|From subprime to prime ...|
|Monday, 02 January 2012 03:52|
NHAI’s stunning fall and turnaround, and the possibility of a reversal, best symbolizes India’s story
Under CP Joshi, NHAI is once again bustling with activity, ready to award 20 km of road contracts a day while earning good money. But with Joshi not even able to appoint an NHAI chief, his success is easily reversed
Psychologist Daniel Kahneman, who won the Nobel prize in Economics, calls it duration neglect, the ability of the human mind to focus on only the end-result—joy or pain—and forget all that happened in between. How else do you account for India Inc forgetting that 2011 was a year that saw India’s biggest FDI inflow (RIL stake sale of its gas fields to BP) or the wonderful sight of a Hero Motors readying to launch its very own motorcycle after the famed Honda split. It was a year in which SAIL got a contract to invest $10.3 billion in developing iron ore mines in Afghanistan, a year in which, despite everything, $480 billion of investments got made and a little over $1 trillion of consumer spending got done.
Nothing symbolises India’s stunning fall from grace, and hopefully resurrection in 2012, than the National Highways Authority of India. When it was set up, under BC Khanduri, the fledgling organisation with no staff managed to build 4-lane highways at many times the pace of the past. With Khanduri out, things unravelled. By last year, apart from a CBI raid on NHAI officials and some arrests, most projects seemed to be getting just one or two bids and, by and large, NHAI was giving around a third of the project cost to bidders as a viability-gap funding (VGF). Planning Commission’s Gajendra Haldea wrote a paper on ‘sub-prime highways’, arguing that the VGF payments were likely to exceed NHAI’s income from cess collections on roads very soon, making it bankrupt.
In the last year CP Joshi has been roads minister, however, NHAI is on track to award 20 km of roads a day and there are multiple bidders now for most projects—for 33 projects bid out this year for 4,624 km, while NHAI engineers had estimated they would have to pay out VGFs of R3,400 crore, bidders have promised to pay NHAI R19,000 crore (all on NPV basis)—the exceptionally huge difference suggests the possibility the original costs may have been padded in order to give generous VGFs to friendly bidders.
If NHAI’s turned around, for whatever reason, why worry and what’s the comparison with India? Well, NHAI has been without a chief for 11 months now, and Joshi has not even been able to broaden the selection criterion to ensure he gets a good person. Don’t forget, nothing’s changed on paper at NHAI, even the engineers are the same—just Joshi’s way of functioning has changed things. That’s where it becomes symbolic of what’s happening in India—without the right man in place, it can go either way.
The plight of one man, who many thought was in the right place at the right time, Nandan Nilekani, is well known. Nilekani’s Aadhar programme, through its biometrics and linking with bank accounts and online payments would have, once rolled out, eliminated a large part of the theft that takes place in the R3,00,000 crore or thereabouts that the government spends each year on subsidies. Yet, the ongoing fight between the home ministry and the finance ministry is putting paid to Aadhar.
That’s the story we all know. What’s less appreciated is what’s happening in Jharkhand. After getting everyone’s biometrics in a few districts, Aadhar is in the process of making direct cash transfers in lieu of subsidies to bank accounts of beneficiaries. If successful, it’s difficult to see how the transformational Aadhar can be kept at bay for too long.
Equally important, if the Jharkhand experiment succeeds, is the work being done by the under-3 year-old National Payments Corporation of India. NPCI’s job is to integrate various payments systems across the country so that one bulk payment (food subsidy) can be routed to millions of small beneficiaries across the country, not just to their bank accounts, but through banking correspondents and micro-ATMs, to the villages where they live.
All of us know, similarly, that the goods and services tax has fallen hostage to competitive politics. But what’s less well known is that all states have agreed to come on to the GST Network, a common platform where a PAN number will be used to identify all shops/dealers—this will help states, and the central taxman, do all manner of cross-matching of data to check tax evasion. If the states were to agree to the GST, and to a lower rate, this would give a huge boost to tax compliance, but the important thing is that, despite the politics, there is an agreement to move to GSTN—not surprisingly, given how NSDL transformed the stock market with its demat drive (when’s the last time you heard of fake shares?), it is the principal owner of GSTN.
My favourite good news story of the year is the work done by Rohan Parikh, Infosys’ green initiatives chief (http://bit.ly/t2Bjyg)—through a combination of ‘radiant cooling’ and ‘spectrally selective glass’, he’s cut energy usage in one half of Infosys’ Hyderabad campus by 30%. Given that around 40% of the world’s energy is used in buildings and around 40% of this in heating and cooling, that’s a huge saving, and all this at zero extra capital cost. But there are so many ‘smart’ buildings developed by smarter people and we still guzzle energy. That’s where Infosys comes in. Given it constructs 4 million square feet of additional office space per year, it is one of the largest and fastest-growing ‘construction’ companies in the world. Add to this the spurt in US oil from fracking shale deposits, and you could be talking of a completely different oil market in the years to come.
You’re right, of course, that none of this can materialise in the absence of supporting government policies, of the type that let a CP Joshi continue in office, for instance. How would Infosys build a green building if it didn’t have the land—don’t forget even Mukesh Ambani’s Navi Mumbai SEZ couldn’t surmount this problem.
There’s little doubt supportive government policies are a force-multiplier, but for all the government lethargy, look at what Gautam Bhardwaj’s IIMPS has done. At a time when the government’s New Pension Scheme was going nowhere, he stitched together a coalition of UTI, Sewa and the Dell Foundation that has managed to collect R100 a month of pension contributions from 3.5 million people in 70 districts in 14 states month after month for 3 years already—the pension regulator reacted by coming up with his own NPS-lite along the lines of Bhardwaj’s scheme! Like IIMPS, NPS-Lite also works with large groups to lower collection costs and works on the principle of co-contribution by government. You can’t keep a good idea down for too long. Happy 2012!