Atma Ram Kejariwal
Till the year1991 our country had a protected economy. Competition was non existent or was for the name sake. Players (i.e. entrepreneurs) in every field were working harder to prevent entry of new players rather than concentrating on quality product/service, customer service or improving their own performance. Since there was no meaningful competition, poor operational efficiencies and bad management were covered by increase in product cost. Customer had no choice but to pay for poor efficiencies and bad management of producers and service providers.
In the year 1991 our economy was opened to the outside world or in other words liberalisation was started. It is a matter of debate if it was a choice or compulsion.
It was realised that to grow and to keep pace with global economy, development of infrastructure is a must. Road network, ports, airports, oil and gas exploration, power etc. were the fields short listed among others for speedy developments. Inter connecting various major rivers in the country for inland water transportation and to take care of drought conditions in part of the country was also thought to be one key thrust area. This concept was the brain child of Shri Atal Behari Vajpayee.
In the beginning, developmental activities in infrastructure started with the financial assistance from the World Bank, IMF and other agencies. Road network was first to get attention. Ministry of Surface Transport; State PWDs were the supervising agencies, consulting firms were ensuring quality and private players were executing the projects. In the beginning most of the project executing players incurred losses. For renowned and large players it was a learning process, they learnt the lesson and are now performing well. Others thought it to be a golden opportunity to make quick money, but without required financial and technical capabilities, relevant experience and patience, such players vanished in due course of time.
The real thrust in this field was given during the time when Shri Atal Behari Vajpayee was the Prime Minister of the country. Conversion of two lanes to four lanes was the thrust activity. Highway stretches with high traffic density were identified. Golden quadrangle and its development was among the priority. Participation of private organisations was thought to be an option for better achievements. This led to emergence of terms like Build Operate and Transfer (BOT), Build Own Operate and Transfer (BOOT), etc. National Highway Authority (NHAI), of India was established and made nodal agencies for all developmental related activities of highways in the country.
Reasonable good progress was done in road sector till the year 2004, up to tenure of Shri Atal Behari Vajpayee as Prime Minister of the country. The momentum continued for another a year or so. The methodology of awarding any stretch of highway as BOT was to assess the project and type of traffic, fixing construction specifications, toll tax structure, fixing eligibility criteria for participation in tender with respect to technical and financial capabilities, specification for maintenance during the concession period etc and awarding contract to the consortium who quoted the minimum. In the beginning this methodology worked reasonably well.
Every player which includes new as well as old saw this opportunity as a gold mine to mint money. The result was increased competition. On seeing large response from the investors/entrepreneurs the ministry thought it to be a very good opportunity to make money for the government. From here onwards the concept of upfront payment came in existence. This resulted in increased project cost not only equivalent to upfront fee but also included interest and overhead on this amount. A strange development – the original philosophy of faster development with private participation was over taken by the greed to generate money for the ever cash starving government.
Cost of construction per km is increasing continuously. It will be a matter of interest for agencies like CAG to investigate disproportionate rise in cost of construction per km. With past gained experience, which should result in efficient execution, lower expenses on expatriates, the cost of construction per km should decrease. Higher overheads created over period of time, cost involved for securing the contract, over billing of expenses, tendency for siphoning off money, etc. maybe few factors contributing to this rise.
The situation has become so alarming that few operators have started terminating the contracts or have given termination notices to the nodal agencies because either the project remains no longer viable or as per general perception the money invested by promoters have been recovered by using illegal means.
Consider the case of Gurgaon Expressway. Delhi Gurgaon Super Connectivity Limited, DGSCL, implemented this project. It was a model project in the country, having maximum vehicle traffic. The actual traffic flow is much higher than anticipated in the original detailed project report. Even after very good revenues, this project is in limelight, for wrong reasons, since couple of years. Frequently the High Court of Punjab and Harayana intervene. NHAI had issued notices to DGSCL several times on various counts for termination of contract. Matter is dragged for years by going to court, engaging renowned and expensive advocates who have the capability to drag on legal cases and thus legal verdicts are delayed and general public suffers.
The history of Delhi Airport Metro Express is more alarming. This was first project in the country to connect any airport with the city centre. The project was awarded to Reliance Infrastructure led Delhi Airport Metro Express Private Limited, DAMEPL. Since beginning the project made headlines for wrong reasons. It missed its completion target many times; even it could not be commissioned before Commonwealth Games. Two of its stations were made operational with extra ordinary delays. Now poor quality of construction having safety risk has come into limelight, so much so that operations had to be suspended. Even after resumption of operations speed of trains had to be reduced considerably. Fares have been increased. As if all this was not enough, DAMEPL has issued notice for terminating the concession agreement with Delhi Metro. It is also reported that now DAMEPL wants that the Delhi Metro should bear the losses. Apprehensions that political connections of the operator and money power will result in Delhi Metro paying losses are not misplaced.
In all these case players were very keen to get project awarded to them and later on they issue termination notices to nodal agencies. Same story is of project not viable due to bad management or to extract some concessions from nodal agency.
Development of Delhi International Airport was awarded to one private player. Reports coming now and then are equally disturbing. Airport usage fee was imposed flouting norms and agreement between operator and government agencies. The case was referred even to Honb’le Supreme Court and it made adverse remarks. The concept of low cost air travel got severe setback with these kinds of unjustified usage fee.
In Oil and Gas exploration, we have seen how the operator for Krishna Cauvery Basin is resisting audit by CAG for capital expenditure verification. If everything is in order, there is no reason to oppose such an audit.
Many of power plants in private sector are way behind schedule. As an example preliminary work has not even started for Dadri Power Plant in UP even after seven years of land allotment. Land still remains unused. The country is loosing foodgrain production from this land.
The list is long. It is essential that the government must review the whole issue with an open mind.
(The writer is the mechanical engineer and gold medalist from University of Rajasthan).