Political Risk in India’s Public Infrastructure Projects
Introduction
India, being a union of the diverse States, presents a unique challenge of political risk when it comes to executing public infrastructure projects. Each state boasts its own distinctive culture, linguistic diversity, likes and dislikes of the concerned political face, and other sets of challenges.
Undertaking such projects requires governmental willpower and substantial financial investments. However, these ventures are not only about bricks and mortar; they are deeply intertwined with public sentiments. Delays or obstacles in completing these projects can lead to political ramifications, affecting the electoral landscape and the fate of political parties. Conversely, change in ruling government can also lead to delay or obstacles in completing these projects.
Impact of Project delay on the fate of Political Parties:
Public infrastructure projects are designed to enhance public convenience, making them particularly sensitive to public sentiments. Any hindrance or delay can lead to discontent among the public, potentially resulting into loss of political support for the ruling government. This loss of support can manifest in the form of reduced votes or even the ousting of the incumbent government in the subsequent elections.
Impact of Political Changes on the Project:
Political changes on the other hand, whether at the State or Central level, bring about a ripple effect on public infrastructure projects. These changes may involve the replacement of top-level bureaucrats, leading to a pause in decision-making until the new government stabilizes. The uncertainty during this transitional period can result in the cancellation or suspension of projects, causing disruptions in the overall development agenda. Change in leadership within the ruling government is also one of the important factor that leads to replacement of the top level bureaucrats followed by pause in decision making.
Moreover, the new government may re-evaluate contracts awarded during the tenure of the previous administration. Individuals or companies associated with the former government might find themselves out of favour, leading to the cancellation of contracts and strained relations with the government. This, in turn, can create delays in project completion, impacting loan repayments to financial institutions, incurring penalties and interest, and sparking legal proceedings by contractors against the government.
Another consequence of the political change on the public infrastructure projects is the relation between the Central and State Government. In case the two differs, the State might find it difficult to complete the project because of the difference of thoughts and agendas between them.
The instances of change in thoughts of the political leaders have also been observed in few projects where the concerned political leader coveys a different scope of the project than it was during the initial phase. Such instances have also resulted into pause in decision making for quite some time and the government machineries have been found not co-operating in the project progress during such intermittent period.
Impact of Political Willpower on the Project:
Public infrastructure projects are primarily spearheaded by the government, which ironically poses the most significant risk to their successful execution. The government’s stand sets the tone for the entire project team. When the government is committed to timely project completion, the execution team is compelled to follow suit. Conversely, if the government decides to temporarily halt the project, the execution team is left with no leeway to expedite progress.
The ruling party, at times, serves as both a catalyst and an impediment to a project, influenced by factors such as public sentiment, funding availability, and impending electoral events. The later plays a pivotal role in shaping the government’s determination to either accelerate the project and meet deadlines or put it on hold. Throughout the country, numerous instances have been observed where projects were suspended or delayed based on electoral considerations in the respective states. In the absence of imminent electoral events, governments have been observed to pause projects temporarily.
Mitigating Political Risks:
Mitigating political risks in public infrastructure projects in India is inherently challenging due to the dynamic nature of political landscapes. However, being aware of the risk indicators of political change can provide stakeholders with valuable insights:
Mass Unemployment: High levels of unemployment often signal public dissatisfaction and can be an indicator of potential political change.
Deliberately Targeted Opposition: A deliberate target to the opposition in every matter can pose a significant challenge to the incumbent government.
Intolerance for Freedom of Speech: A government’s increasing intolerance towards freedom of speech and dissent can be a precursor to political upheaval.
Holding onto Power for a Long Time: Being in power for a long time can be an indicator of potential political change.
Conclusion:
Public infrastructure projects in India are not just about bricks and mortar; they are intertwined with the ever-evolving political landscape. The risks associated with political changes, though challenging to mitigate, can be navigated through strategic planning, contingency measures, and a thorough understanding of the indicators of political shifts. The project execution team can envisage the political situation based on the risk indicators and take proactive steps to save the project from political changes, e.g. taking approval for the prolonged cost and schedule overrun from the existing government before it changes can save the project from delay or halt by the new government. As India continues to invest in its public infrastructure, stakeholders must remain vigilant and adaptive to the dynamic nature of politics to ensure the successful execution of these vital projects.
The government should take steps to make necessary constitutional or policy amendments and bring all public infrastructure projects under the roof of one central authority which continues to execute the projects irrespective of any change in the government, whether state or central.
Follow
Email address
Your email address
Submit
info@complimentor.in
