Pricing it right

As India pushes for more investment in infrastructure projects, the challenge of pricing premium infrastructure services and ensuring the availability of alternatives for those who opt out of the facility, will only grow sharper. In the case of the Delhi-Gurgaon expressway, matters got complicated as both the concessionaire, DS Construction, and the National Highways Authority of India underestimated the volume of traffic, and the government omitted to build alternative lower-cost or zero-cost parallel infrastructure.

Yet in the same city, commuters have peaceably utilised the premium air-conditioned public bus service along with the cheaper alternative. The answer could lie in the ease of access and the options that are made available. AC buses of the Delhi Transport Corporation ply along with their less fancy counterparts but there has been no alternative to the expressway for a long time. Even now there are no other roads to provide connectivity to areas like Udyog Vihar in Gurgaon, for instance. Commuters have thus reacted angrily to this exclusion. Shadow pricing principles could have offered practical advice to policy-makers regarding the cost of such exclusion. The other issue concerns the method of payment for using the service. Wherever an infrastructure project demands payment from the public, the ease with which they can be made will, to a large extent, determine public perceptions of the project. In Delhi, again, the rate of collection of property tax has gone up as the city government has introduced easier payment options. For infrastructure projects, tying up both these issues — providing an alternative and the pricing — is essential as governments at the Centre or in the states can hardly be expected to pay for them through annuities.

The literature on infrastructure built through the public-private mode pays a lot of attention to how the costs and revenues of these projects should be shared, but not to the method of collection, deemed administrative trivia. Yet collection and alternative options in a price sensitive country like India can decide whether or not a project built at considerable cost turns into a political hot potato. These are high stakes choices that cannot be skirted.

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