Tuesday, July 28, 2009


The ruling elites in this country seem to be convinced that government has the answer to every problem citizens face and in turn people, conditioned as they are to the benevolence of the government look upon it to solve all their problems! It is understandable that a responsible government must be sensitive to the difficulties faced by its citizens and bring socour to them through the financial and policy tools but entering into business for helping them, whatever be the justification, cannot be practical. There are hundreds of examples that can be drawn from recent history of this country, especially between 1947 and 1990, to prove that "doing business is not government's business" as its administrative mindset is not synonymous with entrepreneurship and eventually these public enterprises become 'millstones' around its neck. Besides bringing practically no returns on the massive investments in the public sector, most of them become a drain on the exchequer to keep them afloat. According to the latest estimates all public sector industries put to gether have incurred a mammoth loss of Rs 93000 crore compared to Rs 65000 crore the previous year! If this is the case, why not the governments, both at the state and the central levels, desist from starting new 'white elephants' in the name of the hapless citizens?

The provocation for this issue of the blog is the reported news emanating from Kerala, a state touted all over the world as "God's Own Country", that the 'enlightened' government there is contemplating setting up 'fair price hotels' all over the state for the benefit of the common man. The premise is that hotels which are operating presently are fleecing the people by charging exorbitantly for their service and poor man is denied the 'pleasure' of eating hotel foods as rich people do. Such a brain wave coming from a government identified with poor people may appear logical. But consider for a moment how such a quixotic proposal can be implemented in a state where per capita income is one of the highest in the country, inflow of foreign money from expatriates is substantial, the literacy rate is highest, the wages rule very high and a reasonably good PDS system ensures availability of food at subsidized rates for almost the entire population. Besides Kerala, unlike its neighbors Karnataka, Tamilnadu and Andhra Pradesh, does not have adequate decent eateries, probably on account of the 'low eating out' habit amongst its population. How a government can do better than the private sector in the catering area is beyond one's comprehension.

Many states have Tourism Development Corporations (TDCs) set up to attract tourists from far and wide and generally restaurants are part of the hotels under them. Except for a few, most TDCs are not functioning well and exist only because of the low tariff for their lodging facilities compared to their private sector counterparts. The quality of food served in their restaurants, at best, can be termed tolerable, reflecting the ground reality that exists to day. If this is so why does the government want to venture into so called fair price hotels? What is a fair price for a decent meal? Who decides the real cost of preparing the meal? How is the costing to be done, considering that any government operation will always carry a heavy over head cost that has to be passed on to the consumer? According to scanty information available, probably government wants catering entrepreneurs to approach it for setting up eateries in urban and semi urban areas and raw materials would be offered to them at subsidized prices through the state controlled Civil Supplies Corporation. Such a model if it works and if there are takers, could be more viable than setting up governmental hotels in the name of controlling prices. Of course there still will be many constraints in putting such precepts into practice. With real estate rates galloping day by day in a state starved of land, how any entrepreneur can get a decent place to start hotel business, all from the scratch? Will government offer the required facilities like building, water, electricity, drainage, waste disposal, toilet facilities etc that are essential for hotel business? Most important, how can government ensure that the so called fair price hotels will really offer safe and quality foods at fair price and will not divert the subsidized inputs to the open market?

It is understandable that government can intervene in such areas considered essential like medicines and basic food supply at affordable cost and probably Kerala is doing well in these areas with their fair price shops for food grains, sugar, edible oil etc, fuels like kerosene, and perishables vegetables and fruits, truly reflecting its credentials as a welfare state. But by entering into sectors like catering or vending liquor may be disastrous in the long run as both these areas cannot be considered critical to the survival of its citizens. If such a philosophy is extended, government may have to intervene in almost all sectors like entertainment, housing, many service sectors, air travel and almost all industrial operations in the name of helping out the citizens. Is it feasible, practical or logistically right? Government must give good governance, instead of imposing itself on the population what it 'feels' right without really knowing what people want!


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