INFRASTRUCTURE

INFRASTRUCTURE

ROAD INFRASTRUCTURE

India has one of the largest road networks in the world with a total length of 5.8 million km. About 85% of passengers and 70% of freight traffic are carried by roads every year. For the purpose of construction and maintenance, roads are classified as National Highways (NH), State Highways (SH), Major District Roads, and Rural Roads.

Statistics/Data Regional variation The density of roads varies from 12.14 km in Jammu and Kashmir to 517.77 km in Kerala with a national average of 142.68 km in 2011 Expressways: Around 1500+ km of expressways are operational in India. National highways constitute only 2 per cent of the total road length but carry 40 per cent of the road traffic Rural roads constitute about 80% of the total road length in India Market size: A total investment of $23 billion in 2018-19 has been made in the sector Budget (2021-22): Budgetary outlay for the road transport and highways sector is ₹1,18,101 crores Achievements: MoRTH touched a record 32 km/day average of national highway construction (2018). Till 2019, there were 9,242 PPP projects in India, of which 2,864 were related to roads and bridges Reports National Highways Authority of India data suggests that 65% of freight and 80% passenger transport is through roads Transforming Mobility Report by NITI Aayog denoted an annual economic loss of $22 bn due to congestion in the biggest 4 metro cities

 

Significance of road infrastructure in India

1. Connectivity

• Port connectivity: Roadways serve as special links for feeder roads to important railway routes and ports, essential for the development of domestic and international trade
• Integrating backward regions: Such as rural areas, tribal areas, LWE-affected regions, J&K, and North East
• Provides last mile connectivity and door-to-door connectivity: Acts as complementary to railway transport and as arteries for goods and passengers
• Promotes urbanization: Road networks aid the rational flow of resources between villages and cities

2. Economic

• Vital for the economy of the country: Enables the country’s transportation sector to contribute 4.7% towards India’s GDP
• Less expensive: Cheap to construct and maintain roads
• Provides employment: Road building can generate jobs for unskilled sections.
  • Ex: BharatmalaPariyojana is expected to create 14.2 crores man-days of jobs

• Improves ease of doing business: Logistics cost in India is about 14% of the total value of goods, compared to 6-8% in developed economies (MoRTH)
• Improves market competition mechanism: To achieve the optimal allocation of resources and break the restrictions of economic development
• Forward-induced effects: Produce demand of factors of production, thereby increasing the investment of factor markets and consumer market

                                     

                                

3. Strategic

• National security: Border roads and defence roads are very crucial from the strategic perspective
• Freight roads: Efficiently connect agricultural and mining regions to ports, airports, and other transport hubs.

4. Comparative Advantage

• More flexible: Buses and trucks can be stopped anywhere and at any time for passengers and goods, whereas trains stop only at particular stations
• Transport of perishable commodities: Like vegetables, fruits, and milk are transported more easily and quickly by roads than by railways

Challenges

1. Geographical Issues

• Nature of terrain and the level of economic development: Construction of roads is easy and cheaper in plain areas while it is difficult and costly in hilly and plateau areas
• Climate: Quality of roads is relatively worse in high altitude areas, rainy, and forested regions
• Regional variations: Road density in rural areas is less than that of cities and towns. Areas with more industrial concentration have more road density compared to areas with low industrial concentration

2. Infrastructural Issues

• Low capacity of existing highways: National and state highways, which are used for more than 65% of road traffic, are prone to excess load problems
• Maintenance of existing infrastructure: The fixed annual outlay for maintenance and repair of National Highways is only 40% of the required fund
• Low intra-city vehicle speed in India: Due to high traffic, the average road speed is about 30-40 km per hour. The average road speed worldwide is 60-80 km per hour
• Low density of roads per thousand population: Causes congestion and increases fuel consumption, leading to increased pollution

• Logistics bottlenecks: According to the KPMG report, it impacts the GDP growth rate by 1-2%
• Unsurfaced Roads: 40% of roads are unsurfaced, can be used only in fair weather and become unfit for transportation during the rainy season.
• Lack of amenities: Such as poor riding quality, weak and distressed bridges/culverts, and lack of wayside amenities

3. Regulatory Issues

• Widespread corruption: Arising out of contractor-bureaucratic-politician alliances
• Delay in obtaining land: Affects the project cost as the average cost of land increased to 3.20 crores per hectare (2017-18)

