Infrastructure: Energy, Ports, Roads, Airports, Railways, etc.
Infrastructure and Economic Development
Infrastructure is basically the base in which economic growth is built upon. Roads, water systems, mass transportation, airports and utilities are all examples of infrastructure. It covers those supporting services that help the growth of directly productive activities like agriculture and industry. These services include a wide range starting from the provision of health services and education facilities to the supply of such need as power, irrigation, transport, communication, etc.
Infrastructure has a two-way relationship with economic growth. One, infrastructure promotes economic growth, and two economic growth brings about changes in infrastructure.
Output of infrastructure sectors such as power, water, transport, etc. are used as inputs for production in the directly productive sectors, viz. agriculture, manufacturing, etc. Therefore, insufficient availability of the former results in sub-optimal utilisation of assets in the latter. Infrastructure development such as transport improves productivity significantly. Infrastructure provides the key to modem technology in practically all sectors. A close association between infrastructure and GDP growth is observed in many studies. These studies have indicated that 1 per cent growth in the infrastructure stock is associated with 1 per cent growth in per capita GDP.
Thus given the above type of linkage, infrastructural development is important not only for economic growth, (vis-a-vis globalisation and technological innovation in manufacturing) but also for poverty reduction.
Growth of infrastructure in India since independence
The Indian road network has become one of the largest in the world with the total road length increasing from 0.399 million km in 1951 to 4.24 million km as of July 2014. Moreover, the total length of the country’s national highways has increased from 24,000 km (1947-69) to 92,851 km (2014). Governmental efforts have led to the expansion of the network of State highways and major district roads, which in turn has directly contributed to industrial growth.
As India needs power to drive its growth engine, it has triggered a noteworthy improvement in the availability of energy by adopting a multi-pronged approach. After almost seven decades of Independence, India has emerged as the third largest producer of electricity in Asia. It has increased its electricity generation capacity from 1,362 MW in 1947 to 1,13,506 MW as of 2004. Overall, power generation in India has increased from 301 billion units (BUs) during 1992- 93 to 558.1 BUs in 2003- 04. When it comes to rural electrification, the Indian government has managed to bring lights to 5,93,732 (2013 figures) villages as compared to 3061 in 1950.
On the face of it, India has seen several cycles of infrastructure build-out over the past five and a half decades as measured by the share of infrastructure spending in GDP, with each phase being interrupted (and partly, albeit temporarily, reversed) by exogenous shocks of different kinds.
Energy consumption is the amount of energy or power used. Worldwide energy supply refers to the global production and preparation of fuel, generation of electricity, and energy transport. First contemporary energy supply is outlined, statistical data rather than policy. Energy supply is a vast industry, powering the world economy. More than 10% of the world expenditures is used for energy purposes.
Produced energy, for instance crude oil, must be processed to make it suitable for consumption by end users. So the supply chain between production and final consumption involves many conversion activities and much trade and transport among countries, causing a loss of one third of energy before it is consumed. There are 10 main different sources of energy that are used in the world to generate power. While there are other sources being discovered all the time, none of them has reached the stage where they can be used to provide the power to help modern life go. All of these different sources of energy are used primarily to produce electricity.
Availability of Primary Energy in India
Coal and Lignite
In India, about 75% coal output is consumed in power sector. In addition, other industries like cement, fertilizer, chemical, paper and thousands of medium and small-scale industries are dependent on coal for their process and energy requirements.
The Indian coal deposits are primarily concentrated in the Gondwana sediments occurring mainly in the eastern and central parts of Peninsular India, although Gondwana coal deposits also occur in Assam and Sikkim in north eastern part of the country. The Tertiary coal-bearing sediments are found in Assam, Arunachal Pradesh, Nagaland and Meghalaya.
As a result of exploration carried out by GSI, CMPDI and other agencies, 293.50 billion tonnes (including that estimated in Sikkim) coal reserves upto 1,200 m depth have been established in the country. Out of these reserves, 118.15 billion tonnes were proved reserves, 142.17 billion tonnes were indicated reserves and the remaining 33.18 billion tonnes were in inferred category.
Lignite Indian lignite deposits occur in the Tertiary sediments in the southern and western parts of peninsular shield particularly in Tamil Nadu, Puducherry, Kerala, Gujarat, Rajasthan and Jammu & Kashmir. The total known geological reserves of lignite were about 41.96 billion tonnes. Of which 81% reserves are located in Tamil Nadu with about 33.88 billion tonnes. Other states where lignite deposits have been located are Gujarat, Jammu & Kashmir, Kerala, Rajasthan, West Bengal and the Union Territory of Puducherry.
Oil and Gas
Since 1950, roughly 69 trillion cubic feet of proven and probable recoverable gas reserves have been discovered in India. However, only 42 trillion cubic feet have been developed and are currently under production. That leaves 18 trillion cubic feet of reserves yet to be produced and 27 trillion cubic feet of reserves yet to be developed. According to an analysis of 12 basins across India, approximately 64 trillion cubic feet of risked recoverable resources are yet to be found. Thus, India holds at least 91 trillion cubic feet of recoverable gas reserves.
On top of conventional gas reserves, India also holds an estimated 63 trillion cubic feet of recoverable shale gas. While these reserves are considered to be a secondary energy option, Indian agencies are encouraging exploration, and leading companies, such as ONGC and OIL, have implemented pilot projects to assess the shale opportunity.
State-owned and privately owned companies are significant players in India’s electricity sector, with the private sector growing at a faster rate. India’s central government and state governments jointly regulate electricity sector in India. Major economic and social drivers for India’s push for electricity generation include India’s goal to provide universal access, the need to replace current highly polluting energy sources in use in India with cleaner energy sources, a rapidly growing economy, increasing household incomes, limited domestic reserves of fossil fuels and the adverse impact on the environment of rapid development in urban and regional areas.
The growth impetus to the power sector is further fuelled by firm and flexible regulations framed by the Ministry of Power. The objective is to introduce competition, protect consumer’s interests and provide power for all. The Act provides for National Electricity Policy, Rural Electrification, Open access in transmission, phased open access in distribution, mandatory SERCs, license free generation and distribution, power trading, mandatory metering and stringent penalties for theft of electricity.
During the early stages of the development of the uranium industry, plutonogenic hydrothermal deposits were of great economic significance. Such deposits are known from rocks of Proterozoic, Paleozoic, Mesozoic and Cenozoic age, and commonly occur as fissure filling type of veins. Metasomatic orebodies are rare. The deposits are usually found in areas of development of late geosynclinal and post-geosynclinal hypabyssal rocks with which they are genetically related.
India produced 557 million tonnes (metric tons) of coal in 2012-13, and India’s rapidly growing power industry consumed the majority of it. Coal production has steadily increased since the industry was nationalized in the 1970s. The trend is likely to continue. Owing to summer heat, frequent labor strikes, and natural disasters, India has had a harder time meeting growing market demands and faces the likelihood of growing coal imports. Coal remains an essential staple to India’s energy needs and will remain so for the foreseeable future.
A trend almost certain to accelerate as the country faces growing urbanization and an expanding middle class, India has a high dependence on imports for its petroleum needs and is the world’s fourth largest importer of crude oil. Most imports come from the Middle East, but growing investments in South America, the Caspian Sea, and elsewhere look to diversify and potentially increase oil to India. The oil industry has slowly but steadily opened up since major reforms were enacted in 1991.
Subsequent reforms are ongoing. Two state-owned companies, Oil India Limited (OIL) and Oil and Natural Gas Corporation (ONGC), have long dominated the production and refining in the sector. However, reforms in the last decade have increased competition and exhibit potential signs of growing foreign investment in a sector long dominated by domestic players.
India meets its electricity demands with 65 percent use of non-renewables, 19 percent of that demand is met with hydropower, 12 percent from renewables, and 2 percent from nuclear power. Demand is far outpacing supply in meeting the rapidly growing electricity needs of the country. Electricity shortages have resulted in loss of profits for many companies, loss in productivity as plants and businesses have been forced to shut down for a few days a month or slow down manufacturing, and added operational costs as some businesses have been forced to pay for power back up units.
Access to energy is a tremendous problem in India and major inequalities of access plague the subcontinent. According to one census, 77 million households in India still use kerosene for lighting. The problem is even more acute in rural India where up to 44 percent of households lack access to electricity. While India has undertaken various programs and initiatives to address energy poverty, they have been faced with logistical problems and inadequate implementation locally. In the case of rural villages, access issues and geographical hindrances make addressing the issue extremely costly and difficult.
Non Commercial Energy resources in India
About 75% population of India lives in rural areas and consumes about 40% of total energy of the country. Consumption pattern of rural areas is domestic use and other applications, agriculture, industries, lighting and transportation. It has been estimated that 78% energy needs of rural areas is met by non-com¬mercial energy sources.
Natural fuels and animal energy are the two main non-commercial energy sources:
(a) Natural Fuels:
Natural fuel primarily includes fuel wood and crop residues. The demand for the fuel wood has been increasing at a fast pace and has gone far beyond the carrying capacity of our forests. It is putting immense pressure on limited forest resources. In order to cope up with this scenario, concerted efforts are being made for massive afforestation of fuel wood rich plant species, launching of improved chullahs, family size biogas plants and solar cookers etc.
(b) Animal Energy:
Animal energy is mainly for farming operations and trans¬portation. Emphasis is being put on to improve the efficiency of equipment’s, devices and transport vehicles which are animal driven.
Non Conventional Sources of Energy in India
According to energy experts, India’s non- conventional energy potential is estimated at about 1, 95,000 MW. An estimate of 31 per cent of this potential comes from sun, 30 per cent from ocean-thermal, 26 per cent from bio-fuel and 13 per cent from wind. During the last two decades, several renewable energy technologies have been developed and deployed in villages and cities.
India, being a tropical country, is well endowed with plenty of solar energy. Most parts of the country have bright sun-shine throughout the year except a brief monsoon period.
Exploitation of solar energy is an extremely important component of renewable energy sector through both the thermal and photovoltaic routes for a variety of applications like cooking, water heating, drying of farm produce, water pumping, home and street lighting, power generation for meeting decentralised requirements in villages, schools, hospitals, etc. India receives solar energy equivalent to over 5,000 trillion kWh per year which is far more than the total energy consumption of the country.
The daily average of solar energy incident over India varies from 4 to 7 kWh/m2 depending upon the location. Solar water heaters, solar refrigeration, solar drying, street lighting, cooking, pumping, power generation, photo¬voltaic solar cells, solar ponds, etc. are becoming very popular in different parts of the country.
Research and development in the field of solar thermal energy is continuously being pursued in the country for over three decades. As a result, several products have been developed indigenously. To promote these products, a subsidy-based thermal extension programme was launched in 1984 and continued upto 1993. This initiative had resulted in disseminating the solar thermal products in different parts of the country.
Wind is another important source of non-conventional energy. The cost inputs are only at the initial stage and the power generation starts immediately after commissioning. Once the generation starts, cost-free power is available for about 20 years because there is no recurring cost on fuel.
India has vast wind potential and wind-farms have emerged as a viable option with the advancement of wind technology in the country. Estimates by the Ministry of Non-conventional Energy Sources (MNES) place the ultimate wind energy potential in India at 45,600 MW.
The technical potential, assuming 20 per cent grid penetration, is estimated at 13,000 MW. With the augmentation of grid capacity, this estimate will increase. Another study conducted by the Tata Energy Research Institute (TERI) estimated the potential of wind resource along the coastal regions in the range of 50,000 mW.
The first wind farms in India were installed in 1986 in coastal areas in Tamil Nadu, Gujarat, Maharashtra and Orissa. Some of the states have joined hands with centre in coming out with a number of promotional incentives.
Biogas is based upon the use of dung to produce gas which is used as domestic fuel especially in the rural areas. This technique is based on the decomposition of organic matter in the absence of air to yield gas consisting of methane (55%) and carbon dioxide (45%) which can be used as a source of energy.
This energy is piped for use as cooking and lighting fuel in specially designed stoves and lamps respectively. It can also be used for replacing diesel oil in dual fuel engines for generation of motive power and electricity. The left-over digested slurry serves as enriched manure. Biogas technology is taking deep roots in rural India because of certain inherent advantages.
Biogas has higher thermal efficiency when compared with kerosene, firewood, dung and charcoal. It is observed that the thermal efficiency of gobar gas is 60 per cent while dung, which is commonly used in villages for cooking, has only 11 per cent thermal efficiency. Thus the use of gobar gas fuel is advantageous from the point of view of not only fuel efficiency but also fuel saving.
Simply to keep up with rising demand for electricity, India must add around 15 gigawatts each year over the next 30 years. The country gets most of its electricity from aging, dirty coal-fired plants. And its energy infrastructure is in dismal shape. The obsolescence of the power grid was demonstrated by a massive 2012 outage that left more than 600 million people in the dark and drew attention to a utility sector in disarray, with an estimated $70 billion of accumulated debt.
If current trends continue and India follows the traditional path in which emissions increase as living standards rise, it will be disastrous not only for Indians but for the entire planet. If India follows a path similar to China’s, that will add another eight billion tons of carbon to the atmosphere each year—more than total U.S. emissions in 2013.
Such growth would easily swamp efforts elsewhere in the world to curtail carbon emissions, dooming any chance to head off the dire effects of global climate change. Reversing these trends will require radical transformations in two main areas: how India produces electricity, and how it distributes it. While low- or zero-carbon sources would make up a greater portion of India’s energy supply, overall carbon emissions would nearly double: from around 2.1 billion tons in 2014 to more than four billion tons by 2040. The fourth leg of India’s low-carbon energy platform will be natural gas—if the country can find enough to import.
Energy crisis in Rural India
Living standards in rural areas can be significantly improved by promoting a shift from direct combustion of biomass fuels, dung, crop residues, and fuel wood or coal in inefficient and polluting stoves to clean, efficient liquid or gaseous fuels and electricity. Although consumers trend to shift to these modern, higher quality energy carriers as their incomes rise and the carriers become more affordable, the process is slow. The shift to such carriers can reduce the damage to human health and the drudgery associated with continued reliance on inefficient, polluting solid fuels.
Technological developments alone, however, will not improve access or promote greater equity. 5ew institutional measures are also needed, including financing to cover the initial capital costs of devices and equipment. Energy initiatives will be most successful when integrated with other policies that promote development. And because local populations will ultimately use, maintain, and pay for energy services, they should be involved in making decisions about energy systems, the lack of adequate energy services in rural areas of developing countries has social dimensions as well as serious environmental and health effects.
Any of these problems are exacerbated by the almost exclusive reliance of rural populations in most areas on traditional fuels coupled with simple technologies characterized by low energy efficiency and harmful emissions. Besides, several policies and fiscal measures along with implementing wide range of programmes on renewables, have contributed a significant progress andachievement made on the renewable energy.
Measures to tackle energy problem in India
Even though India possesses a rich heterogeneous mix of energy components, deterring policies have created a difficult environment for potential investors.
Coal reserves in India, presently mined by Coal India Limited and its subsidiaries, are around 293.5 billion tonnes, with a few blocks being given to private parties for production of electricity and captive use. From 2012, the country has seen a paradigm shift in coal policy, with the Comptroller and Auditor General stating that there was a national loss of Rs.1,76,000 crore. This resulted in the Ministry of Coal removing coal blocks, but it is obvious that the new government will have to collate a clean coal policy with respect to exploration, mining and use.
Another important concern is the reduction in dependability on imported coal. In addition, the next government must give serious thought to pricing, regulation and resolving disputes for domestic coal, in a manner favourable to both coal blocks and users.
The country has vast reserves of gas and the government should now explore attractive opportunities to lure foreign investors for gas exploration. The government can fix contracts based on the O&M or Public-Private Partnership model, which would ensure that operators do not pocket extra profits or face undue losses. There has been a steady increase in the availability of natural gas, mostly due to indigenous discoveries of more reserves. Opportunities regarding exploration of gas must be formulated to maximise foreign investment in a big way.
With lack of good resources, crude oil has to be imported. However, the government needs to address the issue of pricing of petroleum products drawn from crude oil, which fluctuates every fortnight. Current estimates of crude oil reserves in India stood at 759.59 million tonnes, with maximum reserves in the western offshore. In March 2012, the crude oil refining capacity of the country was 198 million tonnes per annum.
