Tuesday, July 18, 2006

Problems with the new NHAI roads

I have long been fascinated by the transformative power of roads, and have looked to the new NHAI roads as a very big story for obtaining internal gains from trade, factor mobility, etc. In today's Financial Express, Sebastian Morris has an excellent piece about the severe quality assurance problems of NHAI. I think these kinds of problems had long been anticipated by the people who were concerned about the structure of incentives with roads procured by the government through EPC contracts, as opposed to contractual structures which induce superior incentives such as those based on annuities. We have focused greatly on construction and not enough on corridor management.

But going beyond the incentives of the vendor, I think there is a bigger problem going on in terms of the lack of interest in a large array of government agencies - ranging from NHAI to tax men to the police - in the frictionless flows of goods and people. Too many people who have spent their whole life with pothole-filled roads don't particularly care about high bandwidth.

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