Imagining India - Transportation Sector

Currently I am reading Nandan Nilekani's Imagining India - Ideas for the new century. In the book the author takes the reader through various events in Indian history which has led to globally competitive Indian economy. We are not yet there but are on the way. The nice thing about the book is that the author has put together many known and unknown tit-bits in a structured manner.

I referred the book for an academic presentation on 'Transportation Sector in India'. Other than transportation Nandan discusses about various unique characteristics of India. How governments plan to introduce Hindi as an official language was resisted by some southern states. And we continued with usage of English for official purposes. It was a blessing in disguise for the nation in general.

Following some solid excerpts from the book regarding history of Transportation Sector and Infrastructure sector in general.

• India now presents us with a bewildering landscape – of vibrant, private enterprise choking up as it meets crumbling public infrastructure.


• Yashwant Sinha, the finance minister under NDA government, has remarked that all centuries coexist in India.


• For British India, infrastructure meant building roads and rail that focused on colonial requirements, rather than responses to popular demand.


• After 1857 revolt, security became British India’s core obsession. Triggered massive expansion of rail infrastructure. Rail connectivity grew from zero trains in 1850 to a network spanning close to 10,500 kilometer by 1875.
  


• View of roads and railways as an investment towards safety – to move people and goods in and out quickly, and avoid being concerned by enemies – has plenty of precedent.The Romans built Britain’s major road systems when they had occupied the restive island, and many of these still exist. Another parallel was the Eisenhower-era expansion of roads in the United States during the Cold war, to ensure the rapid rollout of the army in case of an attack at home.


• Indians road Congress, 1930. development of rural road. First road plan released in 1943. Ambitious agenda for roads was meant to be carried our over 2 years. Enthusiastic plans, soon gathered dust.


• Between 1950 and 1970 – while passengers and goods traffic increased more than thirty fold, road length went up only five times.


• Rail network increased – 0.5 percent in 1950s, falling to a barely detectable growth of 0.2 percent in 1960s, 70s.


• First major railway project since British Left India, the 750-kilometre Konkan railway on India western coast, came up only in 90s.


• India’s infrastructure vision was top down and govt got carried away with trying to prove to the world what India was capable of. The urgency to turn a desperately poor country into a gleaming industrial power had promted the state to emphasize higher education over primary power plants, steel factories and massive dams over rural roads, and building new cities over reforming older urban pestholes.


• Short-horizon Indian governments have favored short horizon initiatives, expanding subsidy policies and freebies that have an immediate, big bang in PR, even if the real effect in a whimper. For most governments, investment were anyway a lose-lose option. With govt so unstable, it was likely that the next government would take credit for what you did.


• From 1980s India has remained in ‘perpetual election mode, as every one or more major states face the voters’.


• Indira Gandhi – Ramped up subsidies – food, fuel, electricity which elbowed out investments in more universal public goods such a hospitals, roads, railways.


• Subsidies – always tempting – guarantee instant pay-offs for government.


• Incredibly low user charges for road transport and railways – more the state built more it lost.


• Vinayak Chaterjee – heads consultancy Feedback Ventures Ltd: ‘When you talk about building highways, canals and rails in a country like India, you come up against a big constraint – land’.


• N. Sheshagiri describes politics of infrastructure in India – ‘ ten quarreling men holding each other’s bit of hair, and no one is willing to either pull or let go’.


• After 1991 reforms: There was no clean break ideology when it came to India’s infrastructure sector. Infrastructure actually touched a new low in the post reform period. The focus during these years was on rapidly expanding the role of private enterprise, including an infrastructure – it was a thirst long denied and it had to be slaked. In 1992-96 the government drastically cut back its own investments, leaving the glass half empty in the hope that private funds would pour in.


• Infrastructure investment has been a roller coaster of policy in most countries, as when British nationalized its utilties in 1940s, but later reversed it and introduced private but regulated systems in the 1970s and 1980s.


• Markets do not work well in infrastructure, and this springs from the nature of public goods – which are ‘expensive, durable and immobile’. This makes private infrastructure vulnerable- after all a company cannot recall a road if it proves to be a loss. And because of this, governments may be tempted to break promises with companies by reneging on the terms of public-private partnership or forcing them to lower tariffs.


• Infrastructure boost: NDA, Vajpayee, had a penchant for announcing infrastructure projects with poetic flourishes at Independence Day events. 'Vajpayee made infrastructure politically fashionable, something that it had never been before'. says Vinayak.


• Another key innovation of the NDA government was the highway cess consumers paid on all fuel to fund the national highways. This created a seperate revenue stream for NHAI to build roads. UPA government used a similar strategy when it levied a cess on air travel to support airport development.


• Both the NDA amd UPA governments have also attempted to address the delicate issue of land for infrastructure with bills to amend the 100-year-old land acqusition act to ease up land purchases.


• Praful patel: air reforms - permission to buy airplanes for private aircrafts. 50 airports to 80 airports.


• Sudhir Kumar, secretary to the railways minister, notes that the sector which was written of as 'a debt trap in the terminal stages' in 2001, had nearly doubled its operating margin by 2007 and had profits of Rs 250 billion in 2007-08.


• Towards better infrastructure in a demand-driven, ‘grow-first, build later’ model, in direct contrast to China’s slickly top-down, supply driven approach.