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Home News Power Sector News Private sector participation did not yield desired positive results: Study

Private sector participation did not yield desired positive results: Study

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PrivatisationContrary to popular opinion, interventions in the form of reforms in the infrastructure sector do not yield the expected level of positive outcomes in terms of access, cost, efficiency, price or quality, a study by professors in the Indian Institute of Technology - Madras and Harvard University has revealed.

 A two-year study by professors Thillai Rajan and Sudhir Chella Rajan from IIT-Madras and professors Akash Deep and Jose A Gomez Ibanez from Harvard University found that private sector participation and allowing many players into the market, in say a sector like telecom, did not particularly yield positive results in a developing country like India.

"The evidence is not encouraging. It is not negative, but not positive either. So, it raises questions about whether it should be done at all," said Professor Thillai Rajan. The academics chose four core sectors - electricity, telecom, water supply and transportation - as they were similar in nature because all of them needed large investments, provided services and were needed for public growth. They questioned the need for interventions such as reform, competition, privatisation, and regulation in these sectors.

The study, however, said that the common perception that reforms tend to increase prices may not be really true. While it is generally felt that prices increase following reform related interventions, the analysis indicated that there is no significant impact on price in 62% of the cases. Only 19% of the observations indicated an increase in price as a result of the intervention, while another 19% showed a decrease in price as well.

The study also showed that a higher proportion of what positive outcome did accrue of these interventions went to rural, poor and illiterate segments (33%) compared to urban, rich and literate customer segments (20%).

The findings based on the study of the impact of various interventions such as reform, competition, privatisation and regulation from 1995 to 2010 showed that the results were consistent over 15 years. "This means that the country has not learnt from such interventions in the first 10-year period," said professor Thillai Rajan.

The academics gave some suggestions at both the macro and micro levels. They said that at the country level corruption and lack of transparency also affect outcomes. "It is important to make changes to ensure more transparency and reduce opportunities for corruption," the study said. The study also showed that innovation and participation at the grassroots level are more effective in increasing the efficiency of a scheme.

Source- Times of India


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