infrastructure development in india

INFRASTRUCTURE DEVELOPMENT IN INDIA

Expanding investment in infrastructure can play an important counter cyclical role. Projects and programmes [are] to be reviewed in the area of infrastructure development, including pure public private partnerships, to ensure that their implementation is expedited and does not suffer from [the] fund crunch.Mr. Manmohan Singh, Indian Prime Minister,

The Rangarajan Commission indicated six characteristics of infrastructure sectors,

Natural monopoly High-sunk costsNon-tradability of outputNon-rivalness (up to congestion limits) in consumptionPossibility of price Exclusion6. Bestowing externalities on society.Definition

Government is committed to PPP mode- Why?Maximizing investmentBudgetary constraintsDevelopment of assets of world class standardsImproved maintenance and management of assetsProvision of efficient servicesAffordable prices through greater competitionRisk Sharing

CountryProgram DescriptionBrazilGrowthAccelerationProgramThis strategic investment program oversees and approves initiatives and public works investment. PAC, the first phase of the program launched in 2007, invested $349 billion in areas, including energy, urban infrastructure, sanitation, and transportation. PAC-2 is a $900 billion extension of the PAC program for 20112014.CHINA12th Five-YearPlanThe 12th Five-Year Plan, which began in 2011, is allocating some $1 trillion in infrastructure spending over five years. The program is developed by the Central Committee with help from the Ministry of Housing and Urban-Rural Development. Much of the investment willgo toward building high-speed rail, with a secondary emphasis on water supply, electricity, and highwaysINDIA11th and 12thFive-Year PlansThe 11th Five-Year Plan, which began in 2007, is developed and implemented by Indias Planning Commission. Of the plans estimated $500 billion in total infrastructure investment,one-third will flow to roads, including a project to upgrade, rehabilitate, and widen major highways in India. The rest will be spent on transit, water, electricity, and otherinfrastructure sectors. The countrys 12th Five-Year Plan, which runs from 2012 to 2017, will double the amount spent on infrastructure to $1 trillion.

Budget 2012-Infrastructure Sector gets major boost

Size Power SectorGeneration capacity of 122 GW; 590 billion units produced (1 unit = 1kwh)CAGR of 4.6% over the last four years.India has the fifth largest electricity generation capacity in the worldLow per capita consumption at 606 units; less than half of ChinaCoal-fired plants constitute 57% of the installed generation capacity, followed by 25% from hydel power, 10% gas based, 3% from nuclear energy and 5% from renewable sources

Structure of power sectorMajority of Generation, Transmission and Distribution capacities are with either public sector companies or with State Electricity Boards (SEBs).Private sector participation is increasing especially in Generation and Distribution- Distribution licences for several cities are already with the private sector- Many large generation projects have been planned in the private sector

Policy- Power sector100% FDI permitted in Generation, Transmission & Distribution - the Government is keen to draw private investment into the sectorPolicy framework in place: Electricity Act 2003 and National Electricity Policy 2005Incentives: Income tax holiday for a block of 10 years in the first 15 years of operation; waiver of capital goods import duties on mega power projects (above 1,000 MW generation capacity)Independent Regulators: Central Electricity Regulatory Commission for Central PSUs and inter-State issues. Each State has its own Electricity Regulatory Commission.

G - Generation T - Transmission D - DistributionKeY Players-Power Sector

Major Players CapacityGTDPublic sectorNTPC23,749YesNoNoNational Hydro Electric Power Corporation3615YesNoNoNPC2770YesNONoDomestic Private sectorTata Power2203yesyesYesRPG Group - CESC1005YesyesYesReliance Energy885yesyesYesInternational Private SectorChina Light and Power (CLP)655YesNoNoMarubeni Corporation330yesNoNo

OpportunityOver 150,000 MW of hydel power is yet to be tapped in IndiaIndia requires an additional 100,000 MW of generation capacity by 2012

PotentialLarge demand-supply gap: All India average energy shortfall of 7% and peak demand shortfall of 12%

The implementation of key reforms is likely to foster growth in all segments: - Unbundling of vertically integrated SEBs- Open Access to transmission and distribution network- Distribution circles to be privatisedTariff reforms by regulatory authorities

