Bracing Up

Since we're in December, it's probably a good time to look back at the year. The 6.9 per cent quarterly growth figures for the previous quarter come in the year's sunset month, and the fiscal year's growth is now downgraded to about 7.3 per cent. The gross fixed capital formation (GFCF), a proxy for investment rate, has halved from nearly 14 per cent in Q1 to 7 per cent in the second quarter. Worse, we haven't hit rock bottom yet, analysts assure us. Next year's growth rate is projected to be only around 7 per cent.

However, the most uncertainty is being caused by political factors. A parliament logjam in the winter session and the Opposition's boycott of Home Minister P Chidambaram means some of the critical bills may not see the light of day. The Companies Bill, the Nuclear Regulatory Authority Bill, the National Highways Authority of India (Amendment) Bill, the National Sports Development Bill, the Mines and Minerals (Development & Regulation) Bill will all impact the infrastructure industry.

As the publishers of an infrastructure magazine, we have often twiddled our thumbs this year at the distinct slowdown in activity. There has been no T3 airport to showcase this year; probably the biggest achievements were the Bangalore Metro and the Delhi Airport Express. But towering above the rest as an example of good vision of viability, is the Formula One track in Greater Noida, executed under PPP between the UP government and Jaypee Infratech. And projects like this one are examples that the government is opening its mind and learning the ropes of PPP. And such experience will trigger more such projects: The top premium bid from GMR on the Kishengarh-Udaipur-Ahmedabad national highway stretch will pay NHAI an annual premium of Rs 636 crore every year for 26 years. While GMR may be a frontrunner, other players will seek to learn from the experience over time. Experts are divided in their opinion on whether this kind of astronomical premium is prudent and sustainable.

As infrastructure makes the shift gradually but surely from government-owned projects to those jointly owned by the government along with private organisations, project bids are getting more innovative, more aggressive and more experienced. While NHAI and other project-owners are welcome to wait and watch, extra-aggression in bidding must be watched more carefully, and the bidding process in such long-term premium projects needs to be revisited. Still, the F1 and the premium bids on this national highway should be seen as this year's milestones in India's experience in infrastructure. It is the cycle of experience and visionary projections that will galvanise competition in the sectors.

And although it has been one of the favourites, power has been less of a landmark in projects. While the situation is not new, the sector has been in the spotlight for the wrong reasons this year. Indonesia, which had lifted coal export duty in 2006, has reimposed it in October this year, causing panic among developers. JSW and others, which are not permitted to hike tariffs, will be hit-and this means slowdown in captive coal production. State Electricity Boards can no longer run to the Centre for assistance when their own efforts at recovery and curbing AT&C losses are nowhere near ideal, barring a few states.

The aggressive bidding and eager competitiveness among infrastructure players indicates that the industry is trying to catalyse some movement since policy seems to be at a standstill in the middle of fast traffic.