Should BMTC, BWSSB & KPTC be privatizied ? Will such a move improve services & benefit citizens in the years ahead ? When will it be a good time to think of privatizing these entities ? Are we happy with their services as they are ? If not, are there ways to improve them without privatization ? Are there successful examples of such privatization ?

Since liberalization, citizens have benefitted from the successful privatization of airlines, telecom, banking & insurance services. However, all these services are aimed generally at the better off citizens who can take on a price hike or two in their stride en-route to a path of privatization & wait until severe competition drives prices down.

These services are not generally aimed at the lower middle class or the poor - the class that uses PDS, govt run schools & uses health care from primary health centres --- economically weak sections, numbering some 600 million or more in the country, as a whole.

This same class also uses buses, trains, water & power along with other classes - this may explain why they remain under wraps by the netas as votes from these sections are 'gettable' with promises of free /subsidized train fares, subsidized bus fares for the working class, subsidized /free power, even water thro' community water taps, etc.

This is not for the want of trying elsewhere in the country :

Privatization of power & it's distribution has made some progress. In Orissa, attempts were made to privatize the power sector but results have not been encouraging. In mumbai & delhi, they have been quite successful, though.

Privatization of buses for intra-city transport elsewhere is still primitive & almost all operators are of very low quality - this still has a long way to go before it attracts the quality players, if such a turnaround can be orchestrated. Another factor is that the world over, generally public transport is more or less operated as a "not for profit" sector as returns are indirect by way of creation of employment, taxes, competitiveness of the city, image, etc. Thus, assisting quick & cost efficient movement for the general public, particularly the poorer sections becomes vital & important, irrespective of the poor direct returns from the service, or even subsidizing it in consideration for the overall benefit it provides. Indore, with a new PPP model has started working very well & is perhaps an exception to this.

Privatization of distribution of water has not seen any move yet.

I am of the opinion that as long as we carry the baggage of these large EWS sections, progress on privatization efforts in the areas of Transport, Power & Water will remain slow & evolve only in proportion to the decline in their numbers. Quick step efforts at privatization will meet with stiff resistance from these EWS sections & politicians will roll back any privatization initiatives for fear of losing elections as EWS votes can make or break a party's majority.

What are your views ?

thanks karihaida, southern parts too.

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sri awesome. succinct and and yet complete. there some issues where artificially controlling demand is bad and some where satiating demand is bad. there is no one solution that fits all.

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If anyone knows, does BIA have rain water harvesting implemented ? 

With the big terminal building a lot of rain water can be harvested. 

http://clean-and-green.blogspot.com

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i am not convinced either way, but some qs i have. is cell fone = public transport = banking = water supply = services = power and so on? cell fone distibuted use. one person to another person. transport distributed use. one person one place to another. what is the impact of flooding market with cell fones? what is the impact of flooding city with buses? similarly water. is it possible, when supply itself is seriously controversial and limited? oth, will private industry innovate or will it subvert/exploit? eg. bangalore/mangalore train. eg. enron. a side effect of sarkari service levels is virtue of control and conservation. though one hopes that atleast minimum levels of service they provide.

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awesome posts kari. respect, tarlaihda

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This website very good info about water conservation efforts with focus on south india.

http://www.indiatogether.org/environment/water.htm 

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BMTC had plans to go in for an IPO sometime back. While privatization brings in a lot of competition of effeciency and incentives to perform, it can fail badly if there is no strong regulator or good competition laws.

It is not good to privatise BMTC in one shot. There should be good government control / influence in the public transport of the city so that formulating public policies would be easy.

But BMTC can tap capital markets by going in for an IPO which would broaded it's shareholder base and stakeholder base as well.

