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Group 9 (Sec A) Infrastructure Development A prerequisite for Indian Economy
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Page 1: Infrastructure Development New (3)

Group 9 (Sec A)

Infrastructure DevelopmentA prerequisite for Indian Economy

Page 2: Infrastructure Development New (3)

Flow of the Presentation

• Introduction

• Investment Plan

• Budget Highlights on Infrastructure

• Impact of budget on various sectors

• Comparison with China

• Sector wise analysis

• Conclusion

Page 3: Infrastructure Development New (3)

Quote

“The link between infrastructure and economic development is not a one time and for all affair. It is a continuous process; and progress in a development has to be preceded, accompanied, and followed by progress in infrastructure, if we are to fulfil our declared objectives of generating a self-accelerating process of economic development.”

Dr. V. K. R.V. Rao [noted Indian economist, early 1980]

Page 4: Infrastructure Development New (3)

Our Answer

•IS INFRASTRUCTURE DEVELOPMENT A PREREQUISITE FOR INDIAN ECONOMY?

YES

Page 5: Infrastructure Development New (3)

Introduction

• The total investment in infrastructure in 2006–07 was estimated to be around 5% of GDP.

• According to XI th Plan, the total investment in infrastructure required is 9% and 11% in the ending years.

• According to the budgeted plan, the total investment in infrastructure required is 7.5%

• GDP growth averaging 9% per year can be achieved only by – overcoming infrastructure deficit – adequate investment takes

• An investment of USD 515.05 billion is suggested in Eleventh Five Year Plan.

• Achieved through a combination of public investment, public-private-partnerships (PPPs) and exclusive private investments

[Source: www.planningcommission.nic.in]

Page 6: Infrastructure Development New (3)

Why so much focus on infrastructure

• Critical pre-requisite for a sustainable growth of the economy

• Affects international competitiveness and flow of direct international investments

• Influences the living standards

• Realizing their full growth potential

[Source: Economic Survey 2008-09,http:/indiabudget.nic.in]

Page 7: Infrastructure Development New (3)

Investment PlanX Plan XI Plan

Sectors US $ billion Share (%) US $ billion Share (%)

Electricity (incl. NCE) 72.96 33.49 166.63 32.35

Roads and Bridges 36.22 16.63 78.54 15.25

Telecommunication 25.84 11.86 64.61 12.54

Railways (incl. MRTS) 29.91 13.73 65.45 12.71

Irrigation (incl. Watershed) 27.88 12.80 64.34 12.49

Water Supply and Sanitation 16.20 7.44 35.93 6.98

Ports 3.52 1.61 22.00 4.27

Airports 1.69 0.78 7.74 1.50

Storage 1.20 0.55 5.59 1.09

Gas 2.43 1.11 4.21 0.82

Total US $ billion 217.86100

515.05 100

Rs. crore 871,445 2,060,193

[Source: www.planningcommission.nic.in]

Page 8: Infrastructure Development New (3)

Electricity

32%

Roads

15%Telecom

13%

Railways

13%

Irrigation

12%

Water Supply and

Sanitation

7%

Ports

4%

Airports

2%Gas

1%

Storage

1%

XI Plan Investment

[Data Source: www.planningcommission.nic.in]

Page 9: Infrastructure Development New (3)

Projected Investment in Infrastructure in the Eleventh Plan

270,724

322,390

390,957

482,455

593,666

0

100000

200000

300000

400000

500000

600000

700000

2007-08 2008-09 2009-10 2010-11 2011-12

(Rs.

cro

re)

Projected Investment in Infrastructure in the Elevent Plan

(Rs. 20,60,193 crore)

[Data Source: www.planningcommission.nic.in]

Page 10: Infrastructure Development New (3)

Infrastructure Deficit• Highways

– 66,590 Km of NH :only 12% Four-lane; 50% Two-lane; and 38% Single-lane

• Ports

– Inadequate berths, rail / road connectivity and draft are constraints

• Airports

– Inadequate capacity: Runways, aircraft handling capacity, parking space & terminal buildings

• Railways

– Old technology; saturated routes: slow average speeds

(freight: 22 kmph; passengers: 50 kmph); low payload to Tare ratio (2.5)

