Indian regulation: What does colonialism have to do with it?
This is a response to the commentary in the January 2013 issue of Governance, “How Colonial Legacies Still Shape Indian Governance: Power and Telecommunications in Comparison,” by Sunila Kale and Rahul Mukherji. You can also read a reply by the authors.
By Richard D. French. In Sunila Kale and Rahul Mukherji’s recent commentary in the January 2013 issue of Governance, “How Colonial Legacies Still Shape Indian Governance: Power and Telecommunications in Comparison,” we are offered two sectoral case studies in liberalization. The authors want to show that, despite impressions left by India’s massive power failure last summer, Indian policy-making can get things right. Telecom is the favorable case, where we are invited to believe that policy-making has been “sharp and effective”; power is the unfavorable case, rightly called “a disaster” where policy-making has certainly been “dilatory and ineffectual.”
The supposed difference is that when Indians wrote their own constitution, they were unduly influenced by the Imperial statutes’ division of powers between the national and subnational governments. Telecommunications is national and therefore has been reformed successfully; power is largely subnational and its reform has therefore been a failure – these are the “colonial legacies” that haunt a country which has been making its own decisions for over 60 years.
The problem with this interpretation is that it is a sort of “Just-So” story. In telecom, an apparently successful outcome must mean that policy-making has been “sharp and effective.” In power, failure must be blamed on a maleficent imperial past. Neither contention does full justice to the facts.
In the power sector, the authors simply assume that the division of powers is ipso facto flawed. This seems a little myopic, given the fact that power utilities are run or regulated satisfactorily by subnational governments in a number of countries around the world. Kale and Mukherji wring their hands over the politicization of power tariffs and operations in the states, but they never acknowledge that the real issue is not the constitution, but the incompetence and indigence of most Indian state governments – the chaotic politics, the clientelist “vote-banking”, the ineffectual bureaucracies, the inability of the states to mobilize revenue, their mutually parasitic political and financial symbiosis with the national government.
Blaming the Indian power disaster on the imperial influence is like blaming illiteracy on Gutenberg. If a path-dependent case is to be made, it should start no earlier than the Nehruvian settlement, of which the constitution is but a part. A thought experiment in which power were centralized tomorrow would without a doubt improve prospects for reform, but if telecom is any example, there would remain a long, time-consuming, expensive, welfare-delaying struggle to actually deliver a proper power infrastructure for Indian consumers. The real priority for power is to try to get state governments in order.
In telecom, the authors pass lightly over India’s decade-long battle to get the policy more or less right; they claim that it has been “a much more benign and seamless process” than in power, but since power has been an abject failure, this is not saying much. The two dozen or so foreign telecom investors who were attracted to India in the early to mid-nineties, most of whom quickly left, might be pardoned if they asked what was so benign and seamless about the process.
Kale and Mukherji acknowledge “petty corruption” in Indian power, but they are surprisingly silent about the grand corruption which has plagued telecom from 1994 to yesterday – and probably tomorrow. Anyone who reads Indian newspapers is more than aware of the sorry succession of improvisation, scandals, legal cases, and policy reversals which the allocation of licenses and the specification of terms and conditions for private telecom continue to visit upon a hapless citizenry.
The author was present in a Delhi hotel meeting room when an industry personality informed those around the table that a certain problem created by the Department of Telecommunications (DoT) could be resolved “for a million dollars US.” The author, representing Tata, and his colleague, representing Birla, rose and left the meeting. Both of us were regarded as failing to pull our weight in the industry’s campaign to combat the DoT.
The authors rightly point out that the DoT had to be dragged kicking and screaming into the era of liberalized telecommunications. In plain language, an agency of the Indian state spent its efforts and resources for a decade combatting the stated policy of that same state, and sabotaging the entrants who had accepted that policy at face value. The authors rightly state that the Prime Minister’s Office (PMO) was a factor which worked in favor of reform. But Prime Minister’s Offices have immensely large and complex responsibilities. While the Indian PMO was fulfilling these responsibilities for long periods, the DoT operated without adult supervision, and the entrants and their customers, actual and potential, suffered.
It is not for nothing that the DoT was known as “the Ministry of dirty tricks” (Jishru and Jarayam 1999). As an Indian journalist (Barman 1999) put it, “While some arms of government try to attract private investment to infrastructure projects, other arms work equally hard to stall everything. So the government arm-wrestles itself, investors get bored and amble off elsewhere and funds dry up.”
There is much more to be said about these issues than the space available permits. The subtext of Kale and Mukherji’s commentary is that observers of India and potential investors should recognize that many Indians want to support the growth and economic success of their country. Any friend of India can only agree. But a vaguely plausible reconstruction, however well-intentioned, is not the instrument for the purpose.
RICHARD D. FRENCH is CN-Tellier Professor of Business and Public Policy at the University of Ottawa Graduate School of Public and International Affairs. He was Managing Director of Tata Communications, a mobile phone company in Andhra Pradesh, India from 1995 to 1999.
Barman, Abheek. 1999. “Yet another reason to privatize.” Economic Times (November 3).
Jishnu, Latha and Anup Jayaram. 1999. “Ministry of dirty tricks.” Business World (May 24): 12.
Kale, Sunila S. and Rahul Mukherji. 2013. How Colonial Legacies Still Shape Indian Governance: Power and Telecommunications in Comparison. Governance 26.1 (January): 1-4.