Weakening of institutions & profiteering Organization - 8

 

8. Weakening of institutions & profiteering Organization: 

Govt run companies are headed by politicians as chairmen or controlled by Ministers. In either case political interference is there in purchases, recruitment ,administration etc.,  This leads to inefficiency and corruption and losses.  The money goes into the pockets of Politicians, their kith and kin, friends, middlemen, brokers, businessmen etc. These people are spread over nooks and corners of the country and they in turn fund the elections and become canvassing agents etc., at the time of elections.

Unfortunately, all this makes it painfully evident that India is struggling to perform even the most basic functions of a sovereign state. While much of the attention on the manifold shortcomings of the Indian state has focused on high levels of corruption and venality in public life, an equally compelling limitation is the lack of competence, both at the policy design and formulation level, and the even larger challenge in effectively implementing these policies.

This “state capacity”—the ability of the state to effectively design and implement public policies—varies greatly across India. The Indian state is not failing but is seen to be only too often “flailing”. It can successfully manage highly complex tasks, but fails in executing relatively simple ones. On the one hand, India can organize elections for 850 million eligible voters, conduct a census for 1.2 billion people, and run a highly effective space programme. Yet, on the other hand, its record in providing basic public services, from health to education and water to sanitation, ranges from modest to dismal. The persistence of a stubborn Maoist insurgency and the sporadic resurgence of communal violence in certain pockets speak to its patchy law and order prowess, while chronic power shortages are a stark testimony to the quality of its regulatory institution.

The story is not uniformly negative, however, and bright spots do exist. Compared to its developing country peers—not to mention several advanced democracies—India’s highly respected elections body consistently delivers high-quality polls, especially in more recent years. The Reserve Bank of India (RBI), which does face internal capacity issues, not to mention a spate of newfound external challenges, has emerged as a highly credible voice on issues of monetary policy, banking and finance. Even from within the ranks of the much-beleaguered bureaucracy, one can identify talent that is comparable to the best anywhere in the world.

The underlying institutional weaknesses of public institutions in India stand in contrast to relatively dynamic private and civil society organizations. According to a 2012 government report, India was home to 144,000 registered non-profit societies as of 1970; by 2008, that number had grown by a factor of nearly eight (1.14 million). In 1957, fewer than 30,000 companies with a paid-up capital of barely Rs1,000 crore were operational in India. Fast-forward to 2014, and India boasts of nearly 950,000 firms with a paid-up capital of Rs21 trillion. Undoubtedly, the expansion and growth of India’s private sector and vibrant civil society will substitute for some of the shortcomings of the public sector in the foreseeable future. Nevertheless, there is a wide range of core functions, from regulation to security, from social inclusion to public goods provision, where the state is—and will be—indispensable. This is particularly true for India’s vulnerable population—such as its 265 million-odd poor or members of historically marginalized minority groups—who rely on public assistance to meet their most basic needs. These vulnerable populations, unlike India’s middle and upper classes, do not have a viable “exit” option from the public sector and its myriad deficiencies.

If the dizzying transformation of the Chinese economy has been the defining story of economic development in the last three-and-a-half decades, economic changes in India—while considerably less dramatic—have also been transformative. However, India’s recent success masks deep underlying challenges whose import will only multiply in the foreseeable future. While it has been argued that in many ways India’s improved economic performance has been despite, not because of, the state—epitomized by epigrams such as “India grows at night while the government sleeps”—continued welfare gains, better distributional outcomes, and the resilience and sustainability of rapid economic growth are in considerable doubt in the absence of better-performing public institutions.

 To get a sense of the looming challenges, consider this. In the two decades after the onset of economic liberalization, India added 364 million people to its population—more than the stock at the time of independence, which itself was accumulated over millennia. India’s democratic success and this “demographic dividend” mean that tens of millions of young people will be joining India’s workforce with aspirations that previous generations could not even dream of, but without the jobs commensurate with their skills and aspirations. The ranks of those who live in India’s urban cities and townships are rising at a rapid clip, so swiftly that even the government’s own agencies have difficulty in adequately measuring India’s changing demographics.

Even a casual observer of the Indian state would be struck by its limitations. The most obvious manifestation of this is its relatively small size. Contrary to popular belief, the Indian state is one of the smallest among major nations on a per capita basis. While India’s population increased from 846 million to 1.2 billion between 1991 and 2011, total public sector employment actually decreased from 19.1 million to 17.9 million. Over this period, the absolute size of the elite Indian Administrative Service (IAS) dropped by 10%; by 2010, the total strength of the IAS and the Indian Police Service (IPS) was less than 11,000 while the vacancy rate stood at 28%. In foreign affairs, the strength of the Indian diplomatic corps is less than that of Sweden’s. India’s judicial system presently has a backlog of more than 31 million cases. Government estimates suggest that as many as 10% of all cases have been pending for a decade or more.    

The accounts of 427 government companies and corporations by the national auditor show that the central government holds equity worth Rs 4,52,908 crore in share capital in FY20, which increased by a marginal Rs 48,485 crore compared to FY19. Outstanding loans disbursed by the central government as of March 31, 2020, amounted to Rs 3,04,899 crore, which increased by Rs 21,683 crore compared to the previous years.  In the larger picture, investments in government companies and corporations increased by Rs 5,45,125 crore or 23.15% to Rs 28,99,833 crore in FY20 compared to Rs 23,54,708 crore in FY19. The cumulative figure of Rs 28,99,833 crore includes equity investments and loans granted by corporations, state governments and financial institutions.  The number of government companies and corporations that earned profit was 224 in 2019-20 as compared to 233 in 2018-19. The profit earned decreased to Rs 1,40,976 crore in 2019-20 from Rs 1,77,758 crore in 2018-19. The Return on Equity (ROE) of 224 CPSEs was 15.31% in 2019-20 as compared to 18.69% of 233 CPSEs in 2018-19. ROE is a financial indicator calculated by dividing net income by shareholders’ funds.   Three sectors, namely, power, petroleum and coal and lignite contributed maximum profits to the central government’s kitty. The three sectors combined earned Rs 95,311 crore accounting for 67.61% of the total profits of government companies.   Defence, coal, atomic energy and space CPSEs earned a net profit of Rs 41,472 crore, which is 29.42% of the total profit of Rs 1,40,976 crore earned by all the 224 profitable companies.

“The suggestion that Adani Global Pte Ltd supplied to TANGEDCO inferior coal, as compared to the quality standards laid down in the tender and PO [purchase order], is incorrect,” the spokesperson said.  “While it is difficult for us to comment on individual cases due to the sheer volume of data and the elapsed time, not to add the contractual and legal obligations, it is important to note that the coal supplied, irrespective of the declaration by the supplier, is tested for quality at the receiving plant,” the company added.