Solution to Corruption is Not More Government, but Privatization

This Article was written by Nallmothu Chakravarthy
We Indians are so enamored with our failed government services, in order to fix these failures we come up with more government solutions. Our socialist mindset has convinced us that consuming more poison is an antidote to the poison we already ingested.
I recently gave an example of corruption in the electricity department. An electric pole’s foundation became weak and started leaning towards one of our apartment’s balcony. To correct the problem, the local electricity employee asked for a two thousand rupee bribe. When I posted this on facebook, here are the solutions my fellow Indians offered:
1) Write to Modi ji. The person who suggested this already wrote a letter to Modi about corruption and is eagerly waiting for a response.
2) File a complaint with municipality or judiciary (not sure how you complaint to judiciary)
3) Hire a private electrician and give him the implements needed to get it done.
4) Call ACB
5) Corruption has to be “axed to hell”. Hence, get it to KCR’s attention at a public meeting.
6) Get the issue highlighted in media
7) Call the electricity department’s complaint cell
Nobody thought privatization to be a solution. To the contrary, one person commented that it is Capitalism that actually promotes corruption. Alas, he couldn’t be more wrong.
Why is there so much corruption and inefficiency in government services?
Government has monopoly over the services it offers. It doesn’t have competition. Salaries of the employees are guaranteed whether they perform or not. This monopoly power gives the government employees power to extract bribe. This is the root cause for corruption. Whereas, in private sector you survive by serving the needs of the society. You compete with other product makers to meet society’s needs. When your product is inferior to other products, you incur losses and your business shutsdown. While government employees use their monopoly power to extract rent/bribe, private sector, in order to survive, has to produce what people need.
Unfortunately, most Indians don’t seem to see this through. They believe in the benevolence of the government employees. Then they get frustrated and angry when the employees are yielding to the universal human nature called greed.
Providing Internet service or mobile phone services is exponentially more complex and is predominantly offered by private sector. Yet, there is very little corruption. There is constant innovation, increasing speeds, and inflation adjusted per MB costs are going down. There certainly are problems with private sector ISPs, but they pale in comparison with colossal failure in government services such as electricity, RTC, Railways, and Airlines.
Privatization of electricity is the only solution for affordable, reliable, corruption-free electricity supply. Providing electricity involves three main activities- Generation, Transmission, Distribution. Generation involves thermal power plants, hydel plants, and nuclear plants that generate power. Transmission involves transporting electricity from production plants to the cities, towns and villages. Distribution involves local supply of power to residences, farms, and businesses.
Generation is partially privatized today and there is room for lot more privatization, including hydel plants.
Almost all transmission can be privatized too with some creative thinking. Again, fiber optic data cables that are thousands of kilometers long, traversing underground and undersea are good examples of how private sector can actually handle transmission.
Distribution is a tricky area. Privatization of distribution was done in Delhi, however it was not a competitive process. Delhi was divided into zones and private companies practically have a monopoly. Government granted private monopoly can be more dangerous than a government monopoly. One approach to electricity distribution services is to hand off management to local body governments i.e., to the villages, panchayats, mandals and colonies. This will certainly improve accountability and then local governments can decide whether they want to contract out distribution to private companies.
Privatization and localization is the solution to electricity woes we currently face and certainly more government will make things even worse. If you think writing to Modi, calling ACB, or pleading KCR is the solution to this vexing problem, you are sorely mistaken.

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