Economic Highlights

New Delhi, 11 March 2019

Road Tolls Mega Scam

EXPOSES IL&FS TYPE DISASTER

   By Shivaji Sarkar

It’s a never-ending exposure. No, it is not a defence deal, but far more serious. The Infrastructure Leasing & Financial Services Limited (IL&FS) exposure is apparently expanding everyday from the initial Rs 91,000 crore. Now it is established that insurers are not safe, the regulator The Insurance Regulatory and Development Authority of India, (IRDAI) says.

The IRDAI Chairman SC Khuntia says insurers need to be proactive to policy holders’ interest. The Life Insurance Corporation (LIC) alone has over Rs 13,000 crore exposure to IL&FS, in other words this money of insuring people as of now is lost and chances of redemption is bleak.

The functioning of IL&FS has been queer as it virtually gave unsecured loans to the road builders, who were supposed to collect tolls and repay. Tolls were collected but the loans were not repaid. In fact, tolls and road building may be emerging as the largest scam, possibly larger than the 1992’s Harshad Mehta stock scam!

It thrives on the State acquiring land with public money, building roads with National Highway Authority of India (NHAI) money in participation with some private agency and then leasing out the public funded project to the private player for 30 years, for collecting toll. Nobody answers why the toll is needed for 30 years, when not only the Delhi-Noida Direct Company, but also many others recovered investments in just three years.

That IL&FS and NHAI are not alone, is testified by another Supreme Court observation on the Haryana Assembly amending the Punjab Land Preservation Act (PLPA) 1900, removing protection to the forest cover in Aravalli and thus opening up more than 28,000 acres of land in Gurugram and Faridabad to private builders. The court asked the government not act on the amended provisions and described the move as a misadventure by the State government.

Misadventure it is, whether IL&FS, rampant clearance of provisions for road and real estate development or the Haryana amendment of PLPA or Jewar airport-like projects in Uttar Pradesh. The Haryana action is to virtually loot the pristine environmental preserve of the Aravallis for the benefit of a few developers and their cohorts. It is none of their concern that the National Capital Region (NCR), suffering severe environmental degradation as aquifers are choked and forest devastated for benefiting the sharks by causing severe pollution.

And who pays for it? It is the common man. He is huddled into this degraded space and by confiscating their cars and other wealth benefits by industrialists and auto makers. In fact, the worst is happening in UP. The entire stretch of Ghaziabad, Bulandshahr, Noida, Meerut, Agra and Aligarh are being turned into desert as mesh of roads, highways, expressways and airports are constructed. No lesson has been taken from the collapse of Jaypee group which sunk over Rs 95,000 crore in building the Yamuna Expressway and large townships and now is in trouble looking for an exit through acquisition by again government agencies.

In monetary terms alone, the nation has lost over several lakh crore in such ill-thought of non-projects. If GDP is today shrinking to 6.7 per cent these mega failures are responsible for it. The IL&FS does not have the money to pay back. Rating agencies have classified the equity of IL&FS as ‘junk’, which means it is absolutely un-redeemable. But in February, National Company Law Appellate Tribunal ordered that IL&FS and its group companies will not be classified as Non-Performing Assets (NPAs)s that allows the company to look for write-offs.  In the past, there have been many defaults on commercial papers. Its MD and many members board of directors have resigned.

The equity structure of IL&FS is that of LIC, two foreign investors from Japan and Abu Dhabi, own about 36 per cent of equity. The common man’s money deposited with the LIC and State Bank of India (SBI) is virtually lost. Ways are being found to protect the funds of foreign investors.

It is strange that major stakeholders LIC, SBI and Central Bank did not act to stop this. Financial analysts estimate that Rs 57,000 crore is the NPA or money virtually lost. In the case of Jaypee group, the exposure is Rs 75,000 crore.

The RBI in 2016 found that over Rs 5 lakh exposure in the real estate and infrastructure were locked in NPAs. A big group alone has Rs 1.21 lakh crore unredeemable debts. Many of these have linkages with IL&FS.

So be it UP, Haryana or the entire NCR and many other large metros and roads and highways, across the country, irregularities are being allowed without a check. The high tolls, parking charges, airport tax and other levies are leading to the exploitation of the masses. It helps groups engaged in the collection of all these thrive at the cost of public funded companies or the model called PPP (Public Private Partnership), which simply is private pilferage of public wealth.

The toll gates across have become exploiters’ den and for unknown reasons despite those in power knowing it, are unwilling to remove these in the name of “facilitation of development”. In reality, these have become conduits for generating black money through legally sanctioned avenues.

The nation does not need Jewar and many other airports that are being built around Delhi. It is causing severe environment degradation, denuding forests, robbing farmlands, increasing density of population in a periphery of 150 kms around NCR and promoting practices that are immoral, unethical and turning the crest of the country into a virtual desert.

Let us not forget the region has suffered at least seven times in the past -- known as rebuilding of Delhi. The eighth time it would devastate the entire north India. The IL&FS, tolls and many infra projects are symptomatic of a larger disease. Whether IL&FS debts are declared NPAs or not, its redemption is difficult.

A moot question that remains: how for over 30 years this has been continuing and nobody could notice. Still it is never too late. It has exposed that small collections from the people for funding projects, though look simple and effective, but are innocuous and nipping into the big finances.

The first step has to be to do away with small tolls and levies. If taxes cannot pay for it, one-time levies as proposed by truck owners should be tested and toll gates across the country be abolished. Tolls cannot be for infinity. It must be restricted to three years.

A national debate on IL&FS, Haryana, UP or other infra projects, is needed to immediately stop the perpetual loot and regression of the development process.---INFA

(Copyright, India News & Feature Alliance)