Indian Journal of Human Development, Vol. 4, No.

2, 2010

Governance as Networks: Emerging

Relationships among the State,
Business and NGOs in India

Kuldeep Mathur*

Governance is concerned with a network of relationships of three actors—the State, market and
civil society. It is an interactive process wherein the government may like to impose its will but its
acceptance will depend on the compliance and action of others. This paper attempts to explore
the concept of networks and to show how the analysis of the relationship of the State and the
corporate sector is based on a transformed view of the role of State in the neo-liberal economic
framework. The paper questions the possibility of joint decision-making in the socio-economic
context of India wherein adequate efforts have not been made for facilitating State-building
activities.

Key words: Governance networks, Public–private partnerships, Economic growth, Business

associations and their role

INTRODUCTION
It is fair to say that until the late 1980s, the term ‘governance’ was not frequently heard
within the development community. It became part of public discourse in India only
after the economic reforms were introduced in 1991. Today, it is a buzzword used
freely in most publications emanating from donor agencies, academics, and planning
and policy documents in India. It is heavily relied upon to explain developmental
outcomes. International and multilateral aid-giving agencies have adopted it as a
general guiding principle to improve the capability of the recipient countries to handle
development assistance better and utilize it more efficiently. However, improving
a country’s capability to utilize aid better or work for improved developmental
performance does not connote the same meanings for everyone. The meanings range
from following liberal economic policies, to strengthening and reforming market
institutions, to building capacities of public institutions to perform, to encouraging
democratic participation through strengthening civil society institutions, among other
things. Some meanings are concerned with reducing the role of the State in economic
activities, others with strengthening State institutions to promote the role of the market,
and yet others relate to the encouragement of democracy and participation.
In this web of many meanings of governance, there is a baseline agreement that
governance refers to the development of governing styles in which the boundaries

* Formerly Professor, Jawaharlal Nehru University, New Delhi. Email: [email protected]

254 Indian Journal of Human Development

between and within the public and private sectors have become blurred. (Stoker, 1998,
p. 155) What were previously indisputably roles of government are now increasingly
seen as more common generic, societal problems, which can be resolved not only by
political institutions but also by other actors. The main point is that political institutions
no longer exercise a monopoly of the orchestration of governance. (Pierre, 2000, p. 4).
The concept of governance indicates a shift away from well-established notions of
the way in which the government sought to resolve social issues through a top-down
approach.
Thus, the core idea of governance lays stress on network relationships among the
three actors—the State, the market, and civil society, in steering society. The monopoly
of political institutions in providing services is diluted; the private sector and institutions
of civil society fill in the space previously occupied by these institutions. New forms
of institutions emerge, which finds expression in the blurring of boundaries between
the public and the private sectors. A range of participative agencies arise that respond
to collective concerns.
The vantage point is not the interest of the organization and its attempt to gain
influence on public policy through formal and informal contacts with the central
decision-makers. (Sorenson and Torfing, 2004, p. 5). Rather, the focus is on the
production of public policy and the contribution of public and private actors to it. As
Rhodes (2006, p. 426) points out, “policy networks are sets of formal institutional and
informal linkages between governmental and other actors structured around shared, if
endlessly negotiated, beliefs and interests in public policy-making and implementation.
These actors are interdependent and policy emerges from the interactions between
them”. Policy networks are also strategic alliances forged around common agendas of
mutual advantage through collective action (Hay and Richards, 2000).
At the formal level, policy networks have emerged as public institutions wherein
interactions between government, business and civil society can take place. These
interactions lead to policy outputs. In operational terms, governments institute advisory
bodies and various kinds of councils wherein representatives of the government and
the other two actors—business and civil society—are members. Such policy networks
are different from lobby groups, whose role was to influence government to obtain
outputs in their favour.
At the informal level, governance implies the opening up of government activities
to non-government actors. It is no longer a preserve of hierarchical decision-making,
which is often secretive and closed. The three actors, the State, the market, and civil
society, interact more frequently in the public domain and attempt to formulate public
policies together. This is distinct from an understanding of lobby groups, which tend
to influence government to frame/bend policy in their favour. It is a fundamental
change towards a more open government that is willing to listen and become one
participant in among the three in policy-making.
Apart from policy networks, there are operational networks too. These networks
are implementation tools which deliver public goods and services, a task that one
 Governance as Networks 255

single actor cannot do. Increasingly, the government has adopted the mode of seeking
cooperation of one or the other actor in implementing programmes of public interest.
Such cooperation has taken the form of what has come to be popularly known as
public– private partnership. This type of partnership is being promoted across the
world as a strategy of governance in delivering goods and services in many sectors.
The partnerships promise to avoid duplication of efforts and are seen to draw on
their complementary resources and capabilities to design more effective problem-
solving mechanisms. They promise to increase the responsiveness of policies and
create accountability by including other actors—the market and civil society—into
decision-making processes. They are also presumed to improve compliance with
and implementation of political decisions. In addition, the partnerships provide
opportunities to the partners to learn from each other (Streets, 2004). It is widely
believed that networks play a significant role in the processes that promote social and
economic development. Pingle (2000) has argued that shared understandings are vital
for the better functioning of economic decision-making. Shared understandings help
overcome bureaucratic resistance and prevent the State from falling prey to social and
political interests. Industrialists increase their ability to get the necessary infrastructure
and collective goods for future growth.
However, this optimism is not shared by many. Critics point out that these
partnerships can signify the strategy of the State to evade responsibility. There is
considerable belief in the proposition that “the hierarchical governance of the society
by the State is based on substantive rationality. The political values and preferences of
the government—that is supposed to incarnate the will of the people—are translated
into more or less detailed laws and regulations that are implemented and enforced by
publicly employed bureaucracies”. (Sorenson and Torfing, 2004). These bureaucracies
are accountable to the representatives of the people who express these preferences.
Thus, networks carry the risk of weakening traditional accountability mechanisms by
shifting policy decisions to the realm of partnerships that can circumvent parliamentary
control (Streets, 2004). Further, if partnerships emphasize cost reduction or profit
maximization at the price of significant quality compromises, vulnerable populations
may not be able to respond appropriately and aggressively. There is always the risk
that the poor and the marginalized groups in the population may be excluded due to
pricing policies. An impression is growing that networks are cases of privatization by
‘stealth’ and the bargains have been, in general, more favourable to corporate interests
encouraging the corporate sector to embellish their own power and resources (Datta,
2009; Reijners, 1994; Roseneau, 2000; Rhodes, 2006, pp. 425–47).
Despite these concerns, there is optimism about the partnerships, and a complex
web of networks is emerging worldwide in which India is not lagging behind. The
notion of governance is transforming the organization of the State and its relationships
with the private sector and civil society actors. However, little scholarly attention
is being devoted to analysing and debating this transformation of the State and
democracy in India. Our aim, in this paper, is to investigate and unravel the networks
that have been created between the State and business in India, and to explore the way
256 Indian Journal of Human Development

they function. We also attempt to map out the way in which the corporate sector has
organized itself to participate in these partnerships and networks. A major objective of
the study is to bring out in the public domain the dense relations that are developing
among the government and business and some associations in civil society in India,
and to raise questions about their impact on democracy and accountability.