Electricity has become the lifeline of the country, with per capita consumption touching 1000 KW, but we are still lagging behind China and other developing countries. The total installed capacity for electricity generation was 2,66,387 MW in March 2013, but distributing electricity at the retail level at affordable and reasonable prices is still a nightmare. Secondly, the regulatory framework for the electricity business needs strengthening. Loss in distribution is a worrisome factor and sadly efforts being taken to bring down losses are not encouraging. The new government must invest in this field, which may involve rationalising tariff and incentivising reduction of losses.
Renewable energy generation has a potential of 89,774 MW, with Gujarat having the highest potential. Unfortunately, the country does not have any existing Renewable Energy Law. Renewable energy comprises 60 per cent of electricity and 40 per cent of other sectors. Climate change is a global issue, warranting the new government to implement a Renewable Energy Law that would make it mandatory for all conventional energy users to use a certain percentage of renewable energy. This process has started in electricity, but needs strict implementation across all segments.
Merely levying a carbon tax on imported coal will not yield sufficient results. Renewable energy comprises solar, wind and biomass. Wind power accounted for the highest capacity of total installed renewable power at 69.65 per cent, with small hydropower coming second at 13.64 per cent and biomass power at 12.58 per cent.
The primary energy demand in India has grown from about 450 million tons of oil equivalent (toe) in 2000 to about 770 million toe in 2012. This is expected to increase to about 1250 (estimated by International Energy Agency) to 1500 (estimated in the Integrated Energy Policy Report) million tons in 2030. This increase is driven by a number of factors, the most important of which are increasing incomes and economic growth which lead to greater demand for energy services such as lighting, cooking, space cooling, mobility, industrial production, office automation, etc.
This growth is also reflective of the current very low level of energy supply in India: the average annual energy supply in India in 2011 was only 0.6 toe per capita; whereas the global average was 1.88 toe per capita. It may also be noted that no country in the world has been able to achieve a Human Development Index of 0.9 or more without an annual energy supply of at least 4 toe per capita. Consequently, there is a large latent demand for energy services that needs to be fulfilled in order for people to have reasonable incomes and a decent quality of life.
The Energy Conservation Act (EC Act) was enacted in 2001 with the goal of reducing energy intensity of Indian economy. Bureau of Energy Efficiency (BEE) was set up as the statutory body on 1st March 2002 at the central level to facilitate the implementation of the EC Act. The Act provides regulatory mandate for: standards & labeling of equipment and appliances; energy conservation building codes for commercial buildings; and energy consumption norms for energy intensive industries. In addition, the Act enjoins the Central Govt. and the Bureau to take steps to facilitate and promote energy efficiency in all sectors of the economy. The Act also directs states to designate agencies for the implementation of the Act and promotion of energy efficiency in the state.
The Central Government may issue the energy savings certificate to the designated consumer whose energy consumption is less than the prescribed norms and standards in accordance with the procedure as may be prescribed.
The Central Government may, in consultation with the Bureau, prescribe the value of per metric ton of oil equivalent of energy consumed.
The Ministry of Power, through Bureau of Energy Efficiency (BEE), has initiated a number of energy efficiency initiatives in the areas of household lighting, commercial buildings, standards and labeling of appliances, demand side management in agriculture/municipalities, SME’s and large industries including the initiation of the process for development of energy consumption norms for industrial sub sectors, capacity building of SDA’s etc. The target of energy savings against these schemes during the XI plan period was kept 10,000 MW of avoided generation capacity. These initiatives have resulted in an avoided capacity generation of 10836 MW during the XI plan period.
Conservation of energy
We use energy faster than it can be produced – Coal, oil and natural gas – the most utilised sources take thousands of years for formation. Energy resources are limited – India has approximately 1% of world’s energy resources but it has 16% of world population.
Most of the energy sources we use cannot be reused and renewed – Non renewable energy sources constitute 80% of the fuel use. It is said that our energy resources may last only for another 40 years or so. About 75 per cent of our crude oil needs are met from imports which would cost about Rs.1, 50,000 crore a year.
India was the first country in the world to set up a ministry of non-conventional energy resources, in the early 1980s. India’s overall installed capacity has reached 329.4 GW, with renewables accounting for 57.472 GW as of 14 June 2017. 61% of the renewable power came from wind, while solar contributed nearly 19%. Large hydro installed capacity was 44.41 GW as of 28 February 2017 and is administered separately by the Ministry of Power.
India has tremendous energy needs and an increasing difficulty in meeting those needs through traditional means of power generation. India is aiming to expand its power-generation capacity by 44 percent over the next five years but recent problems indicate the scale of the challenge.
Electricity consumption in India has been increasing at one of the fastest rates in the world due to population growth and economic development. India’s economy faces increasing challenges because energy supply is struggling to keep pace with demand, and there are energy shortages (as much as 15 percent daily) almost everywhere in the country. Such chronic lack of energy and unreliable supplies threaten India’s economic growth.
The Government needs to make an assessment of how best to address the power needs to meet the future growth and prevent such massive power failures. India’s power blackout is an opportunity for developing sustainable energy solutions.
For economic as well as environmental reasons India needs to shift to non-polluting renewable sources of energy to meet future demand for electricity. Renewable energy is the most attractive investment because it will provide long-term economic growth for India. A favorable renewable energy policy could create millions of new jobs and an economic stimulus of at least US$1 trillion, and perhaps much more if all indirect economic (ripple) effects are included.
Renewable energy also has the advantage of allowing decentralized distribution of energy — particularly for meeting rural energy needs, and thereby empowering people at the grass roots level. Solar electricity could also shift about 90 percent of daily trip mileage from petroleum to electricity by encouraging increased use of plug-in hybrid cars.
India does not have an overarching energy strategy — instead it has a number of disparate policies. Rather than promoting an overarching energy strategy, to date India has developed a cluster of energy business models and policies that have not been productive. These policies are definitely affecting renewable energy expansion plans. The present business model needs to be changed from a centralized to a decentralized structure that allows all stakeholders including capital investment coming from state-owned investors, pension funds, and foreign countries.
Renewable energy has the potential to re-energize India’s economy by creating millions of new jobs, allowing the country to achieve energy independence, reduce its trade deficits and propel it forward as a “Green Nation.” In short, renewable energy offers too many benefits for India to ignore, or delay its development. India should take full advantage of this golden opportunity because renewable energy has particular relevance in remote and rural areas, where there are around 289 million people who don’t have access to reliable sources of energy. Solar energy is the most cost-effective option for India to reduce energy poverty without having to extend national grid services to provide power for individual homes and buildings.
India’s present generation capacity is about 200,000 MW. The country could potentially increase grid-connected solar power generation capacity to over 200,000 MW and wind energy to over 100,000 MW by 2030 if the right resources (and more importantly, energy policies) were developed. India can develop massive commercial wind farms to harness the strong onshore costal area and offshore wind to boost the country’s supply of clean renewable energy. But, to tap this vast resource, India must develop and implement smart business models and favorable policies as quickly as possible.
The National Solar Mission was launched on the 11th January, 2010 by the Prime Minister. The Mission has set the ambitious target of deploying 20,000 MW of grid connected solar power by 2022 is aimed at reducing the cost of solar power generation in the country through (i) long term policy; (ii) large scale deployment goals; (iii) aggressive R&D; and (iv) domestic production of critical raw materials, components and products, as a result to achieve grid tariff parity by 2022. Mission will create an enabling policy framework to achieve this objective and make India a global leader in solar energy. Further, the Government has revised the target of Grid Connected Solar Power Projects from 20,000 MW by the year 2021-22 to 100,000 MW by the year 2021-22 under the National Solar Mission.
In the context of concerns over health, climate change and energy security, the Ministry of New and Renewable Energy through a Special Project on Cookstove (SPC) initiated the process of consultations under its Core Group on cookstoves to ascertain the status of various types of biomass improved cookstoves being developed and promoted by various organizations, NGOs, entrepreneurs and industries in the country, and to identify ways and means for the development and expansion of the deployment of improved biomass cookstoves.
The consultations indicated that biomass cookstoves do have the potential to directly address health and welfare concerns of the weakest and most vulnerable sections of society. The cleaner combustion in these devices will also greatly reduce greenhouse pollutants.
Under National Wind Resource Assessment programme, initially the wind monitoring was carried out only in known windy areas. Now it is extended to new/ uncovered areas which are not explored in earlier projects to complete the Indian Wind resource mapping. Further hundreds of private winds monitoring stations are also operational in the country.
Based on the analysis on the data collected from these 700 plus WMS, it is found that 237 stations have economically preferable wind power potential greater than 200 W/m2. A total capacity of 22,465 MW has been established up to December, 2014, mainly in Tamil Nadu, Gujarat, Maharashtra, Andhra Pradesh, Karnataka and Rajasthan. Wind electric generators of unit sizes between 225 kW and 2.1 MW have been deployed across the country.
Ministry of New and Renewable Energy has been vested with the responsibility of developing Small Hydro Power (SHP) projects up to 25 MW station capacities. The estimated potential for power generation in the country from such plants is about 20,000 MW. Most of the potential is in Himalayan States as river-based projects and in other States on irrigation canals. The SHP programme is now essentially private investment driven. Projects are normally economically viable and private sector is showing lot of interest in investing in SHP projects. The viability of these projects improves with increase in the project capacity. The Ministry’s aim is that at least 50% of the potential in the country is harnessed in the next 10 years.
Indian Renewable Energy Development Agency Limited (IREDA) is a Mini Ratna (Category – I) Government of India Enterprise under the administrative control of Ministry of New and Renewable Energy (MNRE). IREDA is a Public Limited Government Company established as a Non-Banking Financial Institution in 1987 engaged in promoting, developing and extending financial assistance for setting up projects relating to new and renewable sources of energy and energy efficiency/conservation.
Its objectives are:
1. To give financial support to specific projects and schemes for generating electricity and / or energy through new and renewable sources and conserving energy through energy efficiency.
2. To strive to be competitive institution through customer satisfaction.
3. To maintain its position as a leading organization to provide efficient and effective financing in renewable energy and energy efficiency / conservation projects.
4. Improvement in the efficiency of services provided to customers through continual improvement of systems, processes and resources.
Green Power and Biofuels
India’s energy security would remain vulnerable until alternative fuels to substitute/supplement petro-based fuels are developed based on indigenously produced renewable feedstocks. In biofuels, the country has a ray of hope in providing energy security. Biofuels are environment friendly fuels and their utilization would address global concerns about containment of carbon emissions. The transportation sector has been identified as a major polluting sector. Use of biofuels has, therefore, become compelling in view of the tightening automotive vehicle emission standards to curb air pollution.
The Indian approach to biofuels, in particular, is somewhat different to the current international approaches which could lead to conflict with food security. It is based solely on non-food feedstocks to be raised on degraded or wastelands that are not suited to agriculture, thus avoiding a possible conflict of fuel versus food security.
In the context of the International perspectives and National imperatives, it is the endeavour of to facilitate and bring about optimal development and utilization of indigenous biomass feedstocks for production of biofuels.
Rural Energy Crisis
More than 300 million Indians today don’t have access to electricity, and expanding energy access is critical to improving the quality of life across the country. But rising living standards have corresponded with spikes in carbon emissions in every other industrialized nation in the world—and India is already the world’s third largest emitter of greenhouse gases. If India walks this well-trodden path, the long-run consequences could be catastrophic for the global environment.
India is undeniably an economic power—it is the largest economy in South Asia and the third largest in Asia, and it is one of the leading tech powerhouses in the world. And yet, despite significant strides in poverty reduction and improvements in various social indicators (like declining infant mortality rates and rising life expectancy), some 240 million rural and 72 million urban Indians live in poverty, according to 2015 World Bank analysis. Further, income inequality has continued to grow, making life increasingly difficult for employed, middle-class Indians and untenable for the poor. Expanded electricity access would demonstrably improve educational and health outcomes among India’s poor, especially those in rural areas.
According to the World Bank, 78.7 of India’s population has access to electricity – but that access is spotty, inconsistent, vulnerable to seasonal and recurring brownouts and blackouts, and largely urban; while 94 percent of Indians living in urban areas have electricity, only 67 percent of those living in rural areas do. India’s urban population is expected to grow from 377 million to an estimated 600 million within the next 15 years, but much of that population growth will strain already strained urban power grids.
As early as 2012, the IEA published a study detailing why India was bound for an energy crisis—protectionist instincts had hobbled the country’s efforts to fully liberalize its energy sector, leaving a local market unable to deliver and a growing dependence on fuel imports. But while efforts to streamline and improve capacity in India’s energy market could certainly help improve access, it cannot ensure universal access—and it cannot address climate change concerns.
The MIT study suggests that India could conceivably wriggle its way out of both the access and the climate bind by undertaking radical changes in how it produces and distributes energy. But even if a greater proportion of India’s energy comes from low or even zero-carbon energy sources, India’s overall carbon emissions are still projected to double by 2040.
Decentralised energy in India
Renewable energy technologies are ideally suited to distributed applications, and they have substantial potential to provide a reliable and secure energy supply as an alternative to grid extension or as a supplement to grid-provided power. Over 400 million people in India, including 47.5% of those living in India’s rural areas, still had no access to electricity. Because of the remoteness of much of India’s un-electrified population, renewable energy can offer an economically viable means of providing connections to these groups. Some of the renewable energy technologies that are used in villages and rural areas as decentralized systems are:
1. Family-size biogas plants.
2. Solar street lighting systems.
3. Solar lanterns and solar home lighting systems.
4. Solar water heating systems
5. Solar cookers.
6. Standalone solar/ biomass based power generators.
7. Akshay Urja / Aditya Solar Shops
8. Wind pumps.
9. Micro-Hydel plants.
Many of these systems have been found useful in urban and semi urban areas also to conserve the use of electricity and other fossil fuels. Solar water heating systems have helped in demand side management of electricity in various cities and towns during peak hours. Standalone roof top SPV systems are getting popular for day time diesel abatement in areas where power cuts are very high.
The Planning Commission had set up a committee in February 1997 to prepare a 25-year perspective plan for the development of rainfed areas. The committee submitted its report in April 1997. It highlighted the resource base and development potential of rainfed areas in different agro-climatic zones and the major constraints in realising it. It examined past approaches to development of rainfed areas and suggested a perspective plan for the treatment of degraded and rainfed areas in the country over 25 years. The main objective of the plan was elimination of poverty and unemployment and realisation of the full growth and development potential.
The plan made a strong plea for a participatory approach to watershed development and the use of appropriate technologies in micro watersheds. It recommended that people be empowered to select technologies in view of their experiences. In addition to giving detailed guidelines on agriculture diversification in different zones, the plan also emphasised the need for a coordinated approach to the development of degraded lands in the country.
During the Ninth Plan, programmes for wasteland development were revamped to incorporate the major recommendations of the `25-year Perspective Plan for the development of rainfed areas’. Convergence of programme components and a common approach with clearly delineated responsibilities were accomplished during the Plan period.
The Tenth Plan would carry this process forward with greater allocation of physical and financial resources. Watershed Development Programmes would be an important part of the anti-poverty strategy. The development of the wastelands, degraded lands and rainfed areas would be implemented in an integrated manner. These lands would be used for food crops, horticulture, agro-forestry and social forestry depending on the soil characteristics. Concerns regarding restoration of ecological balance and augmentation of biomass production would drive the programmes.
The watershed programmes are important for bringing land area under tree cover. The Tenth Plan has set an ambitious target for afforestation. Even with the afforestation of degraded forestland to be taken up during the Plan period, the forest cover would fall short of the target. Close to 30 million hectares of nonforest land would have to be brought under tree cover to achieve the afforestation programme. It is necessary to create an environment that encourages people to grow trees on their farmland. Marginal lands are not suitable for crop production but they could be brought under tree crops with technical inputs.
Biogas development in India
Biogas technology is being promoted in India chiefly under the aspect of energy. The focus on this derives from the crucial energy supply situation for the population in the country. Besides China, India is the country where the development of uncomplicated biogas plants for the Tropics which are simple to operate started. Since the fifties the mass dissemination of biogas plants has been propagated and initiated for rural households, yet this development did not experience an upswing until the seventies so that by 1980 100,000 plants had been installed.
