infrastructure – Pertinent Observations

A journey back to civilisation

Earlier this evening, I was at a coffee shop in Whitefield with a friend when it started raining cats and dogs. I got a message from a wife stating that it was raining insanely in her part of town, and that I should be careful while coming back. I promised her that I would wait it out before returning, and returned to my conversation.

I made my first attempt at booking a cab at 1845, by which time the rain had stopped. Uber showed that the nearest cab was 8 minutes away, except that when I tried to book it it failed to find me a ride. Ola was no better – except that it showed that the nearest cab was 20 minutes away when I opened the app.

I continued waiting, and continued checking on both platforms. No cabs materialised. And after some 45 minutes of waiting thus, I decided to get out and find a bus. My friend was surprised that I was willing to change buses to get home. “I would never do that”, he declared, adding that it would be easier for me to move back to India.

I walked up Varthur main road looking for a bus stop. It had stopped raining but there were huge puddles on the roadside, and mosquitoes buzzed all around. There was a huge crowd at the bus stop. The first two buses came at an interval of five minutes each. Both were jam packed.

It was clear that Varthur main road wasn’t a great place to be, since the bus frequency there was low – most buses would be coming from the other side of Whitefield, so it was clear that I should get to Kundalahalli gate.

Presently an “illegal bus” (an office bus picking up passengers for some extra income for the driver) materialised, and it was a good opportunity to get to Kundalahalli gate. The bus sped there, and charged 10 bucks.

As expected, there were plenty of buses, including Volvos, at Kundalahalli Gate, except that there was no room to get into any of them. Once again, there was no luck to be had on the Uber or Ola front. I even tried UberPool and Ola Share (stuff I normally never use), but nothing materialised. The only result of all that was that my phone battery drained like crazy. And it started raining as well – I was happy I had behaved like a rich man this morning and bought a new umbrella when I realised I’d forgotten mine at home.

An airport bus appeared as a sort of a saviour. It was empty, and the conductor said passengers not headed to the airport weren’t allowed on it. I offered to buy a ticket till the airport, and was allowed on. The conductor said I best get off at the next stop (Marathahalli bridge) given where I was headed. He charged me Rs. 16.

So at every step I got closer and closer to civilisation. Kundalahalli Gate was civilisation compared to Varthur Main Road. Marathahalli was civilisation compared to Kundalahalli Gate. Another illegal bus there dropped me to Domlur (Rs. 20), and under normal circumstances that should count as “proper civilisation”. Except that the design of the Domlur flyover means that it’s rather desolate and dark and unwalkable under it. So I needed to reach the next stage of civilisation, which I did when yet another illegal bus dropped me to Richmond Circle (the driver demanded Rs. 15, but I gave only Rs. 10 since I didn’t have change).

At all stages, I continuously tried to get cabs and autos, but perhaps due to tomorrow’s state elections, none materialised. Most of the time I was on one road (Old Airport Road), and most sections of it are rather badly lit and seem unsafe and “rural”. This was a journey I would have never done if I had been with family.

And the mode of transport was bimodal – three of the five buses I took to reach home were “illegal”. Two others were the most expensive Volvos. The last leg of the journey was completed on yet another airport Volvo, where the conductor made no fuss of letting people in, and not only gave me change for Rs. 100 (ticket cost Rs. 37), but also gave me 5 100 rupee notes for a 500 rupee note I handed him.

The entire journey, from the time I started hailing the cab to when I opened my door, took exactly three hours. A cab would have cost me upwards of Rs. 500, but my bimodal transport cost me Rs. 105. Frankly I would’ve been more than happy to spend the former amount for the pleasure of getting home an hour and half earlier, and being able to do something productive on the ride home.

But then it’s not often that an NRI has an adventure such as this!

