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Roadmap To Implement Infra Projects (16 February 2021)

Roadmap To Implement Infra Projects (16 February 2021)

Context:

The Union Budget 2021-222 gave the much-needed fillip to the infrastructure sector.

Background:

With 34.5% more allocation than last year, the Finance Minister has given equal emphasis to all physical infrastructure including roads and highways, railways, urban infrastructure, power, port, shipping and airways, and petroleum and natural gas.

Among the slew of measures that the Finance Minister announced included setting up of a Development Finance Institution, allowing large-scale asset monetisation, and allocating the highest-ever capital expenditure of Rs 1.08 lakh crore for building highways.

Summary of the Debate

What should be the roadmap for effective implementation of all that has been proposed in the budget for the infrastructure sector?

Money Part:

  • There is a need of Sustainable financial management of the infrastructure projects.

  • India is doing very well in many sectors but as far as the key indicators like human development index and per capita income, we have a lot of scope to improve and infrastructure development will definitely help in that direction.

  • We require sustainable finances, so budgetary support is necessary but it has to be augmented with a supplementary resource from the market, so people should also invest.

  • The foreign direct investment should come.

  • Disinvestment is another issue where government have to focus on.

Human resources:Infrastructure 1

  • The other thing requires for sustainability is human resources, we have to have quality manpower to plan the projects well and implement it well and execute it well and then monitor it well so a lot of investment in education and R&D investment has to be enhanced because merely money cannot improve the quality of infrastructure unless we have good quality manpower.

Land:

  • All infrastructure come on land only whether it is a road or whether it is any other project, it has to be traversing on the surface mostly and therefore the land acquisition issues have to be carefully monitored and made as less contentious.

Intellectual issues:

  • The intellectual issues are there like contract management, there are a lot of infrastructure projects are mired in litigation between the executing agencies and the authorities which own the project like whether it is NHAI versus construction agencies and so on so forth.Image result for Union Budget 2021-222 gave the much-needed fillip to the infrastructure sector

  • So, the dispute resolution mechanism has to be resolved so that investors feel more comfortable and existing investors are able to thrive and new investors feel more comfortable to participate.

 

Focus areas for improving the pace and quality of infrastructure development:

  • The focus has to shift on outcome and end results of the efforts and investments being put into the infrastructure sector.

    • For example: In the construction of the new parliament building, there is a reverse clock which is actually working backwards to remind everybody as to how much time is left for them to deliver this project within the committed date.

  • There should be a National Dashboard of infrastructure projects. Use technology to make people aware as to what is the state of each of the projects.

  • In addition to the roads and highways that are being built, there needs to be a focus of decongesting the choke points as connectors between cities and highways.

    • It's not just about setting up a 4-lane highway but how do you reach and within what time do you reach that highway to be able to really effectively get the benefit of that huge infrastructure of these multi-lane highways.

  • The infrastructure development which is going to be mostly confined to tier 1 tier 2 cities is going to see the return of the migrant labour back to the cities. So, government has to work on low-cost housing so that there is no further plight of this migrant labour from temporary accommodation.

  • Infrastructure projects should largely not be the limit of the private sector to build.

What must be done to realize the full potential of national monetization pipeline going ahead?

  • The Build Operate Transfer (BOT) Model is very good, but what has led to its lack of success in many cases is because of lack of a proper legal architecture and implementation architecture.

  • So, even if we want to monetize assets, unless we have a proper number and unless we have proper surrounding development, merely putting assets for monetary value will not work now.

  • Asset monetization has to be given very serious attention.

  • For example: You develop a road, on the road side a huge scope for investment is there and if properly monetized, it can fund for the road and this model has been tried in so many places.

  • The asset monetization pipeline program is deserves a very serious consideration and this is the way forward and government cannot be investing entirely from its own resources on infrastructure project unless they involve the private sector and that will come by participating in the monetization of the asset.

  • Another problem is that if you really build a project and then want to hand over to private sector, then the quality may not come and in the BOT model, we give the task of maintenance for some time along with the asset monetary value to enjoy for some time, in return the investor maintains it for some time and the package is the one which can take it forward.

  • Only thing is the legal and managerial framework has to be strengthened, many of the firms have perished in participating in BOT projects, but many have shown that it is a way forward also.

  • Taking the asset monetization pipeline program forward in a very meaningful and beneficial way.

On the issue of river rejuvenation, the cleaning of rivers, where are we lagging behind and what needs to be done?

  • In addition to the core infrastructure of railways, roads and highways and others, we really need to also focus on cleaning up our rivers that's a major infrastructural push that we have to give.

  • Every single city has a river which is spooning black water and we are investing a lot in some of the main rivers and there is the National Mission for Clean Ganga.

  • All the nalas and the tributaries that are really contributing to the pollution of the main trunk of the river, so we need to go to the source and to be able to do a lot of river rejuvenation programs all over the country.

  • River rejuvenation just like swachh bharat is essentially a movement of the people, there are lots of people lots of in bodies which have to be involved in it and the stakes must be high up there.

  • The people along the river banks have to be invested in the idea that there's a necessity for those things to happen that way.

  • India’s river problem is probably going to be solved almost in tandem with when we realize that our other projects and other things have already got into place.

  • So, it is essentially a huge project which means that we have to first get the individual ones cleared up only then we shall be able to see very major changes here.

  • We need to clean up a lot of our tanks to be able to then provide the water that would be required to feed the urban population and to sustain the urban population.

  • There is the Jal Jeevan mission, the 'Har Ghar Nal Se Jal' programme which are great initiatives already launched by the government but to be able to get that raw material of water, we will need to clean up the source of water and that will be definitely a substantial interrupt infrastructural push.

Way forward to attract more investments in order to boost growth:

  • Bringing in newer technologies: Enhancing FDI, permitting FDI in sectors where our R&D levels are not still at the global level that is one split remedy to encourage.

  • Major collaboration: Industry and academic institutions collaboration in R&D activities that has to be encouraged more it's already there to some extent but it has to be enhanced.

  • Public–Private Partnership: The PPP has to be encouraged, government by itself doing everything may not bring in that entrepreneurial capabilities or enthusiastic entrepreneurship into the segment which is very much required if India has to catch up at the global level in terms of providing the world-class infrastructure.

  • Reviewing Legal framework: To get the FDI in India, legal framework has to be smoothened, if somebody is going to invest huge amount, somebody is coming from abroad to invest here, what kind of comfort level we give and what are the past experiences where people have not been able to thrive the projects ultimately, If the investor does not thrive, then project will not thrive.

  • Dispute resolution mechanism: When disputes come, dispute resolution mechanism has to be given very serious thought and the documents have to be updated from time to time. India do require to have a better contract management system, better dispute resolution management system.

How we can improve dispute resolution mechanisms?

  • The government has to really look at the private sector as a partner not so much as a vendor because there is investment of the private sector also involved and it is equally responsible for the government to ensure the success and outcome of programs.

  • There has to be a huge transformation in the very engagement approach of any project of the government, it is no more of Engineering, procurement, and construction (EPC) or a vendor kind of a relationship, it is equal participation towards transformation of the country from an infrastructure perspective.

  • The government just by signing the contract doesn't outsource all activities and responsibility to the private sector, there is equal fiduciary responsibilities that the government must execute, for example, the permissions about some of the fiduciary functions, the government must stand up and take responsibility.

  • The private sector has enough expertise to be able to execute technically the projects within timelines and budget.

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