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Gadkari's way is the highway

The success of any public sector undertaking depends on the implementation of the policies that support its functioning. Nitin Gadkari, with his focus clearly on fixing the infrastructure problem, is fast emerging as its best role model.
By Hindol Sengupta

The story goes like this. There is a very senior member of the Railway Board, the all-powerful, often Kafkaesque body that administers India’s 1.4 million employee-strong railways, the third-largest employer in the world. For nearly six months, this man was holding up a plan to build 180 rail overbridges that had been pending for at least five years, and some, a decade. Finally, frustrated after numerous verbal and written reminders, Nitin Gadkari, the Bharatiya Janata Party leader from Nagpur, Maharashtra, and the minister for road transport and highways, told the man that he would throw him from a rail overbridge if he didn’t clear the files. It may have been a mock threat, but the files were cleared within a week.

 The high-ranking bureaucrat in the Railways who told me this story asked not to be named but couldn’t resist chuckling: “When Gadkari gets angry, he is a sight—all double chins waggling. But he has the instinct of a contractor; he will get the job done come what may.”

It’s not entirely a compliment, given that Gadkari doesn’t have a spotless reputation when he is getting the job done. He has been accused of passing on sweet deals to contractors friendly to him, and of accepting equity and cash in return. According to a Comptroller and Auditor General report last year, there were several financial violations when the Indian Renewable Energy Development Agency (IREDA) gave a loan to Purti Sakhar Karkhana in 2002, when Gadkari was chairman of the company—and an elected member of the Maharashtra Legislative Council. While Gadkari, predictably, claims that these accusations are egregious, some dirt has stuck. 

It hasn’t helped that Gadkari was, even before this, accused of taking advantage of his party position to get lucrative deals for his company, and of accepting lavish hospitality from corporates. But in the euphoria after the BJP’s victory, and Gadkari’s own decisive win in Nagpur and the role he played in helping the party in Maharashtra, the corruption charges were swept under the carpet and Gadkari made a Cabinet minister. 

When he entered Prime Minister Narendra Modi’s cabinet, it was not obvious that Gadkari would, in two years, be described by policy pundits, infrastructure experts, and even critics, as “the best-performing minister in the Modi government”. Arun Jaitley (finance) was far more powerful; Sushma Swaraj (external affairs) more erudite. But in the two years he has helmed the department, Gadkari has managed to make even his sternest critics set aside the earlier charges and consider him on the merits of the job he has done.

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“Gadkari’s key strength is that he is able to bridge the gap between the crafting of policy and its implementation, a common problem in India,” says Reuben Abraham, CEO of the IDFC Institute, a Mumbai-based think tank focussing on political economy issues, and set up by India’s largest infrastructure company, IDFC.

That Gadkari doesn’t function like a government man is clear; a true government man isn’t likely to shake up venerable public sector undertakings, let alone threaten senior babus with physical violence. Typically, government departments seem to deliberately drag projects on, just so they can keep talking about it. Not so Gadkari. “He is basically very good at getting things done,” says Abraham. There’s a sense of urgency almost, when he embarks on a project.

Consider this. When Gadkari took over as minister, he had 384 projects which were stuck. Of these, he terminated 41 immediately. “These had become unviable; even the contractors were not interested in them anymore after a two-and-a-half-year delay,” says Gadkari. All the rest have been sorted and restarted except 16, which, he says, would be resolved in the next month or two.

Economist Meghnad Desai offers a reason for that sense of urgency—and some sort of explanation for Gadkari’s inexorable drive to make a mark. He “wants to be seen as the go-to man in government after Modi”, reasons Desai. “He realises that with a workaholic Prime Minister, if he has to stand out, he needs to almost outperform Modi himself. But that seems unlikely, so he is bent on outperforming every other minister.”

Of course, there’s a lot of rhetoric involved, but pare that away and there’s still good work being done on Gadkari’s watch. For instance, he had grandly announced that the pace of road construction would go up to 30 km a day by 2016. It’s 2016, and the pace of construction has reached 16 km a day. Which is laudable, given that when Gadkari took charge, construction was hovering at 11 km a day. But it sure isn’t 30 km. Not that reality seems to be hitting Gadkari very hard. When I meet him, he says: “My aim is to get to 100 km a day.” My incredulity must have shown, because he adds: “I am talking to everyone possible—state governments, financial institutions, everyone.”