POLICY NETWORKS: GOVERNMENT AND BUSINESS

As is well known, the liberalization of the Indian economy took place in the context
of international funding agencies like the World Bank and the International Monetary
Fund (IMF) insisting on structural adjustment programmes to help India cope up with
the financial crisis of 1992. These involved keeping budget deficits within reasonable
limits, promoting privatization, and creating space for greater participation of the
non-State actors in the provision of services. The flow of funds was predicated on
India undertaking policy and governance reforms.
In order to promote a much greater role of the private sector in meeting the
challenges of development and alleviating poverty, the government envisaged its
most important role in provisioning infrastructure—power, transport, roads, etc.—for
facilitating private investment. But having taken on the role of providing infrastructure
to attract investment, the government found itself in a peculiar bind. It did not have
the financial and technical resources to invest in the required sectors of power and
transport but knew that private investment cannot be attracted in the industrial
and other sectors without the provision of adequate infrastructure. Public–private
partnership appeared to be an attractive proposition to tide over this obstacle of lack
of financial resources. The demand of financial resources is formidable if the ambitions
of the government have to be realized. It has committed to raise the infrastructure
spending to about 9 per cent of the GDP at the end of the Eleventh Plan period. This
means that around $500 billion would be required by the infrastructure sectors over
the five-year Plan period (Datta, 2009, p. 73).
The Eleventh Plan emphasizes the strategy of public–private partnership (PPP)
for locating these resources and justifies it by saying that “these partnerships must
ensure the supplementing of scarce public resources for investment in infrastructure
sectors while improving efficiencies and reducing costs…Public–private partnerships
must aim at bringing private resources into public projects, not public resources into
private projects’ (GoI, 2006, p. 29). In a recent speech, the Prime Minister reiterated
that “a synergy between public support and private initiative can help multiply
the productivity of resource utilization”. He went on to say, “We have been deeply
concerned about the efficiency of utilization of public funds, especially in infrastructure
development, education and healthcare. We have been looking for ways of combining
our concern for equitable outcomes with our concern for efficient utilization of outlays.
PPPs are an effective means of combining these two concerns”.1
Attracting private investment for promoting economic development and thus
raising the rate of economic growth became the single most important dimension of
 Governance as Networks 257

public policy. A new style of governance was sought to encourage and facilitate the
achievement of this aim. For pursuing this aim, a partnership with big business houses
was necessary. The economic strategy adopted led to the prioritization of growth as
a State goal, supporting large business houses in achieving this goal and keeping
labour under control (Kohli, 2006). The changed strategy of economic development
had a strong impact on the terms of policy discourse. The State set about searching
for market solutions to societal problems. Issues of poverty and inequalities, which
were defined as major problems earlier, yielded place to the argument that as the
rate of economic growth rises, poverty levels will begin to go down. Inequalities of
wealth and incomes were deemed necessary and conducive in providing incentives
for wealth creation. The emerging styles of governance underline an ‘enabling State’,
whose role is to create conditions in which private investment can take place. The
traditional government forms became problematic and administrative reforms were
aimed at relaxing government decision-making processes in the Government such
that business enterprises could be set up within a minimum time after the application
for setting them up had been filed.2
In this broad policy framework, forging partnerships with the other two actors
became a measure of good governance and facilitated the increased role of market
and civil society in the prime activity of the government. While speaking at a seminar
in 2006, the Minister of Company Affairs pointed out that the role of the private
enterprise in taking the country to higher and higher growth paths is very important.
The government’s role is to provide an atmosphere that is conducive for business to
flourish. He then went on to emphasize the need for freedom of action and initiative
by the enterprises as against the pre-reform mindset of viewing the business and its
efforts to achieve growth and expansion, with suspicion. “We are in the era of PPP”, he
said.3 And the search for sectors wherein schemes and projects could be implemented
in the PPP mode began.

GOVERNANCE IN THE NEW POLICY FRAMEWORK

The government sought an alliance with big business to pursue this goal of implementing
PPP projects. It began by initiating many policies that withdrew the controlling and
regulating role of the State and then went on to establish institutional structures that
provided a formal forum wherein big business could participate in policy-making.
Such a government–business alliance became explicit when the Government of India
appointed a three-member Investment Commission in 2004 to enhance and facilitate
investment in India. The Commission makes recommendations to the Government of
India on policies and procedures to facilitate investment, recommends projects and
investment proposals that should be fast-tracked/monitored, and promotes India
as an investment destination.4 Its initial tenure was for three years but it has been
extended by another three years. The Commission is chaired by Ratan Tata, with
Deepak Parekh (HDFC) and Ashok Ganguly (ICCI) as members. The Report of this
Commission is an important policy document not only because its members are major
business leaders of the country but also because the notification of the appointment of
258 Indian Journal of Human Development

the Commission itself laid down the procedure to process the recommendations of the
report. The notification mentioned that it will be located in the Finance Ministry, will
enjoy operational autonomy and government support, and that its recommendations
will be processed in the Ministry and put up for approval to the Cabinet Committee
of Economic Affairs.
The Report, submitted in 2006, formalized the framework policy of pursuing the
goal of raising the rate of economic growth and the need for the kind of governance
required to respond to this policy (GoI, 2006a). The Commission set the goal of
sustained economic growth at 8 per cent and proposed that the investment levels in
the economy have to rise from 30 per cent of the GDP to 34 per cent over the next
five years. Having set this target, the Commission suggested an expansion in foreign
direct investment (FDI) of $15 billion by the end of 2007-08. It then went on to identify
major impediments to investments and then made recommendations to improve the
investment climate in the country. A number of recommendations were concerned with
reform of the debilitating procedures of decision-making and provided sustenance to
the governance reforms being undertaken.5 As the Commission consisted of leaders
of the corporate world, its recommendations further stimulated the pace of forging
government–business partnership that has become the cornerstone of India’s strategy
of development.

INSTITUTIONAL ARRANGEMENTS FOR NETWORKS

New formal institutions that reflected this partnership began to emerge and the
government began to open itself to advice from and consultation with the corporate
sector. The economic ministries formed Boards that had leading lights of the corporate
sector as members to formalize the collaboration between the government and business
in policy-making. The Federation of Chambers of Commerce and Industry (FICCI) and
Confederation of Indian Industry (CII) and other such organizations were recognized
as legitimate forums for political and bureaucratic leadership to interact with captains
of industry. At the highest level, with the Prime Minister as chair, a Council on Trade
and Industry was created as an institutional framework for partnership between
government and business. The Prime Minster emphasized that the partnership flows
from the country’s overall strategy of economic reforms.
According to the government notification in 1998, a Council on Trade and Industry
was appointed with the Prime Minister as chairperson. This practice was continued
with the change of government in 2004 too. The Council provided an opportunity
for a policy dialogue between the Prime Minister and members of the Council on
important economic issues relevant to trade and industry The Council ordinarily met
once in three months on such dates as decided by its Chairman. The membership of
the Council nearly doubled—from 10 to 18 members—between the two years when
the government changed, incorporating many more industrialists who were rising on
the economic horizon. In addition, special sub-groups were also appointed to interact
directly with Ministries. Such sub-groups were set up in varied areas like Food and
 Governance as Networks 259

Agro-industries Management Policy, Infrastructure, Capital Markets and Financial

Sector Initiatives, Knowledge-based Industries, Service Industries, Administrative
and Legal Simplifications.
The membership of the Board in 1998 and in 2004, when the Government changed,
is shown in Table 1.
Table 1
Council of Trade and Industry, 1998 and 2004

Chairman: Prime Minister

Members: 1998 Members: 2004
Ratan Tata Ratan Tata, V. Krishnamurthy
Mukesh Ambani Keshab Mahindra, R.P. Goenka
R.P. Goenka Azim Premji, N.R. Narayan Murthy
Kumarmangalam Birla Rahul Bajaj, Mukesh Ambani
N.R. Krishnamurthy Kumarmangalam Birla, J. Godrej
Nusli Wadia Sunil Mittal, Ashok Ganguli
A.C. Muthiah Deepak Parekh, M.S. Banga
P.K. Mittal K. Mazumdar Shaw, K. Anji Reddy
Dr. Parminder Singh Venu Srinivasan, SK Munjal
Suresh Krishna
Member-Secretary: Principal Secretary to the Prime Minister
Source: Government of India Notification No. 260/31/C/25/98-E&S1, Available at: http://indiaimage.
nic.in/pmcouncils/tic/noti1.htm, Accessed on 7 September 2004.

