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The other India

Print edition : May 04, 2007 T+T-

A report on rural infrastructure brings out shocking facts about the conditions in which the rural population lives.

DISCUSSIONS on infrastructure are quite common these days, but they are mostly about urban areas. Major industries, in particular star performers like Information Technology (IT) industries, complain about the pitiable conditions of the roads that their executives in their posh cars have to use every day; citizens living in high-rise apartments are furious that failure and fluctuations of power supply ruin their domestic equipment; there are demonstrations in the streets because water supply is inadequate and undependable - the litany of woes never seems to end.

But what about the rural areas? How much do we know of the inadequacies of infrastructure of some 750 million people in the rural areas, constituting 70 per cent of the country's population? "Nine-tenths of rural households do not own telephones. Half of them do not have domestic power connections, and even the connected households are without power because of outages for almost 17 hours a day in the monsoon months and 13 hours a day in other months. Half of all people living in habitations away from a main village do not have access to all-weather roads. Although almost all rural households are covered by a source of drinking water, the quality and quantity of water actually available is often low because of poor maintenance and operation. Almost eight-tenths of rural households have no access to sanitation facilities."

Bringing out such dismal and shocking facts about the conditions under which the rural population lives is one of the main contributions of the India - Rural Infrastructure Report.

The factual material is not only in the aggregate. Lower-level data are also provided, bringing out the wide disparities in different parts of the country. Thus, though the tele-density (telephone lines per 100 residents) is 8.6 for the country as a whole, and close to 26 for cities, it is as low as 1.7 for rural areas. While Punjab boasts of almost 100 per cent coverage of electricity connection to rural households, in Orissa the coverage is a meagre 18 per cent. In Kerala, only 0.4 per cent of the rural population (in villages with a population of over 500) does not have access to black top roads; the corresponding figure for Maharashtra is a staggering 71.6 per cent, while in Karnataka it is as high as 55 per cent. A sample survey reveals that almost 75 per cent of rural households in Kerala have functioning latrines, but in Madhya Pradesh and Orissa only less than 5 per cent have this facility; in Tamil Nadu and West Bengal, the figures are less than 10 per cent.

The report is a mine of information and can be put to good use by government departments, development agencies and citizens. The early sections try to establish the relationship between increase in infrastructure and growth in gross domestic product (GDP) on the one hand and reduction in poverty on the other. The report quotes a World Bank study that shows that across all countries a 1 per cent increase in the stock of infrastructure is associated with a 1 per cent increase in GDP. Whether one goes along with such precise quantitative association or not, it is not difficult to see that a rural works programme of road construction or irrigation will increase employment and incomes; that improvements in transportation and communication will facilitate movement of people and goods, and availability of power supply can increase production and productivity in many areas. Similarly, assured and safe drinking water and sanitation will certainly improve health and efficiency.

Then why is it that in a democratic country like India the rural areas where the vast majority of the population lives are so deficient in infrastructural facilities of all kinds? An obvious answer is that whether it is improving transportation, providing power supply, increasing telecommunication services, or supplying clean and safe drinking water, enormous investment and expenditure are required. A major portion of the report consists of detailed assessments of the investments required. For full coverage of telecommunication services the estimated investment, spread over a few years, is of the order of Rs.92,700 crore; of power, Rs.55,200 crore; of roads, Rs.5,890 crore; of water and sanitation, Rs.3,780 crore. These are huge amounts, but not beyond the reach of a country whose GDP is of the order of Rs.3,250,000 crore annually (and growing at over 9 per cent every year!).

However, the quantum of investment as such is not the constraining factor relating to infrastructure, rural or urban. More basic issues are involved. A recurring theme in the report is that the inadequacies of infrastructure in India are the result of the failure of the state or the public sector and hence they can be rectified only through the active participation of the private sector. The verdict in this respect is unambiguous. "Until now investment in infrastructure sector has been largely the responsibility of the public sector in India. Even during the current period of economic reform, started in 1991 [when the critical role of investment in infrastructure has been recognised], the dismal state of rural infrastructure has hardly shown any significant improvement ... To improve the quality and coverage of infrastructural services, the public sector should either make way for private and informal providers or enter into partnerships with the private sector. Private-public partnerships are strongly recommended in the Eleventh Five Year Plan" (emphasis added throughout).

As public-private partnership (PPP) is the new development mantra, it is necessary to examine some of its underlying principles. Though it may appear somewhat far-fetched, it will be useful to go back to Adam Smith who, in his Wealth of Nations (1776), enunciated the principle involved. Even in those days when the economy functioned almost entirely on the basis of private, informal initiatives and efforts, Adam Smith recognised three distinct roles for the sovereign (that is, the state), which had a bearing on the economy. The first was to protect citizens against external aggression. The second was to administer justice, mainly the protection of property and of contracts. The third may be stated in the words of the master himself: "The third and last duty of the sovereign or commonwealth is that of erecting and maintaining those public institutions and those public works, which though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain. The performance of this duty requires, too, very different degrees of expenses in different periods of society."

Some comments on this statement are in order. First, and most important, what distinguishes public works is the fact that while they are in the highest degree advantageous for a great society, they will not be justified on the basis of the profitability calculus of private individuals or groups of private individuals, that is, companies or corporations. In other words, public works are, by definition those beyond the private profitability consideration. If that is the case, there is no question of the public sector making way for the private sector on certain specific areas of economic activity. Second, what these activities are will change over time. If these two basic principles are understood, it can be claimed that post-Independence development in India has always been one of public-private partnership. In the first few decades, basic industries as also major infrastructural aspects such as transport, communications and power remained in the public sector because at that time they did not pass the private profitability calculus.

A few decades later, conditions have changed, at least in three different ways. First, thanks to the investment by the public sector in the past, the requirements today are different. Second, the private sector now is more capable, partly because of the accumulations of the past and partly because of the easier flow of funds from outside the country. And, third, changes in technology and purchasing power of consumers have changed market conditions. All three now make it profitable for the private sector to enter into some infrastructural activities even in the rural areas. It is clearly not the case that some new doctrine called PPP now causes a reversal of roles of the public and private sectors.

It is crucial to note that the private sector will only enter segments that are fairly certain to be profitable. For instance, under the changed conditions private investment will be ready, in fact eager, to move into communications (read mobile telephones), but the same eagerness will not be seen in the case of rural sanitation. To be more specific, even if some private investment may be forthcoming to construct and maintain pay-and-use toilets in selected rural areas, very little private capital will be available for research into the possibilities of inexpensive water-conserving sanitary systems. In other words, the distinction between the public and private sectors is not primarily in terms of operational efficiency as is often maintained (favouring the latter, often considered to be self-evident too), but in the manner in which the two recognise public need and respond to it.

From this perspective, the private sector can only be the junior partner in PPP, especially in the identification of rural infrastructural projects where the voice to be listened to is chiefly that of the local public. The private sector may have some advantage in the stage of implementation (though that has to be demonstrated), but in the matter of pricing (including differential pricing accommodating legitimate subsidies), again, the deciding voice must be that of the local public. For, at all levels, the collective will of the people is the manifestation of the "public", the state.

The crucial issue in rural infrastructure, then, is not public-private partnership as such or the shift in the relative roles within that partnership, but the recognition of the state at the local level, and the manner in which the state at other levels will enable it to identify and prioritise infrastructure projects, to select the appropriate agencies to implement them, and to determine modalities for a fair sharing of the costs. The problem, then, is to deal with some basic aspects of the functioning of a democratic, multi-level political system and not, as the report suggests, one of a few investment and cost calculations, though they are, indeed, significant.