Friday, February 23, 2007

Don’t say ‘what’, tell me ‘how’ 28 January 2007

I was driving down from Jaipur to Ajmer. But I could have been anywhere. The six lane highway was a smooth beauty and the pot-holed India of the PWD was a hazy memory. Then the wondrous colours of Rajasthan appeared and for an instant I thought I had entered a certain paradise, which seemed to unite modernity with tradition, world-class infrastructure with the ineffable loveliness of old India.

What makes the Jaipur-Kishangarh section of the golden quadrilateral special is that it is a true public-private partnership based on transparent legal contracts that might be a model for the world. Such contracts have created a new level of trust and are enabling India to access funds, skills and technologies from the best companies in the world, who will build and operate our roads, ports, bridges, airports, and container trains, and transfer them to the state in 15 to 30 years. Gajendra Haldea, an unusual economist-lawyer of integrity and conviction, drew up these model contracts at the Planning Commission. As a result he is the most hated man in Delhi’s infrastructure ministries. This dharma warrior has demolished opportunities for corruption. Soon we shall have 20,000 km of highways, hundreds of private container trains, and many private ports and airports—all in public private partnership. These quiet steps teach us that reforms are not about the ‘what’ but the ‘how’. They are less about economics and more about law.

Before 1991, we believed that infrastructure was a natural monopoly of the state. If a road had to be built, the PWD would do it. In that era of ‘high bureaucratic modernism’ private contractors were treated like scum to be bilked. So, we got roads with pot holes. The same mentality obtained in ports, telephones, and power plants. In 1991, the government was bankrupt and it turned to the private sector to build power plants, highways, and telecom. But it did not know how to manage the process. Neither did many officers and ministers have honest intentions. We lost a decade in a bungled era of licence fees, crony capitalism and sweetheart deals whose symbol is Enron. Serious infrastructure companies came and ran away.
A new era of genuine public-private partnerships began with the new telecom policy based on ‘revenue sharing’ and the excellent Electricity Act of 2003. These two landmarks showed that we had finally learned the principles of open access, free competition, transparent bidding, and a level field for all players. We also chose some good regulators, who understood that the state ought to be an enabler and an umpire and not a protector of its own monopolies. Haldea’s contracts for highways and freight trains were the next logical step. Whereas the telecom policy has released an amazing revolution, bringing untold benefits to millions, the Electricity Act sadly remains unimplemented. Aside from this one depressing sector, we seem to have found the answer for our physical infrastructure. It is time now to extend public-private partnerships to social infrastructure, and give the poor some reprieve from failed government schools and hospitals—let them choose their provider.

Indian public officials are good at talking but bad at delivering results. But even if they possessed the implementation skills of a Sreedharan at Delhi’s Metro, I would still opt for public private partnerships. The reason is that they focus the state’s attention on governance and the private sector’s on building national wealth. Moreover, it is an idea uniquely suited to our democracy where ordinary citizens can do extraordinary things if the state will let them.

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