost all the issues which are at all within the realm of the possible. When liberalisation was launched, how the critics lampooned it. But where they were in power, those very persons and their parties were taking pride in proceeding on that route even faster than the central government. Similarly, when the critics acquired office at the Centre, they continued those very policies.

That is a large part of the problem today: on almost every practicable matter there is consensus on what should be done, everyone also sees that those steps should be taken forthwith, but when one party takes them, the other shouts and screams, and puts obstacles. So that nothing is allowed to proceed -- except by fits and starts. The same danger lurks today. The economic decisions which will be taken now are ones that carry forward the same process which successive governments have been furthering for a decade. But because this government will be announcing those policies, others will stall them.

There is a conviction -- which all parties need to outgrow -- that because one is in Opposition, one�s job is to oppose, to choke whatever whoever is in government is trying to do. Precisely because it does not have a better idea on the matter, the party out of office feels compelled to contrive differences. Often, a completely unrelated issue is made the occasion for blocking everything. Notice the minatory statements which Congress leaders have been making about Rajiv�s name in the Bofors� chargesheet.

Assume for a moment that there is ground for a genuine difference of opinion on the matter -- I do not see any ground either in law or fact, but assume that there is. How does that difference on this particular matter justify throttling legislation on, say, economic reforms? Even countries deal with each other on some issues in spite of there being sharp differences on other issues. Indeed, many who will today be arguing -- within the Congress, say -- against cooperating with the government on any issue are ones who, when it comes to Pakistan, are most energetic in arguing that we must keep identifying areas on which we can engage it in joint action in spite of what it is doing in Kashmir, and the rest. But when it comes to cooperating with the government of their own country, even when it seeks to further policies they had themselves initiated, Congressmen will think it perfectly in order that they hold back till it interferes in the judicial process and has a document which is before the courts altered in the way they specify. As all parties are in office somewhere or the other in the country, and as all of them are therefore disabled by such conceptions of what the proper role for an Opposition is, all have cause to revise their conduct. The cure liable to be more effective is for people to be alert, notice who is stalling essential legislation or policies, and for what reason, and punish him accordingly.

Governments too would do well to change their ways. At least in five respects. All too often, they lose interest in a remedy the moment it has been enacted. Mr N. Vittal, the chief vigilance commissioner, gives a telling example. In 1988, Parliament passed the Benami Transactions (Prohibition) Act. It was acclaimed to be a decisive step in tackling corruption -- indeed, so urgent and vital were its provisions acclaimed to be that they were first introduced by way of an Ordinance. Clause 5 of the Act specified that a procedure would be prescribed for acquiring property under the Act. Eleven years have gone by, no procedure has been prescribed. Governments have forgotten all about the Act. And not just governments: the other day when I referred to the Act and its fate in the Rajya Sabha, it was evident that MPs too had not bothered to check up on what they had passed. The first point therefore is: follow through on what you get through Parliament, follow through on the schemes you launch.

The second lesson, equally elementary, is about existing institutions. Every government feels impelled to launch new schemes, to set up new institutions. But the need today is to energise existing institutions. It is good that the government will be introducing legislation to set up the Lok Pal: the bill has been in the works for 30 years, and this will be the seventh version of the bill. So, it is good that at last the law will be passed, and the institution will be set up. But just as important is to activate the Lok Ayuktas: in state after state, they have been rendered moribund. Why not call a conference of existing and past Lok Ayuktas, garner their proposals to make the institution functional, and create public opinion for those changes to be enacted? Similarly, I was astonished to learn the other day that the comptroller and auditor general has a staff of 20,000 persons. They produce over a hundred audit reports every year. These run into 15,000 to 20,000 pages. They are packed with details -- often, as we have seen in the case of Bihar, with details of the most alarming kind. But can any one recall a single consequence which has followed as a result of these prodigious labours? The cure would not be to set up yet another institution, but to get together with present and past CAGs and take steps which would make the work of this institution fruitful. The third lesson is about the new institutions we set up. Unable to improve existing institutions, we set up some new one. Unable to get existing courts to speed up, we set up special courts, unable to get states to act reasonably on sharing river waters we enact the inter-state river water disputes law. But the manner we provide for the new institution to function is exactly the manner which has paralysed the old institution. The procedural regulations that special courts must adhere by are exactly the same as the regulations which clog existing courts. The personnel who man the inter-state river dispute tribunals are just the same as the ones that man existing courts: they bring to their new task the same approach, the same fixation on legalisms, on the date of this notification as against that one which hobble our courts. For the new institution to be different, its personnel, the procedural rules that are to govern its functioning, its entire ethos have to be radically different.

Fourth, the solutions must be on an altogether different scale, they must be of an altogether different kind than the ones to which we naturally gravitate. The backlog in courts? As a great concession we agree to the setting up of a dozen courts. But the Chief Justice was mentioning the other day that the requests which are pending for additional courts already total over 4,500. Setting up a dozen more courts -- and that too after years and years of the files going up and down -- is as good as doing nothing. Similarly, to get the inter-state water disputes machinery out of the current rut, we need to man the tribunals with persons whose entire approach will be different: who will craft design solutions rather than pronounce awards that hinge on legalisms.

And when we do alight on a solution, as Montek Ahluwalia with his vast experience points out, we must not look upon it as set in stone. That is the fifth lesson. As new technology beckoned, a new telecom policy was announced in 1994. But technology changed so fast that a newer policy was required by 1998. The steps which have been taken under it have already had to be altered twice. But technology is continuing to evolve at a dizzying pace: the technology to transmit voice over Internet with distortion is almost at hand; you will soon be able, therefore, to talk to persons overseas at the cost of a local call; that will devastate the finances of existing long distance operators. And so we can be certain that an entirely new telecom policy will be required three-four years from now. If we hold up that new policy on the old supposition that the existing policy had been announced just a short while ago, or if allegation-mongering inhibits governments from attempting new formulations, we will be enlarging the gap between us and the rest of the world.

Hence: when you pass a law, when you set up an institution, look back and see how it is working; instead of setting up new institutions, where possible energize existing ones; when you set up new institutions, ensure that their personnel, their operating procedures, their entire thinking is new; think anew repeatedly, and each time at a speed which will, at the least, match the progress of technology.

The Asian Age
November 12 1999

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