Thursday, July 18, 2024

The Modi government: Betting big on infra – The Big Story News

Must Read


Nitin Jairam Gadkari, 64, looks a lot fitter these days. A good 10 kilos leaner than he was a few years ago, he walks briskly and looks sharp in his navy blazer and running shoes, as he inspects the Zojila tunnel at Sonmarg in Jammu and Kashmir, surrounded by an entourage of engineers. The 14.5 km tunnel will supposedly be Asia’s largest bi-directional tunnel and offer year-round connectivity between Srinagar and Leh. The Union minister for road transport and highways was making a two-day trip to J&K and Ladakh to take stock of projects worth an estimated Rs 1.5 lakh crore in the region. The deadline for the Zojila tunnel has been advanced by nearly two years, to be ready before the Narendra Modi government seeks re-election in 2024.

The revised deadline has come as a bolt from the blue for P.V. Krishna Reddy, managing director of Hyderabad-based contracting firm Megha Engineering Infrastructure, also on stage with Gadkari as the minister makes the announcement. “The word impossible does not exist in my dictionary,” Gadkari says, his trademark grin barely concealing the peremptory message. Reddy can only look acquiescent, but his face gives away the challenges his team will face to pull it off in this hard terrain at a height of over 11,500 feet.

Construction of the Zojila tunnel had stalled after IL&FS (Infrastructure Leasing & Financial Services), the earlier contractor, went bankrupt in 2018. It has taken off now and nearly 15 per cent of the work is done, most of it in the past six months.

This Independence Day, Prime Minister Narendra Modi announced an ambitious national infrastructure plan with a targeted investment of Rs 110 lakh crore by 2024-25. Road and highways are central to this drive. Gadkari’s ministry has the job of executing projects worth Rs 26 lakh crore in the next three years. But he is aiming higher. “We are moving fast. Before the end of 2024, we will create infrastructure worth Rs 40 lakh crore,” says Gadkari.

This fiscal’s budget allocated Rs 1.18 lakh crore to road transport and highways, up nearly 20 per cent from the estimates in 2020-21 and higher than India’s outlay for education. The budget also authorised the National Highways Authority of India (NHAI) to raise internal and extra-budgetary resources worth Rs 65,000 crore. “We want to ensure there are no delays from a budgetary perspective,” finance secretary T.V. Somanathan told India Today (see The Mega Infra Push).

India Today spoke with ministry insiders, contractors and investment advisors to get a sense of the task Gadkari has at hand—his challenges and opportunities. The Rs 26 lakh crore worth of politically and strategically important roads and highways targeted for completion over the next three years include the Delhi-Mumbai Expressway and the Char Dham road in Uttarakhand connecting the Hindu pilgrimage sites of Yamunotri, Gangotri, Badrinath and Kedarnath. The latter project has run into litigation over environmental concerns.

These projects are expected to create large-scale employment at a time when the economic slowdown has cost millions of jobs in the MSME (Micro, Small & Medium Enterprises) and informal sectors. Construction has been a tested vehicle for economic revival. The United States is also working on a $2.3 trillion (Rs 172 lakh crore) infrastructure plan that President Joe Biden has pitched as a “once in a generation investment in America”.

Gadkari is well aware of the delays plaguing infrastructure projects in India. During UPA rule, highway construction averaged at 2-3 km a day due to land acquisition problems, litigation and bureaucratic red tape. In 2018, Gadkari’s ministry switched from linear measurement of highways to the ‘lane kilometre’ method used worldwide. Under this formula, the length of each new lane constructed is counted. The new method of calculation takes up the age-old highway km measure by approximately three times.

Taking charge in 2014, Gadkari’s first few years were spent reviving stalled projects worth about Rs 4 lakh crore, including several that had run into legal trouble. A senior bureaucrat who worked with Gadkari in his first term says: “Seeing the volume of litigation, he reminded us that a world existed below the big contractors, and they would die if payments were not made. He felt annulling contracts was the easy option; our objective was to build roads.”

Gadkari cleared payments to contractors and worked on getting clearances for languishing projects. To address land acquisition problems, NHAI now acquires nearly all the land before handing over projects to contractors. Gadkari’s team of experts keeps him updated on the quality of raw material used and the pace of construction. Highway construction—by the lane km method—averaged at a record 37 km a day in 2020-21. Gadkari wants to accelerate it to 40 km a day.

