Power, Coal, Roads, Civil Aviation, Ports, Petroleum and Telecom Sectors of India: A Status Report
|Physical infrastructure has a direct
bearing on sustainability of growth and overall development. The
economic miracle of the high-growth Asian economies was accompanied by
substantial investments in infrastructure. Evidence also suggests that
creation of infrastructure, through its direct and indirect effects,
has a significant impact on poverty reduction. In the Indian context,
though there has been some improvement in infrastructure development in
transport, communication and energy sectors in recent years, there are
still significant gaps that need to be bridged. The current economic
slowdown provides an opportunity for countries like India that have a
substantial degree of unmet infrastructure requirements. This is
reinforced by the understanding that spending on infrastructure has
large multiplier effects.
The demand for infrastructure products and services is substantially a
derived demand. As the economy slumped in activity, consequent to the
commodity price and oil price shocks and then the global economic
crisis, most infrastructure sectors too witnessed subdued growth in
production/services during 2008-09. The port and air cargo growth
slowed down considerably, reflecting the sluggishness in import and
export growth in the second half of 2008-09. The rail freight growth
too slowed down, but to a lesser degree, because the coal sector, which
accounts for a substantial chunk of the rail freight experienced robust
production. Along with coal, the growth in tele-connectivity stood as
exception amidst the general slowdown.
The growth in electricity generation by power utilities during 2008-09
at 2.7 per cent fell much short of the targeted 9.1 per cent. Despite
the sharp decline in hydro and nuclear generation in 2008-09, the
growth in total electricity generation was positive due to the 5 per
cent plus growth in thermal generation. It is further seen that,
despite being quantitatively smaller, it is the visibly higher growth
in power generation in the private sector compared to the Central and
State sectors that pushed the growth in total generation close to 3 per
The negative growth in power generation from hydro stations during
2008-09 was mainly due to less inflow into reservoirs, resulting from
low rainfall during the monsoon. Generation of power from nuclear power
stations also registered negative growth, mainly due to fuel supply
constraints. Other reasons for the lower growth in power generation
during the year 2008-09 included: shortage of coal and gas, shortfall
in capacity addition, delay in achieving commercial operation/
commencement of full generation from some newly commissioned units due
to non-completion of balance of plant works and initial stabilization
problems in some of the new thermal units.
In keeping with the target set by the
National Electricity Policy (NEP), 2005 to raise per capita
availability from 704 units in 2007-08 to 1,000 units per annum by the
end of 2012, a capacity addition of 78,700 MW has been set for the
Eleventh Five Year Plan, of which 19.9 per cent is in the hydel sector,
75.8 per cent thermal and the rest nuclear.
The target for 2007-08 was initially fixed at 16,335 MW which was subsequently reduced to 12,039 MW. Against
this revised target, a capacity addition of 9,263 MW, comprising 2,423
MW hydro, 6,620 MW thermal and 220 MW nuclear was achieved during the
year. A capacity addition target of 11,061 MW comprising of 9,304 MW
thermal, 1,097 MW hydro and 660 MW nuclear was originally planned for
2008-09. On account of revision in definition of commissioning of
thermal projects, the capacity addition target for the year 2008-09 has
been revised as 7,530 MW comprising of 5,773 MW thermal, 1,097 MW hydro
and 660 MW nuclear, against which a capacity of 3,454 MW has been added
up to March 31, 2009. (As per the
new definition, commissioning of the plant is “related to actual output
in the form of generation that is emerging from plant for auxiliary
consumption and input to the grid based on its designated fuel and
completion of all plants and equipments required for fuel handling and
safe operation of the plant.”).