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Should BMTC, BWSSB, KPTC be privatizied ? A very good question! BMTC Go to Mangalore and Udupi and see how well the private intra-city buses operate and how rates are much lower than BMTC. Volvos are not there but who needs Volvos when the ordinary buses themselves are efficiently run? BWSSB Go to Bommanahalli, Begur area and see how private players are supplying water. So far, all these years there has not been a single complaint of water-borne diseases. Compare this with multiple outbreaks of enteric diseases in the last one year alone because of BWSSB's inefficiency. KPTC/BESCOM I had my schooling in Karwar which was the only town that had a private electric supply company. It bought power from the govt. and was responsible for distribution. Except for just a minute's powershutdown at 10 PM in the night, we never had any blackouts for the 2 years that I was there. Of course, this was quite some time back. How many deaths have we had because of the carelessness of BESCOM, people coming into contact with live cables! Have any of the BESCOM officials been held accountable for these cases of manslaughter? If the same cases had happened with private companies, the CEO or the owners would have been arrested. Corporates outsource everything except their core business. The government's core competence is governing and regulating the activities of others. It should restrict itself to doing just that! If on the contrary it tries to run everything, who is there to regulate or supervise it? In the absence of such supervision, because the government cannot supervise its activities by itself things begin to deteriorate and pose dangers to the prajas.

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I am all for privatization, open markets and competition to benefit consumers. But I also think privatization needs a well-thought out planning. Immature implementation of privatization might not yield any benefits and worse, cause harm. One example I want to share here is that of British Rail. UK gave private operators the right to run the trains (while a single public sector body owned all the tracks). Interestingly, privatization failed to achieve the expected improvements in punctuality, prices etc. The effects , positive and negative, are listed in this article http://en.wikipedia.org/wiki/Privatisation_of_British_Rail#Effects_of_privatisation As I understand, the problem was because the routes were auctioned in such a way that a single player was operating a given route. While this was necessary to entice the private players to invest, this also meant that there was no choice for the customer to choose between operators for a given journey. For example, a journey between Birmingham and London has to be made through 'Virgin Trains'. This effectively killed private players' incentive to compete and the privatization in general has not been very successful. I guess we must use such failures as lessons and make sure that we lobby for privatization with adequate measures to guarantee all the benefits. -Shastri

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CityZen - Good Inputs ---

I have observed & travelled on some of the Mangalore & Udupi buses. They are doing fine in terms of punctuality whilst also maintaining low fares. However, quality-wise, they are quite ordinary & BMTC I think is better in this aspect. As far as safety goes, Mangalore buses are rash & unsafe, drivers are quite careless as various bus operators compete for the same customers.

Water supply - I suppose you are referring to the water tanker truck supply (?)  Quality-wise, it may be good - & is in use at many places on the outskirts, & even within the city. Cost-wise, it's hugely expensive as a truck costs some 220 rs. or more. This was not what I was referring to. What I meant was privatization of the water supply network/s right from the pumping station at a dam or lake, right upto the house or office. See the link below for details about water privatization in various parts of the world from wikipedia :

http://en.wikipedia.org/wiki/Water_privatization

About power - power production & distribution can both be in private hands. Accountability is poor with BESCOM as it is with all other govt run services, such as BWSSB, BBMP, etc.

You are very correct in saying that the government must concentrate on only governance & regulating activities.

However, it must be noted that privatization, especially privatization of public utilities, (such as power, water, railways & bus services) is itself a long & arduous task, as shas3n also mentioned. Each sector will take many years, if not decades to stabilize & yield the best results, & many goof-ups & experiments will likely take place in the process to gain expertise to develop the right mechanisms.

 

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TS - Yr questions noted, wl get back soon.

Naveen

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We need to remember that what is being discussed here is the privatization of public goods - something that every human being should have access to - clean water, reliable and affordable power (whether 24hrs or not is a separate story), affordable public transport, good education upto high school. 

Is the real issue here lack of accountability and not really the corporate structure of the service providers?  Will changing the corporate structure automatically bring in accountability?

Can we really model urban transport on the airline industry.  There are far too many differences between the two.  Simple ones being driver (pilot) licensing and the fact that an aeroplane cannot stop wherever it wants to pick up passengers.  How do we regulate urban transport so that safety of the general public is not compromised - regardless of whether BMTC does the job or BTS.  If we cannot regulate BMTC, then what makes us believe we can regulate an XYZ?  I am not saying it is impossible, but it is complex.

How do we ensure that someone who is at the economic margins gets access to decent public goods?  Schools are an example.  Those that can afford it go to private schools and these are probably the better educated (at least in terms of a degree) and those that can't go to public (govt) schools.  The net result is a sort of ghettoisation where better off people in society (in general) just don't care for the state of govt schools and force money to be spent on flyovers (e.g.) so that they can speed on in comfort. 

