Saturday, May 16, 2009

Infrastructure delays and second-best solutions

The Businessline argues that the UPA government achieved less than 40% of the target in roads, ports and power sectors due in large part to the bureaucratic restrictions imposed by the Planning Commission, especially in the bidding process. This blog could not agree more and has posted extensively on the same here, here, here, here, here, and here.

First, it took a long time to formulate the model concession agreements or contract principles. Then the stiff technical qualification norms outlined in the RFQs imposed high entry barriers that both minimized competition and opened up litigation from those excluded. The result was re-tenders and delays.

Now, theoretically and going by the principles of the World Bank and other agencies, the Planning Commission cannot be faulted for adopting the best practice of globally accepted tendering standards. But in the real world of developing economies with their numerous supply side constraints, such best-practice models end up being "the enemy of the good"! In the circumstances, second-best models offer more effective alternatives.

However, unfortunately there are no specific set of second-best alternatives that can be used across the board for resolving these problems. Less bureaucracy will surely help reduce delays and expedite bidding out projects. But any such dilution will have to be balanced with stringent mechanisms to ensure that the outcomes are not compromised or distorted, as the Hyderabad example demonstrated.

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