With the beginning of the 6th 5-year plan in 1981, the National Project for Biogas Development (NPBD) came into being following the objective of mass dissemination of household biogas plants and also including financial support.
Biogas dissemination in India experienced a number of set-backs as a large proportion of the plants erected were not used or only used to an insufficient extent. Reasons on the one hand, were the immature technical properties of plants themselves until the beginning of the eighties and on the other hand, a dissemination strategy which was only minimally developed and which did not recognise the importance of user training and follow-up services until much later.
Despite this, biogas technology was constantly supported by the Indian government. In 1982, the newly founded Department of Non-Conventional Energy Sources (DNES) as a department of the Ministry of Power and Non-Conventional Energy Sources took over central control of biogas dissemination. In the meantime, there are around 1 million household biogas plants in India of which 70-80% are assumed to be in operation.
Biogas dissemination is promoted centrally by the Ministry of Non-Conventional Energy Sources (MNES, formerly DNES). This department consults on and resolves the guidelines on financial support for biogas technology, commissions assignments in research and development and decides on the eligibility of new biogas plants for aid.
The actual dissemination work is carried out by the governments of the Indian states, the public corporations Khadi and Village Industries Commission (KVIC) and the National Dairy Development Board (NDDB) but mainly by countless non-governmental organisations. Within the framework of aid prescribed by MNES each state is responsible for the guidelines applicable in its region. The individual provisions prevailing thus vary from state to state.
In addition to direct allowances for investment costs, the states and private biogas dissemination organisations reaching an annual planned target of more than 8,000 plants receive 2.5% of the total amount of construction as an allowance towards establishing and maintaining an organisational infrastructure. This promotion called “service charge” amounts to 5% for dissemination programmes with a planned target of below 8,000. One half percent of this “service charge” must be allocated to establishing follow-up services, monitoring and evaluation, the compilation of material for public relations work and to gratuities for staff who deserve thee.
Large quantities of agricultural wastes resulting from crop cultivation activity are a promising source of energy supply for production, processing and domestic activities in rural areas of the concerned region. The available crop residues are either being used inefficiently or burnt in the open to clear the fields for subsequent crop cultivation. On an average 1.5 tons of crop residue are generated for processing 1 ton of the main product. In addition, substantial quantities of secondary residues are produced in agro-industries processing farm produce such as paddy, sugarcane, coconut, fruits and vegetables.
Agricultural crop residues often have a disposal cost associated with them. Therefore, the “waste-to-energy” conversion processes for heat and power generation, and even in some cases for transport fuel production, can have good economic and market potential. They have value particularly in rural community applications, and are used widely in countries such as Sweden, Denmark, Netherlands, USA, Canada, Austria and Finland.
The energy density and physical properties of agricultural biomass wastes are critical factors for feedstock considerations and need to be understood in order to match a feedstock and processing technology. There are six generic biomass processing technologies based on direct combustion (for power), anaerobic digestion (for methane-rich gas), fermentation (of sugars for alcohols), oil exaction (for biodiesel), pyrolysis (for biochar, gas and oils) and gasification (for carbon monoxide and hydrogen-rich syngas). These technologies can then be followed by an array of secondary treatments (stabilization, dewatering, upgrading, refining) depending on specific final products.
It is well-known that power plants based on baled agricultural residues are efficient and cost-effective energy generators. Residues such as Rice Husks, Wheat Straw and Maize Cobs are already concentrated at a point where it is an easily exploitable source of energy, particularly if it can be utilized on-site to provide heat and power.
The selection of processing technologies needs to be aligned to the nature and structure of the biomass feedstock and the desired project outputs. It can be seen that direct combustion or gasification of biomass are appropriate when heat and power are required. Anaerobic digestion, fermentation and oil extraction are suitable when specific Biomass wastes are available that have easily extractable oils and sugars or high water contents. On the other hand, only thermal processing of biomass by pyrolysis can provide the platform for all of the above forms of product.
Many thermal technologies require the water content of Biomass to be low (<15 per cent) for proper operation. For these technologies the energy cost of drying can represent a significant reduction in process efficiency.
Moisture content is of important interest since it corresponds to one of the main criteria for the selection of energy conversion process technology. Thermal conversion technology requires biomass fuels with low moisture content, while those with high moisture content are more appropriate for biological-based process such as fermentation or anaerobic digestion.
The ash content of biomass influences the expenses related to handling and processing to be included in the overall conversion cost. On the other hand, the chemical composition of ash is a determinant parameter in the consideration of a thermal conversion unit, since it gives rise to problems of slagging, fouling, sintering and corrosion.
Electric power consumption measures the production of power plants and combined heat and power plants less transmission, distribution, and transformation losses and own use by heat and power plants.
The value for Electric power consumption (kWh per capita) in India was 765.00 as of 2013. Electric power consumption measures the production of power plants and combined heat and power plants less transmission, distribution, and transformation losses and own use by heat and power plants.
The country inherited stagnant agriculture at the time of Independence. The traditional tools and implements relied mostly on human and animal power and used a negligible amount of commercial energy. However, successive governments realized the importance of agriculture and initiatives were taken for the growth of this sector. Increased investment in irrigation infrastructure, expansion of credit, marketing, and processing facilities.
As a result of increased mechanization in agriculture, crop production and rural agro processing emerged as one of the major consumers of commercial energy. The share of mechanical and electrical power in agriculture increased from 40% in 1971/72 to 84% in 2003/04. The availability of farm power per unit area (kW/ha) has been considered as one of the parameters of expressing the level of mechanization. Power availability for carrying out various agricultural operations has increased from 0.3 kW/ha in 1971/72 to the tune of 1.4 kW/ha in 2003/04.
Connected load in the agriculture sector in 2004 was estimated to be 51.84 GW, the number of consumers being 12.8 million. The electricity consumption in agriculture during 2003/04 was 87 089 GWh (second highest)?24.13% of the total electricity consumption. There was an increase of 3.08% in the electricity sales to the agriculture sector in 2003/04 over 2002/03.
Electricity consumption in agriculture sector has been increasing mainly because of greater irrigation demand for new crop varieties and subsidized electricity to this sector. Moreover, due importance is not given to proper selection, installation, operation, and maintenance of pumping sets, as a result of which they do not operate at the desired level of efficiency, leading to huge waste of energy.
The industrial sector uses more delivered energy than any other end-use sector, consuming about 54% of the world’s total delivered energy. The industrial sector can be categorized by three distinct industry types: energy-intensive manufacturing, nonenergy-intensive manufacturing, and nonmanufacturing. The mix and intensity of fuels consumed in the industrial sector vary across regions and countries, depending on the level and mix of economic activity and on technological development. Energy is used in the industrial sector for a wide range of purposes, such as process and assembly, steam and cogeneration, process heating and cooling, and lighting, heating, and air conditioning for buildings. Industrial sector energy consumption also includes basic chemical feedstocks.
Natural gas feedstocks are used to produce agricultural chemicals. Natural gas liquids (NGL) and petroleum products (such as naphtha) are both used for the manufacture of organic chemicals and plastics, among other uses.
India is blessed with immense amount of hydro-electric potential and ranks 5th in terms of exploitable hydro-potential on global scenario. As per assessment made by CEA, India is endowed with economically exploitable hydro-power potential to the tune of 1 48 700 MW of installed capacity.
In addition, 56 number of pumped storage projects have also been identified with probable installed capacity of 94 000 MW. In addition to this, hydro-potential from small, mini & micro schemes has been estimated as 6 782 MW from 1 512 sites. Thus, in totality India is endowed with hydro-potential of about 2 50 000 MW. The total installed capacity of India is 36878 MW.
In India, hydro power projects with a station capacity of up to 25 megawatt (MW) each fall under the category of small hydro power (SHP). India has an estimated SHP potential of about 15 000 MW. he total installed capacity of small hydro power projects (upto 25 MW). The energy of running water has been exploited for very many years. However, traditional approaches have suffered disadvantages due to environmental factors.
Thermal power generation accounts for about 65 percent of the total electricity generated in India. Coal-based plants account for the bulk of the thermal power capacities, followed by gas-based units. That is not surprising, given that India is third-largest producer of coal globally, and yet, is also the fourth-largest importer of coal.
India has around 20 coal-fired thermal plants with capacities of 2000 MW or above while the average energy efficiency of these plants is a mere 32.8 percent, according to a study carried out by Center for Science and Environment (CSE) covering a total of 47 coal-fired power plants.
India’s need for importing such huge volumes of coal (it imports an estimated 30 percent of its coal needs, which helps meet at least 15 percent of power plant needs) arises, at least in part, from the fact that much of the coal produced in the country is of a relatively inferior grade. Only a small part of India’s coal reserves is of the anthracite variety, with the rest being of the bituminous, lignite or peat genres. While there has been much concerted effort to increase generation of electricity from renewable energies such as solar and wind, the reality is that these capacities could take years to build. India has set a target to build 100 GW of capacities by 2022 at a cumulative investment of $100 billion.
However, India’s grid-connected renewable power capacity, excluding hydel but including solar, is currently estimated at around 37,000 MW.
By comparison, thermal power is the mainstay of electricity generation in India. It stood at over 196 GW in 2015, of which coal-based capacities alone amounted to 171 GW. Also, Make in India program envisages addition of another 175 GW of thermal power capacity by 2022.
According to industry estimates, some of India’s power plants emit up to 120 percent more CO2 than the average emissions by plants in European countries.
India has a flourishing and largely indigenous nuclear power programme and expects to have 14.6 GWe nuclear capacity on line by 2024 and 63 GWe by 2032. It aims to supply 25% of electricity from nuclear power by 2050. Because India is outside the Nuclear Non-Proliferation Treaty due to its weapons programme, it was for 34 years largely excluded from trade in nuclear plant or materials, which has hampered its development of civil nuclear energy until 2009.
Due to earlier trade bans and lack of indigenous uranium, India has uniquely been developing a nuclear fuel cycle to exploit its reserves of thorium.
NPCIL supplied 35 TWh of India’s electricity in 2013-14 from 5.3 GWe nuclear capacity, with overall capacity factor of 83% and availability of 88%. Some 410 reactor-years of operation had been achieved to December 2014. India’s fuel situation, with shortage of fossil fuels, is driving the nuclear investment for electricity, and 25% nuclear contribution is the ambition for 2050, when 1094 GWe of base-load capacity is expected to be required. Almost as much investment in the grid system as in power plants is necessary.
Nuclear power for civil use is well established in India. Since building the two small boiling water reactors at Tarapur in the 1960s, its civil nuclear strategy has been directed towards complete independence in the nuclear fuel cycle, necessary because it is excluded from the 1970 Nuclear Non-Proliferation Treaty (NPT) due to it acquiring nuclear weapons capability after 1970.
As a result, India’s nuclear power program has proceeded largely without fuel or technological assistance from other countries (but see later section). The pressurised heavy-water reactor (PHWR) design was adopted in 1964, since it required less natural uranium than the BWRs, needed no enrichment, and could be built with the country’s engineering capacity at that time – pressure tubes rather than a heavy pressure vessel being involved. Its power reactors to the mid-1990s had some of the world’s lowest capacity factors, reflecting the technical difficulties of the country’s isolation, but rose impressively from 60% in 1995 to 85% in 2001-02. Then in 2008-10 the load factors dropped due to shortage of uranium fuel.
India’s nuclear energy self-sufficiency extended from uranium exploration and mining through fuel fabrication, heavy water production, reactor design and construction, to reprocessing and waste management. It has a small fast breeder reactor and is building a much larger one. It is also developing technology to utilise its abundant resources of thorium as a nuclear fuel.
The Atomic Energy Establishment was set up at Trombay, near Mumbai, in 1957 and renamed as Bhabha Atomic Research Centre (BARC) ten years later. Plans for building the first Pressurised Heavy Water Reactor (PHWR) were finalised in 1964, and this prototype – Rajasthan 1, which had Canada’s Douglas Point reactor as a reference unit, was built as a collaborative venture between Atomic Energy of Canada Ltd (AECL) and NPCIL. It started up in 1972 and was duplicated Subsequent indigenous PHWR development has been based on these units. The Indian Atomic Energy Commission (AEC) is the main policy body.
Chronic Power Shortage in India
Electricity is critical to fuel the economic growth of India. The country is on the fast trajectory of development but to keep the momentum of growth high, availability of uninterrupted power supply is a must. India needs electricity to fuel the growth of every industry, be it large-scale or small scale, manufacturing, healthcare or education.
There are many roadblocks in unleashing the full potential of India’s power sector. One is fuel availability concerns faced by the industry. Coal supply by Coal India Ltd (CIL) is restricted to around 65% of actual coal requirement by coal-based thermal plants, leading to increased dependence on imported coal. This results in increasing power generation costs due to limited fuel availability. Increasing operational inefficiencies and outstanding debts have led to poor financial health of state discoms. Then there are other concerns such as land acquisition which has made purchase of land for power projects very expensive. Installation of power plants in any case, requires huge investments and the land acquisition cost pushes the capex to unprofitable and unsustainable levels.
India has been dependent to a large extent on energy imports to meet its national energy requirements. As per the estimates of Planning Commission, India, to ensure a sustained 8% growth of the economy, by 2031-32 India needs to increase its primary energy supply by three to four times and its electricity generation by five to six times of the 2003-04 levels. To limit the dependency on energy imports and contribute in meeting this energy challenge, the government is also laying a lot of emphasis on energy efficiency and demand side management. Efforts are being made to increase supply from renewable sources of energy and promote energy conservation in various consumption sectors through appropriate policy interventions.
India is currently facing energy crisis with its major dependency on coal, crude oil imports to meet sharply growing energy needs of the country. More than 40% household lack access to electricity. There is a need for alternate energy which will not only offset the demand of conventional fossil fuel but also pave way to cleaner solution with less poisonous gases emissions. The alternate solution must be low maintenance and deliver sustained performance in adverse climatic conditions. There is a strong need to push for wider-scale implementation of public-private partnership models. The private sector has been playing a key role in generating power, and in making the desired technological interventions in the energy space.
There are many problems faced by the power sector and these need to be addressed. One of the issues plaguing the power sector in a big way is shortage of equipment. This has been a significant reason for India missing its capacity addition targets. While the shortage has been primarily in the core components of Boilers, Turbines and Generators, there has been lack of adequate supply of Balance of Plant (BOP) equipment as well. There is a shortage of construction equipment also.
The current power infrastructure in India is not capable of providing sufficient and reliable power supply. Some 400 million people have zero access to electricity since the grid does not reach their areas.
Another problem is unstable power supply. There are frequency fluctuations caused by load generation imbalances in the system and this keeps happening because consumer load keeps changing
Frequency is the most crucial parameter in the operation of AC systems. The rated frequency in India is 50.0 Hz. While the frequency should ideally be close to the rated frequency all the time, it has been a serious problem in India. Poor power quality control has knock-on effects on equipment operation, including large-scale generation capacity. Equipment damage can, of course, further compromise supply and aggravate the effects of chronic fuel shortages.
The generation outage is primarily due to repair and maintenance of power generation projects and breakdown of old units. There are two types of outages—planned outages and breakdowns. It is a cause of concern.
There have been instances when soaring electricity demand and lower output from hydro power plants have delayed annual repair and maintenance work on thermal power plants during the monsoon season, exposing the coal-fired generation units to the risk of breakdown. While India has installed power generation capacity of 249,488.31 MW, daily generation is only to the tune of 135,000 MW. Analysts say the data doesn’t capture the real demand, ascribing the lower deficit to the unwillingness of state electricity boards (SEBs) to buy enough power because they cannot afford to do so.
Weakness of SEBs
The power ministry has done a commendable job handling the supply side issues of the power sector. Coal inventory which used to be a perennial problem has been tackled by improving logistics and supply of railway rakes.
While the supply issue has been tackled, the problem in the demand side continues. UBS has highlighted the problem of the sector by pointing out that discoms are finding it difficult to buy power despite electricity availability. Electricity generation in the first two months of FY16 has only risen by a paltry 2.5% despite adequate coal supply. With discoms limiting supply to the loss-making segments and an additional 21GW of coal-fired capacity in FY15, capacity utilisation for coal-fired plants has declined from already low level of 64.5% in FY15 to 62.5% in the first two months of FY16.