The main reasons for under achievement of capacity addition targets
during 2007-08 and 2008-09 were delayed and non-sequential supply of
material by suppliers, shortage of skilled manpower for construction
and commissioning of the projects, contractual disputes between project
authorities, contractors and their sub-vendors, delay in readiness of
balance of plants (BOPs) by the executing agencies, shortage of fuel
(gas and nuclear) and design problem in CFBC boiler (Giral Lignite
Rural electrification: Under the Rajiv Gandhi Grameen Vidyutikaran Yojana
(RGGVY), which is continued during the Eleventh Five Year Plan, 59,882
villages have been electrified and connections to 53.78 lakh BPL
households have been released (up to 31.3.2009). 327 projects have been
sanctioned for implementation in Phase-I of Eleventh Five Year Plan
period at a sanctioned cost of Rs. 16,254.12 crore for electrification
of 49,704 un-electrified villages and release of electricity
connections to 161.76 lakh BPL households. 280 projects have been
awarded till 31.3.2009. Besides 327 projects, ongoing 235 projects of
Tenth Five Year Plan are also being executed during Phase 2 of the
Eleventh Five Year Plan. Franchisees are in place in 97,211 villages in
PETROLEUM AND GAS
The petroleum sector has been shaken by the wild swings in
international oil prices during 2008-09. The production of crude and
products witnessed slack growth in 2008-09, compared to the previous
year. The three per cent growth in refinery production in 2008-09 was
mainly on account of the impressive growth of private sector
production. While the production of crude oil declined in 2008-09, its
consumption increased. In contrast, the production of petroleum
products increased by 3.9 per cent in 2008-09, while its consumption
The growth in diesel consumption which stood at 6.7 per cent in
2006-07, rose to 11.1 per cent in 2007-08 and then declined to 8.4 per
cent in 2008-09, year-on-year. Major reasons for the slowdown in growth
included industrial slowdown, business slowdown in sectors like
automobiles, transporters strike in January 2009, etc.
With the commissioning of Reliance
Petroleum Ltd. (SEZ) Refinery in Gujarat in December 2008, the total
installed capacity of India refineries increased from 148.97 MMTPA to
177.97 MMTPA by the end of 2008-09.
Since operationalizing the NELP in 1999, in seven rounds of NELP, 203
Production Sharing Contract (PSC) have been signed, thereby increasing
the area under exploration more than four times. In the recently
concluded NELP-VII, 181 bids were received from 95 companies including
21 foreign companies. Under NELP, 68 oil and gas discoveries have been
made by private/joint venture (JV) companies in 19 blocks, which have
added more than 600 MMT of oil equivalent hydrocarbon reserves.
As on April 1, 2009, investment commitment under NELP is about US$ 10
billion on exploration, against which actual expenditure so far under
NELP is about US$ 4.7 billion. In addition, US$ 5.2 billion investment
has been made on development of discoveries.
National gas hydrate programme: In
tune with the road map for NGHP, India has acquired core samples with
the help of the drill ship “JOIDES Resolution”. In December 2008, an
MoU was signed between the Directorate General of Hydrocarbons and the
U.S. Geological Survey for exchange of scientific knowledge and
technical personnel to exploit the potential of the gas hydrate as an
alternate source of energy.
Acquisition of oil and gas assets abroad: In
view of the demand-supply gap in hydrocarbons, national oil companies
are encouraged to pursue equity oil and gas opportunities overseas. Oil
& Natural Gas Corporation Videsh Limited (OVL) produced about 8.78
million metric tonnes of oil and equivalent gas during the year 2008-09
from its assets abroad in Sudan, Vietnam, Russia, Syria and Colombia.
In 2008, OVL acquired two oil blocks each in Brazil and Colombia. The
largest ever acquisition of a foreign company, Imperial Energy Plc., U
K (IEC) by an Indian public sector company, ONGC-Videsh Ltd. took place
in 2008. Besides, IEC-OVL-IOC alliance, BPCL along with Videocon, too
have acquired oil assets abroad.
Raw coal production during 2008-09 is provisionally estimated at 493.20
million tonnes (MTs) as against 457.08 MTs during 2007-08, registering
a growth rate of 7.90 per cent. The coking coal production during
April-February 2009 was 29.76 MTs as against 29.70 MTs (RE) in the
corresponding period in previous year. The growth rate of raw coal
production was around 6 per cent during the period from 2003-04 to
2007-08 which was increased to about 8 per cent during 2008-09. This
increase was due to enhanced production by all stakeholders, especially
captive blocks and large public sector undertakings (PSUs) like Coal
India Limited (CIL) and SCCL.
During the Tenth Five Year Plan, CIL identified 91 mining projects, of
which 86 projects with a total capacity of 207.01 MTs per annum were
approved. During the Eleventh Five Year Plan period, 125 projects with
a total capacity of 298.18 MTs per annum have been identified. Of this,
40 projects with a total capacity of 112.37 MTs have already been
approved. SCCL plans to open six underground mines and 14 open cast
mines during the Eleventh Five Year Plan.
Besides, for securing metallurgical coal supplies overseas, CIL is
pursuing two alternative routes viz. participation in Joint Venture of
PSUs for formation of a Special Purpose Vehicle (SPV) to secure coal
resources abroad and acquisition of coal mines/blocks.
