When large contractors shy away …

In our previous issue (IE November, 2008), I had written of an innovative scheme to transform sprawling slums into livable, multi-storied habitats by the involvement of the government and large property developers of Mumbai. The scheme has two distinct advantages: one, the scope for imparting quality and standards in the execution of such large projects and two, building these to tight cost and time estimates.

Tamil Nadu sadly suffers from the lack of concern for entrusting such large projects to reputed infrastructure/development companies. With the humungous increase in monies available for public works of various types, especially through the liberal constituency development funds made available to municipal councilors, legislators and MPs, one witnesses a parallel growth of party-affiliated contractors. The systematic politicisation of the state has contributed to mushrooming of such contractors who specialise in the art of tendering and winning dozens of government contracts.

The system liberally provides for sharing the spoils among the contractors, politicians and the administrators. In this spoils system, quality and timely completion are major casualties. The boom in construction activities has also resulted in large construction companies, with reputation for quality and timely execution, shying far away from such public works. With charges and counter-charges of the major political parties like DMK and AIADMK of taking kickbacks and harassment, such companies do not bother to even look at such projects. It was thus that one witnesses tenders for infrastructure development for a number of projects in the city not getting any worthwhile response. Repeated fresh tendering through a long-drawn process leads to humungous escalation in costs and progressive dilution of specifications and plans and delays.

End of cheap money, a reason for slow-down

Almost a decade of easy availability of inexpensive money appears to have ended, plunging markets and businesses into gloom. It is easy to blame this on the global meltdown triggered by the collapse of US financial institutions; but then the claims of policymakers on the Indian economy performing so much better and being insulated from the impact of the global meltdown seem hollow.

Indian banks and public sector financial institutions have been averse to taking quick decisions: their long bureaucratic decision-making process is acclaimed today as a great virtue!

The spectacular expansion of retail credit led to lending liberally for housing and consumer durables. In just a decade between 1998 and 2007, housing loan accounts expanded five 'fold to over 50 lakh per annum.

The opening up of the housing sector to foreign investments opened the floodgates for speculation in land prices. Property developers, who worked with modest budgets of a few crores, were edged out by bigger players accessing international funding with their capability to invest a few thousand crore at a time. Such large-scale acquisition of land, earlier confined to Delhi and Mumbai, extended to pan India. The country witnessed humungous increase in land prices. In conservative Chennai where an area of one ground (2400 sq ft) was sold at one crore rupees not long ago in an upmarket locality like Mylapore, has shot up five to ten 'fold for selected properties. Agricultural land in Padappai, 40 km from the city, selling for around a lakh of rupees per acre not long ago, has risen to over Rs.3 crore per acre today!

Added to this, the policy on SEZs again opened up the demand for acquisition of land of larger area. IT companies which were facing the end of the 10-year tax concession for Software Technology Parks of India-assisted schemes in March 2009, were quick to acquire the SEZ status to get such concessions on permanent basis.

Look also at the paradox of liberal floor space index of 3.75 extended to larger buildings constructed over half acre, but restricted to 1.5 for buildings in smaller pieces of land. There was a mad rush in the construction of large space for the IT sector, but with the uncertainty over extension of the STPI concessions, there have been few takers. An estimated 20 million sq.ft. of quality office space is reportedly lying vacant in Chennai's IT corridor alone.

Policymakers have been busy improving liquidity through ad hoc measures. Sadly, one is yet to witness a fairer pricing of land and construction. The low cost of a vast range of goods and services, accompanied by more modest rates of interest, contributed to the 9 per cent plus growth rate of economy. With elections to the Lok Sabha due in mid 2009, one is bound to witness decision-making grinding to a halt. But the best that finance minister P.Chidambaram seems to do is to direct chairmen of a few more public sector banks to open branches in his constituency of Sivaganga.

Electoral arithmetic: power of additions and fractions

The search for new identities and new alignments is even more important for political parties. Tamil Nadu has taken the lead in fine-tuning electoral arithmetic election after election. Political parties assiduously work on this arithmetic that transcends year-long animosities and differences with the single goal of winning the elections.

The beginning in this trend was witnessed in 1967: to defeat the Congress party led then by Kamaraj, Rajaji joined hands with C.N. Annadurai of the DMK and brought together other parties opposed to the Congress. The strategy was simple: by bringing together parties opposed to the Congress, split of votes could be prevented, and Congress could return to power with a modest share of the votes polled. The strategy worked and has come to stay as the bedrock of the state's party alignments. Five years later, the DMK aligned with the Congress (I) and defeated the Rajaji-Kamaraj (Congress-O) combine.
The 1981 elections witnessed stranger happenings: for the Lok Sabha elections, the DMK and Congress fought together and won the majority of seats. But just a few months later, MGR conceded a larger share of seats to the Congress for the elections to the assembly and worked together with the Congress. This, despite Indira Gandhi dismissing the AIADMK government that was in power with a comfortable majority with two more years to rule! Since then, MGR stuck closely with the Congress for his life and effectively kept the DMK out of power.

Over the last 12 years, the alignments have turned out be even more opportunistic. One witnessed the AIADMK and the DMK aligning with the BJP for one election and with the Congress for the other! The math worked wonders in 2004, when the parties led by DMK in which the Congress, PMK and the Communists were together, to win all 39 seats to the Lok Sabha, comprehensively defeating the AIADMK-led front. This front again returned with maximum number of seats in the elections to the state assembly in 2006, though not so comprehensively. In fact, the DMK has been in power just with 95 seats with outside support from Congress, PMK and the Leftists. Later, PMK and the Leftists moved out of this front, and there is also the emergence of state level parties led by cine actors Vijayakant and Sarath Kumar.

So the stage is well set for some interesting developments in the next election. The lead provided by DMK supremo M.Karunanidhi may suffer due to the strong anti-incumbency factor in the state, which seems to work to clocklike precision since 1989. The electorate would also of course look forward to more freebies. The AIADMK and DMK have already completed distribution of free cycles. In line with rising inflation, one could possibly look forward to free powered two-wheelers! Of course, it is a pity that the Nano car is not yet released in volumes.

The sense to spread one's bets…

It is time for realignments not just for political parties like the Pattali Makkal Katchi or the Communists, but also for of other institutions and individuals. This should explain The Hindu's N. Ram participating in a function organized in Chennai to release the Tamil version of the autobiography of BJP president L.K. Advani by Swami Dayananda Saraswathi. After all, Ram and his paper have been virulently anti-BJP, never missing an opportunity to be critical of any and every move of this party. Ram explained his participation in the function, to felicitate Advani on behalf of those who did not agree with his core ideology, but praised the book for its transparency.

It appears worth the while to spread one's bets. I remember Ram's alertness in inviting A.B. Vajpayee to his residence for a get together just before the general elections to the Lok Sabha a decade ago that voted the NDA government to power under Vajpayee.

It appears advantageous to have a several writers in a family with different alignments. With the known Leftist leanings of its editor-in-chief N. Ram, The Hindu was critical of Manmohan Singh's nuclear deal with the US. For close to three years, the paper carried dozens of features and edits hypercritical of the deal with many kilometres of columns liberally provided to Leftists of every hue. But just a day before Manmohan Singh's crucial meeting with US President George Bush at New York, that sealed the deal in September, editor N. Ravi (brother of Ram) wrote an edit page feature fully supporting the deal!
I admire the sobriety and more balanced approach of younger sibling Ravi; this would help restore for The Hindu its credentials for presenting news and views without colour and bias. This is more than necessary now with severe competition for readership of dailies in Chennai, home of The Hindu for over a century.