One of the most thoroughly screwed up areas in public life is the Transport. Not only in India, but in several other countries, this very important area is muddled up, thanks to the noble intentions of the Governments.
Lets see the insanity of the situation. A two-wheeler today costs upwards 40k and a four-wheeler upwards of 2.5L. This is a huge factor of a person's annual salary, considering India's Per capita. For a majority of people, a vehicle is rarely used upto 2 hours a day. Buying an item whose cost is so high and whose utility is so less frequent should not make economic sense. People would ideally rent vehicles or share vehicles rather than buying on their own. This would be the only economically sound and viable option, if not for our regulations.
Firstly government has a monopoly on public transport. It makes the transport cheap, dirty, unreliable and crowded. Further since it is governemnt owned, the fares have to be low, and meet only the minimum standard. Forgiving the lack of corporate management skill in the government, the financial position of all these public transport corporations through-out the country is in a dismal state, thanks to the high levels of corruption. If an absolutely important and repeatedly used service, which is run a monopoly, is not economically viable, then the only blame will be on bad-management.
What are the effects of such management. If Cheap, Dirty, Unreliable, Crowded are the adjectives that can be given to this sector, then people obviously shy away from it. Any person who can even remotely afford a own-vehicle will definitely go for it.
There is an interesting side-effect to it. If private enterprise runs public transport, Oil or Energy are a cost to it. Companies will be forced invest on reducing cost and hence vehicles will become energy-efficient, and economical alternate energy sources will be easier to come into market. If private enterprise is only into selling vehicle, Oil or Energy is at best a non-competing partner in the market. Companies see no reward in investing alternate fuels, as Oil is not a cost to them. Since the cost of Oil is pushed to the common man, who is no position to invest on research for alternatives, he picks his available alternatives. Cheap and Unreliable Public transport. Costly but Reliable Private transport. If Reliability leads to success, then you know who gets richer.
As long as the person is poor, he would choose Public transport, but the moment he becomes better off, he's off to buy a vehicle of his own. Another area in which our government regulations cause a heart-burn, is our taxi-service. Autos (three-wheelers), as they are popularly called, are a life-line to public transport, especially for shorter distances. Government excessively regulates them. Fixes the price, Fixes the color, does not allow branding, fixes the dress code, limits the number of passengers.
What is the effect of each:
1. Fixing the price: Auto drivers earn a measly amount per day. Most auto drivers rent their vehicle per day for a fixed amount like 300/- per day etc. They toil the whole day and hardly make an amount more than the rent they pay. No matter how hard an auto driver works, his income is limited due to this. Government artificially keeps the auto-drivers poor, in the garb of keeping the common man happy. Somehow, for government, auto drivers are not common-men. In many areas, auto drivers do not follow pricing and resort to fleecing and/or extortion. Every one of us, at one time or the other, would have had a good fight with an auto-driver over pricing. Such unprofessionalism in a service which we use so blatantly.
2. Fixed colors and no-branding: How many times did you get to travel in the same auto, in which you had once got a very good service. For me, it is almost none. For auto drivers, there is absolutely no incentive to be professional. If they are polite to you, or do not cheat, is there any benefit for them. Almost none. He does not see a repeat business. You would notice in areas where there is repeat business, auto drives act very polite and professional. Such is the effect of our regulation. We reduce people from professionals with self-respect to fleecers and extortionists.
3. Limiting the number of passengers: In India, every kind of vehicle is overloaded. It is in our culture to utilize our resources to the breaking point. Buses, lorries, cars, cabs everything is overloaded. Fining auto-drivers for overloading is just exhibition of power on the powerless.
To fix such simple issues, government ingeniously finds horrible solutions. By making traffic police monitor auto-drivers, we are insulting the police profession. Police who have to manage traffic, handle accident cases and investigate road related crimes have become arbiters of auto-fares, bullying around auto-stands and pocketing petty bribes.
The solutions are simple and straight-in-the face. Yet, we choose to ignore them without an ounce of reason. First, privatize the public transport. Let corporates run the buses. They'll do it more efficiently and cost-effectively. Second, allow branding. Customer loyalty greatly reduces prices. Enable free-market competitiveness, ie. allow multiple operators ply on the same routes. Third, abolish pricing controls, and branding controls on autos. Let them compete with the bus service. They are a good alternative for short travels. These can greatly benefit from alternate fuel technology like Solar / Electric / Pressurized-Air. Abolish any subsidy on transport fuels. Let the end customers feel the real cost of fuel. By subsiding one technology, we are closing doors on alternates.