Over the last two years, the electricity consumption in the loss-making segments, agriculture and residential, has grown 8.4% and 9.7% annually, respectively, whereas the profitable industrial and commercial segments have grown only 4.3% annually. Restructuring of SEBs will serve little purpose unless the state governments are willing to increase tariffs for agriculture and domestic use. But this is easier said than done. Political parties continue to exploit vote banks by announcing cheap power for domestic use. Till such freebies continue, SEB restructuring will be of no use. And unless SEBs are empowered, little progress can be made on power sector reforms.
State electricity boards (SEBs) across India are saddled with losses running into crores of rupees due to power theft during transmission and distribution, billing inefficiencies and, more importantly, because they have to buy expensive power to tide over short-term deficits.
A dependence on subsidies and the political compulsion of providing free power to farmers reflects poorly on the books of these state-owned boards. As agricultural power supply is unmetered, many utilities write off all losses from transmission and distribution as agricultural consumption. Some SEBs have also failed to revise tariffs for many years, adding to their losses.
Utilities in India face about 30% losses due to unmetered and unaccounted for sales—the highest in the world. No system can withstand such losses without coming under intense demand pressure. Combined annual losses of all SEBs add up to about 1% of India’s gross domestic product.
The health of the power distribution sector holds the key to the success of the generation projects. While consumer metering in eight states is below 80% of all households, metering of agricultural consumers in a majority of the states ranges from 5% to 50%.
Distribution is not the only area of concern. The transmission sector requires an investment of Rs 1.4 trillion for increasing the inter-regional capacity from 23,800MW to 38,000MW by the end of 2012. However, given the financial situation of SEBs, tying up funds for transmission projects is difficult.
The problems for Power Grid Corp. of India Ltd (PGCIL), India’s central transmission utility, include getting the right of way for setting up transmission links and securing timely forest clearances. Law and order situation in areas such as Jharkhand, Chhattisgarh, north-eastern states and Jammu and Kashmir is also a problem.
Seized of the problem, India is planning to develop an inexpensive electricity meter that could cost as low as Rs 1,000, or one-fifth of the cost of a similar device available in the market, that will help reduce electricity theft and distribution losses. The so-called smart meter may have features such as two-way, real-time digital communication that would make manual reading of power consumption redundant. It may also be able to terminate a connection remotely. The Union government is also trying to help SEBs access funds. The cabinet will decide this month on subsidizing the interest on loans taken by SEBs to cut distribution losses under the national electricity fund. The utilities are expected to avail loans of Rs 25,000 crore in the first two years. The boards will get a 3-5% discount on interest rates depending on performance, which will be paid by the Union government to the lenders.
The other measures to facilitate funding include a mandatory rating system for 65 state-owned distribution firms to streamline lending to them and relaxing exposure norms for banks and state-owned firms Power Finance Corp. Ltd and Rural Electrification Corp. Ltd.
The government is also planning direct disbursement of power distribution subsidies to consumers such as farmers through a smart card linked to a unique identity card (UID) number. Various ministries of the government are toying with the possibilities of leveraging the UID project being implemented by the Unique Identification Authority of India (UIDAI) to ensure delivery of benefits promised by the government to the right target groups.
Power sector Reforms
The power sector is in early stages of transformation from coal-centric generation to variable renewable power generation. This transformation will pose several daunting commercial and technical challenges for both policy makers and market players. It will also inevitably result in growing incidence of grid curtailment of renewable power, as seen worldwide, for a variety of reasons.
As renewable capacity grows, capacity utilization for conventional power could start falling to 50% by 2021-22 assuming all renewable power output is evacuated. As renewable power becomes more mainstream, it should stop expecting special advantages and compete on equal terms.
There are several plans to enhance transmission infrastructure and introduce grid-level battery storage to address increasing renewable penetration. Current regulatory approach to tackling this risk is predicated almost entirely on providing ‘must run’ status – priority access to the grid – to renewables.
This simplistic approach has been very helpful to the renewable sector but is becoming untenable as it ignores the interests of conventional power generators, transmission companies and DISCOMs. There are already many instances of DISCOMs backing down renewable power for various commercial and technical reasons. In an era of cheaper renewables, we now need compensatory mechanisms for backing down and ramping up conventional power.
Power tariff structures in India are rigid and need to evolve to ‘time of use’ pricing to shift customer behaviour. Backing down renewables may become unavoidable in future, so there is a growing clamour for renewable power to have a two-part tariff and do away with the ‘must run status’.
Future of power sector
The Power sector in India is at a crucial juncture today, with several large investments being undertaken by public and private sector players, and developments promising a significant transformation of the sector. The sector is witnessing a fundamental shift that is opening up new business opportunities for the industry.
At the same time, the competition for scarce resources is expected to intensify and support enablers in terms of logistics, T&D, equipment supply will be stretched to the fullest. The emerging dynamics of the Indian power market would require industry players to realign their strategies and operating models to the changing sectoral trends. The focus would need to be both on project execution as well as efficient operations, in line with the “growth” characteristics of the sector.
Indian power sector has been a mainstay of national growth. As the Indian economy prepares for sustained growth of 8-9%, the importance of the power sector will continue to increase. The power sector itself is going through major changes with unprecedented investments across the value chain.
The Indian power market is evolving rapidly from a “nascent/ opening” market phase to a “developing” phase. The power demand in the base case is expected to grow at a steady 7.5%-8% CAGR till 2017. Further, the low “power penetration” levels indicate large latent/unmet demand. The power markets will have to achieve consistent high growth rates to bring our per capita consumption to comparable levels of some of the other countries. Analysts believe that rate of infrastructure development and government led reforms would have a significant bearing on how far these developmental aspirations are achieved.
Equipment manufacturers can leverage derived demand from the overall growth in the power sector to drive capacity expansions. Technology changes (increased role of supercritical plants in thermal stations; large sized reactors for nuclear plants, etc) present opportunities to introduce and absorb newer technologies and develop market niches. Distribution and financing concerns will also intensify, High AT&C losses and slow rate of discom reforms will hurt the industry in the last mile. Financing may also present a challenge to industry growth. About $ 200-250 Bn investments will need to be undertaken in the power sector in the next 8-9 years to fuel the planned growth.
Future of Rural Electrification
While grid extension is the main driver of rural electrification in India today and almost all Indian villages are now electrified, the reality at the habitation and household level is very different. In states such as Bihar and Uttar Pradesh (UP), the electrification of rural households remains a daunting challenge for state governments.
Moreover, the 2014-2015 ACCESS survey (Access to Clean Cooking Energy and Electricity – Survey of States) shows that electricity distribution companies struggle to provide rural households with high-quality electricity service (Aklin et al. 2016). Even when households can use grid electricity, be it legally or illegally, the number of hours available is often very low. In Bihar and UP, for example, ACCESS reports only nine hours of electricity on a typical day. Perhaps reflecting the low quality of grid electricity service in many parts of India, an impact evaluation of the Rajiv Gandhi rural electrification scheme found no evidence of economic benefits.
Considering these facts and the falling costs of off-grid solar power, distributed alternatives to grid extension have drawn a lot of attention in India.
The simplest step forward for Indian policymakers is to replace the subsidy for kerosene with a more efficient policy. Even households that used solar lighting continue to purchase heavily subsidised kerosene as before.
Another approach would emphasise complementary interventions. The lack of electricity is not the only obstacle to economic growth in rural India, and rural households without electricity access often have to grapple with other challenges as well, ranging from low-quality schools to a lack of proper roads and limited access to credit for livelihood creation. Combining innovative off-grid solutions with other interventions could relax multiple constraints on growth at the same time, with potential for large returns.
For better off-grid lighting policy, it is important to continue experimentation and rigourous impact assessment based on randomisation. Ending energy poverty is essential for sustainable human development in India and elsewhere, and success in this effort requires evidence-based policy and business models.
Transport System in India’s Economic Development
Significance of transport
Transport is a means of carrying goods and people from one place to another. Transport refers to the activity that facilitates physical movement of goods as well as Individuals from location to another.
Transport plays an important role in today’s modern world. It helps in removing the distance barrier. An efficient transport system is essential for sustainable economic development of the country and plays a significant role in promoting national and global integration. An efficient transport helps in increasing productivity and enhances competitiveness of the economy. Efficient transport is indispensable to the economic development of nation. There are various modes of transport that include road transport, rail transport, water transport, and air transport.
Transport and the Five Year Plans
An efficient, reliable, and safe transport system is vital for fostering rapid economic growth. Over the decades, in spite of significant development of transport modes, transport capacity has tended to lag behind the requirement of economy leading to congestion, asset deterioration and high level of energy consumption, pollution and accidents. Rural areas have inadequate connectivity and there is a continuous increase in the share of road traffic at the expense of rail.
Though successive Five Year Plans took cognizance of these problems, there is inadequate investment in capacity building mainly because of resource problem facing the public sector that has been largely responsible for transport infrastructure development. The problem was exacerbated by increasing concentration of economic activity and human settlements in certain areas by relative under-pricing of hydrocarbon fuels and transport services.
In spite of special attention being paid, particularly in the recent years, for development of transport infrastructure, some areas like North-East continue to be inadequately served and this has affected not only their economic development but even social and political integration with the rest of the country.
In the recent years, economic liberalization has quickened the impulses of economic growth. A rapidly-growing middle class needs of domestic and international trade, large-scale mobility of working population to longer distances and growing demographic pressure have fuelled further demand for transport. The new economic policies have opened new avenues for private participation in transport, thus, augmenting resources as also increasing the scope of commercial orientation to transport operations. At the same time, this development may lead to greater concentration of industrial location around existing growth centres and encourage an untrammeled growth of certain modes of transport with regard to their social cost.
Growth of transport in India since 1951
After independence Nehru took charge as India’s first Prime Minister, knowing that real improvement in transport could only be with the development of the railways. By 1947, the year of India’s independence, there were forty two rail systems. In 1951 the systems were nationalized as one unit, becoming one of the largest networks in the world.
Indian Railways is divided into seventeen zones and sixty seven divisions, each having a divisional headquarters.
To compete with international standards the Government also started a number of special types of services which are given higher priority. The Rajdhani trains introduced in 1969 provide connectivity between the national capital, Delhi and capitals of the states. On the other hand, Shatabdi Express provides connectivity between centers of tourism, pilgrimage or business. Trains run over short to medium distances do not have sleepers while the Rajdhani Expresses run over longer distances and have only sleeping accommodation.
The Indian Railways has also initiated a number of highly ambitious projects to provide connectivity to the remote and inaccessible areas of the country. The 738 km long Konkan Railway with around 2000 bridges and 92 tunnels is one such highly difficult project through fragile mountainous terrain of the Konkan region The salient feature of the Konkan railway was to connect two important port cities of Mangalore and Mumbai by a short route and was constructed in 1991-1998. Another such highly ambitious project is the Kashmir Railway, the Kashmir valley part of which was completed in 2009. The governments gave such a direction and outline to the Indian Railways that it could be cost effective and comfortable mode of transportation for the common people and it could also support the commercial activities trade within the country.
In the same manner development of roads in the country was also very important in the country. After the independence in1951 the total road network in India measured approximately 40000 kilometers and during 1947-69 total length of the National Highways in India was around 24000 kilometers. This is another major achievement of the government that the Indian road network becomes of the largest road network in the world. Today the total length of road in India is 4.24 million kilometers.
India has a network of National Highways connecting all the major cities and state capitals, forming the economic backbone of the country. As of 2013, India has a total of 70,934 km of National Highways, of which 1,208 km are classified as expressways.
As per the National Highways Authority of India, about 65%of freight and 80% passenger traffic is carried by the roads. The National Highways carry about 40% of total road traffic, because of the development of good roads by the government. Average growth of the number of vehicles has been around 10.16% per annum over recent years. Highways have facilitated development along the route and many towns have sprung up along major highways.
Freight transportation by waterways is highly under-utilized in India compared to other large countries and geographic areas like the United States, China and the European Union. After the initiatives of the government, cargo transportation in an organized manner, has started to the waterways in Goa, West Bengal, Assam and Kerala.
Problems of transport development in India
Since 1951, the development in the transport sector has been quite good, but there are many hurdles in its path of progress.
1. Faulty Planning of Transport System:
The development of transport system is unbalanced. There is heavy pressure on rail and road transport in certain cities and regions.Alternative routes should be developed e.g. Metro in Delhi has decreased the pressure on road transport.
2. Lack of Rail Road Co-ordination:
Rail and Road transport systems are the main means of transportation. These two should work in coordination. Generally it is not so. This growth is undesirable from economic and environmental point of view. In a well planned and co-ordinate way, the railways should be engaged for bulky goods and long distances while road transport should be engaged for small goods and short distances.
3. Worn out and Obsolete Assets:
The main problem of our transport system is its worn out and obsolete assets. In all modes of transport there are old and worn out infrastructure. These need immediate replacement. They are main cause of accidents and environmental pollution. In air transport nearly one third of the total fleet requires immediate replacement.
4. Improved technology:
Modernisation and use of latest technology in transport system is the need of hour. In rail and road transport system, we are using age old technology so progress is slow. Road construction is of substandard and it increases wear and tear of vehicles and over head expenditure.
5. Transport Bottlenecks
India spends about 14% of its gross domestic product on its logistics system, versus 8% for developed nations. That does not spell cheap transportation, moving or storage. The nation has a way to go both in adopting modern logistics methodology and in repairing a largely sub-standard transportation infrastructure. It is no wonder that the majority of foreign companies doing business in India are using the nation for programming and call centers. Neither requires much more than a workable information technology infrastructure and little in the way of goods transfer.
India’s infrastructure of roads, rails, ports and airports is the most vulnerable part of its supply-chain presence. India’s roads consist of 2.4 million kilometers of paved roads and more than a million kilometers of unpaved roadway. In both cases, much of this network is questionable as to reliability for modern transportation needs. While India’s rail network exceeds 63,000 kilometers, the best two-thirds are broad-gauge and old.
Growth of Indian Railways
The Indian Railways is among the world’s largest rail networks. The Indian Railways network is spread over 115,000 km, with 12,617 passenger trains and 7,421 freight trains each day from 7,172 stations plying 23 million travellers and 3 million tonnes (MT) of freight daily. India’s railway network is recognised as one of the largest railway systems in the world under single management.
The railway network is also ideal for long-distance travel and movement of bulk commodities, apart from being an energy efficient and economic mode of conveyance and transport.
The Government of India has focused on investing on railway infrastructure by making investor-friendly policies. It has moved quickly to enable Foreign Direct Investment (FDI) in railways to improve infrastructure for freight and high-speed trains. At present, several domestic and foreign companies are also looking to invest in Indian rail projects.
The revenue generated by the Railways is expected to grow at 10 per cent in the fiscal year 2017-18. The Union Budget 2017-18 has estimated that the overall earnings will rise to Rs 189,498.37 crore (US$ 28.42 billion) in 2017-18, compared to Rs 172,305 crore (US$ 25.84 billion) in the fiscal year 2016-17.
Railway Development under the Plans
The Railways have undertaken more than 20 projects worth Rs. 14,000 crore during the 12th Five year Plan, including those for laying new lines, doubling the existing ones, enhancing port connectivity and electrifying its network under Public-Private Partnership (PPP) model.
While seven PPP projects worth Rs. 5693 crore are under implementation as part of joint venture model, as many others involving an expenditure of Rs. 2236 crore are being implemented under customer funded model.
Three PPP projects worth Rs. 3016 crore are being executed through the annuity route and in-principle approval has been accorded to six others worth Rs. 3078 crore. Faced with resource crunch for its mega investment plans, the public transporter is exploring various channels for raising funds.
Indian Railway has proposed Rs. 8.56 lakh crore investment plan for the next five years and the national transporter expects to execute a sizable chunk of projects through Public-Private Partnership and in collaboration with states. There are about 16 state governments which have given their in-principle approval for formation of special purpose vehicles (SPVs) to implement rail projects in their respective states. In order to attract private investment, railways have strengthened the PPP framework besides launching investor-friendly build, operate and transfer (BOT) annuity model to construct new tracks.
The participatory policy for rail connectivity was launched in 2012 which has five models including non-government railway model, joint venture model, build operate and transfer model, capacity augmentation with funding provided by customers model and capacity augmentation through annuity model.