The Council of the Ministry of Commerce and Industry, as shown in Table 2,

provided avenues of partnership to another dozen corporate giants.

Table 2
Members of the Board of Trade, Ministry of Commerce and Industry, 2005

Kumarmangalam Birla, Aditya Birla Group Ishaat Hussain, Tata Sons

Baba Kalyani, Bharat Forge Malvinder Singh, Ranbaxy
Irfan Allana, Allana Sons Jagdish Khattar, Maruti Udyog
Ravi Raheja, Shoppers Stop Prashant Ruia, Essar Group
A.C. Muthiah, SPIC Harish Neotia, Gujarat Ambuja
Rana Kapoor, Yes Bank Rama S. Deora, Ampray Labs
Source: “Kamal Nath Reconstitutes Board of Trade”, Available at: http://commerce.nic.in/pressrelease/
pressrelease_detail.asp?id=1611, Accessed on 3 April 2005.

What is significant about the membership of these councils is that trade unions/
labour federations and NGOs go unrepresented in them. It is presumed that gains in
the rate of economic growth or relaxing of government norms is a technical problem
and can be decided within an expert body and those who can invest. Part of the effort
is also to insulate economic decision-making from the political process. In Britain, a
260 Indian Journal of Human Development

three-way partnership was institutionalized in the National Economic Development

Council launched in 1962. During the 1980s, the significance of the Council diminished,
and its members met infrequently. The Prime Minister, Mrs. Margaret Thatcher, was
of the opinion that trade unions had no legitimate role in policy-making and should,
therefore, be excluded. The Council was finally disbanded in 1992 (Dorey, 2005, p.
125).
For networking with the civil society at the policy level, a National Advisory
Council had been appointed during the earlier term of the present government
but was disbanded after its Chairperson chose to resign. The NAC comprised
distinguished professionals drawn from diverse fields of development activity, who
served in their individual capacities. Through the NAC, the Government had access
not only to their expertise and experience but also to a larger network of research
organizations, NGOs, and social action and advocacy groups. The NAC is being
revived and is now is in place with a full complement of members drawn from the
groups mentioned.
Members of the corporate world are also being invited to participate in policy
processes in many other areas apart from merely industry and trade. For example, the
Ministry of Human Resource Development convened a Round Table for discussing
policy issues regarding education. During its first meeting, it was decided that Analjit
Singh of Max would prepare a concept note on vocational education, Hari Bhartia of
Jubilant Organosys would prepare a policy outline on PPP in research, and Rajendra
Pawar of NIIT would recommend measures to ensure that meritorious students get
funds for education in private un-aided institutions as well as ways of incentivizing
private investment (Mukul, 2009). To refer to the British experience again, sectoral
departments have created their own partnerships with non-governmental actors.
These partnerships have been categorized as ‘policy communities’ that are generally
organized around a government department and its network of client groups (see
Dorey, 2005, Chapter 5 for more details). These arrangements help the department
set its agenda and seek stability in policy. Some of the key policy communities are in
the areas of Agriculture, Health, Law and Order, Tobacco, and Transport. Among the
primary organized interest groups that form part of this sub-system are the National
Farmers Union, British Medical Association, Association of Chief Police Officers, the
Tobacco Advisory Council, and British Roads Federation.
In order to create an improved relationship between the bureaucrats and the
private sector, other informal measures are also being attempted. Senior civil servants
are being permitted to go on deputation to work in multinational corporations or
large corporate houses in public interest (italics mine). Making good use of Section 6(2)
of the IAS (Cadre) Rules, 1954, which allows officers to take up assignments outside
the government, as many as 115 members of the 5000-odd IAS cadre are holding
assignments outside the government. At last count, 64 IAS officers were working with
private firms or NGOs while 51 were on foreign assignments, including those with the
India offices of international organizations. The latest officer to head out is a petroleum
joint secretary, said to be joining as chief of an oil refinery owned by a corporate major.
 Governance as Networks 261

Meanwhile, to meet the ‘shortfall’ in the IAS, the government decided to recruit ‘more
and more’ officers—110, 120, and 130, respectively in 2008, 2009, and 2010 (Sinha,
2007).
In addition, individuals who have had wide experience of working in senior policy
positions with the private sector are being inducted at the policy-making level in
government. In 2009, the Planning Commission opened its doors to one such eminent
person. Arun Maira, who had worked with Tata Motors and Arthur D. Little, and was
senior advisor with the Boston Consulting Group in India, was appointed as member
of the Commission.6 In another recent decision, Nandan Nilekani, Co-Chairman of
Infosys Technologies and leading spokesman for the information technology industry
was appointed as Chairman of the Unique Identification Authority of India with the
rank of Cabinet Minister. Thus, policy networks are being created and strengthened
in various ways.
This growing partnership between the executive and big business is also getting
reflected in the membership of Parliament. According to a National Election Watch
Report, there are around 300 MPs in the Parliament who are ‘crorepatis’. Out of them,
138 belong to the Congress Party, and Bihar alone accounts for 52 of them (National
Election Watch, 2009). Many of these ‘crorepati’ MPs have connections with large
business houses. For example, Rahul Bajaj is a leading industrialist of the country
and is a member of several Committees of the government. He has been a member
of the Committee on Labour and also of the Consultative Committee for the Ministry
of Finance in 2007. Parimal Nathwani, who is closely linked with Reliance Industries,
has been a Member of the Committee on Commerce and Consultative Committee for
the Ministry of Home Affairs. An MP like Vijay Mallya, who has business interests
in the liquor and aviation businesses, is a member of the Consultative Committee
for Ministry of Civil Aviation. These are a few examples wherein avenues of direct
influence are accepted in defiance of all issues of conflict of interest.

RESPONSE OF INDUSTRY ASSOCIATIONS TO GOVERNMENT OVERTURES

Associations of industries have also geared themselves to provide platforms for the
leaders of government and business to interact and deliberate on public policy. The
Federation of Indian Chambers of Commerce and Industry (FICCI) is the rallying
point for free enterprise in India. According to its website, “it has empowered Indian
businesses, in the changing times, to shore up their competitiveness and enhance
their global reach.’ With a nationwide membership of over 1500 corporates and over
500 commerce and business associations, FICCI espouses the shared vision of Indian
businesses, and speaks directly and indirectly for over 2,50,000 business units. The
website further says that “FICCI maintains the lead as a proactive business solution
provider through research, interactions at the highest political level and global
networking.’ Thirty-four specialized committees of FICCI on diverse segments of
the economy grapple with sectoral issues on a day-to-day basis to provide solutions
to business-related problems and suggest pragmatic policies to the Government.
262 Indian Journal of Human Development

