Free infra of govt control

Jul 04 2014, 01:48 IST
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SummaryTruly independent regulators must ensure that tariffs give reasonable return to investors and are fair on consumers

There are many things that have to be set right if the economy is to get on to a path of high long-term sustainable growth. An important one is infrastructure. If infrastructure was ample and of good quality at affordable prices, both the economy and the ordinary citizen would be well off.

The principal infrastructure includes roads, railways, inland transport, ports, airports; electricity, oil and gas, coal, nuclear power, renewable energy and their transmission and distribution; housing, sanitation, safe drinking water; dams, canals, water storage, cold and other storages, agricultural markets, agricultural research; education at all levels, skill development, health services. For the first 15 years or so after independence, the private sector had limited funds. High taxation to achieve 'equality and redistributive justice' meant that the honest businessman could not accumulate large funds. The banks and financial institutions also had limited resources. Foreign borrowing was not a feasible option for the private sector. Only government could raise the large funds needed to build infrastructure. This also supported the mindset of Jawaharlal Nehru, who admired the Soviet economic model of centralised planning, state ownership and control of resources, with the government providing most services. Infrastructure was therefore government owned, constructed, operated and maintained. Even today most infrastructure listed above is under government ownership and control.

Decisions on infrastructure investment and pricing were (and continue to be) taken by politicians and bureaucrats in central or state governments. Local authorities do not decide on what must be built and how it must be priced. In some instances in the last 20 years, statutory 'independent' regulators, almost all retired bureaucrats, take these decisions. In the nation's early years there were few experienced managers, but there were experienced administrators who were given these projects to run. This continues, with most infrastructure projects owned by government and managed by bureaucrats, not career professionals.

What is the experience? In many cases, designs are unsatisfactory, construction is of poor quality, there is collusive cheating on materials, major delays in completion, and poor maintenance. Tariffs are grossly inadequate. The projects have limited funds for operation, maintenance, renovation and expansion. All of them require multiple and time-consuming ministerial clearances. Many times they also require bribery, while commissions are earned by the people associated with the project, on various expenditures. Because of delays in clearances and consequent money locked up, private investment shies away from entering infrastructure projects when they are invited.

The

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