Outsourcing governance- Is the new “inn” thing? – Parastatals

In the class on democracy and ecology, I have always had an alternate possition from that of the course instructor. While he upholds the constitution ( although he is not a lawyer, but still! ) above everything, I feel there have be changes in ways of state’s doing business in the context of the larger world.  While I had my reasons to question his point of views, I did agree to his reasoning in certain matters. One of them is the case of parastatal agencies.  The funny thing is when I did agree with him this time, he was unable to see it as he is tuned to believe that I wont agree with him.

Parastatal agencies , what are they? They are agencies that “aid” state in doing its job well by doing certain specific , specialized jobs that generic state can not be expected to do. For example an ISRO (Indian Space Research Organisation)is a parastatal agency. At the same time a KUIDFC (Karnataka Urban Infrastructure Development & Finance Corporation) is also a parastatal agency. And there exist other parastatal agencies that are neither an offshoot of government bodies, nor are non-governmental organizations. They are somewhere inbetween. They ( in the name of helping the state) play the role of state and also not stay answerable to the public that has elected its local representatives – councilors/ corporators / MLAs.  There is a requirement for a parastatal agency like a ISRO to provide and implement experitse, as it is a very specialized task. Whereas requirement of a KUIDFC does exist too, but to provide expertise through advocacy but not implementation. Why this distinction?


  1. The activities that KUIDFC plans/implemented are constitutionally mandated by the Urban Local Bodies to do it by themselves , on behalf of the citizens of the urban area. 
  2. Also agencies like KUIDFC are given the trump card to override these constitutionally guaranteed powers vested with the ULBs. (See image below , snippet from KUIDFC-Municiapl corporation contract).
  3. KUIDFC then takes loans from IFIs (International Financial Institutions) on behalf of the city corporation and further imposes the rules from the IFIs on the city and in this process also changing the laws and policies of the state.


The KUIDFC atleast is a parastatal agency constituted by the state, they can be questioned at some point by the state.

There are other type of parastatal agencies that are set up by  influencial citizens “to do good” for the larger city. In the case of Bangalore one of them is Janagraha. Janagarha, one of the urban specialist NGOs is one example. Bangalore has a handful of such influenctial agencies. I have worked for one of them in the past ( I guess!). The point is all of them intend well, but why are they bestowed with powers that are mandated to the state bodies? Why are they given them without being asked to be accountable for the same?  The questions raised by the instructor were pertinent- why is  a Janagraha a signing authortity for the city plans that cities were supposed to put together under JNNURM?  And who funds these agencies? Do these organizations even know the landscape of politics and governnance? They do not engage with areas that are asthetically not apealign for them in their “citizen engagement assigment” they assign themselves. Like the BATF did not want to engage with the slum board as it ” is a political cesspool” while doing the City Development Plan for the BDA.

It definitely is not a bad idea to have parastatals help state in an advisory role, but they definitely can not be engaged to “do” things without being held accountable.

Also another intersting thing about Bangalore- there was a report commissioned under Kasturirangan on how the Bangalore metropolitan should be governend. But is not available on any goverment website but on archive.org.- https://ia801001.us.archive.org/18/items/DrKasturiranganCommitteeReportOnBBMP/Dr-Kasturirangan-Committee-Report-on-BBMP.pdf


That, that!!!!


Intial thoughts- Environemental goods and Market Based Environmental Policies

Market Based Environmental Policies , can they really work a solution to the environemtal crisis we face today? I have been trying to understand this for a while now. There are two concepts that address this matter  and they can be associated with two economist. One of the olden times A.C. Pigou and other of these times Ronald Coase. The problem of environment is not something they tried to address but the negative externality of any economic transaction. most times the negative externality of any economic transaction was borne by the environment. So their theories can largely be applied to addressing problems that are related to pollution/ exploitation of environment. 

While Pigou lived in the 19th and 20th century, Coase lived in the 20th and 21st century. Pigou tried to address the issue of environmental pollution by suggesting taxation. Later this evolved into the idea of regulating the industries that pollute. But taxation is tricky, as one may not know the actual cost of the polluting activity. Regulation may be technology specific regulation , although this means reduced bandwidth from the state to monitor , this will be a disincentive for innovations on less polluting technologies. The other type of regulations is to do with respect to specifying the quality/ quantity of pollution produced. This increases and facilitates innovation whereas costs high on monitoring of the industries. 

Ronald Coase in 1960 in a paper suggested to reduce negative externality what was needed was not taxation or regulation but property rights.  Property rights that are –  well defined ( of which object, what rights does the right provide), divisible ( are the rights separate and tradable) and defendable (enforceable , recognized by norms or customs of community or government). He got a nobel prize for this particular thought. It did do good in resolving many disputes.

My reason to look at these two regimes of addressing negative externalities is to understand what are the present form of -pollution control boards and environmental clearances processes following. The regime as in India is that of regulation – more Pigouvian as we have not ( and in some cases, it is not easy) to ascertain property rights to certain geographical entities like rivers, lakes etc. Why is Coase’s approach not practices in India – it could be because of the lack of establishing of property rights or inability to allocate rights. 

The other aspect with respect to Coase’s application to environmental goods, internationally, carbon trading is a perfect implementation of it. But can we trade carbon? Does environement work in the ways economist perceive it. Is it so simplistic that I pollute in America and ask some other entity in another nation to do forestration on my behalf. Will it work? Will America will also get to exchange “pure air” generated in that country where forestration is done “ in lue of” that industry in America? 

One needs to explore this further….

