PSDP: the states quagmire

Public sector works and development spending are well-tried ways to jump start the slackening economies. However, such programmes cannot, in themselves, sustain growth momentum, especially when governance, structural and sectoral reforms are found wanting. Federal governments Public Sector Development Programme has been swelling since many years now. The data released by the Planning Commission shows that the Commission had disbursed Rs118.3 billion on account of FY12 federal PSDP, uptil February 17 of the ongoing fiscal. It is Rs25 billion shy of the Rs143.325 billion it is supposed to disburse by March end, in line with quarterly ceilings. Of the Rs290 billion federal PSDP budgeted for FY12, the Commission is authorised to release upto Rs220.5 billion. Of the rest, Rs33 billion are supposed to be released by the cabinet and finance divisions for "Special programmes"; and Rs36.5 billion by foreign donors through the Economic Affairs Division. The government is running a huge throw forward of nearly rupees three trillion, which is mainly on account of large infrastructure projects which have to compete for funding with those projects whose approvals are inspired by factors other than economic impact or service delivery. Hence, the average completion period of a project has escalated to 17 years. Reportedly, the federation is planning to further reduce its social sector development footprint come next fiscal. The ongoing social sector projects will remain with them, but the new ones would be initiated solely by provinces (which is supposed to be the case after the 18th Amendment). Moreover, it is a positive trend that infrastructure projects nearing completion are being given priority. Yet this paradigm of public sector development is not sustainable, especially when a concrete roadmap is lacking and the whole process is inundated with systemic lacunae and incentives for malpractices. What to talk of service delivery mechanism of the completed projects; independent economists and observers out rightly question the effectiveness of the initial, crucial phases of planning, appraisal and approval. The state is up to her neck vis-à-vis mega projects whose design it cannot engineer, whose financing it cannot afford, and whose scale it cannot monitor. Hence, cost and time overruns have become so acute that the economic or public benefit of a long-drawn out project is worth just about Rs38 for every Rs100 spent, according to one study conducted by the Commission. Yet a barrage of new projects appears to be in the offing, as the preparation of the budget for FY13, supposedly an election year during which the receptivity to reformist calls usually goes down, gets under way. There is a need to get out of this bungled state-of-affairs. When the state clearly lacks both the managerial and financial capital to see these projects through, then why not induce and incentivize the private sector, so that the development works are transparently expedited within timelines and public resource constraints? The productivity and management of the infrastructure and facilities already in place are un-reassuring in equal measure, as the Commission has rightly pointed out in the New Growth Framework. From public toilets to state-built guest-houses; and from canal linings to gigantic dams; there is a need to manage and utilise the existing infrastructure efficiently to get more out of them.

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Federal PSDP FY12 (Rs bn)
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                   Ongoing     Throw       FY12 budgetary
Sector            Projects     Forward      allocations              FY12
                     (nos)      (Cost)  (Govt)  (Foreign Aid    Releases*
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Infrastructure         335      2266.7    126.3        31.2          69.1
Social                 859       585.4    123.9         5.3          48.1
Others                  83        41.4      3.3           0           1.1
Total                1,277     2,893.6    253.5        36.5         118.3
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Source: Planning Commission * Jul. 1, 2011 to Feb. 17, 2012