While announcing the national infrastructure plan, Prime Minister Modi had stressed the contribution of infrastructure projects in job and wealth creation. His government’s Rs 6 lakh crore National Monetisation Pipeline has been devised to fund India’s mammoth infrastructure push. Road, power and railway projects make up 60 per cent of that pipeline. “The National Monetisation Pipeline depends totally on private capital, while about 40 per cent of the national infrastructure plan depends on private capital. Between the two of them, large dollops of private and foreign capital are needed. India needs to take PPP (public-private partnership) very seriously. Gadkari inherited a defunct PPP system,” says Vinayak Chatterjee, former chairman of Feedback Infra, an integrated infrastructure services company, who is also on committees advising the government on infrastructure development.

FINANCING THE INFRA DREAM

One of Gadkari’s challenges is to get private investors excited about the India infrastructure story (see Private is the Way). In 2019, private investment in roads and highways was Rs 25,000 crore, less than a fifth of what the government pumped in (Rs 1.33 lakh crore). As an economist put it, “Until now, Gadkari has been using taxpayers’ money to fund projects. That will need to change.”

Graphic by Tanmoy Chakraborty

There are several models of road construction in India: build-operate-transfer (BOT), hybrid annuity model (HAM), toll-operate-transfer (TOT) and infrastructure investment trusts (InvITs). The NHAI was authorised to set up InvITs in December 2019. Through InvITs, it is monetising national highways that have a toll collection record of over a year.

So far, NHAI has collected Rs 17,000 crore by monetising road assets through TOT. It has outlined plans to raise Rs 5,100 crore through InvITs. NHAI was allocated Rs 57,350 crore in Budget 2021-22, up from Rs 49,050 crore in 2020-21. It also got a nod to monetise a dozen highways, totalling over 6,000 km, to raise resources.

Gadkari is optimistic about financing his projects. “We are getting a good response from investors—Canadian funds, Australian funds, even Indian banks are keen. Money is not a problem,” he says. He also hopes to raise toll collections from the current Rs 40,000 crore a year to Rs 1.4 lakh crore over the next three years.

However, Chatterjee says many investors are iffy about putting in their money unless they are assured of a level-playing field by the government. “Nitin Gadkari should consider setting up a regulator for the roads and highways sector, which will act as an umpire between the government and the private sector,” says Chatterjee.

According to the Union ministry for finance, the transport sector accounts for 58 per cent of the 1,539 PPP projects awarded till date; a bulk of them in roads and highways. In 2017, the Union cabinet approved the development and upgrade of 34,800 km of national highways under the Bharatmala Pariyojana. The project envisages market borrowings of Rs 2.09 lakh crore and an additional private investment of Rs 1.4 lakh crore. Of this, Rs 34,000 crore is to be raised through TOT monetisation of national highways and Rs 1.06 lakh crore through PPP. The NHAI raised Rs 9,681 crore from bidding of the first bundle of TOT projects. However, the bids received for the second bundle were below the NHAI’s initial estimated concession value of Rs 5,362 crore.

CHALLENGES AHEAD

Gadkari has a reputation for getting personally involved with the nitty-gritty that tends to derail infrastructure projects. From land acquisition to environmental clearances to shifting of assets (power lines, for instance), he personally liaises with central ministries, departments and state governments to clear bottlenecks.

When he took charge, the road transport ministry had 406 stalled projects worth Rs 3.85 lakh crore. “We solved issues with bankers, the forest department and ensured other clearances, saving Indian banks from accumulating NPAs to the tune of Rs 3 lakh crore,” says Gadkari.

An infrastructure committee constituted by the prime minister under the chairmanship of Gadkari has all key ministers as members. While the committee has helped resolve many issues in ongoing infrastructure projects, including those involving state governments, e-tendering has reduced interface with the government at the bidding stage. “No one can say they had to come and meet the minister in order to get a contract,” says Gadkari.

The head of a Mumbai-based asset management company adds: “In 2012, one of India’s largest road contractors had shifted work to Nigeria complaining of corruption and cronyism in road construction in the country. When I met him years later, he mentioned how e-tendering had made it convenient to bid for government projects, and that decisions were being taken within days.”

While Gadkari can be credited with bringing in some transparency, pendency of central projects remains a concern. A report by the ministry for statistics and programme implementation for April-June 2021 details the status of 1,779 projects. While 253 projects were on/ ahead of schedule, 559 were delayed. In 967 projects, the original/ anticipated date of completion was not known. The delays range from a month to a staggering 27 years. Around 480 delayed projects suffered from a cost overrun of over 60 per cent, totalling to Rs 4.46 lakh crore.

