Opinion - Editorials

Privatisation & Public Services

ISSUES OF ECONOMIC governance are back in focus with the Tamil Nadu Government deciding to restructure its transport corporations. An important change that the Indian economy has undergone during the last decade has been the gradual, but unmistakable, transformation that has taken place at the level of economic management. At stake in this process is the concept of the welfare state. Essentially a post-World War II phenomenon, the welfare state was conceived on the need for an intervention by Governments to prevent market failure. Specific areas of economic activity that engaged attention the world over were education, health and other public services. India's post-Independence, Nehruvian economic thinking had also internalised the concept to ensure that the newborn nation was on the track to growth with equity. The recognition of public goods and services, their importance in economic development and their effectiveness in economic management were by then globally accepted. Consequently, India's management of services was marked by a flurry of Government controls, resulting in the creation of public sector undertakings in several areas of economic activity.

Public transport is a case in point. While attempts to bring the transport services under some form of control began in the country as early as 1915, it was a decision taken in 1950 that made an effective intervention into the market to provide for a properly coordinated transport network. Since 1950, when the Road Transport Corporations Act was passed, 70 State road transport undertakings have been created all over the country. The increasing role of road transport is highlighted by the fact that its share in surface traffic movement has increased since the 1950s, when it handled 20 per cent of passenger traffic and 11 per cent of freight traffic. Present estimates place these figures at 80 per cent and 60 per cent respectively. The country's State road transport undertakings, with a combined fleet of more than one lakh buses, provide mobility to more than 65 million passengers every day and employment to eight lakh people. The growth of this sector, however, did not mean its finances were healthy. In the red for quite some time now, during 1999-2000 these undertakings spread across the country incurred a total loss of around Rs. 2,000 crores, forcing States to embark upon restructuring exercises.

One dominant line of thinking has been privatisation. The factors that resulted in losses to the State-run transport corporations are several and include causes that are both internal and to the system. The sharp rise in modes of personalised transport is an important factor that cannot be overlooked. The switchover from public transport to two-wheelers, for instance, was also propelled by the availability of several financial lending schemes. This, combined with internal failures such as the tendency to utilise State transport corporations as easy avenues for providing employment, irrational fare structures and rising costs of fuel, meant a steady drain on their finances. The present efforts at restructuring public transport should be seen in their entirety and not merely from a financial point of view. Suitable changes in related fields are also called for. Needless to say, an efficient and successful public transport system will have a considerable spin-off in terms of lower pollution levels and reduced crowding. The answer to the public transport conundrum lies not in dismantling the system totally, but in revitalising it through rational and economic decision-making, while maintaining equity imperatives. Given the importance of public transport in daily economic activity, Governments should not abandon their task of providing affordable and efficient services. Declining financial health, most of which can be corrected through systemic changes, should not be held out as a reason to expose such essential services entirely to market forces.

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