Nepali Times
Economic Sense
Infrastructure blues


GRIDLOCK: Despite the metro and expressways, Delhi's transport infrastructure is still bursting at the seams.

NEW DELHI-India's capital in late April has few virtues to attract visitors. Even the residents get out if they can, seeking cooler climes in Shimla and Mussoorie. Unlike our orderliness in Kathmandu, here the powercuts are unscheduled, and the whirr of backup generators makes your head spin.

Last week the city introduced a pilot project for a new traffic system, in which buses were restricted to dedicated bus lanes. Many arterial roads came to a standstill. It's going to take more than new traffic rules to solve Delhi's infrastructure problem. Globally-aware Delhiites compare their transport chaos to Heathrow Airport's Terminal 5, but Heathrow's traffic flow problems don't affect millions of people every day.

Global construction companies are now eyeing India as a country where massive new infrastructures are due to be built, as opposed to countries like the US where most future work is likely to be rehabilitation and maintenance.

As cranes now loom on every corner of the skyline, the boom is creating fresh challenges for the economy. Firstly, with supply of materials unable to keep up with demand, prices are shooting up which means the cost of infrastructure development is increasing apace. Public-funded projects are thus draining the exchequer deeper, and private ones are raising their consumer charges.

Secondly, the demand for skilled and semi-skilled construction workers is going to affect labour costs too. In Nepal, it is becoming increasingly difficult to find a good mason or plumber as most of the ones with any gumption are taking their skills to the Middle East and India where they will get paid more. The rise in food prices and general inflation will also increase the cost of labour, and consequently cost of capital.

For Nepal, the growing expense of construction work has many implications. A hydro-rich but electricity-starved country will really need to think about how to tackle the chasm between demand and supply. People in power-deprived Bihar and UP will not allow the states to export power to Nepal even if the government in Delhi agrees to it. This also means that Merchant Hydro plants, where developers start building plants without Power Purchase Agreements stipulating the sale of electricity directly to big consumers, may start to make sense.

Any kind of infrastructure, whether it's power plants, roads, economic zones or airports, requires land. The issue of land acquisition and compensation in Nepal is likely to be a thorny one, and the Maoist government will have to come up with a definitive policy which balances people's expectations of lightning development with the administrative and legislative frameworks to match them. It took 20 years to build the Kolkata metro because of land acquisition problems. Delhi's metro system has been built in five years as the policies regarding construction were clear and implementable.

In their election manifesto and numerous speeches, the Maoist leadership has talked about 'public-private partnerships' (PPP), but they need to spell out exactly what they mean by this term and how the proposed partnerships will function, especially in the context of infrastructure development. We don't want the same experience Delhiites had with their bus lanes on every new infrastructure project in Nepal.

(11 JAN 2013 - 17 JAN 2013)