Rebuilding Faith

Why does it take the Prime Minister to get his hands dirty each time there is an operational problem in infrastructure? We hope this was one of the many questions Dr Manmohan Singh asked himself before taking on his favourite role—as Finance Minister. The Finance Ministry’s role in spurring infrastructure growth had become minimal under Pranab Mukherjee—one of the most significant changes between UPA I and UPA II, and this is one of the many reasons why the best news in recent times for Indian businesses is that Singh is back.

With his return, a slew of reform-directed statements have already come forth: the push for Foreign Direct Investment (FDI) in retail, the overruling of Sumitra Mahajan’s out-of-sync report which, clearly smacking of political expediency, recommended that the government should have no role in land acquisition, the more recent announcement that the government can agree to acquire land for private companies under the new Bill.

Yet, so politically charged is the atmosphere in the country now, that some states may continue to thwart the central government’s decisions wherever they get a chance to do so. Land acquisition is a state subject and in this issue (see interview in Cover Story: Delivery Models), we ask Anita Chaudhary—the Secretary at the Ministry of Rural Development who handles land resources—whether states like West Bengal can take a hint from the Mahajan report. That question turned out to be eerily predictive: the effervescent Chief Minister Mamata Banerjee has declared that it will not acquire land even for the projects under the public-private partnership (PPP)—exactly what Mahajan had recommended.

Expectations that the PM will suddenly announce a lot of new infra projects may be belied. Instead, he is likely to, rightly, focus on removing bottlenecks in the existing ones. For example, the snowballing financing blues in highways—of all the sectors—is particularly worrying, considering it has been the only high performer among the infra sectors. As an economist, perhaps he ought to take the RBI head-on and convey that a high interest regime is not choking liquidity which in turn would have cooled inflation as liquidity is also a function of the parallel economy which keeps up the pull pressure. High interest rates, on the contrary, are working at choking supply as units are cutting production which is keeping prices up. A change at the Finance Ministry should result in a quick decision in dropping interest rates. Further, as per his announcements, if he can ensure that the projects which have achieved financial closure can be implemented at break neck speed, we can rebuild confidence. Fast tracking dispute resolutions on stalled infra projects can also provide a new lease of life.

But the most important the Prime Minister can make while he prepares the shot in the arm is that the government should become an incubator for projects. PPP projects can best work when the groundwork is laid and the execution is planned systematically—thereby reducing risks at once for the government, investors and lenders. If incubation can be systematised, project financiers will queue up.

Thank you for your tremendous support to Infrastructure Today through the nine-year journey of rebuilding India—one that has been most fascinating. We look forward to your continued feedback and patronage and promise to continue our constant endeavour to improve what we offer to you.