4. Funding Issues

• Non-performing assets for lending institutions: NPAs relating to infrastructure loans of banks remain at elevated levels.
• Issues with PPPs: PPPs are not able to do their best due to restrictive concession agreements.
• Road maintenance in India is underfunded: So, thousands of villages in India still lack access to all-weather roads.
• Economic returns are time taking: The return from rationally priced tolls is unlikely to produce profits in initial years
• Needs huge capital investment beyond the capacity in the public sector: About 20% of national highways need widening and 70% of two-lane roads have to be strengthened

5. Environmental Issues

• Matter of climate impact: Though there is a shift from petrol and diesel to electric vehicles (EVs), the pace of adoption is slow
• Rapidly growing population of motor vehicles: The number of registered vehicles is 295 million, thereby registering a 210 times increase in half a century

6. Social Issues

• Rehabilitation of displaced population: Causes pre-project construction risks and unexpected delays
• Accidents and safety concerns: In India, 400 deaths per day are caused by road accidents
• Large scale land acquisition: Especially in limited access toll highways, this causes protracted litigations

 

Government Initiatives

1. Infrastructure

• National Highway
  • Golden Quadrilateral: Comprises 5,846 km long 4/6 lane, high-density traffic corridor, to connect India’s four big metro cities of Delhi-Mumbai-Chennai-Kolkata
  • North-South and East-West Corridor
    • North-South corridor connects Srinagar in Jammu and Kashmir with Kanyakumari in Tamil Nadu with a 4,076 km long road
    • East-West Corridor connects Silchar in Assam with the port town of Porbandar in Gujarat with a 3,640 km long road
  • National Highways Development Projects: To ensure quicker connectivity, construction of standalone ring roads, bypasses, flyovers, elevated roads, tunnels, road over bridges, underpasses, service roads, etc., on BOT (Toll).

• Bharat Mala Project: Envisaged across 13 states on a 5300 km stretch. It has a strategic component that includes countering Chinese network build-up across the border and providing accessibility to the border-hugging regions.
• Sagar Mala Project: Involves the development of 10 CER (Coastal Economic Regions) along with India’s vast 7000 km coastline freight options—rail, land, and inland waterways—for the smooth evacuation of cargo to and from ports.
• Logistic Efficiency Enhancement Programme (LEEP): Freight aggregation and distribution, multimodal freight movement, storage and warehousing, value-added services such as custom clearances.
• Setu Bharatam Programme: To make all national highways free of railway crossings by 2019.
• Rashtriya Rajmarg Zila Sanjukta Pariyojana: Aims to connect district headquarters in the country with highways.

2. Backward Region Integration

• Pradhan Mantri Gram Sadak Yojana (PMGSY): To provide good all-weather road connectivity to all villages in India.
• Tribal Sub-Plan: Special package for development of roads of around 1000 km length in the Scheduled Areas (under Fifth Schedule).
• Trans-Arunachal Pradesh Highway Project: Road development in the North-East has been boosted along with the capacities of NHAI and BRO.
• Special Accelerated Road Development Program for North Eastern Region: For improving road connectivity between state capitals and district HQs in the North Eastern Region.
• Road Requirement Plan (RRP): For the development of NHs and state highways in 34 remote districts in states such as Andhra Pradesh, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra, Odisha, and Uttar Pradesh.

3. Legislations

• Motor Vehicles (Amendment) Act, 2019: To bring reforms in road safety, facilitate citizen needs, promote transparency, and reduce corruption. It aims to strengthen public transport, safeguard and protect Good Samaritans, and reform the insurance and compensation regime.

4. Environmental Initiatives

• Green Technology, Waste Plastic, and Cold Mix Technology: 30,000 km of PMGSY roads have been built with it to reduce carbon footprint.
• New concrete pavement technology: For development of cool pavement, quiet pavement, and permeable pavement, making it environmentally friendly.
• Green Highways policy: For the development of eco-friendly National Highways with the participation of communities, farmers, and NGOs.

5. Technological Upgradation

• National Electronic Toll Collection (NETC) Program: Provides for collection of user fees through FASTags based on RFID technology.
• National Automotive Testing and R&D Infrastructure Project (NATRIP): To set up testing, validation, and R&D infrastructure across seven locations in India.
• VAHAN (an ICT-based solution for vehicle registration) and SARATHI (for licensing) apps: To curb malpractices in issuing licenses and vehicle registration.

