Monday, October 12, 2009

Heads I win tails you lose-the tale of public money being siphoned

The mega-bailouts of banks, insurance companies & other "too big to fail" have evoked opposition from those who call this "privatization of profits & socialization of losses". But little do they know that even more lurks below the surface..
(1) Extension of concession periods in Public-Private Partnerships: The Govt prefers to delegate its job of creating infrastructure to the private sector on the specious grounds of "reducing risk". The private player builds, maintains & finally transfers the project at the end of the concession period during which he has the right to collect user fee/toll. Generally, the person offering lowest user fee/ highest Govt share gets the contract. But when the usage is below expectations, the private player lobbies the Govt to either hike the user fee or extend the concession period as is happening in Maharashtra where toll periods are hiked. This leads to asymmetrical payouts-will a person with higher traffic reimburse excess to the State?? And the person bearing the brunt is the common man
(2)Bailouts of "too big to fail" institutions: When the going is good, clarion calls arise for "liberalization", "deregulation", "competition", "free markets" & privatization. But when private sector players suffer losses, they look to the State to announce relief packages. And these pleas are often accepted

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