In April 2007, Cairn India won a bid to explore for gas in the Palar Basin in Andhra Pradesh. In October 2010, it declared force majeure, implying its inability to work the project was due to circumstances beyond its control. For more than three years, Cairn never got permission to drill wells due to the fact that 40% of the exploration area it had won in a government bid fell under a restricted area demarcated for the department of space. A similar thing happened to the Mumbai deep-water area it won in August 2010, and declared force majeure on in September 2011. This time, half the block was part of an area reserved for a defence firing range. Ditto for another block, this time in the Krishna-Godavari Basin.
Examples like this abound, of the government giving out projects to private firms that, for years, struggle with getting the necessary permissions from government agencies.
Last month, PTI quoted a road ministry official as saying as many as 16 highway projects worth Rs 15,000 crore were held up due to difficulties in acquiring land.
Delays of up to a year are common to get the forest department to give clearances to remove trees, or to get municipal authorities to shift utilities along the way.
Why not, a group of CII CEOs earlier this month suggested to Pulok Chatterjee and C Rangarajan ? principal secretary to the Prime Minister and the PM’s economic advisory council chairman, respectively ? get the government to procure clearances for all projects before they are bid out? If one branch of the government creates hurdles in getting clearances, surely another branch of the government should clear it, the argument went. Since this is the strategy followed, and very successfully, in the case of the hugely-successful ultra-mega power projects (UMPPs), it is not as if it hasn’t been tried out before.
With both Chatterjee and Rangarajan rooting for the concept, a series of meetings have been held on this in the Prime Minister’s Office already, and sources say the plan will be cleared soon. If executed well, it can be the desperately-needed game-changer ? for the infrastructure sector, given the speed at which the UMPPs are being developed, the change could be akin to the what the 1991 reforms were for the industrial sector.
Under the proposed structure, every project to be bid out ? whether in highways or even oilfields ? will be housed in a special purpose vehicle (SPV) whose job will be to get all clearances, exactly as in the UMPP case where the Power Finance Corporation owned the SPVs. So, in a road project, the National Highways Authority of India’s SPV will get the forest clearances as well as get each municipal body to agree to clear all utilities or encumbrances along the proposed alignment of the highway. Once all this is done, the ready-to-roll project will be bid out, and the winning bidder will take over 100% of the SPV’s shares.
To be sure, this would mean that for ministries like that of roads, where 20 km of highways contracts are being given out every day, the numbers will decline dramatically if they have to be pre-cleared. But on the flip side, once the contracts are given out, the chances of them being completed on time will be much higher.