6. Institutional Support

• National Highways and Infrastructure Development Corporation Ltd. (NHIDCL): To speed up the road construction in strategic areas along the international border and North Eastern Region.
• Tax incentives: Companies enjoy 100% tax exemption for road projects for 5 years.

7. Funding

• Infrastructure Investment Trust (InvITs): Used as a vehicle for mobilizing funds for constructing road infrastructure by monetizing the completed and operational National Highways assets.
• National Infrastructure Pipeline (NIP): A five-year vision with an investment of Rs. 102.51 trillion, of which Rs. 19.64 lakh crore is for roads.
• Different forms of PPPs: Including Build Operate Transfer (BOT), Hybrid Annuity Model (HAM), and Toll Operate Transfer (TOT).
• Infrastructure Debt Funds: India Infrastructure Finance Company Limited for long-term funding of projects.

8. Safety Initiatives

• Integrated Road Accident Database: Aimed at incentivizing the States to improve their road safety and to reduce overall fatalities by road accidents by 25% by 2024.
• National Road Safety Policy: Outlines policy measures such as promoting awareness, establishing a road safety information database, and enforcing safety laws.

 

Ways Forward

• Funding
  • Tap alternative sources of financing: To boost public spending in the roads and infrastructure sector and to crowd-in private sector investment.
  • Leeway to fulfill private debt obligations: Exemption on dividend income and capital gains tax for InvIT units.
  • Road pricing: To provide dedicated revenue streams and a long-term solution to the problem of road investment, maintenance, and finance.
• Regulatory Ecosystem
  • Sustainable policy direction and efficient use of funds: To ensure that fund flow happens from internal accruals, borrowings, state funding, and private funding.
  • ‘Light-touch’ regulation with maturity: Concession agreements and contracts need to be sharp and flexible.
  • Improve land acquisition: Seek social approval for projects by ensuring adequate compensation and rehabilitation.
  • Rejig requirements of environmental assessment: Scheme of self-certification for new projects.
• Technological Solutions
  • Big Data Analytics and Trend Analysis: To develop predictive analysis and the use of robotics in warehouse management and cargo aggregation.
  • Artificial intelligence and machine learning: To significantly improve efficiency and lead to customer value creation.
  • Digitization of processes: To promote transparency and reduce corruption, such as with GST e-way bill.
• Innovative infrastructure development

• Multi-Modal Logistics Parks: To graduate to Integrated Logistics and Manufacturing Zones (ILMZs) that combine railway, road, and port infrastructure.
• Increasing cost-efficiency: To reduce operating costs without compromising on service and customer experience.
• Proper selection of bituminous mixes: Only dense bituminous mixes should be used for road construction and resurfacing.

• Safety Solutions

• Proper construction of roads: Construction with space for pavements, bus bays, and smoother bends.
• Road safety awareness: To help smoothly overcome adverse situations.

 

India is poised to be a commercial hub for the world in the future, and container logistics is a key ingredient to ensure that it happens. A robust road network will be one important pillar in India’s speedy economic recovery. The government’s budgetary commitment to strengthening roadway infrastructure should be accompanied by attractive private investment opportunities in the sector to achieve the objectives of SDG 9.

 

RAILWAY INFRASTRUCTURE

With a modest beginning in India from 1853, Indian Railways has emerged today as the main vehicle for socio-economic development of the country. It is the backbone of India, providing low-fare transportation to passengers as well as agricultural and industrial trade. Apart from being an important means of transport, the Indian Railways have been a great integrating force for more than 150 years. Indian Railway now has the 4th largest rail network in the world, after the United States, China, and Russia.

Statistics/Data Indian Railways run over 13,000 passenger trains and over 8,000 freight trains every day. India has the 4th largest railway network in the world. Railways share around 33% in total freight transport and around 14% of total passenger transport. Railways employ over 1.2 million people and generate approximately Rs. 2 lakh crore annually. ₹1 push in the railway sector has a forward linkage effect of increasing output in other sectors by ₹2.50 (Economic Survey 2019-20). Foreign Direct Investment (FDI) inflow in Railways: Related components stood at US$ 1,107.60 million from April 2000 to March 2020. According to Economic Survey 2019-20: Average speed of passenger trains is 54 kmph, while freight trains operate at 26 kmph. Only 52% of the railway network in India is electrified.

