Rs 3.5 bn for Delhi's infrastructure ahead of Commonwealth games

I think it will be interesting to see how the infrastructure of Delhi is geared up for the Commonwealth games. With our national pride at stake, given the grandeur with which China put up their Olympics, it is an extremely important event for the country and the government seems to have realized this. Here's a small article on Economic Times: http://economictimes.indiatimes.com/news/economy/infrastructure/Rs-35-bn-for-Delhis-infrastructure-ahead-of-Commonwealth-games/articleshow/5153640.cms

We have spoken about political will at many points in the course. A stimulus like the Commonwealth games forces the country to develop infrastructure on a fast-track basis. The SAF Games in Chennai, for instance, triggered rapid infrastructure development. After the games, the residential facilities built for the sportspersons were converted into housing facility for government employees, and the swimming pool, etc. are open to the public for use.

On the one hand, while the government imposes on itself deadlines like Sonia Gandhi's birthday, I think hosting such events of international importance could be a potential area for fast-track world class infrastructure development in urban cities.

Private firms may invest $150bn in infrastructure

Hello Everybody,

Did you notice this news article in today's 'The Hindu -24.10.09'.

Planning Commission adviser says the Government has set a target to spend around $518bn for infrastructure facilities by 2012. Well, we knew it, isn't it - Our Advisor said so! Accordingly, 30% is expected from private sector (aiming at PPP model) which is around $150bn, another 30% from budgetary resources and the rest of 40% from commercialized budgets of NTPC and power grid (Well, is this feasible? Can NTPC and Power grid aide this much amount?). The Adviser, Mr. Gajendra Haldea, planning commission, also states that they expect a quantum leap in the infrastructure development during the 11th FYP from 5% to 9% (Is our present rate only 5%?). they also expect PPP model from developed countries...Because markets in India offer huge opportunities (always quoted statement) and returns on capital would be higher than in a developed country (Ok...facts here). How does all this sound?

A new Indian Public Sector

Following Professor Sitaram's lecture highlighting the importance of heroes and how even public companies can also succeed, here's an interesting story which I came across some time ago.

http://www.indiatogether.org/2009/jul/eco-bridge.htm

The Bihar Rajya Pul Nirman Nigam, which was on the verge of being liquidated, has now turned the corner and built over 330 bridges in three years. The cause has been championed by Mr. Pratyaya Amrit ( :-) ) , an IAS officer of the batch of 1991.

The best part about this story is that it was effected in Bihar. Presently, the company is looking at expanding beyond Bihar and building bridges in other states!

The takeaways from this story are multifold. For instance, Mr Amrit came up with the idea of the “Mobile Inspector” system where all Executive Engineers have a GPRS enabled sim card in their phones. They can go to the site, photograph the bridge, take out their pencil stylus and fill in details like the name of the bridge, its location and status. It is then directly sent to the chairman who sees it on his computer in his office. Everyday, the Chairman monitors the progress. There is thus, a new sense of accountability.

The story is a great read and was shared to me by Vikas. I felt it has a lot of importance for this class. Comments please?

Regards,

Amrit Acharya

Hogenakkal Water Supply Project

Page 13 of today's Hindu has a tender for Hogenakkal Water Supply and Flurosis Mitigation Project. Some interesting observations:

1. It says "Re-Invitation", presumably implying that no one responded the first time around. What could be the reasons? Has anything changed this time around?
   
2. The GoTN has recieved financial assistance from the Japan International Cooperation Agency.
   
3. The contract is for construction and maintenance for a period of five years, and is unit-rate based.
   
4. The pre-qualification documents are available for free, possibly to encourage more small time contractors.

Any comments/observations?

Harsha

Public-private partnership deals no longer confidential

The Central Information Commission has ruled that the information in a PPP deal is not confidential and is open to public scrutiny. Link at http://www.hindustantimes.com/Public-private-partnership-deals-no-longer-confidential/H1-Article1-456228.aspx .The argument being made that the deal involves a public good and therefore the deal should be treated as an agreement between the public (but not the beurocracy) and the private company. But this might have a potential damage implications for the private sector companies with regards to their competency etc. The debate is quite open ended. I think this issue will roll out a series of discussions in the coming time. Will this boil down the ongoing debate whether people really have confidence that the government they elected is actually working for their own good. At it also raises the question that if I am a partner to the agreement (indirectly as government is just a representative of people) Why cant I know the deal I am actually entering into?

PPP's - long term private capital involvement.

