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Home > Business > Columnists > Guest Column > A K Bhattacharya

From feel-good to feel-tense

March 03, 2004

There are now clear signs that the Vajpayee government is nervous about its ability to sustain the feel-good factor for long. Ministers and government officials will deny this.

But the manner in which different departments in the government have been obsessed with the idea of launching new schemes and policies at breakneck speed betrays a lack of confidence in their own ability to maintain the 'India Shining' image till the elections are held in April-May.

First, it was the civil aviation policy. In its comprehensive report, the Naresh Chandra Committee had presented a package of measures to reform the civil aviation sector.

That report was submitted to the civil aviation ministry late last year. The government, however, slept on it, till it realised that the elections were round the corner and it would be a good opportunity to use the new policy to spread the feel-good factor.

But no attempt was made to formulate a comprehensive new civil aviation policy, based on the Chandra Committee's recommendations. Instead, a few of the recommendations were selected and cleared in instalments. And the belief was that all these decisions would spread the feel-good factor far and wide.

Thus, the inland air travel tax was abolished in January, which resulted in a 15 per cent drop in airfares. Some weeks later, aircraft landing charges were reduced or abolished in some cases, which meant lower operational costs for the airlines.

And then somebody in the civil aviation ministry thought of picking up one more proposal from the Chandra Committee and getting that cleared by the Cabinet. That was about allowing private airlines to fly overseas routes, so that Jet Airways and Sahara Airlines too could feel good about the shining Indian economy.

In a belated attempt to counter the charge that only a few proposals were being hand-picked from the Chandra Committee to benefit the private airlines, the civil aviation ministry decided to put together some more recommendations and submitted another note before the Cabinet.

But both the Indian Airlines and Air-India were up in arms as they felt that the government had abdicated its responsibility of making their own companies also feel good and had ignored their basic demand for fleet expansion, without which they were struggling to survive in a competitive market.

Eventually, the proposal could not receive the Cabinet's assent because of a variety of reasons including security concerns expressed by some ministers and the state-owned airlines' demand. That, however, has not deterred the government to make a couple of more attempts to open up select international routes for the private sector.

The same eagerness to introduce some quick policy changes was witnessed in the ministry of power. An official committee on investments and reforms in the power sector, headed by Planning Commission member N K Singh, finalised its first report in the first week of February.

Within a few days, the power ministry decided to draft new electricity and tariff policies based on the recommendations of the Singh committee. Frantic efforts were also made to get the draft note included in the agenda for the Cabinet meeting held a couple of weeks ago.

Power Minister Anant Geete was initially reluctant to push these proposals. But he was convinced by his advisors that getting the electricity and tariff policies cleared before the elections would be counted as achievements of the minister, which the government could use to win votes.

But as it happened, the power ministry's proposals could not be included in the Cabinet agenda. But the ministry was still eager to bring about these changes. One view doing the rounds till last week was that the power ministry itself could announce these policies, since the Cabinet need not clear them.

The divestment ministry's reaction to the investor's initial lukewarm response to the shares offered for sale by several public sector undertakings was also indicative of the nervousness of a government that is uncomfortable with the thought of the feel-good factor losing its appeal.

Recently, the commerce ministry revised the trade data for December 2002 to show a robust 43 per cent exports growth in December 2003. Once again the underlying objective was not to disturb the feel-good factor.

But in an economy that has seen liberalisation across several sectors, it is dangerous and often futile to manage or regulate the external environment to sustain a pre-determined mood.

Just as the January trade data has revealed, exports growth has decelerated to about 9 per cent (and the government can't do anything in spite of its fear that the low exports growth rate may disturb the feel-good factor), the stock market too is bound to hit back at the kind of pressure it was subjected to by the government to ensure the success of the PSU share sale.

It is reasonable to believe that the government's nervousness will only increase as the Election Commission of India has announced the poll dates, thereby enforcing the code of conduct that disallows the government to take any policy decisions or launch a new scheme. The elections will be completed by May 10 -- more than two months from now.

And sustaining the feel-good factor for another nine weeks is going to be a hugely challenging task. There will be too many factors at work and many of them will be beyond the government's control.

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