Where Are The Roads?

Against this background, the Congress minister for surface transport, Jagdish Tytler's, invitation to the private sector to build toll-playing super-highways was warmly welcomed. But today, more than five years later, not one road has been started. In the meantime, the number of twin-axled vehicles that will hit the roads every year is set to quadruple and cross the 1.2 million mark by 2000 AD.

In fairness to Mr Tytler, the blame is not even partly his. When his ministry began to examine the task of privatising road building, it had almost no data on whose basis any prospective investor could make calculations of costs and returns. Collecting such data therefore became the first task. By 1993, the ministry had workable data on traffic densities for around dozen of the most promising stretches of highways and for a number of bridges and bypasses. But it immediately faced two other problems. Judging from the estimates for some of the projects that had been taken up by the largely non-functional National Highways Authority (NHAI), the costs for each project varied hugely, depending on the terrain, the number of tunnels and bridges needed and the amount of land that would have to be acquired.

 

Thus detailed feasibility studies were needed, but who would fund them? Strapped for cash, the ministry decided to ask the companies that had expressed an interest to undertake them on the understanding that they would get the first option for executing the contract. By early 1995, the ministry had received proposals complete with feasibility studies from 21 of the original 22 contenders. But then it hit a bottleneck: the finance ministry ruled that the contracts could not be awarded without going through the tendering process. But then who would pay for the feasibility report and at what rate?

Several more months passed before this knot too was untangled, but by then Mr Tytler had been moved over to coal. One can only wonder what would have happened had he not been removed, but the probable answer is `not much' for by then the real problems of road building had been fully exposed.

The two seemingly insurmountable problems were cost and the acquisition of land. As for the second, the government promised prospective investors that it would take the responsibility of acquiring the land, but the immediate hurdle was the seemingly prohibitive construction cost. The feasibility studies had shown that the average cost would be Rs 7.5 crore per kilometre, and Rs 1 crore per km for the land. That was more than two years ago. By mid-1996, the estimated cost had escalated to Rs 8.5 and Rs 1.5 crore, i.e. Rs 10 crore per km.

Ministry officials were aware that if their estimates of probable traffic were correct, the charge per km would probably be prohibitive. Therefore several expedients had already been thought of for lowering costs. The most important was that they would be allowed a debt to equity ratio of 4:1, which would reduce interest costs dramatically on the loans taken abroad (upto 40 per cent of the total cost), and that the operators would be allowed to develop service and rest areas along the highways. But the final estimates exceeded their most pessimistic estimates. To break even, the operators would have to charge as much as Rs 3.50 to Rs 4.50 per km. Needless to say, this is where enthusiasm waned rapidly, both amongst the bidders and in the ministry.

The second problem was land. The sheer difficulty of acquiring it had already made a hash of every major World Bank-funded highway project undertaken by the NHAI. To this too, the ministry had no answer except, presumably to rely on an amendment to the law that allowed those expropriated to contest the compensation but not the expropriation itself.

When a task is inescapable, the correct response is to find a way of doing it. Instead the surface transport ministry has turned its back on the problem and gone back to a stratagem that not only makes no financial sense but has resoundingly failed. To begin with, it and the potential builders-operators should have known that actual traffic would almost certainly outstrip the projections by a large margin. If roads were faster more people would travel medium distances by car. More importantly, if it took half the time to go from Delhi to Mumbai or Mumbai to Ahmedabad, the same number of trucks would make twice as many trips in the same time period.

But that apart, it should have been obvious that a measure of subsidy would be needed. The surest way of doing this would have been to link the development of new industrial areas and transport and transhipment centres to the development of the highways. The operators would be given a selected number of areas to develop along the way and would keep all the revenues that would accrue. The state would only provide the power and water connections needed.

Precisely, such a scheme had been put forward in 1989 by the chairman of Reliance Industries, Dhirubhai Ambani, who had offered to build a tunnel to Uran from Mumbai if he was given the right to develop a large part of New Mumbai on the other side. But in those final days of Indian socialism, his proposal had been shot down by other industrialists in league with the all powerful command state.

As for land acquisition and its high cost, both birds could have been killed by making the landowners co-sharers in the projects benefits, by giving them convertible debentures and sharing perhaps half of 1 per cent of the gross revenues with them. Instead, the ministry has decided to leave only six of the 22 projects to the private sector. These too are for a few bridges and bypasses. The major highways have been given back to the NHAI and the budget for 1996-97 has even included a provision for strengthening its resource base. Unless someone sees the futility of burying ones head in the sand, it will be four more years and perhaps 10,000 more deaths before India begins to build what the rest of the world already takes for granted.