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Public goods and market economy

A case study of GHMC’s (Hyderabad) garbage collection and how market economics isn’t always the best way to deliver public goods.

In the backdrop of outright rejection of Trussonomics, which includes extensive tax cuts, government deregulation and extreme form of free-market economics, this paper tries to understand what’s going wrong with the Hyderabad city government’s (Greater Hyderabad Municipal Corporation – GHMC) garbage collection and incentive system. Also, alternative mechanisms to bolster the functioning of local bodies are suggested.

Background: A recent article in Eenadu (Oct 17th 2022, Monday Hyderabad/LB Nagar local coverage) bemoans the lack of prompt garbage collection in certain colonies in LB Nagar. GHMC follows a system where the local government has deployed 520 garbage-collection autos for 850 colonies in LB Nagar by giving these autos to individuals who are mostly from socially backward communities. These individuals / sanitation workers had to pay a deposit to the government to run these autos (SC/ST individuals paid Rs. 40,000 and BC individuals paid Rs. 80,000). Now, these sanitation workers aren’t paid by the government. Instead, the sanitation workers operating these autos collect garbage-collection charges from the households. The article states that in certain colonies, these sanitation workers charge upto Rs. 80/- per month per household. On a side note, I live in one of these colonies and shell out Rs. 150/- per month.

The article further goes on to say that this incentive system has led to certain colonies getting neglected if the households are unable to pay the asked amount. In such colonies, garbage collection doesn’t even happen once a week. On the other hand, in colonies where the households pay promptly, the garbage collection happens daily. Moreover, the article underscores the fact that these collected monies don’t even end up with the sanitation workers, but are kicked up to GHMC staff leading to a vicious cycle of corruption.

Garbage collection woes in Hyderabad
Garbage collection woes in Hyderabad – Courtesy: e-paper Oct 17th, Monday Hyderabad / LB Nagar

Public goods and market economy: Sanitation and garbage collection is one of the basic responsibilities of the local bodies. The government has to ensure these goods are delivered promptly to the citizenry regardless of them failing to pay for these goods.

By building an eco-system that is market-driven, where the garbage collection autos are distributed to those individuals / sanitation workers who pay for them and by allowing these sanitation workers to collect user charges from the households, GHMC has created an incentive system that punishes the colonies that can’t afford these user charges by excluding them from a public good that clearly is their right to claim. What GHMC perhaps is inadvertently doing is akin to redlining, a discriminatory practice in the USA that led to withholding of services to certain neighbourhoods mostly populated by Black families. This is a good example of how when market economy is used for delivery of public goods, it results in ghettoisation, i.e., creation of isolated and underprivileged urban areas.

Options to explore:

Devolution: It is very unfortunate that the same state government that loses sleep fighting with the Union government for not devolving funds, ignores the local bodies. Today, the local bodies are starved for funds and at the mercy of the state government. If the state government argues that Telangana contributes a lot to India’s GDP but doesn’t get its share of funds from the Union government, by the same logic, Hyderabad is the major contributor to Telangana’s economy but doesn’t get its share of funds. Only when the local bodies are adequately funded and provided the agency to serve will the citizens get the public goods delivered regardless of their household incomes.

Service level agreements: If the local bodies can learn something from the markets, it should be ensuring that service level agreements and citizen charters are developed and adhered to. For every public good that the government provides, citizens should be made aware of the service levels they can expect and to whom to escalate in case the service levels aren’t delivered.

Online transfers to avoid corruption: India leads the world today with one of the greatest innovations of financial technology – UPI (Unified Payments Interface). With the ubiquitous nature of UPI and a robust banking system, one way to weed out corruption that has seeped into the ethos of bureaucracy is to make sure all transactions are made online.