Is Public Private Partnership (PPP) the cure for India’s Infrastructure woes?

From developing highways and railway networks to gas grids and seaports, all in state partnership with the private sector, Finance Minister Arun Jaitley’s recent Union Budget focused in a big way on the private-public-partnership (PPP) model of infrastructure development. The PPP model, first introduced in a big way by the United Progressive Alliance (UPA) government, has been a mixed bag thus far: with some spectacular successes (airports in various top metros of the country) to relative flops (such as a Delhi Airport Metro Express, which was later nationalized after running into various troubles). But given the infrastructure push that the country needs if it is fully realize its potential as among the world’s most promising economies – and given the state of central government’s finances – it is clear that private sector will be involved in a big way. With over 900 major projects in various stages of development, India is one of the world’s biggest markets for PPP, Arun Jaitley said during the Budget, though he added that “we have we have also seen the weaknesses of PPP framework.” In India, even private companies — largely known for possessing greater efficiency compared to state-run bodies – have faced trouble seamlessly delivering projects in a country where its bureaucratic red tape, slow decision-making and various procedural delays are as famed as they are frustrating. But private players — not without reason — suffer the added scrutiny of propriety, with many valid concerns of crony capitalism coming to the fore in recent years. As a result, many projects which start off with a certain feasibility outlook at the bidding stage later see cost escalations due to various reasons – many a times not in the operator’s control – and so witness the private partner raise its hands up and ask for a greater chunk of revenues. Sometimes, over-ambitious bidders, financed by cheap capital are themselves to blame, who only develop cold feet later when the project’s feasibility is thrown into doubt. But often it is the very long-term nature of such projects — and the fact that the government has not yet put in place a structural mechanism to address grievances — that becomes a problem, Feedback Infra Chairman Vinayak Chatterjee told the Business Standard recently . “In large-sized projects, with commitments running into as many as 60 years, one should expect problems to occur right from day one. International experience shows that contract renegotiation should not be seen as a rare occurrence,” he said. “No amount of human ingenuity can ensure nil problems over the 60-year life cycle of a PPP project.” He added that even as economists are often unable to predict inflation and growth for the near term, it is unreasonable to expect companies to project costs far out into the future with precision, and that as the “partner” in such infrastructure projects, it is imperative on the state’s part to ensure the groundwork for the private player to secure a fair return if conditions change. During the Budget, Jaitley had proposed to set up an institution, 3P India, which would be specifically charged with recalibrating and implementing the PPP model in the country. In an interview with CNBC-TV18, Chatterjee termed the announcement as a “major breakthrough”. But set up a cost of Rs 500 crore, the institution will have its hands full when it comes into existence on day one: overhauling the way PPP projects are conceived, bid and executed in the country, as well as putting in place a framework that irons out chinks in the current model.

Read more at: http://www.moneycontrol.com/news/economy/is-pppcure-for-india39s-infrastructure-woes_1126997.html?utm_source=ref_article

Meeting the urban challenge effectively

The gap between promise and achievement in JNNURM is enormous, writes Subir Roy.

The only positive change visible in Indian cities indicating that policy and action to meet the urban challenge are moving in the right direction is the significant number of shiny, new low-floor buses funded by the Jawaharlal Nehru [ Images ] National Urban Renewal Mission.

Somewhere along the way Delhi [ Images ] acquired a bus rapid transit system, amidst initial vociferous protests from the city’s car owners, and Ahmedabad [ Images ] did the same without any protest because it was introduced on a lonely highway-like stretch which didn’t affect many.

But there are also signs or premonitions of change which the middle class thinks are for the better but are not. Perhaps the most ubiquitous of them is the proliferation of flyovers and underpasses, sometimes funded under the mission. They come initially as a great deliverer but ultimately lead to more road congestion.

