Infrastructure: More good news than bad

What's interesting is that during the 10th Plan, about 25 per cent of the total investment in infrastructure came from the private sector, says Vinayak Chatterjee.

The daylong infrastructure conference in the Capital's Vigyan Bhawan on March 23, organised by the government, was a grand success by all counts. Several senior ministers spoke, key ministries presented their plans and the audience engaged in lively discussions in the conference that was inaugurated by the prime minister.

More importantly, the occasion saw the unveiling of the Planning Commission's mid-term appraisal of investment in infrastructure in the 11th Five Year Plan Period (2007-12).

First the good news:

• The government has started using gross capital formation in infrastructure (GCFI) as per cent of GDP as a standard measure of performance evaluation, and is sharing it publicly. This has taken some doing -- over five years of pressuring the government to do so. While the statistical superstructure to deliver this routinely (like any other macroeconomic data) is still shaky, the Planning Commission has made enormous effort to get GCFI mainstreamed. The effort is appreciated.
• GCFI has more than doubled from about 3.5 per cent in 2000-2001 to an expected 7.55 per cent by 2012. This is a major structural shift in the Indian economy, achieved within a decade. Argumentative democracies do work!
• The 11th Plan is projected to close at 7.55 per cent GCFI, a whistle away from the target of 7.6 per cent. This is commendable, considering that as a nation we are blase about meeting targets.
• We are going to meet the magical, and oft-touted number of $500 billion for the 11th Plan. There is an "apples and oranges" issue here that the composition of the $500 billion achieved is strictly not comparable to the planned components, but so what? Even at an overall level, if we hit the number, we should have reason to cheer.
• What's really interesting is that during the 10th Plan, about 25 per cent of the total investment in infrastructure came from the private sector. In the 11th Plan, it is expected to rise to about 36 per cent, even higher than the government's own expectation of 30 per cent. Thus, all this talk of public private partnership (PPP) and encouraging frameworks for private capital to flow in etcetera is not all hot air but is actually resulting in a quiet but tectonic shift in India's infrastructure landscape.
• The 11th Plan saw two years of a global economic meltdown, severe drought and a limited period of recessionary conditions in the domestic economy. In spite of these negative external conditions, we appear to be still meeting the overall numbers.
• The nation has the required confidence now for the prime minister to publicly say, "Preliminary exercises suggest that investment in infrastructure will have to expand to $1,000 billion in the 12th Plan period. I urge the finance ministry and the Planning Commission to draw up a plan of action for achieving this level of investment." And this is to be attempted with a private sector share of 50 per cent, and a GCFI of 9.95 per cent.

Let us now take a look at the achievements sectorally. The bad news starts flowing in on closer examination of the sectoral break-up.

• The entire transportation and logistics sector (one-third of the total infrastructure sector) -- made up of roads and bridges, railways, ports and storage -- is clearly a troubled area. There is already the acknowledgement that by the end of the Plan period, it would at best achieve 77 per cent of the target.

Even with this revised target, 67 per cent is left to be achieved in the last three years of the Plan period. With all the known delays, it would not be too much of a shock on March 31, 2012 to see that the real achievement is only about 65 per cent. It is probably no surprise that Rakesh Mohan has been appointed to head a committee of national importance to look into this area.

• The electricity prognosis appears optimistic. The 11th Plan document projected capacity addition of 78,700 Mw with a capital outlay of Rs 6.67 lakh crore. Credible voices from within the government have clearly articulated that actual performance is likely to be at best 50,000 Mw.

While it is understood that not all the outlay is for generation, a slippage of 37 per cent should broadly suggest a final investment of around Rs 4.2 lakh crore (Rs 4.2 trillion) against the stated 99 per cent achievement figure of Rs 6.59 lakh crore (Rs 6.59 trillion).

• To address the 'apples and oranges' issue as well as factor in some dollops of realism, the picture that emerges is somewhat less ebullient (see the bottom part of the table). If we were to remove Rs 4.3 lakh crore (Rs 4.3 trillion) from the 11th Plan revised estimate, then the adjusted total would be Rs 16.24 lakh crore (Rs 16.24 trillion), giving a 79 per cent achievement.

If we further remove the unexpected bonanza of another Rs 0.87 lakh crore (Rs 0.87 trillion) on account of telecom, the achievement is further reduced to Rs 15.37 lakh crore (Rs 15.37  trillion) or 74 per cent. Then it is not the 99 per cent achievement of the magical $500 billion number, but is closer to $370 billion.

Kahlil Gibran said, "The significance of a man is not in what he attains, but rather what he longs to attain." In that spirit, if there are a few more items, like oil pipelines, that can be added to the list by March 31, 2012, who knows India may well and truly hit the $500 billion number and march on to the $1,000 billion number for the 12th Plan!

The author is chairman of Feedback Ventures. He is also the chairman of  the Confederation of Indian Industry's National Council on Infrastructure, Views expressed are personal.