Infrascape 2012 | Urban Infra: Needed A reformed JNNURM

Anil Sethi, Chairman, SPML Infra

Implementation of reforms still lacks pace under the scheme. Inflation and reduction in indu­strial output have dece­lerated infrastructure reforms. Only about 70 per cent of projects have been allotted against the target. Delays in land acquisition and environ­ment clearances, inf­lexible conce­ssion agreements (eg, recent revision of tariff prices in power contracts), and scarce funding resources for pri­vate operators con­tinue, leading to time and cost overruns.
Constrained order inflow and rising costs to complete were definitely a variable for the industry this past year. While order inflow was controllable (since orders can be taken at “any” cost) the rising costs were relatively due to market forces and lack of government regulatory intervention (on subjects such as land acquisition, for example).

The trigger? In urban infrastructure, JNNURM has contributed largely for reform in the country. Some liberal states such as Maharashtra, Gujarat, Andhra Pradesh and Tamil Nadu have benefited immensely since the programme commenced in 2005. Funds have been exhausted, indicating that steady progress has occurred with capital deployment and state and local governments are provided with opportunity to execute large scale projects, which are in increased capacity. That said, although JNNURM has been effective as a trigger, there have been relatively few successful projects that can be used as showcases for the scheme, and hence regulatory reform of loopholes will need to be executed.

New funds: In the near future, we expect a slightly better economic outlook with larger project allocation in water and waste management verticals and lower project capital costs that should lead to value creation for both the people and the deve­lopers. From a reforms perspective, however, the present funding allocation under JNNURM is met and future project allotment will be lower, if new funds are not provided by the cen­tral government. A reformed JNNURM is the need of the hour and can be expected to bolster urban infra­structure development.