The road from Kishangarh

Several people in the BJP are thrilled about the endorsement given by Prime Minister Manmohan Singh to the Golden Quadrilateral (GQ) programme, when he said it was one his government planned to continue.

Frankly, given just the findings of agencies like the CVC and the CBI, this always seemed a bit premature, especially in the light of the information that’s coming out in the Satyendra Dubey case, the National Highways Authority of India (NHAI) engineer who was murdered after he complained of corruption in the project.

Just last week, my former colleague Ritu Sarin did a report (The Indian Express, June 7) on how the CVC found a host of irregularities in 18 stretches of the GQ, where the material used was sub-standard, as a result of which the roads which cost Rs 3-4 crore each had caved in.

Indeed, Ritu even spoke to former transport minister B C Khanduri who brushed it aside with the incredible line “we were working on a very tight schedule and that is why some short-cuts had to be taken”.

This, by the way, is virtually the line given to me when I met a top official of NHAI to make some enquiries on the cost of the programme a few weeks ago.

An earlier Express report cited CBI sources as saying the agency had found proof that several of the allegations by the late Dubey — of huge corruption, forged documentation and poor quality — were spot on. The CBI has also come across cases where payments to contractors have been hiked after the bids were awarded.

So what, you may be tempted to yawn. It happens all the time, especially in a project of the size of the GQ. Forget the corruption, the important thing is that, earlier while the country was building 11 km of highways per year, it started doing 11 km a day after the project began.

That, needless to say, is a valid point, and no one is making light of the programme and what it has achieved. The point that the new government needs to concentrate upon, however, is different.

And that is, those in charge of the GQ did not (deliberately or not, one cannot say) make too much of an effort to keeps costs in check (and when I say costs, I even mean quality as well, a point to which I shall return) or to involve the private sector — they’ve been involved, but mainly as contractors with all the risk being borne by the government. An example should make this clear.

One stretch, a 90-km six-lane one from Jaipur to Kishengarh, has been built on what’s called a BOOT basis, which basically means the costs of the project are to be borne by the private builder who will be allowed to keep the tolls on it for the next 15 years — the toll, by the way, is the same as it is for all other GQ projects across the country.

The capital cost for the project is over Rs 700 crore — so, had the project not been built by the private firm, the government would have spent at least this amount.

But, by involving the private sector in a genuine manner, it has spent only Rs 210 crore — the private sector firm, after studying the traffic forecasts for the road, said it would be viable if it got this amount from the government as a grant.

The project was awarded to the company that bid for the least amount of grant. The problem, however, is that there are very few parts of the GQ programme that are being built on a BOOT basis.

By the way, it isn’t just me that’s pointing out these flaws. The Infrastructure Development Finance Company (IDFC) played the role of the secretariat to the PM’s task force on infrastructure that finally came up with the concept of the GQ and additional work on what’s called the North South East West corridor, and IDFC was advisor to the NHAI on various projects as well.

As opposed to the current model where the NHAI pays contractors on the basis of the work they’ve done each month, IDFC favoured the “annuity” method.

That is, the company that wins the bid to build the road gets paid a fixed amount each year (the annuity), but after the construction is over. So what, you might say once again, whether the company gets the money earlier or after the road is complete, it still gets paid the same.

The advantage of this, IDFC found, were many. For one, since the company gets its full payment only over the 15- or 20-year life of the contract, it has to ensure the quality of the road is maintained during this period — in the current scheme, the contractor guarantees the quality for only a year, and NHAI will have to pay for a separate maintenance contract for the highways that are being built, usually between 2 and 3 per cent of the total cost of highway each year.

Given that the CVC has found serious quality problems and collusion between the contractors and the supervisory consultants, it’s obvious which method will ensure better quality and will be cheaper as well.

And, in the few projects that the NHAI did allow to be built on an annuity basis, the costs of the annuities were far lower as compared to a situation in which the NHAI followed its usual contractor model. Besides, the annuity quotes got lower with almost each passing contract.

For the projects still not awarded on the North South East West corridor as well as the other ambitious projects being planned, the new government would do well to re-examine this rather lopsided “public-private partnership” model that’s developed in the golden quadrilateral project.