India's second tryst with destiny

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Urban Inertia
India's burgeoning cities will become overcrowded in the next 10-15 years and fixing them will be a key priority. Mukherjee, in his latest budget, has hardly touched the urban areas, which are likely to be home to more than half the population in about 30 years.

About a third of India's population lives in cities and towns. In a couple of decades, more than half of the country will reside in urban areas. By next year, two-thirds of the GDP will be generated there. Yet, the only integrated programme for development of urban areas, the Jawaharlal Nehru National Urban
Renewal Mission (JNNURM) is woefully slow-moving.

A 2007 McKinsey Global Institute survey estimated that by 2025, urban India will account for two-thirds of the consumption growth. But even the richest Indian cities are victims of bad planning and overstressed infrastructure.

Take the country's commercial capital Mumbai. More than half of its population lives in about 1,950 slums. Running water is available only for two to six hours a day. About 35 per cent of the households lack basic sanitation. The city's storm water drains cannot take a rain intensity of more than 25 mm per
hour and the average travel speed is six to eight kilometers per hour, according to a city development plan for Mumbai of 2006. The plan admits that the quality of life in the city has drastically fallen over the years. In spite of the diagnosis, nothing much has moved in Mumbai. Even the long-standing rent control regulations and land ceiling laws have not been amended.

"It is very clear that as we urbanise and motorise, our cities will have the twin challenges of pollution and congestion," Sunita Narain, director of Centre for Science and Environment, says. "And it is important for us to be able to move quickly to buses today rather than tomorrow."

The McKinsey survey predicts that by 2025, Indians will be spending a quarter of their income on food and beverages, down from 42 per cent in 2007. However, they will be spending a fifth of their incomes on transport, it says. Yet procurement of buses by state transport utilities is nowhere close to the demand.

M.  Ramachandran, urban development secretary, remarked at a JNNURM review meeting on buses in October 2009 that even though orders had been placed for 11,000 vehicles, only 350 had been supplied until mid-September.

The Clean Energy Imperative
The world is keeping a close watch on India's response to the energy challenge. A growing economy will demand new sources of energy. Given the sensitivities around climate change, it will also mean reducing dependence on fossil fuels. For that, the government needs a new set of incentives that encourage entrepreneurs to set up capacity in renewable energy.

The budget says that India will set a clean energy fund that will help research and development of new technologies. "Ten-15 years from now, the competitiveness of the economy will depend on our technological capability," says Pratap Bhanu Mehta, president, Centre for Policy Research. "You would want to be on the technology frontier."

To encourage investment in technology, however, the government needs to present a long term policy vision. Take the solar mission, for instance. India hopes to be the global leader in solar energy by 2022 with an installed capacity of 20,000 MW. That will require huge investments, especially by the private sector. But investors are uncertain.

Jayant Kawale, who heads Pune-based Bharat Forge's renewable energy division, says there is clarity about incentives only until 2013. "As an investor, I need to know if the programme is going to continue."

On the face of it, the mission has launched successfully. The government had targetted setting up 1,000 MW by 2012. However, the incentive structure was such that there was a virtual stampede to set up solar power stations. The mission has offered four units of thermal power at about Rs. 2 for every unit of solar power produced. That is to bring down the cost of solar power which is fixed at Rs. 18 per unit. The producers are free to sell that electricity even on power exchanges where sometimes it trades at Rs. 8 a unit.

The finance minister has increased the budgetary allocation for the ministry of renewable energy by 61 per cent to Rs. 1,000 crore. But more than money it would need to iron out the creases in policy to meet its ambitions.

Clearly, the road ahead is filled with new opportunities - and equally, tricky policy potholes. In his budget, Mukherjee said, "I have placed my faith in the collective conscience of the nation that can be touched to scale undreamt of heights in the coming years."

Now, as the country awaits its moment under the sun, this is the time to convert that rhetoric into substantive policies. Nothing less will do.

(Additional reporting by N.S. Ramnath and K.P. Narayana Kumar)