11 July 2008
10 July 2008
Hijack of Basic ameneties
Why am I so against helping the poor? Because in the garb of helping the poor, government regulations acheive the just opposite, hijack the basic ameneties and make them costlier. The basic amenities are food, water, energy, transport, roads, electricity, drianage. I will take up transport and energy later. But the most basic of all requirements, clean drinking water. How does governemnt screw it up?
Water is a scarce commodity. Hyderabad has 3 huge waterbodies, Hussain Sagar, Osman Sagar/Gandipet and Mir Alam tanks all of which were commissioned much earlier to Indian independence. In the subsequent 60 years. Government has not built even one more water body for the city's growing population. So much for centralized control. But the problem is not in inaction, but in action. I live in a colony of high tax payers. The average income tax per house-hold in my colony would exceed 1 lakh per year. None of the 1000 or so flats nearby have drinking water connection. We buy drinking water from private companies which is very un-reliable. There is a small slum right next to my colony. I doubt if anyone there pays even Rs.1/- as income tax. They have a government water connection and you wouldn't believe the amount of that gets wasted there.
I do not envy their fortune. Quite the contrary, I want to find out the reason for such mis-management. A person who is willing to pay doesn't get the service, and a person who can't pay gets it. We are penalizing those who can afford, and subsidizing those who cannot, with the money from those who can.
The reason is simple: A slum is a mob. They have a herd mentatlity or act to have one. It is a vote-bank for the local politicans. A colony is not a mob. Each individual in a colony may vote for a different candidate. Hence there is no possibility of having a vote-bank here. And so, local politicans gain more by favouring the poor-mobs than the rich individuals, no matter how small
the mob is and how large the individual numbers are.
Secondly, government charges absurdly low charges for the supply of water. Government is not a charitable institution. Even if we agree that profit-making is evil for government, it should atleast get back the cost. How would any organization survive if it does not make atleast as much amount as it spends. As thoroughly illogical it may seem, government expects such a system to work.
Water is a scarce commodity. Hyderabad has 3 huge waterbodies, Hussain Sagar, Osman Sagar/Gandipet and Mir Alam tanks all of which were commissioned much earlier to Indian independence. In the subsequent 60 years. Government has not built even one more water body for the city's growing population. So much for centralized control. But the problem is not in inaction, but in action. I live in a colony of high tax payers. The average income tax per house-hold in my colony would exceed 1 lakh per year. None of the 1000 or so flats nearby have drinking water connection. We buy drinking water from private companies which is very un-reliable. There is a small slum right next to my colony. I doubt if anyone there pays even Rs.1/- as income tax. They have a government water connection and you wouldn't believe the amount of that gets wasted there.
I do not envy their fortune. Quite the contrary, I want to find out the reason for such mis-management. A person who is willing to pay doesn't get the service, and a person who can't pay gets it. We are penalizing those who can afford, and subsidizing those who cannot, with the money from those who can.
The reason is simple: A slum is a mob. They have a herd mentatlity or act to have one. It is a vote-bank for the local politicans. A colony is not a mob. Each individual in a colony may vote for a different candidate. Hence there is no possibility of having a vote-bank here. And so, local politicans gain more by favouring the poor-mobs than the rich individuals, no matter how small
the mob is and how large the individual numbers are.
Secondly, government charges absurdly low charges for the supply of water. Government is not a charitable institution. Even if we agree that profit-making is evil for government, it should atleast get back the cost. How would any organization survive if it does not make atleast as much amount as it spends. As thoroughly illogical it may seem, government expects such a system to work.
Pro-Poor vs Anti-Poverty
Every government in our country aims to be pro-poor. I do not understand this. Why should any government be pro-anybody. Are we all not equals in law? Then why are the law-makers pro-poor? Poverty is the default state of any society. Wealth has to be created. People, by default, are poor. They need to make money (wealth) and accumulate wealth. In any sane society, accumulating or creating means (i.e wealth) to procure goods for survival is a man's fundamental duty. By tagging itself to the poor, government is siding a losing cause., and much worse, it is aiming the wrong cause.