The land above the tracks

Almost exactly a year ago, we were on our way from Vienna to Budapest and ended up reading the Vienna Hauptbahnhof Railway Station some three hours early. It had been snowing that morning in Vienna (it was April 1st, and supposed to be spring), and not wanting to go anywhere in that shit weather, we simply got to the railway station. It didn’t help matters that our train (which was coming from Munich) had been delayed by a further hour.

We were not short of options for entertainment in at the railway station, though. In fact, it hardly looked like a railway station, and looked more like a mall – for there were no tracks to be seen anywhere. We spent the four hour wait shopping at the mall (it was just before Easter, so there were some good deals) and having breakfast and lunch at what could be considered to be the mall food court. And when it was time for our train to arrive, we simply took one of the escalators that went down from the mall, which deposited us at our platform.

Each platform had its own escalator going down from the mall, which had been built on top of the railway tracks. It can be considered that the entire Vienna Hbf station was built on the “first floor”, making use of the land above the railway tracks. Land that would otherwise be wasted was being put to good use by building commercial space, which apart from generating revenues for the Austrian Railways, also made life significantly better for passengers such as us who happened to reach the station insanely early.

This is a possible source of revenues that Indian Railways would do well to consider, especially in large cities. The Railways sit on large swathes of land above and around the rail tracks, especially at stations (where such tracks diverge). Currently, the quality of experience in Indian railway stations is rather poor. If a swanky mall (and maybe other commercial space) were to come up above the tracks, it could completely transform the railway experience.

There will be considerable investment required, of course, but given the quality of real estate on which most Indian railway stations sit, it is quite likely that private developers can be found who will be willing to invest in constructing these “railway station malls” in return for a share of subsequent rent realisation. There is serious possibility for a win-win here.

As the Vienna Hbf website puts it,

The BahnhofCity Wien Hauptbahnhof features 90 shops and restaurants occupying 20,000 m² of floor space. A fresh food market, textile shops, bakeries and cafés are designed to make BahnhofCity a meeting place. During the week, it will be opened until 21:00 and many shops will also open on Sundays. Excellent public transport links and 600 parking spaces complement the offer.

An idea well worth considering for the Indian Railway Ministry.

Why Google, Facebook, etc. are against Net Neutrality in India

I’ve been out of country for close to a month now, so haven’t really been following India news too closely (apart from via social media). But from my (biased 🙂 ) sources I understand that TRAI has put out a discussion paper in which they want to permit telecom companies to charge you based on the service that you use, thus violating Net Neutrality.

Now I’m yet to take a stand on this (this argument by Tim Harford against Net Neutrality is rather compelling, making me believe that well implemented competition regulations can mean we can make do without Net Neutrality, but I haven’t given it too much thought yet), but I have an idea as to why the likes of Google and Facebook, which in the past and in other geographies have come out strongly in favour of Net Neutrality, are okay with Net Neutrality violation in India.

The basic issue in India is with “over the top” services such as WhatsApp and Viber which the likes of Airtel and Vodafone see as a threat for it competes with their rather lucrative voice and SMS business. I’ve mentioned in the past that there’s a quality issue here which the telecom companies can differentiate on (packet switching doesn’t work that well for voice), but given costs it is hard to make a compelling case for using circuit switching for international calls.

So the likes of Airtel and Vodafone are threatened by such services and want to charge users more for using WhatsApp and Viber compared to other applications. Net Neutrality supporters, who argue that internet infrastructure should just be a set of neutral pipes (rather than a “two-sided platform”, as Harford argues), argue that this is unfair, and that Airtel and Vodafone are exploiting their positions as gatekeepers (literally) to defend their own related business.

Coming to the point of this post, entities such as Google and Facebook are coming out on the “wrong” side of the net neutrality debate here in India, arguing that internet companies should be looked at as two-sided platform markets rather than neutral pipes (resisted the urge to use the phrase “information superhighway” there!). Considering that they’re proponents of Net Neutrality elsewhere, why are they taking this stance in India?