During 2002 and 2014, eight port connectivity projects worth about Rs. 3153 crore were implemented. These covered the linking of Mundra Port and Pipavav-Surendranagar, Hassan- Mangalore, Gandhidham-Palanpur and Bharauch-Dahej gauge conversion projects. These projects have added about 1030 km of rail lines.
Besides, railways have offered 400 stations to be redeveloped with private participation for improving passenger amenities inviting open bids from interested parties.
Finances of the Indian Railways
The Railways Budget was separated from the Union Budget in 1924. While the Union Budget looks at the overall revenue and expenditure of the central government, the Railways Budget looks at the revenue and expenditure of the Ministry of Railways. At that time, the proportion of Railways Budget was much higher as compared to the Union Budget. The separation of the Budgets was done to ensure that the central government receives an assured contribution from the Railways revenues. However, in the last few years, Railways’ finances have deteriorated and it has been struggling to generate enough surplus to invest in improving its infrastructure.
Indian Railways is primarily financed through budgetary support from the central government, its own internal resources (freight and passenger revenue, leasing of railway land, etc.), and external resources (market borrowings, public private partnerships, joint ventures, or market financing).
Every year, all ministries, except Railways, get support from the central government based on their estimated revenue and expenditure for the year. The Railways Ministry is provided with a gross budgetary support from the central government in order to expand its network. However, unlike other Ministries, Railways pays a return on this investment every year, known as dividend. The rate of this dividend is currently at around 5%, and also includes the interest on government budgetary support received in the previous years.
Various Committees have observed that the system of receiving support from the government and then paying back dividend is counter-productive. It was recommended that the practice of paying dividend can be avoided until the financial health of Railways improves. In the announcement made today, the requirement to pay dividend to the central government has been removed. This would save the Ministry from the liability of paying around Rs 9,700 crore as dividend to the central government every year. However, Railways will continue to get gross budgetary support from the central government.
In addition to its core business of providing transportation, Railways also has several social obligations such as: (i) providing certain passenger and coaching services at below cost fares, (ii) running uneconomic branch lines (connectivity to remote areas), and (iii) granting concessions to various categories of people (like senior citizens, children, etc.). Other inelastic expenses of Railways include pension charges, fuel expenses, lease payments, etc.
Such expenses do not leave any financial room for the Railways to make any infrastructure investments. In the last few years, Railways has been struggling due to a decline in its revenue from passenger and freight traffic. In addition, the support from the central government has broadly remained constant. In 2015-16, the gross budgetary support and internal revenue saw a decline, while there was some increase in the extra budgetary resources.
Railways’ internal revenue primarily comes from freight traffic (about 65%), followed by passenger traffic (about 25%). About one-third of the passenger revenue comes from first class passenger traffic and the remaining two-third comes from second class passenger traffic.
The share of Railways in total freight traffic has declined from 89% to 30% over the last 60 years, with most of the share moving towards roads. With regard to freight traffic, Railways generates most of its revenue from the transportation of coal (about 44%), followed by cement (8%), iron ore (7%), and food-grains (7%). In 2015-16, freight traffic decreased by 10%, and freight earnings reduced by 5% from the budget estimates.
The Railways Budget for 2016-17 estimates an increase of 12% in passenger revenue and a 0.26% increase in passenger traffic. Achieving a 12% increase in revenue without a corresponding increase in traffic will require an increase in fares.
While the Railways is trying to improve revenue by raising fares, this may increase the financial burden on passengers. In the past, various Parliamentary Committees have observed that the investment planning in Railways from the government’s side is politically driven rather than need driven. This has resulted in the extension of uneconomic, un-remunerative, yet socially desirable projects in every budget. It has been recommended that projects based on social and commercial considerations must be categorised separately in the Railways accounts, and funding for the former must come from the central or state governments. It has also been recommended that Railways should bring in more accuracy in determining its public service obligations.
Railway budget 2012-13
1. An increase in passenger fares across all classes, more than 100 new trains, enhanced frequency or routes for many others, and plans to hire more than one lakh employees are some of the key Rail Budget proposals.
2. Passenger fares to be hiked by 2 paise per km for suburban and ordinary second class travel; 3 paise per km for mail/ express second class; 5 paise per km for sleeper class; 10 paise per km for AC chair car/AC 3-tier and First Class; 15 paise per km for AC 2-tier and 30 paise per km for AC 1-tier.
3. Minimum fare and platform tickets to cost Rs 5.
4. 75 new Express trains to be introduced, along with 21 new passenger services, nine DEMU services and 8 MEMU services trains.
5. Route of 39 trains to be extended and frequency of 23 trains to be increased.
6. Railways to hire more than one lakh employees in 2012-13; 80,000 persons hired last year.
7. Indian Railways Stations Development Corp to be set up to re-develop stations and maintain them like airports.
8. To set up an independent Railway Safety Authority as a statutory body.
9. The open discharge toilets on trains to be replaced with green (bio) toilets.
10. All unmanned level crossings to be abolished in next five years; To target zero deaths due to rail accidents.
11. To provide rail connectivity to neighbouring countries, a new line from Agartala to Akura in Bangladesh to be set up.
12. Double-decker container trains to be introduced.
13. Steps to improve cleanliness and hygiene on trains and stations within six months. A special house keeping body to be set up to take care of both stations and trains.
14. New passenger services include escalators at major stations, alternative train accommodation for wait-listed passengers, laundry services, AC lounges, coin/currency operated ticket vending machines.
15. Two new members, one for marketing, and other for safety, to be inducted into Railway Board.
16. On board passenger displays indicating next halt station and expected arrival time to be introduced.
17. Introduction of regional cuisine; Book-a-meal scheme to provide meals through SMS or email.
18. Specially designed coaches for differently-abled persons to be provided in each Mail/Express trains.
19. Railway Tariff Regulatory Authority to be considered.
20. National High Speed Rail Authority to be set up; Pre-feasibility studies on six high speed corridors completed; study on Delhi-Jaipur-Ajmer-Jodhpur to be taken up in 2012-13.
21. Wellness programme for railway staff at work places.
22. A wagon factory at Sitapali, Odisha, rail coach factory at Palakkad, two additional new coach manufacturing units in Kutch (Gujarat) and Kolar (Karnataka); component factory at Shyamnagar (West Bengal); new coaching terminal at Naihati, the birth place of Bankim Chandra Chattopadhyay.
23. Freight loading of 1,025 MT targeted; 55 MT more than 2011—12; Passenger growth targeted at 5.4 per cent.
Social Responsibility of Railways
To encourage participation of Private companies and PSUs in identified works/activities to be done under Corporate Social Responsibility (CSR) in Railways, the policy framework has been put in place by Indian Railways.
The policy guidelines of Indian Railways details out the works/activities executable under CSR in the field of Environment sustainability, sanitation and cleanliness, such as Rain Water Harvesting, Water Recycling Plants, Solar Panels, construction of toilets, provision for Solid Waste Management, supply of filtered drinking water etc.
As the activities under CSR are typically implemented by the companies (Sponsoring Entity) or its agency as per their CSR policy, no estimation of CSR funding is available with the Railways. The Railway has been executing required works with gross budgetary support from General Exchequer, internal resources, IRFC borrowing, Institutional financing and through other modes of financing as per requirement and feasibility.
Seeking larger participation of corporates in the rail sector, the railways have decided to set up a separate corporate social responsibility (CSR) cell to rope in more private players. According to the law, companies have to spend 2 per cent of 2 per cent of their profits for CSR purpose. And Indian Railways has many areas including cleanliness at stations, environment, conservation of water bodies and solar energy where CSR fund can be utilised. The railways have created a separate environment directorate for promoting green initiatives.
Comparison of Indian and Chinese railways
In 1945, China had 27,000 km of rail, of track. In 1947, when India got independence, India had 53596 Route kms of track- thanks to the British! Net, net China had just about ½ the route kilometres of India in the mid- 1940s. And that too for a much larger area. Chinese Railways today has 78,000 route kilometres, overtaking India sometime in the mid 1990s making only the rail networks in the USA and Russia larger in size. The total track length is 154,600km. By contrast Indian Railways has stagnated at 63,327 route kilometres of network.
The Indian Railways has suffered from the same neglect and apathy towards creating a solid foundation of infrastructure, as our roads, power, irrigation, airports. As of 2007, Chinese Railway owned about 578,000 freight wagons, 44,000 coaches and 18,300 locomotives. India had 225000 freight wagons, 45000 passenger coaches and 8300 locomotives. In 1950 Indian Railways carried 44 billion freight tonne km, against 39 billion in the case of Chinese Railways. Last year, India moved 750 Million MT of freight last year while China moved 4. 5 times that i.e 3300 Million MT of freight.
The Chinese Railways are organized in a more modern and business-like manner. Five major railway corporations — one each for rolling stock, railway construction, goods and materials, civil engineering, signalling and telecommunications — have been separated from transport enterprises and made autonomous, although state-owned. A number of passenger and freight transport companies have been created to operate on a competitive basis. These enterprises will finally be regrouped into three to five larger, separate companies.
Roads and Road Transport System in India
Roads play a very important role in the transportation of goods and passengers for short and medium distances. It is comparatively easy and cheap to construct and maintain roads. Road transport system establishes easy contact between farms, fields, factories and markets and provides door to door service. Roads can negotiate high gradients and sharp turns which railways cannot do. As such, roads can be constructed in hilly areas also.
Roads act as great feaders to railways. Without good and sufficient roads, railways cannot collect sufficient produce to make their operation possible. Road transport is more flexible than the railway transport. Buses and trucks may be stopped anywhere and at any time on the road for loading and unloading passengers and goods whereas trains stop only at particular stations. Perishable commodities like vegetables, fruits and milk are transported more easily and quickly by roads than by railways.
Due to above-mentioned advantages, the road transport has become very popular and its share is constantly increasing.
Road construction and the Five Year Plans
An efficient transportation system is critical for sustaining economic growth and the burgeoning demand for passenger and freight movement. Recognizing this, the Government of India (GOI) and several state governments have launched initiatives during the past decade to modernize and improve the transport infrastructure.
Starting with the 9th Five Year Plan (1997-2002), road sector expenditures have gone up from 3% of the total Plan expenditure to almost 12% today. These expenditures were primarily for national highway and rural road development programs. In addition, GOI, some state governments and industry associations have taken initiatives such as encouraging private sector participation in highway financing, allowing wholly-owned foreign direct investment in the sector, establishing training centers for construction workers, and devising a grading/rating system for construction firms to foster the growth and efficiency of the road construction industry.
In India as elsewhere, the main element of road investment is civil works – typically 95% of the road sector budget. The success of road sector investments therefore depends on the capacity and capability of the Indian road construction industry. However, even as the magnitude of works has gone up significantly in the last decade, the industry has not kept pace with this growth, as evidenced by the under-utilization of funds allocated to road projects and perennial time and cost overruns on national and state highway projects.
The Indian road construction industry is highly unorganized and fragmented. Only about 0.4% of the 250,000 contractors in India can be classed as medium to large firms (based on the number of people employed per firm). Many of the medium and large construction firms are still family owned and lack professional management and work culture. While small and medium contractors have mushroomed in the recent past, large contractors have not grown at the same rate either in size (turnover) or number. Consequently, on the medium to large-sized national and state highway projects there are few contractors to choose from; only about 45-50 Indian contractors and about 10-12 foreign contractors.
Symptoms of capacity constraints in both quantity and quality are also evident from the fact that Indian equity research and rating agencies report unexecuted order books of 5-10 times the annual revenues for some of the leading construction companies in India to attract potential investors in the company stocks. However, this could mean that, on average, most of the construction firms would take anywhere between five to ten years to complete their works, which highlights a severe lack of capacity in the road construction sector. Time and cost overruns much above the original estimates also point to capacity constraints and poor use of the existing capacity to deliver works on time
Major initiatives in Highway Development
National Highways Authority of India (NHAI) is mandated to implement National Highways Development Project (NHDP) which is India’s Largest ever highways project
The National Highways have a total length of 71,772 km to serve as the arterial network of the country. The development of National Highways is the responsibility of the Government of India. The Government of India has launched major initiatives to upgrade and strengthen National Highways through various phases of National Highways Development project (NHDP), which are briefly as under:
NHDP Phase I : NHDP Phase I was approved by Cabinet Committee on Economic Affairs (CCEA) in December 2000 at an estimated cost of Rs.30,000 crore comprises mostly of GQ (5,846 km) and NS-EW Corridor (981km), port connectivity (356 km) and others (315 km).
NHDP Phase II : NHDP Phase II was approved by CCEA in December 2003 at an estimated cost of Rs.34,339 crore (2002 prices) comprises mostly NS-EW Corridor (6,161 km) and other National Highways of 486 km length, the total length being 6,647 km. The total length of Phase II is 6,647 km.
NHDP Phase-III: Government approved on 5.3.2005 upgradation and 4 laning of 4,035 km of National Highways on BOT basis at an estimated cost of Rs. 22,207 crores (2004 prices). Government approved in April 2007 upgradation and 4 laning at 8074 km at an estimated cost of Rs. 54,339 crore.
NHDP Phase V: CCEA has approved on 5.10.2006 six laning of 6,500 km of existing 4 lane highways under NHDP Phase V (on DBFO basis). Six laning of 6,500 km includes 5,700 km of GQ and other stretches.
NHDP Phase VI: CCEA has approved on November 2006 for 1000 km of expressways at an estimated cost of Rs. 16680 crs .
NHDP Phase VII: CCEA has approved on December 2007 for 700 km of Ring Roads, Bypasses and flyovers and selected stretches at an estimated cost of Rs. 16680 crs.
India has embarked on a rapid pace of road development following the policy change in the late 1990s that gave a high priority to road development in India. The National Highway Development Programme (NHDP) was launched in 1997 to develop a large road network in a relatively short period of time. The Public Private Partnerships (PPP) model was adopted for road development in India, given the inherent advantages associated with it over conventional models. Pursuant to the policy decision, a large number road development contracts were awarded under the Build, Operate and Transfer (BOT) variant of PPP model and other variants.
Both NHAI & Ministry of Road Transport & Highways awarded projects of around 6,397 kms in FY161. In 2015-16, 7 projects (20 per cent) of the total 4,368 kms of NHAI projects awarded were allocated to BOT mode. During FY17, projects of about 422 kms were awarded to BOT players by NHAI, in comparison to 873 kms in FY16
The Government aims to boost corporate investment in roads and shipping sector, along with introducing business-friendly strategies that will balance profitability with effective project execution.
In the Union Budget 2017-18, the Government of India has allotted Rs 64,000 crore (US$ 9.55 billion) to NHAI for roads and highways and Rs 27,000 crore (US$ 4.03 billion) for PMGSY.
The Cabinet Committee on Economic Affairs, Government of India, has approved the development of 19 kms long four laning from Pandoh Bypass end to Takoli section of National Highway (NH) -21 in Himachal Pradesh, which is estimated to cost Rs 2,775.93 crore (US$ 430.27 million).
The Road Transport & Highways Ministry has invested around Rs 3.17 trillion (US$ 47.55 billion), while the Shipping Ministry has invested around Rs 80,000 crore (US$ 12.0 billion) in the past two and a half years for building world class highways and shipping infrastructure in the country.
The government, through a series of initiatives, is working on policies to attract significant investor interest. The Indian government plans to develop a total of 66,117 km of roads under different programmes such as National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North East (SARDP-NE) and Left Wing Extremism (LWE). The government has identified development of 2,000 km of coastal roads to improve the connectivity between ports and remote villages.
The National Highways Authority of India (NHAI) plans to build 50,000 km of roads worth US$ 250 billion by 2022 as part of a long-term goal of doubling the length of the national highway network to 200,000 km.
Road Transport in Twelfth Plan
Both freight and passenger movement by road is expected to rapidly expand in the coming years. In particular, freight movement by road transport is expected to show robust growth over the medium term due to a number of factors (a) substantial investment in improvement in national highway network which will facilitate speedy, reliable and door to door services; (b) freight movement by road transport offers a complete logistic solution that minimizes the cost of transport, logistics and inventories; and (c) rising volumes of exports and imports.
