Monday, October 27, 2014

Accountability issues in PPP

We have been seeing of late in New Public Management (NPM) about the changes required in Government’s role. A number of stages are required to get an approval for a project. Government tends to keep the process intact rather than the end result. All this is done to keep the government machinery accountable.

Accountable to.. (Willems & Dooren, 2011)
  1. Political mechanisms – future elections, political debate, questions of opposition
  2. Judicial review – questioning by the courts
  3. Superior authority – chain of hierarchical command, government auditors, regulatory bodies, ombudsman
  4. Groups – Citizens, Interest groups (NGO’s)

In India, the ‘5 C’s and 1 M’ which question government decisions are CBI, CVC, CAG, CJI and CIC. The M is of course Media (

Now, the account holders (people, judiciary, authority) concentrate on the process and not the performance of accounting. It has become easier to hold someone accountable for a 'failure in finance and fairness' rather than on a 'failure in performance'.
What is required now is a change looking at efficiency and value for money.
Few solutions in this regard as mentioned in (Forrer, 2010) are
  1. Cost- benefit analysis -  to show (people, judiciary and authority) that the project is done because of the benefits
  2. Get social and political support – by increasing transparency and involving people in decision making
  3. Performance measurement – based on implementation and benefit to people

  2. Willems, T., & Van Dooren, W. (2011). Lost in diffusion? How collaborative arrangements lead to an accountability paradox. International Review of Administrative Sciences77(3), 505-530. 
  3. Forrer, J., Kee, J. E., Newcomer, K. E., & Boyer, E. (2010). Public–private partnerships and the public accountability question. Public Administration Review70(3), 475-484. 

Monday, October 6, 2014

Water Redistribution - Learnings from China

Many of us would be quite aware of the 'Indian Rivers Inter-Link' [1] project which was proposed in 2005. This is a very large scale project that intends to interlink Indian rivers by a network of canals so as to reduce floods in certain zones of the nation while alleviating the water shortage problem in others. It seems like quite a reasonable thing to do and the government has been in the process of surveying the zones and estimating costs and benefits since 9 years now. There are environmental and relocation issues that the officials have foreseen and will look to address if the project goes ahead, which, judging by its current state seems to be the case. But these are predictions and all international comparisons that have been done so far are with similar projects in the West, where social and economic situations are very different from those in India. 

But now, an opportunity for comparison with a similar project in a nation whose conditions are very similar to those of India has presented itself. China has finished constructing a canal more than 1200 km in length from Danjiangkou Dam in the central province of Hubei to the capital, Beijing [2]. The issues they faced were similar, heavy concentration of industries and agricultural lands near the economy-driving capital area had depleted and polluted the water naturally available in the region and so the only solution they could conjure up was to 'borrow' from the water abundant South. And just like India's Inter-Link project, this seemed like a prudent thing to do and so, being China, they quickly did it.

The Economist [3], however, has a very interesting take on the project and points out secondary and tertiary impacts that make the project seem far less prudent. They say that while the canal will solve the current problem and meet a significant proportion of the demand, this portion will quickly shrink over time with an accelerated increase in population, number of industries and farmlands, spurred by the canal. Additionally, the article mentions "By lubricating further water-intensive growth the current project may even end up exacerbating water stress in the north". And this argument seems largely valid. When there is abundant supply of a commodity, its value decreases and people tend to use more of it, rather carelessly. Moreover, shifting billions of cubic metres of water may stimulate the spread of diseases which is something that even might not have been considered during the planning process. 

They point out the real issue: the high demand for water and inefficient use of it. And this problems only gets exacerbated by the 'solution'. Agreed, that some amount of redistribution will have to happen to address the problem in areas that face acute shortage. But a more enduring solution would be controlled tapping of sustainable local resources and promotion of efficient utilisation techniques. Also, the government shouldn't hesitate in charging high tariffs from the industrial users of the redistributed water. This case also highlights a very interesting aspect of project conception/appraisal: sometimes projects are not the solution and therefore, unneeded and the appraisers should feel comfortable accepting that.  

Tuesday, September 9, 2014

Eight steps away from 24x7 power!