Under e-auction of coal sale, initiated in 2007-08, CIL offered 13.06
MTs in 2008-09 against which the allocation was 5.32 MTs, while SCCL
sold MTs under e-auction. While CIL secured a 43 per cent increase over
the notified price under e-auction while SCCL secured 100 per cent
increase over the notified price in 2008-09.
To improve quality of coal and to upgrade technology in mines, CIL and
SCCL have initiated many steps for additional capacity for
beneficiation of non-coking coal and supply of quality coal as per
buyers’ choice. CIL’s initiatives include; identification of seven high
capacity underground mines for development with latest technology,
restart of mining in eight abandoned mines forming joint ventures with
reputed mining companies, introduction of Continuous Mines as Mass
Production Technology, PSLW in more mines, introduction of high wall
mining and up-gradation of equipment size.
As on March 31, 2009, 201 coal blocks with geographical reserves of
coal of 45.89 billion tonnes (BTs) have been allocated to eligible
companies. Of the 201 blocks, 3 blocks have been de-allocated and
mining lease of one block has been declared void. Out of remaining 197
blocks, 97 blocks with reserves of 27.59 BTs have been allocated to
PSUs. Out of the 100 blocks allocated to private companies with
geographical reserves of 17.93 BTs, production has commenced in 23
blocks. During April-February 2008-09, the production from these coal
blocks was 27.82 MTs.
CIL was conferred Navratna status in October 2008
on the condition that the company will be listed within three years.
Five subsidiaries of CIL—Mahandadi Coalfields Limited, Northern
Coalfields Limited, South Eastern Coalfields Limited, Western
Coalfields Limited and Central Coalfields Limite— have been granted
Mini Ratna (category-I) status.
In pursuance of the recommendations of the Energy Coordination
Committee, the Administrative Staff College of India (ASCI), Hyderabad
was appointed as a consultant for preparing a report on the appointment
of a Coal Regulator.
The country’s road network consists of national highways, State
highways, major district roads, other district roads and village roads.
Out of the total length of national highways, about 30 per cent length
is single lane/intermediate lane, about 53 per cent is two-lane
standard and the remaining 17 per cent is four-lane or more standard.
Though national highways comprise only about 2 per cent of the total
length of roads, they account for about 40 per cent of the total
National highways development project: The
project is implemented by the National Highways Authority of India
(NHAI). Phase I & II of NHDP envisaged 4/6 laning of about 14,330
kilometres of national highways, at a total estimated cost of Rs.
65,000 crore (at 2004 prices). These two phases consist of the Golden
Quadrilateral (GQ), the North-South & East-West corridors, Port
Connectivity and Other Projects. GQ connects Delhi, Mumbai, Chennai and
Kolkata. The North-South and East-West Corridors connects Srinagar in
the North to Kanyakumari in the South and Silchar in the East to
Porbandar in the West. Under the Port Connectivity Project, roads
connecting 12 major ports will be improved.
As of March 31, 2009, 11,037 km of national highways under NHDP has
been completed, the bulk of which lies on the GQ. Nearly 98 per cent
works on GQ have been completed by March 2009 and the NS and EW
corridors are expected to be completed by December 2009.
Approval of the Government has been given for; (a) upgradation of 12,109 km under NHDP Phase-III at an estimated cost of Rs. 80,626 crore, (b) two-laning with paved shoulders for 5,000 km of national highways under NHDP Phase-IV at an estimated cost of Rs. 6,950 crore, (c) six-laning
of 6,500 km of NHs comprising 5,700 km of GQ and balance 800 km of
other sections of NHs under NHDP Phase-V at a cost of Rs. 41,210 crore,
(d) 1,000 km of expressways with full access control on new alignments at a cost of Rs. 16,680 crore under NHDP-Phase-VI, and (e)
construction of ring roads, grade separated intersection, flyovers,
elevated highways, ROBs, underpasses and service roads at a cost of Rs.
16,680 crore under NHDP Phase-VII.