We discussed issues related to public private partnerships, their pros and cons in class. It is clear that ultimately it is the taxpayer's money that goes into building or maintaining any kind of public service. PPP's can be seen as a means to involve private capital in infrastructure building for a long time. In traditional contract based projects also, it is private player that builds the infrastructure and hand it to government. It was only short term induction of private capital. In a project where private player retrieves his investment from tariffs, government is not getting that revenue in future but the effective benefit to the govt is that much needed infrastructure is getting built in advance which improves the general well being.
Since it is believed that private operator is better at providing quality, instead of a PPP we can go for other types of contract where private player operates(maintenance of a facility) for a fixed fee. But it only means direct investment by the government all the time. So, a PPP effectively involves private capital for long time. Apart from problems that arise in initial stages of PPP's such as procuring permits, land acquisition, many problems with PPP's arise because they are longterm. some of them are Political uncertainities, Inflation, apparent complete privatization(perception of general public) of basic provisions by the government and foreign exchange risks if global players are involved.
Another difficult or perhaps the most important challenge is to bring institutional change in general public about government has responsibility to provide all amenities absolutely free. With the advent of the PPP, the problem became more pronounced since public is reluctant to pay more tariffs(example : water). Is it reasonable to conclude that many problems faced by PPP projects are because they are longterm?

Cultural Diversity in Project World - Can it be celebrated?

Cultural influences are ofcourse nothing new. Any of us who have traveled to another country, the least to say to another state in our land of diversity, would have encountered some form of cultural differences in life.
In a mobile project world, it is quite a possibility that the project managers would end up working in a variety of cultures or work with people who reflect an array of multi-cultural perspectives. Projects around the world are found to showcase similar kinds of threats and opportunities that are non-technical and quite often identified as cultural.To name a few, some cultures invite very direct speech, while others abstain from it. Some cultures follow a very formal chain-of-command in terms of project communications, while other cultures promote a more horizontal flow of information.
A Project Manager working within a particular cultural environment will necessarily reflect that culture, both explicitly and implicitly. Now, is this a good reason to learn to value and celebrate the cultural diversity in one's project world?

Bandra-Worli Sea Link

Lessons to learn from

The Bandra-Worli Sea Link presents an interesting case-study of infrastructure planning and management issues, in line with our discussion on the Montreal Olympic Stadium. The sea-link was originally conceived of in 1960s, but received a green signal only in 1999, after studies were conducted by the Central Road Research Institute and the Mumbai Metropolitan Region Development Authority (MMRDA). The Maharashtra State Road Development Corporation (MSRDC) was appointed as the nodal agency for the project in 1999. The MSRDC awarded the project to the Hindustan Construction Company (HCC), but only to see a series of failure in meeting deadlines. The initial deadline was December 2004 which was later revised to December 2007 and then to December 2008. Actual work, however, did not commence until January 2005 when the Supreme Court gave the project go-ahead. The consequences of haphazard planning and scheduling, as was evident in the Montreal case, are reflected in this example as well.

The MSRDC changed consultants in 2003 and gave entry to Egypt-based Dar Consultants. The new party brought in tremendous design changes which escalated the costs by four times (Rs 4.4 billion to Rs 16.34 billion). HCC is said to have lost about Rs 4 billion due to these changes. Thus we see the role of designing and its crucial place in the overall implementation of an infrastructure project.

In April 2009, days before the completion of the project, three sets of sub-contractors threatened to pull out due to issues with the consultants. One of them, the Roman Tarmant Ltd., was about to obtain a contract for Polymer Modified Bitumen (PMB) surfacing to provide a water-proof road. However, the company backed out due to unreasonable conditions on warranty period. The wide spectrum of players involved in an infrastructure project and the corresponding human management that the size of such projects calls for is evident in this case.

A part of the rise in costs was due to the interests on borrowings and payment to the Municipal Corporation of Greater Mumbai for a casting yard, an instance that shows how economic factors can equally inflect a project just as any other. Also to be noted is the fact that around 4000 workers and 150 engineers from India as well as China, Egypt, Canada, Switzerland and Britain are said to have participated in the project, which would have demanded micro-level cultural integration, a pointed that was highlighted in the class.

A few local issues like environmental concerns and issues pertaining to the fishermen, also surfaced during construction, which, though parochial, could have impeded the completion of the project. The Bandra-Worli sea-link, however, managed to brush such concerns aside with active political support from the state. To epilogue, this project presents many of the nuances involved in infrastructure planning and shows the amount of meticulousness that the task calls for.