See this for some experiences on water privatization.

http://www.globalpolicy.org/socecon/gpg/index.htm

I will share an example that things don't have to be as bad as we see.  The lady who works in my parents' house had a fibroid.  My father (a doctor) arranged for her surgery in Jayanagar General Hospital (he does not work there).  Apparently she was treated very well and given meals, etc.  This is because the governing council has some responsible and responsive people in it.   The same surgery in a private place would have cost her Rs.25000 or more.  I pay income taxes precisely for this sort of stuff and not just to pay salaries of government officials. 

Srivathsa

 

 

 

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While not debating on specifc sectors ( water vs transport etc) on this particluar debate , would like to ponder if there is an alternative way then to improve efficencies if not profit.

Actually there is,;

Premise: One wants privatisation because of the efficency it is deemed to bring to the enterprise , not for the investments by private sector alone.

If so , then.

a)why should the head of BMTC be an IAS official , why not head hunt the best.

read the kasturirangan  report , where such a solution is reccomended for even the BBMP.

b)why cannot heads of public sector /government agencies be brought to court answerable , sacked for inefficency.

two separate points here:

one...labour laws not just at the top but across  public sector.

two..legal remedies for a consumer against a publuic sector company.

there are more , but you get my drift., the whole area of administartive reform that IAS resists or becomes the body which is entrusted to do the report of reform!! 

if there is way to bringing efficency to the government sector I am all for it (but not on a slow burn please).Otherwise privatisation might be the only way to go...even in senitive areas like water

 

 

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Even with having a more accountable bureaucracy (my assumption), UK, under Lady Margaret Thatcher, went in for privatisation in a big way, and benefited from it greatly.

Muralidhar Rao

PS: Since the debate has to be specific to the sectors, I have opened another blog captioned 'Imperatives of privatisation of distribution of power'. I'll perhaps open fresh blogs for other sectors calso. 

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Shastrigale'

You couldn't have put it better than as "I guess we must use such failures as lessons and make sure that we lobby for privatization with adequate measures to guarantee all the benefits".

Privatisation is inevitable, and the only way out. But, you can expect the vested interests to do their best to sabotage all efforts. Either because of that, or because the process provides the very last opportunity for these involved to make a quick buck, or because of plain incompetence (or, not to be too harsh - lack of foresight), many things have gone wrong, giving the status-quoists sticks to beat the liberalists with. The important thing is to get the whole thing re-worked based on the learnings from the failures, and not go back to the bad old ways.

Slow progress of Orissa & Delhi power reforms ae because of sabotage. Delhi atleast is beginning to get a grip on things now, and the results are showing. The vested interests in Karnataka are too powerful and clever, and consequently, there has been hardly any movement, though privatisation of distribution has clearly been stated as the objective of the agreed reforms process. Enron resulted from greed. British rail fiascos probably resulted from bungling.

The recent turnaround by the Indian Railways is being touted by the status-quoists as proof that the Indian public sector managers can be as competent as any in the private sector. But, that has never been disputed. The problem is the interference by the politicians in their day-to-day working. It is plainly because of Lalu's realisation that continuing to play the joker role had its limitations, and that after the years of mismanagement of Bihar, he needed to redeem his credibility, that he finally decided to give his managers a freer hand, and then things started moving. For all that, even today, there are enough obvious artificialities prevailing - trains for which there is very little use, running almost empty, but which cannot be discontinued just because it links one party MLA's constituency, even as the much travelled Bangalore-Mangalore route is totally ignored. Like I am advocating for BBMP to be handed over all of BMTC's assets (except the rolling stock), so that their usage can be made available to competitors against user charges, I am advocating private sector train operations using railways assets against payment of user charges.

Muralidhar Rao

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Reliance Energy Ltd. has bagged Mubmbai Phase 1 Metro on PPP model. Can this be done to Bangalore and add more branches to our Metro?

http://www.mmrdamumbai.org/projects_metro_rail.htm 

 

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TS, Srivathsa, Vijayan,

Privatization of telephony, banking, insurance & airlines has been swift & without much hullaboola as these did not effect the economically weaker sections (EWS) when it was started – users were mostly the better off citizens who could accept market vagaries easily, as I mentioned. Now that these sectors have more or less stabilized, the benefits are available to the poorer sections too – especially telephony & banking, which have now become very basic requirements to run even petty shops, autos & taxis that never had a mobile /telephone before.