                       With the closed civil nuclear deal between India and Australia, the NDA govt. of India comes up with an 8 point plan with an aim(although a very bold one!) to provide 24*7 power for all domestic, industrial and commercial purposes.
  1. Rationalization of coal supplies and focus on improving productivity and efficiency of coal production. Target: coal output of 1 billion ton by 2019
  2. Restructuring the coal regulatory body giving it more independent power in decision taking and its implementation
  3. Steps to control of coal theft (Yes! coal theft actually amounts to around $1.5 billion)
  4. Nuclear energy generation
  5. Hydel plants in J&K on fast track basis
  6. Faster environmental and forest clearances (cleared long-pending transmission projects worth Rs 12,272 crore)
  7. More focus on green energy sources-wind and especially solar energy(solar ultra mega power plant in Sambhar)
  8. Gas based energy generation of worth 24,148 MW

Merits:  Firstly the government has begun to focus on efficiency and productivity of energy reserves (from the first 3 points above). Secondly, the 8 point plan reflects that the government is determined to explore renewable and nuclear energy sources(last 5 points above).

Possible improvements: One possible area that might need serious thinking--- instead of concentrating on generation alone (which resulted in looking at it as an isolated system independent of transmission and distribution), we have to start making efforts to integrate and improve the whole process of "generation, transmission and distribution".
It is high time that we realize that 'the whole is greater than the sum of its parts' (true,even though its entirely counter-intuitive!)

Tuesday, August 26, 2014

Ministers handing out infrastructure projects to please voters

On 11th August 2014, there was a news article in the Economic Times titled "Akin to railways, aviation ministers handing out airport projects to please voters" [1]. I found this interesting since this brings out the influence of politics on infrastructure projects, an aspect that is often overlooked and overpowered by financial and technical perspectives in discussions about projects. 

The articles mentioned that "Andhra Pradesh is the new focus area for the civil aviation ministry which, with a politician from the state heading it, has set the wheels in motion to develop three international airports in the state, including one to be built from scratch." I wouldn't so much focus on the particular state or minister as much as I'd like to focus on the fact that many a times, projects are unnecessarily taken up to please voters.  In this particular case, the three airports that are slated to be given international status are Tirupati, Vijayawada and Vishakhapatnam, with the former two being upgradation projects and the last being an entirely new development. 

All three of these cities face shortages of basic amenities [2] [3] and the capital and expertise invested in the construction of airports could have been channeled to tackle these fundamental problems rather than using them to construct international airports, which, in fact are not even needed. With the national carrier Air India operating out of its hubs in T3 Indira Gandhi International Airport, New Delhi and T2 Chattrapati Shivaji International Airport, Mumbai [4], what every other city needs to have is a domestic airport of international standards instead of having an international airport that is underutilised. Moreover, the presence of an international airport in the state at Hyderabad further renders the development of more airports unnecessary. A passenger travelling to the US or Europe is typically taken to one of the hubs and then flown out of the country. For short distance flights to the Middle-East or the Far-East, mid sized international airports of Hyderabad, Chennai, Bangalore etc. are more than capable of handling the present and future traffic volumes. 

A classic case of how underutilised these projects become is the Raja Bhoj airport in Bhopal, the city where I hail from, that was upgraded to handle international air traffic in 2011 but the only international flights that are operated out of the airport are the seasonal Hajj flights operated by Saudia, Bhopal being a city with a considerable Muslim population. The upgrade did instill a sense of pride among the residents of Bhopal when it happened but now it is felt that maybe those funds could have been used to speed up the implementation of the Bhopal Bus Rapid Transit System or the Narmada Pipeline which address much more fundamental issues that the city faces. 

It is obvious that these projects are taken up by politicians to please the voters in their constituency because of the mileage that association with terms such as 'international' generate. It would be interesting to see what becomes of these airports over the next few years since quite clearly, these aren't well thought out projects aimed at developmental or social gains as much as they are aimed at ensuring the continuation of political reigns. 

  1. [1]
  2. [2]
  3. [3]
  4. [4]

Friday, August 22, 2014

Mumbai Metro : (Non) Cooperation between Infrastructure Players on RTI

   After struggling through a lot of problems similar to the Mumbaikar, the much coveted Mumbai Metro finally started running on 8th June 2014.  With total 63km of lines to be laid, the first line of 11.7 km between Versova-Andheri-Ghatkopar finally became operational. This PPP had raised lot of expectations not only from commuters point of view but also as a model on which other PPPs could be formualted. May it be cost and time overruns or  Reliance claiming the Metro to be Reliance Metro this project has shown the cooperation or (lack of it) that exists among Infrastructure Players.

