Dear Mr Amitabh Kant, your pro-privatisation argument is faulty. Here's why
The government is incapable of handling infrastructure projects, according to the chief executive officer of NITI Aayog, Amitabh Kant.
While there is nothing new in this rant based on the economic theory of 'minimum government maximum governance', but Kant in his argument this time has called for even privatising operations of all the schools, colleges, as well as national highways and dedicated freight corridors.
Is this really possible in the near future? And does Kant's argument make any sense at the moment?
Let's us analyse it.
The private sector investment in the country has been at its lowest in the past 3 years. According to Business Standard, “Fresh investments by the corporate sector hit a new low in fiscal year 2016-17. The combined capital expenditure by the country’s top 1,000 non-financial firms, in terms of revenue, was up just 5.8 per cent in FY17, growing at the slowest pace since 1992.
Nobody has stopped the private sector from investing in the infrastructure projects. But the fact that they have not been able to deliver even their past projects only implies that the the Indian private sector is not mature enough to replace the government for big ticket investments.
Moreover, in places where the private sector was able to deliver the projects - take for example the Delhi Airport Metro, the Ultra Mega Power Projects and toll roads, the companies surrendered the projects on their own expressing inability to run them.
This is why, the Delhi Airport Metro line, which was awarded to Reliance Infrastructure is now being operated by the government. Similarly, Tata Power as well as Reliance Power, have time and again requested for change in the terms of contract for the Ultra Mega power projects that they had won in the bidding process.
The companies that have surrendered their projects were the biggest names in the Indian infrastructure space and their failure in running the operations successfully only suggests that Kant's confidence in the ability of Indian corporates is misplaced.
The NDA government, much like its predecessor, has been a supporter of privatising the loss making government units. The sale of Air India is a part of that process.
But much like its predecessor, the government and its high profile officials like Kant, have not been able to explain the grand failure of the private sector since 2012.
All the top 10 most indebted companies in the country are from the private sector and each one of them has defaulted on their loan payments, contributing to the ongoing non-performing assets crisis in the Indian banking sector. Power and steel sector companies are frantically looking for buyers to buy their financially unviable projects and bail them out.
The fact that those projects are not worth the cost they were built at, the government is actually trying to rope in the government sector companies to run their operations until they become profitable.
Kant, before suggesting an outlandish idea of privatising the education sector must also lay out a plan to make that private education affordable for every citizen of the country. The IITs, IIMs as well as central universities in the country are still the best that India has. There is not a single private university, no matter how big its infrastructure is, that has been able to match the quality of education delivered in the government run institutions.
Until Kant finds answers to all these questions, he should avoid making random statements. They make no sense, and raise questions about his understanding of the current state of Indian economy.