The Government provides its support to the activities of Joint Business Councils
formed by the FICCI with India’s trading partners. This is what it calls ‘track two
diplomacy’ to open up new business opportunities for Indian businessmen with
overseas investors, technology suppliers, and multilateral and bilateral funding
agencies. The Annual General Meetings (AGMs) of FICCI have been important
national economic events. As contemporary developmental issues facing the nation
are discussed and debated by the political leadership, business and the academia
during these meetings. These events have helped the Government of India to take
stock of the developmental initiatives and to evolve policy corrections based on
industry responses.
The Confederation of Indian Industry (CII) is another significant business
association with a direct membership of over 5300 companies from the private as well
as public sectors, including small and medium enterprises (SMEs) and multinational
corporations (MNCs), and an indirect membership of over 80,000 organizations from
300 national and regional sectoral associations. Its website says that CII catalyses
change by working closely with the Government on policy issues, enhancing efficiency,
competitiveness and expanding business opportunities for industry through a range
of specialized services and global linkages. With 47 offices in India, 12 overseas and
institutional partnerships with 239 counterpart organizations in 101 countries, CII
serves as a reference point for industry and international business community. Paying
special attention to its linkages in the US, it set up an office in Washington in 1995, and
has close working relations with organizations such as the US Chamber of Commerce,
the US–India Business Council, The Aspen Institute, and the Brookings Institution.
CII has developed strong programmes to brief members of the US Congress and has
sponsored a number of delegations of its members to visit India. As a corollary, it also
sponsors visits of India parliamentarians to the US. The first delegation went in 2003
and consisted of representatives of various parties. Recently, it sponsored a trip of
young parliamentarians to Yale University for an orientation programme.
The Prime Ministers and their reform-oriented colleagues have played an important
role in seeking support from these associations in initiating policies of liberalization.
It must be remembered that Rajiv Gandhi’s attempts at deregulation in 1986 faced
significant opposition from his own party and bureaucrats, and he needed support
from business. Sinha (2005) has documented how Rajiv Gandhi played a crucial role in
transforming the Confederation of Engineering Industries (CEI) into Confederation of
Indian Industries (CII) that was more broad-based and spoke for the entire industry.
In 1991, Dr. Manmohan Singh, then Finance Minister, faced a similar predicament.
He recommended that CII should popularize his ideas of economic reform to the
opposition in Parliament. CII began organizing interactive sessions and this practice
has since continued. Earlier, Prime Minister Vajpayee had asked CII to invite Benazir
Bhutto, Pakistan’s former Prime Minister to India when it was politically difficult
for him to do so. Similarly, Finance Minister Chidambaram made a request in 2004,
“I would like CII and FICCI to address some of our friends in the Left parties and
convince them to increase the Foreign Direct Investment (FDI) cap”.
 Governance as Networks 263

The Finance Minister came to address the National Council of CII in August 2009.
He elaborated on the measures taken in the last Budget and called for support from
the industry to carry out many programmes in the fields of health and education too.
He showed that there were greater opportunities for the private sector because smart
cards are being provided to the citizens to avail of health services from private hospitals
too. Similarly, he underlined the significance of PPPs that were being promoted to tide
over difficulties in various sectors like those of infrastructure, health, and education.
Lauding the members of CII as leading members of industry, he exhorted them to play
a “stellar role in making the Indian growth story a continuing one”.7
The role of CII in influencing public policy is now well recognized and documented
(Kochanek, 1996; Kohli, 2006; Sinha, 2005). CII has argued for a more open and
competitive economy, and promoted greater integration of the Indian economy with
the global economy. As quoted by Sinha (2005, p. 15) Tarun Das, its long time Secretary-
General, described “development as a partnership process between the government
and industry and we (CII) are the junior partner of the government”. It has found
representations in delegations to the WTO and in delegations accompanying the Prime
Minister during the latter’s State visits abroad.8
The CII, in turn, has established several committees and task forces that examine
issues in specific sectors and raise them in government interaction. For example, there
is a National Committee on Healthcare (2009–10), which comprises members from
hospitals, diagnostics centres, medical equipment companies, nursing homes, etc.
The committee is currently being chaired by Dr. Prathap C. Reddy, Chairman, Apollo
Hospital Group. The main objective of the committee is to work on various issues
pertaining to the healthcare sector and to provide inputs in its interaction with the
Government.9
There is a National Committee on Education chaired by Vijay K. Thadani, CEO
of NIIT. CII’s education initiatives are aimed at promoting both at school education
and higher education. The CII works actively in the areas of policy recommendations
on PPP in school, accreditation and the right to education, upgradation of school
education and of higher education, PPPs in higher education, etc. The CII has formed
a University–Industry Council wherein universities and the industry come to a single
platform to discuss issues and take corrective actions in the area of human resource
development (HRD). The following five task forces exist under the National Committee
on Education:  
l Independent Accreditation
l Teacher Empowerment and Development
l Right to Education Bill
l PPP in Schools
l Higher Education Reforms
The CII launched the University Industry Council in May 2007 and since then, it
has held three symposiums to establish various linkages between university and the
264 Indian Journal of Human Development

industry, both of which are critical to the economy of the nation, and hence the need
to set up collaborative ventures between the two in various areas.  CII mentions the
following as its achievements:
l Introduction of Open Source philosophy and software in the schools;
l Introduction of Web-based teaching–learning in the schools; and
l Launch of free online portal for teachers and students, and of a free Training
and Empowerment Academy for Teachers;
It is proposing new initiatives in the following areas:
l Commencement of an E-Teaching Certification Programme for school-
teachers;
l Creation of E-Teaching toolkit for rural schools and teachers; and
l Establishment of a Consortium of B.Ed. Colleges to promote E-Teaching
through Open Source and the Web.10
There are also attempts by the industry associations to reach out to Parliamentarians.
FICCI, for instance, has a unique mechanism known as the ‘Forum of Parliamentarians’,
wherein any Member of Parliament interested in joining it can do so on a voluntary
basis. “At present, about 185 MPs, including those of regional parties, are part of the
forum,” says Mitra, Secretary-General of FICCI. While it is chaired by a member of
the ruling party, the co-chair is an MP from the opposition, with the idea of balancing
viewpoints. Says Mitra, “We send briefings to these MPs on various issues. We also put
forward our views to all parties involved in policy-making,” (see Sebastian, 2008).
FICCI, in collaboration with the Indo-US Forum of Parliamentarians, launched an
India-Yale Parliamentary Leadership Programme in 2007. Since then, young Indian
MPs have been sponsored by FICCI to participate in this programme every year.
Apart from attending the programme at Yale University, the parliamentarians are also
provided an opportunity to meet US business leaders.
Thus, the CII and FICCI are relating themselves to the Government not only
in terms of demands for an improved enabling environment for doing business but
have gradually taken steps to organize themselves to sustain their influence on other
sectors too and to forge partnerships in them. The emerging networks span many
areas concerning the role and responsibilities of the Government that were exclusive
to it before the advent of economic liberalization.

PARTNERSHIPS AS IMPLEMENTING AGENCIES

Infrastructure
Flowing from policy networks, the concept of partnership is also being applied at
the level of providing goods and services that were earlier the responsibility of the
State alone. (PPPs) now constitute a popular strategy of implementing development
programmes primarily due to the limitations of Government resources and the
capacity to cope with the rising demands of infrastructure and social sector needs.
 Governance as Networks 265

The Investment Commission (GoI, 2006a) calculated that in infrastructure alone, the
demand for the next five years would touch around $246 billion. This demand for
resources does not include the estimated demand for social sectors like education
and health, which are important components of the Millennium Development Goals
(MDGs). It is argued that this massive investment is possible only through the support
of the private sector. In addition, it is frequently reiterated that the private sector
brings in new technology and greater efficiency in delivering goods and services.
In a presentation to a Chief Secretaries Conference in 2007, the Finance Secretary,
Government of India, underlined the role of PPPs in bringing private sector efficiencies
to the public sector and reducing the costs of delivery (Subbarao, 2007). It is due to
these reasons—resource deficiency with the Government and delivery efficiency with
the private sector—that the Government stresses that PPPs have to be successfully
implemented. Bovaird (2004, p. 201) provocatively suggests, “Of course, this gives
rise to the possibility that these partnerships have not been marriages based on love,
or even on respect for the qualities each could bring to the relationship, but rather
marriages for money”.