Opportunities in Generation for: - Coal based plants at pithead or coastal locations (imported coal)- Natural Gas/CNG based turbines at load centres or near gas terminals- Hydel power potential of 150,000 MW is untapped as assessed by the Government of IndiaRenovation, modernisation, up-rating and life extension of old thermal and hydro power plants

Total investment opportunity of about US$ 200 billion over a seven year horizon

India has second largest Road network, in the world. Total length is 33 lakh kms Carry 65% of fright & 80% passengersNational highway constitute only 1.7% of roads but carries about 40% of trafficAnnual projected growth is 12-15% for passenger traffic & 15-18% for cargo trafficROADWAYS

Important Development projects

-The Golden Quadrilateral (GQ-5846 kms of 4 lane highway) - North-South & East-West Corridor (NSEW-7142 kms of 4 lane highways) - Four-laning of 12,109 km under NHDP-III

-Program for 6-laning of 6,500 km of National Highways under NHDP- V.

ROADWAYS (cont.)

Roadways (cont.)Investment plan

RailwaysAbout 64000 km of rail network Connects 7083 stationsCarry 2.20 crore passengers & 2.50 million tones of goods everydayAbout 1.5 millions of workforce

In 1947 rail network of about 53000 kmAdded only 11000 km of network in last 65 years Modifications like--Gauge changing-Electrification-Computerization-Double tracksRailways

Investment of Rs. 57630 cr the year 2011-12 for the development, highest ever by Indian railways in any financial year-Target of laying 1075 km of new lines in 2012-800 km of gauge conversion-700 km of Doubling of lines

Investment Plan

High speed rail travelRaising the speed of regular passenger trains from 100-130 khph to 160-200 kmphTo develop 50 world class stations which can be recognized internationallySegregating passenger and freight tracks completely

MISSION 2020 OF INDIAN RAILWAYS

Mega infrastructure project of USD 90 billionTo connect Delhi & Mumbai through road and railway network of 1483 kmDelhi, U.P., Haryana, Rajasthan, Gujarat, Maharashtra this states will be connected to form a corridor of international standard.

DMIC project

Oil & GasIndia 5th largest Consumer of energy

About 5.7 billion barrels of proven oil reserves.

FDI worth US$ 3, 332.78 million during April 2000 to December 2011

Market Dynamics ProductionCrude oil 31.87 MMT from April-Jan 12.Natural Gas 40157 MCM1.04 million barrels per dayGas 50 BCM ConsumptionDiesel 1.44 million b/d.Petrol 388000 b/d.Gas 58 BCM

Developments & InvestmentsKG Basin-Reserves of 56.6 BCM.Reliance Industries J- 3 mega petrochemical ProjectIOCL to set up refinery in GujaratONGC & IOCL seeking refinery options in SrilankaPetronet LNG Ltd planning to set up its third terminal in the east coast of India.

Government InitiativesIndian Government has encouraged Saudi Arabia to get involved in the country's petroleum upstream and downstream sectorOPaL's Petrochemical project at Dahej, OMPL's Petrochemical project at Mangalore, IOC's LNG project at Ennore, Bharat Petroleum Corporation's LNG terminal at Kochi, Hindustan Petroleum Corporation's grass-root refinery in Visakhapatnam.

Road AheadMr S Jaipal Reddy, Junior Oil Minister, India, expects investments worth US$ 75 billion in South Asian nation's oil and gas sector from April 2012 to March 2017 Eventually, the development plan will also cut India's import bill.

Telecommunication3rd largest in the world & 2nd largest in Asia.Mobile subscriber base-936.12 million.Overall Tele- density 77.57%Broadband Subscriber 13.42 million

Market Dynamics

The Indian handset market made a volume sale of 182 million.

The Indian handset market is led by Nokia with 37.2 per cent market share, followed by Samsung (14.9 per cent), G'Five (7.5 per cent) and Micromax (5.8 per cent).

Key developments & Gov. Initiative

Complaint centre by TRAIHybrid powerEasier & standardized municipal laws for TowersSubsidy for Solar panels & use of nonconventional resource of energy.Increased trend of sharing infrastructure.

