, 50, executive director, PricewaterhouseCoopers (PwC), has been consulting in the infrastructure sector for over two decades. An engineer from IIT, Delhi, and a management graduate from IIM, Bangalore, he started his career as a deputy advisor for infrastructure projects to the Karnataka government.
Subsequently, he worked in management consulting firms like A F Ferguson and later KPMG, where he spent about 10 years. He joined PwC last year and belongs to the firm's Government Reforms and Infrastructure Division (Grid). Pandurangi specialises in transport, water and urban reforms.
In an interview with Business Standard, he explains why the core sector has not been able to attract funds despite falling interest rates and abundance of liquidity. Excerpts:
Has the infrastructure sector picked up during the last five years? Has a 22-party coalition led by the BJP been effective in pushing for investments in the core sector?
If you compare the last five years with any other five-year span, we have achieved quite a lot. India has depended on a consensus-based approach during the last five years partly because of a coalition government at the Centre. But this approach is far more stable and workable than bulldozing the way with big plans and bigger investment.
In fact, from the reforms perspective, it will be good if a coalition government continues. Yes, things move slowly but surely.
For instance, we know that the Electricity Act is here to stay. Well, it took a long time but the Act will not be reversed by any political party at the Centre.
In policy areas, we have more or less cleared the maze. It is implementation where we have to improve upon our existing pace. Why, for example, should the Delhi-Mumbai airport privatisation plan take such a long time to fructify? The Cabinet had cleared the privatisation plan, but implementation is taking a long time.
What is the key to quicker implementation of core projects then?
The government does not talk enough with the end-user, customers and the investors before kicking off a project. Higher level of consultation is required. And once a project is implemented, the country or the authorities seem to be neglecting the operation and maintenance (O&M).
In the past five years, we have achieved a fair deal of investor friendliness, but there is much to be desired where customer friendliness is concerned.
India seems to have done well in developing its national highways. The rapid pace, however, seems to be slowing now.
Here, we are not focussing on operation and maintenance. If you look at good international examples, there are strong linkages of financial payments or incentives to performance. We have always been construction oriented.
But constructing roads is not just the only thing. You have to think through the life-cycle of the project. For this, incentives to O&M operators should be linked to parameters like availability of roads, number of accidents, amenities along the highways and upkeep of roads.
For instance, O&M operators should be incentivised to undertake maintenance work at off-peak hours or otherwise be penalised for non-availability.
Do you mean to say that we should now focus on maintaining the vast network of roads built at a frenetic pace in the past five years and go slow on constructing new roads?
It's not an either-or situation. Roads are prime drivers of economic development and its multiplier affect has been well proved. We need a massive network of roads.
At the same time, we cannot overlook O&M. If you continue the two, it's a hit formula. But here you have to experiment. Someone who is good at building roads may not necessarily be good at maintaining it, dealing with customers or providing quality services. The culture and thinking required is different for both jobs.
So far, it has only been the Public Works Department of the highway department that has constructed and serviced roads. We need to change the strategy.
The Delhi Metro Rail Corporation may be an excellent executor of the project, but it's possible, that its skills in customer service are equally good.
But do you think Indians will always find an alternative to toll roads?
On the contrary, I think what we lack today is the willingness to charge and not the willingness to pay toll by the people. Yes, to a certain extent, we are not used to paying tolls, but then, we are also not used to plying on high-quality roads either.
The government, too, is maintaining the tolls at fairly low prices. And having a national toll rate is just not feasible. Today, we are working on standard rates, but that has to change. The government might not raise the toll now, but wait for a while.
Moreover, on many of the new roads being built, there are no alternatives. So people have to pay the toll.
Why has there not been much investment in the infrastructure sector despite the dire need? Is it true that are not enough bankable or viable projects?
I do not believe that there are not enough viable projects. The problem lies in structuring the projects. If you look at all infrastructure projects, they are of three kinds: viable from the private sector point of view, viable through government investment and those which fall in between.
The private sector will obviously eye the high traffic corridors and attractive port terminals in the roads and ports sectors. The government assumes that private funds can come even for unviable projects, which is quite misplaced.
One fantastic feature in India is that we do not seem to believe that things can be done in a transparent and structured fashion. In the UK, for example, intense consultations are followed by testing the feasibility and refining the proposal.
Here, on the other hand, every state has its own model. When we try to do anything in a structured manner, there is too much opposition. The government then sets up a task force, which proposes a particular model without applying much thought to it, and leaving unexplored all the other ways in which the project can be accomplished.
So big-ticket projects will remain on paper, is that what you suggest?
For instance, the airport kind of transaction in India needs strong political support. The group of ministers that has been formed now should have been constituted four years ago.
It's clear that if you want good management expertise in this sector, there are just half-a-dozen global players. What is required of the government is to talk to them across the table and ask them what is required to attract their attention and investment. Be frank about it from stage one of consultation.
Anyway, it is certain that the entire process of selection will be through global competitive bidding. So it is important that consultations with the investors be more intense. There cannot be any opposition on the implementation issues.
