The Tribune, Chandigarh, India

Infosys disappoints
But there is hope for IT sector

India’s number two software exporter, Infosys Technologies, has disappointed investors, who dumped the company stock on Friday to a steep 9.59 per cent fall. The latest results and the profit forecast point to tepid revenue growth and shrinking profit margins, raising questions about the company’s much-admired business model. The dismal results have come at a time when the US and Europe are back from the brink. Two other top IT firms — TCS and HCL Technologies — are recording faster growth. While its rivals have been on an acquisition spree, Infosys is sitting on a cash pile of Rs 16,666 crore.

The below-expectation performance coinciding with the sudden resignations of the company’s co-founder K. Dinesh and Director T.V. Mohandas Pai has come as a jolt to company watchers. Infosys Chairman N.R Narayana Murthy is slated to retire in August this year and the board is meeting on April 30 to fill the vacancies. S.D. Shibulal is expected to take over as the CEO. Though there is media speculation about Pai putting in his papers as the top job has eluded him, he says he wants to slow down — “14 hours a day, global delivery model, travelling on work, no sleep — it gets you”. As competition deepens, shake-ups at the top are becoming common in IT companies. Wipro replaced its key executives in January.

However, Infosys remains a highly respected and professionally managed company. It is not uncommon for company honchos to step aside and make way for a younger leadership. Narayana Murthy quit as the Managing Director when he was only 52. So did co-founder Nandan Nilekani. The management is also conservative about making profit forecasts. Last April it projected a 16-18 per cent growth, but the actual was higher at 25 per cent. India’s IT sector is set to expand to $300 billion by 2020, according to McKinsey. This requires strategic planning, investment in manpower and an efficient leadership at the helm to survive in the highly competitive field.

US bares its Libya plan
Use of force isn’t easy for regime change

With US President Barack Obama, British Prime Minister David Cameron and French President Nicolas Sarkozy together committing themselves to the use of armed forces to dump Libya’s Gaddafi regime into the dustbin of history, now there is the likelihood of swift military action in the troubled West Asian country. In a newspaper article, the three leaders have made it clear that they will not allow Colonel Gaddafi’s forces to massacre the Libyan civilians who have risen in revolt against the dictatorial regime. Their non-ambivalent stand has come after a three-day conference on Libya in Qatar failed to come out with a clear line of action. The Libyan rebels had also appealed to the international community to come to their rescue soon.

Thus, it is now crystal clear — the US along with its allies is ready to get more actively engaged in Libya for bringing about a regime change. There may be no hesitation to use military might. But will it be as easy as it appears? The US will have to work hard to persuade Russia and Germany not to do anything that helps the Libyan dictator to silence the forces of democracy in that country. Russia is of the view that the UN Security Council resolution on Libya does not call for a change of regime there. It only stands for ensuring a “no-fly zone” to prevent the massacre of civilians by Gaddafi’s armed forces. German Chancellor Angela Merkel, too, is opposed to the use of the military to dislodge the Gaddafi regime. Both Russia and Germany favour recourse to a political process for the purpose.

This shows that the rift in the North-Atlantic Treaty Organisation (NATO) — which has the UN mandate to intervene in Libya to prevent the killing of pro-democracy civilians there — remains as pronounced as it was at the beginning of the Libyan crisis. NATO must iron out its differences soon in the interest of democracy and peace in Libya. Allowing Gaddafi to perpetuate his rule on any pretext will send a wrong signal to the other dictators in West Asia who have been trying to cling on to power despite massive protests against their tyrannical regimes.

Thought for the Day

Life is a great big canvas, and you should throw all the paint on it you can. — Danny Kaye

ARTICLE

China warms up to Japan
A fallout of earthquake and tsunami
by Rajaram Panda

The massive earthquake of March 11 and the subsequent tsunami caused large-scale devastation in Japan. Not only a staggering number of people — over 20,000 — lost their lives but the quake also caused a loss of over $300 billion to Japan. The nuclear disaster in Fukushima has added to Japan’s woes. However, a strange yet pleasant fallout of this disaster has been the warming of relations between Japan and China, which had reached its nadir in 2010 — the worst phase in the last decade.

Japan has in the past extended economic and humanitarian assistance to other countries which experienced similar natural disasters. It was, therefore, the turn of those countries to come to Japan’s rescue in this time of distress. Within a day, rescue teams from the US, Singapore, New Zealand and South Korea descended on Japan’s shores with their rescue teams. Others countries joined subsequently.

So far 120 countries have extended their assistance in various forms. Also, 30 international organisations have come to Japan’s rescue. Prime Minister Manmohan Singh signed the condolence message in the Embassy of Japan and India sent blankets and drinking water. These created a lot of goodwill and appreciation in Japan.

