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Home > Business > Columnists > Guest Column > T N Ninan

Are India's infrastructure woes over?

July 08, 2006

It may seem premature to make the claim, so one will have to hedge the assertion in many ways. But it is probably true that the worst phase of India's infrastructure problem (communications, transport, power) is over. In the case of even the most intractable problem (power), the solutions are more or less in place and the results have begun to show. But before we come to that, let's tick off the other items on the list.

The telecom story is already well-known. No matter how messy the process of getting here has been, we are at a stage where India now has the cheapest phone service in the world. With 3 million new telephone connections being given out every month, the country could move from 100 million to 200 million phones in three years. When the process began, the total was 10 million.

All aspects of long-distance transport have improved. The golden quadrilateral project is behind schedule but has already made a difference, with average speeds on the main highways increasing by 50 per cent-and with viability gap funding in contracts at no more than 7 per cent of project cost.

Domestic air traffic has been growing almost exponentially for the past couple of years, fares have fallen, India has become one of the busiest and most profitable routes for the big European airlines, there is competition as new airlines have taken wing, and new private airports are being built for four metro markets. By 2008-10, the airports in these cities will not be a national embarrassment, and may even be a source of pride.

But the biggest success story in transport is turning out to be the railways, which languished for want of investment for long years but will have a surplus of an astonishing Rs 20,000 crore (Rs 200 billion) this year--three times the figure just two years ago.

Pricing has got sorted out, traffic growth is healthy, the organisation is reclaiming market share from roads and even pipelines, and when the big freight corridor gets built (hopefully with port linkages), and with private container operations having got under way, internal transport efficiency will have knitted domestic markets together like never before. If the railway stations also get re-done with all the conveniences of modern airports, as is planned, rail travel will have been brought into the modern age.

That leaves power, where the story must start with the point that this is no longer a bankrupt sector where it is dangerous to make investments because pricing is crazy, everyone loses money and no one pays. Most people have not realised that one-third of the state electricity boards now make cash profits, and almost all the rest break even.

There has been no default on payments to public sector suppliers (the big beneficiaries being BHEL, NTPC and Coal India) for the past two years, and the accelerated power development programme is helping to upgrade state grids. The privatisation of distribution in Delhi and Orissa has made things much better (Orissa has not had a tariff hike for six years, and Delhi's power theft level will have halved before long), and should encourage more movement down this road.

The general scheme for separating generation, transmission and distribution, with regulators in each state and subsidies being funded through state budgets, has begun to make a difference. To be sure, there is still a nationwide shortage of power and not enough capacity addition is taking place, but the groundwork has been done for those two problems to be addressed. It is not a risky bet to take by saying that 2010 will see a different power situation in the country. In all these areas, more investment is taking place than ever before and money is no longer the constraint.

The systemic reform, like free inter-state movement of goods, is yet to happen, but will hopefully follow. Meanwhile, attention has already shifted to the pressing issues of urban infrastructure. That will leave water and sanitation as the last two hurdles to cross. Those are knottier problems than the rest.

But it should be a huge encouragement if we know that India's seemingly intractable infrastructure problems are in fact eminently "tractable", if we try.

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Number of User Comments: 18

Sub: Optimism

The author seems to be an optimist of the highest order. Most of the infrastructural changes have been assured by the poilticians and if I ...

Posted by Amit

Sub: Infrastructure Problems

Ninan, excellent Article. We are on the right trajectory. However the most important for sustained growth once physical infrastructure in place is social infrastructure like ...

Posted by venkat rajan

Sub: First things first

India is on standing on the fence, with development on one side and recession on the other. The direction and velocity of development depends on ...

Posted by Milind Shauche

Sub: India's Infrastructure

It was interesting to read TN Ninan's update on Indias Infrastructure. Just yest we saw the news about the power shut down in Delhi for ...

Posted by mohamed iqbal

Sub: are you kidding

what crap are you talking about??? woes get over when they are recognized and then addressed. We may be making good progress on a number ...

Posted by Aa



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