Assuming that final regulations come out in favour of net neutrality (treating internet as infrastructure, and not a platform), how should the likes of Airtel and Vodafone react? Clearly their data business is cannibalising their voice business, so they should logically increase their prices for data plans (no brainer). Given that they will not be allowed (in this situation) to charge differential rates based on the service, they will have to uniformly jack up data rates.

This can be troublesome for Google and Facebook on two counts. Firstly, the telecom providers may not get their pricing right, and rather than having a ramp (charging heavy users heavily, since only such people will be using WhatsApp or Viber), they might increase data rates across the board. This will result in a drop in mobile internet penetration (one reason it’s so high now is that it’s cheap), and considering that Google and Facebook are services that pretty much every who uses the internet in India uses, it will result in loss of user base, traffic and revenue (possibly) for them.

The second problem is that even if telecom operators get their pricing right (maintain current pricing for basic plans, but jack up rates for high data usage) it spells trouble for Google and Facebook. One of Google’s widely used services is the video streaming application Youtube, and Youtube consumes high bandwidth. Facebook is getting into native video in a big way, and it is estimated that it might be more successful than Youtube in terms of advertising. And with correct internet pricing under net neutrality, demand for services such as Youtube and Facebook Video will go down significantly, which is not good for those services.

So the simple answer is that the reason Google and Facebook are coming out against Net Neutrality is that they are coming out on the right side of the new proposed (anti neutrality) regulations. Like WhatsApp and Viber, they too are high bandwidth applications, but unlike WhatsApp or Viber they don’t compete directly with the owners of the pipes. Thus, they want providers to have the ability to impose differential pricing, since that will mean that subscribers can access their content for cheaper, and this allows them to make more advertising revenues.

In my view (again note that I’m yet to take a stand on this net neutrality business), this move by Google and Facebook to support the anti-neutrality regulations is extremely short-sighted since it can hit them back at a later point in time. There is no guarantee that in the long term their services will not compete with that of telecom providers (Hangouts? Facebook voice calling?) and the regulations that they are currently supporting can come back to hit them at a later point in time.

It seems that Google and Facebook are working on an assumption that there will not be other high-bandwidth applications that will compete less with pipe-owners (telecom operators) than them (Google & Facebook). They are very likely to be in for a surprise, and end up as the cranes in this Panchatantra story.

From STD Booths to Information Kiosks

An IT Action plan submitted to the first NDA government in 1998 had envisaged a plan to “turn STD/ISD booths to information kiosks”. Considering that this was at a time when most of India did not have even a basic dial-up connection to the internet, it can be thought to be pretty far-sighted.

The PIB notification says:

Internet access nodes to be opened by DoT and authorised ISPs in all district headquarters by January 26, 2000, and, until then, Internet access from the nearest node on local call rates; upgradation of STD/ISD booths into full-service ‘information kiosks’ offering e-mail, voice mail and Internet; and permission for the Railways, Defence, State Electricity Boards, National Power Grid Corporation as well as organisations like ONGC, GAIL and SAIL to use their fibre optic backbone to provide service to the public by interfacing with existing or new public networks.

In a speech in 2004, towards the end of his full term, then Prime Minister Atal Behari Vajpayee had mentioned the same idea. Speaking at the inauguration of the TIDEL Park in Chennai, he had said:

There is an urgent need to generate useful educational, commercial, and other types of content on the Internet in Indian languages. As an example, I would like to see information kiosks to become as common across the country as STD booths, where ordinary people can access e-mail in Indian languages and also receive useful information about programmes, schemes, and facilities made available by the Government, banks, and other institutions.

In 1998, after the panel had submitted its report, Vajpayee had set up a high-level ministerial committee to look into the recommendations and come up with an implementation plan. I’m not sure much came of it.

