The Predictability Issue

There are many ways in which private developers and contractors can (and do) jeopardise their own balance sheets. But given that the private sector works on profits and viability, it depends on the government in PPP and other projects to pave the way for project viability. Unfortunately, there seem to be both inherent and contrived prob­lems at the government level leading to roadblocks and unexpected delays.

Take the Delhi airport example. Last year, the project was the darling of the media and in infrastructure circles. Built with taste and glitz, the GMR-led consortium’s Rs 12,700 crore, nine-level, chrome-and-glass Termi­nal 3 is worthy of a showcase project for the nation. But the PPP project has already run into a new kind of a problem. GMR says it can’t make both ends meet without a seven-fold tariff hike. The regulator only wants to allow a three-fold increase (see interviews with the airports regulator and GMR in our last issue). The opulence, observers and critics in the government circles say, is unjustified: glass is great for colder climates to trap heat, but in Delhi, the facades are guzzling 30 per cent more power. The pace at which passenger volumes will justify the cost is frustratingly slow for a cash-flow-strapped GMR. So the regulator is now shrugging its shoulders and saying, “Too bad.” As for the government, achieving viability is not its problem, practically speaking.

Private participation in developmental and social projects will run into many patches of rough weather over many years before the coast is clearer. For example, with minority shareholders clamouring for a stop to charity and for best efforts at viability, Coal India went against the diktat of the Prime Minister’s Office last month. UK fund The Chil­dren’s Investment Fund Management, the largest shareholder in Coal India out­side the government, is suing the company for under-pricing coal. TCI says that while Coal India is selling under the FSAs to the power sector and the market price at $20, it is making a loss of $50 per tonne. While the power sector is set to profit from this, TCI says the public at large will be shortchanged in the process.
The dismal state of clearances, land acquisition and other regulatory roadblocks is well documented and argued. Delays in almost every government-initiated responsibility are rampant and unfair on both the completion of a project and on the bottom lines of the private partner. However, in the era of semi-deregulation, the projects will continue to languish. There are two examples in this issue that should catch your attention. One is the reluctant adoption of critical technology. There is a reason that our Cover Story this month is on Geographic Information Systems (GIS): It provides a sampling of the immense scope for adoption of GIS for better prediction, yield, safety and monitoring. Government agencies are great at research, but are clearly not equipped to conduct many new-tech surveillance activities, including GIS and even less hi-tech ones as prospecting in mining (which forms another interesting story in this issue). In prospecting, the methods the Geological Survey of India (GSI) and the Mineral Exploration Corporation Limited (MECL) use are said to be outdated.

If there is anything that’s abundantly available today, it is technology. Instead of reinventing the wheel, ministries and government agencies dealing in infrastructure should open themselves up to let private companies provide predictive technological solutions that help in predictability of a project and pave the way for more scientifically figured out projections and overall more effective gains.