Gujarat model

Whose development is it anyway?

Print edition : December 08, 2017

Essar Ports at Hazira. An audit report tabled in the Assembly in April 2014 made critical observations about, among others, the Essar Group.

At the neonatal intensive care unit of the Civil Hospital in Ahmedabad where deaths of several new-born children were reported in October. The infant mortality rate of Gujarat during 2010-2015 was at a rather high 22 per lakh live births. Photo: VIJAY SONEJI

The Assembly elections have put under intense scrutiny Narendra Modi’s Gujarat model of development which is touted as worthy of replication throughout the country. Audit reports of the CAG provide ample evidence of it being inefficient, corrupt and not beneficial to the common people.

THE standard indicators of development, as is understood in theory and practice, comprise a range of indices, and not necessarily the level of private investment in an economy. A combination of economic growth and redistributive justice ensues from the overall development of a State or a nation. Is Narendra Modi’s Gujarat model of development, touted as a model worthy of replication throughout the country, a desirable one to emulate considering the skewed impact it has had on indicators that constitute holistic and comprehensive development, which include the quality of human life? Whether the development the model propounds is “development” at all is in doubt.

Surveys conducted before the Lok Sabha elections in 2014 had claimed that 75 per cent of the top corporate honchos wanted Narendra Modi, who was then Gujarat Chief Minister, to be the Prime Minister. A PDF file available on the Bharatiya Janata Party’s (BJP) website ( describes the Gujarat model as a “vision that India awaits”. The file was prepared in view of the Lok Sabha elections with the tag line—Vote for India, Vote for Modi. The “vision” of the Gujarat model lists out “more jobs, low inflation, higher income, faster growing economy, better education, better safety and better life”. The 2014 Lok Sabha elections were fought and won on the Gujarat model agenda. Three years later, it is this model that is going to be tested in the Gujarat Assembly elections scheduled to be held on December 9 and 14. Irrespective of the outcome of the elections, it is pertinent to take a look at what development in terms of the overall quality of life has meant to the people of the State, including a look at those indicators that comprise the “vision that India awaits” as stated in the BJP document. As it appears, this model has not measured up to the yardstick of established development indices; “development” has been vulgarised to mean something quite different.

The BJP document claims that Gujarat has the “healthiest children” with only 38.77 per cent of them malnourished. It quotes a 2012-13 Comptroller and Auditor General (CAG) of India report on the Integrated Child Development Services (ICDS) to claim the State is ranked below five States having highly malnourished children—Bihar (82 per cent), Delhi (50 per cent), Andhra Pradesh (49 per cent), Rajasthan (43 per cent), Haryana (43 per cent). How does the description of the State with the “healthiest children” in the country fit it?

Apart from this interpretational travesty, a more recent CAG report on the “General and Social Sector” for the year ending March 2015 (Report no. 2 of 2016) conducted a performance audit of the Health and Family Welfare Department for the period 2010-15 in April and August 2015 and looked at the delivery of health-care services in government hospitals at the district level. The performance audit for Gujarat noted: “The sanctioned strength of all cadre of staff, including doctors and nurses remained much below Indian Public Health Standard [IPHS] norms in the test-checked district hospitals. The shortfall in the cadres of specialist doctors ranged between 29 and 77 per cent and that of medical officers between seven and 69 per cent vis-a-vis IPH standards.” The situation in the three district hospitals of Surendranagar, Godhra and Petlad was alarming as the shortfall was more than 60 per cent. According to the National Health Mission, “the IPHS are a set of uniform standards envisaged to improve the quality of health-care delivery in the country and have been used as the reference point for public health-care infrastructure planning and upgradation in States and Union Territories”. A Central government release on July 15, 2014, maintained that as health was a State subject, the primary responsibility of upgrading district hospitals to IPHS norms lay with State governments.

The performance audit noted: “Availability of beds in DHs [district hospitals] was neither as per IPH standards nor in consonance with the requirements.” The shortage of beds ranged between 52 and 73 per cent. “Audit observed instances of highly congested wards and patients lying on the floor; two patients were accommodated on one bed for transfusion of iron sucrose, and patients accommodated in the passageway due to non-availability of vacant beds.”

Not only this, the required stocks of essential drugs such as amoxicillin, diclofenac sodium, Hepatitis B vaccine, injection ceftazimide and insulin were not available for more than four months. Patients purchased essential drugs from the open market. The audit found that “Not of Standard Quality” [NSQ] medicines had been supplied by Gujarat Medical Services Corporation Limited and these NSQ medicines had been administered to patients.

