Kerala model’s mutation over the years

By K V Joseph – The pattern of development, which ushered in Kerala during the third quarter of the 20th century, attracted worldwide attention.

It was eulogized as an ideal form of development as Kerala could achieve impressive level of improvement in various social indicators without a corresponding development of the economy.

The growth of consumerism has paved the way for the emergence of various kinds of undesirable consequences. One of them relates to the attitude of Keralites towards work. A mentality for hard work, essential for economic development sadly, seems to have vanished from the bulk of Keralites. A fall in agricultural production, particularly of paddy, is a clear manifestation of such a mentality.

Though overall prosperity is discernible, the quality of life has also deteriorated beyond recognition. The state is facing new problems like shortage of clean drinking water and the menace of waste management with no clear solution in sight. Heaps of plastic bags containing household wastes are a regular sight from one end of the state to the other.

How to retrieve the model poses a major issue calling for serious attention. more>


Discard anachronisms, embrace digital economy

Digital economy transformation offers developing economies opportunities for “leapfrog” economic development. Instead of automating old practices, jump into digital economy.

The Times of India report “Amendment scraps periodic conduct of license exams” (June 28, 2016), provides an example of anachronistic practices in the Kerala government that is ripe for moving to digital.

The report says, “The document writer’s license rules have been amended to put an end to periodic conduct of license examinations.” Instead of doing away with a systems that may have been needed in the 19th century, Kerala government makes a big show and scraps periodic license exams.

Reacting to the government move, document writers said that it would result only in increase in fraudulent and erroneous documents.”If anyone can execute a document, there are chances for rise in number of fraudulent and court court litigations,” Kerala state document writers and scribes association state president Indukaladharan said.

In a modern economy, legal titles and ownerships do not depend on documents, but in digitized authoritative registries. Leading edge technologies such as blockchain, digital certificates and signatures are enabling transactions without paper documents, while eliminating fraud. Rather than trying to hang on to outdated, obsolete practices (like document writing), the smarter approach will be to take the initiative to implement market leading systems for digital document and process management. It is such visionary steps that can create a vibrant industrial sector in the state, rather than the trailing edge IT activities currently being promoted. Nor will the numerous incubators established by the Kerala government generate intended results. Creating real innovation in the economy requires strong, streamlined and linked “value-chain of idea generation, idea conversion and idea diffusion.”

Such progressive efforts will, naturally, make some skills obsolete. Providing social safety net for those displaced by new technologies is the way forward, rather than holding on to obsolete methods. Kerala has a tradition of taking bold, unconventional leaps. Maybe Kerala can claim another first by implementing “Basic Income” for the displaced workers, continuing the tradition of democratically promoting socialist ideals.


A framework for clean environment

The Times of India report, “As you burn, so shall you reap” (June 12, 2016), highlights the health hazards, incompetence and counter-productive actions by authorities regarding waste management in Kerala.

The report says, “People continue to burn plastic waste in the open because the local authorities have not put in place a system to clear it. Waste burning can controlled if people are made aware of the ill effects. Before pushing ahead with disciplinary actions, local self government bodies should ensure setting up collection points for recycling agents, says experts.”

Unfortunately, awareness building and punitive measures alone will not take care of waste and garbage disposal. Effective waste management consists of integrated and sustainable waste systems, processes and strategies.

Learning and adapting from the experience of other successful countries can help finding a solution. Nepal [2, 3, 4], Japan [2, 3, 4] and Sweden [2, 3, 4] have successfully developed and implemented effective waste management solutions.

Best Practices on Solid Waste Management of Nepalese Cities” by Practical Action Nepal describes successful best practices and help understand the roles of various organizations in effective waste management. This study focuses only on examples of best practices that worked, and does not cover schemes that failed, or theoretical cases never implemented.

Solid Waste Management and Recycling Technology of Japan” by the Ministry of the Environment provides a comprehensive overview of waste management methods and technologies used in Japan for management and disposal of waste. With limited landfill disposal sites, Japan has developed a system to collect and transport waste, process it through intermediary treatment by incineration and other methods, and then dispose it in landfills in a sanitary manner to prevent environmental pollution, especially in areas surrounding densely populated cities. Japan is a leader in waste incineration technology for safely disposing waste, while generating electricity efficiently.

