Privatising governance

Updated: Feb 21 2002, 05:30am hrs
Why should you pay increased taxes in the forthcoming budget, you may well ask, if all the government is going to do is to waste it. After all, as even the Planning Commissions mid-term review of the Ninth Five Year Plan shows, while the government spends close to Rs 10,000 crore on food subsidies per year, around a third of both wheat and rice gets diverted from the target audience. And figures from annual economic surveys show the pathetic achievement of targets on most poverty alleviation and employment generation schemes. Arun Shourie, the minister for the north-east is, youd remember, on record as saying that if you took the entire development assistance allocated for that region, and dropped it from a helicopter, the chances of a citizen getting it were higher than that through the normal development programmes.

Well, heres an option thats worth considering, an experiment worth making even though, on the face of it, it could appear tantamount to surrendering our sovereignty. The United Nations Office for Project Services was started in 1995 as an experiment to see if this would make the UNs operations more effective. UNOPS began with executing projects worth around $300 mn today this is up to $4.5 bn. According to UNOPS executive director Reinhart Helmke, the main reason for the organisations success is that it has been able to cut costs (compared to traditional UN projects) by around a fifth. It has, he says, done this through establishing thorough procurement programmes that include performance-linked payment to suppliers/contractors.

In Peru, for instance, UNOPS helped the government contract equipment to construct two dams with turbines, it helped set up a power plant in East Timor and revamped the entire power grid in Bosnia. And in Ecuador, UNOPS was asked to take over the governments programme to build schools three years ago the UNOPS schools cost 40 per cent less than those begun by the local government. The Ecuador government, in fact, was so pleased by this achievement, it promised to build 40 per cent more schools from this saving. In another country (Helmke, understandably, refuses to divulge the name), UNOPS was invited to take over some projects for converting industrial units from eco-unfriendly chlorofluorocarbons to non-CFC technologies, and in some contracts found the price reduction achieved was as much as 80 per cent.

A sign of the major corruption that goes on in all government procurement operations youd think. Well, yes and no. Helmke says that since suppliers know they will definitely get paid by UNOPS, they tend to charge more realistic prices instead of building in a risk premium into their pricing. Corruption, though, is a factor in one case in south-east Asia six months ago, UNOPS walked out of a $200 mn project it had been asked to monitor by the lender, when it felt that the government was not being transparent.

UNOPS also runs various poverty-alleviation projects under the aegis of the International Fund for Agriculture Development. It has seven such projects in India in states such as Andhra Pradesh, Haryana, Maharashtra, and Uttar Pradesh. Most of these projects are micro-credit programmes where small loans are given to individuals to set up self-sustaining local industry. Well, guess what As opposed to between 25 and 30 per cent disbursement of loans for most such government programmes in this part of south Asia, the IFAD projects have a disbursement level of around 80 per cent. In the Andhra project, for instance, incomes in the IFAD project area have almost doubled. Quick disbursement makes two types of difference. For one, the money gets disbursed and so the poor benefit. Second, the government is, in any case, paying an interest to the lender for the funds so if these remain unutilised, thats an additional cost it has to bear.

All this is great, one can anticipate the howls of protest, but Indias not some tinpot Latin American country, nor is it some ravaged Timor or Kurdistan. A point well taken, but the point here is different. India has a lot of leakages in most social sector programmes (the late Rajiv Gandhi used to say only four annas out of every development rupee reaches the poor), and corruption is rampant in government procurement of equipment for anything, whether its for social sector programmes, for departmental use or for public sector firms. No one is saying that the countrys defence procurement should be handed over to UNOPS, but it makes sense to experiment with one or two projects both, in the social sector and in government procurement if nothing else, to establish benchmarks to be applied to other projects.

Postscript: Delhi chief minister Sheila Dikshit was given a presentation by UNOPS earlier this month, and said shed see if there was some way UNOPS services could be utilised. Now to ensure the bureaucracy doesnt scuttle it, because if theres one lot (apart from Dikshits cabinet colleagues) who could get badly exposed, its them.