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Building it brick by brick

If the Swiss Alps can have high quality modern comforts at the height of 2,500 metres then why not Kedarnath, which is about 3,500 metres? A public participation model is the key to rebuilding Uttarakhand rapidly, writes Charan Singh.

india Updated: Jun 29, 2013 07:41 IST
Charan Singh
Charan Singh
Hindustan Times
swiss alps,special purpose vehicles,Morarji Desai

Last few days saw tragic destruction on an unprecedented scale in Uttarakhand, a state with numerous pilgrim centres, holy rivers, scenic beauty and picturesque landscapes, caused by heavy rainfall that triggered floods and landslides.

Cloudburst and human negligence of laws of nature have caused immeasurable damage to majestic pilgrim sites of historical importance. Holy mountains across the world are generally well maintained and are a matter of pride for all religions. But the same cannot be said about India, where accidents like stampedes are commonplace during religious gatherings.

However, the time has come to provide our pilgrims with higher standards of service, safety and modern medical facilities. The movement of pilgrims can be monitored through extensive use of cameras and if necessary controlled.

However, these modernisation measures would require substantial fiscal resources. Funds required would either have to be generated by the state or allotted by the Centre. But, Uttarakhand, a special category state, has limited resources.

The main industry is tourism, especially religious tourism. The recent devastation is expected to adversely affect tourism, economy and employment in the state, thereby further impacting revenue collection.

Borrowing funds from the market and servicing them through the budget would result in an increase in gross fiscal deficits and the burden of interest payments would rise further from the existing 13% of government revenue expenditure, already higher than the national average.

The state’s debt to the GDP ratio is already around 30% (2012), higher than the national average of 21%. The government may also decide to raise resources by announcing special fund for reconstruction purposes.

But, the past record of such specific fundraising has not been very encouraging. There are not many fond memories of the National Defence Fund announced by the then finance minister Morarji Desai during the 1962 Sino-Indian war.

In such a scenario, public participation could be the most efficient alternative to reconstruct infrastructure in Uttarakhand.

The government should set up a Special Purpose Vehicle (SPV) which will float bonds to construct various parts of the destroyed infrastructure in the state.

The complete task of reconstruction should be divided into smaller components like building each of the temples; areas around the temples; roads from one temple to another.

To finance the restoration of each of these components of the bigger reconstruction plan, long-term bonds should be floated and the general public be permitted to subscribe to such bonds.

The SPV should be made responsible and accountable to the public and the state legislature. Its accounts should be scrutinised by the CAG. To illustrate, the task of building a road from Badrinath to Kedarnath should be financed by a floatation of long-term bonds.

The bonds will be serviced by a nominal toll collected by the SPV or through a tax levied on luxury hotels and resorts.

Moreover, human-induced massive deforestation and rampant construction of dams cannot be left ignored. To address this, Uttarakhand could consider increasing the use of prefabricated construction material thereby reducing the need for local timber.

The use of wind mills and solar energy can be encouraged through bond financing to meet the requirements of power supply.

If the Swiss Alps can have high quality roads, hotels and modern comforts at the height of 2,500 metres then why not Kedarnath, which is about 3,500 metres?

Charan Singh is RBI Chair Professor of Economics, IIM Bangalore
The views expressed by the author are personal

First Published: Jun 29, 2013 04:57 IST