Promoting PPPs
The Government of India, quoting a World Bank study, expressed disappointment at
the fact that by 2005, only 85 PPP projects had been awarded by some 13 states and select
Central agencies (including power and telecom). The total project cost was Rs. 339.5
billion when the requirement of investment was very much more. The Government
decided to take urgent measures to promote PPPs. The private sector, including
international financing agencies, were responding favourably to the immense business
opportunities in India by demanding greater flexibility in procedures for approvals
and other facilities (see GoI, 2006a).
According to more recent data available on the Government of India website, which
was updated on 21 February 2009, 136 PPP projects have been approved.11 The total
investment on these projects is estimated to be more than Rs.1,40,000 crores. There are
another 333 projects assigned to the states that are in various stages of implementation.
Most of the projects are in the road sector, a sprinkling in the ports and tourism sectors
while around 67 are in the area of urban development.
The Government has taken several steps to accelerate the process of investment
and remove impediments. As a sign of importance attached to this strategy, a
Committee on Infrastructure was established in 2004 under the chairmanship of the
Prime Minister, as infrastructure demands the highest volume of investment. In 2009,
this committee was converted into a Cabinet Committee for Infrastructure Projects
chaired by the Prime Minister.
A PPP cell was established in the Ministry of Finance to support a coherent
policy framework. Simultaneously, nodal officers of the rank of Joint Secretaries
were appointed in the relevant Ministries to expedite approvals. The states were also
encouraged to appoint such nodal officers.
266 Indian Journal of Human Development

A key initiative of the government to promote PPPs is the Viability Gap Funding
scheme. This is meant to provide financial support to those infrastructure projects that
are economically justifiable but are not commercially viable. The eligible list of projects
contains projects in the urban and tourism sectors apart from those pertaining to roads
and airports, among others. Such projects would be eligible for a grant of 20 per cent of
the total cost of the project. The India Infrastructure Finance Company (IIFC) has been
set up with the specific mandate to play a catalytic role in the infrastructure sector by
providing long-term debt for financing infrastructure projects. IIFC raises funds from
the domestic and international markets on the strength of government guarantees
(GoI, 2008a). In addition, the Government announced in the Budget Speech for 2007-08
that a revolving fund of Rs. 100 crores is being set up in the Department of Economic
Affairs, Ministry of Finance, Government of India, for supporting the development of
credible and bankable PPP projects that can be offered to the private sector.12
In order to help the sponsoring authorities of PPPs at the Central and state levels,
the Government has pre-qualified a panel of firms which can provide commercial/
financial and legal services to them to facilitate smoother and more efficient
implementation of PPP projects. The Panel is intended to: a) streamline the tendering
process for the engagement of Transaction Advisors; b) enable fast access to firms
that have been pre-qualified against relevant criteria, and c) ensure transparency and
accountability through a clear definition of the process and the role and responsibilities
of the agencies and the private sector (GoI, 2008b). The panel consists of firms that
also have multinational partners and probably it is for this reason that guidelines for
choosing a panel member specify that the member must confirm that there is no conflict
of interest in taking up the job. A panel member selected by a sponsoring authority
would be responsible for all transaction services till the approval of the project. As
can be seen from the list of panel of Transaction Advisors, not only are interlocking
members present in the consortium but they may have also conflicts of interest in
bidding for projects. The Government recognizes this but has left the responsibility of
resolving the conflict to the states which are launching the projects.13
Apart from providing technical assistance to the states and the Central Government
to expedite projects in the PPP mode, efforts are also being made to provide training to
the functionaries at the state and local levels. Through the support of the World Bank
and the Asian Development Bank (ADB), a curriculum of training is being developed
at the State Administrative Institutes.
The Comptroller and Auditor General of India (CAG) has undertaken the task
of issuing guidelines for auditing the infrastructure projects in the PPP mode. The
Guidelines emphasize that “Public auditors of PPP projects must note that in respect
of PPP projects, the important principle is to bring out in their reports, what have
been achieved rather than how it was achieved by the private partner responsible
for constructing and managing the project. There is no doubt that good governance
is a sine-qua-non in PPP projects as well, but since the objective of the audit is not to
audit the private partner as such, but to verify primarily the value for public money,
the focus of the audit reports will be the review of end results rather than the how
 Governance as Networks 267

of achieving them. It stresses the need for on an assessment of the ‘value for money’
concern (GoI, 2009b). Audit reports have not yet been commissioned on this basis.
However, PPP projects have come in for adverse comments when taken up by
legislatures for discussion. The Joint House Committee of Karnataka, probing the
construction of the Bengaluru International airport, has indicted several public
functionaries and officials for the faulty design and construction of the airport. It has
recommended blacklisting of the firms responsible for building the airport for the ‘poor
quality of workmanship’ (The Hindu, 2009). The Committee on Public Undertakings of
the Parliament has ‘flayed’ the National Highways Authority of India for irregularities
in the execution of the traffic-intensive Delhi–Gurgaon highway, claiming that it made
certain exceptions to the usual approach to projects in order to benefit the private
concessionaire. For the first time, the Committee raised the question as to what
should be the reasonable profit for the private investors, which operate and collect
toll for periods extending to 20 years in such stretches. The private partner saw profit
in the light of balance of risk and award, and anticipating considerable risk in this
case, pitched in with a higher rate of profit (ENS-Economic Bureau, 2009). There is,
therefore, need for evaluation of such large projects in the PPP mode when they are
being questioned in terms of both the criteria of the quality of work and the level of
profit. There appears to be room for benefiting the private partner on both the counts
and this necessitates constant vigilance.
Without careful evaluation of partnerships in the projects, there appears to be a
sense of urgency in accelerating the pace of PPP-ization in India as demonstrated by the
rapid publication of enabling conditions and establishment of approval mechanisms
at the highest levels. There is a push by international development agencies as PPP is
central to their development strategy. A large part of the FDI and loans being made
available by the World Bank or the ADB are premised on the assumption that the
projects would be implemented in the PPP mode irrespective of whether they are in the
infrastructure or social sector. For the private sector, PPPs in infrastructure represent
opportunities for heavy investment, windows for entering a market that is very large,
and market space to stay for a long period of time. The Government finds that this
partnership helps bring in finances and world-class technology, and so partnerships
seem to have worked in the infrastructure sector. However, projects have yet to be
evaluated for efficiency, costs, and adoption of the latest technology.

PPPs in Health Services

While the challenge that policy-makers face in the infrastructure sector is that of
creating a more favourable ‘enabling state’ to attract greater private sector investment,
PPP projects in the social sector face an additional challenge. This is concerned with
not only creating the physical infrastructure that can provide health and education
services but also of providing them equitably. PPPs in the health and education sectors
appear to face problems that those in the transport, roads or energy sectors do not face.
These are in terms of reaching the poor and those who are deprived of these health
and education services.
268 Indian Journal of Human Development

It is now widely accepted that India’s performance in the social sector has been
dismal over the years. There has been low government investment with health services
being provided by the implementing machinery to the poor and the marginalized
people being of a very low quality. A situation has arisen wherein super-speciality
hospitals, financed by the private sector, are growing to serve the rich and the urban
elite while healthcare services for the large mass of people continue to be inadequate
and of poor standards. A Concept Note issued by the Ministry of Health and Family
Welfare has underlined the fact that the present healthcare system is pro-rich as a
majority of the expenditure on healthcare by the Government ends up subsidizing
the healthcare of the rich more than the poor, as a result of which the poor end up
spending proportionately more from their pocket than the rich. The dilemma is that
the poor cannot get adequate health services from the public sector, but when they
seek these services from the private sector, they face further impoverishment due to
the high expenditures (GoI, 2006c). As a way out, the Government has begun to explore
the possibility of PPPs in the health sector wherein the private sector can provide
the massive investment needed to create the requisite infrastructure (hospitals, beds,
equipment, doctors, nurses, para medical staff), while the Government itself provides
for other infrastructure facilities like land or buildings to enable provision of healthcare
facilities for the poor.
The state governments in India, within whose jurisdiction lies the health sector,
are experimenting with partnerships with the private sector to reach the poor and
underserved sections of the population.14 Currently, several PPP initiatives are
under implementation in various states. However, there is no uniform pattern of the
emergence of these PPPs.15 One reason for this is that there are multiple providers of
health services in India. What is referred to as the non-government sector comprises
several types of medical traditions that range from local therapies to ayurveda, unani,
siddha, and of course allopathy, to individual doctors and practitioners of medicine,
to private clinics and nursing homes, to large super-specialty hospitals. NGOs are
also involved in providing health services in an organized fashion. In this complex
space, the Government has sought partnerships with the ‘for profit’ private sector that
usually runs large hospitals and technical services, and with NGOs, who are willing
to provide health services in an equitable cost-effective way.
Baru and Nundi (2008) have identified three types of partnerships: contracting
of services, franchising, and social marketing. The largest number of projects in the
PPP mode falls into the first category of contracts, which are with the ‘for profit’
private sector, NGOs, and private practitioners. In addition, there are cases wherein
the Government has provided land at subsidized rates or reduced import duties on
technical equipment to corporate hospitals as a partnership venture. It also appears
that partnerships with NGOs are favoured for primary healthcare services and with
corporate hospitals for advanced technical services in the tertiary sector.
In most cases, an important purpose of partnership is to provide free services to
the poor and the deprived. However, monitoring this part of the partnership remains
the biggest challenge. In most cases, identification of BPL (below poverty levels)
 Governance as Networks 269

