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Wednesday, 25 September 2013 00:00
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Aadhaar is in trouble, DDA won’t transfer land to DMICDC, NHAI won’t do PPP projects—it can’t get worse

More than poll time, it’s toll time for the UPA as, one after another, several of its flagship schemes are coming unstuck. Top of the list, of course, is the Aadhaar one where, if the Supreme Court’s interim order is to get reflected in its final judgment, the project is dead in the water. It is true, as the FM said at his press conference on the subject several months ago, Aadhaar is not mandatory for availing benefits—this is what the SC also said in its interim order. But ultimately, if the government is to curb fake enrolments—at ration shops, in schools, at LPG outlets—the only way this can be done is to make Aadhaar mandatory. Aadhaar is meant to be non-mandatory only as long as everyone isn’t enrolled, not after that. The second part of the interim order, that Aadhaar should not be given to illegal migrants, is equally worrying since, at one go, it reduces Aadhaar to a citizenship card; that means the pace of enrolment will slow to the pace at which government departments run. At this point, more than ever before, the government needs its top lawyers to explain to the SC the logic behind Aadhaar and the ramifications of such orders.

But why blame the courts alone? Government departments don’t want to implement government orders. The DDA, FE reported some weeks ago, is refusing to transfer land to the DMICDC despite the Prime Minister’s Office (PMO) telling it to do so and, as our lead story pointed out yesterday, even the National Highways Authority of India is not keen on following the government policy of building projects through the public-private partnership route. Instead, as the NHAI chief has written to the roads secretary, he would much rather go back to the old EPC contracts—contracts where the engineers at NHAI decide on whether a road has been built properly and then release payments for a job done.

Apart from the obvious corruption that giving such power back to NHAI engineers can give a fillip to, what the NHAI chief is forgetting is the reason why the PPP model was conceived. Since the project developer took on the risk of completing the project and also funding it, this not only quickened the pace of construction, it also ensured more roads got built with the same level of government funds—instead of spending R5 crore on building 1 km of road, if the government gave the same R5 crore as ‘viability gap funding’ (VGF), this meant 5 km of road got built— assuming, in this case, the project developer was confident of funding most of the road through toll collections but just wanted a VGF of 20% to take care of the unfunded part of the project. You just have to look at the jump in the number of projects being done through the PPP route—in the last 4 years, over 16,000 km of roads were awarded through PPP based on NHAI’s own data (http://goo.gl/SQ4uVG).

On the face of it, the NHAI chairman’s view is that PPPs need to be junked since, at the moment, there is not enough response from private players for this—either the firms have turned risk-averse or their balance sheets are too stretched for them to raise funds. Granted, firms have less to spend with the economy in trouble, but if firms are asking for a higher VGF, NHAI would do well to get the Cabinet to agree to this rather than junking the whole privatisation process.

Instead of doing this, what we have is NHAI actually making projects more unviable. For one, as NHAI engineers insist on more and more over-bridges, instead of under-passes, the costs rise quite dramatically—since the idea is to allow right of passage to people on foot or tractors or cyclists, surely it makes more sense to have under-passes than it does to make the 4-6 lane road go over an existing 2-lane structure? If that isn’t bad enough, there are enough cases where NHAI is trying to lower toll rates—if costs are going up and tolls are falling, who would want to invest?

In the case of 4-laned roads that are being 6-laned, the current policy is to allow toll collections even as the road is being 6-laned. It causes inconvenience to commuters, but if the tolling is stopped, it increases the financial stress for the developer. In many cases, however, NHAI is in favour of stopping the toll on grounds of inconvenience to commuters.

So before the government takes any decision based on the NHAI chief’s recommendation, it would do well to examine the issues raised. NHAI may be the nodal department in charge of developing highways, but it need not necessarily be correct—in the case of renegotiating projects that were stuck, as the finance ministry pointed out, NHAI’s proposal was unfair since it never envisaged even a token haircut for promoters; indeed, while offering softer payment terms, there was nothing to guarantee the promoters would make good the revised terms. Nor is it clear, similarly, why NHAI has to counter-sign every loan refinancing—this is the crux of its dispute with IDFC on the Delhi-Gurgaon expressway—as long as the amount it pays on termination of a project remains unchanged, as does the agreement to get a part of the upside toll once traffic on a road exceeds a certain target.

Sadly, for the UPA, its problems don’t end with just the roads ministry. Even after the Cabinet approved a higher gas price for projects after April 1 next year, the finance ministry initially and now the oil ministry is finding ways to ensure this isn’t implemented in letter and spirit.

Normally, for an administration bedevilled with such problems, a visit abroad provides welcome relief. In the case of prime minister Manmohan Singh who is going to the US, his problems have multiplied since, apart from the plethora of tax complaints from the US as well as those relating to India’s pharma policy, he has another headache created by a uniquely Indian solution. Nowhere in the world do suppliers of nuclear plants (http://goo.gl/HXN5Y5) take on liability since the plant is being run by someone else—yet, with that a firm part of the Indian law, it’s not clear what exactly the agreement India plans to sign with Westinghouse on the nuclear plant during the PM’s visit will actually amount to.

Uneasy lies the head …

 

 

 

 

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