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Bridging the deficit in infrastructure

— FILE PHOTO

MAINTAINING THE MOMENTUM: Flyover construction work under progress in Chennai.

Achieving or even sustaining a nine per cent growth in gross domestic product (GDP) may not be a problem, and the Union Finance Minister P. Chidambaram exudes confidence in maintaining this momentum. But captains of industry and trade emphasise that a critical component of this growth plan has to be infrastructure development.

There appears to be no dearth of funds or investment. In addition to the private investment, a clutch of special infrastructure funds have made their presence in the market, and a host of foreign institutional investors as well as lending institutions are waiting to participate in infrastructure projects in India. Neither the government nor the infrastructure sector seems worried about funding for some of the ambitious projects on the cards.

What worries them is the pace of implementation. They are afraid of the hurdles still in the way of speedy completion of projects. It is in this context that the industry welcomes the concept of “outcome budgets” that Mr. Chidambaram introduced last year. As the Finance Minister has pointed out, it is not the funding or the allocation for programmes and projects that poses a problem, but their effective and efficient implementation. An investment needs to translate into an outcome.

The Planning Commission had estimated that during the XI Plan, the infrastructure sector would need an investment of about $500 billion.

A senior Planning Commission official says: “It is the extended period of gestation for mega projects that causes concern. Even for the major National Highways projects, we seem to be taking far more time that originally planned. When the Centre or the National Highways Authority of India (NHAI) invests the money, not many people complain about locking up of investment, or lack of returns on it. But when you get the private sector involved, they schedule the repayment on borrowings and their own rate of return. So, they cannot brook delays in implementation.

Contracts are now awarded with special clauses that reward early completion and penalise delays in implementation. This remains the major problem for the infrastructure sector in our country.”

A host of infrastructure projects have come under the scanner for delays — it may be in the power sector, transport and communications, roads, ports or the aviation sector. It takes four to five years to get a greenfield airport ready; between two and three years to modernise or upgrade an airport without closing it down; three to four years at least to commission a power plant, and strangely, even three years to complete a flyover. Besides the delay in implementation, it has caused major problems to the people, or added to their sufferings.

According to a Senior Vice-President in an infrastructure implementation company, the pre-requisites for a mega project are: funds, land, feasibility/viability studies, environmental clearance, and a detailed schedule for implementation. Perhaps the major role for a Central or State government and its agency connected with the project relates to the acquisition of land and handing it over to the project in time.

Delays in acquisition, mainly on account of litigation or compensation disputes, throw the implementation schedule out of gear, resulting in time and cost over-runs. Many projects have floundered because of such delays and contractors withdrawn from projects. “That is why we strongly recommend an outcome study and plan for infrastructure projects. We need to know when and how these projects get implemented, as it can impact on the cost-benefit ratio of a project,” he says.

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