Open Forum

New Delhi, 6 July 2013

Infrastructure Development

EFFICIENCY & NOT RESOURCES THE KEY

By Dhurjati Mukherjee

The Prime Minister recently set an investment target of Rs 1.15 lakh crores in public- private partnership projects over the next six months to ramp up economic growth. The proposals include elevated rail corridor in Mumbai to be built at an estimated cost of Rs 30,000 crores, two international airports in Bhubaneswar and Imphal, which have an outlay of Rs 20,000 crores and power transmission projects worth Rs 40,000 crores. Apart from these, one of the two new port projects at Sagar in West Bengal and Dugarajapatnam in Andhra Pradesh and two locomotive factories (Rs 5,000-odd crores) are also to be taken up this year. 

As is generally agreed, development of infrastructure is a prerequisite for faster and sustainable growth in the coming years. Investments to the tune of $1 trillion (around Rs 56.30 crores) would be required during the 12^th Plan period for the various sectors, specially roads, power, airport, water etc. In this context, private sector participation and investment has rightly been envisaged as a crucial element in realizing the targets.

The obvious focus would have to be on the rural sector, where lot of developmental work needs to be taken up. As is well known, lack of proper roads, non availability of power and telecommunications still remain key problems in most of these areas, thus putting the pressure on cities. All round productivity and socio-economic development can be geared up if the road network is strengthened and electricity reaches the villages.

However, there have been minor efforts by the Government and the overall share of investment in infrastructure as a percentage of GDP during the 11^th Plan was around 7.1 per cent – up from 5 per cent during the 10^th Plan. The share of the private sector, envisaged at around 30 per cent, was actually 37 per cent during the Plan period. But this achievement has not been uniform across sectors.

Though the target for infrastructure investment during the 12^th Plan has been quite ambitious with the Central and State governments accounting for 52 per cent and the rest to be contributed by the private sector, it remains to be seen how much would actually be accomplished. Meanwhile, certain sectors like roads and telecom have been making progress and receiving a fair share of private investment.

However, there are other sectors which have witnessed shortfalls in investments during the 11^th Plan period. These include power, ports, railways and urban infrastructure including water supply. Special attention thus needs to be accorded in the coming years.

There are several problems in going ahead with a faster rate of implementation of infrastructure projects which include the following: Land acquisition and the compensation to be paid to landowners in both rural and urban areas with the stipulation in the Land Acquisition Bill that consent of 80 per cent of the people would be required for private industry and 70 per cent for PPP projects; Environmental and forest clearances; Non-availability of key natural resources such as coal, gas, iron ore etc. and aggressive bidding to win projects, specially in the road sector.

In a World Bank study, ‘Ease of Doing Business’, India ranks at the bottom of the ladder in terms of enforcement of contracts. In fact, the time taken and cost incurred to obtain a construction permit in this country is one of the longest and highest in the world! This includes obtaining necessary licenses and permits, completing required inspections and obtaining connections. Guess, even the outside world is now versed with India’s famous permit raj.

It is thus not without reason that several mega projects in different parts of the country have fallen way behind schedule. Fast track implementation of such projects is absolutely necessary and the Government has to rethink and come forward afresh in this regard. The setting up of the Cabinet Committee on Investment is no doubt a welcome move and it is expected that projects worth Rs 1,000 crores would be expedited by it. But, projects below Rs 1,000 crores too need to be looked into. Perhaps it would have been far better if the Committee considered projects which are Rs 500 crores and above. After all small projects would if taken in good numbers could ease the pressure.  

Past records reveal that six to seven infrastructure projects normally get implemented. It is thus assumed that 60 to 70 per cent of the $1 trillion investment should materialize by the end of the 12^th Plan period. However, to make this happen, what is imperative at this juncture is to ensure that the Government comes forward to make land, finance, natural resources and other necessary clearances available to all those corporate houses who are involved in big infrastructure projects. Its own projects should also be monitored effectively so that there is no unnecessary delay in meeting the target dates for completion.  

Meanwhile, a recent UN report pointed out that public private partnership mode for raising public infrastructure has inherent risks. The huge infrastructure assets exposed to disaster risk, the recent most case the Uttarakhand flash floods that washed away properties worth thousand of crores. The Global Assessment Report (GAR) warned India of greater economic losses from unsafe disaster risk which obviously calls for greater focus on safety while creating new infrastructure and proper maintenance of existing ones. 

Finally, keeping in view resource constraints and the massive task ahead in developing infrastructure, it needs to be emphasised that the focus has to be on rural and semi-urban areas and in sectors such as roads and power. In spite of setting several targets over the years, power is yet to reach all parts of the country and supply is rather erratic and the targets have not been achieved.

At the same time, even in the roads sector, the target set for the 11^th Plan has not been fulfilled. Also the quality of materials in construction of roads is far below acceptable standards and needs to be improved for greater longevity and durability. Potholes after one rain are a common sight all across the country. If one goes a step further, even on National Highways, which would help faster economic growth the Government has not been able to meet its target. Some projects which were sanctioned were later de-notified for absurd political compulsions. Therefore, genuine and meticulous planning, with the goals in sight is required for projects to be taken up both by the Government and in the PPP mode. Shortcuts will only defeat the purpose. ---INFA

(Copyright, India News and Feature Alliance)