Policy misadventures causing irreparable economic and ecological loss

IL&FS does not have the money to pay back. Rating agencies have classified the equity of IL&FS as ‘junk’, which means it is absolutely un-redeemable. (Photo: PTI)

In the last few years India has seen an unusual spurt in infrastructure projects. Be it expressways, townships or airports – there has been a spree of announcements and launch programmes. But how these projects are benefitting the economy or improving the lives of citizens of the country, no one knows. On the contrary, if we go by the recent developments, these big-ticket infrastructure projects seem to be pointing out to a bigger economic and ecological malaise.  

Economically, the most recent example of deliberate policy mismanagement is that of IL&FS, a major infrastructure development and finance company. The IL&FS exposure is apparently expanding everyday from the initial Rs 91,000 crore. Now it is established that even insurers are not safe. The IRDAI chairman SC Khuntia says insurers need to be proactive to policy holders’ interest. The LIC alone has over Rs 13,000 crore exposure to IL&FS, in other words this money of insuring people as of now is lost and chances of redemption is thin. The functioning of IL&FS has been unusual as it virtually gave unsecured loans to the road builders, who were supposed to collect tolls and repay. Tolls were collected but the loans were not repaid!

IL&FS does not have the money to pay back. Rating agencies have classified the equity of IL&FS as ‘junk’, which means it is absolutely un-redeemable. The common man’s money deposited with the LIC and SBI is virtually lost. Ways are being found to protect the funds of foreign investors. It is strange that major stakeholders LIC, SBI and Central Bank did not act to stop this. Financial analysts estimate that Rs 57,000 crore is the NPA (Non Performing Asset) or money virtually lost.

Real estate is a major sector known for dubious investments and financial dealings. The RBI in 2016 found that over Rs 5 lakh crore in the real estate and infra is locked in NPAs. A big group alone has Rs 1.21 lakh crore un-redeemable debts. Many of these have linkages with IL&FS. No lesson has been taken from the collapse of Jaypee group which took loans over Rs 95,000 crore in building Yamuna expressway and large townships. Now it is in trouble looking for an exit through acquisition again by government agencies.

Infrastructure like roads and flyovers are becoming source of illicit revenue generation by private parties. In fact, the tolls and road building sector may be emerging as the largest scam in the country, possibly larger than the 1992’s Harshad Mehta stock scam. It thrives on state acquiring land with public money, building roads with NHAI money in participation with some private agency and then lease out the public funded project to the private player for 30 years for collecting toll. Nobody answers why toll is needed for 30 years when not only Delhi-Noida Direct company but also many others recovered investments in three years.

Political masters have their vested interests in these projects and they make the required changes in the law to facilitate the private parties. The recent Supreme Court observation on Haryana Assembly amending the Punjab Land Preservation Act (PLPA) 1900 removing protection to the forest cover in Aravali and thus opening up more than 28,000 acres of land in Gurugram and Faridabad to private builders, is a glaring example of this. The court asked the government not act on the amended provisions and described the move as a misadventure by the state government.

The Haryana action is to virtually loot the pristine environmental preserve of the Aravalis for the benefit of a few developers and their cohorts. It is none of their concern that the NCR, suffering severe environmental degradation as aquifers are choked and forest devastated for benefiting the sharks by causing severe pollution. In fact, the worst is happening in UP. Entire stretch of Ghaziabad, Bulandshahr, Noida, Hapur, Meerut, Agra and Aligarh are being turned into desert as mesh of roads, highways, expressways and airports are constructed. And who pays for it? The common man – who has no other option but to live in this degraded environment.

The high tolls, parking charges, airport tax and other levies are leading to the exploitation of the masses. It helps groups engaged in the collection of all these, who thrive at the cost of public funded companies or the model called PPP, which simply is private pilferage of public wealth. In monetary terms alone, nation has lost over several lakh crore in such ill-thought of non-projects. If GDP is today shrinking to 6.7 percent these mega failures are responsible for it. The IL&FS, tolls and many infra projects are symptomatic of a larger disease. Whether IL&FS debts are declared NPAs or not, its redemption is difficult. National discussion on IL&FS, Haryana, UP or other infra projects are needed to immediately to stop perpetual loot and regression of the development process.

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