Then, there’s the ambitious project to expand the national highways network from 96,000 km to 180,000 km, which will include 16 express highways. When will that happen, I ask. “Give me 30-60 days,” says Gadkari. “We are almost there.”

Bombast aside, there’s a lot that Gadkari brings to the table. Abraham says it is not just the speed at which Gadkari is building but “his overall approach” that is strikingly different. For example, the minister has allocated 1% of each highway project cost to give the roads a green cover; planting and maintaining the green cover will be monitored using geonavigation systems of the Indian Space Research Organisation and the Airports Authority of India.

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Gadkari has promised that his work alone will add 2% to India’s approximately $2 trillion (Rs 126 lakh crore) GDP by the time Modi’s first term ends in 2019. Over the next three years, his ministry will be handling projects worth $75 billion to $100 billion. That’s not just roads; it includes Gadkari’s ambitious inland waterways project, and his plan to build ports right down the coastline. These are all projects fraught with trouble—building roads involves procuring large swathes of land, sometimes agrarian. And the waterways and ports projects could become environmental minefields. Negotiating this landscape, say experts, has been Gadkari’s greatest achievement so far.

A few days before this magazine went to press, news came in that car maker Hyundai had sent 800 cars to Pipavav in Gujarat—by sea. The shipment was on a roll-on, roll-off vehicle carrier flying a foreign flag (the ship, IDM Symex, is registered in St Kitts & Nevis). It’s a big deal because domestic carriage on foreign ships has so far been prohibitively expensive, thanks to the protectionist cabotage law in force. Under Gadkari, the transport ministry has recommended easing this law to allow shipments such as Hyundai’s on foreign ships. The implications are far-reaching. Not only is transporting by water easier and cleaner, it is also way safer than transporting by road or rail.

Those are all the reasons why Gadkari is pushing his dearest project: inland waterways. The National Waterways Bill of 2015, which he spearheaded, declares 111 inland waterways as national waterways—up from five since 1947—paving the way for their development and use for cargo and traffic. “By encouraging waterways, we can bring down the cost of transport by 15% to 20%, making us more competitive,” says Gadkari.

In China, 47% of goods and traffic move on water; in South Korea and Japan, about 44%; and in most European countries, around 40%. In India, it is barely 3.5%. India has 111 rivers and the government wants to use them all, not just for freight, but also to develop riverfronts for everything from tourism to building cold storages and refineries. With 100 new port-related projects coming up, including 12 new ports (including the Sagar Port in West Bengal, Colachel in Tamil Nadu, and Dahanu in Maharashtra) and an investment of $85.21 million to develop the economically and strategically important Chabahar Port in Iran, Gadkari sees the government saving close to Rs 40,000 crore by 2025 through lower logistics costs and time reduction.

Experts say moving traffic to water will also reduce India’s ghastly record of road accidents—500,000 accidents and 150,000 deaths a year—the worst in the world. While bad and often unlicensed driving is a definite problem, it is something that can take years to fix. Gadkari’s solution seems to be far simpler: reduce traffic. Reducing traffic—and pollution—is very clearly on Gadkari’s agenda. 

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In Delhi (where the BJP lost the state elections last year), the 80,000-odd goods trucks belching smoke through the city add to its already severe air pollution problem; Delhi has the most polluted air in the world. “We want to reduce Delhi’s air pollution by 50% by reducing 50% of the traffic on Delhi’s roads,” says Gadkari. “I am giving you the assurance that in the next two years Delhi will be free of traffic jams and air pollution will go down dramatically.” His plan is to build two major ring roads around the city, which will allow trucks to bypass the national capital altogether. (Delhi’s chief minister, Arvind Kejriwal, also wants to reduce traffic on Delhi roads, though he is aiming at reining in private vehicles through an alternate-day odd-even number plate scheme.)

What Gadkari is getting high praise for is his work on highways. “Gadkari has charged up the highways sector,” says Shailesh Pathak, former officer of the Indian Administrative Service (IAS), who rejoined the private sector a decade ago. Pathak used to be the infrastructure investing head of ICICI Venture, the private equity subsidiary of ICICI Bank, and secretary of the Public Works Department of Madhya Pradesh, as well as managing director of the State Infrastructure Development Corporation. “After 2004, a succession of NHAI [National Highways Authority of India] chairmen could not do much with the indifferent quality of ministers,” he says. “Gadkari rejuvenated the entire sector; there is unprecedented activity here.”

Pathak agrees that it’s far from unusual for ministers to push through pet projects. The reason he singles out Gadkari is for his ability to make sense of the complex alphabet soup that is India’s road-building exercise. 

