A parliamentarian for close to three decades, Suresh Prabhu has been an integral part of India’s growth story. He has played an instrumental role in defining the policy landscape, in particular, infrastructure policy. He also has to his credit several reform initiatives. As union minister of power, he pushed through critical legislation, most notably the Electricity Act, 2003. As railways minister, he fast-tracked the development of rail infrastructure with the aim of creating a worldclass passenger experience. In the aviation ministry, he piloted the implementation of pivotal policies such as UDAN, MRO and the National Air Cargo Policy. In this free-wheeling interview for Indian Infrastructure’s special anniversary issue, Prabhu looks back at the journey of the infrastructure sector over the past two and a half decades, and the changes that can be expected over the next 25 years. Edited excerpts…
Looking back, how would you assess infrastructure development in India over the past 25 years and what are the areas that you feel have not done well?
Firstly, I would like to congratulate Indian Infrastructure for completing 25 years. In fact, the publication’s journey has, in a way, been instrumental in shaping the policies of the infrastructure sector over the years. I can say this with confidence as I have been in Parliament for the last 27 years and have very closely observed your growth as well as your contribution to India’s infrastructure journey. Your magazine has facilitated reliable interaction with the infrastructure sector community.
Infrastructure encompasses a very broad spectrum. Education, healthcare, roads, railways, etc. all come within its ambit. It is the bedrock of a nation’s growth. About two decades back, we realised that India has a huge infrastructure deficit that could be overcome by the creation of a large amount of physical and social infrastructure, but we lacked adequate resources for it. The taxes paid by the public were mostly being used for various pre-committed expenses such as salaries, expenditure and defence. And thus the idea of creating public-private partnerships was conceived.
“I believe there lies a great opportunity for the private sector to participate. And for that, policy stability is imperative. Making regulators independent is also very important.”
In India, there have been unique experiments wherein public infrastructure has been created using private money. But private investments seek returns. Unlike public investments where returns are calculated on social benefits, private investments involve pure financial returns, wherein both equity holders and promoters want to get rewarded adequately for the investment made.
And thus comes the biggest challenge of balancing the expectations of end-users (who are paying direct/indirect taxes and demanding public good) on the one hand and those of private investors on the other. I recall when we were trying to address this dilemma for the power sector (and once again, I would compliment you as you are also the publishers of Power Line, one of the most respected magazines in the trade), we ended up conceiving the Electricity Act, 2003, which provided massive policy support for private investments and today more than half of the installed capacity is coming from the private sector.
Aviation is another success story wherein privatisation has helped meet the surging demand. Almost a thousand new aircraft orders have been placed from India, and both the carriers are private. One is IndiGo and the other is the recently privatised Air India.
The railway sector, however, has several social obligations – the network operates not for profit but for providing an essential service to the economy, ensuring the transportation of goods and people, including during emergencies. When I took charge as railway minister, the underinvestment in the sector was one of the biggest challenges. There was only one source of investment, the fund allocation by the finance ministry. We had plans to lay new railway lines, modernise existing railway stations and develop state-of-the-art passenger amenities. Priority was also being given to the creation of infrastructure for goods transportation by setting up warehouses, new terminals, etc. To achieve these, relying exclusively on budgetary allocations was not enough, and we decided to raise our own resources, such as a loan worth Rs 1.5 trillion from the Life Insurance Corporation.
Thus, public finances need to be improved to support capital expenditure on creating infrastructure. A country whose public finance is not in good shape has a bleak future as there will always be the challenge of infrastructure deficit or a huge public debt burden.
Involving the private sector may look like a plausible solution. Presumably, the private sector will operate the infrastructure better, but how does one ensure that the end-user is not taken for a ride? Here, the role of independent regulators and their functioning become paramount.
In fact, this is something that I believe will need our attention in the years to come. How do we create independent and enlightened regulators, who will encourage operational efficiencies and think about both the government’s and the private sector’s interests. Efficiency will be important, but so will be the need to encourage (and reward) the private sector for infrastructure creation.
Looking at the future, what are the opportunities that you see in the next decade or so?
I personally feel that India has a great and incredible future; to harness it, infrastructure will be the key. And to harness the infrastructure potential, the private sector is important.
I believe there lies a great opportunity for the private sector to participate. And for that, as I have mentioned already, policy stability is imperative. Making regulators independent is also very important. At the same time, the private sector must also come with a medium- to long-term view and not expect to recover investments upfront.
Meanwhile, the growing role of technology and digitalisation in infrastructure holds big promise for the future. Everything is getting digitalised – the future lies in the creation of digital infrastructure, which will not only bring benefits to businesses but also improve the end-user experience.
“The government must encourage entrepreneurship in a big way. The focus should be on creating a more entrepreneurial spirit within the government as well. One way to go about this is to provide the right policy framework and encourage and incentivise new investments. This can be a game changer for infrastructure development in the country.”
What are the steps that you think the government should take?
One of the key initiatives by the government has been the launch of the PM Gati Shakti master plan. When I was the commerce and industry minister, the prime minister had created a new department within the ministry to focus on logistics.
I suggest that the government must encourage entrepreneurship in a big way. The focus should be on creating a more entrepreneurial spirit within the government as well. The government should become entrepreneurs themselves. One way to go about this is to provide the right policy framework and encourage and incentivise new investments. I truly believe that this can be a game changer for infrastructure development in the country.
“The growing role of technology and digitalisation in infrastructure holds big promise for the future. The future lies in the creation of digital infrastructure, which will not only bring benefits to businesses but also improve the end-user experience.”