PPP - Who is beneficiary?

Greetings,

If you have traveled on NH-1 between Delhi and Amritsar, you have noticed a number of toll plazas. Toll plaza is a barrier point where you will stop your vehicle, pay for using the stretch of the road that a private builder has constructed and zooms ahead to stop by at the next plaza. In a stretch of 275 km from Delhi to Khanna, where I commute often, there are 2 toll plazas charging Rs. 110/- a side, when I travel by car.

All these toll collection centers are the revenue collection points of PPP projects, better known as Public-Private Partnership projects. In year 2007, Ministry of Finance has approved 37 projects under PPPAC category. In 2008, so far 8 projects are under the consideration. The project can be a highway project, flyover, bridge etc. However, mostly are highway projects trying to widen the roads, making them 4-lane, 6-lane, 8-lane etc. These projects exist because the state failed to keep pace with the infrastructure needs and humbly agreed that they can't do it themselves so they need more efficient people to work on their behalf. Let's understand this entire concept in one line. The taxpayer's money, which the government was supposed to utilize for building the infrastructure, is being given to some company to execute the project. So far, so good.

Just take any highway project. A car owner, who is a tax-paying citizen of this country, will first buy a car, pay the one time road tax and pay again to commute on the road. Now, in the name of the maintenance of the same highway project, private company is given the right to collect money from the public. Didn't that private company make margins on the project? Maybe. Maybe not. The company might have agreed to go into the long term contract of revenue sharing, rights of project-adjacent land development etc.

Whatever the agreement is that, I failed to understand WHY should the people give the extra money when they are already paying the taxes? What is the government using the taxes for? The government should pay the private company the money for executing, maintaining and whatever of the project. Finance Minister makes sure in every budget that the public is paying enough taxes. The government just can't say "Okay..Govt couldn't provide you better services myself. Govt is arranging for a private company which will provide you better services but public will have to pay more." I don't wish to pay more because this is the basic need that government is obliged to provide.

I really accept that some companies can provide better services and some people do want better services. Some people just can't afford to pay extra. Recently, the NH-8 highway stretch between Gurgaon and Delhi was put under PPP to decrease the commute time. Govt should have done that in first place. They couldn't and they let the private builder built that stretch and now the commuters have no option but to continue paying that extra toll for rest of their lives. The irony is that the traffic problem is still not solved.

Such companies, or rather Government and Private Company, should build a parallel project. NH-1 can be running in parallel just like in US where you have toll road and non-toll road. The right of choice should be reserved with the citizen.

Think, who is bigger beneficiary - Public or Private Company?
~ Navjot Singh Sohanpal

Real Estate Globally - Where is it headed?

Greetings,

I think by now, everybody, at least in IT and realty business, must have heard about Noida. Well, this is the city where I work and live and this is the city which has witnessed almost 4 times real estate appreciation in last 5 years. BPTP bagging the Noida land at awesome 5006 crore gives you an idea that investor's appetite hasn't gone down as such. Such euphoria reminds me of the same Dec/Jan for stock market.

Needless to say that real estate is lot safer than stock market but nobody is sitting out there who can guarantee you returns, especially in such global economy downturn. There are some pockets of real estate which have been virtually sitting at the same rates as they were in 1 year ago. Real estate developers and property brokers have formed such a net that they are not letting the euphoria coming down. If brokers are unable to create that aura, they will be out of business and might even be looking up to losses, assuming they themselves had invested heavily in real estate. Right now, their aura is as shiny as summer's sun in the noon because recently launched DLF's project near Manesar was reported to fully subscribed in flat 6 hours.

You can easily refer to the US, UK and Chinese and even Spain real estate and what happened to the entire housing sector starting first quarter of 2007. Reading this article on US real estate make the entire scenario look more gloomy but looks like this is what is happening.

Reading the ET Estate or speaking to real estate agents paint you a rosy picture but looking at global scenario, I wish to ask a simple question WHY India's market should be different? I think India's real estate bubble has already grown too much and maybe it's high time that government comes in with tighter controls to curb the real estate inflation. If RBI can follow China in increasing the interest rates to curb the inflation, moderate liquidity and slowdown the economy boom, they may also do same as China did for real estate sector.

Cash is King in 2008.
~ Navjot Singh Sohanpal

IT - Sailing through tough waters!!

Greetings,

If you come to of think of IT as a sea and various IT companies as ships sailing through the waters to find greener pastures, you would agree that waters have become turbulent in the pretext of US slowdown and it's impact across the world.

Forrestor has forecasted the slowdown in the IT spending worldwide. The declining dollar has seen the IT service providers growing at 10+% in 2007. They may not see the same growth but the declining dollar and economic slowdown in US would still help them achieve 5-6% growth in 2008. Some people also claim that the picture would become rosy yet again in 2009 with the expected growth around 10%. So, it looks like the overall picture is not that bad; if not that good.

BUT if you read between the lines, the growth trajectory is cutting down by 50%. When IT companies started their year, they must have started planning/budgeting for '08 keeping in mind the growth of '07 because the vision was that US slowdown would increase outsourcing. But, 3 events changed the overall outlook by end of Dec and start of Jan.

1. All of the major financials showed the multi-billion dollars sub-prime write downs in their quarterly results.
2. The fear that sub prime issues might spill over to primary market.
3. The problem of credit growth that Mr. Bush tried to solve using stimulus package.

All of the above led to the major fall in consumer's confidence in US economy which also got proved with real estate meltdown, new home construction figures, jobless data, retail spending figures in US. The companies were suddenly not just looking at reducing the costs by simply moving more jobs to offshore. You can do that but there's a limit to it. They were looking now at strategic long term measures to eliminate the non-productive businesses, basically eliminating costs altogether. Which simply means "I don't need this non-productive / loss making / not-part-of-my-vision business. Right now, I don't need people working in this business. I don't even care if people working in that business were outsourced or not. I may re-visit my decisions once the dust settles down as I don't know how deep the roots can be."

So, in my view, IT companies got caught on the wrong foot where they expected fatter order pipelines but in reality they faced the loss of business; may be just for short period. Even in recent NASSCOM summit, the expectation across the board was that things will turn good in second half of '08.

Hope my company's ship sail through.
~ Navjot Singh Sohanpal