A Strategy for Sustainable Waste Management (Sweden’s Waste Plan)” by Swedish Environmental Protection Agency discusses the scope and depth of waste management in Sweden. Sweden’s sustainable waste management is based of the country’s sustainable development goals. “Sustainable development means that all political decisions are to be formulated taking account of their long-term economic, social and environmental implications.” Also, “when it comes to waste, Sweden is very much at the forefront, and there is thus great potential for commercial export of technologies and know-how, even to rich countries.” In fact, Swedish waste management is so effective that there is shortage of waste and the country is importing garbage.

Using this background, here is a framework for solving waste management problems in Kerala:

Starting point for effective waste management is understanding people, systems and technologies.

Here are the operating principles to be adopted:

  1. Simple, efficient and clear stakeholder responsibilities.
  2. Promote awareness, understanding and a vision about waste management in the Kerala context.
  3. Local government entities are responsible for collecting, intermediate processing and disposing of household and similar waste, except for the product categories covered by producer responsibility.
  4. Sorting of waste at source.
  5. Sorting of waste must be simple.
  6. Treat waste management as a basic infrastructure need similar to water, power or roads.

And here are the implementation steps:

  1. Implement education programs to promote 3R (Reduce, Reuse, Recycle).
  2. Develop and popularize waste management desired outcomes.
  3. Waste management must be made part of initial construction: For any type of construction, either residential or commercial, the responsible local government entity should enforce basic requirements to reduce and segregate waste at source. For example, local self-government entities should consider making household composting and separate containers for recyclables mandatory, before approving construction proposals.
  4. Develop regional networks for waste collection and transportation. Maybe divide the state into 5 regions, centered around main cities in the state: Thiruvananthapuram [2, 3, 4], Kollam [2, 3, 4], Kochi [2, 3, 4], Thrissur [2, 3] and Kozhikode [2, 3, 4].
  5. Develop regional
    • composting centers,
    • intermediate waste processing centers for sorting, recycling and compacting for long distance transport,
    • incinerator plants with pollution controls,
    • hazardous waste processing disposal centers, and
    • landfills.
  6. Collect data necessary to measure the performance, efficiency and effectiveness of waste management activities. Evaluate collected data and implement improvements.
  7. Enforce compliance with waste management norms and standards.

Once a full-scale plan is developed, there is no need to get loans [2, 3] for implementing the plan, the “normal” project financing method in Kerala.

There is a huge amount of money on deposit in the banks in Kerala: “Bank deposits in Kerala up 53 per cent at Rs 407,000 cr ($61B)” [2], not including the gold holdings. The New York Times reports, “With only 3 percent of India population, Kerala gobbles up 20 percent of the country’s gold every year, and the World Gold Council estimates that India, the largest consumer of gold in the world, consumes 30 percent of the global supply.” [2, 3, 4, 5, 6] For comparison, Kerala GDP is $59B (2014). Kerala bank deposits is about 103.4 per cent of GDP.

If effective programs are implemented for channelizing the bank deposits, not to mention gold holdings, into systems for capital formation, Kerala can jumpstart economic development without relying on loans. That, unfortunately, will require a whole lot of changes for which the political will may not be available. For starters, people (depositors) may not trust the current political system to spend their money wisely.



Higher education management needs reorganization

University Grants Commission (UGC) is the organization responsible for improving the quality of education in India. Education institutions in India need huge quality improvement. However, the structure of the UGC seems to be an inhibiting factor for achieving its mission.

The Times of India feature, “Varsities fail to utilize UGC plan fund” (May 18, 2016) [2, 3, 4, 5, 6] highlights that the management and operation of the universities in Kerala are in a mess. However, the universities are not the only ones to share the blame.

Your report says, “With less than a year left for the plan period (2012-2017) to expire, there is apprehension that most of the institutions may lose 40% to 50% of the money allocated to them. The objective of this UGC scheme is to improve the infrastructure and basic facilities at universities so as to help them ‘achieve at least the threshold level and promote enhancement of quality.'” The use of funds “includes construction and renovation of buildings, campus development, appointing staff, funding for books and journals, innovative research activities, ICT requirements, health center, creating student amenities, university-industry linkages and publication grant.”

