Thursday, April 4, 2013

Prioritizing Communications & Energy

Two Sectors to Fix

Shyam Ponappa  | April 4, 2013

After curbing unproductive expenditure and imports, we must focus on developing communications and energy

A difficult aspect of addressing our economy, apart from necessary firefighting, is that of prioritisation, whether it is through organisation (or reorganisation), management and execution, or all these combined with policy reforms. With infrastructure growing for years at only about half the rate that gross domestic product has, crisis and turmoil are inevitable without systemic remedies. How should the authorities address the many deficiencies if our need is comprehensive, integrated improvement in systems?

Prerequisite: control expenses
First, a caveat: meta-processes such as managing cash flows and the balance of imports to exports, our most urgent problems, must be dealt with as a prerequisite. Giving out more cash than receipts has to stop. Many countries have come to grief on welfare spending before they could afford it, and no one has found a magical way out. India is not likely to find one either, so we do have to end this unsustainable indulgence. Second, hard as it is, without investment in capacity augmentation and system building, we cannot escape the cycle of deficiencies and crises. If we can get help from the International Monetary Fund now, that's what we should seek, and use it judiciously.

Communications and energy
Communications is a compelling priority, because of the bang for the buck it provides, compounded by correcting past mistakes. Other infrastructure deficiencies, while equally critical or even more so - think energy, water, sanitation and transportation - require much more by way of capital, human resources, and organisation, and generally do not yield as much return as quickly. Also, other sectors often require co-ordinated action by state and local governments in concert with the central government.

There are areas that need central policy correctives, too. For energy, an urgent requirement is a solar energy policy to induce the spread of equipment. The policy should include tax rebates and the concept of Net Energy Metering, as in California, that facilitates selling excess power to the grid. In the US, for instance, of the new capacity commissioned in 2012, nearly half was from renewable energy - of which 40 per cent was from wind, with a substantial share from solar. We have to find a balance between the inducements that led to overbuilding in Spain and our own backward-leaning policies, as we have abundant sunshine that is not adequately used as well as high energy imports. Italy, Spain and Australia are apparently close to price parity in solar and conventional fuels; perhaps there's scope for selective adaptation of some of their policies.

The difficulty with communications alone, however, is evident from the growth of mobile telephony in India. The proliferation of networks and equipment with the need for standby generation because of unreliable grid power has resulted in:
  • higher oil imports for diesel for generating electricity;
  • a multiplicity of networks, towers and radio transmission equipment, with substantial investments in spectrum, resulting in a huge drain on capital, in addition to the environmental impact of excessive materials used, high electromagnetic radiation, and a blight on the urban landscape.
Energy for communications

According to a recent statement in Parliament, the annual diesel consumption in 585,000 towers is estimated at over five billion litres. This underscores the need to develop our own approach to the whole range of requirements, from network architecture and organisation to equipment, even as we re-evaluate how to provide countrywide broadband access. The existing paradigms will result in escalating capital cost, operating expenses, and fuel import patterns that are unsustainable.

Our approach to voice and data communications itself has to evolve. In a way, communications services are an enabler and force-multiplier for other infrastructure, providing a framework and facilitation for structured development. Also, if a systematic approach that serves our needs evolves for this sector, it could provide a template for integrated, goal-directed development of other sectors, starting with the verticals to deliver reliable power to users.

This undertaking is especially complex in India because of our fragmented organisational structure, with no apparent co-ordination mechanism. Another aspect of the problem is reflected in this quotation from a McKinsey report: “Delays in building ‘hard’ infrastructure often stem from a lack of ‘soft’ infrastructure, such as educated, skilled workers with project-management capabilities.”*  There is also a lack of effective institutions and processes for the organisation and management of human and material resources. For instance, fuels such as coal and oil are under different ministries; power generation and distribution, alternative energy and nuclear energy are all separate ministries, as are the railways that transport coal, while another ministry evaluates the environmental impact. Nothing is going to work if each one acts independently without co-ordinating with the others. It’s as though we have not understood the importance of organisation and co-ordination to achieve results, or are consciously ignoring this in an opportunistic free-for-all.

Finding our own way

Google Chairman Eric Schmidt observed recently that India lagged behind the rest of the world in adopting the Web services model and in harnessing the power of the internet, attributing this to failure to invest in high-speed networks, perhaps through complacency because of a strong IT sector. While this could be interpreted as self-serving, our needs would be very well served if the authorities focused on correcting this through policies that induce private sector investment in networks and service delivery, in data centres, and in terrestrial links to supplement our submarine cables. In communications, as in other sectors, we have to fashion our own way because cut-and-paste solutions won’t work, as the contexts are too different. We must explicitly address developing local data centres; terrestrial links with other countries, if feasible; our own designs for rural broadband including common facilities, with efficient, low-powered elements to the extent possible; use renewable energy; explore small-cell architecture in urban settings; and devise policies that facilitate investment in ubiquitous internet access, including spectrum reforms like allocating more bandwidth for Wi-Fi. It would be in our interest to focus on doing what it takes to achieve top-tier Web services in the next five to 10 years.

                                                                                               shyamponappa at gmail dot com

*“Can India lead the mobile-Internet revolution?”
Laxman Narasimhan, February 2011

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