When do we say India does not have any poor? In 1980s, people who did not own a radio were considered poor. In 2000s, people who did not own a black-and-white television were considered poor. Now, most of these people own color tv's. If we take 1950 standards, India would be almost rid of its poor instantly. But unfortunately, government does not consider so. This is like a race where the finish line moves faster than the runners. Who can win such a race? What is the objective of such an effort? Does the government have an agenda, like we will help poor till 90% of people earn more than 3000/- pm or that we will help poor till 2050 etc or a list of 20 million or so people and their details, whom it'll help till they grow over poverty? When do we end this charity?
A typical example of this is the CPI/CPM (Left)'s stand on small traders. Before the retail business was opened to corporates, Left had criticized small traders for having huge margins and eating into the Producer's (farmers) pie. Now with Reliance, Bharti, Heritage etc., venturing into Retail space, the culprits have become the victims. Now Left is sympathysing with the petty traders, saying that corporates are eating to the trader's pie.
This agenda of supporting anyone who is poor, without an iota of thought on the rationale behind it or the objectivity to define who is right and whose right is it, is the cause of our mis-fortune. Poverty can end, if we define it, measure it and take steps for its eradication. Atleast we could hope to reduce the high prevelance of poverty. But, Poor will always exist. There will always be poor people and rich people, because not everybody is equal in ability, timing or luck.
When do we say India does not have any poor? In 1980s, people who did not own a radio were considered poor. In 2000s, people who did not own a black-and-white television were considered poor. Now, most of these people own color tv's. If we take 1950 standards, India would be almost rid of its poor instantly. But unfortunately, government does not consider so. This is like a race where the finish line moves faster than the runners. Who can win such a race? What is the objective of such an effort? Does the government have an agenda, like we will help poor till 90% of people earn more than 3000/- pm or that we will help poor till 2050 etc or a list of 20 million or so people and their details, whom it'll help till they grow over poverty? When do we end this charity?
A typical example of this is the CPI/CPM (Left)'s stand on small traders. Before the retail business was opened to corporates, Left had criticized small traders for having huge margins and eating into the Producer's (farmers) pie. Now with Reliance, Bharti, Heritage etc., venturing into Retail space, the culprits have become the victims. Now Left is sympathysing with the petty traders, saying that corporates are eating to the trader's pie.
This agenda of supporting anyone who is poor, without an iota of thought on the rationale behind it or the objectivity to define who is right and whose right is it, is the cause of our mis-fortune. Poverty can end, if we define it, measure it and take steps for its eradication. Atleast we could hope to reduce the high prevelance of poverty. But, Poor will always exist. There will always be poor people and rich people, because not everybody is equal in ability, timing or luck.
Group Appeasement vs Individual
Around two years ago, in some small village in Northern India, a 6 year old child, named Prince, fell into an open empty borewell. As the borewell wasn't very deep, he survived the fall with minor injuries, but safe at the bottom. This event would have gone unnoticed and uncared for had it not been for a news-starved and a low-on-trp television channel. The rescue effort to get the kid out of the borewell was aired live on the channel for the whole day.
As the day progressed, and the rescue was getting delayed due to various reasons, the live-program on television got more and more viewership and in a matter of hours became a national sensation. This might have been left out as a small abberation or an example of the effect of mass communications in public life and closed the chapter. But that is not to be so. Seeing such popularity for the show, a few politicians showed up at the scene of rescue, and bashed up the poor police for their lack of sensitivity to the issue and delaying the rescue. The icing of the cake came when a local MLA declared that the kid would get Rs.1 lakh in compensation and free education till school.
This is exactly the misfortune of our governmental policies. An MLA gives Rs.1 lakh (that is not his) to a kid for falling into a borewell. For what is government compensating the kid? What if other kids take the example and start jumping into borewells. Do we compensate every one of them? Who's money was the MLA donating anyway? Do we suppose that an MLA can exhibit his sensitivity to such issues at the expense of tax-payers. This is not very different from the Kings we had a few centuries ago, where if the King was pleased he could graciously give any amount to anybody. The only difference here is a politician would give any amount to anybody,
as long as feels that the public is pleased with it, or he should manipulate the public to get pleased at his donations. That is the rule of the game, and a very dangerous one at that. A lot of government policies are just that. They are aimed at pleasing the public at large.