More importantly, the growth in exports is expected to increase the demand for inland transport for moving cargo from production centres in the gateway ports – both air and sea. These developments imply that a higher growth in road freight transport sector during the Twelfth Plan would be required to sustain a given targeted growth in the overall GDP. Despite good performance of the road transport sector, it is beset with slow technological development, low energy efficiency, pollution and slow movement of freight and passenger traffic.
The step-up in freight and passenger road traffic during the Twelfth Plan in consonance with alternate growth paths provides an opportunity for technological upgradation, capacity augmentation and replacement of over aged rolling stock
The application of IT to surface transportation is called “Intelligent Transport Systems” (ITS). ITS provides that ability to gather, organize, analyze, use, and share information about transportation systems. In the modern world, this ability is crucial to the effective and economical construction and operation of transportation systems and to their efficient use. ITS can be used in conceiving, planning, and building new parts of the transport system.
The Ministry of Road Transport & Highways with the help of the National Informatics Centre (NIC) is implementing a project for creation of National Registers and State Registers of Driving Licenses and Registration Certificates of motor vehicles. The project involves computerization of Regional Transport Offices (RTOs) / State Transport Authorities (STAs) and subsequently links them to the National and State Registers.
Under the New National Permit System (NNPS), composite fee are being collected through an e-payment system with the help of software developed by the NIC. Once the system is fully integrated with leading banks, States would be advised to collect composite fee on National Permits through e-payment which would help Sates in checking revenue leakages and lessen the time at border check posts to cross-check validity of payment of taxes, thus, paving the way for seamless movement of inter-state traffic.
Road Accident Data Management System (RADMS) is a comprehensive traffic-management system launched by the Government of Tamil Nadu, which helps to study and analyze road accidents in a systematic and scientific way. The three stake holder Departments are Police, Highways and Transport have access to use the data for analyses and follow up actions in order to reduce accidents.
RADMS is being used for: a) for making appropriate data entry relating to accidents; b) for verification of data; c) to ensure quality of data and; d) to analyze the data various purpose of planning in the interest of public. All user departments like Police, Transport and Highways feed the data relating to road accidents in the RADMS. Various components included in the RADMS are as follows:
Nationalisation of road transport
India’s transport sector is a rapidly growing sector and contributes 6.4 % to the GDP of the country. The sector is largely oil dependent and accounts for 13 % of the country’s energy-related CO2 emissions (MoEF 2010). Crude oil imports have been increasing steadily and making India the third largest oil importer globally. Nearly 80 % of India’s current crude oil consumption comes from imports raising challenges of national energy security.
Intercity transport is mainly met by road (88 %), rail (11 %), and a limited share of air transport. Indian railways are among the largest rail networks globally and transport 23 million passengers and 3 million tonnes of freight daily (GoI 2015). Despite its extensive network, railways are faced with issues of capacity constraints and poor infrastructure. The share of rail has dropped from over 40 % in 1970 to 11 % in 2010 due to high competition from road transport. Similarly, rail dominated freight transport in India; however, this share is on the decline in recent years.
In urban areas, road transport dominates. Present status of urban transport is characterized by increasing trip distances, increasing share of private motorized transport, and declining share of public and non-motorized transport. These trends are leading to increasing problems of poor air quality, road safety, noise, and congestion.
Intercity travel demand will increase by 4.3 times between 2010 and 2050. In business-as-usual (BAU), this demand will be met by road-based transport and a growing share of air transport resulting in a higher energy demand resulting in challenges of national energy security and greenhouse gas emissions. In cities, increasing travel demand, reliance on private motorized modes, and declining share of public transport and non-motorized modes will increase energy demand and GHG emissions from cities (Dhar et al. 2013).
Rail- Road Coordination in India
In India, Railways is facing increasing competition from road transports. As for example, the share of road transport in respect of freight has increased from 11 per cent in 1950-51 to 58 per cent in 1985-86 and then declined to 40 per cent in 1992. But the share of railways in respect of freight has come down from 89 per cent in 1950-51 to 42 per cent in 1985-86 and then again increased to 60 per cent in 1992. Same is also the case in respect of passenger traffic. Thus through evil competition road transport in India is expanding its network over railway transport. Although such competition has enhanced the level of efficiency and productivity but it has also generated various problems in the transportation system.
Factors which are mostly responsible for growing rail-road competition include:
1. Flexibility of time table of road transport as compared to railways;
2. Facilitating door to door service by road transport which the railways could not provide;
3. Time consuming system of booking and other formalities in railway which the road transport system are not adopting;
4. Higher operational cost of railways due to increasing expenditure on overheads as compared to lower operational cost of road transport;
5. Increasing involvement of railways in social welfare programmes leading to higher overhead cost as compared to lower overhead cost of road transportation; and
6. Increasing facility of route changing both for passenger and freight traffic under road transport as compared to railways.
Need for Rail-Road Co-ordination:
In order to remove such a wasteful competition, there should be proper rail-road co-ordination in the country so that one can supplement the other services accordingly. Thus there should be a balanced growth of both these two modes of transport. Thus proper rail-road co-ordination is recommended on the following grounds:
1. Huge investment in the fixed assets of railways should be utilised optimally for gaining maximum return;
2. Lack of proper co-ordination between road and rail transport leads to the establishment of dual system of competitive transportation leading to huge wastage;
3. Rail-road co-ordination is an important pre¬requisite for all-round development of the country; and
4. Rail-road co-ordination is very important for the development of new projects such as construction of river bridges, new railway lines etc.
Water Transport in India
India has about 14,500 km of navigable waterways which comprises rivers, canals, backwaters, creeks, etc. About 50 million tonnes of cargo corresponding to 2.82 billion tonne km was transported in 2006-06 by Inland Water Transport (IWT). Its operations are currently restricted to a few streches in the Ganga-Bhagirathi-Hooghly Rivers, The Brahmaputra, the Barak River, the rivers in Goa, the backwaters in Kerala, inland waters in Mumbai and the deltaic regions of the Godavari-Krishna rivers.
Besides the organised operations by mechanised vessels, country boats of various capacites also operate in various rivers and canals. Data of cargo and passenger movement in unorganised sector (i.e. by country boats, etc.) has not been compiled but it is a fact tht substantial quantum of cargo and passengers are transported in the unorganised sector as well.
The Inland Waterways Authority of India (IWAI) came into existence on 27 October 1986 for development and regulation of inland waterways for shipping and navigation. The Authority primarily undertakes projects for development and maintenance of IWT infrastructure on national waterways through grant received from Ministry of Shipping, Road Transport and Highways.
The Ganga between Allahabad-Haldia (1620 km) the Sadiya-Dhubri stretch of river Brahmaputra (891 km) and Kollam-Kottapuram stretch of West Coast Canal along with Champakara and Udyogmandal Canals (205 km) in Kerala have so far been declared as National Waterways and are being developed for navigation by IWAI. Bills for declaration of 3 more waterways viz. Talcher-Darmra stretch of canals;Kakainada-Puducherry stretch of canals etc. and the Barak Rivers as National Waterways have already been introduced in the Parliament.
Inland Waterways and Tenth Plan
The Union Government is set to start negotiations with multilateral agencies such as the World Bank for securing loans worth about $850 million for the inland water transport sector during the Tenth Plan period starting April 1, 2002.
The first meeting of the Inland Water Transport Development Council had decided to consider the Tenth Plan as the period for resurgence of the IWT sector. The council had recommended a dynamic and proactive strategy to make the Plan a “watershed in the development of IWT sector.” The council also endorsed the main themes recommended by the Tenth Plan working group for the sector. These included extension of national and other waterway network in the country by providing connectivity between national waterways and other connecting rivers.
The group had also recommended according priority for connecting those critical linking points on the State rivers with national waterways which have the highest capacity for cargo movement and enhancement of overall economic activity.
Further, the working group had suggested providing inland water connectivity to existing major and minor ports. Besides, priority should also be given to the development of inter-model riverine ports like Kolkata. The working group had said that river ports should be developed based on cargo intensity and definite potential for movement of coal and agricultural products.
The Indian shipping tonnage has developed fairly after independence. India now has a shipping fleet of 6 million gross register tonnage (GRT). The Indian shipping industry is classified into two categories, like coastal shipping and overseas shipping. Indian shipping is a very long history and has its roots from the early centuries. The position of Indian shipping during 1947 was just 59 vessels. Out of which, 48 were coastal and 11 were overseas.
There are 45 trade routes that emanated from the Indian continent. During the time of independence the British vessels dominate the coastal scene. So, the government of India declared a “Coal Reservation Policy” in 1950 in reference to coastal trade. Soon, the Indian ship owners formed,” Indian coastal Conference” in 1951.This agreement tried to regulate the business through various measures. But still, there were problems like under rating, rebated and other malpractices continued.
However, by 1953, Shares of British shipping were reduced to nil. Indian shipping grew in quantum leaps. But the problems faced by the industry are very complex and complicated due to various reasons like increase in operational coasts, railways penetrating the market, etc.
Shipping conference administer their own freight rates through their own tariffs. This is unlike the transporting sector where freight rates are determined through the market force of supply and demand, The administered freight rates are which member liner of conference caters to the requirements of shipper have often been a bone of contention between shippers and the concerned conference. As India’s foreign trade become modernized. The freight making policies of these shipping conferences also become much more complicated.
In most cases, the actual carriers of the Shipping lines never touch the Indian port. Instead, reaches the Colombo port the transshipment port for this port of Asia. The cargo from various Indian ports is transported to the Colombo port, through the shuttle service operating between these ports and the Colombo port. From there, the cargo is transshipped to various destinations. This is done in order to reduce the time and cost involved in carrier touching all the ports in the same ports in the same region. The shuttle service will be more or less a regular one and it is know as the ‘Feeder Service’ and the actual carrier is known as the ‘Mother Vessel’.
Growth of Indian Shipping
At the time of Independence, the total number of vessels in India was 59 with the total Gross Registered Tonnage (GRT) amounting to 192 vessel tonnes during the year 1947. Out of this, the number of overseas vessels in India was 11 with the total GRT amounting to 73 vessel tonnes and the number of coastal vessels in India was 48 with the total GRT amounting to 119 vessel tonnes. The total number of vessels in India was 1204 with the total Gross Registered Tonnage (GRT) amounting to 10309 tonnes during the year 2014.
The Indian Shipping has shown good growth from the year 2000 to the year 2014 in terms of the number of vessels as well as Gross Registered Tonnage (GRT). Gross Registered Tonnage (GRT) applies to the vessel and not to cargo. It is the weight of the volume occupied by the closed in space of a ship taking 100 cubic feet of such closed in spaces as equivalent to one vessel ton. It thus refers to the cubic capacity of the vessels. The total number of vessels in India was 549 with the total Gross Registered Tonnage (GRT) amounting to 6953 vessel tonnes during the year 2000.
As on 31st December 2014, India had a fleet strength of 1204 vessels, compared with fleet strength of 1199 Total vessels at the end of December, 2013. Out of the 1204 vessels registered as on 31st December, 2014, 846 vessels (70.3%) were engaged in coastal trade and the remaining 358 vessels (29.7%) were deployed for overseas trade. As on 1947, there were 59 Total vessels in India.
The Indian government plans to develop 10 coastal economic regions as part of plans to revive the country’s Sagarmala (string of ports) project.
The zones would be converted into manufacturing hubs, supported by port modernisation projects, and could span 300–500 km of the coastline. The government is also looking to develop the inland waterway sector as an alternative to road and rail routes to transport goods to the nation’s ports and hopes to attract private investment in the sector.
Indian shipping companies are expected to gain from the surge in country’s iron ore exports to China, and as a result shipping firms are increasing the number of their large sized vessels deployed on the India-China route.
Some of the major initiatives taken by the government to promote the ports sector in India are as follows:
1. The Ministry of Shipping has announced plans to execute 199 residual maritime projects worth Rs 800,000 crore (US$ 124 billion) over the next two years, via government funding.
2. The Prime Minister has launched several projects of Kandla Port Trust, including Dr Babasaheb Ambedkar Convention Centre, 14th and 16th General Cargo Berth and Interchange-cum-ROB at Kutch Salt Junction among others.
3. The Union Cabinet has approved the proposal of Ministry of Shipping to replace the ‘Major Port Trusts Act, 1963’ by the ‘Major Port Authorities Bill, 2016’, which will empower major ports to perform with greater efficiency by having full autonomy in decision making and by modernising the institutional structure of major ports.
4. The Ministry of Shipping plans to undertake development of 37 national waterways (NWs), out of the 111 NWs declared under the National Waterways Act 2016, in the next three years, which would have positive impact on reduction of overall logistics cost.
5. The Union Cabinet has approved a new productivity-linked reward (PLR) scheme for 37,870 Port and Dock workers in all the Major Port Trusts for the years 2015-16 to 2017-18 at an annual cost of Rs 49.58 crore (US$ 7.4 million).
6. India would like to collaborate with Germany for projects worth Rs 1 trillion (US$ 15 billion), aimed at enhancing port rail connectivity and identifying environment-friendly technology for scrapping of old vehicles.
7. Increasing investments and cargo traffic point towards a healthy outlook for the Indian ports sector. Providers of services such as operation and maintenance (O&M), pilotage and harbouring and marine assets such as barges and dredgers are benefiting from these investments.
8. The capacity addition at ports is expected to grow at a CAGR of 5-6 per cent till 2022, thereby adding 275-325 MT of capacity.
9. Under the Sagarmala Programme, the government has envisioned a total of 189 projects for modernisation of ports involving an investment of Rs 1.42 trillion (US$ 22 billion by the year 2035.
Problems with Indian shipping
Local shipping companies are no longer finding it worth their business to carry on in the manner they have been. They know they need to change, and change fast. The entire pattern of cargo traffic has changed. It was all well in the past under a protected environment. Then, a “tonnage” committee decided for them what was the type and size of ships they should buy. For the rest, the vessels acquired through government subsidy were freed from the need to seek out cargo. The cargo was assured to them. Things have changed. Even state-owned enterprises have begun commissioning foreign ships to bring in government imports. What used to be captive business has been denied to domestic lines.
A major chunk of India’s sea-borne cargo is accounted for by crude and petroleum products. However, new trends have begun to show up in the pattern of movement of the cargo, thanks largely to the de-regulation in oil sector over the past year. The new regime has meant that crude carriers are no longer guaranteed fixed freight rates. They were long used to such payments, whatever be the market ups and downs.
Several new refineries have been commissioned. India has become a new key destination for crude supply. At the same time, the refineries are now free to opt for foreign lines to bring in crude. There have also been cut-back in imports of petroleum products because of higher production by domestic refineries. With it, the need for transportation has been reduced as well. Local shipping companies have also a new competitor to reckon with in the shape of a large upcoming pipeline network. Opportunities for coastal transportation are bound to be severely restricted by this development.
On the other side, there are newer shipping opportunities in the horizon as well. Plans are on to import liquefied natural gas (LNG) on a large scale to feed India’s future power and fertilizer projects. The moves involve a huge volume of business for the shipping industry. They may be worth several billion dollars. On a recent count, there were 20 potential projects on the anvil. They required 30 million tons of LNG imports a year, according to estimates. Currently, India does not import LNG nor does it have a sophisticated carrier to bring in the imported fuel. One such ship could cost around $200 million.
As of now, foreign lines are welcome to partake of the LNG business. However, they will be required to take Indian players as equity partners and transfer technology to the locals.
In order to make the Indian shipping industry attractive and more competitive, the Government has exempted Customs and Excise Duty leviable on bunker fuels used in Indian flag vessels for transportation of mix of EXIM, domestic and empty containers between two or more ports in India. Government has brought in a uniform abatement of service tax for transportation of goods by rail, road and sea vessels.
Indian shipping industry has been provided cargo support through Right of First Refusal (RoFR). Besides this, Government has taken a policy decision to allow shipping enterprises based in India to acquire ships abroad and also flag them in the country of their convenience. As a step towards promoting “Ease of Doing Business” methodology for computation of period of stay of seafarers in India has been redefined.
Major ports are regularly enhancing their capacity by means of mechanisation, capital dredging, rail-road connectivity and capacity augmentation projects both through PPP mode and internal resources. In 2015-16, 70.56 million ton capacity has been augmented in Major ports out of which Chennai Port’s share is 5.00 million tons.
