Ministers making demands on public sector undertakings and interfering in organizations functioning efficiently is not a new phenomenon in India. But a minister arguing that a project could succeed only if it were to pass through the state from where he hails, even if in jest, marks a new low. This is what Kamal Nath, minister for commerce and industry, has said about the $90 billion, 1,483km long, Delhi-Mumbai industrial corridor project.
The raison d’etre of elected officials is to prevent egregious omissions on the part of technocrats and others. In India, however, this logic has been inverted. Its ministers often tend to be busybodies who go about wrecking plans—industrial investment decisions have been marred by such interference right from independence. One only has to look back to note how such practices continue: from the 1971 Hindustan Aeronautics Ltd plant in Koraput to the ongoing Bathinda refinery project, investment rationale has been bypassed.
The corridor project in question envisages special economic zones, agri processing zones, skill development centres, ports and airports, industrial areas and power plants. It promises a multiplier effect on speeding economies of the states through which it passes. All this requires careful consideration of viability, costs and finances.
One can reasonably ask: does the minister realize the consequences of changing project parameters drastically? The corridor does not pass through Madhya Pradesh. One effect of such changes is the injection of uncertainty. This would mean further cost overruns. Already, the project cost stands substantially revised from the original estimate.
Yet this is the least of the problems project managers are likely to face. The project is to be financed by central government funds, investment by Japanese firms and through Japan depositary receipts issued by Indian companies. In an uncertain environment, the cost of such borrowing increases. This, in turn, makes calculating future rates of return, a crucial parameter that influences the investment level in the first place, difficult.
Investors want to pour money into projects where there is pre-existing infrastructure or demand for the output of the project is attractive enough. This is one reason why five investment regions covered under the project are the ones which already have industrial activity (such as the Vadodara-Ankleshwar area in Gujarat) or infrastructure/connectivity (for example, the Dadri-Noida-Ghaziabad sector in Uttar Pradesh).
For any politician, more so for ambitious ministers, vote enhancement is a key objective. In India, this is usually done by manipulation of symbols. But for some time now, “development” has also become a useful adjunct in such ventures. Politics is serious business and no wonder Nath wants the corridor to pass through his state.
The problem would be solved if the cause and effect between the project passing through Madhya Pradesh and the increase in number of votes for the minister could be quantified. In that case per vote increase in cost could be easily calculated and financial adjustments made quickly. The change in project parameters could be treated as a political cost instead of a loss. Calculations of this kind are never easy and involve various stakeholders in a process that needs to be transparent. In the political conditions that prevail in India, this is not possible.
The minister knows this, and the incentive behind such ill-thought schemes is the belief that some political gain will come his way. Voters know better and demand more than such projects these days. This hammer and sickle approach of pushing projects towards one region or sector will do no good and will only inflict misery on stakeholders.
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