Why India's timid system is proving to be a big challenge for Modi's audacious reform path

When there is a big problem, say a whale of a problem, can you remove one fin of the whale and claim that you have solved the problem.

Sometimes the timidity of the system prevents it from even looking at the whole problem. After all, if it’s a whale of a problem to solve it would take a long time and no one knows it can even be solved. It is better to solve small part of the problem. People might argue, but it is better to solve a small part instead of doing nothing.

The trouble with solving small parts of a public policy problem is which part. The easiest part is the most impactful part or any part. While framing any public policy this is a crucial choice and it is never taken by the political leadership. It is a choice that is influenced by several constituents but primarily taken by the bureaucratic leadership or the real government.

Matter of fact is this choice is well documented in theory Public choice theory (PCT), expounded by Nobel prize winning economist James Buchanan. While simplistic logic will dictate it would be taken in public interest and that is what the government would like to believe. There are number of interests, constituents, lobbies which dictate it.

 Why Indias timid system is proving to be a big challenge for Modis audacious reform path

Narendra Modi. PTI

In the last few weeks two policies have come up one National Healthcare Policy 2017 and the Fertiliser subsidy distribution policy. Both these policies have one thing in common they have taken the route of fin route to solve the problem. In a way in both these policies the system has prevailed over the politicians. Ironically, the justification for both these policies has come from political leadership. Which shows that the Luytens’ Delhi is still overpowering Modi’s government.

First, the NHP 2017, after two years this policy has been approved in a such a diluted form that it shames the draft on which it was based upon. The original draft of NHP wanted to give citizens the right to healthcare, universal healthcare insurance, affordable healthcare service, set standards for pricing and quality. I wrote about the draft here. The policy was opposed by the private healthcare sector as it curtailed its capability to charge whatever it wanted without promising anything. This lobby convinced the government that it was not wise to go the whole whale but do it incremental.

Ministry of Finance and even Niti Aayog opposed the implementation of such an ambitious policy. A policy envisaged increasing public investment in healthcare to 2.5 percent of GDP, almost double of what it is now. The logic was that it is just too high an expenditure to be borne by the exchequer. Since then I have been part of two public debates on this issue with bureaucrats from health ministry. One of whom explained that it is not possible to give the right to health without building the healthcare infrastructure on the ground. A perfect catch-22, you cannot deliver healthcare services because the government does not have healthcare infrastructure. There is no public healthcare infrastructure as the government does not believe it needs to deliver healthcare services. In the last 40 years, healthcare services almost 80 percent of it has shifted to private sector, besides AIIMS there isn’t any public-owned healthcare service for critical care.

The second argument offered for going in for an incremental approach in NHP 2017, was it is a state subject and the central government cannot legislate it directly. Variant of this argument that it requires a constitutional amendment etc. This at a time that the finance ministry is carrying out the biggest amendment in the form of GST. Maybe, the health ministry and finance ministry is part of two different governments.

The timid approach adopted by the health ministry in adopting NHP 2017 also shows that corporate lobbyists have won over public interest. This is not new but the bravado amidst this defeat is ridiculous.

Now, the second policy that is in the offing and will be publicly announced soon is the subsidy policy on fertilisers. The government is expected to announce a process revamp in the way that the subsidy will be paid to fertiliser companies.

The government will now only pay the subsidy after the sale of fertiliser to a farmer. Earlier it was paid after the companies had shipped the product to depots and stockists. This process revamp is being done to ensure that the fertilizers are bought by the farmers only and subsidy leakage does not happen.

Therefore, two lakh odd fertiliser retailers spread across the country will have to keep electronic point of sales equipment and record each sale. They will have to identify and keep the record of a farmer who has bought the fertiliser. The farmer will have to show Id proof like Aadhar card or Kisan credit card or voter Id card. This is expected to reduce the diversion of subsidised urea and other chemical fertilisers to other industries. The logic here is that farmers will buy limited stock so any single sale of 200 bags or such will be detected and subsidy rejected for it.

This does not take into account that other industries will use farmers Id cards to buy these chemicals. Very similar to how some industrialists used the bank accounts of their workers to convert their currency during the demonetisation days. Ostensibly this is an interim step towards transferring fertiliser subsidy directly to farmers.

The government cannot determine the exact subsidy to be given to each farmer. As the amount of fertiliser a farmer needs varies as per fertility and size of his land holding. This approach or focus on just distributing subsidy for fertiliser ignores the bigger problem. The bigger problem is that farmers need to be weaned away from using chemical fertilisers. Every year his requirement for chemical fertilisers increases and the soil fertility keeps going down due to use of chemical. Heavy usage of chemical fertilisers erodes soil fertility, increases water consumption and leads to over dependence on food grains like rice and wheat.

Addressing the fertiliser subsidy is a problem the system wants to address, but it has a very powerful industrial lobby behind it. They want to keep the gravy train running. This industrial lobby does not want the farmers to move away from chemical fertilisers to organic manures.

PCT plays to benefit of the industrial lobby that defines the problem as distribution of subsidy not increasing productivity of the land more efficiently. If the problem is defined as : What should be the system that will incentivise farmer to use the most sustainable method to improve productivity and increase his profit from his holding? The answers to this question will lead to better utilisation of Rs 70,000 crores given in the name of farmers to companies to subsidise chemical fertilisers,

The system needs to define the real problem and makes independent choices of its own. Otherwise, Prime Minister Narendra Modi’s efforts to usher in reforms will be waylaid by the same lobbies that have been holding back the progress in these country forever.

The writer is Delhi-based policy analyst and digital strategist; he tweets @yatishrajawat

Updated Date: Mar 24, 2017 16:33:25 IST