Continuing on the path of liberalization, it is desirable that other basic sectors (power, water, transport) also improve. The service levels in all these sectors could do with a lot of improvement as corruption & private interests have been ruling the roost, whilst service levels have continued to remain the same without much needed improvements. The question is how do we improve it without jeopardizing the interests of EWS ?

Developing capacity to regulate & oversee, obviously – the post independence era saw domination by IAS officers who were never up to the task, but assumed capable enough to meet challenges for any & all needs. This may not have mattered much up to the time of liberalization, but demands & competence levels required now are far higher & we need professionals & not administrators to oversee the functioning of these various bodies, or overseeing these areas, if & when they are out of state control.

Recognizing these needs, the Kasturirangan committee report has objectively recommended many new changes, unlike the usual ‘stain-remover’ kind of reports of the past.

Take water, for example – similar to airline deregulation (where airlines were forced to operate in the north-east & other poorly patronized non-metro sectors), a condition can be incorporated to ensure that community taps (24x7) be provided by the private water distribution companies & they could then be subject to questioning, RTI laws & the courts – all this could improve services, though initially, costs may go up to improve the existing BWSSB infrastructure.

Likewise, power – a condition that power would be supplied to EWS quarters at subsidized rates whilst power supplied to the well off BDA layouts can be at higher, unsubsidized rates could lead to improvements in the long run.

For intra-city bus services, the logic is the same – use differentiated services – the AC buses would subsidize ordinary services. Also, different licenses for different routes so that the many drivers do not compete too intensely & bite into one another’s turf, thereby making it safer & better, overall. Additional revenues can be through advertising on buses & bus shelters to ensure that the players have enough incentives to bite & improve services, overall.

These are examples, & obviously there would be many more nitty-gritties to sort out.

Srivathsa - education & health care for EWS, even in countries such as the US & UK are held & run by the govt since they need huge subsidies & the services are generally not profit oriented. I doubt very much if they can be handed down to private parties, ever.

 

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Power distribution in Mumbai and Delhi are already in private hands. Reliance Power in Mumbai and BSES+Tata Power in Delhi.

It would be interesting to know if things have improved in Delhi and Mumbai with privatisation of the power distribution. 

 

http://clean-and-green.blogspot.com

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In today's TOI, there is an article about how private water suppliers are looting the ground water reserves. (sorry the epaper link doesn't work)

Water supply privatization has to be done with a lot of over sight and very tight regulation, but more importantly local communities must take it upon themselves to invest very seriously in ground water recharging, if not in water conservation. Its sad that water is not being given any importance compared to infrastructure, that too in the light of the fact that the ground water and the overall water situation in North and eatern parts of bengaluru is precarious.

 

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The only justification for the government to continue its enterprises is helping the EWS Economically Weaker Sections. (Thanks to Naveen and others for highlighting the cause of EWS). Beyond that, everything should be privatized to be operated under guidelines and policies laid down by the government. Let me dwell on the cooking gas which is heavily subsidized. There are public sector gas suppliers who are bleeding because of govt. controlled prices and there are private sector companies which charge market rates at almost double the govt. rates. The PSUs are now forced to take stern steps to prevent misuse of domestic cylinders by autos and hotels. The govt. has also stopped giving kerosene to people having gas connections. New gas connections are given only to those with ration cards. These measures ensure that the subsidized service does not go to the rich. These kind of strict measures could be innovated because the services were provided by semi-autonomous PSUs which found their profitability eroding. I doubt if the govt. departments on their own would have been able to come up with such drastic measures. 

I feel this is the kind of proactiveness needed in ensuring that the govt.'s largesse goes only to the economically weaker sections of cityzens. This is how an honest govt. should handle the monies it collects from taxpayers - with care.

