Breaking down silos to build India

PM GatiShakti a step in the right direction, but will need a concerted push.

Silos have long plagued the governance of public sector projects in India. Projects with cross-departmental/ ministry stakeholders have been hobbled by inertia in execution compared with more unitary initiatives.

In a bid to tackle this, the Cabinet Committee on Economic Affairs on October 21 cleared the PM GatiShakti - National Master Plan (GSNMP) for Multi-modal Connectivity to economic zones.

The master plan aims to break down silos, institutionalise holistic planning & ensure seamless functioning across major infrastructure projects. It seeks to streamline such collaboration by means of a three-tiered institutional framework.

Institutional framework

The scaffolding framework to implement, monitor and support the GSNMP has the following constituents:

Tier I: Empowered Group of Secretaries

The Empowered Group of Secretaries, which comprise secretaries from 18 ministries and a member convener from the logistics division, will be led by the Cabinet Secretary. The group will reviewand monitorimplementation to ensure logistics efficiency. It will also have the authority to establish a framework and standards for any further revisions in the GSNMP.

Tier II: Network Planning Group

The Network Planning Group, which is made up of the chiefs of the network planning wings of infrastructure ministries, will help the Empowered Group of Secretaries.

Tier III: Technical Support Unit

The Technical Support Unit will provide the required competencies given the complexities involved in network integration. It will enhance optimisation to avoid duplication of work for the holistic development of any region and help lower logistics costs through micro-plan detailing.

Developing these economic zones in alignment with the sectoral development strategy would be pivotal in the execution of this master plan. For example, road and rail connectivity, as well as availability of rakes, is an important success factor for most sectors the GatiShakti plan proposes to revive.

Hence, a well-planned execution of these economic zones can provide optimum logistics efficiencies in terms of lower integrated logistics costs, providing greater value to stakeholders.

The trade-off

Infrastructure projects often face the brunt of unsynchronised development of enabling logistics activities, leading to hampered prospects despite sound fundamentals — for example, poor utilisation of a port gas terminal due to delays in pipeline connectivity or limited evacuation capacity due to a non-widened connecting road or stalled construction activity due to land acquisition issues of a small stretch.

The GSNMP aims to minimise such issues through a technology-driven platform. Few of the benefits are:

a) Improved project execution visibility

Viability of large infrastructure depends on a plethora of ancillary actions, such as last-mile road connectivity, access to rail sidings, evacuation pipelines, supporting urban infrastructure, etc.These activities typically fall under the purview of different government entities - central, state or local. Lack of synchronisation in completion of these enabling activities often impacts the viability of infrastructure projects.

Well-coordinated government stakeholders across levels can help in timely completion of all ancillary work, improving the visibility of project execution. This, in turn, will help the lenders in assessing the project meaningfully and the developers in predicting the utilisation of the developed assets commensurate to their planned capacities.

b) Control on cost overruns

Infrastructure projects are often marred by cost overruns due to lack of coordinated development in associated works. These costs overruns are typically attributed to halting of construction activities due delays in critical legs of development, underutilisation of deployed resources, idling of machinery, need for additional studies due to time overruns, etc. The cost and time overruns add to capital requirements and impact the viability of the project itself.

Well-monitored ancillary infrastructure with frequently available status updates from government departments, including the state and local bodies, can limit the overruns.

c) Better project appraisal and monitoring

Increased costs due to delays impact the viability of carefully conceptualised projects, burdening the developers and lenders. It is envisaged that with a technology-driven portal, having real-time updates on developments around the projects will help lenders appraise the projects thoroughly. Frameworks can also be developed on the basis of real-time status of the enabling infrastructure, in addition to the construction activity of the project itself.

Lenders can identify and allocate project risks through such frameworks, aiding in disbursement negotiations as well as duediligence. 

d) Boost to connectivity and multimodality to curtail logistics cost

The GSNMP promotes multimodality, which is an efficient way of cargo movement, vis-à-vis bulk/disjointed movement. The ease of cargo movement provided by multimodal logistics improves the utilisation of industrial assets and limits wastages. Despite such advantages, multimodal or containerised freight accounts for less than 10% of overall freight (in billion tonne kilometre terms).

Making the plan work

Private sector participation will be critical for the effective rollout of this much-needed initiative, whether for augmenting existing infrastructure or greenfield development. In recent past, we have seen significant appetite for built infrastructure and the authorities havealso been able to get good value due to larger participation.

Moreover, the private sector can recoup an exponential increase in value (bankability) if it is able to show progress.

Hence, a time-bound rollout with the participation of the state governments and other stake holders can help ensure better market access for our manufacturing sector.

Dedicated economic zones could provide a fillip to micro-sectors across the country

The sectoral strategy

Mihir Sunil Patil

Senior Research Analyst  CRISIL Research

Navneet Kumar

Manager, CRISIL Research

Jagannarayan Padmanabhan

Director, Transport & Logistics, CRISIL Infrastructure Advisory

Hits: 56