Speaking of STD booths and information kiosks, though, it is very interesting to see what New York is doing with its telephone booths. The Washington Post reports:

The city announced Monday that it had selected a consortium of advertising, technology and telecom companies to deploy throughout the city thousands of modern-day pay phones that will offer 24-hour, free gigabit WiFi connections, free calls to anywhere in the U.S., touch-screen displays with direct access to city services, maps and directions for tourists, and charging stations (for the cellphones you’d rather use). The devices will also be capable of connecting people straight to emergency responders, and broadcasting alerts from the city during emergencies like Hurricane Sandy.

This is very impressive. Rather than doing away with PCOs like they’ve done in the Netherlands, this seems like an extremely interesting way to make use of them. I hope we can implement some of these in India, too. Considering that it was under a BJP government that the STD Booth to Information Kiosk idea first came up, I hope that the current government takes steps to implement it.

The long-term effects of government failure

In a good blog post on FirstPost, R Vaidyanathan writes that one of the possible reforms for the new government to take up would be to invest massively in electricity and water supply infrastructure and ensure 24 x 7 supply of these two commodities throughout the county. In his post, he explains that a move such as this will help Indian households (especially “middle class” households) and industry save a sum total of Rs. 1 lakh crore per year. While his numbers are not particularly convincing, his point is well taken – that irregular supply of basic infrastructure leads to additional private investment in such infrastructure which is an unnecessary cost. Electricity and water supply have “natural monopolies” and it helps to have a single supplier (in a local area at least) supply these goods rather than people making their own private supply arrangements.

Setting aside the problem of creating capacity for 24 x 7 universal power and water supply (priced at marginal cost, I assume), the problem reform such as this is likely to face is that there will be entrenched players who have a vested interest in such reform not taking place. And the reason such vested interests exist is because of past government failure.

In the absence of reliable public supply of infrastructure, private companies have come up to fill in the gaps. You have, for example, companies that manufacture invertors (to store and supply electricity in times of power failure), those that manufacture diesel generators, companies that supply water in tankers when there is none in the pipes (or worse, pipes don’t exist) and so forth. None of these companies will like the reform that Vaidya has proposed – for reliable supply of water/power will put them out of business! Hence they can be expected to lobby against such reform! Notice that the primary reason such companies exist is because of past government failures. Had past governments intervened and invested at the right time to provide reliable power and water supply, there would have been no gap in the market for such companies to fill.

Power and water supply are only two of several examples. Take for example the basic public good of law and order (strictly speaking power and water supply are not public goods). The lack of effective law and order enforcement by the state governments has led to a mushrooming of private security agencies. Every apartment building, every office building, malls and hotels are all now patrolled by a heavy posse of private security guards. In the presence of effective policing, these agencies have no business being in business (except perhaps in very limited cases)!

The point I’m getting at is that government failure at a particular point in time can lead to continued government failure. When we encounter policy paralysis, it is not just a temporary slowdown in decision-making and policy-making we face – it can lead to significant long-term consequences.

Here is an old related blog-post on my personal blog on private supply of what should be provisioned by the government.

Market Share Of Indian Air Operators

Not so long ago, we had a CAG report that discouraged giving sixth freedom rights to Gulf-based airlines, the argument being that it was reducing the market share of Indian airline companies, and was reducing the chances of Delhi airport ever becoming a hub. In that report, the CAG had also claimed that the granting of these sixth freedom rights was hurting the financial performance of Air India.

The Ministry of Civil Aviation, via the government data portal, has put out data on the market share (in terms of number of passengers and amount of cargo) of Indian and Foreign airlines for flights to and from India. While the data strangely refuses to mention the units for some of the variables, that doesn’t prevent us from calculating the market share of Indian carriers in the passenger and freight markets. The graph below summarizes this:

What is interesting is that the market share of Indian carriers in terms of both passengers and freight grew significantly between 2006 and 2011, slowing down a bit towards 2012 (wonder if Kingfisher’s demise adequately explains that). While this was the time when many of those sixth freedom rights (that the CAG was so opposed to) were granted, this was also the time period when privately owned Indian airlines started expanding globally and adding international routes.