Before the earthquake, the incident over Senkaku islands had strained Sino-Japanese relations. The Japanese security community saw China as a potential threat. In an opinion poll in 2010, over 80 per cent of the Japanese said China could not be trusted. Similarly, a poll taken in China in 2010 showed 79 per cent of the Chinese feeling that Japan could not be trusted. The earthquake dramatically changed such perceptions.

After the quake, the Chinese government was quick to offer its sympathy and support. A vast majority of the Chinese endorsed the government stand, thereby changing the predominantly prevalent negative sentiments about Japan that existed in China a few months ago in 2010. In an article in The Japan Times on April 1, Hong Kong-based journalist Frank Ching says that an on-line survey in China conducted after the earthquake showed that “1.2 million of 1.5 million respondents backed their government’s efforts to aid Japan”. He further argues that just as the 9/11 attack on the US in 2001 provided an opportunity for China to improve its ties with the US, the triple disaster — earthquake, tsunami and nuclear reactor crisis – provided a good opportunity to repair Japan-China relations.

It may be recalled that in 2010 Japan-China ties went terribly wrong when China arrested a Japanese fishing boat captain in the vicinity of disputed islands after his trawler allegedly rammed two Japanese coast guard vessels. In 2010, China’s foreign profile had taken a beating and its relations with the US and Europe had deteriorated after it refused to release Liu Xiaobo, the dissident literary scholar, who has been serving an 11-year prison term even after he was awarded the Nobel Peace Prize. China called Liu a “traitor”.

China’s softening of foreign policy behaviour first manifested when President Hu Jintao tacitly supported President Obama in criticising North Korea for its uranium enrichment facility, a quick reversal of not endorsing the findings of the international investigation team that claimed Pyongyang as being responsible for sinking the South Korean corvette Cheonan in March 2010. China saw an ideal opportunity in the earthquake to mend its relations with Japan.

At least for now, the acrimony has gone to the back burner. In turn, the appreciation for the Japanese for their way of handling the disaster with calm, orderliness and stoicism without complaining has increased in China. The selfless individual efforts by the Japanese in rescuing those in distress at the risk of their own lives speak a lot about Japanese national character. The news that a 59-year-old company manager, Mitsuru Sato, escorted 20 Chinese female interns to safety and then returned to look for his own family, only to be swept away by the waters, has already become a part of folklore. This single incident has touched millions of Chinese hearts.

It was, therefore, appropriate that China is reciprocating the Japanese gesture of help in the 2008 Sichuan earthquake by providing material aid and sending a search-and-rescue team. In 2008, when pictures of Japanese rescue team members paying respect to Chinese bodies were circulated, this enhanced the image of Japanese people in China. This time around, the Chinese can return some of these gestures to Japan.

The earthquake provides China a huge opportunity to create a reservoir of goodwill in Japan. China may have taken over Japan as the world’s second largest economy, but Japan is not an economic pigmy either. By taking advantage of the goodwill created, China needs to seize the opportunity to resolve the dispute over natural resources in the East China Sea and work towards a programme whereby the earlier agreement of 2008 for joint development is taken to its logical conclusion. If China truly is aspiring to be a major power, this is a golden opportunity for it to behave as one.

Japan is traumatised, no doubt, but it showed to the world its self-belief and that the Japanese people do not rely on executive orders to mobilise and organise. It has built its faith and is deriving its strength from civil society, which is rock solid. The force of the natural disaster is great, but the strength of the social framework is still greater. This is the precious wealth that Japan possesses and this came in full display in handling the national calamity with poise and stoicism.

The writer is Senior Fellow, Institute for Defence Studies and Analyses, New Delhi.

MIDDLE

An open letter to Sonalika
by Aditi Tandon

Dear friend,
Saw you the other day, distraught and terrified from the realisation that life had stayed on even when you thought it was long over. I know this feeling. I have lived it before -- this hideous feeling of being lost in the distant darkness of the woods, with nowhere to run or hide, no hand to hold, no sun to see you out of the night.

Death can do that to you. It can banish your soul in ways you will never know and throw you around like the wind throws the leaves shunned by their trees. It can beget pain that will never seem to pass, that will suck the last drop of life out of your heart.

But then, there’s more to pain than we think there is. It’s the shadow of life itself, showing up in broad daylight just when everything seems so under an eternal shine. It’s then that life throws up that other side, the one we hate to see. But as they say, the walk is in the raising of the foot as it is in the laying of it down.

That’s what makes the stride called life. That’s how it is meant to be: a strange mix of sun and shade, a long journey of rise and fall. Remember the days when we, as kids, would run after clouds knowing we could never catch them; chase butterflies off the flowers least minding the painful prick of thorns and crisscross alleyways around our homes in the hope of catching that fireflies’ dance.

