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UPA'S INFRATIORITY COMPLEX
By PARTHA MUKHOPADHYAY
The first three years of a government’s tenure at the Centre provide a fairly complete resume of its intentions. The third anniversary of the Manmohan Singh government is therefore a milestone to ask, does the UPA suffer from an inferiority complex on infrastructure? Notwithstanding its poll reverses, the NDA could point to the National Highway Development Programme (NHDP), the Pradhan Mantri Gram Sadak Yojana (PMGSY), the New Telecom Policy, private participation in container terminals, private participation in electricity distribution in Delhi, the Accelerated Power Development and Reform Program (APDRP), a new Electricity Act and the growth of regulatory institutions in telecom, electricity and even ports, as significant accomplishments.
But, despite its vocal support for public-private partnership (PPP) and strenuous but unproductive efforts at developing a regulatory architecture, the consensus is that the infrastructure momentum has slackened in the past three years. Not that the UPA is without accomplishment. The policy breakthrough in rural telecommunications is a singular achievement. The use of the Universal Service Obligation (USO) Fund to catalyse investment in rural backbone infrastructure, which is then shared by multiple operators, has reduced the cost of rollout dramatically. Bids for towers were a fifth of the estimates and the operators bid zero or negative subsidy to be among the first three on the tower. Soon, the aam aadmi in rural India will join his urban counterpart in ringing in a telecommunications revolution.
The UPA can take credit for recognising that if Bharat is to morph into India, our cities need attention. The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) is flawed in its implementation, and cities are not being helped to manage themselves, but similar birth pangs affected the Golden Quadrilateral (GQ) too. If JNNURM launches the revival of cities, in the manner in which the GQ heralded the growth of highways in India, these initial missteps may be worthwhile. Another creditable achievement is the Railways turnaround, with increased investment flowing from internal resources, that is, user charges.
The plan is to almost triple investment in the next five years, redressing any modal imbalance flowing from the NHDP. Beyond these, the UPA can also point to private participation in two major airports and finally, the Viability Gap Funding mechanism, as an institutional recognition of the importance of PPP — though more attention should have been paid to project preparation capacity before it was established. As against these acts of commission, there are many acts of omission that the UPA has to answer for, especially in the critical areas of transport and power. The slowdown in the highway programme is the result of well-intentioned emphasis on PPP and an utterly misplaced distrust of existing contractual structures. The upshot has been a stalled NHDP and a model concession agreement (MCA) that is at best unwieldy and at worst an invitation to renegotiation — a Lawyer’s Employment Act, if you will. Similar imprecision in thinking has also led to reworking the MCA for ports.
Reform in electricity is admittedly difficult, but here the UPA has not tried very hard. The erstwhile Dabhol, now rechristened Ratnagiri, continues to operate in fits and starts. Its one major initiative, the ultra mega power project (UMPP), is under an avoidable cloud. In electricity distribution, it has tended to palm off the responsibility to the states. Some states have taken up the gauntlet. Andhra Pradesh, Gujarat and West Bengal seem to have improved markedly. Maharashtra has begun the franchising of urban zones like Bhiwandi. But, while safe, it’s useful to remind oneself that a similar hands-off approach would not have led to VAT reform. What are a few of the things it can do differently? In power, it needs to aggressively address the fuel and location problem by reforming the coal sector, building a national gas pipeline network and strengthening inter-regional electricity transmission.
These initiatives, along with open access, can go a long way to address shortages in industrial and urban power. For reducing distribution losses, there needs to be a serious conversation between the Centre and the states. In highways, the need is for a flexible, forward-looking MCA with a national electronic tolling system that makes our highways a barrier-free network instead of the fragmented fiefdoms that currently reduce the benefits from NHDP. In ports, it should pay more attention to connectivity and focus strongly on competition regulation — especially now that a single operator has container terminals in five of our key ports.
Indeed, it needs to seriously consider a unified transport regulator, rather than piecemeal approaches exemplified by the proposed airport regulator, as well as build a strong database of transport flows. Finally, in the PPP arena, it has become fashionable to trumpet the revenue earned, as in negative bids on highway concessions — or saved, as in the USO bids for telephony. In both instances, it is necessary to ask whether this outgo reflects the fruits of competition or monopoly rents from an under-designed facility. Should the lucrative highway stretches have been redesigned for higher traffic and analogously, should the telecom USO Fund be used for covering rural India with wireless broadband? Is the UPA’s fiscal diffidence triumphing over developmental imagination?
Maybe, some of this is balanced by the UPA’s increased spending on soft infrastructure, that is, on the Sarva Siksha Abhiyan and National Rural Health Mission and its promises on Bharat Nirman. But even there, the targets in rural roads, water supply and electrification are not very ambitious. More pertinently, the expenditure is not outcome-focused. Perhaps the UPA’s infrastructure challenges were more formidable, but so too were the reputations that it brought to the economic table. For whatever reasons, it seems to have chosen not even to test the reputations against the challenges. And that is a sad story.
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INSIDE STORY
