For a historically capital-starved and infra-deficient nation, we have rightfully been obsessed with asset creation in the public-utility space. Little emphasis has been paid, however, on the maintenance of these assets or the delivery of pre-determined service levels from these assets. Take, for example, our roads and highways. Highway users continue to be a frustrated lot in spite of massive investments in this sector. Waiting-time at toll-plazas, safety aspects, ride quality and haphazard lane-management continue to bedevil even newly constructed roads.
Highway operators must eventually get prepared for regulatory raps as well as individual and “class action” litigation for failing to provide desired levels of service. They will have to wake up to the reality that toll cannot be charged merely for the privilege of being allowed to use a particular stretch of road. The “purchase consideration” inherent in charging a toll has to come bundled with the commitment of a smooth ride at a designated average speed, with full consideration of safety and highway amenities. Failure to ensure this should attract penalties and damages.
In this cauldron of frustrations and rising aspirations, it is interesting to note that the responsibility for operations, maintenance and tolling (OMT) is gradually shifting from the developer or the contractor group to independent and professional OMT service providers. Simultaneously, the focus is also shifting from merely reducing capital expenditure to optimising life-cycle cost, as well as, providing an accountable delivery of services.
My friend and colleague, Vivek Rastogi, who has a deep knowledge and insight on these issues, likes to draw out lessons from Brazil’s experience.
Brazil, with emerging-economy demographics much like India, has faced similar challenges in highway operations. Brazil embarked on its public-private partnership (PPP) highway development programme a decade ago. Its journey in developing national highways on a build-operate-transfer (BOT) basis has been equally successful. The operations and management (O&M) for these highways started the same way as where India is today — a toll revenue leakage as high as 25 per cent, below par patrolling and unsatisfactory maintenance and traffic management.
What is remarkable is that in the last 10 years Brazil has improved the O&M performance to reach close to world standards. There are four main reasons for this success:
In essence, Brazil has created a virtuous circle in which concessionaires have near-100 per cent toll collection and thereby have adequate funds and motivation for O&M. They have strong legal and police support to ensure this is an ongoing process. In case they do not deploy adequate funds or do not perform activities in a timely fashion, the regulator ANTT has the stick ready. The same is the case in other developed countries with large PPP highway development programmes — such as Portugal, Spain and Malaysia.
In contrast, India has a vicious circle – one that reduces the value and impact of the new asset – and this, unfortunately, starts from the design and construction phase.
Sarkari authorities often “under-design” to reduce project costs and sometimes to save “viability-gap” funding. The under-provisioning of service-lanes, under-passes and pedestrian facilities are simply obstinacy to recognise genuine consumer needs. The state also often abdicates its role in removing encroachments and ensuring hassle-free right of way. Many Indian concessionaires have their roots in the construction business. They enter BOT highway projects for the construction revenue and not for operating a long-term asset. As a result, profit maximisation during construction is often in conflict with the desired asset lifecycle longevity. The concessionaire has little legal or police or state support to make all users pay. This is one of the reasons 20-30 per cent leakage in toll collection is not uncommon.
These three aspects – poor design parameters, short-sighted development and collection difficulties – together create a financial pressure on the concessionaire. This is the start of the slippery slope — a story with which we all are very familiar across most Indian roads. The resultant poor O&M of roads leads to more headaches and accidents.
Similar to ANTT of Brazil, the National Highway Authority of India (NHAI) is currently performing the role of setting O&M requirements in the concession agreements and monitoring implementation. The NHAI role in follow-up and corrective action often lags intent, leading to the known “chalta-hai” attitude.
With all these in place, the romance of a long-road journey can surely be brought back. All we need is 21st century attitudes, technologies and systems in place.
The author is Chairman of Feedback Infrastructure. These views are personal. email@example.com