Bridge the gap

The following is an outlook for 2018 for all infrastructure projects —  not just for the small subset of PPP that gets disproportionate attention.

First, the mega-programmes of Bharatmalaand Sagarmala would be launched for road and water transport respectively. Having reviewed the plans for both, it appears that detailed and thoughtful planning has gone into both. We look forward to good project preparation, and rapid bidding out of individual packages. A sixmonthly project-wise bidding calendar by government entitieswould be most welcome. Meanwhile, toll revenues from highways are rising steadily, as a lead indicator of an economic recovery. TOT (toll operate transfer) of highways would see at least one package bid out. This would lead to global investors focused on long-term operation and  maintenance of infrastructure assets.

Second, Railways are on track for safety upgradation and organisational restructuring for better outcomes. The new Railway minister has a demonstrated track record, and is rapidly changing India’s largest people mover. Railway station redevelopment projects could acquire greater urgency in 2018. Work on the Mumbai-Ahmedabad High Speed Rail would begin, with human capacity creation.

Third, air passengers are increasing steadily. With the regional inter-connectivity scheme UDAN, many more dots would be joined on India’s air map. We look forward to the bidding out of Jewar airport, as Delhi NCR’s second airport. Navi Mumbai airport would also start construction. Hopefully, Indian aviation authorities would promote Indian hub airports, instead of allowing Dubai, Abu Dhabi and Singapore to continue as India’s hub airports. 

Fourth, integrated multimodal logistics would see rapid growth. Logistics has been included in the definition of infrastructure. At May 2017’s Integrated Transport & Logistics Summit, minister Nitin Gadkari declared that water and rail are far more efficient in logistics than road, and that future planning would be integrated around multimodal logistics solutions. With the introduction of GST, efficiency in logistics has already increased. 3PL and 4PL Logistics could get a boost.

Fifth, the Insolvency & Bankruptcy Code is contributing towards cleaning up of the private sector in infrastructure. In the earlier bull run, between 2006 and 2010, there were many infrastructure companies who functioned as buccaneers. They would submit very low bids to win, and then to re-negotiate. Bank loans were gold-plated, with political pressure. Defaults had little risk of any strong punitive action from lenders. Such buccaneering companies are no longer aggressive. There’s a real fear of losing one’s company over the last one year. Bidding is more realistic, and players are much more serious. Welcome development for good, serious companies.

Some specific measures that we would be delighted to see

1. Stop the 2019 fixation in all infrastructure analysis. India’s Constitution does not provide for a central government, but Union government. This Union government is on par with our 29 states under the Constitution, with specific responsibilities under the union list and state list. Our analysts need to focus on what the 29 states are responsible for. Most infrastructure in India has beenconstructed and would be created by states, not the Union.

 2. Much more capacity building in states and cities. Today, the Union government has reasonably robust institutions and processes for bidding out and supervision of infrastructure projects. Since India’s states are like European countries, their state capitals need to have high quality institutions and processes. Good examples are MMRDA in Maharashtra and MPRDC in Madhya Pradesh. Nodal officers have been designated for the 115 poorest districts of India by the Union government. Similarly, proactive states need to appoint high-calibre officers with stable tenures for their infrastructure projects.

3. Asset recycling needs to happen across sectors and governments. With the experience of TOT highways, one hopes that all infrastructure sectors in the Union government as well as state governments would proactively come out with their infrastructure assets to be bid out for long-term operation and maintenance to the private sector. This would generate considerable funding, which could be re-invested into creating new infrastructure projects.

4. FASTag for all commercial vehicles within one year. FASTags have already made crossing highway toll plazas a painless experience. Since every commercial vehicle has to get an annual fitness certificate, in 2018 Union and state governments would do well to ensure that every vehicle has a FASTagaffixed, before issuing the fitness certificate. This one step would make it easy for trucks, buses and taxis to move towards a ‘less-cash India’. This would also help convince private car-owners to opt for FASTags.

5. Judicial ecosystem improvements, especially in contract enforcement and dispute resolution. Commercial courts need to give fewer adjournments and quicker decisions. Similarly, conciliation and arbitration need to be concluded quickly. High courts and Supreme Court need to be vigilant about preventing ‘judicial risk’ in business decision making. Quicker resolution of disputes, with expeditious hearings and quick judgments would be a great boost for infrastructure companies. 

All chief ministers and Union ministers keep talking about the importance of infrastructure. Hope 2018 will see more specific action in construction, bidding out and above all, project preparation.

(The writer is CEO of L&T IDPL)

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