Much has already been written about whether the Mumbai-Ahmedabad bullet train is a waste of resources or a brilliant investment. Given that high-speed rail generally can turn a modest operational profit, where you stand on this usually comes down to whether you think the Japanese offer of ultra-low-cost finance makes the high start-up cost worth it. This depends on things such as whether India bears all the currency risk on the Japanese loan - in which case capital doesn't cost 0.5 per cent, it's closer to six or seven per cent - and whether the low cost of finance is being made back by the Japanese inflating other costs. Certainly, the fact that the overall cost has gone up from Rs 64,000 crore to Rs 98,000 crore in the last Japanese estimate is suggestive.
But there's a larger question here. If the capital is cheap enough that the project has a positive net present value, then the government should always say yes, shouldn't it? The answer is: No. Even if there are projects for which financing is available and which make financial sense, there is a crucial un-costed input: Administrative expertise and attention.
Even a cursory examination of the Indian state reveals that it is not, in fact, the shortage of money that causes most interventions to fail. It is the shortage of managerial skill or of attention. This means that even if projects like the bullet train make apparent financial sense on paper, there is still a decision to be taken: Will they suck up scarce resources of administrative skill that could better be used elsewhere?
The Indian state and its policymakers have grown accustomed to working around its various incapacities. In the social sector, there are "missions", where a particular target is chased down; in the infrastructure sectors, there are "special purpose vehicles" (SPVs), pseudo-corporations put together with government resources and a single project. They're so ubiquitous now it's worth remembering what an SPV pioneer, E Sreedharan, said about why the Konkan Railway he steered was an SPV: "Generally, the Planning Commission allocates about Rs 250-300 crore for new line projects. In the railway kitty, there are already 25-30 projects sanctioned....each line will hardly get Rs 4-5 crore as allocation." In other words, the Konkan Railway SPV was formed partly to jump the queue for cash. The other reason, of course, was so that Mr Sreedharan could put into practice some of his ideas - such as subordinating finance to engineering. "We took some very enterprising and very smart finance officers from the Railways. They fine-tuned the system so well, there was no difficulty for any executive to function properly."
Two things are worth noting from this. First: SPVs, while serving as locations for healthy policy experimentation, essentially serve as magnets for the best public-sector officers. Second: the lessons from such SPVs are hardly ever internalised by the parent organisations or cadres. As demonstrations, they're close to useless. If the Delhi Metro was built speedily and regular railway lines aren't, it's because they functioned under incomparable circumstances.
Sadly, the current focus on SPVs doesn't mean that regular projects gain SPV-like characteristics over time; it just means that everything we really want to set up at a particular time becomes an SPV or a mission or a scheme, and jumps to the head of a crowded queue, sometimes temporarily.
Something you hear regularly is: If we could do so well with the polio mission, why can't we fix the rest of primary healthcare? Or: If Uttar Pradesh can create an entire tent city for the Kumbh Mela, why are its regular cities such cesspools? The answer lies, of course, in India's preference for missions and SPVs at the cost of raising administrative capacity overall. The polio mission succeeded because it was focused, and got the best talent; by definition, that's not something that can happen for all of primary healthcare.
The scope of such SPVs is widening. Matthew Idiculla, writing for the web site Scroll, has pointed out that several elected local government representatives in designated "smart cities" are concerned about the fine print of the smart cities mission. Smart cities will be run by SPVs in each chosen town - the head of which can only be removed with the Centre's prior approval - and which will have final call on all smart-city development projects. Indeed, even under the Jawaharlal Nehru National Urban Renewal Mission or JNNURM, some states objected to the setting up of SPVs as a prerequisite for the financing of JNNURM buses.
The danger is that cities can only be truly smart if they are made more accountable to their citizens. This means that local government must be empowered, not further disempowered. The projects under the smart cities programmes - whether transport, or sewerage, or in making the payment of property taxes and inspections easier - must have accountability to the citizen as a crucial part of the system if they are to succeed. Citizens' priorities - what they imagine their town must be in order to be "smart" - will then be front and centre. Typically, this will require local administration overall to be better run and to have more capacity. Just running SPVs with Delhi-appointed chief executive officers won't cut it.
The basic problem is this: Each SPV, mission - or even Central or state "scheme" - is essentially a way to earmark scarce administrative resources, power and attention. In fact, one of the problems with the proliferation of Centrally-Sponsored Schemes was that they essentially burdened the district magistrates (DMs) with more and more work. Some states have worked to fix this. Nitish Kumar, at the beginning of his second term, observed that his DMs were in charge of implementing over 5,000 schemes and on an average had to see 100 files a day. Through a single government order in 2011, he reduced the DM's authority, and indicated each departmental official under a DM - sometimes as many as 50 in a district - would be responsible for signing off on files relevant to their departments. Several observers suggest this helped create a more responsive and accountable local administration in Bihar.
It has long been a theory dear to Indian policymakers' hearts that creating such islands of competence and focuses of attention could make up for abysmally poor administration overall. And certainly, one or two headline projects that can serve as positive examples were a good idea. But it is now increasingly the case that SPVs, missions and schemes are the basic tool of governance. Not only does this distract from the real business of administrative reform - which is creating accountability to the citizen - but it also means that the basic capacity for a more effective state is not being built.
mihir.sharma@bsmail.in
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