Milton Fredman, the nobel prize winning economist, once said, Our policies should be measured not by intentions but by the results they achieve.
As the day progressed, and the rescue was getting delayed due to various reasons, the live-program on television got more and more viewership and in a matter of hours became a national sensation. This might have been left out as a small abberation or an example of the effect of mass communications in public life and closed the chapter. But that is not to be so. Seeing such popularity for the show, a few politicians showed up at the scene of rescue, and bashed up the poor police for their lack of sensitivity to the issue and delaying the rescue. The icing of the cake came when a local MLA declared that the kid would get Rs.1 lakh in compensation and free education till school.
This is exactly the misfortune of our governmental policies. An MLA gives Rs.1 lakh (that is not his) to a kid for falling into a borewell. For what is government compensating the kid? What if other kids take the example and start jumping into borewells. Do we compensate every one of them? Who's money was the MLA donating anyway? Do we suppose that an MLA can exhibit his sensitivity to such issues at the expense of tax-payers. This is not very different from the Kings we had a few centuries ago, where if the King was pleased he could graciously give any amount to anybody. The only difference here is a politician would give any amount to anybody,
as long as feels that the public is pleased with it, or he should manipulate the public to get pleased at his donations. That is the rule of the game, and a very dangerous one at that. A lot of government policies are just that. They are aimed at pleasing the public at large.
Milton Fredman, the nobel prize winning economist, once said, Our policies should be measured not by intentions but by the results they achieve.
Money, Government and Tax
First, let me begin with a few definitions.
Money - is the value somebody is willing to pay for a product/service.
This means, if you create a product, you create money. If you enhance a product, you enhance the value and hence create money. If you work for a company, you enhance its capability to produce, hence you create money. The amount of money is not a fixed value within a country (or world, city, family). It increases if you produce and falls if you dont.
Government - is a system formed my people to make and enforce laws that ensure our social interactions remain peaceful and just.
Tax - is money collected by Government from its citizens for its expense.
The following definitions are intentionally very simplistic to allow for later interpretations.
Money - is the value somebody is willing to pay for a product/service.
This means, if you create a product, you create money. If you enhance a product, you enhance the value and hence create money. If you work for a company, you enhance its capability to produce, hence you create money. The amount of money is not a fixed value within a country (or world, city, family). It increases if you produce and falls if you dont.
Government - is a system formed my people to make and enforce laws that ensure our social interactions remain peaceful and just.
Tax - is money collected by Government from its citizens for its expense.
The following definitions are intentionally very simplistic to allow for later interpretations.
Its all about Money, Honey
“Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it” - Ronald Regan.
Coming from a seasoned politican, this quote is amazingly honest. Funny as it may seem, it is also the hard truth. For almost 60 years, Indian government has been actively working for social and economic equality and bridging the divide. Thousands of Crores of public money has been spent on public administration and social welfare schemes of which I too am a beneficiary and am also a contributor to the funds.
Even after such magnanamous effort by the Government, the results often leave a lot to be desired. Why do so many well-intentioned plans fail to impress? Are we funding the wrong cause?
The following are a series of blogs is an attempt to understand of our economy.
. Money, Government and Tax
. Group appeasement vs Individual (Rajas of Free India)
. Pro-Poor vs Poverty
. Hijack of Basic ameneties
. Transport
. Energy
. Cost and Subsidy
. Price Rise, Demand and Housing
. Movies..Freedom...Govt.Control
. Rich-Poor gap and Power struggle
Coming from a seasoned politican, this quote is amazingly honest. Funny as it may seem, it is also the hard truth. For almost 60 years, Indian government has been actively working for social and economic equality and bridging the divide. Thousands of Crores of public money has been spent on public administration and social welfare schemes of which I too am a beneficiary and am also a contributor to the funds.
Even after such magnanamous effort by the Government, the results often leave a lot to be desired. Why do so many well-intentioned plans fail to impress? Are we funding the wrong cause?
The following are a series of blogs is an attempt to understand of our economy.
. Money, Government and Tax
. Group appeasement vs Individual (Rajas of Free India)
. Pro-Poor vs Poverty
. Hijack of Basic ameneties
. Transport
. Energy
. Cost and Subsidy
. Price Rise, Demand and Housing
. Movies..Freedom...Govt.Control
. Rich-Poor gap and Power struggle
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