These UGC programs fail miserably as the universities do not even attempt to make an effort. “The major reason for the failure to utilize allocated funds is their inability to take decisions, lack of initiative, leadership and planning.” However, the UGC may share part of the blame. The report adds, “a university registrar who didn’t wish to be quoted said, ‘sometimes universities do prepare projects and spend the money, but it gets stuck as UGC raises objections and reject it.'” In addition, “conflicts between university officials syndicate members as well as the financial and audit teams can lead to confusion and delay and delay in submitting necessary documents. I will inquire into why we have failed to utilize the released grant money,” said MG university vice chancellor Babu Sabastian (“Lack of planning land them in a mess”).

Your feature also points out a critical data: India “spend only 0.6% of GDP on higher education, while in the US it is 2.7%.” This shows there is huge funding gap for higher education in India.

Your feature identifies another important factor for improving education quality: “Trying to solve academic problems through academic reforms alone won’t help, unless one addresses the administrative and financial issues.”

Based on the reports, higher education in India needs drastic reforms.

The current command-and-control model of the UGC needs to be converted into a model based on collaboration. At present, the universities requests grants from the UGC, and UGC approves the grant proposals. But UGC can second-guess the universities and deny the funds. This puts the universities in a bind, since they lack independent funding sources. This is probably the reason for under utilization of UGC grants.

So the fund approval process in the UGC need to separated out from the auditing function. Maybe the audit function can performed by an autonomous agency responsible for auditing all central government funding for all sectors, making it possible to have uniformity in performance, and develop data on funding needs and utilization for all sectors.

Currently, universities are left to their on devices for project planning, management and execution. Since the needs are common, UGC could take the initiative to develop organization and project prototypes for common development needs universities have. And provide know-how and knowledge transfer for effective project planning and execution.

Another problem apparent from the reports is the centralized nature of UGC funding system. Rather than allocating funds at the university level, decentralize funding to smallest-operating-unit level. For example, a chemistry department in a university could request and get funding for improving their lab facilities without involving the whole university bureaucracy. Or, a university facilities department could request and obtain UGC funds for an auditorium without involving all of the university.

Also, why should the funding be based on 5-year plan periods. Each projects has its own natural lifecyle. Many will require less than 5 years, but others may take more than 5 years. Government of India has abolished the socialistic centralized planning. It is high time UGC also abandoned centralized planning vestiges. Instead of plan funds expiring at the end of plan terms, continue to make funds available to deserving projects without having to duplicate proposal activities.

To sum up,

  1. Change current command-control UGC model to a decentralized model based on collaboration.
  2. UGC should provide project/ organization know-how and knowledge transfer for effective project planning and execution to universities.
  3. Eliminate fund expiration at plan periods, but make funds available throughout the lifecycle of deserving projects.
  4. Decentralize, and distribute funds to smallest operating units within universities. For example, students, staff, departments.
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Lifecycle of a development project

The Times of India report about construction of a sewage treatment plant (Mundamveli in West Kochi) says, “At best you can call it official apathy or inefficiency and worst, criminal negligence” (“After sinking Rs 45cr ($6.8m), KSUDP dumps Rs 170cr ($25.6m) sewage plant,” Mar. 31, 2016) [2, 3, 4].

The problem involves deep seated beliefs. A common thread with development projects in Kerala is the way things are planned. Getting a loan is the goal. It is assumed that once the loan/finance is secured, everything else will workout. Getting the loan is considered an achievement. After getting the loan/finance there is little attention or follow through by leadership, resulting in projects floundering.

In this case, Kerala Sustainable Urban Development Project (KSUDP) secured Rs 170 crore loan from the Asian Development Bank (ADB). “As per the original schedule, work on the project began in November 2013, should have been completed in November 2015. After the agreement with the contractor expired in November 2015, KSUDP asked him to continue work. But the contractor demanded a cost revision by around 70 to 100%, despite a request from officials to continue work at the existing rate till the elections are over.”

In addition, “in January this year, the National Green Tribunal (NGT) had also quashed the tender procedures for constructing the treatment plan which was proposed on marshy land. This would have resulted in the destruction of mangroves in the areas.” And ADB, the funding agency, decided to back out due to the inordinate delay in executing the project.

This project planning raises several questions. What are the reasons for the demand to increasing project costs by 70-100 per cent? Was the estimates set too low to secure the loan? Or, was it the result of inadequate project planning skills?