Hope would always keep us going. Hope is a strong word, a harbinger of change. Remember when we were little, how mother would feed us tales of hope: of two children that ducked the demons to find their way back home and others who fought the dark spirits to redeem their benighted souls.

She didn’t feed us those meals without reason. She knew they would come in handy some day when the demons of despair would seem hard to handle and the pain too pervasive to tame, when you would be alone, pitched against that ugly dark in the mighty battle for life.

It was for then that she fed us hope and put us to rest every night so we could wake up shining bright, ready for life in all its hues. And trust me, once in every life, that hope would be put to test. Your day of trial is now and you must raise your step before you let it fall. Remember the message those lullabies sang us? “Be brave’, they said, “stand tall with or without us”.

The charms of life are many but death has its own charms. It dashes our hopes to the ground, daring us to pick up the pieces; steals from us our shadows, testing if we can still make that journey. And journey we must for the stream of life to flow, for the mothers’ lullabies to make that one, final sense in which everything falls in place the way it should and death becomes part of life itself.

Remember “Gitanjali”? How Tagore had said: “The world does not leak because death is not a crack.” It’s not a crack….

Yours in life…

OPED DEVELOPMENT

The Public Private Partnership model is good for infrastructural development. However, it has recorded uneven success in some states. A resolute political will on the part of the state government is imperative for its success.
PPP: A road to building infrastructure
Deepak Dasgupta

In the section dealing with infrastructure in his Union Budget speech, Finance Minister Pranab Mukherjee said: “Our experience with PPP (Public Private Partnership) model for creation of public sector assets has been good. We have recently launched the National Capacity Building Programme to enhance capacities of public functionaries in identifying, structuring and managing PPPs.”

This statement in the budget speech reflects the government’s desire for greater use of the PPP model for developing infrastructure, on one hand, and the lack of understanding or perhaps downright opposition of public functionaries coming in the way of a bigger roll out of PPP projects on the other.

The roads and ports sectors have seen a fairly large number of PPP projects. The Gurgaon-Delhi National Highway. Tribune photo

The public and private sectors usually have a distinctive, but potentially complementary role to play. In view of this, partnerships between the public and private sectors have the capacity to enable the delivery of high quality infrastructure services. PPPs enable the public sector to benefit from the commercial dynamism, the ability to raise finances in an environment of budgetary restrictions, the innovation and efficiencies, all harnessed through the introduction of private investors who contribute their own capital, skills and experience. A PPP is all about creating a structure in which improved value for money is achieved through private sector management skills delivering significant performance improvement and efficiency savings.

There is now a move globally, whereby more and more of the operations involved with the delivery of public services are being handled by the private or the non-governmental sector. This move is being dictated by the financial difficulties being faced by governments all over the world and the discernible need for the infusion of greater efficiency in the delivery of public services. The experience of developed countries that are moving towards the model of a smaller state buying in services from a variety of different providers holds lessons for India also.

Woeful inadequacies

We in India are familiar with the woeful inadequacies in the delivery of public services. It is also seen that it is far more difficult to restructure government departments for better performance and ultimately it is perhaps simpler to hive off certain operations to the private sector for more efficient delivery. However, notwithstanding the reluctance on the part of some public functionaries, there is an inexorable move, even in India, towards the restructuring of the delivery of public services across various sectors with a larger role being assigned to the private sector. The changes in the delivery of road services over the last 20 years are illustrative of this move.

WHAT NEEDS TO BE DONE
n The states’ progress in the execution of PPP projects has been quite uneven. Some southern and western states have implemented more projects as compared to the states in the north and the east.
n As the states acutely feel the constraint of financial resources, private resources can make a worthy contribution towards a more rapid build up of their infrastructure, physical and social.
n The decision making processes can be less cluttered, thereby enabling new ideas and ventures to be attempted without undue delay.
n The states will need to develop the capacity to identify possible PPPs to develop bankable projects and bid them out and thereafter monitor their costs.
n The institutional arrangements necessary require a PPP Secretariat under the Chief Secretary or the Finance Department and which would enunciate a PPP policy, engage in experience sharing and develop a cross-sectoral pool to guide and supplement capacities in the line agencies that contract for PPPs.
n It would be useful for these line agencies PPP units to be distinct units within the department and function as a virtual office sourcing its expertise and experience on PPP from outside.

The provision of roads was till recently regarded as a quintessential public service for which the government was wholly responsible. For this purpose, a full-fledged Public Works Department exists in all states. To begin with, the department had its own labour, albeit work charged, and equipment; purchased its own material, while the department’s engineers designed and supervised all the works.