Essential specialist services in general medicine, obstetrics and gynaecology, paediatrics, radiology and orthopaedics were either not available or partially available owing to a shortage of specialist doctors. Similarly, accident, emergency and trauma care services were not equipped with essential equipment, the audit observed. Three district hospitals did not have intensive care units (ICUs) while in the rest of the test-checked district hospitals only one or two ICU beds were equipped with life-saving equipment. The situation was no different in civil hospitals. Higher neonatal deaths and maternal deaths, absence of life-saving equipment in the maternity wards of test-checked district hospitals, including instances of “patients on the floor”, were found in these hospitals. At the Surendranagar district hospital, the posts of paediatrician and gynaecologist were lying vacant since November 2011, and as a result the number of delivery cases had declined. In the maternity ward of the Surat district hospital, patients were seen lying on the floor. The audit report collected photographic evidence of the situation in these hospitals.

Various tests were not available in the diagnostic and imaging departments of the district hospitals and there was a lack of adequate referral management and infection control facilities. Interestingly, the audit report also highlighted the fact that the State government had an allocation of Rs.732.64 crore for building health-care infrastructure but it spent only Rs.580.08 crore, that is, 79 per cent in the period between 2010 and 2015. The audit found that the Department of Health Services had not conducted appraisals of the hospitals for conforming to IPHS despite the State government preparing a five-year plan (2012-17) for medical services and medical education in order to enhance the standards of health care services in district hospitals.

Health indices

“Health care services in a State can be evaluated on the basis of the achievement against the benchmark of health indicators,” the performance audit observed. The indicators, including crude birth and death rates, total fertility rates, maternal mortality rates (MMR) and infant mortality rates (IMR), were in some cases better than the national averages but “not among the front-ranking States of the country in terms of health indices”. The MMR at 122 and the IMR at 22 per lakh live births was rather high, falling slightly below the national average of 178 (MMR) and 44 (IMR). The IMR and the MMR for the Scheduled Castes and Scheduled Tribes, including the Under Five Mortality Rate, were all higher than the national average. The Human Development Index [HDI], a tool for measuring the overall development in a country, including social and economic aspects, placed Gujarat at number nine, according to the second India Human Development Report: Towards Social Inclusion (2011) prepared by the Institute of Applied Manpower Research. The top-ranking States were Kerala, Delhi, Himachal Pradesh, Goa and Punjab. The HDI, originally developed by the United Nations Development Programme (UNDP) for its Human Development Reports, is a composite index comprising three indicators—consumption expenditure, education and health. States with high per capita income were found to rate better in HDI. Gujarat had slipped from the 10th position in 1999 to the 11th in 2007.

The economist Atul Sood and Jawaharlal Nehru University scholar A. Kalaiyarasan point out that the “healthiest children” claim and tag is not valid as midday meal and utilisation of the ICDS in the State was close to the national average but not among the list of the best-performing States. Expenditures on health and education were, again, not rated as good. Eleven States, including Kerala, surpassed Gujarat in health expenditure. In fact, Gujarat has been reducing the budget allocation for health care—it fell from 5.59 per cent in 2015-16 to 5.40 per cent in the 2016-17 (Revised Estimate) to 5.06 per cent in the 2017-18 (Budget Estimate). The public distribution system in Gujarat was among the worst in the country; not only was per capita consumption very low but the State had the highest rate of food diversion. Half of the poorest people in Gujarat did not get subsidised grain and it was the only State to register a decline in the per capita consumption of foodgrains.

Low unemployment, low wages

Quoting an Employment-Unemployment Survey of the Ministry of Labour and Employment, the BJP website in 2014 claimed that the unemployment rate in Gujarat was the lowest. In an article for Frontline (“Fiction and Facts”, April 4, 2014), Atul Sood and Kalaiyarasan pointed out that although Gujarat was the third most popular destination for private investment after Odisha and Chhattisgarh, the rate of employment was low. Even so, the share of “projects implemented” or “under implementation” had declined from 73 per cent in 2003 to 13 per cent in 2011. Between 1983 and 2010, they write, much of the employment, investment and projects were concentrated in the chemicals and petrochemicals sector. This corresponded with a decline in the State’s share of “investment intentions” from 20 per cent in 2005 to less than 10 per cent in 2011.

