About four years ago, IL&FS recommended to the state government that 1,053 kilometres of roads at the state highway level – on a north-south axis – be implemented across the whole state in one go. The result was RIDCOR with a track record that has left many in envy.
In 1991, India witnessed a significant policy reform – liberalisation of economy. Since then, liberalisation has thrown up fresh challenges as well as exposed critical lacunae in the areas of policy and regulation in the country. Today, when the economy has opened up and moved away from liberalisation towards globalisation, states need to get a competing edge to attract investments and achieve the goal of sustainable development.
In this regard, one of the key strategic areas is infrastructure which is critical for sustainable development of the new regime of global economies. Critical to kick start the economy, infrastructure attracts investments, resulting in Gross Domestic Product (GDP) growth. Good infrastructure raises productivity, lowers production costs and expands fast enough to accommodate growth. Infrastructure capacity grows in step with economic output – a 1 per cent increase in the stock of infrastructure is associated with a 1 per cent increase in GDP.
One of the rapidly growing economies in India is the state of Rajasthan. It is a gateway to markets in northern and western India and has successfully managed to attract the investors. The state’s business environment is powered by an enterprise-friendly government, good infrastructure and a young and highly skilled workforce.
The Government of Rajasthan was among the first ones to recognise the need to augment assets and services in the infrastructure sector. It realised that investments in this sector are essential to facilitate the flow of investments. The key focus of the State government thus has been to invite private sector investments in roads, power, tourism, urban infrastructure, industrial infrastructure, etc. The state has also opened various social sectors such as health, education, drinking water, housing, etc., for private sector investment.
RIDCOR is very unique because it marries capacity at the State level through a public private partnership programme. It follows transparent procedures so that the results can be shown effectively.
Road connectivity forms an important part of infrastructural development. But before 1991, road infrastructure in Rajasthan was very poor. The roads were going from east to west and were designed largely for military movements or to link principalities historically, but there were no north-south roads to ease travelling across the state.
Today, the situation is quite different. Rajasthan has a total road length of 180,000 km. Out of these, 5,655 km are National Highways, 11,615 km are State Highways, and 7,340 km are major district roads. Through schemes like the Missing Link Project and the Central Road Fund, new roads are being constructed to link all villages in the state. Under the state’s Mega Highways Project, over 1,000 km of road stretches joining National Highways are being upgraded into expressways to provide better and quicker connectivity.
It would not be wrong to credit this achievement to the Road Infrastructure Development Company of Rajasthan Ltd (RIDCOR). An ambitious initiative of the Government of Rajasthan for improving the state’s road infrastructure, RIDCOR is a public limited company. It is a 50:50 joint initiative of Government of Rajasthan and Infrastructure Leasing and Financial Services Ltd (IL&FS). The Partnership and Development Agreement (PDA) was signed on August 7, 2005, and it formalised the respective roles and obligations.
In the recent past, Rajasthan has been in the forefront of successfully implementing a number of road sector projects. The first State to announce a State Road Policy in 1994 to facilitate the entry of private sector in the roads sector, Rajasthan has come a long way. A Model Concession Agreement was put in place for inviting private sector to develop roads on Build, Operate and Transfer (BOT) basis. The enactment of Rajasthan Road Development Act 2002 further encouraged a greater level of participation of entrepreneurs in the development of roads in the state.
About four years ago, IL&FS recommended to the state government that 1,053 kilometres of roads at the state highway level – on a north-south axis – be implemented across the whole state in one go. Further, it said that it should be done through a public-private partnership (PPP). Hari Sankaran, MD & CEO, IL&FS says, “We were very clear that this initiative must lead to the overall development of the state. So, the presentation that was made to the Chief Minister was that this network of roads should actually result in increase in employment, tourism, delta incomes, GDP and local employment opportunities in the state, etc. Capacity would be built up in the State so that more such projects could be taken up by the State itself. The idea never was that IL&FS companies come and build a road in 30 years and then move out. The idea was that we come and stay permanently and create the capacity of the State to take on more of such projects. The government loved the idea. It was put together and a 50:50 partnership was done, 50 per cent equity by IL&FS and 50 per cent equity by the government.”
The plan was implemented, constructed and commissioned as per schedule and the 1,053-km project was successfully completed in less than 24 months. Overnight, the Government of Rajasthan also had a new instrument of development, the RIDCOR, which has Rs 500 million equity capital and was formed to improve the State highway network in Rajasthan and to implement Mega Highway Projects.
Sankaran says, “I cannot imagine people from the Rajasthan Government taking any less than 10 years to build 1,053 km of roads. It is very easy to find out from the records of last 20 years as to how many could put up this level of roads. The answer, incidentally, is zero because they haven’t done this kind of quality work.”
The first State to announce a State Road Policy in 1994 to facilitate the entry of private sector in the roads sector, Rajasthan has come a long way. A Model Concession Agreement was put in place for inviting private sector to develop roads on Build, Operate and Transfer (BOT) basis.
This is the first part of the story. The second part of the story, as Sankaran puts it, is that they (IL&FS) don’t see a road as a simple road. “When you build a road from Jaisalmer to Bikaner, you have created a tourism circuit potentially,” he says, adding, “you have to map this; you have to build upon the capacity in a region to support that tourism, which means, let them speak English if it’s an English tourist, let them speak Japanese if it’s a Japanese tourist, let them create those kind of cuisines and tourist offerings and create a culture for tourism to support this industry. So, this road is actually a catalyst for development. If it is simply seen as a method of commuting from point A to point B, then that is not going to solve the purpose.”
RIDCOR mapped this and figured out how it could be done in a real way. Firstly, they had to reinvent the organisation. “This is why RIDCOR is very unique because it marries capacity at the State level through a public private partnership programme. It follows transparent procedures so that the results can be shown effectively. The project has been designed in such a manner that the implication of the outcomes of the project has been done using a public pattern but in a very accountable way, not asking for a grant. So, RIDCOR’s way should be followed while designing all the infrastructure projects across the country.” says Sankaran.
The ‘Mega Highways Project’ is the largest road sector project in the country taken up in a PPP framework. Private investors can take up road development projects in the form of up-gradation of State Highways; construction of bridges, bypasses, rail-over bridges and construction of wayside facilities. This initiative has also led to the overall development of the state, leading to a rise in employment opportunities and greater tourism potential.
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