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May 17, 2009

Page: 2/35

Home > 2009 Issues > May 17, 2009


Privatisation of welfare schemes
UPA?s glib promises on Health Security, Education For All

By Naresh Minocha

UPA?s foremost and much-abused technique of privatisation is public private partnership (PPP). The government has also encouraged its public sector undertakings (PSUs) to either privatise directly or indirectly hospitals, schools and agro-service centres that provide inputs and educate farmers to use modern farming techniques.

Most of the PPP agreements, whatever the format, are open-ended and vaguely worded to enable private players to profit at the expense of poor patients and students.

The UPA government is short-changing aam aadami by privatising social infrastructure such as hospitals, educational facilities and rail passenger amenities. This, in effect, means slamming doors on his face as his access and affordability is limited only to the government facilities.

Several cases of such privatisation deals are emerging both from the Centre and the States especially the ones governed by UPA or its allies including the estranged Left in the West Bengal.

UPA?s foremost and much-abused technique of privatisation is public private partnership (PPP). The government has also encouraged its public sector undertakings (PSUs) to either privatise directly or indirectly hospitals, schools and agro-service centres that provide inputs and educate farmers to use modern farming techniques. We will discuss specific instances later in this write-up.

The triple P would prove to be the last straw on the back of inflation-battered aam aadami, when he would be asked to pay market or near market rates for services, which are currently priced nominally as the public facilities are under government control.

The Congress Party knows that very well. It has thus cleverly left out PPP from its manifesto for Lok Sabha polls. Here too it has shown the audacity to throw wool in the eyes of the public by stating ?We will guarantee health security for all? in its manifesto.

The glib promise of health security is like rubbing salt in the wounds of the aam aadami, who frequently falls prey to water-borne diseases just because potable water remains a dream for millions across the country.

The term PPP also does not find any mention in the National Common Minimum Programme (NCMP) that the United Progressive Alliance (UPA) contrived in May 2004 for its survival.

The ruthless introduction of PPP in the social infrastructure sector is thus violation of NCMP. And yet there has been conspiracy of silence on this count among all UPA constituents.

It is not the involvement of private sector that makes PPP so controversial. It is the government?s penchant to dole out public money to private participants as outright grant, interest-free loan or soft loan or as equity seed capital.

UPA government has already committed several thousand crores of tax-payers? money to diverse PPP projects.

Most of the PPP agreements, whatever the format, are open-ended and vaguely worded to enable private players to profit at the expense of poor patients and students.

The unwritten motive underlying all PPP projects is to recover the market cost of social services from the public and to usher in crony capitalism.

One does not have to look hard for examples to understand this issue. Delhi is a dubious example of the government failing to enforce its commitment to provide free medical care to specified percentage of poor at its joint venture Apollo Hospital and at 36 nursing homes & hospitals that were given land at dirt cheap rates.

One need not elaborate further as the issue had already reached the Supreme Court after prolonged litigation.

What is worse is that PPP would further shrink the availability of government-run hospitals, schools and other social infrastructure that is so crucial for survival of aam aadami. He has so far only seen the tip of an emerging iceberg in the shape of charges for using toll roads.

PPP is making redundant the very concept of India being a Welfare State that is enshrined in the Constitution. We need to have a new Constitution that should clearly state that there is no free lunch and no free medicines even for the dying citizens. Jai Ho!

PPP has been introduced in Central and State-run hospitals in various formats?joint ventures, operation and maintenance/management (O&M) contracts and letting private operators run diagnostic services and pharmacies.

Delhi government, for instance, has built two super specialty hospitals (SSHs) costing Rs 100 crore each, at Tahirpur and Janakpuri for private players to run them under O&M format. The government is also ushering in 111 ambulances through the PPP format of procure, operate and maintain (POM).

The Delhi government has categorically told the bidders for this POM contract that ?capital and O&M cost of the project could be recovered through user charges to be collected from the patients who seek ambulance services, advertising revenues, corporate social responsibility funds, etc?. The government will only reimburse to the private partner the amount for specified free services rendered.

PPP bug is spreading fast. Employees State Insurance Corporation (ESIC) is in the process of appointing a consultancy firm that would help it upgrade its existing hospitals into SSHs and build medical colleges along with each hospital.

In February 2009, Western Coalfields Limited invited offers for setting up SSH at Indora in Nagpur district on build-own-operate-maintain-transfer (BOOMT) basis or on equip-operate-maintain (EOM) basis.

In March 2009, Pimpri Chinchwad Municipal Corporation (PCMC) solicited offers to redevelop Jijamata Hospital complex at Pimpri in Congress-NCP-governed Maharashtra into multi-specialty hospital on PPP basis.

