The Hindu Business Line : Infrastructure and governance deficit

Having neglected to invest in infrastructure throughout the 1990s and for the first half of this decade, India is now short of all sorts of vital support systems, ranging from sewerage in the rapidly growing towns to roads, railway tracks, bridges, airports, ports, electricity and so on. As long as the economy was chugging along at a slow 6-7 per cent growth, this didn't matter much. The economy could cope. But suddenly — and much to the Government's surprise and joy — it has started growing at around 9 per cent. Yet to sustain this rate of growth, there has to be a massive and rapid increase in infrastructure which requires investments of over a trillion dollars, if not more. In the past, the Government used to build these facilities, because they yield low and slow returns, require massive investments and entail different types of risk. But now its investment focus has shifted to the social sector which too has been neglected by successive State and Central governments. Health and education services are in perennial short supply and since they help directly the poor, who matter more in elections than urban folk, the investment focus has shifted to these sectors. Net-net, for the last five years the Government has been trying very hard to attract private investment into infrastructure, with a notable lack of success. Some private investment has come in but compared to the requirement, it is negligible.

On Wednesday, both the Finance Minister and the Finance Secretary reiterated the Government's resolve to get public private partnerships (PPP) in infrastructure going. Not many people will take them seriously, however, because of at least five reasons. First, much of the infrastructure India needs is outside the central Government's control as it falls within the States' jurisdiction. Second, the Government has done nothing to minimise political risk which has emerged as the biggest problem today. Third, there is very little competence in the state governments to deal with PPP issues. Fourth, there is no political will to deal with the displacement of hundreds of thousands of people from traditional homes that is typically associated with infrastructure projects. As a result land has become hugely expensive. Finally, as result of this, corruption has increased.

Overall, therefore, it is not at all easy for private capital to enter the business. So it has stayed away except when shown special favours by some minister or the other. But now even that route seems to be closing. The answer lies not in creating more entities, as the Finance Secretary has indicated or in exhortations at seminars. It lies in adopting successful models of governance as demonstrated first by Mr Chandrababu Naidu in Andhra Pradesh and more recently by Mr Narendra Modi in Gujarat and Mr Nitish Kumar in Bihar. Until that happens, PPP will remain a bit-player at the margins.

Related Stories:
Govt hopeful of meeting infra spend target: Chawla
PPPs: High-cost solutions to low-cost problems
CAG audit of PPPs

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