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Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
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Infra: A major overhaul is the way out 
(Mon, 6 Jan Pre-Open) 
 
India is not a country known for its infrastructure. While there is huge scope, opportunity and requirement, this broad sector has not performed to its maximum. Be it power, land, road, water, demand has long exceeded supply.

It seems that a 'too many cooks spoil the broth type' of situation is a key factor here. The process of seeking approvals, and the many clearances required to take up projects are just some of the many aspects that have been delaying developments. To top it off, corruption has been prevalent in many sectors where shortage is prevalent.

Mr. Sanjeev Aga, who wrote an interesting article in the Economic Times recently, is of the view that one must not also ignore the indirect costs that occur due to lack of infrastructure. Examples cited by him include the power or water shortage, which are on account of various factors including transmission losses, or indirect costs that are incurred on account of purification (in case of water) and backup power (in case of electricity). As such, it is quite possible that while the final consumers may be paying lower monthly bills on account of the various benefits received from the government, indirect costs are not really taken into account by them.

He also wrote about how one could take a leaf out of the developments in the telecom space, wherein more players trying to grab the share of the pie led to prices being dropped down to very affordable levels. At the end of the day, it was a win-win situation for consumers. A similar model, if adopted in other areas of infrastructure space could possibly bring down prices. However, for doing so, he opines that a major overhaul would be required in the governance process. A suggestion he made is of converting the respective 'not so fit' ministries into regulatory bodies.

The success rate of regulatory bodies in India can be questionable. As such, it is something that needs to be addressed as well. This we say on account of the many cases where interests of consumers have been sacrificed in order to fulfill vested interests. These aspects tend to lead to delays as well. As such, we fully agree with the views of Mr. Aga. And with the recently proposed measure to grant autonomous statuses to the existing regulators, these would do well to insulate them from the selection, appointment and removal of members (of the regulators) from any political or non-political interference. Such steps are moves in the right direction. And at the end of the day, it would be in the best interest of the final consumers.

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