Kamal Nath needs to revitalise NHAI completely
Given his track record as an energetic minister, Kamal Nath’s innings in the highways ministry are being keenly anticipated. For if there’s one infrastructure ministry that needs urgent attention, it is this one. However, given how the DMK’s TR Baalu brought the NDA’s highly-successful highways programme to a complete halt, Kamal Nath will always be seen as more efficient! From a high of 8,203 km of highways under implementation in March 2007, this fell to 6,350 km in February this year, according to a research report put out by Morgan Stanley. The backlog of projects to be awarded, on the other hand, rose from 9,456 km to 15,731 km over the same period. Of the 10,858 km of national highways four-laned/built till February 2009, contracts for around 7,000 km were actually awarded by the NDA when Maj Gen BC Khanduri was the roads minister. If you look at it in terms of the highways completed, the last five years of the UPA saw a total of 7,658 km completed — Kamal Nath wants to raise this by 3.6 times! So that’s a really huge task he’s set for himself.
Apart from what this implies in terms of getting the National Highways Authority of India (NHAI) to perform (and we’ll get to that in just a moment), this means Kamal Nath needs to find at least 3.6 times more budgetary grants each year. The real amount, of course, could be a lot more thanks to the usual cost overruns associated with NHAI projects.
It’s a good idea to read the report the World Bank put out on NHAI last year after it found that, at the current pace of implementation, it would take another decade to complete the projects which it had begun funding four years ago — just a fifth of the work had been completed on the Lucknow-Muzaffarpur National Highway Project for which the Bank had committed $620mn of funds (the Bank has a total of $2bn tied up with NHAI and so keenly monitors its progress). According to the Bank, the problems arose due to the poor manner in which NHAI functions (see http://www.business-standard.com/341138/ for a summary of the report’s findings). Apart from collusion with the contractors when it came to testing of materials and the quality of the highway, the Bank found that design consultants did a very poor job as a result of which the road specifications had to be changed after the contract was awarded — in one case, 90 per cent of the road’s alignment was changed after work began. In another case, seven underpasses, one rail overbridge and new spans were added to bridges afterwards. Another Bank criticism was that roads are over-engineered and this raises costs — in the Delhi-Gurgaon expressway, the contractor was told that the section at Rao Tula Ram Marg was to be made an elevated one two years into the contract.
One way out, of the delays as well as of the need to find more government funding, is to award more projects on a public private partnership (PPP) basis. The problem with this, however, as the Morgan Stanley report makes evident, is that NHAI doesn’t appear too keen on awarding PPP contracts. About 11 per cent of the 7,300-km NHDP-II projects have remained unawarded since March 2007. Just 590 km of NHDP-III projects have been awarded in the last one year and only 711 km of highways have been completed so far in the 4,815 km portion of NHDP-III that was to be ready by December this year. Around 78 per cent of the 12,109-km NHDP-III remains unawarded till date. Just one per cent of the 6,500 km of national highways that had to be six-laned by 2012, under NHDP-V, has been completed so far — 84 per cent remains to be awarded. Most of these NHDP phases were to be completed via PPP.
So, if he has to fulfil his targets even remotely, Kamal Nath needs to revitalise/revamp NHAI completely. For a start, he could ensure he implements the suggestion of the inter-ministerial committee on restructuring NHAI — top on the list is to ensure the chairman has a three-year tenure. Under Baalu, NHAI had three chairmen in the last three years. Other tasks include getting NHAI to overcome its opposition to PPP and to address other issues like its poor working, colluding with contractors, and so on.
Postscript: As commerce minister, Kamal Nath put in a lot of energy coming up with, and then pushing through, his SEZ policy. A large number of these SEZs are now being denotified, partly because of the slowdown and partly due to problems with land acquisition. We have to hope his changes are more permanent this time around.
In spite of the RBI's rate cut and the Centre's reforms, any recovery will only be half-hearted