Special Accelerated Road Development Programme in the North-eastern Region: The
Special Accelerated Road Development Programme for North-eastern region
(SARDP-NE) aims at improving the road connectivity to state capitals,
district headquarters and remote places of NE region. It envisages two-
four-laning of about 5,174 km of national highways and two-laning/
improvement of about 4,589 km of state roads. This would provide
connectivity to 85 district headquarters to national highways/ State
roads. The programme has been divided into the following two phases:
Phase A would include improving
2,619 km of roads consisting of 2,029 km of national highways and 590
km of state roads at an estimated cost of Rs. 16,286 crore. Of this,
the Department of Road Transport & Highways (DoRTH), Border Roads
Organisation (BRO) and State PWDs have been assigned with the
development of 1,795 km of roads. Out of this, 1,400 km of roads at an
estimated cost of Rs. 4,285 crore has been approved for execution and
the remaining 395 km has been approved "in-principle" by the
Government. Improvement of the remaining length of 824 km of national
highways is to be done by NHAI. Out of this, works on 330 km will be
done by inviting bids for construction works and balance length of 494
km will be taken up on BOT basis. Out of 1,400 km roads to be executed
by DoRTH, BRO & State PWDs, projects covering a length of 1,065 km
at a cost of Rs. 3,378 crore has been approved till date and works are
The likely target date of completion for phase A is 2012-13.
Phase B involves two-laning of
4,825 km of national highways and two-laning/ improvements of state
roads. Phase B is approved only for DPR preparation and investment
decision is yet to be taken by the Government. The Arunachal Pradesh
Package for Road and Highways involving roads of 2,319 km length was
also approved by the Government. Out of this, 1,472 km is national
highways and 847 km is state/general staff/ strategic roads.
Construction of rural roads under PMGSY: The
Eleventh Five Year Plan has projected an investment requirement of Rs.
41,347 crore (at 2006-07 prices) in rural roads. During the first two
years of the Eleventh Five Year Plan, an expenditure of Rs. 25,780.7
crore has been incurred on rural roads under PMGSY. Additionally, there
are roads built by PWD and the Panchayati Raj institutions in the rural
Under PMGSY, the limited absorption capacity of states in terms of the
number of programme implementation units (PIUs) at district level and
at the State Rural Roads Development Agencies (SRRDAs) constrained the
programme initially, but could be mitigated gradually. Further,
shortage of contractors is being felt in many states. Need-based
relaxation in the bidding capacity and packaging of works has helped to
overcome this problem to an extent. Besides, in the beginning, in some
states, the personnel with the implementing agencies like the Rural
Engineering Services, Rural Works Departments, Zilla Panchayat
Engineering Units and the Panchayat Raj Engineering Departments were
not well-equipped in road construction compared to their counterparts
in the Public Works Department.
The Civil Aviation sector had undergone dramatic expansion during the
Tenth Five Year Plan period which continued during 2007-08. The volume
of air traffic increased sharply during 2004-07, with a near doubling
of the number of domestic and international air passengers (combined).
However, during 2008, this sector showed signs of slowdown due to steep
rise in the cost of ATF (air turbine fuel) and the global economic
slowdown. The number of domestic passengers declined by 5 per cent
during 2008 as compared to 2007. However, the silver lining is that the
domestic cargo showed a growth of 14.55 per cent. Fall in ATF prices
augers well for the passenger traffic in 2009.
Fleet size: There are 11
scheduled passenger operators and one cargo operator in the country
with a combined fleet size of 407 aircraft. In 2008, the scheduled
operators/ companies were given permission to import 62 aircraft. To
promote regional connectivity and to expand air connectivity among
smaller cities, a separate category of Scheduled Air Transport
(Regional) Services has been introduced. At present, MDLR Airlines
operates such services in the Northern Region with two aircraft in its
fleet. There are also 99 non-scheduled airline operators who have 241
aircraft in their inventory.
Subsequent to amalgamation of Air India and India Airlines with
National Aviation Company Ltd., the brand name "Air India" has been
retained with "Maharaja" as its mascot. The merged entity along with
its subsidiary companies, with more than 140 aircraft, would enter the
list of top 30 airlines globally in terms of fleet size. As on December
31, 2008, the company has inducted 42 new Boeing/Airbus aircraft to its
fleet out of 111 aircraft ordered in December 2005.
Airport development: The
international airports at New Delhi and Mumbai have been restructured
and modernization and up-gradation works are being carried out through
private participation. The construction of first phase development
works in Delhi started in early 2007 and is likely to be completed by
March 2010. The cost of development works for first phase is about Rs.
8,975 crore. The construction works for Mumbai airport started in
January 2007 and is expected to be completed by March 2010. The
development works are to cost around Rs. 9,802 crore and are expected
to be completed by 2012.
The plan for modernizing/expanding Kolkata airport at Rs. 1,942.51
crore has been approved. Passenger terminal building would be 1,80,000
sq m. having pile foundations including all civil and superior
finishing works at par with highest international standards.
