The B.K. Chaturvedi panel has submitted the second part of its report on highways to Union road transport and highways minister Kamal Nath. In an interview, Chaturvedi, a member of India’s apex planning body, the Planning Commission, defended his stand against setting up a separate corporation to finance road projects—which was part of the minister’s 100-day agenda—and discussed other issues. Edited excerpts:
Defending stand: Planning Commission member B.K. Chaturvedi. Rajkumar / Mint
Why are you against setting up a separate road finance corporation?
The issue was discussed by us in great detail. It was felt that unlike the power department, where we have the Power Finance Corp., the road sector is one which requires huge resources. We already have IIFCL (India Infrastructure Finance Co. Ltd) for infrastructure funding and that, along with the recommendations of the committee on getting the loans with the sector being considered—secured loans, on which some movement is taking place—the committee felt that it is not a good thing. Otherwise, each sector will start asking for each sectoral corporation. It gets very difficult then to manage the overall NPAs (non-performing assets), the overall sectoral balances across the board in the entire financial segment.
What are your recommendations on improving finance availability?
...One (recommendation) is on the question of take-out financing. We understand that already some movement has taken place by IIFCL on this take-out financing, and that will enable companies to take funds from the financial segment. (The) other recommendation is on considering this as a secured loan.
...In case the loan is defaulted, then government pays 90% of the loan, it is secured in (the) sense of tolls revenues being available. So we felt that it is in a sense secured loan. We understand that the committee under the finance secretary is already working on this and discussing with the Reserve Bank of India on how to take it forward to consider this as a secured loan so that the rates of interest go down...
Many seem to like the exemption of dividend distribution tax for special purpose vehicles (SPVs) that you have asked for. But do you think the finance ministry will be reluctant to implement this?
This report will now go to the group of ministers. They would take a view on it. The ministry of finance will be represented there and the call will be theirs. I understand the group of ministers is chaired by the finance minister and there the ministry of road transport will put forth its point of view.
The Planning Commission will put forth its point of view and mention the rationale of the recommendations. The ministry of finance was part of the report and, therefore, they also felt that it (tax exemption for SPVs) was a good recommendation. Let us hope that it does get implemented.
How crucial is the issue of dispute resolution for road projects?
I do think it is an important issue because around Rs10,000 crore is locked up in dispute(s) between companies. If companies are in dispute with their organizations, I do not think they can work very well.
Neither the company feels very comfortable nor the organization feels very comfortable. But in case this is resolved one way or the other, it will provide them the resources to move forward or enable them to put this as a bad loan in their balance sheet and move forward from there. But one way or the other, it will (have to) get resolved. The focus, therefore, was that we must try and get these issues resolved quickly.
How soon do you expect to hear a final word on your report?
As I mentioned, the report now will go to the group of ministers. It will be piloted by the ministry of road transport. The minister for road transport will put it in front of the group of ministers and they have to take a call there.
Do you feel disappointed that suggestions of expert panels are left pending or only partially implemented due to political or financial compulsions?
To be honest, we are living in a democracy. Every actor has to do his job. As experts we are supposed to do our job and as part of the political system the government takes a call on how much it can implement. We keep on emphasizing in these reports and from the Planning Commission the need for these reforms. Quite often they get implemented, may be with some delay.
But the good point is that you will find (the) Dr Rangarajan Committee, (the) committee under my chairmanship and (the) committee under Dr Kirit Parikh...have given similar recommendations. So that emphasis does really point out that there is a lot of meat to what we are saying what is required to be done...