Perhaps more fearsome is the talk and occasional promise of signal-free stretches along important thoroughfares. “Signal-free” is a boon only for cars. The poor who go by bus or cycle or on foot are either unaffected or worse off. Crossing a signal-free road is a pedestrian’s nightmare and you need an underpass or a foot bridge at a great cost at every earlier signal point to restore the status quo ante for the pedestrian.

The gap between promise and achievement in JNNURM is enormous. A senior official in charge calls it a “hit” and cites achievements like many states having reduced stamp duty (this is indeed a step forward) for property transfer to the targeted 5 per cent.

He also speaks of some states having formed unified transport authorities (certainly a good first step) and some others realising (action is still some way off) the virtues of levying user charges on water. Also promised is action on e-governance at the municipal level for better transparency and accountability.

The government’s own website lists 23 heads of reform with target dates and current status (updated till June 2008!). Chennai is one of the leaders and Delhi the worst, having agreed to do nothing. As many as 28 states and Union Territories have got rid of the urban land ceiling legislation, but there is no change in the reality on the ground in two of the largest urban concentrations, Mumbai [ Images ] and Delhi. Around Budget time this year, with four out of the seven years of the mission gone, states were way behind in utilising the central funds which had been made available to them, and were even further behind in undertaking the promised reforms as the first tranche is released by simply promising to do so.

The reality is that the new buses will soon get battered and old, and the situation will go back to square one because the central funding for them was a once-for-all effort prompted by the need to give the country’s automotive sector, reeling from the economic slowdown, the much-needed stimulus.

As things stand, critical reforms which were to be enabled by central funding of JNNURM, without which the urban challenge cannot be met, will largely remain a distant goal at the end of the mission. And it was the most comprehensive, well thought out policy attempt in the country’s history to meet the urban challenge, a challenge which will not go away as rural migration to urban areas will continue and even speed up.

By 2020, that is barely a decade hence, India’s [ Images ] urban population will increase by 100 million, that is, we will need additional facilities equivalent to seven Mumbais to simply remain, amenities wise, where we are!

Since JNNURM is destined to fail where it matters the most (taking reforms forward), and since without that the enabling governance cannot be put in place, here is a list of simple, achievable actions which will make a difference at the margin:

Just put as many buses as you can on the roads, powered by LPG/CNG, making the public transport system more frequent and reliable.

Disallow old public transport vehicles in all cities.

Wherever road width permits, introduce BTR.

Make shopping areas either pedestrian or served only by electric buses.

When the road space situation gets intolerable, raise the tax on cars.

Favour sanctioning of mixed-use development plans (office and residential blocks next to each other) on city outskirts.

Develop new cities which can house up to a million people over 5,000 acres, linked to a main city by a high-speed rail or road link that keeps journey time within an hour. Infrastructure for such cities will be self-financed and not more than 20 per cent will want to step out for whatever reason. This will de-congest the main cities.

These are things that governments can do and may be more willing to do than what will really work – institute for every city (only a few have it now) a mayor in council type of set-up, and direct election of mayor.

A bleak future awaits India’s retail chains

Another one almost bites the dust. Vishal Retail has been bailed out by its bankers who have put together a corporate debt restructuring plan for the beleaguered company, which has piled up a debt of Rs 700 crore (Rs 7 billion). It’s a fresh lease of life but suppliers will be wary and will demand immediate payments which, in turn, will pressure the balance sheet.

How Mumbai can be a world-class city

Consider this: the average traffic jam in Mumbai will be of 5 hours by 2030 as there will be three times as many vehicles as there are today in the city!

That is just one of the many terrifying scenarios that Mumbaikars can look forward to, provided urgent steps are taken to address the city’s problems of physical infrastructure, housing, governance, growth, healthcare, education, and security.

At ‘Megamorphosis: Resurgence of Mumbai’, a two-day conference organised by Bombay First on Tuesday, a host of ideas aimed at making Mumbai a world-class city were floated.

Should Students Be Paid to Do Well in School?

