The announcement of a relatively small cabinet and the reorganisation of various ministries by the new government could have interesting implications. Certainly, both Dalal Street and Lutyens' Delhi are feverishly computing possible synergies between the portfolios that have been clubbed together and handed to the same person.
For example, Nitin Gadkari holds a sort of joint transport portfolio with roads & highways along with ports & shipping. Piyush Goyal is a minister of state with independent charge of power, coal and new & renewable energy. And, of course, Arun Jaitley holds the twinned portfolios of finance and commerce (as well as defence, which doesn't have synergies with the other two).
There could be obvious synergies in some of these cases. Road connectivity to ports is a big deal but it might have made sense to give Gadkari either railways or civil aviation or perhaps both in order to ensure all the transport channels were tackled by one man. The clubbing of power, coal and NRE is an excellent idea in theory, since these are all parts of the same value chain. In this case too, petroleum and gas could have been made a member of the “club”.
These are all critical aspects of infrastructure. Port-road connectivity is unsatisfactory in many cases. Multiple highway projects are held up for various reasons such as land acquisition woes and tardy environmental clearances. Many developers are also cash-strapped because they made over-optimistic bids on road projects. If the transport sector can be kick-started, massive amounts of blocked cash would be deployed effectively and, of course, transport logistics would improve as projects are completed.
Power sector entities have needed multiple massive bailouts for several reasons. Several of the states refuse to charge reasonable tariffs and their state-run distribution companies are perennially cash-strapped even after subsidies are released.
In theory, generation capacity has grown quickly. At the same time, coal shortages have impacted thermal plant load factors badly and natural gas shortages along with very expensive LNG prices have hit gas-based generation. A lot of capacity is under-utilised or simply not viable at the given LNG prices. Plus, there are high levels of power theft and transmission & distribution losses.
Coal and gas prices are obviously key inputs when setting tariffs and, hence, NRE tariffs are also benchmarked to coal. The sector has its share of litigation. Since these are all part of the same value chain, it makes sense if there is one minister in charge of all the segments. Of course, this presupposes a fair amount of competence on the part of the minister.
This government has just entered its honeymoon period. The next major event on the schedule will be the Budget. Narendra Modi has essentially been elected because a large number of people hope that he will be able to turn the economy around.
It is inconceivable that the economy could sustain a much higher growth rate without a turnaround in the infrastructure sectors. By clubbing several of these crucial sectors in sensible fashion, the government may have created some of the pre-conditions for acceleration.
For example, Nitin Gadkari holds a sort of joint transport portfolio with roads & highways along with ports & shipping. Piyush Goyal is a minister of state with independent charge of power, coal and new & renewable energy. And, of course, Arun Jaitley holds the twinned portfolios of finance and commerce (as well as defence, which doesn't have synergies with the other two).
There could be obvious synergies in some of these cases. Road connectivity to ports is a big deal but it might have made sense to give Gadkari either railways or civil aviation or perhaps both in order to ensure all the transport channels were tackled by one man. The clubbing of power, coal and NRE is an excellent idea in theory, since these are all parts of the same value chain. In this case too, petroleum and gas could have been made a member of the “club”.
These are all critical aspects of infrastructure. Port-road connectivity is unsatisfactory in many cases. Multiple highway projects are held up for various reasons such as land acquisition woes and tardy environmental clearances. Many developers are also cash-strapped because they made over-optimistic bids on road projects. If the transport sector can be kick-started, massive amounts of blocked cash would be deployed effectively and, of course, transport logistics would improve as projects are completed.
Power sector entities have needed multiple massive bailouts for several reasons. Several of the states refuse to charge reasonable tariffs and their state-run distribution companies are perennially cash-strapped even after subsidies are released.
In theory, generation capacity has grown quickly. At the same time, coal shortages have impacted thermal plant load factors badly and natural gas shortages along with very expensive LNG prices have hit gas-based generation. A lot of capacity is under-utilised or simply not viable at the given LNG prices. Plus, there are high levels of power theft and transmission & distribution losses.
Coal and gas prices are obviously key inputs when setting tariffs and, hence, NRE tariffs are also benchmarked to coal. The sector has its share of litigation. Since these are all part of the same value chain, it makes sense if there is one minister in charge of all the segments. Of course, this presupposes a fair amount of competence on the part of the minister.
This government has just entered its honeymoon period. The next major event on the schedule will be the Budget. Narendra Modi has essentially been elected because a large number of people hope that he will be able to turn the economy around.
It is inconceivable that the economy could sustain a much higher growth rate without a turnaround in the infrastructure sectors. By clubbing several of these crucial sectors in sensible fashion, the government may have created some of the pre-conditions for acceleration.
The author is an equity and technical analyst