Desai of Ernst & Young says, “With losses in the power sector as high as Rs 10,000 crore, we will end up seeing a repeat of the strife that we went through in 2001 unless we take action and start working on distribution reforms.”

The highway sector also presents a sorry picture. Of the total 33,097 km of roads planned, only 10,858 km have been completed as of February 2009, according to a recent study done by Morgan Stanley. About 50 per cent of highway tenders are yet to be awarded. According to monthly data released by the National Highways Authority of India (NHAI), not a single project was awarded between August 2008 and February 2009 (things picked up a bit in February as the financial year drew to a close). While percentage of contracts awarded under cash-and-carry system has been quite high, those that were to be awarded on the basis of public private partnership (PPP) has been painfully slow. The National Highway Development Project (NHDP) Phase III (12,109 km) and NDHP Phase V (6,500 km) are glaring evidence of this with 78 per cent and 84 per cent of the contracts not awarded as of February 2009. And then, the government only got around to asking for bids when the meltdown had already started — which resulted in as many as 38 projects not finding any bidders, and another seven highways getting only single bidders. Cabinet Secretary K.M. Chandrashekhar, who has chaired several meetings to kickstart investments in highways sector, told BW that the government would restructure some of these projects and then again put them out for bids.

The amount of work that needs to be done is staggering. Most of India’s highways are two-lane, with poor service and low speeds. Of the total 66,590 km of national highways, only 13 per cent is four lane, 55 per cent is two lane and 32 per cent is single lane. This despite a spending of around $14 billion a year on development of highways.

NREGA: SHORT-TERM DIVIDENDS

(Pic by Amit Verma) On 22 May 2008, Prime Minister Manmohan Singh, speaking on the occasion of the fourth anniversary of the United Progressive Alliance (UPA) government, said, “I urge all state governments to ensure effective and transparent implementation of the National Rural Employment Guarantee Act (NREGA). This historic programme will make a major contribution to softening the harsh edges of extreme poverty in rural India.” Exactly on the same day a year later he has been mandated to continue as Prime Minister of India and persist with implementation of NREGA, with many hoping that he would increase days of assured employment from 100 days to 250 days. “The success has been good in states that have used information technology tools to track the progress. Information technology needs to be a critical component in disbursement of job cards,” says a senior officer in charge of monitoring the online ICT project report in Ministry of Rural Development. According to National Council for Applied Economic Research (NCAER) and Public Interest Foundation study on NREGA, till the middle of financial year 2008-09, about 64 per cent of the rural households in the country had been provided job cards. The western region is on the top with a coverage of more than 76 per cent followed by eastern region at 71 per cent and southern region at 68 per cent. Northern India is at the bottom with just 39 per cent. bottom with just 39 per cent. The fact that a few state governments did not or could not implement it is a cause for concern that even the Comptroller and Auditor General highlighted in its performance report on NREGA. The UPA government has to rectify this anomaly. “We need a rural employment guarantee scheme that can be implemented by states in a flexible framework and that is rigid only in respect of transparency and accountability to the people whom it is meant to serve,” says Bimal Jalan, chairman of Public Interest Foundation and former governor of the Reserve Bank of India. UPA might have got its strategy right by highlighting the success of NREGA in these elections as its major achievement. However, the challenge now is to sustain it, so that more rural poor can get employment on a sustained basis. The reward for sending UPA back to power could come in the form of increased number of job days in a year. And yet, the NREGA is only a short-term solution for India’s rural masses. What is needed is a comprehensive rural development policy that generates jobs without the government playing the direct role of employer. And that is the biggest challenge.

Since 2007, Montek Singh Ahluwalia, deputy chairman of the Planning Commission, has been saying that India needs about $492 billion to fix its infrastructure, money that cannot be found in government coffers. Planning Commission sources say inviting private investment and making it conducive for them to invest in airports, ports, railways will be key. “Tweaking foreign direct investment (FDI) policies will not attract foreign investment. Investment will flow if the conditions are right,” says a source. He points out that episodes such as Posco and Singur need to be avoided at all costs.

But there is a more fundamental problem that the government needs to deal with. The credibility of the entire PPP model — which India has been increasingly adopting to fund its infrastructure projects in the past few years — is under question. Ever since the government has permitted Delhi International Airport (DIAL) to charge an additional development fee — Rs 200 from domestic passengers and Rs 1,300 from international ones — many are beginning to question the integrity of the bidding process as that was never part of the original bid conditions. Desai, who is also the national director for infrastructure and real estate for Ernst & Young, says, “If bid conditions or what you allow the developer can change mid way through the process, it puts a question mark over the integrity of the entire bidding process.”

The point he and many senior government officials are making is that if one can use one’s influence, which can affect the financial viability of the project, it is unfair to other bidders. Then, everyone can bid unreasonably just to bag the project and later worry about how to make it financially viable.

Food Security And Agricultural Reforms
The global crisis may have dragged down the growth in sectors such as manufacturing and services but surprisingly agriculture growth in India fell by 2.2 per cent in the third quarter of 2008-09 (in the same quarter last year, it rose by 6.9 per cent).

While that may be a one off, there is no denying that in the past, agriculture has been the drag when the rest of the economy does well. In 2007-08, when the Indian economy grew at 9 per cent, agriculture grew at a pathetic 3.7 per cent compared to 9.5 per cent for industry and 10 per cent for the service sector.