Sources:
Indian Infrastructure, July 2009
"Bandra-Worli Sea Link: A Traveller's Delight", The Economic Times, June 30, 2009
(http://economictimes.indiatimes.com/News/Economy/Infrastructure/Bandra-Worli-sea-link-A-travellers-delight-/articleshow/4718082.cms)
Official Website (http://www.bandraworlisealink.com/)

Planning Infrastructure projects

In continuation to the discussion we had with regard to the planning problems pertaining to the Montreal olympic complex Case study, I would like to make a point regarding the time duration allocated to a project. Usually when we bid for a project, the successful bidder is the one who quotes the lowest. So, its basically the cost (or the expertise of the bidding company in certain cases) that we are looking into and the time constraints are not given emphasis while awarding a project. The contractor is basically bound to accept the time line given to him to execute the project. With so many projects going off track, isnt it high time we gave enough emphasis on time constraints too while bidding? Should we not give due importance to submitting the tentaive schedule for the project too while bidding.. which could probably throw light onto whetehr the contractor has done his Home work well enough..??

Augmenting Supply vs. Increasing the efficiency of use

In class, we spoke about how most power sector reforms were targeted at increasing the supply of power (i.e installing more power plants etc) and how the actual power supplied to users could also be increased by reducing transmission and distribution losses. The same is true of water. One way of solving a water scarcity problem is to treat, recycle and re-use wastewater. This way we reduce our dependency and our impact on the natural environment. The following article by Dr. R.K. Pachauri of TERI is an interesting read, and talks about the same issue.

Delhi Metro - Some Interesting Facts.

I found out an interesting article on Delhi Metro in Live Mint "Off the record" column. The link is at http://www.livemint.com/articles/2009/08/30220005/Delhi-Metro-what-counts-what.html

I sensed a tinge of bias against Delhi Metro in general, and Sreedharan in particular, in the whole article.Nevertheless, it discusses some very interesting points, on lines of what we discussed about the urban metros in our class. I am jotting some points that i felt were interesting.

• Presence of a champion figure in E. Sreedharan.
• Some form of reduction in Vigilance and audit has helped the decision making to become a lot quicker.
• Huge tax exemptions and soft loans provided are a critical factor for the success.
• Land acquisition was done under emergency clause of Land Acquisition act ! (I do not know whether we can acquire land under emergency clause for metros anymore.)
• He also makes a point towards the end about replicability and development of second string of leadership.

It is interesting to note a lot need to be done to create a facilitating environment for such projects. Such things may not have been possible if the project was done PPP way. We will have to see how the other metros handle these issues, where Delhi Metro was benefited by some extra-ordinary privileges.

National Sanitation Policy 2008

In continuation of the discussion in today's class on Urban Infrastructure, I wish to mention the National Sanitation Policy 2008.

The GoI announced the National Urban Sanitation Policy 2008 with the vision that “all Indian cities and towns become totally sanitized, healthy and liveable and ensure and sustain good public health and environmental outcomes for all their citizens with a special focus on hygienic and affordable sanitation facilities for the urban poor and women".

The institutional arrangements encourages the local urban bodies to come up with a City Sanitation Plan involving the multiple stakeholders of the city. The policy also envisages constitution of a City Sanitation Task Force, headed by the Mayor (does one exist?? :P) involving the key stakeholders including representatives from the civil societies. In addition, the policy also announced a National Award Scheme for Sanitation for Indian Cities with a proposed methodology on the rating and categorization of cities on 100 points scale based on their performance.

You can find a nice summary of the policy here.

You can also download the policy (PDF) here.

Harshavardhan R.

PPPs in Infrastructure

The Confederation of Indian Industries, Southern Region (CII-SR) organized a conference called Suminfra on Public-Private-Partnerships (PPPs) in Infrastructure in Chennai last week. Several speakers spoke about very relevant issues that affect PPPs in India, most of which we will also discuss in our course. Dr. A. Ramakrishna, who was the president of L&T and is now an adjunct professor at IIT-M spoke of the need to re-define contractor procurement procedures, Mr. Venkatesh of L&T spoke about bringing in more flexibility into contracting mechanisms, a speaker from CRISIL described the creation of an overall project-rating system to evaluate PPP opportunities and so on. There was also an interesting presentation on PPPs in water treatment and supply by Tata Projects.

We might reflect on this later in the semester, but there seems to be a gradual shift in the ways infrastructure is being viewed, moving from being transaction or deal-focused to a more holistic integration of long-term sustainability goals. This certainly seems to be the right approach to follow. However, it remains to be seen as to how we actually implement such strategies in practice, outside conferences.

Financial Crisis

Hi all,

I have one issue to discuss...I know all the classes are over now! And even Exam too...!

But had one issue for discussion so posting my thoughts on the blog...

Well, As we all know about the financial meltdown across the Globe leaving the finance giants and banking sectors in a HUGE HUGE trouble.

Most of the construction companies and infrastructure developers are indirectly affected from this Financial Meltdown, since they get their finances for the project from these finance and bank sectors....

