India’s over-sized cabinet

In September, Rajeev Mantri and I started a (as of now, fortnightly) column in Mint.

Here was the first piece:

Why does India have 77 Union ministers?
India needs a leaner government with fewer ministries to dramatically curb corruption and make governance more efficient

Food, steel, communications, aviation, agriculture, petroleum, renewable energy, shipping, chemicals, tourism, coal, power, science & technology, broadcasting, textiles, mining, and housing.

These are not just some of the fast-growing sectors in the Indian economy, but also the names of Union government ministries. Each has its own budget, its own minister, and often a junior minister too. More importantly, in a narrow bid to protect its turf, every ministry becomes the biggest impediment to reform in that sector. Worse, government-granted monopolies in key sectors such as rail transport and coal mining are an unseen but substantial drag on the growth of the economy.

Major public sector enterprises such as Nacil (that owns Air India), HPCL and BPCL have been running up massive losses and are functioning only because of continuous taxpayer support. The only long-term, fiscally-sustainable solution is for the government to completely divest its shareholding in these companies and transfer management control to the private sector. But this is easier said than done and requires strong political will.

During the BJP-NDA government, attempts made to privatize the three entities were scuttled for one reason or another. In 2001, Prime Minister AB Vajpayee went to the extent of shifting coalition partner JD(U)’s chief Sharad Yadav out of the Civil Aviation Ministry because he was against privatization. The government came close to divesting Air India to a Tata-Singapore Airlines group for about Rs.12,000 crore, but the transaction was shelved when the global economic environment changed after the bursting of the dot-com bubble. In 2003, civil society activist Prashant Bhushan filed a PIL against the divestment of BPCL and HPCL in the Supreme Court, which directed the government to obtain parliamentary approval for the policy, thereby stalling the privatization of the oil PSUs.

Since then, just these three companies have absorbed over Rs. 2.25 lac crore in taxpayer funds. This isn’t a notional loss, and exceeds even some of the annual estimates of losses caused by government corruption. It’s also unclear how much more money these organizations would require to continue operating in the coming years. Besides being a huge drain on public money, these public assets are subject to abuse too – petrol pumps and gas agencies are doled out to acolytes by powerful politicians, and Air India flights have been known to be delayed at the whim of government officials.

For the rest of the piece, continue here

Most Indians, irrespective of political or economic ideology, would support some combination of spending more on social welfare and cutting taxes for the middle class instead of funding white elephants like Air India, especially when umpteen private airlines already ply our domestic and foreign routes.

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