• Power

– 13.8% peaking deficit and 9.6% energy shortage; 40% T&D losses; absence of competition; and inadequate private investment

• Telecom/IT

– Only 18% of market accessed; obsolete hardware; acute human resources’ shortages

[Source: www.planningcommission.nic.in]

Page 11: Infrastructure Development New (3)

Break up Investment

270,824 322,330 390,290 480,514

596,234

2,060,193

1,063,902 996,291

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2007-08 2008-09 2009-10 2010-11 2011-12 Total XIthPlan

Total ProjectedInvestmentNon-Debt

Debt

[Data Source: www.planningcommission.nic.in]

All figures are in Rs Crore

Page 12: Infrastructure Development New (3)

Gap between Estimated Requirement and Likely Debt Available

32,513 31,869 32,110 34,202 40,057

170,752

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2007-08 2008-09 2009-10 2010-11 2011-12 Total XIthPlan

Likely Total Debt Resources

Estimated Requirement ofDebt

Gap between EstimatedRequirement and Likely Debt

[Data Source: www.planningcommission.nic.in]

Page 13: Infrastructure Development New (3)

Investment by Public and Private sector

38.31 34.17 31

77

34 30

33.8631.83

3.82

4 0

27.8333.99

68.75

19.23

62 70

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Electricity Roads Telecom Railways Ports Airports

Private

State

Center

[Data Source: www.planningcommission.nic.in]

Page 14: Infrastructure Development New (3)

Projected vs Real Investment

Projected Investment in Infrastructure

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

02-03

03-04

04-05

05-06

06-07

07-08

08-09

09-10

10-11

11-12

US

$ B

n.

X Plan

XI Plan:

Business

as Usual

XI Plan:

Projected

[Data Source: www.planningcommission.nic.in]

Page 15: Infrastructure Development New (3)

GDP vs Infrastructure Investment

2007-08 2008-09 2009-10 2010-11 2011-12

Total 11th

Plan

GDP 44,97,040 49,01,774 53,42,934 58,23,798 63,47,939 2,69,13,484

Public

Investment 1,92,558 2,28,138 2,75,233 3,35,693 4,08,979 14,40,602

Private

Investment 78,166 94,252 1,15,724 1,46,762 1,84,687 6,19,591

Total

investment 2,70,724 3,22,390 3,90,957 4,82,455 5,93,666 20,60,193

All figures are Rs. crore

[Data Source: www.planningcommission.nic.in]

Page 16: Infrastructure Development New (3)

Investment as Percentage of GDP

6.02

6.58

7.32

8.28

9.35

7.65

4.284.65

5.15

5.76

6.44

5.35

1.741.92

2.172.52

2.91

2.30

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

2007-08 2008-09 2009-10 2010-11 2011-12 Total 11th Plan

Total

Public

Private

[Data Source: www.planningcommission.nic.in]

Page 17: Infrastructure Development New (3)

Regression Analysis

y = -6E-06x2 + 4.9659x - 996552

-100000

-50000

0

50000

100000

- 100,000 200,000 300,000 400,000 500,000 600,000 700,000Re

sid

ual

s

Total investment

Total Investment Plot

Coefficients

Intercept 3052603

Total investment 5.65504

R Square: 0.990602

[Data Source: www.planningcommission.nic.in]

Page 18: Infrastructure Development New (3)

Infrastructure Investment vs IIP

36.4 36.140.4

48.7

56.3

67.7

80.6

5.8% 7% 8.4% 8.1%11.4%

8.5%2.7%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

02-03 03-04 04-05 05-06 06-07 07-08 08-09

InfrastructureInvestment

IIP

All figures in USD Bn.