The plan for modernizing and expanding Chennai airport amounting to Rs.
1,808 crore was approved in August 2008. The proposal consists of
construction of domestic terminal covering an area of 67,700 sq m,
extension of existing Anna International Terminal of 59,300 sq m,
extension of secondary runway across the Adiyar River and construction
of parallel taxi-track and parking bays.
Development of non-metro airports: The
Airports Authority of India is upgrading and modernizing 35 non-metro
airports in the county in a time bound manner. Development of airports
in the North-eastern region is being taken up on priority basis.
Architectural design competitions for terminal buildings at Ahmedabad,
Thiruvananthapuram, Jaipur, Udaipur, Dibrugarh, Trichy, Lucknow,
Mangalore, Bhubaneshwar, Indore, Ranchi, Port Blair, Vadodara, Madurai,
Bhopal, Raipur, Tirupati and Coimbatore airports have been held. The
terminal buildings will be modular in design for easy expansion. The
terminal building at Nagpur and Srinagar airports have been expanded
and modified for integrated operations. Terminal building works have
been completed in Ahmedabad (domestic), Kullu, Kangra, Porbandar,
Udaipur, Gaya, Nagpur, Belgaum, Akola, Calicut, Hubli, Surat,
Aurangabad and Trichy airports. The development works on the airside
and city side are likely to be completed by March 2010.
The city side development of 24 airports will be undertaken with
private sector participation under PPP mode. These airports include
Ahmedabad, Amritsar, Guwahati, Jaipur, Udaipur, Thiruvanthapurum,
Lucknow, Madurai, Mangalore, Aurangabad, Khajuraho, Rajkot, Vadodara,
Bhopal, Indore, Raipur, Vizag, Trichy, Bhubaneswar, Varanasi, Agatti,
Dehradun, Ranchi and Dimapur. The scope of city side development,
through PPP, would comprise commercial development of property, car
park and cargo operation.
Development works at additional 13 non-metro airports are being
undertaken for completion in a similar time frame. These airports are
Akola, Belgaum, Calicut, Cooch Behar, Dibrugarh (Mohanbari), Gondia,
Hubli, Kullu (Bhuntar), Mysore, Rajahmundry, Surat, Srinagar and
India's coastline of 7.517 km, spread over 13 States/UTs, is studded
with 12 major ports and 200 non-major ports. Of the non-major ports,
about 60 are handling traffic. The total traffic carried by both the
major and minor ports during 2007-08 was estimated at around 723 MT. The
12 major ports carry about three-fourths of the total traffic, with
Visakhapatnam as the top traffic handler in each of the seven years.
In 2008-09, the cargo handled by
major ports registered growth of 2.1 per cent against 13.9 per cent in
the corresponding period of 2007-08. About 80 per cent of the
total volume of ports' traffic handled was in the form of dry and
liquid bulk, with the residual consisting of general cargo, including
containerized cargo (Table 9.23). There was an impressive growth of
14.8 per cent per annum in container traffic during the five years
ending 2007-08. Half of the world's traded goods are containerized, and
this proportion is expected to increase further.The Jawaharlal Nehru Port Trust (JNPT), India's largest container port, handled roughly 4.1 million TEUs in 2007-08.
The annual aggregate cargo handling capacity of major ports increased
from 504.75 MT per annum (MTPA) in 2006-07 to 532.07 MTPA in 2007-08.
The average turnaround time increased marginally from 3.6 days to 3.9
The average output per ship berth-day improved from 9,745 tonnes in
2006-07 to 10,071 tonnes in 2007-08. The pre-berthing waiting time at
major ports on port account, however, increased from 2 hours in 2006-07
to 11.40 hours in 2007-08 and reduced to 9.59 hours in 2008-09.
Significant inter-port variations in pre-berthing waiting time
continued to persist.
Despite having adequate capacity and modern handling facilities, the
average turnaround time is 3.85 days during 2008-09, compared with 10
hours in Hong Kong, undermines the competitiveness of Indian ports.
Since ports are not adequately linked to the hinterland the evacuation
of cargo is slow leading to congestion. To this end, all port trusts
have set up groups with representatives from NHAI, the railways and
State Governments to prepare comprehensive plans aimed at improving
road-rail connectivity of ports. The NHAI has taken up port
connectivity as major component of NHDP. An efficient multi-modal
system, which uses the most efficient mode of transport from origin to
destination, is a prerequisite for the smooth functioning of any port.
