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COVER STORY: UNION BUDGET
CUTTING BUREAUCRACY
"Government will reduce by 10% in 5 years."
Sinha's budget commitment
GOOD ECONOMICS: Actually saving on salaries
isn't the best outcome of government downsizing. The efficiency gains
matter more. An overstaffed government means duplication, and triplication,
of work that costs time and money. So far government downsizing has not
taken off because of the failure of VRS programmes. Sinha has taken a
cue from the Planning Commission's idea of creating a pool of surplus
government staff and redeploying them after retraining. But the success
of this measure will hinge on the retraining imparted to the surplus staff.
Like in the case of labour reforms, here too Sinha has taken only a small,
but important, step forward. Says Subodh Bhargava, adviser, Eicher Group:
"Cutting down bureaucracy is somewhat symbolic at this stage. But
at least a beginning has been made."
 RISKY
POLITICS: Sinha's biggest hurdle in government downsizing may not
really be politics, but the bureaucracy itself. Besides, being a part
of a jumbo 72-member ministry, Sinha may not be in the most credible position
to effect downsizing. Two years ago too he had promised some reduction
in his ministry, which never happened. The only difference this time is
that he is armed with a report of the Expenditure Reforms Commission (ERC).
But since the ERC does not have political backing, don't expect Sinha
to deliver cent per cent on his commitment.
USER CHARGES
"100% power to be metered by 2001 end."
Sinha's budget commitment
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WHAT SINHA DID NOT DO
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CUT SUBSIDY:
Budget 2001 hiked subsidies by 11
per cent, despite Sinha's warning that subsidies had touched unaffordable
levels.
TAX THE UNTAXED: By not taxing
exporters or rich farmers Sinha has continued to burden existing taxpayers.
REDUCE PROTECTION: Though Sinha
scorned at the fears of import deluge, he increased customs duty on
a host of consumer products. |
GOOD ECONOMICS: In a country where only
30 per cent of the power produced is paid for, any attempt to recover
cost of electricity is very good economics. The first step towards doing
it is metering the power supply. More than 40 per cent of the power supply
is non-metered, which not only means revenue loss but inefficient use
too. Sinha is also hoping to phase out the administered pricing mechanism
(APM) for petroleum products by March 2002. That will dismantle the complicated
oil pool once and for all, and subsidies on petroleum products like kerosene,
diesel and LPG will have to be paid directly out of the budget. But the
APM phase-out will not be good economics for household budgets. A hike
in prices of LPG and diesel is likely by March 2002.
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"The budget
is long on intent and promise."
Manmohan Singh,
Ex-Finance Minister
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RISKY POLITICS: The politics of power
pricing is just about as regressive as the politics of labour laws. For
years now there has been a law making it mandatory for all states to ensure
a return of 3 per cent to state electricity boards (SEBs) on the capital
invested. The reality: SEBs have a negative return of 19 per cent. Politics
and politicians have defied their own law. The Government's carrot-and-stick
policy, of giving aid to states committing power reforms, will help overcome
some of the political risks. On APM, expect halfway movement. Some part
of the LPG subsidy will be cut, and the rest (kerosene and diesel) will
be paid for by the Government through the budget.
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