[Data Source: www.indiastat.com]

Page 19: Infrastructure Development New (3)

Budget Highlights

• Rs. 1,73,552 crore for infrastructure• 46% of the total planned expenditure to infrastructure• To provide adequate funding for developing rural

infrastructure: Bharat Nirman• Additional Rs. 20,000 can be invested in infrastructure

bonds under section 80CCF• IIFCL would enable the funding the infrastructure projects• Imported duty-free machines allowed to be used for other

road projects• Project imports status granted to Mono Rail Projects for

urban transport- 5% concessional custom duty on imports

[Source: www.indiabudget.nic.in]

Page 20: Infrastructure Development New (3)

IIFCL’s Loan sanctions to different sectors

Power

46%

9629 cr

Roads

40%

8275 cr

Airports

10%

2150 cr

Ports

4%

820 cr

Urban Project

Negligible

14 cr

[Source: Company Website: www.iifcl.com]

Page 21: Infrastructure Development New (3)

Negative effect of Budget

• 2% hike in excise duty for cement

• Rs 50 per tonne cess on imported and domestic coal

• Excise Duty hike in petrol/ diesel ; increase in prices

[Source: www.indiabudget.nic.in]

Page 22: Infrastructure Development New (3)

Fund Allocation

Scheme/Ministry 2009-10(revised estimate) Rs.Cr

2010-11 (Budget allocation)Rs.Cr

Change Change %

Road , transport 19,941 24,079 4,138 20.8

PMGSY 10,285 10,886 601 5.8

Power 6,650 10,475 3,825 57.5

Subsidy for RGGVY

4,497 4,852 355 7.9

MNRE 573 1,009 436 76.1

Delhi Metro 5,834 4,141 -1,693 -29.0

Fertilizer Subsidy 52,980 49,981 -2,999 -5.7

Textiles 5,912 5,608 -304 -5.1

Non Plan Grant, Loans to PSU

3,468 605 -2,863 -82.6

[Source: www.indiabudget.nic.in]

Page 23: Infrastructure Development New (3)

Budget Proposal on Electricity/Power

Electricity/Power

• in allocation to Rs. 5130 crore ( of 152%)

• in long term funding from IIFCL

• in allocation to renewable sector to Rs. 1000 crore ( of 61%)

• in MAT (from 15% to 18%)

• Clean energy cess of Rs 50/ tonne on domestic and imported coal

[Source:www.irca.org]

Page 24: Infrastructure Development New (3)

Budget Impact on Electricity/Power

• Competitive bidding and regulatory clarity through Coal regulatory authority

• Participation from private firms will

• MAT and cess would adversely affect the profitability

[Source:www.irca.org]

Page 25: Infrastructure Development New (3)

Budget Proposal on Roads

• in allocation for road projects to Rs. 19,894 crore

• Allocation to ministry of Road Transport and Highways is hiked by 20-30 percent

• Incremental disbursement of Rs 25000 crorefor next 3 yrs by IIFCL

• Import Duty exemption for certain construction machinery

[Source:www.irca.org]

Page 26: Infrastructure Development New (3)

Budget Impact on Roads and ports

• in outlay favorable to road construction

• Financing through IIFCL will facilitate long term capital

• MAT would adversely affect the profitability

• in Excise Duty in petro/ diesel , cement will push up cost

[Source:www.irca.org]

Page 27: Infrastructure Development New (3)

Railway Budget

• Rs 4411 cr allotted for new railway lines• To exceed freight loading target by eight million tonnes• Service charge on AC fares cut• Freight cut on food grain and kerosene• Mobile e-ticketing centres at hospitals, courts• Centre for railway research to be set up in IIT- Kharagpur• To introduce 54 new trains in FY 2011• Rs 1300 cr for passenger amenities• Plan to raise Rs. 10,000 - 20,000 crore by next fiscal• Railways will not be privatized: Mamata

[Source: www.indiabudget.nic.in]

Page 28: Infrastructure Development New (3)

Budget Impact on Telecom-Marginally Negative

• Increase in MAT 15% from 18% will impact cash flows.

• Indian telecom sector is amongst the most heavily taxed in the world(30%)

• Overlook demand of rationalizing multiple taxes

• Full exemption from 4% special CVD on parts for manufacture of mobile phones and accessories.

• Extension of the credit period to ten years from seven years is a positive.

• Increase in diesel prices will increase network operating expenses.

[Source:www.irca.org]

Page 29: Infrastructure Development New (3)

Budget Impact on Port

• Introduction of tonnage tax

• Increase In MAT to adversely affect sector.

• Hike in IIFCL disbursements targets to Rs 200bn.

• Investor friendly policy - $13.6 billion to be raised through private sector.

