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How to transform the highways

In India, we have a unique and anomalous situation where there is neither lack of resources nor lack of demand and yet we create hugely suboptimal outcomes in roads construction.

Pradeep Puri | Print Edition: July 12, 2009

Pradeep Puri
Pradeep Puri

Let’s begin with a simple fact. Take the case of conversion of the National Highways (NHs) from two lanes to four lanes. Against a targeted completion of 3,165 km during 2009-10, the actual achievement on the ground is 330 km. On an annualised basis, this means that against 8.6 km per day, the achievement is only 0.5 km per day. Indeed, there is overwhelming evidence of a systemic malaise.

Let’s begin with a simple fact. Take the case of conversion of the National Highways (NHs) from two lanes to four lanes. Against a targeted completion of 3,165 km during 2009-10, the actual achievement on the ground is 330 km. On an annualised basis, this means that against 8.6 km per day, the achievement is only 0.5 km per day. Indeed, there is overwhelming evidence of a systemic malaise.

Currently, we have a unique and anomalous situation where there is neither lack of resources nor lack of demand and yet we create hugely suboptimal outcomes. For example, the annual accrual on account of a Rs 2 cess on every litre of petrol and diesel is Rs 11,000 crore and increasing this to Rs 3 per litre would yield Rs 18,000 crore per annum. This can provide a powerful platform to augment and substantially improve road capacity in India, provided certain simple reforms are initiated and procedural bottlenecks are cleared.

At present, all NHAI projects above Rs 500 crore, and this implies the vast majority, require Cabinet approval. This is preceded by a timeconsuming appraisal process that involves scrutiny by the Public Private Partnership Appraisal Committee headed by the Finance Secretary. The short point is that there are multiple layers of bureaucratese. It is the old mandarin obsession with process rather than outcome. The appraisal/approval process can easily be streamlined and centralised in the Ministry of Roads or even fully delegated to NHAI, which is a statutory body.

The extant policy dispensation has a clear preference for the Build Own Operate Transfer (BOOT) and the Annuity model. It merits a relook. In the event a project does not succeed on a BOOT basis, six months are lost and the project is then sought to be repackaged on an Annuity basis. In the current scenario, a cogent case exists for the old fashioned Engineering, Procurement and Construction (EPC) model without compromising the Public Private Partnership (PPP) orientation. What is required is a shift from over reliance or exclusivity accorded to the PPP format. The PPP should be pursued for selective segments with healthy traffic. The bulk of the one-lane and two-lane highway networks are not amenable to a BOOT framework given low traffic levels, etc. These should be the target for an intensive upgradation programme under the EPC route. The additional resources can easily be mobilised by a Re 1 hike in the petrol and diesel cess to generate an incremental Rs 7,000 crore per annum.

Given a gloomy economic prognosis, boosting investment in infrastructure is not just good Keynesian economics, but can provide a long term and sustainable basis for national development.

Pradeep Puri is President & CEO, Noida Toll Bridge Company.

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