AAP policies portend economic ruin

Written by SL Rao | Updated: Jan 15 2014, 08:25am hrs
The Aam Aadmi Party (AAP) was a refreshing change after the corruption, lavish spending and hubris of the two leading national political parties. The persistent inflation of the last two years, almost zero employment growth, declining infrastructure and declining investment growth have added discomfort to disgust. The AAP, which came out of the anti-corruption movement organised by Arvind Kejriwal and led by Anna Hazare, offered squeaky clean leaders, apparently ordinary people who were tired of the political and economic quagmire that India had become. They appealed to many who swept them to power in Delhi polls. In fact, millions are flocking to join the party across the country. Small financial contributions from thousands are pouring in. They now appear to pose a serious challenge to both national parties and the regional ones.

Kejriwal is RK Laxmans iconic cartoon, the Common Man. His approach is that of the man on the street. So are his solutions. Power and water are too expensive and rates must be cut. Report all corruption cases to a government helpline and that will solve the problem. The metro is the common mans transport and for short distances it must be free. All problems faced by the common man can be solved by an honest government and its representatives.

What is a disaster for the future economic growth of India is that the AAPs appeal has influenced other parties. The Congress in Haryana is already considering reduction in power tariffs by 30%. Sanjay Nirupam, a Congress spokesman, is agitating in his state Maharashtra that his party should do the same. The new Rajasthan chief minister is now bending to be common from being a princess. No one remembers that, long before Kejriwal, Manohar Parrikar in Goa was living a simple life as the chief minister. A more modest and humble demeanour among political leaders is welcome. But imitating the AAPs simplistic approach to pricing of expensive services like electricity, water or transport (with others to come) must be condemned.

Captain Gopinath, now in the AAP, almost destroyed the Indian airlines industry with his ostensibly low cost Air Deccan by actually setting tariffs below costs. High aviation fuel cost, no cheap air terminals or airports, and inefficient airports with low turnaround times for planes make major cost reduction impossible. Gopinath had no plan to reduce costs. He and his lenders lost money. Kingfisher Airlines, which acquired Air Deccan, is now practically dead. Other airlines that cut tariffs to stay competitive got into trouble because of Gopinaths mistakes.

The AAPs economic policies are like Gopinaths. There is no understanding of complex issues and there is no plan. But Kejriwal is playing with Delhi government funds. The authority for power tariff determination is exclusively with the electricity regulatory commissions. The government can reduce power tariffs only if it pays the difference to the service provider. The Delhi Electricity Regulatory Commission (DERC) had determined tariffs after scrutiny of expenses. Power for Delhi is mostly bought from other state governments or central government undertakings. Where is the scope for corruption A former chairman of the DERC, also an IRS officer, had approved expenses submitted by the electricity companies. He kept aside over R20,000 crore as regulatory assets. This enabled him not to increase tariffs. Legitimate expenses of the companies could not be collected by them. Kejriwal had said that he would use these regulatory assets to reduce Delhi electricity tariffs. This is tantamount to theft. The money belongs to the electricity companies. Kejriwals solution is simplistic. He does not talk about ways to reduce electricity thefts, more efficient working methods, or a disciplined workforce. Fortunately, the Appellate Tribunal For Electricity had earlier ruled forbidding such government action to reduce tariffs at the cost of the providing company.

Kejriwals guarantee of water for all is now a guarantee only to the 50% or so of the users who have water meters. He has no plan to increase water for Delhi by improving the quantity and quality of underground water, or of cleaning up the stinking sewer that the Yamuna river has become, though the latter could be a source of water as it used to be earlier. The AAP has no plans for real governance; only for implementing simplistic promises at the cost of the exchequer. Acting on peoples wishes without planning is misgovernance.

Another AAP leader suggested determining the will of Kashmiris on whether the Army should remain in Kashmir. The AAP is replete with these woolly-headed ideas from do-gooders and intellectuals with no idea of implementation issues.

The AAP has no knowledge or experience of governance and the many issues that must be considered and decided upon. Kejriwal is a bureaucrat brought up in a socialist mindset, viscerally against the private sector, and the making of profits. He prefers government ownership (however incompetent, inefficient and thieving) to give as many free services as possible without considering the consequences on the state finances and the states duty to build physical and social infrastructure while maintaining security.

What other giveaways will the AAP lead other parties into following (much in the manner that other airlines copied Captain Gopinath) Free trips up to three stations on the Delhi metro could become free bus, rail and even air transport.

All these demand immense capital investments and loans from nationalised banks. Given its present mindset, the AAP will be against toll roads. That will end the public-private partnership model. Consequently, infrastructure investments will slow, as will the economy.

The AAPs parent, India Against Corruption (IAC), shares a similar ideology though the two are now separated. They are against new private banks because they will make it difficult for nationalised banks who cannot compete. The IAC is against Aadhaar, for privacy reasons, and very soon its runaway child, the AAP, will be so. Aadhaar would enable social schemes with direct cash transfer to beneficiaries, without having to deliver goods and services physically. Physical delivery has entailed massive theft and corruption. Aadhaar is essential for direct benefits transfer to be practicable.

The IACsoon, the AAP will be saying the sameis concerned about the declining employment in agriculture. We know this decline and trend towards urbanisation are essential to provide better livelihoods to more people. Urban migration from rural areas must be facilitated by better infrastructure, housing, etc, in cities and towns. The AAPs mindset seems to assure the turning back of this clock. Nostalgia about rural life is no substitute for better livelihoods for millions. If the AAP succeeds in winning, we will see the decline of India. This is because competitive politics will compel other parties also to take the AAPs popular and pro-aam aadmi actions.

The emergence of the AAP is welcome because it brought out the disgust with corruption and the culture of entitlement among politicians. It might change our politics and politicians, as mainstream parties are compelled to imitate the AAPs integrity. But the AAP will put the country back in its growth and development because of its illiteracy on economic matters. We cannot expect the AAP functionaries to change their mindsets of a lifetime. The AAP is a bad augury for Indias growth and development.

The author is former director general, NCAER, and was the first chairman of CERC