[Source:www.irca.org]

Page 30: Infrastructure Development New (3)

Our Analysis of Budget

• Infrastructure received its due attention

• To achieve 9% GDP growth aggressive investments in infrastructure is proposed

• Govt’s commitment to road infrastructure; increase in allocation by 13%

• Measures taken to increase private participation and transparency

• Major focus on RGGVY, PMGSY, MNRE to enhance development and growth

Page 31: Infrastructure Development New (3)

Comparison with China

Page 32: Infrastructure Development New (3)

Economic Growth and Poverty Reduction – India and China

Page 33: Infrastructure Development New (3)

Infrastructure in China and India in 50s

• In early 50s or 60s; both countries had fairly similar levels of infrastructure assets and services

Sector India China Remarks

Electricity output

6.3 billion kWh

7.3 billion kWh

Roads Network

400,000 kms 1,200,000kms

Almost 40% of roads werepaved

Railway network

53,000 kms 23,000 kms

[http://www.pbrc.soka.edu/Resources/Documents/KimNangia/pdf]

Page 34: Infrastructure Development New (3)

Infrastructure Development in China and India

Page 35: Infrastructure Development New (3)

Saving rates

•In the 1980, China saved 35% of GDP whereas India’s savings rate was less than half at 15.5%.•Combined with higher fiscal deficits in India, it was not always possible to invest in infrastructure.

Page 36: Infrastructure Development New (3)

Investment Rate

Page 37: Infrastructure Development New (3)

Infrastructure Sector Performance Indicators

Page 38: Infrastructure Development New (3)

We may conclude

• Links between infrastructure and economic growth and poverty reduction is neither certain nor automatic

• results in improvements in productivity and in overall quality of life

• facilitates economic growth• provides connections to the global economy that

are crucial for export competitiveness and manufacturing

• increased inequality and great regional disparity

Page 39: Infrastructure Development New (3)

Sector Analysis

Page 40: Infrastructure Development New (3)

Roads

•Road transport accounted for around 87 per cent of passenger movement

• 60 per cent of freight movement in 2005-06

•Road network consists of national highways (NHs), statehighways, major district roads, other district roadsand village roads.

[Source: www.morth.nic.in]

Page 41: Infrastructure Development New (3)

Roads

• One of the largest highway and road networks; second to the road network of US

• Total length of roads exceeds 3.34 million millionkilometers (source: Economic Survey 2008-09)

Source:http://www.unescap.org/ttdw/Publications/TPTS_pubs/bulletin73/bulletin73_ch3.pdf

Page 42: Infrastructure Development New (3)

Roads

• The Government has laid down ambitious plans for development and upgradation of the domestic road network.

• Private sector participation through PPPs is being actively encouraged to achieve greater efficiencies in development, operation and maintenance.

• Private projects witnessed a 17 percent slippage in time targets as opposed to a 65 percent slippage in projects funded by the NHAI.

[Source: www.morth.nic.in]

Page 43: Infrastructure Development New (3)

Projected investments in Eleventh Plan

7338 77578469

10055

11747

5680 5956 63647299

8834

212 238 291 317 344

1875 2025 2150 2300 2463

1510415976

17273

19971

23387

0

5000

10000

15000

20000

25000

2007-08 2008-09 2009-10 2010-11 2011-12

National Highways

State Roads

North East Roads

Rural Roads

Total

Total investment requirement for development and upgradation of the country’s road network over the next five years is approximately US$ 55 billion. (Economic Survey 2007-08)

[Data Source: www.planningcommission.nic.in]

Page 44: Infrastructure Development New (3)

National highways development projects (as in November 2009)

[Source: Economic Survey 2009-10]

Page 45: Infrastructure Development New (3)

Funds and Borowings(in crore)

Year Cess Funds External Assistance Borrowings Budgetary Support

Grant Loan

1999-2000 1,032 492 0 656.6 0

2000-01 1,800 461 120 804.4 0

2001-02 2,100 887 113 5,592.90 0

2002-03 2,000 1,202 301 0 0

2003-04 1,993 1,159 290 0 0

2004-05 1,848 1,239 361 0 0

2005-06 3,270 2,400 500 1,289 700

2006-07 6,407.50 1,582.50 395.5 1,500 110

2007-08 6,541.50 1,789 447.2 2,000 265

2008-09 6,972.5 1,515.0 379.0 1,096.3 159.0

2009-10 8,578.5 272.0 68.0 492.4 200.0

[Source: Economic Survey 2009-10]

