Business, Economics and Jobs

Indian infrastructure? It's politics, stupid.

India's troubles building bridges, ports and highways are notorious. But its infrastructure problems are political, as well as bureaucratic.



In a bid to shore up flagging economic growth, India moved to make it easier for companies to get bureaucratic approval for infrastructure projects -- proposing that departments set up "special purpose vehicles" for "hand-holding project proposals, bringing them to a certain level of maturity and then pushing them into the bidding pipeline.”

The only trouble, according to Forbes India, is that this plan has been tried before -- with only limited success.

Bureaucratic approvals are one of the biggest hurdles for infrastructure projects, or just about anything. But the bottom line always comes down to politics, according to the magazine.

RV Shahi, chairman of Energy Infratech, a power sector consultant. Shahi, a former secretary in the ministry of power and the architect of the UMPP scheme, says that projects also get better valuations when all clearances are bundled before auction.

He says it becomes very difficult for private parties to even get appointments with government officials responsible for granting approvals. But a senior government official can easily expedite the process, he says. As power secretary, Shahi used to a hold a 45-minute meeting at 1 pm every Friday with just UMPPs on the agenda.

The meeting was attended by representatives of the environment ministry, state governments, bankers, etc. Decisions were taken quickly and hurdles sorted out immediately. Since Shahi was second only to the minister of power, he could call up the highest officials in other ministries and state governments to get things moving. That ensured the scheme took off the ground quickly and three projects were auctioned away within a year of it being announced.

In other words, you can set up all the special purpose vehicles you want. But (again, as is pervasive throughout Indian life) nothing happens unless a senior government official takes ownership of the project and cracks the whip.

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