A passage through India

tauringhuang.

It
is 1am and Ashok Alange prays for a safe trip, lighting incense sticks before the miniature statue of the Hindu elephant god Ganesh that he keeps fixed to his truck's dashboard.

His second driver, Hanmunt Sagar, climbs aboard the locally made Eicher 9-tonne vehicle, which is laden with cans of paint and chemicals. Together they begin the journey from the yard of Patel Integrated Logistics, in Thane near Mumbai in Maharashtra state, to Ahmedabad, the capital of neighbouring Gujarat.

In terms of distance, the 540-kilometre drive is relatively short in a nation of India's size. But the country's battered roads and red tape will turn the trip into an Indian infrastructure odyssey that will take nearly 24 hours with barely a break.

After only minutes on the road, the truck pulls into what will be the first of numerous government tax collection checkpoints and toll booths along the route. This one charges Rs100 ($2.35, £1.20,

tauringhuang.

"These guys are staggering for what they've achieved and also for their ambition. You've really got to look at the Carnegies in the States for the equivalent impact on history," says Michael Queen, managing partner at 3i, the UK-based private equity group, which has invested in Adani projects.

The scale of the opportunity has brought other foreign groups flocking in too, including Australia's Macquarie Bank and Citigroup of the US. "The prime attraction of India is the extraordinary demographic story that will support economic growth and therefore will support demand for infrastructure not only over the next five to 10 years but right through to 2050 and beyond," says Nick van Gelder, head of Macquarie Capital Funds in Asia.

India's biggest infrastructure success story so far is the liberalisation of the telecommunications industry to allow almost unfettered private sector access. This has created the world's fastest growing market for mobile phones with a total of about 269m subscribers. The country has also completed showcase projects such as the Delhi metro. It has formed public-private partnerships to upgrade the international airports of Mumbai, Delhi, Hyderabad and Bangalore and built 3,600 miles of highways for the Golden Quadrilateral project, compared with the 300 miles built in the previous 50 years.

tauringhuang.

But in a country as vast as India and with a population of 1.1bn people, critics say much more progress is needed. On almost every front - ports, electricity, roads, airports and urban transport in centres such as Mumbai - infrastructure is close to breaking point. It takes exporters an average of more than 15 days to get their goods through customs - double that of other main emerging markets.

Perhaps the most worrying sector is power. Already power outages are costing Indian business nearly 7 per cent of sales - nearly six times the rate in China. McKinsey, the management consultancy, estimates in a recent report that if the economy continues to grow at even 8 per cent a year, the country will need to nearly triple its generating capacity within the next decade to about 440,000MW. This means adding up to 10 times more capacity each year than the 4,000MW it built on average during the previous 10 years. This seems a tall order given that between 2003 and 2007 the government built less than half the 41,000MW it had targeted.

McKinsey lists the numerous reforms still needed in power, some of them politically difficult, such as privatising distribution in more cities, reducing theft and curbing indiscriminate subsidies for agriculture. India's power plant equipment and construction companies need meanwhile to be strengthened and difficulties acquiring land, gas and coal all addressed - along with a shortage of semi-skilled workers to build the plants.

Beyond the physical realities, economists point to the less tangible reforms needed to stimulate progress in infrastructure, such as fostering a large corporate bond market to provide long-term capital, providing single windows for project approvals and unifying regulations across state borders.

At least as concerning than the challenges themselves, however, is a growing impatience evident in some quarters of Indian business over the speed of the reform process. The clearest sign of this is that, even as foreign investors are rushing to India, some local groups are quietly taking their cash overseas.

GMR Group, which recently completed a sparkling new airport at Hyderabad, in June bought the previously US-owned InterGen, an overseas power operator, for $1.2bn. The move follows a successful bid by the group for a contract to refurbish Istanbul's Sabiha Gokcen International Airport. GMR says the acquisition will give it the expertise to bid for large government power contracts in India.

But some executives in Indian infrastructure companies privately admit the real reason they are looking overseas is because things are moving too slowly at home. "People talk about the opportunities in India - though we would also love to invest only in India, where are these opportunities? It takes such a long time to crystallise a project," says one such local executive, who declined to be identified.

