Since privatization seems to be the current hot topic, i thought i would share some of my HUMAN ideas here, in my first blog. What i mean is......no figures and analysis here, not yet...just opinions and feelings. I would then like to progress to actual analysis based on facts and figures in my future blogs. Any criticisms( especially negative) will be appreciated since i really want to understand this better.
The need for privatization was discussed at large in class. To summarize(just a few of them) had been:
1) the govt doesnt have enough funds to finance a lot of the infrastructure projects.
2)the govt has taken quite a sum as loans from financial institutions and,as such, is finding it difficult to repay the loans without taking on additional debts.
3)the already existing infrastructure requires maintenance...which in turn needs money.
No matter how we play it around, it all finally comes down to money. Its a lack of money thats making the govt think about bringing private players on to the field. In spite of the fact that it makes the govt look inefficient, the willingness of the govt to accept that such a situation does exist is credit worthy. Maybe experience, which can indeed be a bitter teacher, is what has made people wary of privatization. Most people equate privatization with economic divide. As most things,even though there is some truth in this, I personally believe that thats not entirely true.
Let me explain. We all agree that private players' motive(for the large part) is profit( money again). Now if I were to open my own establishment I would try to do 2 things(once the establishment is running smoothly):
Build a reputation and Expand my clientele.
Building a reputation is important only in the case of competition. Which is pretty obvious. Monopoly implies i dont have to work to build my clientele. They have no choice but me.
Expanding my clientele is important to me for the reason that, assuming man is a creature of habits, once he has decided on whose service he will use, my only option to make more
(of course) money is to make sure more people know of the service I am providing. This means I will try to reach the far reaches of the nation before my competitor does. Think telecom Given the competition is right, the service I provide will be cheap(if the technology is so widespread) which means that more people will be able to use telecom and because I want to reach them before my competitor the speed at which things progress will also increase. This technology would improve their business, bringing in...thats right....more money and so improve their lifestyle for the better. Given they have more money now(relatively) they can get choosy and that will make me improve my quality of service so that my clientele doesnt look for other options. In their own way both should be satisfied. This is a classic example of "you scratch my back and I scratch yours". Which, I believe, gives both the parties relief.And is not that what we wanted in the first place ...... greater good to more number of people???
Monopoly can mean 2 things
One that I have no competition, in which case, I am the only choice they have (whether my service is good or bad).The other is the time period for which I own the infrastructure in which case even if I have competition but the government has given me the ownership for a long period of time, I might just slack off. And in this case legally nothing can be done(unless the govt was intelligent enough to have an escape clause). In almost all the cases they do(cos believe it or not, the govt has intelligent people for the most part) and thats why all those legal papers have sooooo many sheets.
Ideally one would wish for no private participations. And that would mean to have an extremely efficient government. Given that the ideal situation does not exist what is the next best thing? privatization?? personally, i believe, its the best choice we have(next to only maybe PPP).
I feel its really selfish and narrow-minded if you feel that you cant handle the thought of few 'private' people making money out of doing something that would help society in some way, in any way. Do not forget its not easy and cheap controlling something as huge as infrastructure. So if some 'private' people(who are working their heads off) actually makes a little profit out of the whole thing along with making the life of some person (who was until then just a figure ..a number ...in one of the government papers) comfortable.... then please just think of their profit as their fee.
And if you dont like THAT idea....then the best thing instead of holding rallies and shouting and complaining would be to tell the govt a way( a feasible way) to get the country out of this rut.
P.S Dont forget the govt has done its homework much better than you or me since they have been around far longer than us.
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3 comments:
can you make your writing a bit short and clear so that it will not be difficult for the reader to understand what you are writing and also keep it short, i am sure people will be put off and cannot really spend time to read such long postings ?
what i gather from the blog is that it is addressed primarily those people who cannot stand privatizations..as u have indicated instinctively in ur blog that the basic mentality of people against privatizations will not serve the purpose for a large number of people in terms of privatization...but ur extension of logic (monopoly & perfect competition) has its own vices...my understanding says that ur point makes perfect sense when there is a outweighing demand for something i.e ability AND willingness to pay for that thing...like as u mentioned telecom but if the farmers of central india cannot pay for electricity and hence technically there is no demand for it would it mean government(it being the ultimate authority to think about the incumbents of the nation) would not do anything for them?..FOr them privatization may prove to be a bane rather...
Ammu - to add to your discussion right at the beginning you mention the reasons behind the need for privatization. One issue that you have not mentioned is the greater efficiency that the private sector brings due to performance incentives and so on, that is often lacking in the public sector.
Abhishek's point is an excellent one and answers the latter half of your essay. If people cannot pay the cost of production of the service that I (as a private player) offer, then I have no problem allowing my competition to serve that segment since I cannot make a profit. The problem is that my competition will also use the same logic and abstain from such sectors, leading to a lack of service. This is when the government needs to step in.
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