Monthly Archives: August 2016

Step up contracts!

The industrial policy statement of July 24, 1991, set the notes on which the elephant learnt to dance. Manmohan Singh´s reform Budget scrapped industrial licensing and the requirement to get clearance from the Monopolies and Restrictive Trade Practices Commission for large companies to expand or start something new. This paved the way for foreign investment and foreign technology licensing. Opportunities opened for the private sector in many areas hitherto reserved for the public sector. India had to pledge 67 tonne of gold to Europe to get $600 million to tide over a dire import payments crisis.

Now, 25 years later, in 2016, India has become the world´s fastest-growing major economy. So while we have lost several years to ´policy paralysis´, global headwinds have once again, put the country in pole position. This is yet another opportunity to regain its pace by breaking shackles and leveraging the demographic dividend to move into superpower status.

As stated in this column earlier, projects commissioned reached a record high of Rs 4.6 lakh crore in FY2016 according to CMIE. This is the highest-ever commissioning of projects in a year and represents a 12 per cent increase over Rs 4 lakh crore in FY2015.The stock of projects on hand is also huge – total outstanding projects are worth Rs 159 lakh crore. Of these, Rs 92 lakh crore worth of projects are estimated to be under implementation. However, as per CMIE, a low addition to the stock of investment projects has contributed to a fall in the total outstanding projects from Rs 171 trillion at the beginning of the quarter to Rs 170 trillion at the end of the quarter of June 2016. This is the largest fall in outstanding investments during a quarter since June 2002. It is also the first fall since June 2014. The government needs to accelerate the conversion of project announcements to project tenders. The numbers of ´tenders issued´ and ´contracts awarded´ need to grow rapidly to create the momentum in the economy.

Union Minister of Roads Nitin Gadkari, who has already built up some momentum with acceleration in the roads sector, is also seeking FDI from the US and other Asian countries to explore business opportunities in India, including Bharatmala projects, projects under the TOT model, tunnel projects and intelligent transport systems (ITS). The National Investment and Infrastructure Fund (NIIF), with a mandate of Rs 40,000 crore, has identified the first eight projects it plans to invest in. These include the Konkan Railways project, a power transmission project in the north region, and a few road projects.

Still, India´s infrastructure spending is sub-par for the economic growth we aspire to. This is evident from the state of our airports, which have exhausted their capacities. The worst-hit airports are those in Mumbai, Delhi, Bengaluru, Hyderabad, Goa, Lucknow and Calicut. The Indian civil aviation market is growing at a rapid pace and now ranks ninth in the world. It is estimated that by 2020, India will be the third largest civil aviation market. To cater to this sector, which is growing at a pace of over 20 per cent, a much larger supporting aviation infrastructure is required than the proposed plan to invest $5 billion can address.

Although the monsoon has done its part to provide adequate rainfall this season, the roads in Mumbai have caved under yet again. It is shameful that six contractors – KR Construction, J Kumar, RPS Infraprojects, RK Madhani, Mahavir Infraprojects and Relcon Infraprojects – have been named in an FIR filed by the state government as perpetrators of a scam. This brings shame to the contracting community as the public paints all contractors with the same brush. Contracting associations must have stringent rules that uphold the dignity of the profession and should debar those that bring disgrace.

If India has to build infrastructure worth $1 trillion, it will spend $200 billion on construction.

Let us earn our keep with some dignity.