The causes behind the project overruns are manifold and complex. “There are land acquisition, compensation and encroachment issues. We also need permission from state governments, the cooperation of railways and power departments, and permission to cut trees. Everywhere there are problems, but if there is a strong will and commitment towards the country, things can be done,” says Gadkari.

There are impediments from within the system as well. Infrastructure experts say the frequent changing of the NHAI chairman hinders the efficiency of the agency. This July, NHAI got its eighth chairman in six years, Giridhar Aramane. The road transport minister does not have a say in the appointment of the NHAI chairman.

Chatterjee adds that NHAI has too much on its plate and should be split into two corporations. “We need a separate authority that handles everything on the lifecycle management of roads. There is a long list of tasks unrelated to construction, such as designing PPP formats and instruments of monetisation, that can be taken care of by another authority,” he suggests.

Even as the road transport ministry has set some world records—for instance, a 2.5 km, four-lane concrete road was built within 24 hours in the Mumbai-Baroda section of the Delhi-Vadodara-Mumbai Expressway—Gadkari concedes that decision-making is slow at several levels. “The problem I am facing is with financial closure. Banks are taking six months to a year and a half to even approve a 2 per cent guarantee. It causes delays and has costs implications,” he says.

With a chunk of their NPAs coming from the infrastructure sector, banks are wary of investing. After peaking at 15.2 per cent in fiscal 2015, the share of banks’ outstanding credit to infrastructure fell sharply to 11.5 per cent in 2018.

Graphic by Tanmoy Chakraborty

MAN OF THE MOMENT

Several flagship projects are timed for completion around the 2024 Lok Sabha election. Gadkari’s priorities for the next year and a half are a slew of projects that promise to halve travel time between key destinations: Delhi-Katra to six hours; Delhi to Jaipur, Chandigarh and Dehradun to two hours each (see Connecting India). Also high on the agenda is the 1,350 km, eight-lane Mumbai-Delhi Expressway being built at a cost of Rs 1 lakh crore. It is targeted for completion before the end of 2023.

Graphic by Tanmoy Chakraborty

The Rs 12,000 crore Char Dham project is expected to be ready by April 2022. A senior official who worked with Gadkari on the project says the ministry has identified 10-12 landslide-prone areas on the route, and these have been circumvented. Road infrastructure in India, he adds, is increasingly relying on ‘German engineering’. “All our life we looked at British engineering, which requires upkeep of roads every five years. It essentially entails laying of roads by going around a hill or valley. German engineering is about cutting through a hill—once you build a road, it will last 50 years. It’s now becoming a part of our thought process,” says the official.

Even Gadkari’s critics agree that he thinks like an entrepreneur and has built the reputation of a ‘doer’ over the years. Between 1995 and 1999, as PWD minister in the BJP-Shiv Sena government in Maharashtra, he foresaw Mumbai’s massive need for flyovers and commissioned 54 projects, accomplishing a lot of what he had set out to do in the city.

Several infrastructure sector watchers say Gadkari inherited a system plagued by cronyism and project delays. Several contractors who had been awarded big contracts had declared bankruptcy; many others didn’t have the requisite experience in road building. The terms of the contract would change arbitrarily and quality checks were poor.

As part of the reforms, Gadkari has taken the entire tendering process online. Several bids for the Zojila tunnel were rejected until the selection of Megha Infrastructure, which made the lowest bid. If he does his best to ensure prompt payments to contractors, Gadkari also insists on accountability. Last year, the Essel Group had to give up the Mukarba Chowk-Panipat highway project after work failed to make progress. Welspun Enterprises is acquiring the toll road project under the BOT model. “The message is very clear—that being seemingly close to the administration does not offer one any advantage,” says an investment advisor who works with companies on investments in India.

Being PM Modi’s key infra man, Gadkari carries the burden of expectations. Highway expansion is closely linked to trade and economic development. Better connectivity also helps decongest cities and speed up cargo movement. Good roads also mean fewer fatal accidents. A World Bank report says India, with just 1 per cent of the world’s vehicles, is responsible for 11 per cent of road accident deaths—the highest globally. Gadkari has made an impressive start, but will he be able to cut through the systemic problems and deliver on his promise of a better-connected India? Election year 2024 will a point of reckoning.

Graphic by Tanmoy Chakraborty



Source link

- Advertisement -spot_img
- Advertisement -spot_img

Latest News

NASA’s Sunita Williams explores watering plants in space: When will Starliner astronauts return to Earth?

'How plant absorb water in microgravity?'On Wednesday, NASA (National Aeronautics and Space Administration) reported that Indian-origin...
- Advertisement -spot_img

More Articles Like This

- Advertisement -spot_img