Not a NICE precedent

It is with great fanfare that the government announced the opening up of the construction sector to foreign investors last week, and presumably the Budget today will take this process a bit further.

While that’s all very well, would-be investors would be well-advised to take a trip down the Mysore-Bangalore highway, which Nandi Infrastructure Corridor Enterprise (NICE) Ltd began work on in 1995.

Of course, since there is no highway as yet that could be a bit difficult, a possible solution may be spending a few hours with Ashok Kheny, or his partner Baba Kalyani, whose billion-dollar forgings and auto components group’s biggest claim to fame is that there is not a single car of any repute in Europe that does not carry a Kalyani part in it.

Kheny has been responsible for various mega infrastructure projects in the US such as an 800-mile fibre optic cable design and construction project for US Telecom and was a senior member of the team that developed the Hubli-Dharwad bypass in Karnataka.

Kheny’s story is frightening, not just because he’s been given a raw deal by the Karnataka government after he spent Rs 350 crore already on the Rs 2,250-crore project, including paying Rs 7 crore as salaries of government officials who spent time working on his project, but frightening since even the Congress-run government at the Centre appears helpless to do anything in a state that they are also supposed to be in command of.

Indeed, one of the stories doing the rounds is that, when he is in Karnataka, Dr Manmohan Singh will fly over part of the project’s route to signal his commitment to the project to the state’s chief minister! Clearly no one thinks Dr Singh can directly order his own party’s chief minister to do anything, and certainly his clout over the other alliance partners in Karnataka will be less than minuscule.

Two years after the initial MoU, the government of Karnataka signed a framework agreement with NICE to build the Mysore-Bangalore Infrastructure Corridor, which included a 111-km expressway from Bangalore to Mysore which will cut travel time from 3.5 hours to 1.5, a 41-km semi-circular peripheral road connecting National Highway 7 (NH 7) with NH 4 on the southern part of Bangalore, a 9-km link road connecting the expressway to State Highway 17, and five towns for one lakh people each between Bangalore and Mysore—the project will have a 400-MW power plant, a sewage treatment facility, and its own water supply system.

In addition, the highway would have 16 interchanges of around 200–300 acres each, which would have petrol pumps, schools, warehouses, workshops, among other facilities.

Since it began, according to Kheny, the project has dealt with seven Prime Ministers (tolls levied by private firms on state highways required a change in the central act, for instance), six chief ministers, and an equal number of public works department ministers, eight PWD secretaries—all told, nearly 300 IAS officers and several hundred departmental officers had to be approached for clearances. Not surprising, for a project of this size, there were a host of court cases as well, in the Karnataka High Court as well as the Supreme Court, which cleared the project.

Since the project was one of the few (you can count such projects on the fingertips of one palm) that had genuine private funding, as opposed to the much-touted Golden Quadrilateral ones, where all funds/risk is taken on by the central government, it was a high-profile one, and work on it proceeded at a pretty rapid pace.

That’s when the politicians once again stepped in, and leading them was former Prime Minister H D Deve Gowda, who, when he was Karnataka chief minister, had cleared the project (indeed, when the current chief minister was the state’s PWD minister, he too had been pushing clearances for the project).

As a result of this, Kheny’s got just 3,000 of the 6,200 acres (one acre is 4,840 square yards) he requires for Phase I of the project (the semi-circular road, 12-km of the expressway, 10 interchanges and one township). Indeed, according to Kheny, he’s been sent details of land (which was previously supposed to be part of his project) which are now to be de-notified.

One possible reason for the problem is that since the expressway is ring-fenced, land around it may not appreciate in the manner expected—indeed, the only land whose prices will really appreciate in a big manner are the ones at the interchanges, and it is this that the state government now wants to denotify.

According to Kheny, the government is now planning to build another road parallel to his and he plans to go to court on the matter—while this will undoubtedly help those who bought property in anticipation of the NICE project, it will play havoc with NICE’s financial returns.

What complicates matters further is that Deve Gowda’s son is now the state’s PWD minister and has appointed a review committee (the head of the committee just got a Padma Shri this Republic Day!) which has said the project doesn’t need so much land—Kheny went to court again and got a stay last month against the government’s orders telling various departments to act upon the committee’s recommendations.

Any promises made by the government, today or later, have to be judged against what happens to projects on the ground such as the NICE one, and the unhampered ability of the political system to derail them as and when they please.