Forest Right Act (2006) and Compensatory Afforestration Bill (2015)


A conveyer belt  of Vedanta that carries the bauxite, with the Niyamgiri in the backdrop. Place and date: Odisha ( October,2015)

Last year around this time I wrote a paper on Forest Right Act (2006) – The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 – Who’s right and bestowed by whom? –  looking at the postivies apects regarding the  the rights that it bestwos to the tribal and indigeneous people and also the gaps in the act that dealt with the issues regarding the precedural requirment for the people to avail / assert their right. The gaps were stark especially given the sociological context and economic background of these communities. The critique was on how the act is still not rolled out completely.

The enactment of the act was an uphill task. To get this act to come into effect the biggest struggle the activitst working for these communities had was not with the industry but with  the state forest departments. All the officicals of this department form the Conservator of Forests to the forest rangers were against this act because: they did not want to let go of their turf of power, where they wielded influence.  In the garb of being custodians of forest, these department staff have been taking bribes from  ( and at times exploiting)  these tribals to gather minor forest produce from the forest they have inhabited and protected for generations together, and take bribe from the industries to allow them to do illegal activities. The allegations I make may sound quite activisty and blanket remark. But this is the experience of majority of the communities that dwell in and around forests. To descibe the attitude of the staff of Forest Department, a paper written about them in year 2000 still hold good. Donal M Schug in his paper  (Bureaucratisation of Forest Management in India) talks about the internal culture of the department and how it has only been detrimental to both forest conversation and to the communities dependent on them. And in the minds of certain other bureaucrats from other departments, like a  Rural Welfare Department office  I met in Odisha ( in Octover 2015), they think giving rights on the forest to the communities by awarding individual rights, decreases the land cover under forest. And therefore they would rather award community forest rights to the whole village rather than individual rights. Eventually move to the strategy of awarding only community forest right rather than any individual rights at all.   This attitude is only supportive to that of  the forest department’s.

It has been more than 9 years since the enactment of the Forest Right Act and during a field visit conducted 8 months ago in Odisha it was found that not all the households and commutieis have secured their rights. Gujarat is the best performing state with respect to  awarding the rights (both individual and community). The state has awarded to most percentage from the total applicants. Madhsudan Bandi in his paper looks at the implimentation of FRAs in further depth with respect to Gujarat and Chattisgarhh state.

Why is it importnat to look at the status of FRA implementation and the awarding of rights to the communities? The innate inefficiency with respect to roling out this act is a matter of seperate discussion. In this post I am trying to raise up this point in the light of the new Compensatory Afforestration Fund Bill, 2015,(known in short as CAF Bill) that was passed in the upper house (Rajya Sabha)and after it was passed in the the lower house ( Loksabha) of the parlimanent of India.

What is CAF all about, why did it come to exist?

(Excerpt from PRS Legislative Research )

Highlights of the Bill

  •   The Bill establishes the National Compensatory Afforestation Fund under the Public Account of India, and a State Compensatory Afforestation Fund under the Public Account of each state.
  •   These Funds will receive payments for: (i) compensatory afforestation, (ii) net present value of forest (NPV), and (iii) other project specific payments. The National Fund will receive 10% of these funds, and the State Funds will receive the remaining 90%.
  •   These Funds will be primarily spent on afforestation to compensate for loss of forest cover, regeneration of forest ecosystem, wildlife protection and infrastructure development.
  •   The Bill also establishes the National and State Compensatory Afforestation Fund Management and Planning Authorities to manage the National and State Funds.Key Issues and Analysis
  •   The Bill establishes the Funds for compensatory afforestation and forest conservation. However, there are several factors (other than administration of funds) which affect compensatory afforestation and forest conservation. These factors are mentioned below.
  •   A 2013 CAG report noted that state forest departments lack the planning and implementation capacity to carry out compensatory afforestation and forest conservation. With the share of funds transferred to states increasing from 10% to 90%, effective utilisation of these funds will depend on the capacity of state forest departments.
  •   Procuring land for compensatory afforestation is difficult as land is a limited resource, and is required for multiple purposes, such as agriculture, industry, etc. This is compounded by unclear land titles, and difficulties in complying with procedures for land use.
  •   A High Level Committee on Environment Laws observed that quality of forest cover has declined between 1951 and 2014, with poor quality of compensatory afforestation plantations being one of the reasons behind the decline.
  •   The Bill delegates the determination of NPV (value of loss of forest ecosystem) to an expert committee constituted by the central government. As NPV constitutes about half of the total funds collected, its computation methodology would be important.

There are many issues regarding the bill, starting from the understanding of the word “compensation” by it, how the compensation is calculated, who is assigned to calculate the compensation among many other things. But in the context of FRA the issue is of the rights of Forest. The CFA does not have any text regarding how is is going to be implemented without making the FRA redundant.

To summarise in short:CFA  has taken the forest rights from the tribals & forest dwellers and slyly placed it  back in the hands of  forest department.

How did it do it: In the version fo the bill that was passed in the Rajya Sabha there was no rule  that acknowledged the power of the local self governing body – Panchayat or the Gram Sabha on their say in how the forest will be dealt with. This is in direct conflict with what FRA and the PESA act bestows upon these communities.

These points of concern were  raised by the opposition party  to the the finance minister and environment minster of the ruling party. Their concerns were placated by saying these will be addressed once the bill was “passed” in the Rajya Sabha.

The role of the local self governing bodies is not codified in the CFA act and the implementation of FRA is still far from complete. The attitude of the Forest department still remains that of the owners of the forest, rather than custodians. What is the government going at? Is it a game to ammend constitution and make permanent promise to marginalized lot, just to make another new ammendment that trumps the older promise? If this is some sort of a joke, it is a cruel one at that.