This article was published in Time. The French government is offering its students incentives to attend school and get good grades. This is to combat increasing number of drop-out rates in French schools. Worldwide, this practice has been adopted by many countries, including US and UK. And nowhere is the need to get students in school greater than in India. Maybe we can take a leaf out of their book and try to come up with fiscal incentives to motivate kids to enroll in school.

Few things in France can provoke heated debate faster than moves to tinker with the country’s vaunted public-education system, which embodies republican values that date back to the French Revolution. It’s especially true when the changes involve an idea as capitalistic and nonegalitarian as paying certain students — the ones most apt to fail and drop out — to attend classes and get good grades.

Give babus the power to empower us

Published in TOI by the best selling author Chetan Bhagat!!

In recent weeks, there have been significant disasters at government-run establishments, caused by negligence and or poor maintenance. At Thane

station in Mumbai, for instance, an overhead water pipe broke and fell on a train. In Jaipur, an oil storage depot caught fire, and the fire took days to put out. What makes these events even more tragic is that there is a dull sense of acceptance about them in our psyche. It is government run, so what else do you expect? What happened is just a visible example of badly broken government systems.

The untapped potential of India’s tourism Industry.

By 2020, Tourism in India could contribute Rs 8,50,000 crores to the GDP. (Source- WTTC).

In other words, every man, woman and child could become richer by Rs 7,000. India has yet to realise its full potential from tourism. The Travel and Tourism industry holds tremendous potential for India’s economy. It can provide impetus to other industries, create millions of new jobs and generate enough wealth to help pay off the international debt. That is why we have included Tourism amongst the Core Sectors of the Indian Economy.

India’s Infrastructure – Creaking, Groaning!!

Infrastructure is India’s biggest handicap

TO KNOW why 1,000 Indian children die of diarrhoeal sickness every day, take a wary stroll along the Ganges in Varanasi. As it enters the city, Hinduism’s sacred river contains 60,000 faecal coliform bacteria per 100 millilitres, 120 times more than is considered safe for bathing. Four miles downstream, with inputs from 24 gushing sewers and 60,000 pilgrim-bathers, the concentration is 3,000 times over the safety limit. In places, the Ganges becomes black and septic. Corpses, of semi-cremated adults or enshrouded babies, drift slowly by.

India’s sanitation is execrable. By one estimate, only 13% of the sewage its 1.1 billion people produce is treated. An estimated 700m Indians have no access to a proper toilet. Water-borne diseases caused by poor sanitation are a big reason why India’s children are so malnourished. This might sound familiar. Almost a century ago Mohandas Gandhi disparaged a book about India by Katherine Mayo, an American novelist, as a “drain-inspector’s report”. India needs to follow a simple mantra: “Fewer inspectors, more drains”.

Goldman Sachs report on India

GOLDMAN SACHS REPORT ON TOP 10 CHALLENGES INDIA SHOULD CONFRONT IN ORDER TO SUSTAIN ITS HIGH GROWTH TRAJECTORY

The top 10 challenges for India 

 1. Improve governance

India’s governance problems stem from the inability of the government and public institutions to deliver public services. Without better governance, delivery systems and effective implementation, India will find it difficult to educate its citizens, build infrastructure, increase agricultural productivity, and ensure that the fruits of economic growth are well-distributed.

Saving Udaipur’s Lakes

 At 63, Tej Razdan is old enough to remember what Lake Pichola used to look like. “With so many ghats [steps] and temples lining the lake, and buildings limited to single-story development, it was more beautiful even than along the Ganges in Benares,” Razdan, a surgeon who lives in Udaipur, Rajasthan, says. “To see it now, I am weeping. That is the pain in me.”

Lake Pichola, a 4.3-sq.-mi. lake in Udaipur, could go the way of the cheetah and other endangered wonders in India unless someone finds a way to put the brakes on its long list of misfortunes. Inadequate sewage systems, overgrowth of hyacinths, industrial waste pollution, deforestation and heavy lakeshore development have left the lake with plastic bottles and other debris lining its once pristine edges.