Opinion

A trillion-dollar Indian dream

Updated on: Apr 19, 2011
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On land acquisition, the author suggests an option of a land holding corporation, where the farmers or others who occupied the land are given a stake.

India's bijli, paani and sadak (power, water and roads) building mission is all set to become a $1-trillion story in the Twelfth Five-year Plan and yet, sadly, the country is still seen grappling with core issues such as land acquisition, transparency in bidding for projects and the primary issue of what constitutes infrastructure.

That is why, infrastructure consultant and key proponent of the public private partnership model, Vinayak Chatterjee's book appears well-timed. Christened Getting it Right: India's unfolding Infrastructure Agenda (Lucid Solutions, New Delhi), the book is a collection of Mr Chatterjee's various columns that voices critiques of many an infrastructure policy, and provides suggestions for implementation as well as innovative ideas for the private sector. The articles are classified into four major infrastructure challenges that the country is dealing with: policy and implementation-related issues, funding of infrastructure projects, carving successful public-private partnership models and providing land for infrastructure and special economic zones (SEZs). While a good number of this collection remains contextual, quite a few of the articles have lost their relevance given the changes in infrastructure policies over the last couple of years.

Projectisation

One of the first questions that Mr Chatterjee raises in his book is ‘where are the projects and is there a case for a Ministry for Infrastructure?'.With the Eleventh Five Year Plan envisaging a 9 per cent gross capital formation in infrastructure as a proportion of the GDP, the government has diligently spelt out the sectoral requirement of funds in roads, railways, power and so on. However, while doing so, how much of these are actually ‘projectised', asks the author. Simply, put if projectisation does not happen, there would be no recipients to absorb the projected investments.

The author also holds the government responsible for creating a project pipeline that would provide sufficient opportunities for the private sector to bid. After all, the private sector cannot create projects, it can only bid for them. The travails of the road sector are perhaps a classic example of this raging issue.

Despite fixed allocation of investments, the road sector has seen only sporadic spells of order flows coming in over the last couple of years, thanks to delays in land acquisition as well as constant regulatory changes.

Mr Chatterjee also points at the array of Ministries that need to co-ordinate or complement each other to create, implement and monitor a project. He hints at the possibility of a single Ministry for Infrastructure, similar to the models adopted in countries such as Japan and Israel. While the author is primarily favouring a single-window for infrastructure, given the pace at which projects move in the Indian context, a common window for say a power project as well as a road project, may well end up stalling both given the long-routed procedures involved.

Funding ideas

The second chapter of the book dwelling on infrastructure funding provides plenty of ideas ranging from using foreign exchange reserves for deployment in infrastructure to creating dedicated infrastructure funds as well as luring retail money and foreign investment to infrastructure.

As some of the articles were written over three years ago, quite a few of these ideas have already been implemented or dropped altogether. For instance, retail participation in infrastructure through tax saving bonds has become popular in the last one year, while the latest Budget has proposed dedicated infrastructure debt funds. .

One other bold idea stemming from the inadequacies of a Revenue Budget is the need for a Capital Budget. Just as any large organisation places emphasis on its Capital Budget, so should a country, opines the author. Capital budget, according to him would help clearly bring out how much capital is needed for nation building, how much has been planned and invested and how is it being financed.

The author states that revenue and capital budget are inter-related, the way a profit and loss account and balance sheet are. The government's Capital outlay to some extent does provide some data on the above, although not on the lines suggested by the author. For instance, the government provides ministry-wise outlay, but does not spell whether the same would be a capital expenditure or revenue expenditure. Capital idea, no doubt, but it finally boils down to disclosing heaps of numbers and they often confuse than clarify.

Land acquisition

On the ever-controversial land acquisition for infrastructure projects, the book suggests a possible option of a land holding corporation, where the farmers or others who occupied the land which is being acquired for projects are given a stake.

This corporation would be given a portion of the land set aside for the project. The corporation can sell off its assets to the stakeholders to earn money over and above the compensation received. To cite an example of the above option, the author has aptly chosen the case study of an idea seeded in 1993 that later became a model city called Magarpatta in Pune. Magarpatta was a unique model of farmers near Pune pooling their land to form a co-operative society to take stake in the development company that built the Magarpatta city.

SEZs in A mess

While the author welcomes the development of similar model townships and land consolidation for infrastructure purposes, he criticises the indiscriminate growth of SEZs in the country. Citing the large number of SEZs that have cropped up worsening the land grab situation, the author reckons that SEZs are best kept to a few, specifically near coastal regions, perhaps in the lines of the Chinese model. Sadly, this comes a little too late, as much of the SEZ has already been built for IT and technology parks than for port-dependent manufacturing industries. Worse, still, just as the manufacturing sector started evincing interest in SEZs, the key incentive – tax sops – are set to be withdrawn.

As no subject on infrastructure is complete without an India-China likeness, the author has a positive note for the country. He cites research on the lower quantum of new foreign investments flowing into China, thanks to its protective model. India's open approach to private equity, international sponsors and foreign direct investments means that India could provide more opportunities for foreign investors going forward. The question though, remains, whether foreign money can take the red-tapism and nepotism that comes tagged with India-projects.

Published on November 17, 2011

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