Dr Ashwani Mahajan
Government has prepared a draft bill for Regulatory Authority for Highways in India. It is expected that the proposed authority would help in overcoming the hindrances coming in way of the progress in road building. The proposed bill is a part of the road map suggested by the Finance Minister P. Chidambaram, about road building infrastructure. Stating the urgency of the issue, Government has indicated that the Government may even bring an Ordinance to accelerate the process. As per officials of the Ministry of Surface Transport, projects totaling nearly rupees 17000 crores are entangled in litigation and arbitration. This argument is specifically being used by the Government to push this legislation.
UPA: Failure in Road Building
Whatever may be the argument of the Government, it is a fact that the Government has proved to be an utter failure, so far as the road building is concerned; and government is making this legislation as ‘cover up’ for its failures. During NDA regime, we find that after the year 2000, unprecedented growth was witnessed and nearly 10 to 15 percent of plan expenditure was made on roads. NDA had its two flagship programmes in road building. One, National Highway programme; and two, Prime Minister Rural Road Programme. As a result of these programmes, between 2002 and 2005, 6300 kilometres national highways roads were constructed including Golden Quadrilateral and another 6200 kilometres national highways were under different stages of construction.
However, road construction came to near standstill during UPA-I itself. Not only that national highway programme was nearly stalled, even rural road construction programme also could not make any headway, due to paucity of resources. Road construction, planned under Golden Quadrilateral Phase I, could not be completed even today. Central government is seemingly completely unsuccessful in this programme. Ministry has conceded at number of occasions that they are finding it difficult to appoint consultant and award tenders for roads. UPA Government has nearly completed 10 years of its existence; however it has not come out of its hiccups. To cover up its failures, it is trying to blame high land compensation prices, litigation and arbitration as major road blocks in road building projects.
There are several other causes responsible for stalling road projects in the country. Today government is not directly undertaking the work of construction or renovation of roads, rather for each project, a SPV (special purpose vehicle) is created under public private partnership, to implement any road construction project. Government also contributes its share in the project; however total size of the project is 10 to 15 times bigger than the contribution by the Government. It’s important to know that in 2000-01, Central Government’s contribution in national highways building was only rupees 4500 crores, whereas actual investment in national highways building was nearly rupees 55000 crores. This shows that private sector showed a lot of enthusiasm in these projects and road building, especially national highways and the programme made a big leap forward and the then NDA government is remembered for this progress in road building.
However if we look at the situation in the last couple of years, we find that for 2012-13, the target of national highways was kept at 9500 kilometres, whereas actual award of contracts was merely for 1322 kilometres. For the year target was originally fixed for 7500 kilometres, which has been revised downward twice and is now kept at 2128 kilometres. Reason for downward revision of the target was that investor companies have not shown much interest in these projects. So far, only 123 kilometres of highways have actually been built. It is believe that in the current financial year these public private partnership projects are not expected to make much headway. Though the Government is planning to invite tenders and expression of interest for Delhi Meerut Expressway, Delhi Jaipur Expressway, Mumbai Vadodara Expressway and others, however it seems that the private companies are not willing to participate in the same.
Proposed Regulatory Authority for Highways in India
A regulatory body equipped with judicial powers is proposed to be constituted, with three to nine members. The Regulatory Authority for Highways in India Bill, 2013, proposes to give adjudicatory powers to the proposed regulator in areas such as contract dispute resolution, enforcement of contractual provisions and renegotiation of future contracts. This means decisions taken by this authority will be legally enforceable.
Imperative For Promotion, not Regulation
It is not denied that the proposed regulator will help in solving disputes arising at different stages of road construction and even at later stages; however, at present the stalling of road building projects is majorly because of factors other than disputes. The real causes are economic in nature. Lack of interest shown by the companies in road building projects indicates at declining attraction to these ventures, as now they are not as profitable, as they used to be earlier. Attraction to road building was primarily due to economic reasons. Government did encourage the road building, especially the highways; but the major factor which helped these projects sees the light of the day was low cost of borrowing. It is notable that during this period rate of interest had declined to 7 to 8 percent. Taking advantage of the low rate of interest, these companies made heavy investments in road building and also earned good profit.
However, we find that due to continuous inflation, not only the cost of constructing roads has now gone manifold, due to high cost of cement, steel, stone and labour; even the cost of borrowing has gone up. RBI has been pushing up the rate of interest, to somehow combat inflation. There is always a limit to impose toll charges, which is the income of the road building company. Thus, one can say that road building is no longer a profitable business for private investors. This phenomenon has practically stalled road building (highways) activity in the country in the last 7 to 8 years. The proposed regulator will not be able to address the causes which have impacted the road building activity.
During NDA regime due to the boost received by the road building projects, transport sector made a significant progress. Not only it has helped linking villages with the cities and different parts of India, lot of permanent employment opportunities could also be created in the process. When roads improve not only the speed of vehicle improves, there is huge saving of fuel as well. We can save time and take goods from surplus areas to the area where there is paucity, in short period of time and thereby control inflation. All these factors help in improving incomes and living standards. Now when these road building ventures are no longer profitable, government cannot simply take its hands off from the responsibility of creating this important infrastructure. The government should adopt all possible means to help constructing roads, including making provisions for investing in these projects and giving interest subsidy to the private players, in order to reduce interest burden and thereby make the road building projects profitable for the private sector. It is also observed that due to lapses on the part of Government planning, even the funds which were available from international agencies like World Bank at concessional rate of interest could not be used. Had the government adopted a pro-active approach for this sector, the nation would have fought the battle with recession more effectively and economy could be brought on right track.
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