It involves coordinating rail and road networks to ensure good
connectivity between ports and the hinterland.
Traditionally, most ports in the world are owned by the public sector.
But privatization of port facilities and services has now gathered
momentum. An enabling policy framework has been put in place by the
Government. Depending on the nature of facility/service, private
operators can enter into a service contract, a management contract, a
concession agreement or a divestiture to operate port services. Areas
that have been opened up to the private sector on a BOT basis include
construction of cargo handling berths and dry docks, container
terminals and warehousing facilities and ship-repair facilities.
Indian telecom industry continued to register significant growth in 2008-09. Indian
telecom network, with about 414 million connections in February 2009,
is the third largest in the world, while it is credited with the second
largest wireless network in the world. At the current pace, the
target of 500 million connections by 2010 is well within reach .The
Government of India has reiterated its commitment to reach out to the
remote and uncovered areas and to augment the broadband facilities in
The total number of telephones increased from 76.53 million by
end-March 2004 to 413.85 million by end-February 2009. About 113.36
million telephones, at the rate of more than 14 million subscribers
every month, were added during the 11 months of 2008-2009. Total
tele-density increased from 12.7 per cent in March 2006 to 35.65 per
cent in February 2009. While rural tele-density reached 13.81 per cent
in January 2009, the urban teledensity shot up to 83.66 per cent.
While the wireless subscriber base grew at a compound annual growth
rate (CAGR) of 75.9 per cent per annum since 2003, the wire-line
segment has been declining gradually. The share of wireless phones
increased from 24.3 per cent in March 2003 to 90.88 per cent in
February 2009. Improved affordability of wireless phone has made
universal access objective more feasible. The government has taken
several steps directed at reduction in entry barriers, creation of a
level-playing field between incumbents and new entrants and forward
looking regulation. Consequently, the share of private sector in total
telephone connections increased to more than 79 per cent in February
2009 against a meagre 5 per cent in 1999.
Rural telephony: With
the special thrust given to rural telephony, the number of rural
telephones went up from 12.3 million in March 2004 to 112.71 in January
2009. The strategy for rural network expansion involves provision of
phones through market mechanisms in the viable areas and through
Universal Service Obligation (USO) Fund in the non-viable areas. While
village public telephones (VPTs) and rural community phones (RCPs) will
enable public access, a scheme of RCPs has been launched under USO(F)
to create the infrastructure in rural and remote areas. Out of more
than 22.71 lakh public call offices (PCOs) functioning in the country,
two lakh are in the rural areas. The Mobile Grameen Sanchar Sewak Scheme
providing telephone at the doorstep of villagers is in place in about
12,000 villages. About 8,61,459 wireless broadband connections with
speed of at least 512 kbps always on, shall be provided by BSNL with
subsidy support from USO(F).
the importance of increasing broadband connectivity for the growth of
knowledge-based society, several steps have been taken to promote
broadband. As a result, the broadband subscribers grew from a meagre
0.18 million as on March 2005 to about 5.69 million by February 2009.
An agreement has been signed with BSNL in January 2009 to provide
wire-line broadband connectivity to rural and remote areas by
leveraging the existing 27,789 rural exchanges and copper wire-line
network and by facilitating the service providers in creating broadband
infrastructure. Under this, BSNL would provide 8,61,459 wire-line
broadband connections from rural telephone exchanges with subsidy from
USO Fund. The speed of each of the broadband connections shall be at
least 512 kbps always on, with the capability to deliver data, voice
and video services in the fixed mode. The rural broadband connectivity
will cover government, institutional users, gram panchayats,
higher secondary schools, public health centres and individual users.
Subsidy would also be provided for setting up one kiosk from each rural
exchange for providing public access to broadband services.
A proposal is being considered to provide broadband connectivity in
rural and remote areas in a phased manner, under which 5,000 blocks
would be connected by wireless broadband and villages coming within a
radius of 10 kms. of the taluk/block headquarters would be covered.
Guidelines have been issued for broadband wireless access (BWA)
services. BWA services will increase broadband penetration.
FINANCING OF INFRASTRUCTURE
The Eleventh Five Year Plan envisages an infrastructure investment of
20,56,150 crore (at 2006-07 prices), equalling US$ 514 billion, to be
shared between the Centre, States and private sector in the ratio of
37.2, 32.6 and 30.1 per cent.