He points to the airports. The government has stalled on tendering for the 35 secondary airports, with few new projects being awarded in the sector since 2005. In power, India is sitting on some of the world's largest reserves of coal but bureaucracy between the state and central governments mean it is not being allocated quickly enough to power producers. "In India we are just twiddling our thumbs and waiting for the opportunities to emerge," the executive says.

With the Congress party-led ruling coalition facing a general election within the next year, few expect it to find the time or the political will to make a further big push on infrastructure any time soon. That means India will in all likelihood have to get used to slower economic growth.

Chetan Ahya, a Morgan Stanley economist, agrees with the government that for India to continue growing comfortably at 8 per cent a year, it needs to at least double its investment in infrastructure. He says India's failure to step up infrastructure investment in the past few years to keep pace with investment in other parts of the economy, such as manufacturing and services, has already led to over-heating and inflation - which, according to figures released last Friday, is at a 13-year high of 11.4 per cent. That is forcing the central bank to increase interest rates, choking economic growth.

While that may cost business money, ultimately it is people such as Mr Alange who pay the price for bad infrastructure - often with their lives, in a country whose road accident rate is 40 times that of the UK.

After clearing the jam at the toll booth, the truck finally makes its way towards the Gujarat border, dodging crater-like potholes and swerving at the last minute to avoid a broken down truck left parked in the middle of the highway.

At the border, Mr Alange must first buy an entry permit to get into the state, then queue in his truck at a separate booth to pay a central government tax. Often, drivers have to supplement these payments with bribes. The bureaucracy cleared, the truck finally arrives at its first drop-off point, Vapi, an industrial town in Gujarat. It is only 140km from Mumbai, yet the journey has taken seven hours.

Before pushing on to Ahmedabad, Mr Alange, a portly former farmer from inland Maharashtra who earns Rs10,000 a month, allows himself the brief luxury of a roadside cup of chai, half of which he pours into the saucer for the second driver.

Despite the parlous state of the roads, which are littered with the debris of head-on collisions, he does not grumble much. Asked whether he fears accidents, he invokes the spirit of a 17th century Hindu king who terrorised India's Islamic Mughal rulers from his hilltop forts near Mumbai. "I have been driving for this company for 25 years," he says. "Until now, Chhatrapati Shivaji has protected me."

'The city will be in trouble - we'll get the blame'

In the Arabian Sea off Mumbai's western coast, a miracle of sorts is taking place. An eight-lane highway, culminating in what the contractors claim is "the world's longest, concrete cantilever cable-stayed bridge", is slowly taking shape above the choppy waters.

The Bandra-Worli Sealink, phase one of a project that will connect Mumbai's airport in the north of the city with its central business district about 30km to the south, may not be the Golden Gate. But the project - with its elegant 128-metre central tower anchoring the cables for the main bridge - is the kind of civil engineering feat more often associated with China rather than India. ^_^

The problem is the project is running over-budget and is years late. Not only that, due to clumsy government planning, when the Sealink is finished it will be in danger of becoming a white elephant.

Across India, a similar story is playing out. The central and state governments have kicked off a number of flagship projects but are in danger of squandering the benefits through a lack of planning and co-ordination.

Nowhere is the need for infrastructure more evident than in India's cities. Goldman Sachs estimates that the percentage of urbanites will double to more than 60 per cent by 2050 - as many as 700m additional people. "The impact on infrastructure demand will be enormous, from demand for inner-city transport, water and sewerage to low-income housing," Goldman says in a report.

That means India will have to get better at implementing projects such as the Bandra-Worli Sealink. To ease congestion on the city's existing airport road, the government in 2000 commissioned Hindustan Construction, a local contractor, to build the bridge for Sealink. But the project, today valued at Rs16.4bn ($380m, £190m,

tauringhuang.

He points to the airports. The government has stalled on tendering for the 35 secondary airports, with few new projects being awarded in the sector since 2005. In power, India is sitting on some of the world's largest reserves of coal but bureaucracy between the state and central governments mean it is not being allocated quickly enough to power producers. "In India we are just twiddling our thumbs and waiting for the opportunities to emerge," the executive says.

With the Congress party-led ruling coalition facing a general election within the next year, few expect it to find the time or the political will to make a further big push on infrastructure any time soon. That means India will in all likelihood have to get used to slower economic growth.

