On March 23, 2010, Manmohan Singh, at an Infra Conference in Vigyan Bhawan, New Delhi, said, “Preliminary exercises suggest that investment in infrastructure will have to expand to $1,000 billion in the Twelfth Plan period. I urge the finance ministry and the Planning Commission to draw up a plan of action for achieving this level of investment.”
The Twelfth Plan can only take off from where the Eleventh Plan signs off. The Eleventh Plan has not done too badly on infra. Building on the $220 billion or so achieved in the Tenth Plan, the Eleventh Plan, according to independent estimates, might close at around $400 billion or about 78 per cent achievement. In its mid-term appraisal of the Eleventh Plan, the Planning Commission had let out that the achievement would be closer to 99 per cent, but it did so by making some rather over-optimistic projections, particularly vis-à-vis the power sector. On September 15, 2011, Montek Singh Ahluwalia stated, “I would not be surprised if it is 10 per cent or 12 per cent short.”
Table 1 summarises the Eleventh Plan projections and possible achievements. There is the possibility that the final Eleventh Plan achievement may surprise all of us by exceeding 100 per cent on the basis of “an apples-to-oranges comparison”. This can happen due to the significant initial under-budgeting of some areas (as has been officially admitted in oil and gas pipelines); or by substantial investments in urban infrastructure and other areas that were not reckoned at the time of formulating the Eleventh Plan.
Still, the Eleventh Plan has good news on three fronts:
- The 80 per cent or so “apples-to-apples” achievement is far better than before and putting over $400 billion on the ground (in spite of the plethora of adverse implementation conditions) is worth a round of applause. It also marks a near-doubling over the Tenth Plan.
- In the Eleventh Plan, private investments were planned for 30 per cent. Surprise of surprises, it appears to be clocking 36 per cent. (Sceptics would argue that the higher percentage is because public expenditure is not up to the mark — but so what). This happy development sets the stage for attempting 50 per cent through public-private partnership (PPP) in the Twelfth Plan.
- Gross Capital Formation in Infrastructure as a per cent of GDP (GCFI) would have doubled from a turn-of-the-century level of 3.5 per cent to about 7.5 to eight per cent by the time the Eleventh Plan ends.
However, one of the avowed objectives of the Eleventh Plan was “achieving faster and inclusive growth.” Inclusiveness has possibly lost out to growth. Table 2 shows far more implementation tardiness in the “aam aadmi” areas vis-à-vis those that are not generally considered inclusive.
The 182-page Approach to the Twelfth Plan while announcing its overarching theme to be “Faster, Sustainable and More Inclusive Growth”, rightfully focuses on the “aam aadmi” areas of water and energy as cornerstones for the Twelfth Plan infra strategy.
As the Approach Paper starts getting converted into a full-fledged Plan document, the following five issues are being highlighted for consideration:
Transportation: The Twelfth Plan is well poised to benefit from the recommendations of the high-level National Transport Policy Committee under the chairmanship of Rakesh Mohan. This is recognised in the chapter on transport. Expectations are that adequate attention would be paid to road-rail mix, multi-modalism, coastal shipping, urban transportation and the possibility of setting up a Transport Regularity Authority.
Urban infra: This was clearly one of the gaping holes in the Eleventh Plan. Even as a lot of homilies are regularly delivered on the challenges of urbanisation, planners seem to be very quiet when urban infra projects need to be grappled with. Nobody really seems to have a fix on how much investment urban India needs and how to deliver them. One of the estimates going around comes from Ramesh Ramanathan of Janaagraha. He reckons that the appropriate thumb-rule is Rs 50,000 per capita of urban population. By his estimate, investments required for all our towns and cities put together is certainly over Rs 20 lakh crore, over the next 15 years. So, a town like Dehradun (population — 5,28,000) will require Rs 2,640 crore and a city like Bangalore (population — 56,87,000) will require Rs 28,435 crore. This is well in sync with the Approach Paper’s own estimate of Rs 40 lakh crore as capital expenditure, and Rs 20 lakh for operation and maintenance for the next 20 years. Will the Twelfth Plan do a deep dive and come up with an investment strategy?
Railways: The Planning Commission has asked the railways to draw up a roadmap to implement specific suggestions during the Twelfth Five-Year Plan that begins on April 1, 2012. The key suggestions include increasing passenger fares, minimising cross-subsidisation between passenger and freight earnings, and setting up an independent tariff regulator. The subject of fundamental reorganisation was brilliantly dealt with in the epochal Rakesh Mohan Committee Report on railways submitted in February, 2002. While the railway establishment has distanced itself from it, few can argue against its recommendations that call for a separation of roles into policy, regulatory and management functions. The Twelfth Plan should bite this bullet.
Regulatory authorities: The Approach Paper mentions that “There is a case for considering an overarching framework law governing the functioning of independent regulators in different sectors, other than the financial sector. The need for legislation in this area has been discussed extensively and draft legislation should be prepared for wider discussion.” This is just too mild — not even a bark, forget the bite. Considering that the PPP environment is crying out for truly independent regulatory authorities, surely the Twelfth Plan could be far more aggressive on this front.
Projectisation: The real challenge is the creation of “bankable” projects in the PPP space, and a new stock of implementable projects in the public space. The Twelfth Plan envisages $1000 billion investments on the ground between 2012 and 2017. That means $200 billion implemented on average every year. Assuming that infra projects have a developmental cycle of four years that means work-in-process of at least $800 billion. Does India have so many “cooked, and cooking projects?” The answer is a resounding no. And this is the key challenge of the Twelfth Plan. The final plan document will have to muster all the intellectual energy it can to suggest practical solutions to the issues raised from pages 164 to 173 in Chapter 15 (Governance).
Kahlil Gibran said, “The significance of a man is not in what he attains, but rather what he longs to attain.” The same could be said of the Twelfth Plan Approach Paper.
The author is Chairman of Feedback Infrastructure. These views are personal. vinayak.chatterjee@feedbackinfra.com
