Q&A: Raj Kalady, MD, Project Management Institute

'PPP in infra financing requires transparent risk and revenue sharing'

Project Management Institute is the leading global association of professionals in this area, representing half a million practitioners across the world. Raj Kalady, its managing director, talks to Sanjay Jog on the challenges and opportunities in India’s infrastructure sector. Edited excerpts:

What are the factors responsible for the slow pace of infrastructure growth in India?
The infrastructure sector in India has witnessed an unprecedented pace of growth, with exponential demand and increasing technological sophistication. While the trend is expected to continue, time and cost over-runs threaten to limit the potential. Other limiting factors include accessibility/cost of skills/labour, demand for output or sales, compliance costs/regulations, exchange rate volatility and energy (cost & supply). In addition, foreign investors often complain about the slow progress in shoring up infrastructure and have called for less bureaucracy. Projects are still burdened by misconduct and wastage, within an inflationary environment. A correlation is observed as organisations mature towards high-level adoption of best practices. Better performance in project delivery translates to cost savings through operating efficiencies, which contributes to national savings.

 

What projections has PMI made for the investment required in infrastructure in the 12th plan and ahead?
India’s target for investment in infrastructure in the 12th Plan is estimated at an ambitious $1 trillion (Rs 45 lakh crore), doubling the 11th Plan figure. The accompanying increase in projects would result in a burgeoning demand for skilled manpower, to prepare, plan, design, execute and operate the same.

Total infrastructure spending has doubled between 2005 and 2009. It is estimated that the infrastructure sector needs to grow at a compounded annual rate of 15 per cent over the next five years to support the growing requirements of almost every sector of the Indian economy. Throughout our forecast period, infrastructure will be the main driver of the construction industry.

Is the PPP (public-private partnership) model working successfully in infrastructure?
Bureaucratic efficiency and adequacy of returns are the major factors for a PPP model of infrastructure financing to succeed. Success requires facilitating factors such as bureaucratic efficiency, adequacy of returns, efficient market mechanisms and information access, to name a few. The PPP mode of infrastructure financing comes out as the most viable and desirable one, provided a transparent risk and revenue sharing approach is followed. Although there is robust growth in PPP investments in the road sector, investments in other sectors such as power, irrigation and ports are relatively meagre. Infrastructure financing needs cannot be met by the government alone and, hence, the case for private sector participation is strong.

Adequate manpower in the is another issue. How could this be tackled?
Skilled manpower shortages are across the board, acute at middle-higher levels. While skilled manpower shortages are felt across levels and skills, there are some areas where the shortage is more. Given that professional project management is a relatively recent phenomenon in most construction companies, especially small and midsized players, there is a shortage of experienced project managers. India needs at least 500,000 qualified project managers to finish the 591 projects carried out in the country.

Initiatives need to be implemented to develop project management capabilities with domain and sector-specific experience. Focus needs to be driven towards sector-specific training and certification for project management, within the framework of acknowledged and accepted project management policies and guidelines.

PMI India has launched ‘Project Connect’, an initiative to encourage project management education in academia and facilitate students to obtain global credentials. The first train-the-trainers programme was successfully held at BVM Engineering College, Vallabhvidyanagar, Gujarat. Initially, the programme will be executed in select engineering colleges.