Page 46: Infrastructure Development New (3)

BHARAT NIRMAN (2005)

A FOUR YEAR BUSINESS PLAN FOR RURAL CONNECTIVITY (2005-2009) •To connect 66,802 habitations with all weather roads •To construct 1,46,185 kilometers of the new rural roads network •To upgrade 1,94,132 kilometers of the existing rural roads network •Investment of Rs.48,000 crores over four years •Ensuring quality and transparency in the programme implementation

[Source: www.planningcommission.nic.in]

Page 47: Infrastructure Development New (3)

Current Status of Bharat Nirman

• provide electricity to the remaining 125000 villages and to 23 million households

• to connect the remaining 66802 habitations with all weather roads

• to provide drinking water to 55067 uncovered habitations• to provide irrigation to an additional 10 million hectares• to connect the remaining 66822 villages with telephones• Rs 435349 crore (or 30.3%) would be spent exclusively

towards improvement of rural infrastructure by public sector.

[Source: www.planningcommission.nic.in]

Page 48: Infrastructure Development New (3)

Investment in Rual Infrastructure under Bharat Nirman

7.81

9.5

3.68

58.18

20.83

Projected Investment in Rual Infrastructure

Electricity

Rural Roads

Telecommunications

Irrigation (incl. Watershed)

Water Supply and Sanitation

[Data Source: www.planningcommission.nic.in]

Page 49: Infrastructure Development New (3)

Power Sector

• Electricity generation by power utilities during 2009-10 has been targeted to go up by 9.1 per cent to 789.5 billion KWh.

• The growth of power generation during April–December 2009 was about 6.0 per cent

[Source: Economic Survey 2009-10]

Page 50: Infrastructure Development New (3)

Electricity Generation

•Decline in hydroelectric power generation was mainly due to poor monsoons•Coal based generation of power constituted around 80 %of thermal generation and around 66 % of the total generation of power•power sector is a major consumer of coal using 74 per cent of the coal production•total consumption of coal by the power sector: 271.0 million tonnes•16.7million tonnes of coal was imported

Power Generation by Utilities (Billion KWh)

[Source: Economic Survey 2009-10]

Page 51: Infrastructure Development New (3)

Power deficit

[Source: Economic Survey 2009-10]

Page 52: Infrastructure Development New (3)

Rajiv Gandhi Gramin VidyutikaranYojana (RGGVY)

• During 2007- 08 electrification of 7077 villages release of connections to 12 lakh BPL households

• During 2008-09 electrification of 25,000 un-electrified villages offering electricity connections to around 60 lakhs BPL

households

• During 2009- 10 up to January 15, 2010 69,963 villages have been electrified and connections have been released to 88.8 lakh BPL

households

• 7.9 % increase in subsidy for 2010- 11

[Source: Economic Survey 2009-10, 2008-09]

Page 53: Infrastructure Development New (3)

Problems

[Source: Economic Survey 2009-10]

•Close to 66% of India’s power generation capacity is coal based, consuming 74% of domestic production. •Large-scale investments are needed to expand mine capacity and to improve the quality of domestic coal. •SEBs are unable to raise and collect sufficient revenue to cover costs•Around 400 million Indians still have no access to electricity.• Just 44 percent of rural households have access to electricity.•Power Theft

Page 54: Infrastructure Development New (3)

Suggestions

• Allow the entry of the private sector in distribution

• A separate policy specific to hydroelectric power

• A nuclear power policy to explore the possibility of allowing the private sector into nuclear power generation.

• Untapped renewable sources of energy (approximately 126,000 MW comprising 79,000 MW from ocean thermal, sea wave and tidal power; 20,000 MW from wind energy; 17,000 MW from bio-mass: and 10,000 MW from mini-micro hydel power projects).

Page 55: Infrastructure Development New (3)

Indian Railways

• World’s third largest rail network • Freight Charges :

– Railways have rationalized the freight structure extensively to make it simple and transparent.

