Infrastructure Prioritization

As India moves in the next phase of development post 15th Lok Sabha elections, the Economic Survey just prior to the Budget clearly states "Economy is sound, let's push for reforms". Some reforms look difficult to deal with others look much easier. In the case of infrastructure, which is a priority area, certain reforms can look innocuous but would leave long term benefits to the economy.

One such area is "Infrastructure Prioritization". As mentioned above, this word looks innocuous. In layman's terms it would means that we need to prioritize our infrastructure spend. On a Policy front, this appears to be already done by the Planning Commission in their document "Projections in investments in Infrastructure during the Eleventh Plan" where sector wise infrastructure investments are detailed therein. In fact, the document also looks into the India's infrastructure requirements to be filled by the private sector during the Eleventh Plan which really goes beyond what is true Government planning. Having said that, it does not specify individual projects that constitute the US$ 500 billion requirements in the Eleventh Plan.

Infrastructure Priortization means that each or a group of projects that constitute a long term plan must be disclosed from various fronts (a) type of projects (b) how they fit into India's current and future needs and priorities relating to nationally significant infrastructure (c) how such infrastructure addresses the various needs of its users and the country at large and (d) possible mechanisms for financing investments in such infrastructure. Therefore it is a drill down of about two levels from what Planning Commission has done in their report "Projections in investments in Infrastructure during the Eleventh Plan".

Infarstructure Priortization is nothing new. The Australian Government has published a document called "Outline of Infrastructure Australia's prioritization methodology". This is an integral part of their National PPP Guidelines. In describing their prioritization methodology Infrastructure Australia states that "methodology provides an integrated framework that harmonises the information and data resulting in a balanced range of initiatives and uses cost benefit analysis (CBA) as the primary tool for prioritising initiatives." The aim of the methodology is to be:
• Logical and well defined – as it is systems focused and based on and conforms to Infrastructure Australia's aims, objectives, strategic priorities and principles;
• Clear and transparent – as it promotes the open sharing of information;
• Evidence driven – as it uses quality and suitable data and consistent tools; and;
• Robust – as it is comprehensive by looking though multi-lenses to solving a complex problem.
This prioritisation methodology provides a best-practice approach for infrastructure prioritisation and has been drawn from international and national based practices and research.

In India, prioritization process would help in evaluating competing projects for VGF or completion based on the CBA score. Currently, one could argue that a lack of projects being taken up on PPP basis by concessionaires makes priortization a redundant philosophy in the Indian context. However, prioritization does tell the Authority and public at large that certain projects need to be emphasized, given a special status etc etc based on certain criteria. In effect, they score well above the others and need to be given a special status. Example, currently whilst most infrastructure projects in India are critical, those linked with the Commomwealth Games have a special status because their completion has an impact on the country's pride and the smooth functioning of the Games. The recent collapse of the Delhi Metro Bridge is a clear case in the direction - had these projects been priortized such a mishap on account of the looming deadline wouldn't have occurred. This project woulsd have been completed much earlier. A project high on the Priority List requires more men, materials, faster clearances and therefore would require to be completed within schedule time and date.

The Priortization Methodology of Infrastructure Australia

The prioritisation methodology for Infrastructure Australia is one process incorporating three phases:

• profiling;
• appraisal; and
• selection

The profiling phase of the Infrastructure Australia’s prioritisation methodology assesses the compatibility of the range of initiatives to Infrastructure Australia's strategic priorities. A picture of the potential national productivity value of initiatives can be determined while producing a balanced view of the initiatives and their linkages and dependencies to other initiatives.

The profiling of initiatives needs to outline:
• rating of compatibility to Infrastructure Australia's strategic priorities;
• how the strategic priorities are to be addressed by the initiative, and;
• how the initiative is dependant on other complementary and dependant initiatives being policy, regulatory, demand and pricing solutions, enhancement and capital investment solutions.
Profiling creates the coherent argument as to why the initiative is being considered in the first place and what is it actually trying to achieve relative to Infrastructure Australia's strategic priorities. The simplicity of testing and reporting against the strategic priorities defines the appropriateness of any initiative at the outset.

The appraisal phase of the Infrastructure Australia’s prioritisation methodology adopts ‘monetised’ cost benefit analysis as its core tool. This is complemented by ‘non-monetised’ effects. Together, a picture of the wider economic, environmental and social merits of each initiative can be determined.

Infrastructure Australia
• Use objective cost-benefit analysis as the primary driver of decision making;
• Consider a wide range of benefits and costs – not just economic, but also social and
environmental;
• Give monetised CBA (through the benefit cost ratio) a key role in decision making;
• Ensure non-monetised effects are also taken into account; and;
• Consider both efficiency and equity impacts.

Finally, the selection phase of the Infrastructure Australia’s Prioritisation methodology integrates the profiling and appraisal assessments and other data and information. As such the national productivity impact of individual initiatives can be compared. Together, the picture of the national productivity impact of the entire range of solutions across all sectors can be created into the infrastructure priority.