Noted banker Deepak Parekh today attributed the “very poor” quality of city roads to the government’s bidding process, saying that the lowest bidder will always make a “shabby road”.
“Quality is very poor and every monsoon after rains, we have to redo the roads. This is because state governments have to award to L1, to the lowest tender because their rules and regulations don’t permit… So the lowest contractor, lowest price bidder will always build a shabby road because he underbid it and so every year you have to spend,” he said.
Citing the example of Mumbai, he said, the authorities have blacklisted five contractors who will not participate after monsoon because their quality has been poor.
His comments come after the visiting US Secretary of State John Kerry this morning remarked about Delhi rains and the ensuing traffic jams.
“I don’t know if you came in boats…but I salute you,” said a smiling Kerry to a packed audience at IIT, Delhi, after his motorcade was once again stuck in Delhi traffic as heavy rains led to waterlogging.
“You guys deserve an award for being able to get here today. I don’t know if you came in boats or amphibious vehicles of some kind. But I salute you,” said Kerry who was forced to cancel his trip to three religious sites today in the city after incessant rains in the national capital.
Parekh also observed that the car population in India has grown much much faster than what government can manage.
“In Delhi, you tried odd and even car, it didn’t work. In Mumbai and Bangalore, we had the problem of not only traffic but quality of road,” he said.
Parekh, who is the chairman of the country’s largest mortgage lender HDFC, said the government needs to pay proper pricing for infrastructure building.
“We need better contractors. The government and states must pay proper pricing. They don’t have the resources, they go for the lowest bid. We have to build more permanent roads which, don’t get damaged after every monsoons every year,” he said.
Besides, he also made a case for Public Private Partnership (PPP) model for construction of urban roads. “I think some (PPP) experiment could be done with city roads,” he added.
Referring to NHAI, Parekh said: “It has given major road contracts but they are connecting to cities, connecting a port and a capital but we are not looking at the urban roads that are in major metros how can we improve roads in major metros and how do we ease the traffic.
“If this is the position in Delhi in two days, it has paralysed everything. What will happen 3-5 years later when the number of cars in the city will increase? So we have to put our minds together, get adequate funding from states so that they can build better quality roads.”
Delhi has been experiencing massive traffic jams over past few day due to heavy rainfall.
Making a case for allowing municipal authorities to raise fund by issuing bonds, Parekh said, it will help create quality urban infrastructure.
“Funding roads and urban infrastructure, we must equip our municipalities to be able to borrow or access bond markets. Worldwide municipal bonds are issued and subscribed by private institutions, insurance companies financial institutions sovereign wealth funds, mutual funds,” he said.
In India, Parekh said, “we do not have any municipality floating public bonds because the municipal balance sheet is stretched”.
They cannot not tap bond market unless some of them are capitalise or they are professionalised, he said.
As municipality is a part pf the state government guarantee by state governments can also help them to tap bond market, he added.
If municipalities float bond issues, there will be liquidity in the system, he said, adding that if they have a reasonable rate, its a government guarantee paper, people will buy, financial institution like HDFC will buy, infrastructure companies will buy.
“We want long term assets. It is the reluctance of municipalities…they are not issuing bonds because they don’t know if the revenue will come, whether they will be able to pay back on time, pay interest. We will have to do some financial re-engineering,” he said.
The problem is participants of the bond markets are not sure about the revenue model of municipalities, and state governments to permit municipalities to raise money from bond markets, he added.
Besides, he said, there should be longer term maturity, withdrawal facility over a period of time.