What is needed in development projects is a clear vision of the future benefits the project will bring about. What are the goals? What are the benefits of achieving those goals? What are the steps necessary to achieve those goals? What capabilities are needed to complete those steps? What are the obstacles? What are the resources required? What is the estimated effort/budget? What are the contingencies and how to handle them? Who are the stakeholders? Are their interests aligned with the project goals? These are some of the questions to consider when planning for any project.

Defining the goal as achieving the benefits associated with project completion — not securing loan/finance — and developing a comprehensive operation plan will produce better success with project completion.

With the sewage plant project in disarray, the need still exists — garbage is piling up and pollution problems are getting worse.


Kerala economy needs dashboards

The report in The Times of India, “Cash-strapped state govt knocks at Center’s doors” (Mar. 24, 2016), describes the logical result of the Kerala government engaging in publicity-seeking gimmicks [2, 3] and outright scams [2, 3, 4].

With almost no effort being directed towards productive activities in the economy, getting loans have become necessary source of revenue for Kerala government — from Japan, France, Germany, ADB, Central government [2, 3, 4, 5] and anybody else [2] willing to offer loans.

“To meet monthly expenditures, the state government had opted for raising money through the auction of 10-year state development loans (SDLs.) During January-March, 2016, the government had raised Rs 3,500 crore by auctioning securities.”

It seems Kerala government does not even know the distinction between “development” investment and monthly expenditures. Clearly, using development loans for monthly expenses is deception or illegal. Kerala economy seems to have reached “regulatory capture” [2, 3] by Kerala government.

Things can improve, but first Kerala government needs to change its misguided approach.

  1. Give full autonomy to all Kerala government agencies. Currently, the government occupies a disproportionate share of economic activities and creates “decision bottlenecks.”
  2. Transform the education system to develop a skilled workforce to operate the Kerala economy, so that full economic potential of Kerala can be achieved.
  3. Implement “performance monitoring dashboards” in all government departments, agencies and companies.

One of the current problems is many, if not all, Kerala government departments, agencies and companies are operating without proper financial controls. Performance dashboards, similar to the dashboard in a car, will help monitor revenue, expenses, goals, warnings, impending problems, etc. so that corrective actions can be taken before things turning into crisis.

Kerala economy ($59B, 2014-15) is like a boat without a compass, and Kerala government regularly conjures up ideas which way to go without meaningful goals. With functioning performance dashboards, programs can implemented to revive Kerala economy effectively.


Corruption, over-staffing and political interference

The Times of India reports, “Ventilator economics,” “Behind the rut: ‘Corruption, over-staffing and interference’” (Mar. 3, 2016) are informative and educational.

The report says, Kerala State Beverages Corporation Ltd., the government agency selling alcohol to people, is the most profit-generating government company in the state. It made Rs. 220.59 crore ($33m) net gain in FY 15 nearly one third of the total profit of SLPEs (state-level public sector enterprises.) Kerala Financial Corporation is the third most profit-generating enterprise of the government, with a financial gain of Rs. 68.81 crore ($10.3m), which is roughly one tenth of the total profit of state public companies.”

The report also points out the reasons for the pathetic state of government-run enterprises. “Corruption, over-staffing, and growing interference of political parties are the reasons behind growing losses of public sector companies.”

It seems the Kerala government industrial policy appears to be operate the government enterprises to promote inefficiency, financial loss and patronage. And provide overpriced alcohol to get people drunk, so that they don’t notice the mismanagement, misdeeds and ineptitude [2, 3, 4] of the Kerala government.


For 15 yrs, Kochi corp has been taking you for an audit ride

The Times of India report, “For 15 yrs, corp has been taking you for an audit ride,” (Mar. 3, 2016) is astounding!

The report says, “Showing an absolute lack of transparency or accountability for public money, the civic body (Kochi Corporation) has failed to submit proper revenue and expenditure statements for audit since 2000.”

Curiously, Kochi [2, 3, 4] corporation “authorities” gives one of the reasons as “official apathy.” The report adds, “Corporation authorities blamed the delay on technical reasons and official apathy.”

Further, an official of the Kochi audit committee said, ” We used to report the Corp.’s failure to submit financial statements to the local fund account committee, headed by MLAs [2], and to the state government. It is up to the committee and the government to take action against the local body.”

