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May 23, 1998


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Business Commentary/Dilip Thakore

Bechtel, Mitsubishi must storm India

One of the top priority items on Prime Minister Atal Bihari Vajpayee's economic package presented to the Confederation of Indian Industry on April 28 is the completion of a national housing policy and revision of the Urban Land Ceiling Act, 1976.

This statement of intent to address the huge problem of massive homelessness is as welcome as it is overdue though it is doubtful whether the prime minister will be able to make good his promise to present a comprehensive national housing policy within 60 days. Solutions to a problem which has snow-balled into monstrous proportions because of decades of neglect are not that easy to find.

Perhaps the most unkindest cut of India's failed economic development effort which is characterised by a shockingly callous disregard for human welfare, is the continuous neglect of the housing development industry.

During the heyday of socialist centralised planning, Pandit Jawaharlal Nehru reportedly rationalised the neglect of the mass housing construction industry on the ground that India's climate is such that, unlike the developed nations of the West where winter kills, India's tropical climate makes residential housing a low priority area.

On the basis of this cruel rationalisation, the not inconsiderable savings of the populace were canalised into high-cost, overmanned, corruption-bedeviled public sector enterprises which never delivered the promised surpluses which were to fund the Central and state government's utopian social welfare schemes including housing for the masses.

Consequently, housing mortgages, which became popular in the fifties to enable people the world over to build and own houses, were not encouraged in India until the late seventies; and even then the income tax exemptions granted for home building and purchases were grudging and negligible. Not surprisingly it is officially admitted that there is a shortage of 40 million residential houses in contemporary India.

Even this mind-boggling backlog which requires an aggregate investment estimated at Rs 8,000 billion ($ 20 billion) to rectify, is an underestimate. Because most of the nation's existing housing stock is of very poor quality. For example, only 38 per cent of the grossly overcrowded (average density: six persons per room) residential homes in urban India are serviced with modern sanitation and sewage disposal facilities; and barely 50 per cent receive piped water.

In rural India, the overwhelming majority of the population does not enjoy these basic amenities. The periodic outbreak of ancient epidemic diseases such as the plague, malaria and gastroenteritis is a natural consequences.

Nor can the foolish planners and economists, who dominated the Indian establishment from the sixties through to the eighties, claim to be unaware of the social benefits of encouraging the growth and development of the civil engineering and the housing construction industry in particular.

Both these industries are employment-intensive and wealth-creating. Indeed the US statistics relating to the annual number of 'housing starts' are carefully compiled and monitored because they are regarded as a valuable indicator of the state of health of the national economy. This is why the growth of giant civil and housing construction companies with awesome technologies has been consciously encouraged in all the developed nations of the western and eastern hemispheres.

On the other hand, despite India's cities being more backward and more populous than the neat, well-planned and efficiently administered cities of the first and second world nations, the civil engineering and housing construction industries have become the preserve of the technologically obsolete and hopelessly corrupt public works department of the central and state governments, and of unqualified small-time builders whose expertise is limited to bribing politicians and bureaucrats to secure the hundreds of licences and permissions required for housing projects to get off the drawing board.

Only very recently have large widely-held companies such as Larsen & Toubro, Great Eastern Shipping and Unitech, and industrial houses such as the Rahejas, the Tata and the Mahindras have been permitted to enter the civil engineering and housing construction industries. But even they are tiny in comparison with civil engineering giants such as Bechtel, Mitsubishi Heavy Engineering, Wimpey and Waters which have the technology and resources to rapidly build cheap, high-quality residential estates, and indeed entire cities.

There is certainly a great deal that Indian companies can learn from western and Japanese civil construction megacorps about infrastructure and mass housing construction technologies which offer the only hope of overcoming this nation's monstrous civil infrastructure development and housing backlog.

The need to absorb civil engineering technology from the developed nations was recognised by an individual for whom establishment and Left intellectuals have scarcely disguised contempt: Mahatma Gandhi. ''The one thing which we can and must learn from the West is the science of municipal sanitation. The peoples of the West have evolved a science of corporate sanitation and hygiene from which we have much to learn,'' he wrote. Way back in 1924!

Unfortunately as in much else, the nation's socialist politicians and establishment intellectuals chose to ignore this sound practical advice to develop a contemporary civil engineering industry. Instead they encouraged the growth of the PWD and public sector organisations such as HUDCO, DDA, CIDCO and others which have not only proved to be hopelessly unequal to the task of developing the nation's civic infrastructure, but have also scarred the Indian landscape with structure of exceptional ugliness. In keeping with socialist dogma, private sector participation in the civil engineering and housing industries was restricted to small, systemless, fly-by-night firms driven by corruption.

The consequence is poor planning, urban decay, chaos and maladministration which characterises post-Independence India's cities where typically more than half the population lives in street slums amidst conditions of unimaginable squalour and filth.

Consequently there is an urgent need for governments at the central and state levels to accord high priority to the long-neglected task of housing the nation's too long deprived masses.

A new target-driven housing programme -- with the objective of building five million cheap but high-quality homes supported by adequate infrastructure annually -- needs to be urgently undertaken. Quite clearly such a mammoth task is beyond the capabilities of the pathetically outdated public sector PWD and civil engineering companies as also of the puny private sector Indian companies in this line of business.

Therefore, under its economic liberalisation and deregulation programme, the Union government needs to encourage the entry of international construction industry majors such as Bechtel Corporation, Mitsubishi Heavy Engineering and Nakamoto among others, into India in a big way.

The entry of such construction industry giants which have the technology, finance and skill to quickly build huge residential estates on a build-operate-and-transfer basis, needs to be encouraged directly and through the promotion of joint ventures with Indian companies.

False notions of unwarranted national pride and self-reliance which have deprived the overwhelming majority of the most basic necessity of housing for over four decades need to be given a quick and speedy burial as the nation gets down to the business of making up for lost time.

Dilip Thakore

Budget '98

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