The ministry of road transport and highways is said to be a different place with Kamal Nath at the driver’s seat. After his predecessor’s tepid tenure—managing to build only 3-4km of new roads a day—Nath’s weekly declarations that he will construct 20km a day have energized India. But we wonder if this energy will translate into action.
Nath had last year claimed that he would start hitting the 20km a day (or 7,000km a year) mark by March. Earlier this year, the Planning Commission expressed doubts that this ambitious target would be met: In the last seven months, only 2,000km have been allotted to contractors. Then, in an op-ed for The Wall Street Journal last month, Nath noted that he would start hitting 20km by April. On Monday, he revised the target to June.
We don’t know if Nath will meet his new targets. But given the structural factors plaguing most infrastructure projects, 20km a day was always too good to be true. For instance, the power ministry has had to continually reduce its ambitious targets.
Consider the obstacles. Land acquisition, first, is a constant one. Nath may improve how his ministry administratively deals with this issue, but after that, it’s a matter of nationwide law or individual contractors’ conduct. Without solid property rights, can India completely rule out another Singur?
Second, financing still isn’t ideal to cough up the $427 billion that Goldman Sachs estimates roads require in the next decade. Banks say there’s ample liquidity today for companies to take out loans. Still, as companies start focusing on larger projects, they’ll need equity, not just debt. Nath is trying to pool in foreign equity, but it’s unclear if foreign investors will assume the kind of risk Indian ones are used to: Goldman Sachs noted last year they wouldn’t.
As for debt, expanding its available avenues—external borrowings or commercial credit— could affect the financial system. The best avenues still aren’t available: to develop the corporate bond market and then to get pension or insurance funds to buy up these bonds.
Clearly, these are long-term problems. The government will be prolonging them if one minister, intent on meeting his immediate targets, tries to find short-term solutions.
Will India be able to build 20km of roads a day? Tell us at firstname.lastname@example.org