– Under the new pricing strategy, surcharge is levied during peak season and discounts offered during lean season

• Upgradation of passenger amenities (Station Amenities)– Out of the 594 stations identified for upgradation of

passenger amenities through Model Station scheme, 325 stations have already been developed, while the rest are at various stages of progress.

[Source: Economic Survey 2009-10]

Page 56: Infrastructure Development New (3)

– The accidents per million train kilometre, an important index of rail safety, came down from 0.55 in 2001-02 to 0.20 in 2008-09.

Year No. of consequential Accident

2001-02 415

2008-09 177

2008-09 (April to Nov) 117

2009-10 (April to Nov) 102

Rail safety

[Source: Ministry or Railway]

Page 57: Infrastructure Development New (3)

Instructions have been issued to improve fuel efficiency and reduce wastage.

Fuel consumption

Page 58: Infrastructure Development New (3)

Computerization of passenger and freight services

[Source: Ministry of Railway]

Page 59: Infrastructure Development New (3)

Electrification Status of Indian Railways

Page 60: Infrastructure Development New (3)

Telecom Sector

• Fastest growing telecom market in the world

• India is 4th largest market in asia after china, japan and south korea

• Indian telecom network is 8th largest in the world and 2nd largest among emerging ecomomies

• Contribution of telecom sector in terms of revenue is 2.1 % of GDP as compared to 2.8% in developed economies

[Source: Department of Telecommunication]

Page 61: Infrastructure Development New (3)

Telecom Sector

Page 62: Infrastructure Development New (3)

Regulatory Evolution

Source: TRAI, Fitch ech Report, Dot, IBEF, Press Search

Page 63: Infrastructure Development New (3)
Page 64: Infrastructure Development New (3)

Opportunities

• Mobile Governance

• Micro Financing

• Developing locally relevant content

• Education

• Government support

• Mobile Banking and M-commerce

Page 65: Infrastructure Development New (3)

Port Sector

• India’s coastline of approximately 6,000 km enfolds 192 ports.

• direct jurisdiction of the Ministry of Surface Transport (MoST)

• An additional 181 minor and intermediate ports are governed by the Indian Ports Act.

• Currently, Ports follow “service” or “comprehensive” port model whereby all operations, services and facilities are provided by the port authority.

• Transfer into landlord model whereby the port authority will only be responsible for regulatory functions and infrastructure, the latter to be leased out to private companies for a certain period of time.

[Source: Economic Survey 2008-09]

Page 66: Infrastructure Development New (3)

[Source: Ministry of Ports]

Page 67: Infrastructure Development New (3)

Comparison of Major Ports in India and NW-Europe

Source: Indian Ports Association September 2007Port Restructuring in Global Economy: International Journal of Transport Economics, Vol. XXVII, No 1, 19-39 (2000)

Page 68: Infrastructure Development New (3)

Comparison

Source: Indian Ports Association September 2007Port Restructuring in Global Economy: International Journal of Transport Economics, Vol. XXVII, No 1, 19-39 (2000)

Page 69: Infrastructure Development New (3)

Shortcomings

• Cargo Handling Capacity

• Competition among the ports

• Port Management and government control

• Private Sector Participation

• Port Infrastructure

• Hinterland Connection

• SEZ’s and Industrial clusters along the port.

Page 70: Infrastructure Development New (3)

Challenges• Indian Ports as a transshipment point are not competitive

with international ports due to high port costs and tight regulations.

• Lack of Private participation and investment because of lack of business environment.

• Certain physical limitations like low water depth and logistics limitations like old infrastructure and cargo handling facility.

• Lack of expansion capabilities since the land around ports has been inhabited and uncommitted political will make it difficult to take land for expansion.

• Hinterland infrastructure like rail, roadways network is as important as the ports itself. Poor infrastructure makes it unproductive for business purposes as cost and time rises.