For those of us without Gadkari’s ability, here’s a quick primer. Before 2004, most highways were built on cash contracts. In the last decade, the government opted to take the PPP (public-private partnership) route. Its preferred contracting structure within this was the build-operate-transfer (BOT) model, where the contract is signed with a private company (and lowest bidder) to construct public infrastructure. The private company raises finance and operates the project for a specified period (15-20 years). The company can charge a toll from users, and at the end of the period, the project is returned to the government.

Of course, things are never as simple as they seem. I ask Kamal Verma, who was CEO of SREI Infrastructure Finance between 2011 and 2014, in charge of the company’s roads business handling PPP BOT projects worth $2.2 billion. He tells me how a SREI project had been stalled in 2013. The project, a highway stretch in Kerala between Thrissur and Angamali, could not be opened (and, therefore, no toll could be collected) due to political rioting for 66 days. “Everyone wanted to use the road but no one wanted to pay,” remembers Verma, who is now deputy chief business development officer at the Hindustan Construction Company. In another SREI project, the highway from Indore to Ujjain in Madhya Pradesh, toll revenue was barely a third of the estimate when it opened in 2011. “It was impossible for a private company to take into account such levels of risk.”

The problem as Verma sees it is: “Many of the companies bidding were basically contractors. They had no expertise in maintaining a project and running it profitably. So they just wanted to complete it and then sell the lease to someone else.”

This is why, says Pathak, several bidders resorted to ‘financial engineering’ by trying to inflate the bank loan amount to much higher than the actual construction cost, and that’s where delays and corruption started. He says Gadkari knew how to handle this from his experience in building the Mumbai-Pune Expressway. “One of India’s biggest companies was the single bidder in the initial PPP tender, bidding over Rs 3,500 crore. Gadkari asked why it couldn’t be done within his estimate of Rs 1,600 crore. The patriarch promoter of the company laughed at him, challenging him to go ahead and do it. But Gadkari had the last laugh; he got the Maharashtra State Road Development Corporation to complete it within cost, in a record time of barely three years,” remembers Pathak. 

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Another typical Gadkari solution to the problem of toll collection is his introduction of e-tolls at 360 toll collection centres. “There is little incentive for any of the stakeholders to move away from cash collections in tolling operations. There are incentives to fudge numbers on part of the concessionaire, the vehicle drivers, and regulatory agencies. This cannot be solved through better monitoring alone. Technology is the only solution, and Gadkari has taken it,” says Pathak.

That kind of solution is not possible all the time. So, Gadkari introduced a new set of letters: EPC and HAM. In the EPC model, the government finances the project, and hires contractors on a turnkey basis. In the recently launched hybrid annuity model or HAM, the government pays 40% of the project cost; the rest is raised through debt or equity by the private company which builds and operates the project, in return for a fixed annuity payment.

Rohit Singh, joint secretary in the Ministry of Road Transport and Highways, is a Harvard Kennedy School graduate and among the best authorities on building highways in India. He worked on the HAM plan, and was part of the ministry in the Congress government too. He says: “Though as a bureaucrat one is usually reticent, there is little doubt in my mind that Gadkari is probably the best performer in this ministry.” 

Gadkari is also looking wider afield with the 4,000 km Delhi-Bangkok road route, for which a trilateral pact between India, Myanmar, and Thailand will be formalised soon, perhaps even this month. There’s already a pact in place between Bangladesh, Bhutan, India, and Nepal, for an $8 billion project to connect the countries by road, financed by the Asian Development Bank. 

The multilateral pacts with neighbouring countries are part of Prime Minister Modi’s ambitious foreign policy. By aligning himself closely with this, Gadkari seems to be making sure of his political future. 

It seems to be working. In his Budget speech for 2016, Finance Minister Arun Jaitley pointed to Gadkari and power minister Piyush Goyal as key performers. He also sanctioned an unprecedented Rs 1 lakh crore to be spent on building infrastructure. 

Equally important, as one top ranking BJP leader says, Gadkari is naturally affable. That’s a valuable quality in politics, and stood Gadkari in good stead decades ago when erstwhile party stalwarts, the late Pramod Mahajan and Gopinath Munde, allegedly threatened to end his career. It’s that affability and ability to stay on the right side of most people that could allow Gadkari to push through the Herculean task of upgrading India’s infrastructure. Of course, if that fails, there’s always the threat involving that rail overbridge.