To counter cost disadvantage vis-a-vis imported ships, the Government has exempted customs and central excise duties on inputs used in shipbuilding. Further, the Institutional Mechanism on Infrastructure has recommended inclusion of shipyards as “Infrastructure”
Development of ports and private Participation
India has 12 Major Ports, administered by the Central Government, and around 200 notified Non-Major Ports, administered by the State Governments. In 2014-15, out of the 200 Non-Major Ports, 69 ports were reported to have handled cargo traffic. The infrastructure sector, particularly the Maritime Sector, is expected to grow significantly with the increase in international and domestic trade volumes.
Since about 95% of India’s trade by volume is via the maritime route, there is a continuous need to develop India’s ports and trade related infrastructure to accelerate growth in the manufacturing industry and to aid the ‘Make in India’ initiative.
The total volume of traffic handled by Indian ports in FY2014–15 was 1052.1 million tons per annum (MTPA), of which 55.25% (581.3 MTPA) of total Traffic, was handled by Major Ports and the remaining 44.75% (470.9 MTPA) of total traffic by Non-Major Ports.
The overall compound annual growth rate (CAGR) of traffic at Indian Ports between FY2005–06 and FY2014–15 was 7.07%, with traffic at Major and Non-Major Ports growing at a CAGR of 3.58% and 13.94%, respectively. It is expected that by 2025, the ports will be required to handle a cargo of 2500 MTPA while the current port capacity in India is 1500 MTPA. According to estimates, significant capacity expansion will have to come from new ports. There are broadly three main levers that propel the need for building new ports:
Capacity Saturation – Ports such as JNPT, Paradip have limited capacity to expand and are saturated with traffic. Hence it makes sense to build new ports in the vicinity to cater to the increased traffic
Non-availability of Ports – There are few specific stretches along the coastline which do not have an operational port. In absence of the port at such locations, the cargo is forced to travel longer distances to use alternate ports. This adds both to the cost and time required for cargo handling. New ports built at these locations can significantly optimize cargo movement.
Strategic Locations – The southern tip of India is optimally located as it falls under the East-West trade route. However most of transshipment cargo from India is dependent on ports of Colombo and Singapore. There exists a potential for development of an International transshipment hub at the southern tip.
New port locations have been identified based on the cargo flow for key commodities and the projected traffic:
1. Greenfield major ports to be developed at Vadhavan (Maharashtra), Sagar Island (West Bengal), Paradip Satellite Port (Odhisha), Cuddalore/Sirkazhi (Tamil Nadu) and Machilipatnam/Vodarevu
2. International Container Transhipment hub at Enayam (Tamil Nadu) and Vizhinjam (Kerala)
Civil Aviation in India
India has a long history in the field of aviation. The operation of air transport was entrusted to three Public Undertakings, namely Air India for international services, Indian Airlines for domestic services and services to neighboring countries, and Vayudoot.
The Hindustan Aircraft (now Hindustan Aeronautics Limited), was founded in 1940. It was started at Bangalore (now Bengaluru) as a repair, overhauling and assemblage depot, has now grown into an important manufacturing plant. It has designed and manufactured trainer air-crafts. It belongs to the aerospace and defence industry. It is managed by Ministry of Defence.
Growth and progress of Aviation sector
In the sphere of civil aviation, there has been remarkable progress in India. Both in respect of speed and carrying capacity modern aircraft are far superior to those in use even a decade ago. As already mentioned earlier, India is already among the top 10 aviation markets serving over 16 million passengers annually. The volume of air traffic, both in terms of passenger and goods, is also daily increasing. These improvements that are being daily made may very well further reduce the time of travel and correspondingly improve the safety and comfort of journeys.
The government owned Airports Authority of India (AAI) operates 122 airports and civil enclaves out of a total of 449 airports and airstrips located throughout India. Less than 80 airports/aerodromes receive regular commercial flights. The cities of Bengaluru, Delhi, Hyderabad, Kochi and Mumbai are served by privately (or joint-venture) operated airports. All operational airports handled a total of around 265 million passengers (205.7 m domestic and 59.3 m international) in 2016-17 (Apr-Mar). The total number of aircraft movements increased to 2.05 million and air freight handled reached 2.53 million tons during 2015-16.
With the strong growth witnessed in 2016, India became the fifth largest civil aviation market in the world (behind the USA, China, Japan and the UK) based on the 254 million passengers handled at all the airports.
As per the IATA, India will become the third largest aviation market in the world in terms of passengers by 2026. Furthermore, the IATA also expects the air passengers to grow at a compound average growth rate (CAGR) of 3.7 per cent to double from 3.8 billion air passengers in 2016 to 7.2 billion air passengers by 2035.
India has become the world’s fastest growing domestic travel market for the 22nd time in a row, recording a 26.6 per cent year-on-year growth in January 2017. India has replaced Japan to become the third largest domestic aviation market globally, recording a total of 100 million domestic flyers in 2016, as compared to 97 million flyers in Japan during the same period.
Five year plans and civil aviation
The rapidly expanding air transport network in India and opening up of the infrastructure to private sector participation have fuelled the growth of air traffic in India. The Indian government has envisaged an investment of USD12.1 billion in the airport sector during the country’s 12th five year plan, (covering 2012 to 2017). USD9.3 billion in airport investment is expected to come from the private sector for construction of new airports, expansion, modernisation of existing airports and development of low cost airports to keep the tariff at its minimal at smaller airports, improvement in connecting infrastructure, development of air navigation services infrastructure.
Indian airlines are expected to add around 370 aircraft, worth USD27.5 billion, to their fleet by the year 2017. The commercial fleet is expected to expand from 400 to 1000 aircraft over the five year plan period. The Indian government recently allowed flexible use of airspace by civil and military users, permitting them to use the available airspace on sharing basis. To develop civil aviation in India and further facilitate the functioning of the sector, series of policy reform decisions are under consideration.
These include getting aviation fuel declared as notified product & bringing transparency in its pricing; rationalisation of bilateral air service agreements with different countries, traffic entitlements on international routes to Indian carriers, creation of a separate Air Navigation Services Corporation from the Airports Authority of India to make it more effective, efficient & professional body, creation of an Indian Civil Aviation Authority in place of the Indian Directorate General of Civil Aviation and creation of a separate Indian Civil Aviation Security Force.
Communication System in India
Like many other institutions such as the Indian Railways and the Indian Civil Services, the postal system was also one of the great legacies initiated, built and left behind by the British in India. Today the institution is known as India Post. India Post is the most widely distributed postal system in the world with 154939 post offices as on 31st March, 2015. It has grown to be India’s third largest employer after the Indian Railways and the Armed Forces, with over 466000 employees as of 2015.
Its vast network supports the Government by delivering economic programs and hundreds of savings, investment, insurance and money transfer products to Indians through reliable, last mile connectivity. ‘Service before self’ has been the motto of India Post since 1959. India Post has a variety of saving plans to meet the different needs of different individuals. These range from short, medium and long term saving plans to monthly income plans, senior citizens plans and more.
Telecommunications in India
India is currently the world’s second-largest telecommunications market with a subscriber base of 1.05 billion and has registered strong growth in the past decade and half. The Indian mobile economy is growing rapidly and will contribute substantially to India’s Gross Domestic Product (GDP), according to report prepared by GSM Association (GSMA) in collaboration with the Boston Consulting Group (BCG). The country is the fourth largest app economy in the world.
The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector. The government has enabled easy market access to telecom equipment and a fair and proactive regulatory framework that has ensured availability of telecom services to consumer at affordable prices. The deregulation of Foreign Direct Investment (FDI) norms has made the sector one of the fastest growing and a top five employment opportunity generator in the country.
The Indian telecom sector is expected to generate four million direct and indirect jobs over the next five years according to estimates by Randstad India. The employment opportunities are expected to be created due to combination of government’s efforts to increase penetration in rural areas and the rapid increase in smartphone sales and rising internet usage.
The mobile industry is expected to create a total economic value of Rs 14 trillion (US$ 217.37 billion) by the year 2020. It would generate around 3 million direct job opportunities and 2 million indirect jobs during this period. Smartphone subscriptions in India is expected to increase four-fold to 810 million users by 2021, while the total smartphone traffic is expected to grow seventeen-fold to 4.2 Exabytes (EB) per month by 2021.
Telecom policy reforms in India
The vision of telecommunications in 2020 is a vision of information society built on an edifice where IT and telecommunications merge. Rapid technological convergence has already implied a symbiotic overlap between the development strategies of IT and telecommunications. Part of today’s IT is ‘telecom writ large’, it flourishes on the telecom-network and in turn permits modern day telecommunications to use sophisticated IT-software. Hardware is a common platform for both IT and telecom.
There is a legacy vision derived from export-success of India’s software that has given rise to optimism regarding India’s growing pre-eminence in global IT canvas. Such a vision builds on a much larger vision of all round development of IT that pervades wide cross-section of Indian economy and society. Deeper analysis shows that there is need for a comprehensive IT development strategy to ensure India’s durable presence in the global software market. As discussion in the subsequent paragraphs will show, ‘enclave’ type development of software with exclusive focus on export can not bring about desired benefits if such a strategy ignores the linkages between export and the domestic market. Vision 2020, therefore, is a much larger vision.
Two important indicators of IT penetration in Indian market are Internet use and availability of Personal Computers (PCs). There has been significant expansion in both during the last decade. Internet kiosks, telekiosks, telecottages and cybercafes have emerged in important roles in expanding community access to ICT popularizing IT among the masses and promoting domestic market. However, their expansion crucially hinges on the growth of telecommunications infrastructure.
In India, a spectrum of technologies has been unleashed to connect remote villages, which includes Wireless in Local Loop (WLL), wireless cum wired technology developed by C-DOT, radio systems, switching systems of different capacities integrated with underground cables, CorDect and medium capacity satellite systems. Besides, a number of small-scale ICT initiatives is already at work in different parts of the country (Box 1). It is envisaged that with the growth of telecom infrastructure such examples would multiply and create an information society in not so distant a future.
Recent developments in telecom sector in india
The mobile industry is expected to create a total economic value of Rs 14 trillion (US$ 217.37 billion) by the year 2020. It would generate around 3 million direct job opportunities and 2 million indirect jobs during this period. With daily increasing subscriber base, there have been a lot of investments and developments in the sector. The industry has attracted FDI worth US$ 23.95 billion during the period April 2000 to March 2017, according to the data released by Department of Industrial Policy and Promotion (DIPP).
Legislation in Telecom Sector
Like in other countries, telecommunications in India started as a state monopoly. In the 1980s, telephone services and postal services came under the Department of Posts and Telegraphs. In 1985, the Government separated the Department of Post and created the Department of Telecommunications (“DoT”). In the early 1990s the Indian telecom sector, which was owned and controlled by the Government, was liberalized and private sector participation was permitted through a gradual process.
Telecom equipment manufacturing sector was completely deregulated. The Government then allowed private players to provide value added services such as paging services. The Government has been introducing its strategy on telecommunications vide various telecom policies introduced in 1994 (i.e. the NTP 1994) and in 1999 (i.e. the NTP 1999) and most recently in 2011 (i.e. the NTP 2011). NTP 1994 and NTP 1999 were instrumental in paving the way for private investments to be made into the telecom sector.
NTP 2011 aims to develop a robust, secure state-of-the-art telecommunication network providing seamless coverage with a special focus on rural and remote areas and bridging digital divide. Albeit there have been significant improvements in liberalizing the telecommunications sector, the law as it currently stands still bestows an exclusive privilege on the Government to provide telecommunications services. The Government has statutory power to grant licenses to private companies in India to enable them to provide telecommunication services.
The Central Government has the exclusive privilege of establishing, maintaining and working telegraph and wireless telegraphy equipment and has the authority to grant licenses for such activities. The Central Government acts through the DoT. TRAI is the sole authority empowered to take binding decisions on the fixation of tariffs for provision of telecommunication services.
Emphasis needs to be placed on the interplay between the recommendatory powers of TRAI and the policy making powers of DoT. While the DoT is the sole authority for licensing of all telecommunications services in India, it is mandatory for the DoT to have TRAI’s recommendations, beforehand, with regard to matters over which TRAI has recommendatory powers (mentioned above). Having done so, the DoT has the discretion to either accept or reject the recommendations of TRAI.
The WPC was created in 1952 and is a wing of the DoT which is responsible for Frequency Spectrum Management, including licensing of wireless stations and caters to the needs of all wireless users (Government and Private) in India.
There are various laws and regulations that govern the telecom industry in India. Some of the important ones are as follows:
The Indian Telegraph Act, 1885: This Act is one of the oldest legislations still in effect in India and it inter alia authorizes the Government of India to grant telecom licenses on such conditions and in consideration of such payments as it thinks fit, to any person to establish, maintain, work a telegraph within any part of India.
The Indian Wireless Telegraphy Act, 1933: This Act was enacted to regulate the possession of wireless telegraphy apparatus. According to this Act, the possession of wireless telegraphy apparatus by any person can only be allowed in accordance with a license issued by the telecom authority. Further, the Act also levies penalties if any wireless telegraphy apparatus is held without a valid license.
The Telecom Regulatory Authority of India Act, 1997: This Act enabled the establishment of the TRAI. Interestingly, the 1997 Act empowered the TRAI with quasi-judicial authority to adjudicate upon and settle telecom disputes. Later this Act was amended by the Telecom Regulatory Authority of India (Amendment) Act, 2000 to bring in better clarity and distinction between the regulatory and recommendatory functions of TRAI. Further, the 2000 amendment served a very important purpose in completely differentiating the judicial functions of TRAI by setting up of the TDSAT.
Urban Infrastructure in India
India’s infrastructure is a growth sector and it is clearly recognized as a national priority. Over the past four years, the Indian Economy consistently recorded growth rates in excess of 8.5% per annum resulting in rapidly increasing infrastructure spending. Total infrastructure spending is expected to increase from US$ 24 billion in 2005 to US$ 47 billion in 2009.
The focus of the Indian Government is on developing roads, railways, bridges, mass housing, power and healthcare facilities. The Planning Commission had estimated the investment requirement in the infrastructure sector will be approximately € 350 billion during the 11th Five Year Plan period (2007-2012). The construction sector alone has contributed to Indian GDP and has increased from 8% in FY06 to 8.5% in FY08. This has become the key component of the process and is expected to create multiple opportunities for several other sectors, such as steel, cement, and construction equipment.
About 28% of the Indian population (1027 million) are living in urban areas according to the 2001 census. As a result of the liberalization policies adopted by the Government of India, it is expected to increase the share of the urban population which may increase to about 40% of total population by the year 2021.
It is estimated that by the year 2011, urban areas would contribute about 65% of GDP . Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country’s standard of living . The higher productivity is dependent upon the availability and quality of infrastructure services. Thus the urban economic undertakings are dependent on infrastructures such as power, telecom, roads, water supply and transportation, sanitation and solid waste management.
Public private partnership (PPP) is a business venture which are funded and operated through a partnership of government and one or more private companies for the creation and management of infrastructure for public purpose for a specified period of time and in which the private partner has been procured through a transparent and open procurement system.
The Public Private Partnership gained a significant importance in India in the 2000s, as the country experienced a fast economic growth. India highlighted itself as a suitable place for investment on the basis of its strong domestic demand, large human capital, cost effectiveness and democratic government. In most developing countries, the government face the challenge to meet the demand for better infrastructure services. Governments have found that partnership with the private companies is an alternative to increase and improve the supply of infrastructure services.
Urban Transport in India
India’s transport sector is large and diverse, it caters to the transport needs of 1.1 billion people. In 2012-2013, the sector contributed about 5.2 per cent to the nation’s GDP, with road transportation having a major share of it. Good physical connectivity in urban and rural areas is essential for economic growth. Since the early 1990s, India’s growing economy has witnessed a rise in demand for transport infrastructure and services. Efficient and reliable urban transport systems are crucial for India to sustain high economic growth.
The significance of urban transport in India stems from the role that it plays in reduction of poverty, by improving access to labour markets and thus increasing incomes in poorer communities.
Services and manufacturing industries particularly concentrate around major urban areas, and require efficient and reliable urban transport systems to move workers and connect production facilities to the logistics chain.
With over a quarter of India’s urban population below the poverty line, the mobility problems of the poor are of special concern. The unaffordability of private transport or the lack of public transit options forces this segment of the urban population to walk or cycle increasingly long distances, and, consequently, suffer severe pollution.
