People's Democracy

These Are The Harmful Conditionalities

THE following are some of the proposals of government of AP (GOAP) and the conditionalities of APERL 2 loan, which are detrimental to interests of different sections of the people:

On employees and workers:  GOAP is also planning to deal with the currently inflexible industrial labour market by granting permission related to lay-offs and closures of industrial undertakings, and seeks to become a pioneer in building institutions, which help to promptly resolve labour disputes in the state. AP recently became the first Indian state to amend its Contract Labour (Regulation and Abolition) Act, 1970, to facilitate hiring of temporary/contract labour for non-core service oriented activities by the firms and commercial establishments. GOAP plans to undertake further labour reform in the coming months, including the introduction of the Special Enclave Service Condition and Dispute Resolution Act, 2003.  This Act will lead to creation of labour arbitrators in notified areas and is expected to result in faster resolution of industrial disputes and removal of certain rigidities in the functioning of the labour market in the state. While the number of civil servants per capita in AP has historically been high for Indian states, over the past several years the government has made substantial progress in reducing the size of the civil service and controlling the growth of the wage bill.

On amending pension scheme: A pension forecasting plan with a robust forecasting methodology has been prepared.  The software package developed in the report serves well as a policy tool: it can quantify the fiscal impact of changes in any parametric or fundamental variables  (link contributions to pension benefits for existing employees).  A blue print for pension reform and ways to rationalise the pension system have also been suggested.  The report has been put up to a cabinet sub committee for discussion.  Implementation of the report’s recommendations will be planned after its clearance.

On public sector units: As of September 2003, nine public sector enterprises have been privatised, 8 disinvested, 22 closed and 11 restructured.  21,467 employees had taken VRS.  Phase II of the reform programme covers 68 enterprises and will be implemented over a four year period  - from 2002-03 to 2006-07 - with a target of 16 corporations, 43 cooperatives and 9 industries.  The state has yet to tackle the two major enterprises  - A P State Road Transport Corporation and Singareni Collieries.  The reform process has been sequenced appropriately and is slowly gaining acceptance, which should help set the stage for future actions on the larger and more complex enterprises beyond phase II.

On privatisation of agricultural markets:  In AP, like many other states, agricultural markets are highly regulated, dominated by public sector organisations, and are monopolistic in nature.  Direct bulk sales to prospective buyers by farmers are prohibited. In order for the agricualtural marketing system to function efficiently, farmers must be given freedom of choice to sell their produce wholesale either through mandis or other marketing channels and the operation of wholesale markets be opened to the private sector.  GOAP is in the process of amending its agricultural marketing Act and draft proposals to this effect are currently being reviewed.

On privatisation of power sector:  GOAP seeks to lock in the efficiency gains achieved in the first phase of the power sector reforms by privatising the distribution business.  GOAP has prepared a draft privatisation strategy, which will be finalised by March 2005 based on consideration of the structural issues laid out in the new Electricity Act, 2003.  The implementation of the agreed plan will be important for GOAP readiness to launch the privatisation of distribution in 2005.  As key steps towards commercialisation of the power sector and readying distribution companies for privatisation, the sector’s financial vulnerability and risks are mitigated by (1) in future any increase in the power purchase costs on account of uncontrollable factors is proposed to be passed on to residential consumers through fuel adjustment surcharge. (2) Measures for reduction in cross subsidy will be continued and attempts will be made to move tariffs close to cost of service to the consumers. (3) The objective is to progressively achieve full cost recovery through tariffs and limit power sector operating subsidies at a minimal and fiscally affordable level. Discoms plan to progressively improve cost recovery through tariffs in the medium term - from 79 per cent in 2002-03 to 88 per cent by 2004-05 and further to 96 per cent by 2006-07. (4) The strategy for alternate mechanisms to provide subsidy to farmers by direct payment from the government to be finalised and implemented from April 2005. (5) Hundred per cent metering to all service connections. (6) AP is planning to move to a multi-buyer model with direct contracting between the generators and distributors by March 2005.  

On education and health:  While the state government still does not actively encourage the private provision of primary and elementary schooling, several initiatives have been undertaken that would help lead to greater private involvement in both actual operations and the management of existing school programmes. The state plans to develop a strategy to ensure that the private sector contributes optimally to achieving the health goals of Vision 2020.  Detailed plans for a pilot scheme will be developed, which will use vouchers to enable poor women to obtain antenatal care, and delivery and postnatal care through public or private nursing homes.