State of Railway Infrastructure in London and India

          As Ashwin sir mentioned in the class about the railway infrastructure in London, I wanted to add some more to it from my personal experience. The operators of railways in London viz, National Rail, Greater Anglia, Underground, and others operate together. In the sense, the railway lines can be operated by more than one operator. And while travelling between two stations, say, from a suburb to some place inside the city, even if the passenger has to change trains of different operators, still he can buy only one ticket for the whole travel. This facility eases the travel procedure for the passenger. But to maintain this, there has to be a proper structuring of the fare, and other parameters. This kind of system ensures a higher standard of infrastructure, also due to the competition set up due to involving more than one operator. The application of this system in India might not be viable unless private operators are allowed to operate. In my point of view, this can be achieved, given proper regulation of fares (set by the private operator) is done by the government, because the raise in fares is a potential roadblock to let the private sector enter the railways.
          Also, one more new thing I learnt about the railways in London is that they have “community rail” where, local people and organizations work together with the railway operators to improve their local railway infrastructure. This kind of a system aims to improve the infrastructure and at the same time involve the community. The benefits of this system are also proved to be high. This again is a difficult thing to implement in India, but not impossible. Awareness can be created in the local people to develop the infrastructure by their own. For example, the current status of MRTS stations in Chennai is very bad. A person who is new to Chennai, gets out of the train, can’t really understand which way to go to reach his final destination. Setting up proper sign boards can be done and the funding can be done by the government by dedicating some share from the ticket price. Improving the existing infrastructure is as important as creating new infrastructure.

Social-Environmental issues in Infrastructure Project

Polavaram Project

            The project, estimated to cost Rs.15,000 crores, is intended to bring 7.2 lakh acres under irrigation and produce 930 mw of power. Its Left Main Canal will bring 1.5 lakh acres under irrigation in Visakhapatnam district and 23 tmc ft of water to the city to help meet the growing industrial and domestic needs.

            In this project the cost for environmental disturbance was Rs.372 crores and it displaced 1,17,034 people in 276 villages besides submerging 37,743 ha of land – of farmland, forests and wasteland. However, with the strong political support it overcome all the bottlenecks and is in progress now. None have clear evidence that this is a socially and environmentally sustainable project, as the process was not transparent. It’s presumption is that the Godavari river has surplus flow and the water can be diverted to Krishna river so that it can be efficiently used. But, the IWMI (International Water Management Institute) challenged that the NWDA (National Water Development Authority) has falsely calculated the water in river Godavari without considering the environmental use of water which amounts for 8,200 MCM and the analysis procedure was ambiguous and at many instances there was no data available even. But, however with the strong political clout the challenges were fell on their deaf ears and the project was already given clearance and made free from all bottlenecks. In the context of the social issue in this project there were strong allegations that the Public Hearing which was quintessence of EIA was not done transparently and the real victims were not allowed to speak in such hearings using what illegal power the govt. have. The IWMI and many other NGOs working for the Polavaram project-effected victims strongly claimed that it was not a sustainable project and hence should be canceled consideration while analyzing the projects CBA. But, it was the political commitment that made a socially & environmentally nonviable project become viable, but in vein. In fact, it cannot be said as a viable project if one has taken the social & environmental aspects into consideration.

             This shows how lack of transparency, public communication results in expensive delays and also role played by political leaders.

NPM in Developing Countries (Comparing the Cases of Singapore and Bangladesh)

          NPM techniques have been imported by some developing countries and transition economies to reform the public sector and to provide sufficient public services. The NPM reforms succeeded in some countries and failed in others.

 There are some preconditions for successfully implanting the NPM approach.1) There should be a reasonable level of economic development, experience of the operations of markets, and a well-developed judicial system to ensure the rule of law.2) Political commitment 3) State capacity. I felt it is worth exploring two different results of applying NPM in developing countries – a successful example from Singapore and a failed example in Bangladesh.