persons poses the greatest source of harassment to the patients and gets a whimsical
response from the administrators. There is no accountability mechanism that places
responsibility for particular decision. The study by Venkatraman and Bjorkman (2006)
cites this difficulty in the case of a Jaipur hospital wherein the contracting out of
X-Ray services has taken place. On the other hand, in Delhi, the High Court issued a
notice to Apollo Hospital for allegedly charging money from patients belonging to the
economically weaker sections of society. “It is completely unfair on the part of Apollo
that they are not abiding by orders of giving free treatment to poor,” observed a division
bench of the High Court (IANS, 2009). The Delhi government, for example, has woken
up recently to make some of the provisions of the partnership transparent. In a recent
meeting with medical superintendents of private hospitals, which had acquired land
at concessional rates by promising free treatment to BPL patients, the state officials
instructed them to update details on the bed vacancy at the end of each working day
on the website of the Directorate of Health Services. The state government recently
appointed a nodal officer exclusively for Indraprastha Apollo Hospitals, which had
gone to court against paying for consumables to treat poor patients. A doctor has been
posted there for three months to ensure that 200 beds are kept aside for BPL patients
(Krishnan, 2009).
In a recent interview, Delhi’s Health Minister also expressed some misgivings in
this regard. She was asked, “When you assumed office, you expressed enthusiasm
about PPPs. Has there been any change in emotion?” Her answer was, “Yes there has
[been a change]. We have felt cheated [at] the hands of big corporates like Apollo and
Fortis. After that, we decided that our Dwarka hospital will be a wholly government
project,” (Walia, 2010).
Among the many problems that PPPs in the area of health services face is that the
managers in the government sector are ill-prepared to properly design the partnership,
monitor the performance, and provide an enabling environment for execution of the
project. Indeed, the system of evaluation of performance is not adequate. Another
major problem has been that of accountability. The Government is responsible for
providing health services and if there are any deficiencies, it is held accountable.
But at the operational level, one stakeholder tends to blame the other. How can the
partnership be held accountable? As Baru and Nundy (2008, p. 69) point out, the
experience of PPPs in health services shows that these partnerships have been built
without the requisite organizational and administrative preparedness, which raises
questions about their role, accountability and effectiveness.
A comment in the Report of a Working Group constituted by the Planning
Commission on Public Private Partnership to improve healthcare delivery for
the Eleventh Five-Year Plan (2007-12) under the Chairmanship of the Secretary,
Department of Health and Family Welfare, Government of India, sounds an alert. It
says significantly, “However, it may be reiterated that private partnerships are not
sufficient to resolve the dilemma of inadequate healthcare for the people. The focus
of public policy in the context of the Eleventh Five Year Plan should be the flagship
march for strengthening the public health sector,” (GoI, 2006c). Despite the realization
270 Indian Journal of Human Development

that PPPs may not adequately fulfil the goals of the health policy in India, the process
of using them for this purpose continues unabated.

PPPs in Education
The Ministry of Human Resources Development has also brought out a Concept Note
on PPPs in Education and suggests that it is an approach used by the government to
deliver quality services to its population by using the expertise of the private sector. It
goes on to point out that this approach has been used in India since a long time. The
most common form that it has undertaken is that of the government-aided schools
system in the country. In 2006-07, 30.05 per cent of higher secondary schools and
junior colleges, 27.15 per cent of high schools, 6.75 per cent of upper primary schools,
3.19 per cent of primary schools, and 5.15 per cent of pre-primary schools were run
by private institutions with substantial financial assistance from the respective state
governments (GoI, 2009a).
However, the Government is moving towards different forms of PPPs and also
establishing more schools only in this mode. The HRD Minister recently announced that
the PPP would be the basis of educational expansion in the country in the next two years.
He added that the schools would be set up in PPP mode as part of the Government’s
efforts to strengthen the human resource base and then went on to urge the corporate
houses to invest in a big way in the education sector, emphasizing that developing
human resources is the key to the success of any nation (ENS, 2009b). This commitment
to PPP in the education sector had been articulated earlier in a session on the knowledge
economy at the Pravasi Bharatiya Divas meeting. Admitting that it was not capable
of meeting the challenges of the education sector on its own, the Government invited
the participation of overseas Indians in the field (ENS, 2008). The Federation of Indian
Chambers of Commerce and Industry (FICCI) has been holding summits in higher
education from 2004 onwards.16 It has been organizing them as annual international
events with the support of the Ministry Human Resources Development and the Planning
Commission, Government of India. From the last two years, Ernst and Young has joined
FICCI to prepare the background paper in these meetings. In the paper prepared for
the 2008 summit, titled ‘Leveraging Partnerships in India in Education Sector’, the need
for PPPs in the higher education sector is underlined. While arguing that it is necessary
to meet the financial constraints of the government and to meet the demand of skilled
persons for industry, the paper identifies various types of partnerships and recommends
collaboration with foreign universities for research and student exchange (FICCI and
Ernst and Young, 2008). Other institutions and researchers have also joined in stressing
the need for introducing PPPs in the education sector for similar reasons and also for
fulfilling the commitment of raising literacy levels. In a World Bank study, Jagannathan
(2001) has explored the working of six NGOs that extend primary education to rural
children in India. She argues that these NGOs have demonstrated effective grassroots
action to enhance the quality of basic education and have also influenced mainstreamed
education through the replication of their models and through policy dialogue with
the Government. While suggesting that NGOs are best suited for small projects and
 Governance as Networks 271

micro-level interventions, she strongly advocates sustainable and enduring partnership

