New Delhi: India needs to make a quantum leap in building roads, transport minister Kamal Nath said. Just about a month in office, Nath has already met several stakeholders, highway officials, developers and consultants in trying to work out a plan to improve the country’s rutted highway network. Nath spoke about the challenges he faces, his 20km a day highway construction target and how he intends to finance it. Edited excerpts:
Monetary issues: Nath says finances are not a problem because India remains a good investment destination both for domestic and international investors. What the country needs is more bankable projects. Harikrishna Katragadda / Mint
How do you see the highway sector now?
In India, the challenge is infrastructure. And in the infrastructure sector, roads have highest priority, the greatest need and the most usage. Road building activity cuts across sectors: it serves industry, it serves agriculture, it serves trade and it serves the people. The road building sector also is all-inclusive because it may start from Delhi and wind up in Orissa. So you are cutting across some of the most backward districts. So road building activity is an all inclusive developmental process, by its very nature.
National highways are 2% of the roads in India but carry 40% of the total traffic. And it’s the second largest in the world. So the challenge is enormous because of the gap between need and what is there. Just by an incrementality every year, it’s not going to happen. We’ve got to have a quantum jump.
That’s why I set a target of 20km a day, which means 10 times of what we are doing if we are to catch up from the past. Today, we have India of the 21st century and roads of the 20th century. This is one area which requires a lot of catching up to do.
From an economy point of view, the most natural economic stimulus is roads. It creates jobs, it creates demand, it creates efficiencies and it reduces costs of transportation if you’ve got an efficient network.
Is the 20km a day target achievable?
We got to create our own structural strengths, management strengths. We got to look at land. Land is the biggest impediment. Everything which is being held up is because of land. So, without strengthening the land acquisition process, you can’t go from two to three also, you know. That’s very clear.
In a slowdown, when not enough private sector players are bidding, do you think there is a case for the government stepping in to help out?
Well, I don’t see finance as a problem. But there is a case for stepping in into anything and everything which does not work. So, if you invite bidders and nobody bids, there is nothing wrong with the bidders, there is something wrong with your document. It is very clear, what is wrong. And we need to correct that. Certain roads in India are tollable and certain roads are not tollable.
So your focus is on building the roads, as opposed to worrying about which way they get built.
See, once you decide that you want to build roads, then you’re deciding to build roads, whichever way and whatever the traffic (they) can bear. Inputs are necessary from everywhere. But in the end, we got to see what works and what is practical. See, this is the art of the desirable and where the art of the desirable doesn’t work, you got to have the art of the feasible.
Do you think the annuity model will help get bids for roads which are not tollable?
We’ve got to have three distinct models in the country. We must have BOT (build-operate-transfer) toll, that should be the first preference, because that is the best one. Number two, we should look at annuity, with separate toll. We should create tolling companies with tolling skills, you know, so have separate tolling bids, just for tolls. Have annuity-cum-toll, have annuity without toll, and have the standard EPC (engineering procurement and construction contracts).
How do you propose to go about it? Is there a road map?
Well, it’s the state governments who have got to come on board. The state governments must feel that they are the stakeholders in this, because it is passing through their states. If you don’t want it, tell them, if you don’t want it, forget it.
There was some talk of restructuring the National Highways Authority of India.
Management restructuring in the form of making it more efficient. That you know, you should have one member in charge of various states. (We’ve got) one member looking at everything. Now if you make a member in NHAI in charge of one thing and he is looking at all the states for that one activity, so he has project directors of one project... he must have his team, so he’s accountable.
That means hiring more people?
In any case we have to hire. There are so many posts which have not been filled. See, we need to create these strengths by at least filling up posts that are lying vacant. There are hundreds of posts lying vacant. We’re doing that (filling up vacant posts). That’s my target. That in July-August, we must do all the hiring (for) posts which are lying vacant.
On the financing side, what do you think the situation is?
I don’t believe finances are a problem. Because India remains a good investment destination both (for) domestic and international (investors). We got to have more bankable projects. Simple. And money will come in. India remains a good parking lot for investment. Money is not the problem.
Companies talk about equity issues they are having. They’ve made some representations to you...
When they want to unlock the equity after the project is complete, they can’t unlock 33% or something. The point is this, that if the government is to take it over—you haven’t built the road properly—so there is a cutout clause that the government can terminate his concession. So they are a bit concerned about that.
There’s been lots of representations from the construction companies (that) I found to be very valid. You see the best thing is we invite somebody to do it for us for free, I don’t think that is going to happen.
So we have to live with the fact that construction companies need to make a profit. We need 100 construction companies in the country. And there are 25-26 who are operating. There’s got to be capacity building in our construction sector.
There is a large amount of money tied up due to arbitration or variation cases.
Yeah, that is also a thing …there is a dispute settlement, after dispute settlement there is arbitration, after arbitration it goes to the courts. And, this has to be resolved. Equitably resolved. You cannot have a system where everything is in court. Every contractor goes to court. That’s a funny record to have.
I am told there are arbitration claims worth Rs5,000 crore.
There is a large number in claims. More than Rs5,000 crore.
What is the number?
You want me to shock you? Rs10,000 crore.
How do you plan to populate the road finance fund that you talked about?
We are looking at it. It’s got to be incremental. I am not looking at creating another institution which does no good. I am looking for, what is the right way, what will the road finance corporation do? How will they raise money? I am trying to understand this. So, I have asked certain sections to give me their views on this. So that if we have it and raise more money, will it be incremental? What can you do that IIFCL (India Infrastructure Finance Corp. Ltd) cannot do? They must be able to do more. Else, why have it?