The public private partnership momentum needs to move on from national highways to state and district roads Two roads diverged in a wood, and I — I took the one less travelled by, and thFat has made all the difference.”
— Robert Frost
India now needs to make a difference beyond national highways. With so much discussion and attention focused on the National Highway Development Programme, there is a need to remind ourselves that with a coverage of 67,000 km, national highways constitute only 2 per cent of India’s total road network. It is true that this minuscule proportion carries 40 per cent of the road traffic, but the state highways network is double the size at 132,000 km. And another category, major districts roads, adds up to 468,000 km and constitutes 14 per cent of the total road network. Finally, rural roads stand at 2,650,000 km and make up 80 per cent of the total network
It can’t be denied that the emphasis on national highways is well placed. However, considering there has now been over a decade of attention directed here, the time has come to energise the public private partnership (PPP) movement in state highways and major district roads. State highways, major district roads and rural roads are in state governments’ domain and are at the receiving end of State Public Works Departments and State Roads Development Corporations.
It was most appropriate, therefore, for the Planning Commission to have organised a conference on public private partnership in state highways in July this year. The conference not only saw extensive participation from states but also signalled that this area was now poised for greater attention and action.
The state highway segment is showing clear signs of a pick-up in PPPs (see table I).
Several state governments such as Gujarat, Madhya Pradesh, Rajasthan, Andhra Pradesh, Karnataka and Maharashtra have taken significant initiatives to augment their state highways through PPPs.
Moving beyond state highways, the Pradhan Mantri Gram Sadak Yojna (PMGSY) was launched on December 25, 2000, as a fully-funded, centrally sponsored scheme. Its primary objective was to provide connectivity to all the eligible unconnected habitations of more than 500 people in rural areas (250 people in the hilly and desert areas) through good quality, all-weather roads.
Up to July 2008, project proposals amounting to Rs 81,717 crore have been approved. Against these approvals a sum of Rs 38,499 crore has been released for roads covering 331,736 km. Against this, 52,218 road works with a road length of 175, 629 km have been completed with a cumulative expenditure of Rs 35,295 crore.
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In many states, commendable work has been done. In many others, however, corruption and leakages have been coming in the way of the successful implementation of the PMGSY. There is also the issue of maintenance of these capital assets. Any move to shift the burden of execution and maintenance to the private sector will certainly address these issues.
The real challenge is to usher in private sector interest in those areas of state highways, major district roads and rural roads where there is inadequate traffic. Clearly, there is no alternative other than to suggest the Annuity Model, in which the traffic risk is taken out of the format, yet private capital, management and maintenance are brought in. Annuity, in fact, is quite a plausible option, and attractive to the private sector if the project size of each bid is not less than 100 km or Rs 100 crore. The following factors need to be kept in mind:
# State roads and major district roads are far less capital-hungry. State highways, major district roads and rural roads can be bundled together to provide for logical packages.
# A plethora of such contracts galvanises the entrepreneurial energy of the smaller contractor groups scattered across smaller towns.
# Such contracts can also gainfully employ the National Rural Employment Guarantee Act beneficiaries.
# These contracts give an impetus to using roads as a developmental tool in naxal-affected and remote areas.
If, indeed, the PPP programme, through an effective use of the Annuity Model, were able to develop large swathes of state highways, major district roads and rural roads, the addition to the programme could be almost the size of the currently envisaged private sector involvement (see table II).
The issues that remain are the corpus requirement and contingent liability linked to a large-scale annuity programme. But, consider the huge flows of public expenditure being directed in this area. The total investment in state roads during the 11th Plan period is expected to be Rs 1,41,855 crore. Add to this a total cost of Rs 1,00,000 crore being incurred on the PMGSY and one can see a sizable corpus of public expenditure that can be adroitly deflected to support a countrywide non-national highway annuity programme.
Much like the persuasive framework adopted in the Jawaharlal Nehru National Urban Renewal Mission to motivate state governments to get involved, a similar scheme could be devised to get parties on board for this huge PPP annuity opportunity across the length and breadth of the country.
If done successfully, it can change the face of India by engaging the private sector to energise a substantive portion of that 98 per cent of the network that stands outside the definition of a national highway, and services a majority of aam aadmis.
The author is the chairman of Feedback Ventures, The views expressed here are personal
