Friday, June 6, 2014

A Great Start (for the Modi government)

With miles to go, and many details to resolve

The National Democratic Alliance government has made a terrific start. Time will tell how this plays out, but it has begun decisively and set a sure tone. With such an unequivocal mandate, it would have helped to avoid jarring notes like the appointment of the principal secretary to the prime minister through an ordinance. Besides, the government has already shown wisdom in its actions in not rolling back the previous government's good schemes and in extending senior administrators' incumbencies.

If this wise approach continues to show in their thinking and action, greater support is likely from civil servants, citizens, and perhaps even opposition politicians, resulting in better outcomes. It's a question of pulling together towards common goals, or pulling in different directions. Think of the indecisive second term of the United Progressive Alliance (UPA), and recall that it was the Bharatiya Janata Party that stalled the functioning of Parliament on many occasions, including measures such as the induction of the Goods and Services Tax (GST). The general perception, however, was of a dithering UPA unable to coordinate and achieve results. In other words, impressions are more important than the reality of untidy facts.

This is why it's important that the PM and his team consciously create a good impression and carry people along. If they can do that, they are likely to achieve a great deal for us all. Instead, if they are perceived as heavy-handed, roughshod, and not going through due process, the salutary effects of exemplary leadership and governance are likely to be lost. The two-thirds who voted for others recently might well begin to converge, so that an opposition that is currently non-existent because it is dispersed, begins to coalesce. This could obstruct a high-handed government, or even try to pull it down. The result, as before, is likely to be irresponsible shouting matches and disruptive behaviour in Parliament that have stymied efforts to improve our lot.

The Tasks Ahead
There's so much that needs to be done in so many areas to recover our growth prospects and potential that it is truly daunting. For instance, consider nfrastructure, and take just one aspect of it: energy and power supply. This covers many things:
  • The need to build electricity generation from all sources;
  • The supply of fuels, including the mining, transportation and pricing of coal, the development and pricing of hydrocarbons, hydroelectricity, nuclear fuel, and alternative energy sources;
  • The requisite transmission and distribution systems, and their finances; and
  • Issues related to retail pricing and collection in the context of our difficult legacy of unsustainable giveaways.

In addressing these, there are a couple
of priorities suggested for the new government:

1. Infrastructure & Digital Access

The government seems serious about infrastructure. The PM's 10-point guidelines to his ministers begin with infrastructure reforms, mentioning health, water, education, roads, and energy as priority areas, with a separate mention of e-auctions for transparency.Given this, one would expect that digital networks are an integral aspect of desirable infrastructure that provide people access to e-governance services.  However, if digital networks are not mentioned specifically among the government’s priorities, their importance is likely to be lost in the ensuing activities.  Meanwhile, the situation in the sector is complex and confusing, with conflicting demands from private sector contenders, state-owned operators MTNL and BSNL, I&B, and the Finance Ministry’s need for short-term revenues.  This is why issues relating to communications infrastructure deserve to be addressed and resolved with high priority, and the government needs to explicitly recognise this.

2. Solar Power: Incentives & Promotion

A baffling aspect of our energy policies is why solar power has not become a centrepiece of our daily energy use. Much of the country gets so much solar radiation for most of the year that it should be an obvious focus for an energy-hungry developing economy. It should be possible, one would think (without knowing how simple or complex it would be to engineer the solutions), to use solar power when it is available, and grid power when it is not. The ministry of new and renewable energy had a scheme for partial capital reimbursement and soft loans for individuals and groups until the end of March 2014.
2 It doesn't appear to have been particularly successful.

Surely our priority should be to devise and implement schemes that actively encourage individuals and groups to invest in distributed solar generation for themselves? A long-term approach may require feed-in tariffs and grid modifications, as well as changes in administrative policies including taxes, to ensure (a) a significant increase in solar power (b) with more locally manufactured equipment. In the short term, an appreciable increase can result from enabling changes in rules and procedures, and the reimbursement of some capital costs combined with reduced excise and taxes.

The scope at the macro and micro levels is immense, encompassing multiple ministries that add up to a vast tangle, like an immense Gordian Knot. Add the other aspects of infrastructure, and the list seems endless: networks that are essential to enable e-governance and productivity through communications, transportation - e.g., rejuvenating the railways, disentangling the stalled process of building highways and roads, air and water transport, water supply and sewerage, and so on. All these have to be addressed within the constraints of the fiscal situation, inflation, restrained economic momentum, employment generation, budgetary limitations, and the reconfiguration of asset pricing to make financial returns attractive relative to property and gold without disrupting property values and the banking system. It will certainly help if our energies converge on the tasks focussed on realising the requisite goals, instead of being frittered away on disunity and fratricidal skirmishing.

Despite the daunting tasks ahead the prospects are solidly encouraging, because of a clearly mandated government. Another positive factor is the swing in votes favouring development over regressive caste and religious affiliations or hand-outs. This happened abruptly, without warning. If such tremendous change is possible so quickly, imagine what good leadership and honest governance could pull off with an inspired and supportive citizenry.

shyam nospace ponappa at gmail dot com