Wednesday, April 8, 2015

Path-Breaking Models for India?

Examples of coordinated initiatives if they can be made to work.

Press reports suggest that there are some encouraging economic developments despite continuing uncertainties. The examples below relate to and an aspect of waste management. If they're for real and are successful, there may be hope yet for a transformation.

Energy: Coal-to-Electricity Supply

Some years ago, Ltd (CIL) began exploring a joint approach with other stakeholders in the process of delivering electricity to users. Prospective partners included the railways and state and local government agencies, such as ports (Chhattisgarh, Jharkhand and Odisha; Krishnapatnam Port). The intent of these ventures is to develop coherent solutions to customary problems, such as land acquisition, environmental clearances, logistics, distribution and collection. Participants in these ventures share the responsibility for the delivery of electricity for payment. These efforts to combine the disparate interests of the players, formerly operating in separate domains without acknowledging their interrelationships, could achieve much better outcomes than with each entity working solely in its own interests. The domain expertise can be focused as required, for example, in developing mines, producing coal, transporting coal (or more generally, fuel), generating electricity and distributing it, and collecting payments.

The participants with CIL, such as Ltd (Ircon) - an engineering and construction company promoted by Indian Railways specialising in transportation - state governments, and local administrative institutions responsible for power generation and distribution, can harmonise their activities for convergent results. With appropriate skills where required in the value chain, and given CIL's strong cash position, a substantial increase is expected in the electricity generated from domestic coal.1

Waste Management in Trains: Self-Contained Bio-Toilets

Another equally momentous path-breaking effort has been under way in the railways to develop and replace the primitive, direct-discharge toilets in railway carriages with self-contained bio-toilets. A decade ago, Indian Railways and the (DRDO) began collaborating on a venture to apply biotechnology to toilets in passenger carriages. The product was developed and tested in 2011, and installation in new carriages was begun. Over 17,000 carriages now have these toilets. In the next five years, all passenger carriages are slated to have them.

Apart from being far more hygienic and functional, they are likely to contribute to substantial savings in replacing corroded tracks that are damaged by the direct discharge toilets (see "Railways aims to eliminate direct discharge toilets by 2020-21" for details).2 In addition, they may engender an entirely different mindset and approach to the Swachh Bharat (Clean India) campaign, taking us from the superficial to the sublime, even though that's a long way off.

Exemplars of New Paradigms

Both are examples of path-breaking solutions through innovation and coordination, instead of continuing with business as usual. They also exemplify templates for collaborative problem solving, which is sorely needed in so many areas. The coal-to-electricity example invites the question of why many more issues requiring coordinated solutions have not been pursued actively before and made to succeed. One set of reasons may be insular thinking or a silo mentality, and the related preoccupation with territorial concerns or turf wars that impede collaboration. This is aggravated when the leadership is unable or unwilling for whatever reason to control internecine squabbles among "feudal barons", or does not treat it as a sufficiently high priority. It could also be that our top political leadership, whichever the party, has different priorities, and concern for the public interest is largely for appearances.

If they are successful, the developments in coal-to-electricity will have a huge salutary impact on the availability of electricity, especially because of the coal mining lease cancellations. The shortfall from the cancellations is estimated at 18 gigawatts (Gw), whereas the coal auctions so far cover fuel for only an estimated 2.5 Gw. Yet the waste management initiative by the railways may be even more significant. This is because it is an aspect that has been so utterly ignored over many decades, if not centuries, and because it doesn't offer the allure of quick returns, or of a glamourous image. What it does offer is the greatest upliftment in conditions for civilised living. If the Swachh Bharat campaign adopts this philosophy and extends it, we can progress from merely shifting garbage from one place to another, to beginning to deal with it effectively.

The Sticking Points

In contrast to these positive examples, however, there are very serious deficiencies in our current trajectory. Consider the recently concluded coal and spectrum auctions. While auctions have popular appeal because of transparency and market pricing considerations, they have inevitable consequences when there are "winner's curse" outcomes, or where there is already inadequate availability that results in continued service deprivation, as in the limited broadband reach in India.

Both auctions have concluded "successfully", with success defined as high government collection prospects (~2 lakh crore for coal, and ~1.1 lakh crore for spectrum), but they will have two major detrimental effects. The first is price escalation, because of the added auction costs that must be recovered over the life cycle of the leases for the companies to stay profitable.3 The prospect of increasing costs makes little sense in a developing economy striving to build capacity and momentum, although there is a treasury argument for balancing future potential revenues with current cash collections. The question is to what extent this tradeoff, of taking cash from prospective capital investments to plug expenditure gaps, undercuts essential infrastructure, and for how long. This applies equally to broadband for communications as well as electricity for the grid. As it happens, the inadequacy of electricity from the grid significantly increases the costs and difficulty of deploying and operating the broadband infrastructure as well. The flip side of government collections is the opportunity cost of benefits from investment in networks and services. This investment would enhance employment and productivity, and thereby sustainable government levies, as well as prosperity and living conditions.

This is where the leadership can contribute. If the pathbreakers in electricity supply and waste management succeed, these could serve as models for breaking the mould in our approach to coal and spectrum allocation and management.

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