Page 71: Infrastructure Development New (3)

What Needs to be Done

• Liberalization• Commercialization• Corporatization• Privatization• Autonomy in tariff setting and investing.• Establishment of Second Generation Ports• Developing India as a world Cruise Market

Page 72: Infrastructure Development New (3)

Facts about Port Sector

• 100% FDI has been allowed in this sector

• “India expects to double port capacity to 1,500 million tonnes by 2011/12 and would require 1 trillion rupees investment in the port and shipping sectors.” - Federal Shipping Secretary, A P V N Sarma [October 2008]

• National Maritime Development Program includes 276 projects, with a required investment of about $15 billion over the next 10 years with private investment targeted at $8 billion

Page 73: Infrastructure Development New (3)

Most of the commercial activity perhaps other than agriculture and village merchandise takes place in Urban areas.

An overcrowded city will create more problems than solving some. Hence an broad and far sighted infrastructure plan incorporates both economic growth and social well being. Thus infrastructure growth goes hand in hand with the economic growth and in most cases is a pre-requisite for growth.

Cities as engines of economic growthYear Percentage of Urban Estimated contribution

to total population to national income (%)1951 17.3 29 1981 23.3 47 1991 25.7 55 2001 30.5 60 Source: Economic Survey 2008-092008 36.2 66

[Source:www.assocham.org/prels/shownews.php?id=1432 ]

Urban Infrastructure

Page 74: Infrastructure Development New (3)

In the last 50 years:Country’s population growth: 2.5 timesUrban areas population growth: 5.0 times

[Source: Economic Survey 2006-07]

Growth of employment during 1996-2006:In urban India : 38% Rural areas: 16%Country as a whole : 28.1%

Population of cities like Mumbai and Delhi has grown more than 6 times since 1951.

A weak infrastructure will deter entrepreneurs and repel money flowing into the region thus hampering the prosperity of the region.

[Source: www.saarc-sec.org/data/pubs/rpp2005/pdfs/Tables/Table-4.7.pdf]

Urban Infrastructure

Page 75: Infrastructure Development New (3)

Civil Aviation

There are 14 scheduled airline operators having 334 aircraft. During 2007, the scheduled operators have been given permission for import of 72 aircraft.

The Ministry of Civil Aviation has given approval for import of 496 aircraft and, in the next five years, more than 250 aircraft are likely to be acquired by the scheduled operators.

There are also 65 non-scheduled airlines operators who have 201 aircraft in their inventory.

Page 76: Infrastructure Development New (3)

Civil Aviation

• There are 14 scheduled airline operators having 334 aircraft. During 2007, the scheduled operators have been given permission for import of 72 aircraft.

• The Ministry of Civil Aviation has given approval for import of 496 aircraft and, in the next five years, more than 250 aircraft are likely to be acquired by the scheduled operators.

• There are also 65 non-scheduled airlines operators who have 201 aircraft in their inventory.

Page 77: Infrastructure Development New (3)

Deregulations

Year of the

Amendme

nt

Number of

Aircraft

Seats

May

provide

service to:

May provide

service when

Who can Service Fares:

1986 Max. of 10 Notified

Airports Only

2 hrs before/

after National

Airline

National and non-

scheduled

Regulated by

National

Airline

9.8.1989 Max. of 50

seats

55 Notified

airports

May-

December

1990

Min of 15/ No

max

All airports

(93)

Prior approval

of flight times-

abolished

Ownership expanded

to: Citizens, NRI

Government

Fare

restriction

abolished

25th

Feb 1993 40 % foreign Equity

allowed

1st March

1994

8.3.94

A max. of 30

seats for new

entrants

A company/ body

registered in India*

24th

Jan 1997 No restrictions No

restrictions

No restrictions Anyone in the

aforementioned

categories*

NO

restrictions

02 Feb 2006 do do do FDI 49% airline

100% airport

No Restric.

Page 78: Infrastructure Development New (3)

Our Conclusion

• Increase Private participation to fund the deficit in investment to attain GDP growth rate of 9%

• Focus on balance growth theory: Investment in rural infrastructure like rural roads

• Increase in Index of Industrial Production through better infrastructure

• Better employment rate through infrastructure investment

Page 79: Infrastructure Development New (3)

Our Conclusion

• Co-operation from state government

• use of standard documents: Model Concession Document for better and fast decision making for complex PPP programme

• Setting up of committee like PPPAC for better execution of project and informed decisions

• Giving more authority to IIFCL for faster raising of funds for infrastructure

Page 80: Infrastructure Development New (3)

Thank You