Private infrastructure in India doomed by politics

The fast road that connects south Delhi with the sprawling new urb of NOIDA is an excellent example of what the infrastructure of brave new India should be - designed with plenty of headroom for growth, well-maintained, and above all, funded by capital that is serviced by user fees. Sort of.

Last week, NOIDA Toll Bridge Company, a listed company that operates the road, set out a new tariff, that raised the one-way fee for cars from Rs. 20 to Rs. 25. There was a storm of protests, the toll road was blocked by agitators, who threatened to close it down for an indefinite period, and management relented.

Returns on the toll road were below projections in its early years, and the UP state government responded by awarding some real estate concessions to the operator. Now that traffic on the facility is healthy, the capital should be serviced by user fees that keep pace with inflation. Compared to average driving speeds in Delhi, the seamless 7 km. transit to NOIDA saves at least 15 minutes of driving time. In my reckoning, any one who owns a car should be more than happy to pay Rs. 25 for this time-saving alone - that's Rs. 100 per hour.

In India, however, politics, especially the politics of appeasement, always trumps economics, and the tariff for cars is back down to Rs. 20. There goes the Internal Rate of Return (IRR) of the project. This is a horrible signal for those seeking to invest in infrastructure in India, especially at a time when our government is clearly signalling that it has neither the capital, nor the management ability to create modern facilities for a rapidly growing nation.

US House pulls IPCC funding

Republican Rep. Blaine Luetkemeyer was hot about global warming funding. And we quote Luetkemeyer:


“Scientists manipulated climate data, suppressed legitimate arguments in peer-reviewed journals, and researchers were asked to destroy emails, so that a small number of climate alarmists could continue to advance their environmental agenda.

“Since then, more than 700 acclaimed international scientists have challenged the claims made by the IPCC, in this comprehensive 740-page report. These 700 scientists represent some of the most respected institutions at home and around the world, including the U.S. Departments of Energy and Defense, U.S. Air Force and Navy, and even the Environmental Protection Agency.

“For example, famed Princeton University physicist Dr. Robert Austin, who has published 170 scientific papers and was elected a member of the U.S. National Academy of Sciences. Dr. Austin told a congressional committee that, unfortunately, climate has become a political science. It is tragic the some perhaps well-meaning but politically motivated scientists who should know better have whipped up a global frenzy about a phenomenon which is statistically questionable at best.

“Mr. Chairman, if the families in my district have been able to tighten their belts, surely the federal government can do the same and stop funding an organization that is fraught with waste and abuse. My amendment simply says that no funds in this bill can go to the IPCC. This would save taxpayers millions of dollars this year and millions of dollars in years to come. In fact, the President has requested an additional $13 million in his fiscal 2012 budget request.

“My constituents should not have to continue to foot the bill for an organization to keep producing corrupt findings that can be used as justification to impose a massive new energy tax on every American.”

Four words for the House of Representatives:

It. Is. About. Time.

Further (not second) thoughts on the budget

Expect some measures on the revenue side. To my mind, the most likely candidates are excise hikes. Excise duties were cut in the wake of the global recession; by most measures, India has weathered the recession well, and some sectors, like automobiles, have been more than buoyant. It would be politically palatable to reverse - fully or partially -  the drop in excise duties in those sectors where Pranab can politically peddle them as being elitist.

 

Cars, I suspect, would be the first target. In fact, if I wanted to schemingly specific about this, I would hike excise on all cars by x amount, say 4%; but, to compensate for the 'subsidy' on diesel, which is 'needed' for freight, tractors and pumpsets, I would raise the excise on diesel cars by a larger amount, say 6, or 8%.