Infusing Intellectual Capital into Infrastructure

This report is subtitled as Issues in Regulation and Market Structure. It could well have been An Insightful Look at the Sordid State of India’s Infrastructure. Chapter after relentless chapter, it makes a sad reading of the opportunities lost and what could
have been. But to say that it just examines issues of the past alone would be to tell only half the story.

Future Agenda
The report lays down, clearly and succinctly, the agenda for the future and makes a strong case for reforms bereft of populism and platitudes. It suggests, without mincing words, that the ‘vested interests’ of bureaucrats and politicians, and not the usually identified workers and subsidized groups, along with ill-conceived reforms have led to the present moribund state of infrastructure in India. And in that streak of boldness, which is maintained throughout its over 290 pages, lies its intrinsic strength, its immutable power.

It’s another thing that I loved the report for the sheer lyricism and lucidity of the language used. The feel of the language demonstrated by the editor, Sebastian Morris, IIM-A, is a joy in itself. After a very long time, perhaps after Prof. Sumit Sarkar’s Modern India, has an economist shown such felicity with the language and used it so beautifully especially in a subject that’s as arid as the barren landscape it sketches.

Prey, don’t take my word for it, for I feel intensely and passionately about infrastructural issues. It’s not a lost cause entirely. First things first. This report is the result of a truly unique collaborative effort by the 3iNetwork (www.3inetwork.org), consisting of the Infrastructure Development Finance Company (IDFC), the Indian Institute of Management, Ahmedabad, and the Indian Institute of Technology, Kanpur.

No Pussyfooting, Here
Deftly edited by Morris, it articulates the key issues and policy changes that are imperative to increased commercialization and private sector participation in the infrastructure development.

What is remarkable about this report, however, is the honesty and integrity with which it sets to achieve its objective. There is no attempt to placate the government, no desire to be seen on the right side of the establishment, no pussyfooting. Nasser Munjee of IDFC sets the tone in his preface. Says he: “We need to ask ourselves one simple question…is it sustainable, and is this in the interest of the consumer? If the answer is ‘no’ we need to seek alternatives, even if that means eliminating existing structures of governance. Governance is about citizens, for citizens, and has no other purpose.” Bravo! That’s why I feel there is still hope for this much abused country. More power to men like Munjee and Morris!

Infrastructure development has indeed come full circle over the last hundred years or so and the inefficiencies of the so-called welfare state have bred public utilities monsters that now exist with the sole objective of self perpetuation. They feed on a distorted incentive structure and are fired by rent-seeking behaviour. These are some of the punches that the report pulls.

Nine Chapters: Core Issues

The report is neatly divided into nine chapters, each covering a matter of consequence when it comes to infrastructural facets of the Indian economy. The first two are written by Morris and spread over 32 pages. Overview (Chapter1), and Issues in Infrastructure Development Today: The Interlinkages (Chapter2) offer the most incisive and telling commentary that I have come across on the state of Indian Infrastructure. For instance, Morris pooh-poohs the conventional view on subsidies. He says: “the problem is not subsidies per se but their mode of administration…The myth that low prices are in the interest of the poor needs to be recognized as such and exposed. Low prices have created the problem of slow expansion or stagnation of the service, and hence have kept a large number of the poor as ‘outsiders’, that is those who are denied the service since they do not even have access.” Can you argue with that?

Chapter 3, ‘Regulation of Tariffs and Interconnection: Case Studies” outlines three cases of tariff rulings by regulators, two in the telecom sector and one in bulk power. ‘Regulatory Dilemmas in Infrastructure Financing’ in Chapter 4 makes the point that while credit enhancements and tax support for funds flow into infrastructure would be okay, one needs to be careful about dilution of financial regulation or standards. Structural constraints in infrastructure development in India form the theme of the Chapter 5. In an essay, Rakesh Basant studies the Indian telecom sector and highlights the cross-linkages between sector-specific regulators and the competition agencies.

The Right to Information
In a brilliant, short and sweet essay, ‘The Right to Information as a Tool of Empowerment’, Abha Singhal Joshi makes a strong case for throwing open to public scrutiny, processes within organizations that deal with the provisioning of public goods and services, and governance. In a truly democratic set-up, the government must be made accountable to the people for acts of commission or omission. Chapter 6 makes an in-depth study of ‘The Electricity Sector’ and the Chapter 7 takes a long and hard look at ‘The Transport Sector’, both a rich reservoir of information and analysis for the sector professional.

Being a new economy professional, Chapter 8, ‘Review of the Indian Telecom Sector’ by Rekha Jain got my attention. She examines the developments in the institutions, policy, regulation, and network and industry since the process of reform began in the early 1990s. You can see how the policy gradually evolved from monopoly to licensed oligopoly and now competition, and whether it has succeeded in terms of basic services or not. NTP 1994 and NTP 1999 are discussed with economy of words but with tremendous sharpness. In a subsequent essay, ‘Looking Beyond NTP 99’, Ashok Jhunjhunwala makes a well argued case for a paradigm shift into local and small-scale telecom solutions, relevant for a poor country like India.

While the Chapter 9 deals with ‘The Spatial Context’ of Indian infrastructure (urban local bodies,
road design issues, vehicular air pollution, water and wastewater sector, issues and strategies required for rural drinking water supply, bus transport in Delhi), the essay on ‘Dealing with Drought’ by Saumyen Guha is a must read for its clear focus. It suggest that to deal with drought, the storage of water in small reservoirs and ponds with local initiative and involvement of the
people is critical and makes a strong case for the assignment of water rights to the local bodies.

Too Cerebral?
The report is intended to be a standard work of reference regarding infrastructure development in India. I have no doubt that it will emerge as one for the cognoscenti. The trouble is whether babudom has the intellectual wherewithal to understand it implications, leave alone nuances.

It’s too well-done for their taste or calibre. Perhaps they will do well to go through just the first two chapters. You can’t ask them for more, given the state of their intellectual capital. I’d be interested in what you have to say? Happy reading.

(The author is Vice President with India’s first reverse auction portal for travel, Razorfinish.com and writes a popular column in The Economic Times on infrastructure related issues on the Internet. Talk to him at sanjay@razorfinish.com if you feel the same passion for the Infrastructure.)