Five years on, India’s infrastructure still shaky

New Delhi/Bangalore: When it came to power in 2004, one of the top priorities of the United Progressive Alliance (UPA) was to reinforce India’s creaky transport infrastructure—roads, railways and ports—to stay in step with then surging economic growth.
Five years later, as the economy slows and a funding squeeze becomes tighter, the Congress party-led coalition government’s track record is one of partly fulfilled promises, stalled projects, delayed deadlines and shabby execution.

Take roads. When Prime Minister Manmohan Singh’s government assumed office, it inherited a mammoth road development programme the previous National Democratic Alliance, or NDA, government had started—and almost completed—within its term.

Three-fourths of the 5,300km long, four-laned highway network, the Golden Quadrilateral which envisaged connecting New Delhi, Mumbai, Chennai and Kolkata—had been already completed when the UPA took over. A part of the remaining 25% is still unfinished.
Despite some high-profile public-private partnership —ventures funded and operated by the government jointly with the private
sector—the 33,000km National Highway Development Programme (NHDP) is stalled as investors stay away. These PPPs were sanctioned in the first two years of the UPA government.
Highways were among the key sectors the government had identified to soak in $60 billion (Rs3.1 trillion) of investment in the five years to 2012. The government estimates India should invest some $500 billion in its infrastructure by 2012 to attract foreign investment and boost economic growth.

Among the first things the UPA did after coming to power was to set up a committee on infrastructure, with representatives from several ministries. Over the next two years, it was busy preparing model agreements to govern infrastructure concessions in segments such as airports, highways and ports.

And very soon, the country’s highway programme fell hostage to a global economy that went into a deep downturn, crimping the ability of private developers to raise debt.
The government failed to finish any of the highway projects it started in 2004 that had been targeted for completion by October. As reported by Mint, the highway regulator could not complete any of the 47 projects in the second phase of the north-south-east-west, or NSEW, corridor, which falls under NHDP.
The highway projects were also delayed after a developers’ body filed a lawsuit in the Supreme Court in January 2008, challenging the government’s decision to shortlist bidders based on prior experience to put in financial bids for highway projects. The government subsequently withdrew the shortlisting criteria.
Also See Tracking the Railways (PDF)
Indian Railways, meanwhile, has succeeded in almost quadrupling its annual cash surplus (after dividend) from Rs4,208 crore in 2001 to Rs20,103 crore in 2008.
The railways also enhanced the carrying capacity of its wagons by at least 10% and cut down the time taken by freight trains to complete two-way trips.
A railways official said a third of the extra revenue that was earned by the railways from freight operations was on account of such improvements.
But major railway expansion plans—such as setting up locomotive manufacturing facilities in Bihar at a cost of $6 billion—have been mired in red tape. The railway ministry couldn’t push through the modernization of the New Delhi railway station either.
By turning around the finances of the railways, however, railway minister Lalu Prasad succeded in attracting the attention of management schools.
“He has taken advantage of the upside in the economy. He managed to at least let the railways retain a fair amount of modal share (of goods being transported),” said Partha Mukhopadhyay, a senior research fellow at Delhi-based think tank Centre for Policy Research.
The 12 Union government-owned ports, which handle some 75% of India’s external trade shipped by sea, suffered from delays in revising a so-called model concession agreement that sets the terms and conditions for port contracts auctioned to private investors. This exercise took the UPA government half of its five-year rule.
This was followed by the introduction of a new rule to shortlist only six firms for each cargo handling project. Curiously, the eligibility criteria for prospective port bidders gave weightage to all infrastructure activities except shipping (a key element of maritime trade), which was omitted from the experience required for computing experience scores.
The result was that the auction process for cargo handling projects, such as the Rs1,407 crore container terminal planned at Ennore port in Tamil Nadu, got mired in litigation, and port authorities are not able to take it forward.
The cargo handling capacity at India’s ports has to double to 1.59 billion tonnes a year by 2012 from about 757 million tonnes (mt) now to meet demand. The 12 major ports handled 519mt of cargo in the 12 months to March 2008 as against a capacity of 529mt.
“If you are operating at capacity utilization of 90%, it is not a very good sign because it leads to waiting period for cargo and delay in turnaround time of ships,” said Shailesh Garg, general manager at the Indian unit of London-based consultancy Drewry Maritime Services Pvt. Ltd.
Policy ambiguities and court cases have hindered capacity addition plans. The UPA failed to auction even a single cargo handling project during its tenure.
“India has thus lost five years to expand port capacities that could have spared its exporters and importers from port congestion and high transaction costs,” Garg said.

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