Ashok V. Desai is consultant editor of The Telegraph

Murli Manohar Joshi, Union Minister of human resources development, has invited much opprobrium for his reduction of Indian Institutes of Management (IIMs) fee. The reduction in fee was unnecessary, since no one who got admission to an IIM went without a bank loan if he needed one. It was unjustified, since those who are going to earn crores in their lifetime do not deserve a subsidy from the HRD ministry. And it was malafide; Joshi and his favourite bureaucrats are fond of throwing their weight around, so it was reasonable to assume that their reason for reducing fee was to make IIMs into supplicants, and to exercise undue influence on them. For innocent ones, undue influence includes influence in getting undeserving favourites into IIMs. Joshi said in as many words that his constituents complained that their offspring found it difficult to get into IIMs. Price determines demand. The lower the fees, the greater the shortage of IIM seats, and the greater will be the value of a phone call from Delhi that gets someone a seat.

Now fears have been raised that Jaswant Singh is about to do a Murli on Infrastructure Development Finance Corporation (IDFC). The Financial Times reported that the government planned to merge IDFC with the State Bank of India. The Reserve Bank of India is about to transfer the 15% of equity it holds in IDFC to the government. Institutions owned by the Central government hold 43% of IDFC's equity. It should be enough to push through a merger. Finance ministry's Vinay Rai has denied any plans of merger. But Nasser Munjee, managing director, IDFC, has resigned with six other senior executives; obviously they know more than Rai is prepared to disclose.

Behind these power moves, there are issues. A frequent point of friction in the board meetings of IDFC is that it is not prepared to fund a project that is the favourite of some government or the other. The reasons are specified in IDFC's project appraisals: they lie sometimes in the poor prospects of the industry, but mostly in the fact that governments have not created the conditions needed to make the industry commercially viable. This is most true of power. Despite many regulatory organisations, state governments have neither freed electricity tariffs nor ceased unduly to favour their electricity boards. So competitive markets do not exist, and electricity has been a no-go area for IDFC.

IDFC's obduracy has sometimes forced the government to change regulations and deal more evenhandedly with entrants into infrastructure industries. Thus, IDFC's discussion papers presaged the migration in telecommunications to proportional taxes and unified licensing. Conversely, policy reforms have induced IDFC to increase its lending to the telecommunication industry.

But if you are in the government and see development worth billions held up by IDFC's pigheadedness, you may want to behead it and feed it to do-good politicians. Such murderous feelings may have peaked in the ministry when the finance minister announced that he would give Rs 500 billion for an infrastructure fund. The amount is so huge that he cannot afford to give it out of the Budget. He has to enlist off-balance-sheet entities like Industrial Development Bank of India (IDBI). IDBI, like other government financial institutions, is in poor health, so it is not surprising that Jaswant's covetous eye fell on the bonny baby IDFC.

Possibly this is an unfair reading; I hope it is. If it is, then it is time for diplomatic handling. The finance ministry is livid at the temerity of IDFC's management, and would love to sack them. Such feelings of high dudgeon come naturally to those in government, but are counterproductive in policymaking. The finance minister should call over Nasser Munjee and ask him to take back his resignation. Instead of trying to suborn IDFC, he should insist that projects financed out of his kitty undergo the litmus test of IDFC approval.