        In the case of Singapore, this country possessed special economic, political, and social circumstances that were behind the success of the application of NPM reforms.  Singapore is a small country in size compared with many other Asian countries and this was a motivating factor in enhancing economic growth rapidly in order to be able to compete with other countries in the region. Thus, the government put attracting foreign investment and the expansion of private sector activities at the top of its priorities. New approaches were introduced, including accountability and anti-corruption policies.

           Unlike Singapore, Bangladesh had an unstable political situation. It also suffered from a highly bureaucratic system and many other barriers such as a weak economy, the absence of security and weak law and order, all of which undermined attempts to enhance economic performance and reform the public sector.

           On the one hand, Singapore had a strong stance and achieved considerable success in reforming its public sector through following many NPM approaches. It was well-prepared economically and politically to embrace and implement NMP. It should be also considered that Singapore’s implementation of NPM spread over several decades(1960s to 1990s). On the other hand, the political and economic circumstances in Bangladesh were not as favorable as in Singapore. Although Bangladesh succeeded in obtaining democracy in 1991, which was supposed to help combat corruption and end the bureaucratic system, the bureaucracy remains in existence and it resists any attempt to reform it.

              The commitment of political leaders to the reform of the public sector and their support for the wide application of NPM from the early stages of reforms was one of the important reasons behind the success of NPM in Singapore. In contrast, political leaders in Bangladesh used to call for reform but they did not undertake effective actions to achieve it. The wide gap between state capacity in Singapore and Bangladesh can also explain the reasons behind the failure of Bangladesh’s attempts at reform. Education is another strong factor that helped Singapore to achieve such success as Singapore has considered education the cultural and social base of the country

Ensuing Problems in Urban Transportation PPP Projects

I happened to read this article in the Economic times on PPP projects in the Urban Transportation sector in India, and I believe it is relevant to our discussion yesterday about the Vadodra Halol Toll Road Case study.  

Link: (http://economictimes.indiatimes.com/news/economy/infrastructure/ppp-projects-face-flak-experts-call-for-review/articleshow/16681219.cms)

I think the article summarizes the main problem with the Vadodra Halol road, i.e the demand estimations were way too optimistic. However, as we know, most of the urban transportation projects in the country have this in-built concern right from the moment the project is conceptualized.  The ridership estimations on almost all of the major Urban Transportation projects executed till date have been  much higher than the actual demand (Kolkata Metro is an excellent example in this regard). However, in projects executed under the PPP mode, these risks are generally, more as a rule than an exception, borne by the private player involved, which makes the returns on the investment very dicey.

We in India, have not implemented more Private-sector friendly” revenue models (like the Annuity toll model) extensively, and hence this risk continues to be a major concern for urban transportation projects executed with a Public-Private partnership. Private players, already rather wary of the multitudes of risk involved with PPPs  further get discouraged from bidding on these projects, and hence almost all of the “competitive advantage” that the PPP mode is supposed to bring in is lost at the very first step. The Mumbai MRTS project line II is a case in point, where no Private player bid for the project, and the contract was then given to Reliance Infra in light of its previous association with the MMRDA in the Line I of the same MRTS project ( a la IL&FS joint venture story seems to be emerging out of this practice, like Ashwin Sir mentioned in class yesterday). A perfect example of the private sector getting more and more disillusioned with these lopsided contractual terms in highly risky projects is Reliance Infra’s recent decision to exit many of the non-metro brownfield airport projects, citing unsubstantial returns as one of the major causes.

(Link: http://articles.economictimes.indiatimes.com/2012-09-07/news/33677051_1_airport-projects-reliance-infrastructure-lalit-jalan)

Hence, I believe it is time that the government of India take pro-active steps to refine the framework and policies enshrining PPPs in the country, and refine the contractual terms on these projects to have a Public-Private Partnership, rather than merely a Public-Private Mix, as Ashwin Sir’s research paper on the PPP experience in India mentions. Merely giving land-development rights as a sweetener and possible safeguard against lower than expected revenues is clearly not enough, as the Hyderabad MRTS project has shown us. It is high time that the government takes a firm stand on these issues, and with its new found confidence in face of increasing political pressure, finally remedies the major roadblocks plaguing the PPP chapter of the Indian Infrastructure story.