The DAME Was Late

October 12, 2010

Swami A Aiyar’s latest column is about how the messes in the Commonwealth Games are the ones the government has made, while the few successes involved are the ones the private sector are involved in. This is a sentiment that I generally agree with, but it commits one key error when it talks about how the Airport Express line opening late is an example of government failure.

Actually, the public sector DMRC completed almost all its work within the hard deadline of the Games opening ceremony. Though they did miss their own deadlines; and the violet line still isn’t operating on the last few stations. The Airport Express line however was a private sector responsibility – it’s being operated by Reliance Infra (Anilbhai, that is). The DMRC was supposed to do the civil engineering, and R Infra (whose website’s core infrastructure page says it’s under construction – tee hee) didn’t do the electrical work and testing on time. To be fair, the DMRC has an interest in putting the blame on Reliance – they get to charge it a penalty.

The Swaminomics column also mentions Reliance’s putting up the world’s biggest refinery in record time as an example of private sector excellence; so the Reliance failure this time around is kind of piquant. The difference between the two situations could be explained by:

  • Dhirubhai was betting the farm with the Jamnagar refinery, and this added a little bit of desperation. The Airport Express Link is nowhere as important or as much of a flagship project; so management was not quite so obsessive about getting things done ahead of schedule.
  • Dhirubhai had it in him, while Anilbhai is a wanker. This is my favourite explanation, but then I’m biased. It is an explanation that is shared, though – some years ago I read either in Business Standard or Business World a deliciously snarky editorial that when talking about Anil Ambani’s attempt to set up ultra-mega power plants in UP, talked about how only an idiot would want to sell power to the bankrupt Uttar Pradesh electrical utilities. Sadly, I’ve lost the link.
  • Or to be very cynical, since this is a public-private partnership project, Reliance Infra presumably ends up making money no matter how late they are.

That last point could work the other way around too, though. Maybe Reliance Infra isn’t actually that late, and the Commissioner of Metro Rail Safety is refusing to give the clearance to extort a bribe out of Anilbhai.

The exasperating thing is that ever since the news about the Airport link not opening on time came out, there’s been a news blackout on what is going on. There was that one Business Standard article I linked above on the penalty, and nothing since then. Not even news about when the line will open. So we can’t actually know what is going on, and who actually fucked up. What sadness.

On a more personal note, I wish there was at least some information on where the airport station actually is. At present, DIAL hasn’t got the Terminal 3 parking completely functional; so being picked up at the new terminal is a nightmare. If the metro station is right inside T3, though, it would mean I could come to Delhi, catch the metro to Dhaula Kuan, and get picked up from there. That would be awesome. Of course, this would also require domestic operations to start at Terminal 3. They haven’t, and this time this is because of fuckups from both the private and public sector – the IT systems didn’t work back in July, but now the bottlenecks are the entirely government owned and run Delhi Transco and Delhi Jal Board.

Oh, and for a very well written piece on how the vast majority of fuckups are governmental, not private sector, here’s Salil Tripathi in WSJ.

Making Roads and Mortgaging Farmland

February 4, 2008

Four months ago, I wrote a post on how allowing the free sale of agricultural land for any use was the best possible move against agricultural distress. My logic in that post was:

  1. Allowing the free and easy conversion of agricultural land for residential, commercial, or industrial purposes creates a liquid market for agricultural land.
  2. The liquid market for agricultural land makes it more acceptable as collateral for lending.
  3. The existence of the liquid market also makes agricultural land more valuable.
  4. Point 2 and Point 3 combine to drive down interest rates and increase the loan amount a farmer can get against his land.
  5. This means that being indebted is not such a problem for farmers.

I now worry that I gave the impression back in October that allowing the sale and conversion of agricultural land was a magic bullet, and that once this happened we would enter a happy agricultural paradise. It isn’t. It’s necessary, but not sufficient. You need other things too. The three most important ones I can think of are:

  1. Farmers actually knowing that they can sell and mortgage their property legally, and knowing what the market rate is. Currently, anybody who wants to buy agricultural land to put up flats or a factory bribes the collector to change the land usage, buys it at a bargain basement rate from the farmer, and then goes ahead and develops it. If land sale is legalised, but the farmer doesn’t know about how much more valuable this makes the land, all that changes is that the developer no longer has to pay a bribe (or as much of one). As I mentioned in the October post, auction sales are a good mechanism to prevent this happening.
  2. Competition in the market for lending. Which means multiple banks lending to rural areas. As things currently stand, I think each Regional Rural Bank has a geographical monopoly on rural banking in its particular region. Discussing how to create viable and competitive rural banking is a blogpost in itself – many blogposts axshully. Maybe later.
  3. The agricultural land needs to be well-connected enough to urban centres that there’s demand for it. Which in turn means rural roads. Rural roads also have the advantage that they make it easier for banks to reach farmers (fulfilling Point 2), and make it easier for multiple land developers to court farmers for their land (fulfilling Point 1).

Happily, this week’s Swaminomics (h/t: Ravikiran) is all about rural roads. Key excerpts:

For every million rupees spent, roads raised 335 people above the poverty line, and R&D 323. Every million rupees spent on education reduced poverty by 109 people, and on irrigation by 67 people. The lowest returns came from subsidies that are the most popular with politicians – subsidies on credit (42 people), power (27 people) and fertilisers (24 people).

For decades, rural roads in India were neglected by most states. Besides, rural employment schemes, starting with Maharashtra’s Employment Guarantee Scheme in the 1970s, created the illusion that durable rural roads could be built with labour-intensive techniques. In practice labour-intensive roads proved not durable at all, and those built in the dry season vanished in the monsoons.

The posts on rural banking and agricultural finance will happen sometime in the future. Work is horrible this month.