Highways: Road To Growth

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[<p><p align="justify"><span class='dropthecap'>I</span>f the nation is banking on rural India to trigger its next wave of growth, it would be naïve to expect that to happen unless India builds a web of world-class highways. The neoclassical growth theory tells us that highways play a three-pronged role in economic development. First, good highways are indirect inputs into waste-free production processes.<br /><br />Second, they improve productivity of labour. And, third, they attract industrialisation and labour migration. The Prime Minister recently spoke of how new roads boost both overall infrastructure and other sectors such as automobiles. <br /><br />It is in this context that Union Road Transport Minister Kamal Nath's announcement last week — that all procedural bottlenecks in awarding projects have been removed — is crucial. Nath told BW that all new procedures, ironed out after incorporating developers' concerns would be notified in a couple of weeks. These pertain to qualification parameters, termination clauses, forfeiture of deposit money and conflict of interest arising on account of crossholdings in separate companies.<br /><br /><img style="width: 100px; height: 210px" src="http://www.businessworld.in/bw/image/Business/Infrastructure/wef_logo_100x210.jpg" alt=" " width="100" height="210" align="right" />This is a positive development for a sector that has promised action, but has shown little results. The government planned to award around 120 projects with investments of Rs 80,000 crore under the current fiscal. But this date has already been extended to June 2010. Close to five months after Nath took charge, the government is far from achieving its target of building 20 km of highways every day. Monthly data show that construction is still limping at around 3-6 km a day. To achieve the target, several bottlenecks have to be removed. <br /><br />The very open stand-off between Planning Commission and the road transport ministry on conditions in bid documents (RfQ and RfP — request for qualification and request for price) as well as model concession agreements had scared investors away. <br /><br />Over the past four months, discussions between developers and government resulted in a list of recommendations made by a committee headed by member of Planning Commission B.K. Chaturvedi on what needed to be done with some of the tricky clauses in the documents. <br /><br />This was then taken to the cabinet committee on infrastructure headed by the Prime Minister and a decision was taken in early October.<br /><br />However, as this decision was not made public, there was intense speculation among developers and even in the road transport ministry on whether the tricky clauses had been modified. Or whether the Planning Commission still prevailed over what clauses need to be incorporated in the bid documents.<br /><br />However, this week, all this speculation was put to rest when Nath went a step further and declared that all future decisions on amending the RfP and RfQ will be taken by the road transport ministry and need not go through the long- winding tortuous route of inter-ministerial discussions that tend to go on for months. <br /><br />One important element in expediting road construction would be to ensure that there are no delays in land acquisition. As delays are often at the state level, expect some action in the coming days where the Centre is going to tie release of funds from the central road fund to states meeting their side of the bargain by acquiring land for the projects. And if there is consensus between the Centre and the state on this issue, that would be a quantum leap forward in developing our highways to growth. <br /><br />kandula dot subramaniam at abp dot in</p> <script type="text/javascript"> var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } </script> (This story was published in Businessworld Issue Dated 16-11-2009)