Rohini Hensman, a researcher and activist writing in Economic & Political Weekly (“Gujarat Model of Development, What would it do to the Indian economy”, Volume 49, Issue no. 11, March 2014), explained that employment growth was mainly in the informal sector and negative in manufacturing and services. Atul Sood and Kalaiyarasan, quoting National Sample Survey Office (NSSO) data (Employment and Unemployment Round 2011-12), explained that the average real wage, for both regular and casual employment in rural and urban Gujarat, was lower than the national average. A 2016 paper by the economists Indira Hirway and Atanu Chatterjee, titled “Recent developments in Gujarat rural labour market: Critical Concerns”, showed that the unemployment rate in Gujarat among educated youths in the 15-29 age group was higher than the national average. The average wage rates for regular and casual workers were much lower than the national average.

A crucial component of “vibrant Gujarat” and the model of development has been skill development. The CAG conducted a performance audit of skill development programmes in the State between 2010 and 2015 to reveal shocking facts, including money lying unspent, fudged enrolment figures, low employability as well as youths getting paid at rates below the States’ declared minimum wages. Under the craftsman training scheme, it was seen that 4.14 lakh students enrolled but 21 per cent of them dropped out. In many of the Industrial Training Institutes, machinery was found uninstalled and instructors were not appointed.

Under the Deen Dayal Upadhyaya Grameen Kaushalya Yojana, a Central government scheme, the audit report found that while 45,000 candidates were to be trained by Project Implementation Agencies, only 3,312 were enrolled, and only 587 candidates passed. About 1,060 telephone interviews were conducted by the CAG, which revealed that after training, 39 per cent had found employment, 24 per cent were self-employed, while 37 per cent remained unemployed. Of the candidates who managed to get jobs, 44 per cent were found drawing a salary of less than the State’s minimum wage of Rs.6,960 a month.

Education and literacy rates form important constituents of human development as they denote a certain level of access to education and literacy facilities. While literacy levels were better than the national average, the gender difference (Atul Sood and Kalaiyarasan) of 20 percentage points was higher than the gap in the literacy rate between men and women at the national level. The gap in the literacy outcomes, between those in the general category and the marginal social groups, again, was higher than the national average in 2007-08.

Sexual harassment

Safety of women is claimed as one of the hallmarks of Gujarat’s development. Data from the National Crime Records Bureau (NCRB) (Crime in India 2015) show that Gujarat is among the States where the crime rate against women has seen a decline, but the figures also show that there is a substantial increase in cases of sexual harassment against women. The crime rates of Nagaland, Sikkim and Tamil Nadu are lower than Gujarat’s. Apart from crimes against women, sex ratios are indicative of the prevalence of sharp gender biases and the prevalence of sex-selective abortions. The sex ratio of Gujarat was lower (919) than the national average (940) and so was the child sex ratio (890) compared with the national average of 914. Mehsana in Gujarat followed by Agra, Uttar Pradesh, have the lowest child sex ratio.

Mismanagement of funds

Even before early 2013, when the campaign to promote the “Gujarat Model” of development was gaining momentum, audit reports prepared by the CAG revealed serious mismanagement of financial resources by the Gujarat government and its various companies.

Instances of financial mismanagement by government-run companies, undue benefits received by certain large corporate groups on account of the State’s actions, and poor governance have been frequently highlighted in recent years. Especially since 2014, when the Gujarat government saw a change of guard, irregularities and poor governance highlighted by the CAG have been under relatively more scrutiny.

The first instance of this was evident in the initial months after Modi handed the reins of the State government to his successor. A series of five audit reports placed in the Assembly on the last day of the Budget session in 2014 revealed in astonishing detail undue favours provided to Reliance Petroleum, Adani Power and Essar Group during Modi’s tenure as Chief Minister.

Consider chapter II of the audit report titled “Compliance and Performance Audit on Economic Sector of Government of Gujarat”, which was tabled in the Assembly on July 25, 2014. The report contains performance audit observations relating to the functioning of the Gujarat Maritime Board (GMB), which was set up for administration, control and management of all minor ports in the State. The “performance audit” covers the period from 2008-09 to 2012-13 or the second and third terms of Modi as Chief Minister. Before pointing out the favours granted to select corporate houses, the report details the background of the issue.

In December 1995, Gujarat declared a “Port Policy” and subsequently enacted the Gujarat Infrastructure Development Act, 1999, for development of ports in the State through private participation and the GMB. The report subsequently noted: “Though Port Policy discouraged development of captive jetties, the GMB had entered into nine captive jetty agreements (CJAs) after declaration of Port Policy. The non-recovery of full wharfage after set-off of the cost of captive jetty (Rs.362.01 crore), erroneous calculation of set-off and application of incorrect full wharfage rate after set-off period resulted in short recovery of wharfage amounting to Rs. 649.29 crore from Reliance Petroleum Limited.”