As Indian cities continue to spread outward, those residents too poor to afford motorised transport will be increasingly put at a disadvantage, and further cut off from employment, recreational, educational, medical and other activity sites they need to access in the city. In spite of the large diversity in the urban size, form and growth patterns of the 468 cities in India, there are several common factors that contribute to the severity of urban transport problems.
Metro projects are meant to cater to cities with more than four million population and the costs in these cases are related to areas which are proposed to serve underground, elevated or at grade alignment. Larger the underground and elevated proposal, larger shall be the cost involved.
Funding process is done through the PPP model (Public-Private Partnership) as in Hyderabad and Mumbaior by DMRC model by the state or the central government as in Bengaluru, Chennai and Kolkata. Under this, the viability gap funding scheme caters to 60% cost borne by the private investor and upto 40% borne by the government in terms of grants. The Hyderabad Metro is the first metro to be on PPP mode. Though Mumbai is also on the PPP mode but they haven’t taken the viability gap fund.
Science and Technology in India
India ranks third among the most attractive investment destinations for technology transactions in the world. Modern India has had a strong focus on science and technology, realising that it is a key element of economic growth. India is among the topmost countries in the world in the field of scientific research, positioned as one of the top five nations in the field of space exploration. The country has regularly undertaken space missions, including missions to the moon and the famed Polar Satellite Launch Vehicle (PSLV).
Nehru and S & T
Jawaharlal Nehru’s farsighted vision and admirable leadership is responsible for developing modern science in our country. He played a major role in establishing a modern scientific and technological infrastructure and strove to promote scientific temper. Nearly 50 years after his death it is time to review the state of Indian science and scientific temper in the present society.
Pandit Nehru laid the brick and mortar of science in newly independent India. Nehru’s enormous contributions to the establishment of the IITs, of the large network of research laboratories of the CSIR and DRDO and of the atomic energy establishment are all well known. To accomplish his dream of making these institutions world class centres of research and learning, Pandit Nehru invited and encouraged a number of renowned scientists and acade-micians like Homi Bhaba, J.B.S. Haldane, Sir C.V. Raman, Satish Dhavan, Nalini Ranjan Sarkar, J.C. Ghosh, Humayun Kabir and many others.
It was Nehru’s sustained and spontaneous political support that translated the idea into a reality. Over 45 Central laboratories in different fields of science were launched during his time. He was also responsible for initiating the first steps to launch India into the electronics and space era.
Nehru was preoccupied with what he at different times called the “scientific method”, the “scientific approach”, the “scientific outlook” and the “scientific temper”—the soft-ware. Inaugurating the 34th session of the Indian Science Congress, which met in Delhi in January 1947, Pandit Nehru expressed the hope that as “India was on the verge of independence and science in India too was coming of age, it would try to solve the problems of new India by rapid planned development in all sectors and try to make her more and more scientific minded”.
It may be worth gauging how far these economic and scientific achievements—and scientific temper—in India have percolated down to the common man. As scientific progress outstrips scientific understanding, people are increasingly dependent on science and technology and yet largely ignorant of their working. This places us at a great disadvantage. It is sad to note how few of our science graduates are aware of what vaccines are available today for averting many life-threatening diseases in children or the impact of progress in space research on simple communications and broadcasting.
To Nehru, scientific temper was something to be inculcated in society at large. Pandit Nehru believed that with the spread of education and with economic development itself, the values which animate scientific temper would get embedded in our lives. However, in professional education it has not led to a broadening of horizon but to a narrowing of outlook. According to some estimates, nearly eighty per cent of our graduates (churned out in lakhs every year) lack essential skills and are unemployed.
Applications of Science and Technology
Agriculture and allied occupations
Agriculture plays a vital role in India’s economy. Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood. Agriculture, along with fisheries and forestry, is one of the largest contributors to the Gross Domestic Product (GDP). As per the 2nd advised estimates by the Central Statistics Office (CSO), the share of agriculture and allied sectors (including agriculture, livestock, forestry and fishery) is expected to be 17.3 per cent of the Gross Value Added (GVA) during 2016-17 at 2011-12 prices.
India is the largest producer, consumer and exporter of spices and spice products. India’s fruit production has grown faster than vegetables, making it the second largest fruit producer in the world. India’s horticulture output, is estimated to be 287.3 million tonnes (MT) in 2016-17 after the first advance estimate. It ranks third in farm and agriculture outputs. Agricultural export constitutes 10 per cent of the country’s exports and is the fourth-largest exported principal commodity. The agro industry in India is divided into several sub segments such as canned, dairy, processed, frozen food to fisheries, meat, poultry, and food grains.
The Department of Agriculture and Cooperation under the Ministry of Agriculture is responsible for the development of the agriculture sector in India. It manages several other bodies, such as the National Dairy Development Board (NDDB), to develop other allied agricultural sectors.
India’s GDP is expected to grow at 7.1 per cent in FY 2016-17, led by growth in private consumption, while agriculture GDP is expected to grow above-trend at 4.1 per cent to Rs 1.11 trillion (US$ 1,640 billion).$ As per the 2nd Advance Estimates, India’s food grain production is expected to be 271.98 MT in 2016-17. Production of pulses is estimated at 22.14 MT.
Some major initiatives in the sector are as follows:
The NITI Aayog has proposed various reforms in India’s agriculture sector, including liberal contract farming, direct purchase from farmers by private players, direct sale by farmers to consumers, and single trader license, among other measures, in order to double rural income in the next five years. The Ministry of Agriculture, Government of India, has been conducting various consultations and seeking suggestions from numerous stakeholders in the agriculture sector, in order to devise a strategy to double the income of farmers by 2022.
The Maharashtra State Agriculture Marketing Board (MSAMB) has operationalised 31 farmer-to-consumer markets in the state, and plans to open 100 more such markets in the future, which would facilitate better financial remunerations for the farmers by allowing them to directly sell their produce in open markets.
The Ministry of Labour and Employment plans to amend the Minimum Wage Act to raise the daily minimum wage of unskilled agricultural labour in C-class towns to Rs 350 (US$ 5.2) in the central sphere, from the current wage of Rs 160 (US$ 2.4) per day.
The Central Government plans to open at least one Krishi Vigyan Kendra in all districts of the country, which will provide advanced agriculture technical assistance to the farmers near their farms itself.
The Government of Karnataka plans to invest around Rs 1 trillion (US$ 15.1 billion) for developing irrigation projects across the state to mitigate the impact of deficient rainfall and resulting drought on agriculture in recent years.
The Government of India and the Government of Israel have expressed their commitment to further strengthen bilateral relations in the field of agriculture and allied sectors, as well as enhance cooperation at the government-to-government and business-to-business levels between the two countries, in a bid to further enhance the relationship.
According to the Agriculture Ministry, 50,000 hectares of area is available for coconut cultivation in Bihar, the Coconut Development Board plans to equip the farmers thus making India the world leader in production, productivity, processing for value addition and export of coconut.
Since Independence, India has endeavoured to bring economic and social change through science and technology. The effort has been both on upgrading the traditional skills to make them relevant and competitive and developing advanced capabilities in frontier areas of science and technology. The visionaries who led the growth of science and technology (S and T) in India were convinced that S and T could play an important role in transforming India in to a modern, industrialized society. Experience and results show that this confidence was well placed.
Science, technology, and innovation are even more relevant today. Scientific knowledge and expertise, innovation, high technology, industrial infrastructure and skilled workforce are the currencies of this new era. Science and Technology are important drivers of economic growth and development in the contemporary world. The present juncture is critical for Indian science and major positive steps in this area will help the country to achieve sustained and rapid growth in the future.
The Science and Technology Division of the Planning Commission is the nodal division for all matters relating to Science and Technology Plan formulation (both Five Year Plans and Annual Plans) and appraisal of the S and T programmes of six major S and T agencies/Departments, viz.
1. Department of Atomic Energy (DAE)- R and D Sector
2. Department of Space (DOS)
3. Department of Science and Technology (DST)
4. Department of Biotechnology (DBT)
5. Department of Scientific and Industrial Research (DSIR) including the Council of Scientific and Industrial Research (CSIR)
6. Ministry of Earth Sciences (MoES)
In order to promote Science and Technology in the States/UTs, create scientific awareness among the masses through popularization of S and T and technology dissemination for improving the quality of life of the people, the Division undertakes detailed discussions with the representatives of the States/UTs and provides important inputs/suggestions for the formulation of their Five Year Plans and Annual Plans in respect of the Science and Technology Sector.
Weakness of Science and Technology
Despite the impressive economic growth, scientific research continues to lag behind the country’s possibilities.
Certainly, one problem is the comparatively low level of overall research investment — the present 0.9% in GDP is notably less than China’s 1.5% or the 2.6% of the US. This value must increase if the country is serious about closing the gaps with leading nations. Insufficient scientific research in India’s private sector seems to be part of the problem. The large pharmaceutical sector, for example, remains dominated by the fabrication of generic products rather than original formulations.
At present, a large section of the country’s public research is concentrated in national research centres such as the S. N. Bose Center, the Raman Research Institute and organizations such as the Indian Association for the Cultivation of Science. In comparison, research at universities has been neglected. In response to this problem the country has now launched a larger initiative that, for example, foresees extra funds for 14 elite universities.
It is not only in terms of research where India’s universities are left behind. Its multifaceted higher education structure includes thirteen elite Indian Institutes of Technology (IIT), and their more recent spin-offs, the Institutes of Information Technology. Through their centralized entrance exams the IITs enforce tough selection, and their students are educated to a very high standard. However, to be able to lift a population of 450 million out of poverty and to have them participate in the country’s economic development, higher education needs to be a priority. This is where well-functioning and well-funded universities could have an increasingly important role.
Science in India still has significant potential for further development. Although scientists from the subcontinent excel on an international level, the huge potential offered by the country’s young population is far from being fully leveraged. Yet, India has a long and proud tradition of scientific excellence. As economic development advances and a broader section of society benefits from high-quality education, science in India will be able to fully capitalize on this unique heritage.
Private Infrastructure in India
Private investment and private savings are in a deplorable state. Since a large number of private firms are facing debt overhang and this debt has been financed by banks, the economy is witnessing a vicious cycle where the private sector investors are not investing and banks, particularly public sector banks are avoiding lending corporate or commercial loans. The credit off-take of medium and small enterprises which are significant contributors to the economy is also in the negative zone.
In order to boost investment in private sector, there should exist low-interest rate regime and single window project clearance mechanism which are the few hurdles still remaining. GST is already in place which earlier was the biggest hurdle to attract investments on a large scale.”
While the government’s effort to bring reform through goods and services tax needs to be praised, the Central Bank and the government must also try to better the investment atmosphere of the country. Increased allocation for public infrastructure investment along with a dip in global oil prices will surely help India’s fast growth but we still need to counter challenges like the unfavorable global environment and a slow investment recovery to ensure smooth growth.
Investment in Infrastructure
In the first half a century after Independence, India invested around 3.0 per cent of its gross domestic product (GDP) in infrastructure, which resulted in the tattered state of the sector till quite late in the 1990s.
Realisation dawned from around 1997, that to keep pace with growth realities and aspirations, investments in infrastructure needed to be substantially stepped up – and that too with a large dose of private capital, popularly called PPP (public private partnerships). In fact, emergent markets with high economic growth have typically invested at seven-10 per cent of GDP in infrastructure in their boom years.
So, from the 10th Plan period, the Gross Capital Formation in Infrastructure (GCFI) started its upward climb from 4.8 per cent in 2002, to a high of 8.4 per cent in 2011. Private investment also picked up from 22 per cent in the 10th Plan period to 37 per cent in the 11th Plan period. This uptick gave the confidence to planners to envisage a Rs 56 lakh-crore investment in the 12th Plan period (2012-17) with a PPP component of 48 per cent culminating in an expected nine per cent GCFI in 2017, the terminal year of the 12th Plan.
The steps required to revive PPP are well documented – resolve the twin-balance sheet problem, modify the Prevention of Corruption Act, speed up dispute resolution, release locked amounts in arbitration, create capacity to structure a new generation of PPP projects, fast-track the National Investment and Infrastructure Fund, stimulate the municipal bonds market to get smart cities going, and set up level playing fields for private investors by having truly independent regulators.
It is amply clear that the void left by disappearing private investments cannot be made up by public investments. Thus, creating a positive enabling environment to galvanise PPPs strongly suggest itself as a priority area for government. The latest Economic Survey candidly postulates “a political dynamic that would banish the ambivalence towards embracing the private sector”. Otherwise, the infra deficit would widen again in the early period of the 21st century.
Public Private Investment in Infrastructure
The state of infrastructure in India has been a source of concern for local and foreign investors interested in tapping its potential as a business destination. For a fast-growing economy like India, a sustained growth rate of about 8–9 percent is feasible and necessary to maintain global competitiveness.
According to the Government of India, investments of around 320 billion U.S. dollars (USD) are expected in the infrastructure sector as part of the Tenth Five-Year Plan (2006-2011) to meet this growth. The creation of world class infrastructure would require large investments in addressing the deficit in quality and quantity.
Therefore, it is necessary to explore the scope for plugging this deficit through Public Private Partnerships (PPPs) in all areas of infrastructure like roads, ports, energy, etc. Recently, legal and regulatory changes have been made to enable PPPs in the infrastructure sector, across power, transport, and urban infrastructure.
Though the PPP model has gained significant importance in the country, there is a need to refine and evolve it further to make it a successful proposition. The key issue that must be addressed is an approach to satisfy the conflicting interests of multiple stakeholders (governments, private players, users, financial institutions, etc.). Some approaches have been highlighted below to enable private sector players to secure a reasonable return at manageable levels of risk, provide the user adequate service quality at an affordable cost, and facilitate the government in procuring value for public money.
In the generation segment, opportunities exist due to the large demand-supply shortfall. While most of the power generated would be sold through long-term contracts, there is a policy focus on enabling open access that would allow generators to sell directly to large consumers. This and the evolving power trading market imply that generators can also look at the possibility of setting up merchant plants or at least set aside a part of the capacity for merchant use.
The government has also made significant progress towards the establishment of ultra mega power projects (projects of a size of around 4,000 MW). While public equity in such projects will be absent, the public participation concept involves a government agency that would undertake the preparatory work related to land acquisition, environmental clearances, etc. and then award the projects to private developers on a competitive basis.
As a result, significant risk issues perceived by a developer (particularly foreign ones) are being addressed upfront leading to easier project management. As part of the process, for captive coal mine-based generation plants, the government agency is also identifying the coal blocks that would provide fuel over the life of the plant, while allowing generators to take up coal mining for self use. These measures, along with fiscal concessions for large generation projects such as the waiver of customs duty, make this an attractive opportunity.
While sectoral reforms are being pursued, ambitious project plans have been developed for various transport sectors to bridge the infrastructure gap. These measures have opened up various opportunities for private participation in the provision of transport infrastructure and services. The initiatives in developing transport infrastructure alone are estimated to require a total investment of USD 90 billion over the next 5 to 10 years
To cater to investment needs of the road sector, the investments in the sector are projected to grow by around 24 percent over the next 5 years. The state and the central governments have planned investments in the road sector to the tune of almost USD 50 billion by 2011. The share of private participants is expected at USD 4 billion by way of equity alone for NHAI BOT projects under the National Highway Development Program from Phase III to Phase VII.
The dedicated Rail Freight Corridor is being developed at a total cost of USD 15 billion. A large proportion of the capital investment is proposed to be raised through PPP. In addition to capacity expansion of rail network, an investment of USD 3-4 billion is planned for upgradation of rail safety. Apart from safety-related investments, there would also be substantial investments in upgradation and laying of new railway lines.
At present, there are only few projects that can be showcased in the PPP domain in the aforesaid sectors. However, several new opportunities are likely to emerge in each of these sectors for private sector participation including:
1. Water-supply schemes under long-term lease / management contracts (Greater Bangalore Water Supply Project)
2. Solid waste management facilities (sanitary landfills, integrated waste-toenergy projects), including collection and transportation of municipal solid waste, under appropriate service / management contracts in several class-I cities
3. Mass rapid transport systems in cities such as Bangalore, Hyderabad, Ahmedabad, and Goa \
4. Integrated housing development similar to the experience in Lucknow and Hyderabad