1 INTRODUCTION

Although the time and money spent on rural development related interventions have been enormous, the results have not been as planned and desired. Rural development, rural health, rural women empowerment, rural water, rural road, rural infrastructure, rural child malnutrition, etcetera etcetera, and above all rural electrification, have been the focus of many developing country governments, bilateral, and multilateral donors projects and programs. The latest related catch phrase is “… for rural poverty alleviation”.
What had been the fate of these projects and programs? In most of the cases, once the funds dried up, the projects or program also died, and their remains have often become monuments that even the archeological departments would not take up for maintaining as showpieces. In most of cases funds have not been sufficient to operate and maintain the projects, primarily because quite often the project or program was not designed to provide for operation and maintenance.

Why these programs could not sustain. Well, in fact, to start with, there has been little chance for them to sustain. Even many new programs being designed and developed have little chance for sustaining. This is not pessimism, but realism. All the reasons are there and have been spelt out in various (even conducted by World Bank). However, the factors have not been taken cognizance of. One example is the findings of a World Bank study (1982), which states that subsidy breeds inefficiency. All and every cause of concern is there for picking. But most of the programs are bogged down by four main reasons. Firstly, there is a tendency to design a program for the benefits of large number of people. Secondly, the programs are targeted on only one of the aspects of rural development. Thirdly, there is no consumer participation in project formulation and subsequent project implementation, operation, and maintenance. Lastly, most of the programs are handled by government-controlled departments.

In light of these and other facts, what is the way out? What should a rural development program cover? Before embarking upon the design of a rural development program, it may be worth looking at differences between state developed and owned programs and privately run businesses.

The government department run programs are mostly characterized by inefficiency and luck of accountability. The personnel manning these programs are least bothered about the program success. They often indulge into corrupt practices leading to use of poor quality materials and poor workmanship in program implementation. Further, the budgeting of government run programs is planned for limited periods and quite often the budgeted funds cover heavy doses of subsidy. The focus of budgeting often changes with changes in governments or changes in priorities of existing governments. A survey of status of rural development programs run by the developing country government departments worldwide has revealed that, except for some stray cases, most of these programs met the same fate. Even the few successful programs have constantly required propping up infusion of funds from time to time

On the other hand, if the private players would’ve been involved in rural development program development, implementation, operation, and maintenance; then another picture would’ve been developed – most of the funds spent wouldn’t have gone waste. For being successful, however, the private players need to have free hand to carry out their activities. Further, it would be plausible if the existing subsidies (currently provided for the rural services) would be channeled through private players to keeping the cost of rural services within the means of rural population.

A number of developing countries have had a bad experience about the private players in the past, because of the licensing regimes they have been implementing. However, with the opening up of the economy and abolition of licensing regimes, any private player can run any type of business without restrictions or requirements for approval. These open economic policies and approaches are leading to open competition, thereby reducing the cost of products and services, including rural services. Under these new circumstances, the private sector is becoming more efficient than public sector; this leading to reduced cost of services. Any comparison between the public sector and private sector would show that the profit made by private sector is actually less than the cost of inefficiency and corruption in the public sector.

One of key reasons why the private sector is more efficient than the public sector in offering services to people is because careful and appropriate advance planning and realistic business planning. The rationale for these is based on each group’s viewpoint and motivation – private ownership and for-profit vs. no direct ownership and no direct profit

The private sector strives to prepare sound business plans. Business plan development capacity is an area of concern that requires an increased focus by governments and donors. Business planning must take into consideration the following areas:

i. Area of operation: There is a need to carefully work out the area of operation, which leads to economy of scale. ii. Assessment of natural resources: This is very important. It would help in developing projects, which can provide products and services at lower costs.

iii. Rural services: The approach should be to cover all rural services including energy, drinking & irrigation water, health, sanitation, etc. This would help in reducing the overhead and other operation and maintenance costs.

iv. Education and vocational training: Education and vocational training may be part of strategic business planning process. Children must have option to go for higher studies or get right kind of vocational training for employment with the private company itself.

v. Local skills: There are areas where the local population has some skills and are already engaged in producing consumer products or artifacts. This should be encouraged, and the private company may use this advantage by offering services for promoting sales of these goods at higher prices. It can also help in procuring and selling the raw materials required for the activities. This would reduce the cost of procurement for rural population. The rural people engaged in these activities would thus be able to earn more. These increased earnings would be spent by villagers in buying the products and services provided by the private company itself.

vi. Rural economic activities: Private entities may themselves or encourage villagers to set up rural/medium industries. This would help in creating more jobs for the locals and help in increasing their disposable income.

vii. Finances: Private companies may also play the role of financier or bring in other financiers to help the villagers in their need. In fact money lending is a big business in rural areas. This need may be served through the active involvement of the private players.

viii. Agriculture: Private companies may also provide consultancy to farmers in terms of what crop to grow. The agriculture inputs, such as, fertilizers, seeds, pesticides, etc may be sold by private companies to the villagers. They should also be involved in procuring the agricultural produce to sell outside.

ix. Consumer goods: Private companies may also open shops in rural areas to sell consumer goods such as clothing, toiletries, shoes, and other items consumed by villagers.

x. Household appliances: Private companies may also not only sell household appliances such as radio, television, bicycle, etc., but also provide maintenance services.

