In the calendar year, we heard lots of big statements about the government?s intention to quickly scale up infrastructure investments in the country. There was a talk of ?catching up? and reaching an ambitious goal of investments in infrastructure at 9% of GDP. The Planning Commission came out with a very clear statement and a document detailing the break-up of how the target of $500 billion will be reached during the 11th Five-Year Plan. A number of policy initiatives and other measures to assist the implementing agencies were initiated and put into place.
However, the actual progress of infrastructure project implementation in 2008 was quite dismal. Almost all projects in the transport sector, which were to be awarded in 2008, are still stuck. The most visible delays have taken place in PPP projects in the highways sector where a large number of build-operate-transfer toll roads were planned in 2008, but did not materialise. Important railway projects such as the modernisation of New Delhi station and new locomotive factories were also stuck.
While some progress was made on the dedicated freight corridor, it is now very clear that its commissioning date will be deferred. Even the port projects where lot of groundwork had already been done (eg, the Ennore terminal) are way behind schedule with no clear award date is in sight. Non-metro airports (Amritsar and Udaipur) also did not take off. Very little progress has been achieved in the second Mumbai airport and the Noida airport.
While a lot of public money has been sanctioned for urban water projects, actual implementation has been very slow. The industrial infrastructure projects (SEZs) that showed a lot of promise are now going through a very rough patch with many smaller SEZs being cancelled altogether. So, where did we go wrong?
The often quoted reason for the slowdown is the global financial crisis. Everyone knows that India has also been affected. However, this is far from the truth if one were to carefully analyse the delays for these projects. In the first place, the effect of the global financial crisis was felt mostly towards the end of the calendar year, so why were there delays in the first nine months of 2008?
Are there different sector-specific reasons are there some common underlying issues that have delayed these projects? Was there no interest from developers, investors or contractors, which resulted in supply-side constraints leading to delays? Were the executing agencies (NHAI, port trusts, railway ministry, etc) not keen to bring these projects to fruition? These and several other questions need to be asked and responded to.
Industry experts and financers, as well as executing agencies, are very clear and have agreed on the conclusion that the main reason for the delays was not the financial crisis at all. There is also a fair bit of agreement that the financial crisis, which impacted India during the last quarter of 2008, made the situation worse, but was not the cause.
Having a coordinating, high-powered group to quickly resolve major policy impediments or putting in place standardised processes and documents to help executing agencies whose capacities are always less than desirable, are some of the actions taken by the government. However, as always, the devil is in the details. Like in many other fields, the government, perhaps, ignored the ground realities while putting together the details of the frameworks, processes and the documents. The lack of abundant clarity (and abundance is what really is required in all first-time attempts) and disempowerment of executing agencies altogether, has resulted in a huge number of operational issues that hindered the progress of the projects.
In some sectors, there is also the issue of existing incumbent government agencies being told to cut the very branches on which they are sitting, resulting in internal and sometime passive resistance by these agencies to push ahead with the projects. In a few cases, making the projects more complex by including real estate components, whose values cannot easily be determined, caused the delays.
Almost every country in the world is talking about significant scaling up of investments in infrastructure to keep their economic activities going. India is no exception. It would be fruitful if India were to learn important lessons from the mistakes we committed in 2008 while going ahead with the ambitious plans of upscaling infrastructure investments.
It is also important that the fundamental advantages of bringing private sector efficiency, enterprise and innovation to infrastructure asset creation, maintenance and service provision are not given the go by in favour of large-scale public projects, which we have known for the last several decades to be cost inefficient.
?The writer is India leader for transportation & infrastructure practice, PwC