On the conduct of the Gujarat government in the development of the Adani Group’s Mundra port project, the audit report said: “GoG (Government of Gujarat) extended the port limit for four Single Buoy Moorings (SBMs) without signing the required supplementary concession agreement (SCA) to legally enable GoG to set off the amount of concession availed by it at the time of transfer of Mundra port. The construction of a quay in Phase 1 of Mundra port was regularised without submission of revised DPR [detailed project report] indicating non-monitoring of the port constructions. Incorrect application of full water front royalty rate instead of the escalated rate for coal and crude handled resulted in short recovery of Rs.118.12 crore.”

Another audit report tabled in the Gujarat Assembly on July 25, 2014, titled “Financial Audit on State Finance of Government of Gujarat”, made this observation about the controversial Mundra port: “The review of Gujarat Maritime Board (GMB) revealed that no accounting framework and auditing arrangement was prescribed under concessional agreement entered with concessionaire, i.e., Gujarat Adani Port Limited (GAPL) for the development of private port at Mundra.”

Another audit report tabled in the Assembly on the same day made strong observations about, among others, the Essar Group. Looking into the conduct of the State public sector undertakings, the audit report mentioned at least two instances in which the taxpayer-funded companies suffered while dealing with the Indian multinational. The first observation involves Essar and another private power firm. The report says: “Gujarat State Petronet Limited passed an undue benefit to Essar Steel Limited by waiver of ship and pay charges and also to Torrent Power Limited by taking an imprudent decision to reduce the contracted quantity and suffered loss of revenue of Rs.92.34 crore.” Another audit observation, in which power purchase agreements (PPAs) with independent power producers (IPP) have been analysed, reads: “Change of delivery point subsequent to finalisation of PPA led to passing of undue benefit to Essar Power Gujarat Limited for Rs.587.50 crore during the tenure of the PPA.”

More recent audit reports have revealed further fiscal mismanagement and poor governance, indicating that matters have not improved during the tenure of the two Chief Ministers who succeeded Modi. Issues highlighted by subsequent audit reports on the functioning of two prominent government-run companies, Gujarat State Petroleum Corporation (GSPC) and Metro Link Express for Gandhinagar and Ahmedabad Company Limited (MEGA Company), show poor financial record of these firms, which undertook some ambitious projects during the tenure of Modi whose implementation is overseen by the incumbent Chief Minister.

About the GSPC, in a report tabled on March 31, 2016, the CAG observed: “The company went ahead acquiring overseas blocks during 2006-10 mainly as an operator with considerably high participating interests without any prior experience overseas as an operator. Further, the delayed execution of the work committed resulted in cost escalations in overseas blocks. As a result, the company had incurred expenditure of Rs.1,757.46 crore for 10 surrendered overseas blocks, of which Rs.1,734.12 crore has been written off.”

In the same report, the following observations were recorded by the auditor about MEGA Company: “The company had awarded 1,868 work orders for the earlier phase of metro project, which was subsequently scrapped. The work of earlier phase was stopped in September 2013 due to non-receipt of approval from GoI [Government of India] and GoG and expenditure of Rs.445.86 crore was incurred on the abandoned phase up to March 2015. The company incurred an expenditure of Rs.373.62 crore on the development of Indroda, Motera and Chiloda site under the earlier phase without the approval of DPR. As the earlier phase was scrapped and the expenditure incurred could not be used in the new phase under progress, it resulted in infructuous expenditure of Rs.373.62 crore.”

The GSPC continued to receive uncomplimentary remarks in subsequent audits. In an audit report released on March 31 this year, the CAG, analysing the expenditure incurred on the KG-21 gas well being drilled by the State-run “blue chip” petroleum firm, observed: “As the KG-21 well could not be developed at present due to operational errors as conceded by the management, the exploration cost of Rs.478.98 crore incurred on the same remained idle.”

Who benefits?

In an Economic & Political Weekly article, Rohini Hensman wrote presciently that “tax breaks essentially meant that the people of Gujarat would not be getting any of the money”. She was referring to tax breaks and incentives given to investors. The loot of the exchequer, as enunciated in CAG reports, shows that the people of Gujarat were not the beneficiaries of the development model. Had it been so, it would have reflected in the human development indicators.

A popular video showing youngsters tapping their feet to the song “Vikas Gando Thaye Che” (development has gone mad) has gone viral for good reason. Whether the electorate will push the candidature of those who have plumbed for this model of development is unclear. Yet, it cannot be denied that the model of development that served as the leitmotif for 15 years in Gujarat is being questioned now, and rightly so.

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