‘PPP model for highway projects was wrong’

Pratim Ranjan Bose Kolkata | Updated on January 24, 2018 Published on March 29, 2015

Sumit Mazumder

Coal bids are more strategically correct and well thought out: CII’s president-designate

Elegant yet down-to-earth, Sumit Mazumder is among the last few Bengali bhadroloks ruling the industrial scene in Kolkata. The Vice-Chairman and Managing Director of infrastructure equipment major TIL Ltd is set to become CII president on April 7.

In an interview to BusinessLine, Majumder says the auction of coal and iron ore blocks will revive growth in the mining sector. But the roads and highways sector is languishing and in need of a special attention. Excerpts:

The coal block auction is on. The Coal Mines (Special Provisions) Bill is cleared. The Mines and Minerals Development and Regulation Act has been amended, paving the way for auction of iron ore mines. How should it impact the Indian economy?

A lot of activity has come to a standstill because of issues in the mining sector. Except for a few mines, iron ore mining has come to a halt. Why should we import iron ore when we have mining resources?

They found a transparent solution to the problems — the biggest of them all is in coal. With the new Act you can now mine coal to be sold in the market. It has resolved a major viability concern for private miners. The auction is going to bring major funding to the coal-bearing States. Only, the States should use this money judiciously.

Lack of development in coal bearing areas and the resulting rise of leftwing extremism is a threat to mining. In the absence of end-use restriction on auction funds, how should people benefit?

As I say, they should use it judiciously. Spending money has to be the responsibility of the States. But, in my opinion, improving the quality of life of people in coal bearing areas and infrastructure creation should be of utmost importance.

We are talking about lots of money, not some small change.

We have seen aggressive bidding for coal mines so far. Do you find any similarity with the aggressive bidding for power and roads projects in the past that led to serious viability concerns?

I think things are far more systematic in the case of coal block auction. Also, the industry has learnt its lessons.

Unfortunately, the environment of the country was different in the past. It was like ‘make hay while the sun shines’. Suddenly roads and power were sunrise industries. There were many small players out to grab the opportunity. Bids defied logic. The PPP model for roads and highways was wrong. It dumped almost every responsibility on the bidder. The logical build-up of the bidding process was not there. In comparison, things are following a logical pattern now. Most of the players in the coal block auction are very big. And, the bids are far more strategically correct and well thought out.

The government promised a large number of projects to bring the growth momentum back to the roads and highways sector. Have things started improving there?

There is no growth in the roads sector. The Minister (Nitin Gadkari) promised growth. But how it will be done is still a question.

The problem is people who build roads and highways have strained balance-sheets and banks are flooded with NPAs.

You can offer any number of projects. But there must be people to do it. Today contracts are offered but people are not bidding. Moreover, a lot of people are surrendering old contracts. So there are project backlogs.

The problem is unique. It needs an innovative solution. Standards solutions will not work.

The government is talking about putting some pressure on banks to somehow bail developers out. But any bailing out has to be done by the government, not by the banks.

Do you have any solution in mind?

This is a very difficult one. They have to identify the serious road builders and bail them out. But I don’t know how to do it. It may lead to transparency issues.

Does it mean growth will elude the roads sector in the near future?

I will not say that. I think, for growth to come there has to be some structural changes by the government. I am not seeing the structural changes.

Corporate results have been poor so far this year. How soon will things improve?

Corporate results were bad. And, I feel, they are going to be bad for the next three quarters. Because there are so many issues — like infrastructure — that need to be resolved.

About the country’s growth prospects — is it all sentiments or are there some fundamentals as well?

Sentiments are high. And that’s a start. The real problem is investments are not happening. People are looking for a conducive environment. Confidence is lacking. And that’s why you need all those Bills to be cleared. To get investments flowing, we need issues with land acquisition and labour laws to be resolved.

A plant cannot be set up where land is available. It has to come up close to either the raw material or consumer.

Published on March 29, 2015
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