To achieve his target of building 20 km of national highways per day, Highways Minister Kamal Nath seems to have it all figured out—he's made remarkable progress in untangling the vexatious issue of land acquisition, he's overhauling the way the National Highways Authority of India (NHAI) works, and he's talking about introducing new technologies to speed up the pace, and improve the quality, of highway development. In an exclusive chat with BT's Puja Mehra, Kamal Nath reveals why he is so upbeat about meeting his target by June 1. Excerpts:
To do 20 km a day from June 1 onwards, you have got to get the momentum going.
I set a target when I joined this ministry on June 1, 2009 that in one year, from 1st of June 2010, we will build national highways at the rate of 20 km a day. National highways are built by the NHAI and by BRO (Border Roads Organisation). I am not adding the district roads we fund... like those under the CRF (Central Road Fund). I am only talking of national highways. I am confident that in June we will do this. On June 1, 2010, I will say: Till now we have reached this figure. And from today onwards this is what we are going to build: So and so stretch and at so and so rate.
What has been the progress so far?
We had gone up to 10 km a day by July but then we had a late monsoon (in August, September). We were heading towards 20 km, but we lost November to the fog. Of course, that will happen every year but I have said 7,000 km a year, which amounts to 20 km a day on an average.
To do 7,000 km, we need to have 20,000 km of work in progress, which translates into Rs 2 lakh crore of work in progress. So my first challenge was to build the capacity to manage Rs 2 lakh crore of work in progress. I recently hired 200 managers in one week. In the last six months we have hired general managers, managers, deputy managers. I am acquiring land under the NHAI Act, not the Land Acquisition Act.
What are the challenges that you have to face and what are the strategies to fix them?
The first thing is that to be able to have work in progress, you must award bids. To award bids, you must get bids. To get bids, you must have a proper set of contracts, concession agreements. If you don't have that you won't get bids... or you get bids that won't perform. So I spent 3-4 months on correcting all this... I will get a bid provided bidders like the investment opportunity.
Bidders will bid provided they get financing. If bidders don't get financing, they can't bid. I have to create an environment of credibility that this is an attractive investment. So I created this atmosphere. Now a contractor tells me that everybody calls saying we want to be an investor with you. They are finding this change.
What about land acquisitions?
We had to correct the process, which was cumbersome. I brought it down to eight months (from 12-24 months earlier). I found that a file was coming to me three times—what for I have no clue. I changed the processes. I said we need structural changes. Earlier everything was being run from Dwarka (headquarters of the NHAI).
I told everybody there that they've got to move. The CGMs will now move to the state— the one for Maharashtra, for instance, is already there, looking after Goa too. I am in the process of appointing Executive Directors for five regions. CGMs are now posted in states. By delegating, we've structurally changed the way we manage this show.
By expediting land acquisitions, you seemed to have removed the biggest hurdle in highway construction. What made the big difference?
Accountability. The project director is responsible for this. I said if you don't do this and this, please tell me, we will find you another job. I have this whole system of reviewing and tracking each project director. When I had the last meeting with project directors, I told one of them you have acquired 40 hectares but you have done nothing. I had that paper and he was shocked out of his mind. I set up a programme into which a fortnightly report is punched...The biggest change is attitudinal. You have to be accountable. Accountability needs to be changed at all levels within the framework. NHAI must learn they are accountable.
The Planning Commission believes that the NHAI engineers push EPC (engineering, procurement & construction) projects—rather than PPP (public-private partnerships)— as the former model lends itself to greater corruption (by inflating traffic estimates).
EPC is the last way to build a road because it's not only clumsy, it leads to all kinds of issues. That's why I said in my programme 60 per cent will be BOT (build, operate, transfer), 25 per cent will be annuity (which will also be a PPP) and 15 per cent will be EPC. So, of 7,000 km, only 1,000 km will be EPC—and that too only where it has to be necessary.