This suggests that the reason for Air India’s losses lie less in the grant of the sixth freedom rights – which only grew the market, and more to do with the quality of service provided by the airline vis-a-vis both foreign carriers and privately owned Indian carriers.

What can also be seen from the above graph is that there is perhaps significant scope for expansion of Indian carriers when it comes to Air Cargo where their market share is minuscule compared to their passenger market share.

Up North

So it’s exactly a year since I moved to the north. North Bangalore that is. For exactly the last one year, I’ve called a place in Rajajinagar 2nd Stage (not to be confused with Rajajinagar 2nd Block) my home. It’s been a roller-coaster ride, I must say. Lots of ups, lots of downs. I must admit a year in I still haven’t settled in completely, and for the record, I’m already plotting a move back south.

The problem with the area where I live is that it is an area of houses built on 30 feet by 40 feet plots. While that itself is not a problem (with an FSI of 1.5, you can build a 1800 square foot house here, which is pretty massive), the problem is that this area was “built” in the early 1970s. Back then, nobody had cars, and given the economic situation nobody aspired to have a car. This, coupled with the smallish plots meant that people didn’t make a provision in their plots to park cars. Again – given the economic situation when this layout was built, it is a perfectly rational decision.

Now, forty years later, with rapid economic growth in the last 20 odd, everybody has a car. And since there’s no space to park them inside the houses, people park them on the streets. So on every street in my locality, you will find cars parked continuously on both sides of the road. Unfortunately people haven’t figured out a protocol of one-ways, so sometimes that leads to traffic deadlocks when cars approach from both sides of the road. Thankfully we are spared of such deadlocks since we live on a road that leads to a dead end (a real dead end, not a “Bangalore dead end”, which is just a T-junction).

Thinking about it, I find the land use here rather suboptimal. Most plots have two-storeyed houses, and given the size of the plots, the plots are fully built. So there is less than five feet space between my window and my neighbour’s – and on Sunday mornings we get woken up because Neighbour Uncle likes to talk loudly on the phone sitting in his porch (the neighbours reconstructed their house a few years back, so they have a porch to park their car). Essentially there is little privacy.

There is little of other things also – like open spaces and trees, again a function of the plot sizes. I have a solution for this, but it is going to be hard to implement, and I don’t want to be the ones doing that. Yes, everyone has a plot of land to call their own. But they live in houses that aren’t too large and don’t have much privacy or open spaces or gardens.So I think it would be a profitable enterprise for a real estate developer to buy up the entire area (let’s say about two or three roads at least), merge the sites and build a high rise apartment here with all “facilities”. Even if the realtor were to pay above market rates (necessary since a lot of people wouldn’t want to sell) and compensate the incumbents handsomely in terms of houses, there is profit to be made. But then everyone wants their own “piece of land”.

Notwithstanding any of this, where I live is a great area. It is residential and solidly middle-class, and I can buy just about anything I want within a kilometer of my house. I only need to walk about 100m to catch an auto rickshaw, and it isn’t that hard to get an auto home at any time in the day. The biggest problem I find here, though, is infrastructure.

Malleswaram is a pre-car area. It was built in the 1890s to rehabilitate people from the old city (pete) area following an outbreak of plague. Consequently, the roads aren’t particularly wide. Which ever way I want to get out, I’m faced with narrow roads, and that combined with heavy traffic means travel times to the centre of town and beyond are large. And to make matters worse, Dr. Rajkumar Road (one boundary of “mainstream” Rajajinagar) is a highway, with buses leaving for all parts of Karnataka passing through this road.

I have a habit of living in cusps. My last residence was at the trijunction of Jayanagar, Basavanagudi and Banashankari. This one is on the border of Malleswaram and Rajajinagar. Maybe the next time I move, I should think of going into the “middle” of some area.

The Problem with Smaller States

I’m a fan of smaller states. I think our states are currently way too large and we could do with more states since that could lead to greater administrative efficiency and federalism. So yes, I’m fully in support of the Telangana movement – only because I think AP is too huge and unwieldy a state (42 parliamentary constituencies) to be managed from one place.