The above list is not exhaustive. However, private companies must be on hunt and get engaged in as many profitable transactions as possible. The creation of opportunities for increasing the incomes of villagers should be an integral part of their business planning process. Experience shows that these plans are realistic when aim at making profit within three years, start reducing the subsidy component after five years, and bring the subsidy down to zero in about ten years from business start.

Governments may invite tender from private companies to deliver rural services. Existing facilities for rural services may be handed over to bidding private companies that pay highest amounts and requests for least amounts of subsidies. Governments may also ensure to provide other infrastructures such as rail/road for transport, canal service for water, etc. Facilities falling within local government areas of operation needed to be decentralized and handled by local governments. Same with operating budgets for these service facilities – decentralize them.

Engage local governments in facility and budget management provides for local empowerment. Further, involving local governments in handling the tendering of private companies has proven being a good public policy. Then, why not engage local governments in allocating and distributing subsidies for capital expenditures? In this case, there exist greater chances for transparency and accountability. All these are elements of giving chances and opportunities to local people to make decisions on how to improve and build their life – so making them owners of their fate and future.

Rural consumers and local government’s participation during the development of business plan and then its implementation would go a long way in making the business successful. Locals must be educated and their apprehensions that the privatization leads to higher cost of services (which make it unaffordable for the poor) and that profit-oriented companies are unwilling to provide services to remote villages must be removed. Here is where the NGOs may and can play a vital role. They can help in creating a conducive environment and building awareness among locals on the activities to be taken up by private companies. Local NGOs can help in educating and persuading the rural poor to effectively participate in the development of business plans. NGOs could help in identifying the local resources, skills, and assessing markets, which are the critical inputs for developing sound business plans. NGOs may provide training and educate people through sensitization on various issues by using posters, pictures, and audio-visual tools.

How can one create a market for any commodity or service? What are the conditions, which help in not only creating new markets but also expanding the existing markets? The main factor in creating a market in low economic zones is the availability of money to spend on commodity and service. Rural areas are basically poor, with the majority of population having no or very little money to spend for services including energy. The increase in income level leads to the creation of a market, which is a well-known phenomenon for marketing experts. Unless there is sufficient income, rural poor consumers cannot and would not be willing to buy avoidable commodities or services, which are not required for subsistence. In fact, only if rural populations have sufficient income, then and only then would they contribute to creating a market. Thus, the only assured way of creating a market is to create opportunities for increasing incomes of rural populations. That is exactly what Henry Ford did. He increased the salary of his employees marginally but sufficiently to induce his employees to dip into their savings and buy his cars. A novel method was so adopted to expand the car market.

One of the best examples in the South Asian region is from Bangladesh. The Grameen Bank (GB) was already providing loans to rural poor for their economic activities, thereby increasing their incomes. Grameen Bank realized that there is a need for integrating its effort with the increase in energy supply to its clientele. They established a sister organization – a renewable energy company named Grameen Shakti (GS) - which primarily provided solar home systems (SHSs) to the existing clientele of the Grameen Bank. GS set up selling and servicing centers and also financed the SHSs. There are offered to clients four schemes of financing. GS levies a service charge of 8 to 10% depending upon the scheme. In fact, Grameen Bank and Grameen Shakti have pooled in their resources to cut down the overhead costs.

There are also examples from Nepal. The Himalayan Light Foundation is promoting programs which combine an income generating project with an energy supply system based on solar photovoltaic. Another unique example was detailed by an ex member of parliament, now Chairman of a newly founded rural electric company registered with Nepal Electricity Authority in conformity with the recently enacted “Community Electricity Distribution Bye-Laws, 2003”. This rural electric cooperative has distributed cattle (one or two goats and six to ten chickens) to its poor members. This was done to facilitate the start of generating income by poor members within eight to ten months. The rural electric cooperative was expecting to be fully operational by that time, and that these poor rural consumers would be able to afford paying for electricity.

Besides the above described innovative methods, there is a need to bring in finance, which would help in not only funding activities to generate income but also fund electric services. Micro financing has now been recognized as an important tool to fund such programs. Grameen Bank and the World Bank/Global Environment Facility (GEF) funded “Energy Services Delivery” (ESD) program in Sri Lanka (now extended as the Renewable Energy for Rural Economic Development Project - REREDP) are good example of micro-financing. Now the big players in financing have realized the potential of micro- financing. They, however, engage local financing institutions in administering the funds, which helps them in keeping the overhead costs lower.

The above examples show that private undertakings can plan their strategies based on local conditions and locally available natural resources for increasing the incomes of local villagers. A good business plan must spell out this strategy for reaping the benefits.

Presently, most of the rural development programs are focused to poverty alleviation. Micro financing of rural services and income generating activities along with provision for capital subsidies should be offered as a single package. This simple mantra would go a long way in creating a sufficient market for sustaining rural development and creating a whole new generation of wealthier rural who can afford anything and everything. In fact the motto of the private company entering in rural areas must be: “We are here to make you (villagers) wealthier and improve your quality of life. Your success is our success. You soon will be able to afford those consumer goods and services which your urban counterparts can.”