The express of interest (EOI) document says: ?The successful bidder shall be selected based on the net present value of the highest annual payment quoted to PCMC.? What about the fees payable by aam aadami? Jai Ho!

Even the railways, which is viewed as social welfare employer, is planning to convert few of its hospitals into SSH through PPP mode.

PPP bug has spread to even the Left?s bastions as well as to opposition parties-controlled States apparently because the Centre gives money to States for specific PPP projects in the social and economic infrastructure sectors.

It is here pertinent to quote a West Bengal government?s document titled Establishing diagnostic facilities in rural hospitals under PPP.

It says: ?The private partner will be authorised to collect charges for the diagnostic tests from all patients referred by government health facilities as per rates fixed? by the State government. What about poor people who cannot afford such tests? Lal Salam to them.

?The private partner will be entitled to conduct tests referred by private doctors/hospitals/nursing homes also. For these tests, the private partner shall be entitled to levy and collect charges for all the mandatory tests at prevailing market rates from patients referred by private practitioners.?

A private player operating from a government hospital charging market rates! He has thus incentive to give preference to patients referred to by private doctors. Lal Salam again.

As for PSUs selling or leasing their social infrastructure assets, Heavy Engineering Corporation (HEC), on June 7, 2008, invited offers for takeover of its 350-bed hospital at Ranchi under initial lease for 30 years ?on one time premium (to be proposed by the bidder) and annual lease rent of Rs 6 lakh?.

HEC might well have drawn inspiration from Hindustan Copper Limited (HCL). It booked profit of Rs 54.26 crore on sale of Mosabani & Rakha Township including hospital to Jharkhand government. (If anyone has any doubt, one can refer to page 44 of the HCL annual report for 2005-06.)

Say Jai Ho to corporate social responsibility of PSUs!

There are more cold facts to drive home the point that UPA has bluffed aam aadami in the realm of health care.

Recall what UPA said in NCMP. It said: ?The UPA government will take all steps to ensure availability of life-saving drugs at reasonable prices. Special attention will be paid to the poorer sections in the matter of health care. The feasibility of reviving public sector units set up for the manufacture of critical bulk drugs will be re-examined so as to bring down and keep a check on prices of drugs.?

Compare this with a tender notice from Hindustan Antibiotics Limited (HAL) in February 2009 seeking pre-qualification of parties for leasing, joint venture, technical collaboration for fermentation facility at Pune. In earlier years too, HAL had leased these assets to private sector.

What stopped Mr Ramvilas Paswan, who has ministerial control over HAL, from asking it to mass produce antibiotics for Dalits and Muslims?

Incidentally, Industrial Development Bank of India had last year invited bids for sale of HAL?s 20-acre plot at Pimpri in Pune to raise funds for rehabilitation of the company. Of the total acreage, 3.7 acre is reserved for a high school and the remaining land falls within the residential zone as per the development plan approved by PCMC.

Mr. Paswan also had the ministerial control over National Fertilizers Limited (NFL) whose long-term lease of its school at Nangal in Punjab to an educational society hit headlines in 2006.

NFL had at least issued two tenders in the recent years for sale of its agro service centres (ASCs). The tender notice issued in late 2005, for instance, was for sale of ASCs at Vidisha in Madhya Pradesh and at Bharatpur in Rajasthan. NFL?s private sector competitors such as Tata Chemicals, on the other hand, have been aggressively expanding their network of ASCs to reach out farmers.

UPA introduced PPP in social and other infrastructure sectors methodically after coming to power in May 2004. Thus, Planning Commission?s report on social sector PPP, dated November 2004, observed that there is a need for greater public participation in PPP projects through risk sharing to assure the private sector of the necessary ?comfort? they may be looking for.

And the comfort is now coming in the form of ?viability gap funding?, a concept that has built-in incentive for private participants to pose projects put in PPP format as non-viable and thus in need for capital and operational cost subsidies.

Finance Ministry?s PPP guidelines provide for cash grant of 20 per cent by the Centre and additional cash grant of 20 per cent by the State or a statutory entity to make private sector-controlled projects viable. If 40 per cent of the project cost need not be serviced either as debt or as equity and if the project is to be executed with debt-equity ratio of 2:1, then equity component would be only 20 per cent of the project cost. And of this, part of the equity is expected to be raised from public sector, strategic investors, etc.

Such funding pattern would prove PPP a lucrative business for crony capitalists and deathbed for aam aadami in globalised Indian economy.

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