The total required debt financing has been estimated at Rs. 9,88,035
crore. The gap between the likely availability of debt resources and
the estimated debt requirement is sought to be bridged through enhanced
credit, ECBs, pension and insurance funds and other debt funds on
commercially viable terms. The actual flow of debt resources to
infrastructure needs to be evaluated against the requirement indicated
above. However, this is rendered difficult on account of insufficient
information. Nonetheless, the available information on flow of
investible resources to infrastructure sectors, gathered from different
sources, is presented in this section.
Net bank credit to infrastructure in any year is defined as the
difference between end-March amounts of outstanding gross deployment of
bank credit to infrastructure. Setting the flow of credit during
2007-08 and 2008-09 against the estimated requirement, it seems that
the flow of bank credit may bridge a portion of the gap between the
likely debt resources and the estimated debt requirement.
In the stock of infrastructure investment made by insurance companies
by end-2007-08 (Rs. 93,924.2 crore), the public sector companies had a
share of 94.3 per cent. With increasing infrastructure investment of
insurance companies, their share increased from 2.5 per cent 2004.05 to
5.7 per cent 2007-08. In 2006-07, the public sector insurance companies
made a significant step up in their infrastructure investment, but
could not sustain the pace in 2007-08.
Flow of resources to infrastructure through external commercial
borrowings had quadrupled from 2005-06 to 2007-08, but then came down
drastically during 2008-09. Major ECB receiving sectors, air transport
and telecom, witnessed slowdown in ECB flows during 2008-09.
Infrastructure development and public private partnerships
a third of the Planning Commission's estimate of Rs. 20,01,776 crore
(at 2006-07 prices) required for infrastructure development during the
Eleventh Five Year Plan is expected to be met through private
investment and public-private partnerships (PPPs). Besides
supplementing limited public sector resources, PPPs bring in private
sector expertise, cost reducing technologies and efficiencies in
operation and maintenance. While encouraging PPPs, six constraints have
To address these constraints, several initiatives have been taken by
government of India to create an enabling framework for PPPs.
Progressively, more sectors have been opened to private and foreign
investment, levy of user charges is being promoted, regulatory
institutions are being set up and strengthened and fiscal incentives
are given to infrastructure projects. Approval mechanism for PPPs in
the Central sector has been streamlined through setting up of Public
Private Partnership Appraisal Committee (PPPAC). Standardized bidding
and contractual documents have been notified.
Policy and regulatory gaps, specially relating to specific sector policies and regulations;
Inadequate availability of long-term finance (10 year plus tenor)-both equity and debt;
Inadequate capacity in public institutions and public officials to manage PPP processes;
Inadequate capacity in the private sector - both in the form of developer/investor and technical manpower;
Inadequate shelf of bankable infrastructure projects that can be bid out to the private sector.
Inadequate advocacy to create greater acceptance of PPPs by the stakeholders.
To address the financing needs of these projects, various steps have
been taken such as setting up of the India Infrastructure Finance
Company Limited (IIFCL) to provide long tenor debt to commercially
viable infrastructure projects; and launching of a scheme for financial
support to PPPs in Infrastructure to provide viability gap funding
(VGF) to PPP projects. IIFC (UK) Ltd., a wholly-owned subsidiary of
IIFCL at London—operates with the objective of borrowing funds from the
Reserve Bank of India (RBI) and lending to Indian companies
implementing infrastructure projects in India solely for meeting
capital expenditure outside India. RBI would be providing up to US$ 5
billion to IIFC (UK) Ltd by subscription of 10-year maturity USD
denominated bonds, in several tranches, of the subsidiary. Multilateral
agencies such as the Asian Development Bank have been permitted to
raise rupee bonds and carry out currency swaps to provide long-term
debt to PPP projects. Setting up of dedicated infrastructure funds are
also being encouraged to increase the flow of equity investments.
For building the capacity of public institutions in preparing a
pipeline of credible, bankable projects that can be offered to the
private sector, State governments and Central Ministries are being
provided with technical assistance in the form of in-house PPP, MIS
experts and access to a panel of legal firms. Other measures include
assistance to State Governments and Central Ministries in hiring
consultants through a panel of transaction advisers and preparation of
sector-specific tool-kits for engaging in PPPs. To deepen the capacity
building of public functionaries at the state and municipal level, a
national training programme on PPPs is being developed which will be
delivered through Central and state administrative institutes. As the
reach of PPP increases across sectors, the capacity of the private
sector to manage these projects over their entire life cycle of 20 to
30 years would also have to be enhanced. In addition, steps need to be
taken to provide adequate skilled manpower in different sectors. The
government of India has announced National Skill Development Mission
and National Skill Development Corporation has been established in the
PPP mode to scale up skill development activity.