So now the issue is:

“What can we (Infrastructure Developer/Government) do to come out of this FINANCIAL DEPRESSION?”

Putting in simpler terms what strategies can be thought of, so as to ease the fund flow?

To minimize the effect our Finance Minister has come up with a strategy to lower the Interest Rate and try to boost the present financial condition...[Source: Business Line]

What can be the other mechanisms to avoid/minimize the effect of Financial Crisis?

I know that this problem is not so easy to solve...

One option would be to give a pause to the development/improvement programs for the time being!

Another option would be to take small projects, which involves lesser capital and can be borne by the developer himself.

Another (Strange & Out of Hat) option would be to do every development/improvement project on CREDIT!!!

Can you suggest some of the strategies??? Since the thoughts what I mentioned above are not the right solutions!!!

- Jeetu

PPPs for affordable housing

Very recently, my research has moved in the direction of figuring out whether PPPs can be used to develop affordable housing in Tamil Nadu for the Economically Weaker Sections (EWS) and Low Income Groups (LIG) in society. There has also been a lot of talk recently on building 'nano homes' and the last edition of Infrastructure Today had several articles related to this.

The second master plan for the Chennai Metropolitan area estimates housing demand for the EWS and LIG segments to be 8,00,000 by 2026. Informal estimates seem to suggest that we are currently building at the rate of a mere 2000 houses per year! This seems to be a clear case for PPP where private sector efficiencies might have to be harnessed to deliver 8,00,000 houses by 2026. The catch is that by definition, affordable housing (300 sq ft pirced at Rs 3,00,000, say). is not very profitable and therefore might not be very attractive to the private sector.

So how do we solve this conundrum? I have some thoughts but would like to see suggestions that you guys come up with.

Stanford Blog on Infrastructure

Stanford University's Collaboratory for Research on Global Projects (CRGP) also hosts a blog that contains several infrastructure-related articles from an international perspective. All of you might consider browsing through this at some point.

Only Central & State Government must handle future metro projects...

This is the essence of an article in a news paper (23rd sep) written by E.Sreedharan (managing director of Delhi Metro Rail Corporation Ltd) to Montek Singh Ahluwalia (Deputy Chairman, Planning Commission, Government of India).


Already news came (on 30th Aug) in Economic Times that govt is willing to construct all future metro projects through BOT process. If this is true, private companies are the owners. The central Govt is just there to release funds. So there is a chance that they can extend the railway network thereby their properties near the project may increase to 2 to 3 folds.

Govt tries to charge less fares for the prosperity of the society and the private companies are not interested to take up the project unless they get high package amount. this may some times leads to losses for the Govt.

BOT projects are difficult to extend or repairs as each private company has their own way of constructing.

There is a chance of grabbing the valuable Govt lands for the construction. These all can be saved if govt involves, thereby ticket fares can be decreased so that purpose is served. In one Sentence, Govt have to handle large govt lands to private companies in the future if they nod for BOT projects as the private companies are the owners.

Conclusion: Only central & State Govt are the owners of future metro projects as BOT projects leads to more trouble in the future.

Both Central & State Govt s must involve in the metro projects. Only State Govt ownership also doesn't help much as it lacks the uniformity among the states.

This also helps to encourage the manufactures and producers in India.

BTO

I would like to add on the issue of What Rajesh told in class.
in context with doing a BTO.to go about doing a BTO , Build-Transfer-Operate. Building a infrastructure by the private sector and transferring it to public sector and the operation through the same private sector.
one thing when the Govt.raises the tax during transfer , can hold good, instead of private players raising the tax and getting vast opposition.
Also giving the operations and maintenance to the same private sector will be more efficient, than giving to another private player who might complain about the standards of the infrastructure and quality issues. also such a move would ensure quality standards, or other wise when two players one for building and another for operation might subsidize the quality at the cost of other.

PPPs in the USA

I recently read this article in the New York Times that talks about the perception of PPPs in the USA. The article makes for very interesting reading because almost all the issues mentioned are identical to those currently faced in India. For instance the article talks about opposition to private ownership of roads, reservations about government "selling out" to private companies and so on. Yet, the USA also seems to face the same problems with respect to crumbling infrastructure and lack of financial resources. Developed or developing country, PPP issues seem to be quite similar!

SEZ BY GVK IN TAMIL NADU

This is article from times of india (20/8/08) . IT shows interest of TIDCO in development of SEZ.
Gvk company offered six times of actual value of land and also training and job opportunities for those who sold the land. I think these offers made people to sell land voluntarily. One more interesting aspect is pondicherry govt promised to supply power to the SEZ. If govt provides support in all aspects i think India will be on par with China in few years.