Chetan Ahya, a Morgan Stanley economist, agrees with the government that for India to continue growing comfortably at 8 per cent a year, it needs to at least double its investment in infrastructure. He says India's failure to step up infrastructure investment in the past few years to keep pace with investment in other parts of the economy, such as manufacturing and services, has already led to over-heating and inflation - which, according to figures released last Friday, is at a 13-year high of 11.4 per cent. That is forcing the central bank to increase interest rates, choking economic growth.

While that may cost business money, ultimately it is people such as Mr Alange who pay the price for bad infrastructure - often with their lives, in a country whose road accident rate is 40 times that of the UK.

After clearing the jam at the toll booth, the truck finally makes its way towards the Gujarat border, dodging crater-like potholes and swerving at the last minute to avoid a broken down truck left parked in the middle of the highway.

At the border, Mr Alange must first buy an entry permit to get into the state, then queue in his truck at a separate booth to pay a central government tax. Often, drivers have to supplement these payments with bribes. The bureaucracy cleared, the truck finally arrives at its first drop-off point, Vapi, an industrial town in Gujarat. It is only 140km from Mumbai, yet the journey has taken seven hours.

Before pushing on to Ahmedabad, Mr Alange, a portly former farmer from inland Maharashtra who earns Rs10,000 a month, allows himself the brief luxury of a roadside cup of chai, half of which he pours into the saucer for the second driver.

Despite the parlous state of the roads, which are littered with the debris of head-on collisions, he does not grumble much. Asked whether he fears accidents, he invokes the spirit of a 17th century Hindu king who terrorised India's Islamic Mughal rulers from his hilltop forts near Mumbai. "I have been driving for this company for 25 years," he says. "Until now, Chhatrapati Shivaji has protected me."

'The city will be in trouble - we'll get the blame'

In the Arabian Sea off Mumbai's western coast, a miracle of sorts is taking place. An eight-lane highway, culminating in what the contractors claim is "the world's longest, concrete cantilever cable-stayed bridge", is slowly taking shape above the choppy waters.

The Bandra-Worli Sealink, phase one of a project that will connect Mumbai's airport in the north of the city with its central business district about 30km to the south, may not be the Golden Gate. But the project - with its elegant 128-metre central tower anchoring the cables for the main bridge - is the kind of civil engineering feat more often associated with China rather than India. ^_^

The problem is the project is running over-budget and is years late. Not only that, due to clumsy government planning, when the Sealink is finished it will be in danger of becoming a white elephant.

Across India, a similar story is playing out. The central and state governments have kicked off a number of flagship projects but are in danger of squandering the benefits through a lack of planning and co-ordination.

Nowhere is the need for infrastructure more evident than in India's cities. Goldman Sachs estimates that the percentage of urbanites will double to more than 60 per cent by 2050 - as many as 700m additional people. "The impact on infrastructure demand will be enormous, from demand for inner-city transport, water and sewerage to low-income housing," Goldman says in a report.

That means India will have to get better at implementing projects such as the Bandra-Worli Sealink. To ease congestion on the city's existing airport road, the government in 2000 commissioned Hindustan Construction, a local contractor, to build the bridge for Sealink. But the project, today valued at Rs16.4bn ($380m, £190m,

tauringhuang.

The Bandra-Worli Sealink, phase one of a project that will connect Mumbai's airport in the north of the city with its central business district about 30km to the south, may not be the Golden Gate. But the project - with its elegant 128-metre central tower anchoring the cables for the main bridge - is the kind of civil engineering feat more often associated with China rather than India. ^_^

The problem is the project is running over-budget and is years late. Not only that, due to clumsy government planning, when the Sealink is finished it will be in danger of becoming a white elephant.

Across India, a similar story is playing out. The central and state governments have kicked off a number of flagship projects but are in danger of squandering the benefits through a lack of planning and co-ordination.

Nowhere is the need for infrastructure more evident than in India's cities. Goldman Sachs estimates that the percentage of urbanites will double to more than 60 per cent by 2050 - as many as 700m additional people. "The impact on infrastructure demand will be enormous, from demand for inner-city transport, water and sewerage to low-income housing," Goldman says in a report.

That means India will have to get better at implementing projects such as the Bandra-Worli Sealink. To ease congestion on the city's existing airport road, the government in 2000 commissioned Hindustan Construction, a local contractor, to build the bridge for Sealink. But the project, today valued at Rs16.4bn ($380m, £190m,