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Tarle, here is the TOI article Private suppliers LOOTING water reserve Nirmala M Nagaraj | TNN Of the 30 houses on a lane in Indiranagar II Stage, around 15 have their own borewell. Of these, Mohan Kumar’s borewell adds to the depletion of groundwater there more than the others as he is in the business of selling water to reputed hotels for more than 12 years. This forced residents to complain to BWSSB, Lok Ayukta and the mines and geology department, but the authorities are helpless. With no legislation in place to check it, exploitation of groundwater for commercial purposes is a thriving business. Several private water suppliers like Kumar loot the emergency water reserve. “Groundwater is no private asset to be exploited limitlessly by individuals or corporations. It is a cosmic wealth to be preserved in trust beyond the power of the state to barter away,’’ says leading geologist B P Radhakrishna in his book ‘Groundwater in Karnataka.’ BWSSB supplies around 20,000 litres per month to each of the 5.35 lakh households with Cauvery water supply. This does not meet the growing urban need and around 75,000 private borewells have been dug up in the city. According to BWSSB, 900 million litres per day (MLD) of Cauvery water is pumped daily, of which around 232 MLD (14%) is used for non-domestic purposes. Most parts of the city suffer from a water crisis, especially the erstwhile CMC areas where BWSSB pipelines are not there and private water suppliers are minting money, supplying 6,000 litres of water for Rs 250 to Rs 500. As per a mines and geology department study, of the 918 water samples collected from 735 locations in Bangalore and surrounding areas, samples of 370 locations were unfit for domestic purposes and were nonpotable. But unmonitored and ignorant water suppliers provide water from several such places, and proof of this is the frequent outbreak of water-borne diseases in the city. Since there is no control on drilling deep borewells and pumping unlimited quantities of water, there is a steep decline in water tables. According to Radhakrishna, a large amount of fresh water is used for sanitation purposes when in most parts of the city, safe drinking water is a rare commodity. So use of fresh water should be drastically cut down, he feels. It is estimated that each person generates 550 litres of sewage and 15,000 litres of water is used for bathing and washing in a year. “In an aircraft, half a litre of water is used to meet sanitation needs of 400 passengers. We need to adopt such conservative steps at home like implementing dry toilets, based on the principle of separation of urine and faeces, collected in separate containers. Those who can afford it should go for sun-bio electric toilets,’’ he says. The UN has declared 2008 as the international sanitation year. Presently, BWSSB is meeting the water needs of 100 wards and to reach out to the erstwhile CMC area, an additional 500 million litres have to be augmented, which is planned through the Rs 3,000 crore Cauvery Stage Four — Phase 2 project. Bangalore district’s groundwater resource BANGALORE URBAN — Gross annual groundwater recharge is 17,508.33 HAM and gross annual groundwater ceiling for use is 32,916.66 HAM and the balance groundwater potential is zero BANGALORE RURAL — Gross annual groundwater recharge is 46,007.40 HAM and gross annual groundwater ceiling for use is 75,308.33 HAM and the balance groundwater potential is 2,042.98 HAM KOLAR — Gross annual groundwater recharge is 61,088.14 HAM and gross annual groundwater ceiling for use is 1,14,946.82 HAM and the balance groundwater potential is 989.59 HAM (Note: HAM is a measurement unit)

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“Groundwater is no private asset to be exploited limitlessly by individuals or corporations. It is a cosmic wealth to be preserved in trust beyond the power of the state to barter away,’’ says leading geologist B P Radhakrishna in his book ‘Groundwater in Karnataka.’ very very important point. the test for privatization ought to be: is it a cosmic asset? can it be exploited limitlessly?

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I'm all for privatization, but it has to be in selective sectors. Me feeling is that natural resources should not be privatized, or even if it is, then the gov't should have a major say. Power is fine, since it is not a natural resource per say, and the privatization is well justified as they will be more efficient in minimizing T&D losses, reducing wastage and pilferage.

But in resources such as water and minerals, I'm not too keen on free market principles.. as an example take the case of mining in Bellary, the iron ore resources are being depleted at a rapid rate, but with little benefit to the country in the long run. People might argue that this mining has improved the economy in the Hyd-KA area, but is it worth it?

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BIAL apparently has rain water harvesting and sewage treatment plant for resuse the water..

http://www.thehindu.com/2007/07/13/stories/2007071357380500.htm

" But he ruled out any chance of flooding because the airport would be equipped with good drainage system. The landscaping around the structure would prevent it. Besides, the airport will have a rain-water harvesting system covering 1,680 acres, a sewage treatment plant and a tertiary treatment plant to reuse the water. "

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