Performance first: A real measure of public monopoly

When an election is held, the public does not elect multiple governments. We elect one party – sometimes with its coalition partners – to pass laws, create budgets, provide law and order, and so on. Neither the public nor the Opposition can make up its own laws or budgets and expect those to be followed; the elected State has a monopoly on lawmaking and governance. This is both common sense and constitutional.

But what about public services? Can someone other than the State provide electricity to our homes? Can someone other than a government company run Metro? Around the world and even in India, there are examples of such things, so clearly they are not inconceivable. Some people even argue that private providers could do this better than the State, and in doing so, they would be fulfilling a public obligation better than the government itself.

Some services are monopolies because it doesn’t make sense to have two different entities deliver them. The infrastructure and networks needed for power supply, for example, are logically best done by one entity, else the expenditure may be duplicated and wasteful. These sectors are considered natural monopolies. But which sectors?

This week, the Union Ministry of Power released its annual ranking and rating of power distribution companies. DH reported that Bengaluru’s power distributor, BESCOM, received a C- rating and a red card (whatever that means!), and was ranked 51st out of 54 rated entities. Apparently, the agency scored 12.44 out of 100 marks in the rating system, a figure so low that one wonders why it is given a C- rating. Schools and colleges are not the only ones suffering from grade inflation!

By itself, is this low rating a case for privatising BESCOM? Perhaps not. But it surely raises the question – why has the State chosen to reserve this function to itself if it can’t do a good job of it? Or, to put it differently, having chosen itself to deliver electricity, why is the State not doing a better job?

Monopolies, by nature, are obliged to do well precisely because they have been protected from competition. China’s one-party rule is an oft-cited example. If there’s only one of something, the public doesn’t have the option of obtaining it from someone else. Naturally, therefore, people expect the protected entity – whether a party or a company – to perform to a high standard. And when that doesn’t happen, people wonder if the monopoly should be ended.

Not all monopolies are natural. Some services can be provided by more than one entity. In fact, in some cities globally, even power supply is not considered a natural monopoly, and models have been developed to allow consumers to choose their preferred provider.

A few weeks ago, there was a flurry of exchanges online – later reported in the press – about whether BMTC’s monopoly should be ended and private bus services should also be allowed to operate. The state government is against it, pointing out that a private operator may not consider the service a public good and may only operate buses on profitable routes, whereas the government accepts that it must serve all people, regardless of their ability to pay.

But does it do that now? The BMTC bus service outside the Outer Ring Road is limited. By global benchmarks, we have a deficit of 10,000 buses in the public fleet. India has chosen to set lower benchmarks for itself, and while I don’t agree with that, even by that benchmark, we are at least 5,000 vehicles short. And this gap has only been widening.

Also, it is possible to cross-subsidise services on unprofitable routes using fare collections from the popular routes. Private companies can be mandated to do that, and a regulator can monitor compliance with such a mandate and issue fines for not meeting it.

In Delhi, which recently caught up to Bengaluru in the number of buses in its fleet, a growing portion of the services are now private. Some private operations also exist in Kolkata. In Tier 2 cities and smaller towns, private service is not uncommon. Within Karnataka itself, in Mangaluru, private service began decades ago, although KSRTC also operates part of the network.

The ‘private or public’ question is a red herring. While governments and policy wonks might have strong views on this, residents of a city usually don’t venture into those. Their expectation is straightforward: they want regular, convenient, and comfortable bus service in their localities. They want uninterrupted power supply, with no surges damaging their electrical and electronic equipment.

If a government believes that delivering electricity or public transport is part of its natural monopoly in governance, then it must do those things well. The best defence of a public monopoly is great performance.

The writer is a social entrepreneur, founder of Mapunity and LVBL, and co-founder, Lithium, wakes up with hope for the city and society, goes to bed with a sigh.