I have one concern, however. I was thinking of the case of Karnataka and the possible demand by areas of North Karnataka for a separate state. While I support this demand (Karnataka again I think is too huge and unwieldy to be managed from Bangalore which is in a corner of the state) I was suddenly worried about power supply.

From what I last remember, Karnataka’s biggest source of power is the Raichur Thermal Power Station in Shaktinagar. Assuming that it breaks away from “Mysore” as part of a new “north Karnataka” state, what will happen to the energy security of Mysore (the smaller southern portion)? I guess there might be some agreements and long term power supply contracts put in place, yet the loss of this massive captive power source would significantly hurt Mysore.

My concern is that if the demand for a separate North Karnataka grows, the government of undivided Karnataka would be loathe to invest much in any area that may fall under a part of the state that wants to “break away”. And this could lead to concentration of investment in areas that are close to the seat of power, and further skew the development of different parts of the state. Power supply is just one example that I took here – it could be any other massive government investment – say SEZs or large industrial plants and so forth.

There is another issue with smaller states but I think this is a problem for which a solution has been found and is under implementation. The problem with having too many states is that we will end up with too many inter-state boundaries and thus too many “checkposts”. However, the proposed Goods and Service Tax regime (if/when it were to get implemented) will ensure that India would become a common market and inter-state commerce would become more seamless. Nevertheless it is important to get the GST regime in place before we get too many more new states – for it also means less stakeholders to deal with!

Rail track utilization, per Railway Minister

Now I guess you know how I work. I come across a data set and then torture it to extract as much information as I can before I let go of it. So continuing with the railway data put out by the EPW, in this post we will look at the track utilization. The metric is simple – how many passenger trains go over a piece of railway track each day?

We have numbers for the total route length and the total number of passenger train kilometers. Dividing the latter by the former gives us the number of trains that pass over the average piece of track in a year. Divide that by365 and you get the number of trains that go over the track per day. In 1992, this number was 16. An average piece of track was run over by 16 trains each day. By 2009, this number had gone to 25!

Data source: Economic and Political Weekly May 18, 2013 vol xlviII no 20

Note that these are average numbers. They hide the fact that there might be tracks on which no trains run, and other tracks on which maybe 100 trains run each day (even higher if you think of something like the Mumbai local train tracks). Yet, they give us a good indication of how the railways have utilized the infrastructure that is most scarce (tracks are the hardest thing to add, given the complexities involved in laying additional track – taking into account land acquisition, etc.).

Notice that though this is a largely linear growth, there have been times when growth has been faster than in other times. Next, let us look at how much utilization has been added each year. And let us look at it in terms of who the railway minister was in that financial year!

Notice that the outlier years are the first two years of Nitish Kumar’s occupation of the Ministry. During his unbroken 5 year tenure, Lalu Prasad Yadav also consistently added significantly in terms of track utilization. Unfortunately the data for passenger train kilometers ends with 2009, so here we are not able to see how Mamata Banerjee performed in her second stint in the ministry.

Strain on Indian Railways

In my last post I looked at some railways data that was put out by the Economic and Political Weekly to show that the total addition in route length over the last 20 years is not much to talk about. The same data set also gives data on “passenger kilometers” and “passenger train kilometers” for each year. The latter gives the total distance all passenger trains in India have run, while the former gives the total distance traveled by (ticketed) train passengers in India each year.

Now, the ratio of these two numbers gives us the number of passengers per train. It is interesting to note how this has moved in the last 20 years.

In 1990 the average train used to carry about 800 passengers. That number has almost doubled to 1400 in 2009 (data on passenger train kilometers not available after that).

While some people might see this as a measure of higher efficiency by the railways, I see it more as an inability by the railway infrastructure to keep up with passenger demand. With little track length having been added, there is no surprise in that.