Clearances major challenge for large infra projects: DMIC

Taking approvals for the private sector is quite a nightmare.

Amitabh Kant CEO & MD DMIC

He is hopeful that this infrastructure programme will bring a paradigm shift in India’s infrastructure development and process of urbanisation.

However, he adds that there is need for large industrial projects to be well-structured and the government should obtain requisite approvals for big ticket projects before bidding them. Speaking to CNBC-TV18, Kant said, by May 2014, two large townships and two multi- modal axles are likely to begin by May.

Below is the edited transcript of Amitabh Kant’s interview with CNBC-TV18

Q: How much of the industrial corridor investments have been tendered at all?

A: In Delhi Mumbai Industrial Corridor Development Corporation, one of the key lessons is that projects must be well structured. When we put out the projects into bidding all approvals must be in place before any bidding is done. We must clearly understand that the DMIC is about making completely new Greenfield cities in India and Greenfield cities require very detailed planning. These plans need to be notified, these cities need to be ring fenced so that the land monetization values come back to the city and therefore state acts were to be amended, which have been done. When cities were made in India, Gurgaon, Noida, we have seen upsides of land values being captured by political parties and by real estate players and not coming back to the city. Therefore a lot of work had to be done. All this has been done. The DMICDC Trust has approved substantial number of projects. We are going to break ground with Dhulera in Gujarat for the first 24 sq kilometer, Maharashtra and with two new cities in Uttar Pradesh (UP), the Greenfield township in UP and one in Madhya Pradesh (MP) between Ujjain and Indore. My view is that DMIC is going to be a long-term play; we should not rush up with it. This is a project which is going to make a paradigm shift in India, infrastructure development and its process of urbanisation. It is very important that we don’t make the kind of mistakes we have done in other infrastructure sector.

Q: How much is ready to be tendered, has anything been tendered at all or how much will be tendered in 2014 first half or second half?

A: In 2014, we will have close to about almost four new cities taking off in India. We have finalised the development plan and with all approvals in Maharashtra, Gujarat, UP, MP and two large multimodal logistic hubs. This w   ill be nothing less than very substantial movement on ground forward. This will really push urbanisation in a very big way. The important thing is that this would have been done after a lot of detailed homework, detailed engineering work; environmental clearance would have been taken by the end of this year. We will see by about May of next year in 2014 for two large cities and two large townships and two large multimodal logistic hubs taking off in 2014 with implementation on ground.

Q: It is important to bring out that there is a consorted move to make investment a lot friendlier on the ground and surely this will not happen in three-four years but directionally this is what we needed to do? If you put out your tenders in May, will India Inc bite?

A: When you do new cities, it is very important that you create the backbone of the city, the drainage, the information and communication technology (ICT) network on the back of it and that is the kind of detailed engineering that we have done. So that India makes a quantum jump in quality of engineering. This backbone of these new cities is being created with government funding with long-term lending coming in from Japan. Therefore, once the backbone of cities is created then it becomes far easier for private sector to come in. You cannot have situations like we have had in our existing cities where we bring in private players and then we start doing retrofitting of trunk infrastructure much later. My view is that once the backbone of these cities has been created and many of these contracts in the initial phases will be EPC contracts. To our mind, this would enable the private sector to come into the subsequent phases much quicker, much faster because all approvals would have been in place. Taking approvals for the private sector is quite a nightmare. We have struggled with this, we have taken about 44-45 clearances. That is a big challenge that we have met. We are extremely confident that once the EPC contract to global scale and sizes cracked on ground, the private sector will come in an extremely big way and that will provide the momentum to India’s manufacturing to India’s urbanisation.

Q: Like Mr Kant said that to create this entire infrastructure backbone, you have direct and indirect beneficiaries and all of these sectors, power, auto etc, can you just put together some stocks or some pockets that would benefit from this?

A: I just wanted to conceptualize it this way. When you created one port in Gujarat with Adani, it has gone from nowhere to the largest port in India effectively today, it is a USD 5 billion marketcap in these depressed times. What they are doing is creating seven manufacturing enclaves across India. It is much beyond the port, you will get the power and the water and the roads and everything built up, so you can go and plug and play. It also solves things, which we don’t have on the export side. We don’t have scale in India because you don’t have these zones, which allow manufacturing because today our special economic zones (SEZs) are all 50 sq miles - suiting a developer or a particular industrial house or a particular party and so on. If this is indeed implemented, this changes the landscape of manufacturing in India and these new townships effectively are a new Mumbai or a new Aurangabad or a new Nasik and so on. It is a bit like the internet. When the internet came, it is the content providers who just completely lifted off. This can lead to a big revival of manufacturing in India. Manufacturing is 15 percent of gross domestic product (GDP). Our exports are some 7-8 percent net of GDP today. We clearly need that to lift off. I would just like to put this in a perspective because goods produced in the northern part of India, today take about 13-14 days to reach the ports to the Western coasts of India. Once the Dedicated Freight Corridor comes in by the end of 2017, you will have goods reaching the ports within 14 hours and that is to my mind is a radical shift. It will make a paradigm shift. This would bring in a huge amount of efficiency in India’s exports and when you have these new large manufacturing cities on either side of these dedicated freight corridors, India will make a quantum jump in manufacturing. Dhulera, the city which we are doing in Gujarat is size of almost 920 sq kilometer. This was the size and scale of dimension of the planning process, the detailed engineering that we have undertaken. That is larger than Singapore. So we need to take a long-term perspective on this.