with the voluntary sector that would strengthen the Government’s efforts to actualize
the goal of universal elementary education. In their official documents, both the World
Bank as well as the ADB have been advocating the policy of “PPP-ization’ (GoI and
ADB, 2006).
The Centre for Civil Society launched a School Choice Campaign in 2007, arguing
that what the poor need today “is not just the Right to Education, but the Right to
Education of Choice”. It advocates PPPs through the use of voucher system. At a recent
Conference in 2009, the speakers included representatives of the World Bank and the
private sector, and stressed the need for quality education by providing choices to the
poor. This scheme was meant for funding the students and not the schools, and giving
choice to the students through a voucher system.17
Thus, the international donor agencies and some civil society organizations are
demanding greater PPP in the education sector. Having articulated its commitment
to provide education for all through the enactment of the Right to Education, the
Government is also becoming receptive to these ideas as it is facing a resource crunch
and lack of capacity to run a responsive and efficient educational system.
However, even after having articulated its commitment to PPPs in education,
the Government is still at the experimentation stage. For one thing, the forms that
partnerships can take place at the primary and secondary levels of education are
diverse. There are also few takers for schools in rural areas and for education facilities
for poorer people. At the higher education level, the forms it can take are in terms of
establishing research collaboration between the Government and industry, giving space
to private entrepreneurs to enter the field, and opening up of partnerships with foreign
universities. For quite some time, large business houses have been big players in the field
of higher education like engineering and medical education. These institutions were
primarily colleges affiliated to Universities, which exercised control over their academic
norms. By the mid-1990s, the promoters of private colleges perceived the regulatory
control of the affiliating university and state governments as cumbersome, impeding
the full utilization of the market potential of colleges. Thus, they wanted to wriggle
out of the control of state governments and the affiliating universities. This resulted
in a proliferation of private universities and private deemed universities. While in the
field of higher education, it is resource deficiency that is driving the government to seek
partnership with private sector, at the primary school level this is not the only reason.
Another reason is inefficiencies in the delivery system. Thus, in both the health and
education sectors, the Government is seeking partnership—with NGOs at the local and
grassroots levels, and with the ‘for profit’ private sector at a higher level.

ISSUES AND CHALLENGES

In conclusion, it needs to be re-emphasized that the advent of governance in the
Government is taking place within the broad framework of neo-liberalism in which the
role of the State is being recast. The pre-eminent place that it occupied in steering society
272 Indian Journal of Human Development

is now yielding to a more shared space with market and civil society. In this sharing,
many responsibilities that were exclusively undertaken by the State are now being
given to the other two actors while some are being undertaken in a partnership mode.
But the neo-liberal framework demands increasing privatization of the provisioning
of goods and services, leaving what are called the ‘core’ functions with the State. The
clear demarcation of ‘core’ functions is still fuzzy because, many of them, up to now
considered as ‘core’, are either being privatized or being undertaken in a shared mode.
Education and healthcare are emerging as clear examples of this duality.
In this process of transformation, the State is being seen as a problem and the
consistent demand of the liberalizers is that it should become an enabling State, a
facilitator and not a hindrance to the promotion of the market. The creation of policy
networks and the emergence of PPPs are efforts in that direction. These are also new
institutions of governance that have the Government, the market and civil society as
partners. They promise to prevent the duplication of efforts and are seen to draw on
their complementary resources and capabilities for designing more effective problem-
solving mechanisms.
As seen above, the Government and the corporate sector are developing close links
with each other in determining public policies. There are formal institutions in which
they participate to take policy decisions and there are also informal ways in which the
government bureaucracy and its related institutions are encouraged to empathize with
the interests of the corporate sector. Currently, the policy perspective is to pursue the
goal of raising the rate of economic growth and the expectation is that the networks
will strengthen the dedication and commitment of the Government to achieve this
goal. The corporate sector, in turn, is creating forums wherein the representatives of the
two partners can debate issues in the public domain—the Government is interested in
learning what the needs of the corporate sector are. The exchange of ideas is important
in the negotiations that take place in the formal networks. The industry associations
have devised several instruments for this purpose.
Network governance is assumed to contribute to the production of public purpose
within a certain area. This public purpose is an expression of social vision and the
direction that the policies should take to achieve this vision. However, network
governance relies on political and social processes at work in society, which may not
necessarily be conducive to the production of public purpose on all occasions. Even
the Prime Minister, while speaking at a public function, expressed doubts about the
way things are going and alerted the country to the growing symptoms of ‘crony
capitalism’. The reason for this is that in the Indian context, it is possible for big
business houses to influence decisions in their favour and get away with it. The data on
the Indian economy is a testimony to this view. Quoting Jessop (1998), Sorenson and
Torfing (2004) have also argued that governance networks can fail. They suggest that,
“There has been much talk about State failure and market failure, but we should also
analyse the conditions for governance network failure. Network governance relies on
precarious social and political processes and there are many things that can go wrong
and prevent the production of public purpose.”
 Governance as Networks 273

This brings up the issue of the capacity of the State to negotiate and bargain in these
networks. There is ample evidence to show that both political as well as bureaucratic
leadership has been comfortable in taking personal advantages and benefits that
the liberalization policies have offered. Consequently, their capacity to negotiate is
weakened. In addition, with the blurring of boundaries between public and private
interests, public servants may not feel the urge to carry the burden of pursuing public
interest alone. Thus, the partnerships are not equal and can allow certain private
interests to dominate.
However, the State's capacity is not only a function of legitimacy. It is also a function
of the performance of institutions and their ability to rise up to the tasks allocated
to them. Bureaucracy is the most important instrument of implementation of public
policies. It has not yet adjusted to the new paradigm of governance and continues
to act in a mode that is reminiscent of an era gone by. Innumerable committees and
commissions have been set up to reform it but the elephant has moved very slowly.
This is one of the foremost challenges of good governance in India today. Unless the
government institutions themselves have the capacity and capability to deliver high
performance, their ability to negotiate in forums of partnerships and networks with
other actors will be weakened considerably.
Over the years, after Independence, there has been a gradual decline in the
effectiveness of institutions of accountability. It is now being increasingly left to
civil society to raise issues connected with financial probity and administrative
responsibility. The Right to Information has attempted to fill in the accountability
gap and the tool of Public Interest Litigation (PIL) has also helped aggrieved groups
to fight the arbitrariness of the State. However, getting redressal under PIL is not
easy and continues to be a struggle against State mechanisms. Even the process of
decentralization after the Constitutional Amendments has been an uphill task. In the
face of weaknesses in other institutions of accountability, the Right to Information is
proving to be a strong instrument of curbing corruption and holding public officials
accountable for their public functions. Perhaps, it is now the most important advance
in the quest for good governance.
The central point is that as the web of institutions of governance becomes more
and more dense, and the new institutions of partnerships with the corporate and
voluntary sectors multiply, the State’s capacity to negotiate and bargain for pursuing
public interest has to be strengthened. In addition, if the new partnership institutions
are being kept out of the ambit of the Government’s hierarchy, the challenge of making
them accountable becomes even more acute. What the country is facing today is the
consequences of its faltering efforts at bureaucratic or institutional reform. Even though
the issue of corruption is high on the public agenda, the instruments to control it have
weakened over the years. Little attention is paid to the reports of the Comptroller
and Auditor-General, which are themselves based on events that took place years
ago. The findings of the Central Vigilance Commission (CVC) and also of the Central
Bureau of Investigation (CBI) are ignored. The challenges that PPPs face as vehicles of
implementing public policies are embedded in this broad perspective of State capacity
274 Indian Journal of Human Development