In India we are not short of traffic. Many times traffic is underestimated, not overestimated. We have got a large number of projects which we bid out in the last two months where people are paying us the money—negative viability gap funds—to get the awards...Capital costs are very high. That we are overestimating traffic makes no sense.
Sometimes the Planning Commission is unable to comprehend ground issues. I am saying a very harsh thing but it must be said: The Planning Commission must really do the planning work and leave the understanding of the ground situation to the people on the ground.
The Planning Commission, more specifically Gajendra Haldea (Principal Advisor-Infrastructure in the commission) obstruct your ministry's work, don't they?
I have no issues with the Planning Commission. Haldea is advisor to the Deputy Chairman (of the commission), Montek Singh Ahluwalia. He's not advisor to the Planning Commission. He has his views. I don't think Haldea is a problem for this ministry. He just gets overruled. Ahluwalia is very practical on all this so there is no real issue. Certainly, you can have a view but accountability rests with my ministry. People in Parliament question me and I have to answer them, not the Planning Commission.
In the past, some of the decisions of the Planning Commission were quite erroneous as they cut out some of the structure and facilities of roads. This resulted in an uproar by the MPs and the public. They wanted to know why service lanes have been cut out and safety issues compromised. I can't have a situation where a huge number of MPs are complaining and are in fact opposing some of the projects, saying that they are not properly engineered. So we have to be cautious—we don't over-engineer but we also don't under-engineer.
With concession agreements changing often, investors can complain of a lack of predictability.
We changed the concession agreements designed by Haldea very substantially because those won't fly. This is a continuous process. There is no one-size-fits-all. Because you have roads in Kerala and you have roads in Madhya Pradesh. In MP you don't require all those things that you require in Kerala—like elevated highways, for instance, because some parts (of Kerala) are so densely populated. Elevated highways would be a waste of money in MP.
What about the new condition you have slapped that a company with three or more projects awaiting financial closure can't bid for any more projects?
There were indications that a few players were perhaps under-quoting the market and cornering projects but not delivering the required performance on the ground. We want to encourage them to do their financial closures fast and not to bite off more than they can chew. For us it becomes a stress check because when the banks appraise them they see if they have over-capacity or under-capacity.
Have your roadshows overseas last year resulted in tie-ups with investors and contractors?
The main purpose was investment. It had come to a standstill. I had to create the environment that this is a credible investment. In all the roadshows, I said this is what we are going to do, this is what India is all about, this is what we need and this is the traffic. They invest with the concessionaires so I can't give you any figures.
The concessionaires, who earlier said that they weren't getting any financiers, now say they are getting calls from investors. I told them (financiers) that there is no postconstruction risk in India because of factors like traffic and the political situation. The pension and insurance funds that look to invest their money for 12-15 years accepted that point.
The PM's review of the progress of highway projects and the ministry was scheduled for January and, I hear, you have had it deferred a couple of times. Are you avoiding the review?
The PM reviews the status with me from time to time personally; normally such are done when there are interministerial issues; (in our case) there are really no inter-ministerial issues.
During its highway-building initiative, the NDA government had disallowed roadside shops and elevated structures to prevent water-logging.
The NDA government did only EPC projects, which is only thekedari (contractorship)... The constructions along the highways are already done and the cost of elevating a highway is very high. You have got to use technology to address water-logging. In London it rains all the time, but the road doesn't crack up. They are using the right technology.
There is a technology which is used for 10 years in South Africa, in Bangladesh. He (owner of the technology) comes to India and says please use this technology. We told him fine we will do research on it. I told our fellows it's new for you, but actually it's pretty old. It is tried, tested and an applied technology. What do you want to research?
I am trying to have a tolling technology that is common for the country. This is an issue that has a solid component of IT so I said that instead of some chief engineer doing it, outsource it to a committee chaired by Nandan Nilekani (a co-founder of Infosys and head of the Unique Identification Project).