There is a broad acceptability towards the need for engaging in PPPs in
the country. However, the constraints cited above and need for
sustained government intervention have been accentuated by the current
economic downturn. The slowing of economies and resultant shrinking
income and demand has dampened the PPP exuberance due to drying up of
sources of debt and equity for PPP projects. Nevertheless, an
overriding perspective remains that investments would continue to flow
to well structured projects; greater focus of project
revenues/viability and optimal risk management arrangements are likely
to attract private capital. This approach points towards imperatives of
developing capacities to structure projects and exploring alternative
In the wake of the global financial crisis, the government of India has
initiated a series of measures to sustain the impetus in investments in
infrastructure. Foreign borrowing rules have been eased by removing
"all-in-cost" ceilings on such borrowings, expanding the definition of
infrastructure sector for availing external commercial borrowings
(ECBs), allowing corporates engaged in the development of integrated
townships to avail ECBs under the approval route and raising foreign
investment limit in corporate bonds to US$ 15 billion. NBFCs, dealing
exclusively with infrastructure financing, would be permitted to access
ECB from multilateral or bilateral financial institutions, under the
approval route of RBI.
The India Infrastructure Finance Company Limited (IIFCL) has been
authorized to raise Rs. 10,000 crore through tax free bonds to provide
refinance to banks for their loans in the road and port sector for
which bids have been submitted on or after 31.1.2009. The refinance
from IIFCL would supplement the resources available with banks to
finance such infrastructure projects involving projects worth Rs.
25,000 crore. To fund additional projects of about Rs. 75,000 crore
during the next 18 months, IIFCL is being enabled to raise Rs. 30,000
crore by way of tax-free bonds in several tranches, once the funds
raised during 2008-09 have been effectively utilized.
Challenges and Outlook
Provision of quality infrastructure is a crucial prerequisite for
sustainable growth. In the current Indian context, the programme for
infrastructure building is undertaken broadly through two routes:
first, through planned execution of large infrastructure projects under
the Central and State government agencies and through private
initiatives including PPPs, and, second through public works
programmes, which have the twin objectives of creating infrastructure
and generating employment for the poor. As such, the expected impact of
these two approaches to creation of infrastructure is different. While
public works programmes are concentrated in the rural areas with small,
short-duration projects, the bigger infrastructure projects have an
urban-rural mix, which is different across sectors. Public work
programmes have been considerably scaled up in the recent years with
the introduction of new nationwide schemes and the consolidation of
existing schemes. Indisputably, both the approaches to creation of
infrastructure would need to be invigorated. It is also equally
important to ensure the coordination between these two approaches so as
to promote balanced development of infrastructure throughout the length
and breadth of the country.
Tracking the build-up of rural infrastructure is marred by inadequate
and lagged information base. The latest consolidated information on the
roads below the level of national highways is 2003-04. The generation
of timely information is, of course, constrained by the multiplicity of
implementing agencies and inadequate data management systems at the
ground level. Nonetheless, there is an inescapable need to put in place
mechanisms for obtaining updated, reliable information on
infra-structure creation at all levels at a regular frequency.
The Eleventh Five Year Plan (2007-12) has estimated an investment
requirement of US$ 500 billion in infrastructure for broad-based and
inclusive growth. The foregoing analysis indicates that achieving this
is a challenging task. The Eleventh Five Year Plan has envisaged
mobilization of private resources in substantial degree to supplement
the efforts of the governments. In recent years, tangible progress has
been made in attracting private investment in infrastructure. However,
such public initiatives are constrained by factors like inadequate
shelf of bankable projects and shortage of long-term finance for
projects. These are difficult issues but not insurmountable, given the
resilience that the Indian economy and its financial system has
demonstrated amidst adversities.
Availability of finance is only a necessary condition for investment.
Once a project is financially closed, it is faced with issues like
disputes in land acquisition, rehabilitation, contractual issues,
shortage of raw materials, capital goods and fuel, environmental
disputes and inadequate availability of skilled manpower. These
problems result in delays in the completion of infrastructure projects.
These problems have wide ramifications, yet, there is no option but to
address them systematically, as timely implementation of projects is
critical for ensuring their financial viability, as also for reaping
the projected economic benefits.