and accountability. As has been seen above, PPPs are being celebrated as constituting
a key strategy for delivering services in India. From infrastructure projects entailing
the building of roads, ports and airports to providing healthcare and educational
services, the Government is entering into a partnership mode. International financial
institutions and the private sector and NGOs are being mobilized to support this
effort. The Government is also attempting to marshal private financial and technical
resources to provide goods and services to society.
It has also been pointed out that partnerships are being forged not only because
the Government is seeking private resources for public causes but also because of
bureaucratic deficiencies. Thus, the one important reason for entering into partnerships
with the private sector is that the Government is unable to single-handedly implement
complex projects that are critical to the development of the country. The Government
is too weak or too corrupt to operate a public service. However, it is a mystery as to
how the Government believes that the same bureaucracy which is so weak and corrupt
can be any better at working in a partnership or regulating partnerships involving
large multinational companies. Thus, we also need to know why the private sector is
interested in partnerships. What is its motivation?
An important dimension of partnership projects is that the private investment is
assured of returns irrespective of the outcome of the project. There is a provision of
viability gap funding as also that of user fees. Whatever be the nature of the services
provided—roads or airports, primary healthcare facilities or specialty health services,
or drinking water supply or primary education or highly skilled education, users
have to pay a fee. This goes to refund the private investor. Both the World Bank and
the Asian Development Bank have been promoting cost recovery through 100 per
cent rational user charges because “without improved cost recovery, the quality of
utility services will not improve and opportunities for engaging the private sector
in these utilities will be limited” (quoted in Baindur and Kamath, 2009). Thus, the
stipulation that the private sector bears the burden of risk in a partnership is not
entirely correct.
Partnerships in the social sector face an additional challenge. Health services for
primary healthcare may have been established but the health of the beneficiaries does
not improve. Or schools are provided but the quality of education is poor. Or the
benefits of delivering services do not reach the poor. The Government, therefore seeks
partnership to deliver services in a more effective and equitable fashion. If this does
not happen, then the purpose of setting up a partnership gets defeated. To meet this
challenge, regulatory agencies and accountability mechanisms are required. It has
been suggested that partnerships seem to work well in the United States because there
is strong regulation, transparency and tenacious NGOs with resources.18
Finally, the most important challenge is of delineating accountability procedures
of PPPs. In the government documents that were surveyed, there is near silence
on this very important dimension. A widely accepted view is that the partnership
approach to public issues fragments government structures and processes, and
 Governance as Networks 275

weakens accountability. In a government hierarchical system, there is a clear line of

individual accountability while the institution’s responsibility is to the Parliament.
The question in partnership is: Who is accountable to whom and for what? There are
multiple partners who have different ways of holding their agents accountable but
that may not satisfy partnership accountability. And the MOU should be in the public
domain so that partnerships are transparent and accountable.
The new governance structures that have emerged in the era of the liberalized
economy are making the collaboration between the Government and business more
open and transparent. However, network governance obscures the process and
accountability for public policy formulation, decision-making, and execution. Yet,
conversely, it opens the door to involvement by a wider range of actors and in ways
that are less constrained than those applying to institutions of political authority
(Mathur and Skelcher, 2007, p. 235). However, sometimes partnerships can be used
as a form of back door entry by the private sector in the provisioning of services and
goods. Partnership necessitates a clear understanding of the roles of the partners, their
mode of financing, the agreed design of the project, the goals of partnership and how it
is going to work. It is this understanding that needs to be placed in the public domain
for the benefit of those people who will be affected by it. In most cases, this does not
happen. The interests of the beneficiaries suffer.
In conclusion, it may be said that partnerships have come to stay. Since they
constitute an integral part of not only the governance framework but also of the neo-
liberal paradigm, they cannot be completely rejected, yet they cannot be completely
accepted either. There are significant challenges in their functioning, which must
be attended to. Their functioning needs to be brought increasingly into the public
domain for ensuring transparency and accountability. This demands a more rigorous
examination of their role and functioning. As Miraftab (2004) points out, one
must ask: Under what political, social, and economic conditions and institutional
environments, and with what processes, can PPPs succeed or fail as synergistic
relationships that benefit all partners, including poor populations and their allied
organizations? Policy-makers and practitioners, who formulate a partnership
programme focused on the nuts and bolts of the scheme, must also give profound
consideration to its socio-political environment and the pitfalls that may lie in wait
there. Otherwise, they risk having the State fade away after project formulation,
with the result that the power-sharing scenario intended to serve the interests of all
partners dwindles into a familiar charade. Like the Trojan horse, these partnerships
might arrive with the promise of a gift but only to further dispossess the poor from
their local resources.

Acknowledgement
Thanks are due to the Centre for Democracy and Social Action, and to OXFAM for sponsoring
this study, and to Richa Singh for offering organizational support on their behalf. Thanks are
also due to Sunayana for providing research assistance.
276 Indian Journal of Human Development

NOTES
1. Prime Minister Manmohan Singh’s address delivered to the McKinsey meet, Available at http://
pmindia.nic.in/speeches.htm, Accessed on 12 December 2009.
2. In fact, the World Bank conducts a worldwide survey, assessing the business environment and
the speed with which a government responds to an application to set up an enterprise. In a
survey carried over 183 countries, the World Bank ranked India at 132 in 2009 with Singapore,
New Zealand, United States, Hong Kong, Denmark and United Kingdom being at the top in that
order (World Bank, 2009).
3. Seminar on ‘Competition Policy and Law’, Indian Institute of Public Administration, 16 November
2006, Details available at http://www.indlawnews.com/NewsDisplay.aspx?d24e0889-69db-
4cdb-b44b-526fd45d1299, Accessed on 10 December 2009 .
4. The Commission was set up under Government of India notification F. No. 1/7/2004-FIU.
Details are drawn from its website— http://www.investmentcommission.in/
5. A recent newspaper report (Iyer, 2010) says that there is a sense of resignation in the Commission
on the lack of adequate follow-up by the government on its recommendations and it has asked
the government to wind it up instead of extending its term.
6. The Planning Commission is the top think-tank of the government and privy to all major policy
decisions pertaining to social and economic development.
7. Address by Union Minister of Finance, Pranab Mukherjee at CII National Council Meeting, 3 August,
2009, Available at http://finmin.nic.in/fmspeech/fmspeech_ciinationalcouncilmeeting030809.
pdf, Accessed on 10 December 2009.
8. Rajiv Gandhi was the first Prime Minister who invited businessmen to accompany him on his
foreign trips. On hearing of such inclusion in the PM’s entourage, the Indian Ambassador to the
USSR is reported to have telegraphed his displeasure. Rajiv Gandhi told the Foreign Ministry
officials to throw the telegram in the dustbin and proceeded with his plans (Sinha, 2005, p.12).
9. See http://www.cii.in/CCDetails.aspx?enc=uynmj+oUo63zz/LKp/g+BD1OhPLKwGOe15ip8
+OIYvm2t0vnrVZGzc7y/jThUzAbfeTzcUy+fRmyyQ05esFM1VtTx6aLR/03fVvGlCJ5YKw0fN
ERtqC8MAoKNTLHSPYPKARG+s+V5cg7sEr27a0kGN+I/yogFhdtsTRWFOpjjeulwg6BTt7sFg
+oDDiV5vDE, Accessed on 10 December 2009.
10. See http://cii.in/Sectors.aspx?enc=prvePUj2bdMtgTmvPwvisYH+5EnGjyGXO9hLECvTuNsJ
Kom60HRHReZ5/udUByhH, Accessed on 10 December 2009.
11. For details, see http://www.pppinindia.com/database.asp.
12. The full text of the speech is available at http://indiabudget.nic.in/ub2007-08/bs/speecha.htm,
Accessed on 23 December 2009.
13. The relevant clauses are: 1) There may be potential conflict of interest in the case of Panel members
such as if IL&FS and IDFC Limited are selected as the Transaction Advisers for a project for which
they could be potential bidders. It is, therefore, recommended that the state governments/local
governments appointing the Transaction Advisers should take an undertaking from the selected
consortia that they/their affiliates will not bid for the same projects. 2. There may be potential
conflict of interest in case the agencies with CRISIL consortia are selected as the Transaction
Advisers.
14. See discussion on this issue in the study by Venkatraman and Bjorkman (2006).
15. For the forms that PPP has taken in the health sector, see Baru and Nundy (2008), pp. 70-71.
16. See http://www.ficci-hes2009.com/htm/e&y-executive-summery.pdf, visited on 10 December
2009.
17. The speeches are available on its website: http://schoolchoice.in/scnc2009/index.php, Accessed
on 9 January 2010.
18. Hindustan Times (21 February 2010) reports that civil society organizations in Delhi have won a
 Governance as Networks 277

year-long struggle and made the National Highways Authority of India (NHAI) agree to place
an agreement with the construction firm responsible for the Gurgaon Expressway on its website.
With this, the agreement will now be under public scrutiny.

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