Lack of financial reporting and audit for 15 years means Kochi Corporation has, in effect, no governance. Based on the report:

  • Kochi Corporation has no financial controls to evaluate organization performance,
  • Fund Account Committee members, including the MLAs, are in dereliction of duty, and
  • Kerala government has no oversight capability.

The troubling fact is that this is unlikely to be an isolated case. The question to ask is,

How many other Kerala government entities (corporations, municipalities, panchayats, companies) are also failing to provide regular financial reporting and audits?


Rs741-crore ($110m) German loan deal to be signed by mid-march

In reponse to a report in The Times of India, “Rs741-crore ($110m) German loan deal to be signed by mid-march,” [2, 3, 4] Mar. 8, 2016.

The report about the German loan for the water transport [2, 3, 4] illustrates the problem with development projects in Kerala.

There is lot attention and effort made for getting the initial finance. But hardly any attention to operations and follow-on issues, leading to stranded investment and financial loss. For example,

  • How operating expenses will be covered? Can the service be operated profitably?
  • Who will perform maintenance, repair and overhaul?
  • Who will provide the necessary training for the new systems?
  • Running the boats efficiently will require many support systems. Anyone paying attention about them?
  • There is already an organization operating ferry services. Why create a new entity because some new boats are being purchases?

If new projects are incorporated into existing organizations — instead of ignoring them until the next crisis — it will help provide for ongoing organization renewal, avoiding organization decline and failure.

“Rather than a transportation project, it will be one which would redefine infrastructure facilities in the islands and and places surrounding the city. The development would enhance the standard of life and livelihood facilities of the people in areas which come under the project. The better connectivity to the city will also improve the lives of residents in these areas,” the official said.

How can running some boats bring about all these benefits? If, indeed, it is so revolutionary why was it not done before?

Based on the report, the Integrated Water Transport is another half-baked plan to generate publicly, without planning for necessary follow-on steps. (The report on the same page, “New master plan proposed to save Brahmapuram” [2, 3, 4, 5] provides an example of a half-baked waste treatment plant started with lot of fanfare without sufficient planning, and not providing any of the promised benefits after completion. The plight of the fertilizer factory, FACT, and Smart City [2, 3, 4, 5] are two other examples.)

In the Silicon Valley, getting venture funding is considered a success, and over 90% of the venture-funded companies proceed on to failure. Kerala government considers getting a loan for a project as an achievement. Due to lack of comprehensive planning and effective execution most of the projects fail to take off, fail to deliver promised benefits or become zombies.

For things to actually improve, Kerala government and its agencies need to stop publicity-generating, finance-focused mode of operation, adopt comprehensive project planning methods, and develop operation expertise and capabilities.


A bitter pill for sick fertilizer giant

In response to a report in The Times of India, “A bitter pill for sick fertilizer giant,” Mar. 6, 2016.

The handling of the Fertilizer and Chemicals Travancore Ltd. (FACT) illustrates the Kerala government’s lack of basic understanding how finance need to be used for an industrial enterprise.

The whole hoopla was focused on getting a loan to keep the operations going. With the current loan, the can has been kicked down the road. There was not even a whiff of discussion about the reasons why things reached such a pathetic state.

“The loan is not a viable option, but we didn’t have an alternative. Currently, the company doesn’t have even the working capital and hence this loan is of critical help,” said K Radhakrishan, general secretary, FACT Officers’ Federation.

The only way an industrial enterprise can operate is if it can generate a surplus from its operations after covering its expenses and costs. Depending on government patronage, by virtue of being a government owned enterprise, can only go so far — especially when the Kerala government itself is running chronic budget deficits of Greek proportions.

All the discussions and news have centered on the loan, as if finances will solve the management and operating deficiencies. There has been no discussion about underlying causes and solutions to the problems to run the factory efficiently. Clearly, the operating expenses for FACT are greater than its revenue. So the drama will be repeated again sometime in the future.

The related report, “Cabinet clearance for FACT to sell 170 acres to BPCL,” [2] points to the bureaucratic fiefdom run by the Kerala government. Why should the state government cabinet of ministers have to make any operating decision about FACT? It demonstrates the utter lack of autonomy for FACT management.

If Kerala government enterprises are to be viable and successful they need autonomy, and necessary management skills and operations expertise. Without these minimum requirements, all the news-making about loans and finances are a smoke screen to cover-up widespread ineptitude in the Kerala government, its enterprises and agencies.