The hardware hurdle

Updated: Dec 30 2006, 05:30am hrs
Infrastructure is ending 2006 on an upbeat note. The government, in what is seen as the most important and least progressive of sectors, power, managed to attract extremely competitive bids from companies with strong track records of implementation. For a year in power that began with the unfortunate capping of trading margins, this was a dream finale. The Indian growth and reform opera has had highs and lows, but the story continues. The bidders appear reasonably certain of being able to find buyers for low-cost power, even among State Electricity Boards. However, the ultra mega power project (UMPP) bids have also brought the cost of not reforming the coal sector into sharp focus. The difference between the bids at Mundra and Sasan can be attributed almost entirely to fuel cost, and raises questions on whether other coastal UMPPs, which use coal imports, should proceed at all. If they are allowed to, the pressure to reform Indias coal sector will be that much less. Moreover, the song-and-dance over the super-low Sasan bid should not detract attention from the real issues in power sector reform which continue to be at the distribution end. That said, there is reason for hope even in distribution. Regardless of the bad press that the Delhi privatisation has received, it has been a relative financial success, and one of the three companies, NDPL, which has Tata Power as a joint venture partner, has shown sterling gains in efficiency. Such efficiency gains are also being seen under public ownership in the Central Power Distribution Company of Andhra Pradesh. The sustainability of this public sector turnaround remains a question mark, though, given its dependence on political whim.

Telecom has been coasting along its superhighway, looking to close 2006 with around 150 million subscribers; reason enough for Europe-based Vodafones interest in Hutch Essar. However, the gap between rural and urban areas remains a source of worry. In this, the governments decision to use the Universal Service Obligation (USO) Fund for bankrolling shared infrastructure in rural areas is a little-noticed landmark decision thats of consequence beyond the urban glitter that tends to keep the metro-centric media preoccupied. With a little more synergy with the ambitious National E-governance Action Plan, Indias digital divide could be a thing of the past. For a country ridden with disparities, this would be no small achievement.

The other sector that has quietly reformed and grown in capacity and efficiency is ports. The Jawaharlal Nehru Port Trust handled well over two million TEUs in the last six months of 2006, putting it in the big league of container ports. The terminals at Mundra, Pipavav, Kochi, Tuticorin, Chennai and Vishakhapatnam are also growing steadily, though there were some jitters when DP World, subsequent to its acquisition of P&O, ended up with terminals all around the Indian coast, with a couple of spare ones in Karachi and Colombo to boot, not to mention its home base in Dubai. Along with ports, Indias airports, which are creaking under the load of low-cost carriers, are now being modernised, which is another significant advance. One niggling concern is the high revenue-share bids that have been received by the ports and airports so far. The proposed model concession agreement (MCA) on ports does little to address this concern. Along with negative grants for roads, these bids appear to indicate that the infrastructure is being sub-optimally designed. If there is really that much surplus left in the projects, perhaps they need to be redesigned to higher standards or lower tariffs.

But, such good news does not conceal tardy progress in other sectors. Highways, after their stellar success in the past, have been slow starters this year. The government now seems to be delayering the decision process, doing away with the Public-Private Partnership Appraisal Committee for some highways. Even in this, however, the insistence on a cumbersome MCA takes away most of this benefit. Our software prowess and wireless connectivity have not yet been leveraged for electronic barrier-free tolling. Elsewhere, both our urban and rural infrastructure is in a state of collapse. The Jawaharlal Nehru National Urban Renewal Mission is funneling funds to urban local bodies (ULBs), but years of neglecting urban governance have left no mechanism at the ULB level to take ownership of the projects. Even where the projects are not state-directed showpieces like rail mass transit, but useful water and wastewater schemes, the worry is that the operation and maintenance capacity of ULBs is weak. And if their capacity is weak, the condition of rural self-governments makes for pessimism on Bharat Nirman. Whether it is rural roads, drinking water or rural electrification, this initiative, which can transform the face of India, is operating as a cacophony of projects with little service implication. The funds are there, thanks to the fiscal bonanza of the Centre, but are we willing to do what it will take to bridge this gap between Bharat and India