NEED FOR INFRASTUCTURE DEVELOPMENT IN AIRPORTSAir traffic has increased rapidly in recent years, although this slowed in 2007.A number of Indian airlines have faced challenging market conditions in 2008Indians are still flying in much greater numbers.Estimates made in 2007 by the Indian Governments Committee on Infrastructure suggest that passenger traffic will grow at a CAGR of over 15% in the next 5 years

AIRPORT DEVELOPMENT PLAN

(During the XI Plan Period 200712)

Main Objectives To boost Infrastructure in Aviation sector. To provide WorldClass infrastructure facilities. To meet the increased demand by enhancement of Aircraft/Cargo handling capacity. To provide safe Air Traffic Services. To achieve efficiency by improving Air Traffic Flow Management.

INVESTMENT BY AAIXI Plan (200712)

Planned Investment $10 billion . Financing Mainly through Internal Resources Relatively small portion through Budgetary Support Balance through Borrowings. Issue of Bonds in Domestic Market. Exploring Loan from JBIC/World Bank.

Credit Rating Awarded AAA stable by CRISIL and L AAA byICRA for AAI Bonds. Awarded A1+ by ICRA for Shortterm Loan/Commercial Papers

The Airports Authority of India (AAI) manages and operates 126 airports and 329 airstripsThe Government established the Airport Economic Regulatory Authority (AERA) State governments are also getting involved and looking to facilitate the development of new airports. The total investment on new airports has been proposed at about $10 billion by 2012. Greenfield airport projects are planned in resort destinations and emerging metros Further, 35 non-metro airports are proposed for development. STEPS TAKEN BY GOVERNMENT FOR DEVELOPING AIRPORTS

NEED OF DEVELOPMENT OF PORTSWith 12 major ports and 187 minor ports, 7,517 km long Indian coastline plays a pivotal role in the maritime transport helping in the international tradeIncreasing connectivity with inland transport networks is challenges currently facing Indias portswhich have seen massive swells in the amount of goods transported. Traffic is estimated to reach 877 million tonnes by 2011-12, and containerised cargo is expected to grow at 15.5% (CAGR) over the next 7 years. Indias existing ports infrastructure is not sufficient to handle the increased loads cargo unloading at many ports is currently inadequate, even where ports have already been modernised

STEPS TAKEN BY GOVERNMENT FOR DEVELOPING PORTSAn estimated investment of around $22 billion is targeted for port projects in the five year period from 2007-12. The National Maritime Development Programme includes 276 projects, with a required investment of about $15 billion over the next ten years, with private investment targeted at around $8 billion.Projects related to port Development will provide a major opportunities for E&C companies.Recent deregulation of the sector now permits 100% FDI, and an independent tariff regulatory authority has been set up to facilitate projects at major ports.

Infrastructural requirement scenario in IndiaUrban population is expected to grow about 50% by 2025Growth in GDP is predicted to be 8-9% per annumRoad Traffic growth will be 15% per year Air traffic is growing by 25% per year101,000 MW of new power needed by 2012Sanitation Coverage is only 35% currently

Steps taken in the 11th 5- year plan 2007-2012Actions taken in the 11th 5 year plan 2007-2012:The amount of money spent on infrastructure will be raised to 8% of GDP (earlier, infrastructure spending was only 4.6% of GDP)One Half of all new investments in the 11th plan will be in infrastructureThe planning Commission has estimated that a total investment of $450 Billion in infrastructure is required over the next 5 years to meet Indias infrastructure needs.Port capacity will be increased from 520MT to 800MT60000 MW of new power is to be added by 2012

Steps taken for infrastructural development IIFC - India Infrastructure Finance CorporationSetup to fund infrastructure funds in India & is owned by government.Will lend money at low rates to public and private infrastructure projectsWould be able to borrow at low rates as they are guaranteed by GoI.Government has started the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to improve Urban infrastructure

ConclusionInfrastructure inadequacies in both rural and urban areas are a major factor constraining India's growth. India needs a lot more infrastructure to meet its needs.The government is focusing on this and has created a set of programs and reforms aimed at addressing this issue.

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