Though the controversy between the Planning Commission and the road transport ministry is old, the trigger for Road Transport and Highways Minister Kamal Nath calling the Commission an ‘armchair advisor’ seems to be a document of the Planning Commission.
A model concession agreement of the Planning Commission, a document defining the procedure of awarding and implementing road projects, has said building highways the way they are done now may lead to a subprime crisis and termed these subprime highways.
“We have received a kind of document from the Planning Commission, which, in a weird way, says building roads will lead to a subprime crisis in the country. This might have been the reason behind Nath’s open crticism of the Plan panel,” said a senior National Highways Authority of India (NHAI) official who did not want to be identified.
The official explains that the document says the total project costs (TPC) are very low and banks are lending more than that to road developing companies. “Now it (document) goes on to say that the developer will build poor roads, show it could not make profits and file for bankruptcy. Many such cases will together lead to a sub-prime crisis. This is a naïve way of putting things,” said the official.
Subprime lending (also referred to as near-prime, non-prime, and second-chance lending) means giving loans that are in the riskiest category. Subprime lending encompasses a variety of credit types, including mortgages, auto loans, and credit cards. A subprime crisis in the US led to a global slowdown in 2008, when many banks in that country collapsed. The world is still recovering from it.
Kamal Nath termed the Planning Commission an armchair advisor at a conference organised by the Planning Commission. Nath also questioned the quality of reports produced by the panel and blamed it for delaying the completion of projects, going on to say that the new terminal at the Indira Gandhi International Airport in Delhi could be built because the panel had nothing to do with it.
This was the first time the differences between the road transport ministry and Planning Commission came out in the open and the minister criticised the panel.
The ministry and NHAI have termed the procedure in the model concession agreement as theoretical and not practical. The document, according to NHAI officials, has raised questions over everything and is confusing and contradicting.
“The document is very confusing and contradicting. On the one hand, it says the TPCs of our projects are low and on the other it says it is high. We have sent a detailed reply to the road transport ministry,” said another senior official on condition of anonymity.
“The document, sent by Gajendra Haldea, advisor to Deputy Chairman Montek Singh Ahluwalia, has also raised questions over the recommendations made by the B K Chaturvedi committee,” added the second official.
B K Chaturvedi is a Planning Commission member and a committee under him was formed by the prime minister to find ways to expedite road projects.
