What does the gunning down of Phoolan Devi have to do with economic reform? A lot. The whole premise of economic reform is that the government should stop doing things that can be left to private enterprise (like running steel mills) and focus its energies on what the state alone can do, like enforcing laws and contracts, and ensuring a conducive climate for competitive enterprise. Alas, the only contracts enforced these days seem to be those put out by the mafia. The police seem very poor at catching criminals, and the courts at convicting them. When redress cannot be obtained through due process of law, it will be obtained through bullets. The villagers of Behmai know that as well as Phoolan Devi’s Mallah gang.
It is one thing for the state to withdraw from excessive economic meddling, quite another to withdraw from its basic functions of collecting taxes and delivering public services. The growing incapacity of the state to convict criminals has progressed in tandem with its incapacity to collect taxes (which are slipping as a percentage of GDP), to supply water and electricity towns, and to supply primary health and education to villages. The state is eroding, even collapsing in some areas. In these circumstances, it is a wonder that the country is able to achieve 6 per cent GDP growth.
Economic reform is about recasting the role of the state. It is not about having a weak or collapsing state. On the contrary, economic reform requires a strong and capable state that fulfils its basic functions of tax collection and service delivery. Efficiency-enhancing competition is possible only when the rules of the game are well enforced by a capable state. But, if a dysfunctional state allows laws to be flouted with immunity, if money, muscle and influence decide outcomes, then markets cannot promote competition, efficiency or social justice.
In todays context, the old argument of the public sector versus private sector is obsolete. The need of the hour is good governance. If the state cannot redress grievances and only bullets can, neither socialism nor capitalism will work, and only those with access to money, muscle and influence will prosper.
Phoolan Devi’s story is one long sequence of outrages outside the law. It started with her abduction and rape by Baba Gujjar. It continued with the murder of her rapist by her lover, Vikram Mallah. It continued with the murder of Vikram Mallah, and the subsequent mass rape she suffered in Behmai village.
The revenge she later extracted at Behmai violated the rule of law. So did her subsequent incarceration without trial for 14 years. So did the arbitrary dropping of charges against her by the Chief Ministers of Madhya Pradesh and Uttar Pradesh. So, too, did her own murder this week.
Even in death, the violations did not stop. Contrary to the law, her body was hijacked by the Samajwadi Party and taken to Mirzapur for a cremation aimed at extracting political capital. The law entitled her relatives to arrange her cremation, and they wanted it done in New Delhi. But Mulayam Singh Yadav coolly declared that the Samajwadi Party was her family, and nobody dared contradict a politician who could one day be Prime Minister.
Phoolan Devi’s murder may seem to have nothing to do with the privatisation of electricity in Orissa. Yet a common thread runs through both the lack of rule of law. In Orissa, the moribund state electricity board was trifurcated as part of a reform process into a generating company, Orissa Power Generating Corporation (OPGC), a transmission company (GRIDCO) and two distribution companies (CESCO and BSES). There was some controversy over whether this really would promote competition and efficiency. But optimists hoped that anything would be better than continuing with the old state electricity board, which had lost all capacity to generate power and collect dues. An American company, AES, took a 49 per cent stake in OPGC and 51 per cent stake in CESCO.
Two years down the line, privatisation is in shambles. The new owners discovered that they had been told a pack of lies about the true extent of transmission losses and theft of power. Nobody in the government has been hauled up or prosecuted for fraud. Worse, the new distribution companies inherited crooked but unsackable staff, and inflexible rules that made it impossible to fix responsibilities and deal with the corrupt and inefficient. Earlier the state electricity board was helpless to act against crooked linesmen who colluded with big consumers to fix meters, and now the private owners faced the same problem.
Besides, poor governance for years had created a culture of non-payment, of non-accountability, and a general feeling that people could keep using electricity without paying for it. So there was much indignation when CESCO attempted to check theft and leakages, and conduct door-to-door surveys. When it disconnected supplies for non-payment, huge pressure was brought to bear by officials and politicians to restore the connections, despite continued non-payment. Cases of arson and theft made work conditions impossible, according to CESCO, and the government proved unwilling or incapable of lending law and order support.
In consequence, CESCO cannot even meet its costs, let alone service its debt or earn any profit. It is supposed to put its sales receipts into an escrow account to pay Gridco for supplies.
For three months it broke this escrow account in order to pay its employees.
For this transgression it was threatened with prosecution. So CESCO is now putting its sales receipts into escrow, but no longer has enough money to pay its employees, who will doubtless become more rapacious than ever.
CESCO cannot pay the transmission company, GRIDCO, for power. GRIDCO, in turn cannot pay Orissa Power Generating Company. The same lack of governance which earlier bankrupted the public sector is now bankrupting the privatised network. The lesson is clear. Neither privatisation nor delicensing nor anything else can work unless we have a capable state that delivers good governance. The need of the hour is not more economic reform but urgent administrative, police and judicial reform to ensure justice and redressal within a reasonable time frame.