The Hindu Business Line : People must pay up user charges for public services: Rakesh Mohan

FOR the human development index to look up, the well-to-do segment of the society must pay up the real user charges rather than sponge on subsidised rates, according to Dr Rakesh Mohan, Deputy Governor, Reserve Bank of India.

He told presspersons that the pattern public services in India is such that the public has got used to not paying economic charges for these services.

The services include power, water supply, irrigation and transport.

"The larger consumers of these services are typically the better-off. Thus, appropriate levy of user charges also promotes better income distribution," said Dr Mohan.

He said by strengthening the finances of the agencies that supply these services, their capacity to improve and expand services and serve the economically poor was also enhanced.

According to one estimate, Dr Mohan said the hidden subsidies on these non-merit goods was 10.7 per cent of the GDP on an annual basis. The combined fiscal deficit of the Centre and States in recent period is around two to three percentage points lower than that as a percentage of GDP, he said.

"This highlights the need for augmenting revenue from user charges. However, it can be noted that with the poor quality of public services provided in India, the public is loath to paying higher charges. Hence, imposition of higher user charges has to be accompanied by perceptible improvement in the quality of services," he said.

Dr Mohan said rural connectivity also played a critical role in higher human development index.

Evidence suggested that States such as Kerala, Tamil Nadu, Goa, Punjab and Himachal Pradesh, which have invested heavily and early in better rural connectivity, are also placed better in terms of human development.

Dr Mohan said better rural infrastructure and connectivity is necessary to accomplish programmes related to human development. He said the indirect benefits of better communication would be better dissemination of information on agricultural products, particularly prices.

Dr Mohan said the RBI has appointed an `Internal Group on Rural Credit and Micro Finance' to look into the broad aspects of increasing `financial inclusion' and promoting micro finance institutions.

The report suggests that if financial inclusion is to be made a reality, it is necessary to leverage socially active organisations and individuals to work with people, particularly those with small means, empower them and bring them closer to the financial services provided by formal financial institutions.

These agencies and persons can also be used to reach out easily to several far-flung and socio-economically disadvantaged people. To translate this into action, he said the report has suggested that banks may use the services of `business facilitators' to bring people and banks together. He added that NBFCs, NGOs, co-operative societies, rural kiosks could also work as the facilitators.

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