Finance News

FE Editorial List too short

The new bidding process norm for infrastructure projects are innocent of political economy—that's a damning criticism no matter what the proposal's influential backers claim. The idea is to keep the number of bidders small so that selection is more 'efficient'. So, the number of short-listed bidders who clear the first stage and are invited to submit financial bids is being kept the minimum. The argument is that credible bidders come forward only when the field is not too crowded. Also, that a restricted list improves the chances of executing a private-public project. The fact that even small road projects have sometimes attracted over 30 bids is cited as proof of the inefficient chaos that no-restriction bidding can engender. However, India is a rambunctious democracy in the middle of a big change. Exclusion of participants in any aspect of this transformation has to be carefully thought out. What would be the cost in the present case of keeping out a potential participant like the National Highway Builders' Federation, whose members are not exactly without business experience? Litigation is an almost-guaranteed result of such policies.

There's an argument that global best practices show that only about five pre-qualified bidders are favoured when the goal is to attract high quality bids. But when big projects are to be executed at the same time this pre-qualified list goes up substantially even in global practice. Again, let's not get away from the main issue: infrastructure is politics in India in the best sense of the latter term. It means making people's lives easier and it should not be a policy that looks cliquish. The British understood this well when they built the canal network that irrigated 11 million hectares of land in undivided Punjab; colonial India's biggest infrastructure project. This was designed to make people feel better disposed towards the Raj. It would be tempting but wrong for enthusiastic nationalists to say that the Raj was wholly unsuccessful in its mission. In India now infrastructure building cannot exclude and make unhappy many for the alleged benefit of an efficient bidding process that entertains a few. Plus, remember, pre-qualification always carries with it the potential for too much use of official discretion that in turn creates project-blocking controversies.