Govt may subsidize pvt players in rural welfare

Govt may subsidize pvt players in rural welfare
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First Published: Tue, Sep 04 2007. 01 07 AM IST
Updated: Tue, Sep 04 2007. 01 07 AM IST
To encourage private players to invest in public-private partnership (PPP) projects in social sectors such as rural health care and education, the government is willing to pay out a subsidy.
“We want to identify 20 to 30 geographically contiguous schools where common services, such as building construction and upkeep and even some teaching functions can be shared more economically,” a finance ministry official involved in ongoing discussions, but who did not wish to be identified, said.
The government hopes that by stimulating private investment in these sectors, it will be able to overcome the resource constraint and at the same time improve the quality of health services and literacy in rural areas without compromising affordability.
A set of pilot projects, beginning with primary education, will be launched soon. “Private players who ask for the lowest annual grants will be allowed to run these services. Things are at a very initial stage right now, but we are moving ahead,” the official said.
The entire effort is part of the government’s bid to implement PPP projects, which typically allow the private sector to levy user charges for services that they fund and operate.
A report on health care in 2006 by consulting firm Ernst & Young (E&Y) said the private sector would invest $70 billion of the $78 billion (Rs3.2 trillion) to be spent over the next five years on health care. One million new hospital beds are to be added through these funds, the report said. E&Y is an adviser to the government on PPP projects.
Business models and investment criteria that will encourage private players were discussed with representatives from Tamil Nadu, Rajasthan, Uttar Pradesh and Andhra Pradesh by officials from the ministries of finance, education and health at a meeting held in late August. While most states already have pilots running in both sectors, they can’t necessarily be scaled up to become business models.
Murali Narayanan, a partner at E&Y, said that for wider appeal, business models must be determined clearly. “Lack of well defined business models and clear directives from the government on health care PPPs is the single biggest challenge for the government. Clarity will help,” he said.
While determined not to give up controls over setting the education fees, the government is ready to let schools function after-hours as vocational training centres.
But Partha Mukhopadhyay, a senior fellow at Centre for Policy Research, a think tank, said the government would find it difficult to enforce standards in primary schools under the PPP model. “Performance standards in primary education are not easy to develop. Before trying to enforce them through a PPP model, the government would do better to test the standards (first) by trying them out in some schools under its control,” he said.
The finance ministry, however, is ready for a system of “continuous certification” by the government, where the projects would be monitored regularly for meeting quality standards. The standards themselves, the official said, would be an improvement on existing norms.
Literacy levels have improved in rural India of late, but education standards have not, leading to a widening of the rural-urban divide in quality. According to Mukhopadhyay, it is not a question of not having enough schools, the real issue is having access to good enough schools. “If you don’t have a problem on supply side, then work on the demand side,” he said.
The finance ministry believes the model will work if the government can ensure a viable business model and ensure quality. “If a private party can also improve school enrolment, it is an incentive for them,” the official said.
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First Published: Tue, Sep 04 2007. 01 07 AM IST