  Latest to top it is the secrecy that Reliance Infrastructure has been maintaining about the project. Three RTI applications to get reports by RDSO, CMRS and Railway Board have not been responded to. This is not the first time Rinfra has been unwilling to share information with the public. It has ran away from taking responsibiltiy for signal failure near Jagruti Nagar Metro Station and technical failure at Ghatkopar Metro Station as well.
  Mumbai Metro One Pvt. Ltd. is the joint venture of Rinfra, Veolia Transport and MMRDA running the operations of the Line 1 of Metro. Rinfra has a major stake while MMRDA owns only 26%. With 3 of the 8 Board of Directors being from MMRDA other from Rinfra, the latter certainly has a upper hand in decision making process. Rinfra is a private organisation and hence does not come under purview of RTI. However, RTI experts claim that since CEO of MMOPL is Metro Rail Administrator, a public servant, MMOPL should come under RTI.
  In the current grievance redressal mechanism, Mumbaikars have to direct their pleas to MMRDA for information, which then alerts MMOPL, which may or may not reply since the RTI has not been served directly to it. Hence, Rinfra stays clean and non-accountable. Steps need to be taken to make the mechanism more transparent and hold Rinfra accountable, so that same mistakes are not repeated for other phases of the project. Any suggestions and also what are the problems that we may face in implementing them?

Source :

Monday, August 18, 2014

Public Vs Private - A contradiction

Hey ! I have recently come across an article in Economic Times. I thought of sharing some of the interesting observations.
There was a comparison made between the government run Kandla port and the privately run Mundra port in Gujarat.It turns out that the Mundra Port is excelling a lot more compared to the Kandla port. Mundra loads nearly seven times more cargo compared to Kandla.
The Adani Group which owns the Mundra Port charges up to five times more compared to the Kandla Port. But still the shippers prefer Mundra, this is mainly because of the high quality of infrastructure provided by Mundra in comparison to Kandla. Mundra does charge more but it properly uses the money in improving the Infrastructure which attracts the shippers.
Anand Sharma, director, Mantrana Maritime Advisory, said that "Shippers choose to go to a port with higher charges but better infrastructure than a port that is cheaper but is saddled with poor infrastructure. A cheaper, but clumsy port would eventually make shippers pay more in total end-to-end logistics cost".
(Economic Times, August 3-2014)

So, I think low tariffs do not make a port more attractive, in fact what matters is the infrastructure of the port. The government should start looking into this, may be it should start charging more and use the revenues in modernizing the ports.
Have a good read at: 

Monday, August 11, 2014

Land Acquisition Act, 2013

Land is needed for all infrastructure projects. Highway projects require more land in the cities and road side (for expansion) compared to other infrastructure projects and hence Land Acquisition is the main reason stated for delay in highway projects.

In India, land is a considered as a source of livelihood and identity as majority of the people are agrarian. Many argue that it would not be fair on the government to rip this resource from the poor for the sake of infrastructure development. So, there is a need to balance the objectives of development and social justice. With this aim, the government took a step to replace the 120-year old prevailing Land Acquisition Act, 1894 with the Land Acquisition Act, 2013. This act came into force on 1st Jan 2014. 

Some of the key reforms and issues in this act are as follows.

Issues for implementation
There is a minimum consent to sell from land owners. This is fixed at 70-80% for projects involving private.
Lands in India are highly fragmented. It is said that 12,000 owners were there in 1,000 acres to be acquired by Tata motors for Singur plant (West Bengal). It is difficult to get consent from these many owners.
Market value of land fixed based on consent of land owners, average prices of recent transactions in the vicinity, etc.
-Effective compensation becomes 2-4 times earlier. Huge concern for Investors.
-Definition of recent transactions and vicinity not given.
-Since consent of owners are required, they would escalate costs to high values.
Gram sabhas, Panchayat and Collector involved in decision making process.
-Sequential time would be 48-60 months from inception to payment of award
-Since more levels of sanction, there is scope for misuse of powers (corruption)
These new reforms are applicable for projects of 100 acres in rural and 50 acres in urban
Rather than land area measurement, the number of people displaced would have been a better criteria

The Act is criticised to be favouring land owners and not favouring new projects in this infrastructure deficient country. This also puts a lot of pressure on the government as it promises land owners so many benefits like 4X land value, Job to family member, house of 50 sqm. plinth area etc.

Rather than giving owners all these benefits, it would be better to give Land bonds (Infrastructure bonds) as currently practised in many countries. These land bonds would reduce upfront costs of payment to owners, would be a livelihood for owners who lost land and land owners would not delay the process as they are also stakeholders of the project. 

Reference- Infrastructuretoday - LA Bill
TOI - Land Bonds