As labour and equipment became difficult to handle departmentally, contractors were engaged first to provide labour and thereafter to bring in their equipment. Subsequently, as controls over cement and steel etc. were relaxed, these contractors also purchased their own material and produced the road works according to the design supplied by the department and under the supervision of its engineers. Finally, the design and supervision work was outsourced to engineering consultants.

The outsourcing process in road construction was considerably hastened with the constitution of the National Highways Authority of India (NHAI) and the organisation being entrusted with the huge task of the implementation of the NHDP (National Highways Development Project). Being a nascent organisation, not saddled with an overburden of staff, the only way NHAI could handle the NHDP was by way of outsourcing various operations, i.e. the construction to qualified contractors and the design and supervision task to qualified engineering consultants.

Time & cost overruns

In this manner, while all the activities relating to a road project were outsourced, reducing substantially thereby the management load, the NHAI still continued to carry the risk of time and cost overruns. It was, therefore, decided that these risks be also transferred to the private sector who, it was felt, could manage the risks better.

Accordingly, a concession was provided to a selected private entity under which it would construct the road using the finances raised by it and thereafter operate and provide the service, recovering its investment through a prescribed user fee. Finally, at the end of the concession period the road is handed back to the department. In cases where the user fee was not sufficient to recover the investment made, the NHAI provided a grant (viability gap funding). Further, if viability was not established even after the payment of a grant, the NHAI procured the service from the concessionaire by paying a fixed amount in the form of annuities.

In this manner the PPP model was established for the roads sector. While there have been variants to the examples mentioned here, such as grant of lease rights to appurtenant lands etc., the basic principle essentially remains for the private sector to be responsible for the design, financing, building and operations of the service for the period of the concession with the public sector acting as facilitator and making any provision necessary. The PPP model may appear to represent a radical departure from the traditional departmental one. Nonetheless, it is a result of evolution arising out of the inability of the traditional model to manage and provide the requisite service.

The process of partnering with the private sector started in 1991, with the power and telecom sectors. Over the past 20 years, there have been numerous examples of successful PPPs in telecom, roads, ports and airports. The government’s effort in recent times has been to not only rely on the PPP model for a major thrust in these sectors but to also expand and apply it in other sectors.

Despite the government’s earnest desire to go ahead with PPP, the progress has been quite uneven, both across sectors and across regions. The telecom sector has been largely privatised with results that have benefited people across the social stratum. The roads and ports sectors have seen a fairly large number of PPP projects.

Policy flip flops

Of late, there has been a tardy roll out largely because of policy flip flops. The airport sector has seen the privatisation of Delhi and Mumbai airports and new green field airports in Hyderabad and Bengaluru. Thereafter, however, the up-gradation of other airports has been undertaken by the Airport Authority of India. The Railways, as expected, have proved a hard nut to crack. In the power sector, a number of merchant power plants have been set up, but transmission and distribution have continued to be largely with the public sector with the privatisation of distribution in Delhi being the only significant achievement. The potential use of PPPs in the education and health sectors also remains substantially untapped across India as a whole.

There is little progress too in the development of urban infrastructure through PPP. The Delhi Government’s effort at creating a PPP for their water supply network met with resistance and had to be given up. Investment in urban infrastructure is a major challenge and unless innovative financing mechanisms are found to develop and sustain urban infrastructure, there can be a serious problem.

The incumbent mindset that is reluctant to cede control over construction and operations of projects is a principal cause behind the slow roll out of projects in some sectors and at present the demand for projects is far greater than their supply. This, in turn, masks a number of policy issues, particularly relating to finance.

Secondary market

The growth of non-budgetary financing of infrastructure requires the development of a long-term secondary market for debt instruments supported by insurance and pension funds. The slow roll out of projects has amongst other thing affected the development of such a secondary market. Equally affected and in serious jeopardy would be the government’s target of one trillion US dollars of expenditure on infrastructure in the Twelfth Plan of which 30 percent is expected from the private sector. Mr. Mukherjee’s statement thus reflects the government’s concern over the slow movement of PPP. A significant help forward to PPP efforts can, however, be provided by the states and their local bodies.

Apart from obvious areas like power generation and roads, other areas in which PPP models could be attempted in the states can include power distribution and renewable energy; urban infrastructure such as urban transport, water supply and sanitation; education infrastructure and services; health infrastructure and services; agricultural markets and storages; etc.

No effort at creating a PPP model can take off without the support of a resolute political will. An ambitious programme such as the NHDP could get implemented, incorporating new variants such as PPP, only because of the unstinted support of the political leadership. While the move towards public services being substituted by private efforts is inexorable and inevitable, the need to rapidly create modern infrastructure befitting an emerging India does not allow for a ‘hasten slowly’ policy.

The writer, a former IAS officer, was Chairman, National Highways Authority of India