 

Significance of road infrastructure in India

1. Economic

• Employment generation: It employs over 1.2 million people and generates approximately Rs. 2 lakh crore annually.
• Aids growth of industries: Textile industry in Mumbai, jute industry in areas surrounding Kolkata, coal industry in Jharkhand, etc., are well connected by railways.
• Commercialization of agriculture: Farmers can sell their agricultural produce to distant places and even in the world market at remunerative prices.
• National market: Railways stimulate the process of equalization of prices.
• Driver of growth: Efficient and optimal use of the railways could add up to 1% to GDP.

• Promotion of international trade: Railway is connected with major ports facilitating imports and exports of strategic goods.
• Forward linkage effect: ₹1 push in the railway sector has a forward linkage effect of increasing output in other sectors by ₹2.50 (Economic Survey 2019-20).

 

2. Social

• Social service obligation: Train services cover all classes of passengers, meeting the social service obligation to connect remote locations.
• Multiple stakeholders: Railways stretch their hands in conducting activities like business, sightseeing, pilgrimage, along with the transportation of goods.
• Preferred mode of transport: Easier for long-distance travel and has the capacity to carry huge loads and bulky goods for both long and short distances.

3. Environmental

• Energy efficient and cost-effective: Rail transport systems are 6 times more energy-efficient than road and 4 times more economical (Economic Survey 2019-20).
• Lower social costs: Environmental damage or degradation is significantly lower in rail.
• Environment-friendly: Railways create less pollution and are a relatively more eco-friendly mode of transportation, especially with electric traction.

4. Strategic

• Defense and internal security: Quick movement of troops, defense equipment, etc., to remote places with the help of railways.
• Disaster management: Relief, rescue teams, and essential items are carried to affected areas to aid people suffering from natural calamities like droughts, floods, famines, earthquakes, etc.

 

Challenges

1. Economic Challenges

• Low financial performance: Unable to make higher investment with a low operating ratio (OR) of 0.96 (2020-21).
• Increase in expenses and decline of revenue: Implementation of the 8th Pay Commission (2025-26) will increase expenditure.
• Competitive backwardness: Railways have been losing their share of freight and passenger traffic to other modes.
• High capital requirement: Railways would need an investment of around ₹50 lakh crores between 2018 and 2030, according to the Ministry of Finance.
• Issue of cross-subsidy: Low passenger fares are maintained by keeping high freight rates artificially.
  • As per the NRP, India’s operating ratio (OR) was 0.59 for freight and 1.92 for passenger traffic (2018-19).
• Issues of PPP model in Indian railways:
  • Increased passenger fares
  • Lack of connectivity to remote areas as the private sector may be reluctant to operate on low traffic density routes
  • Coordination issues while running private sector trains and Indian railway trains on the same tracks
• Monopoly of the Indian railways: Leading to poor competition, lower costs, and degradation in service delivery.

2. Logistic and Infrastructure Challenges

• Proliferation of regional trains: With multiple stops, they cater to short-distance journeys and contribute significantly to losses in passenger business.

• Supply-demand mismatch: The Railways’ endemic capacity constraint has kept its share in the nation’s transport market steadily decreasing.
• Construction bottlenecks: A large number of rivers in the north Indian plain make it necessary to construct bridges that involve heavy expenditure.
  • The Himalayan region in the north is almost entirely devoid of railways due to its rugged topography.
• Network capacity constraints: Around 60% of all train traffic is on the golden quadrilateral while it represents only 15% of the total network.
• High transit time: Both freight and passenger trains have remained stuck in slow tracks over decades.
• Insufficient track density: Passenger trains are given preference over goods trains, limiting the average speed of a freight train to 24 km/hour.

3. Administrative Challenges

• Lack of requisite autonomy: Commercial decisions such as fixing passenger fares, freight charges, introduction of new trains, and introduction of halts in existing trains are taken by the ministry.
• Human resource issue: Overstaffing, low quality of services, lack of punctuality, low profitability, etc.
  • Unfilled vacancies at the lower level such as track men, line men, and technicians.

4. Performance Issues

• Low quality of services: Mismanagement in the form of unclean washrooms, lack of water supply, and dirty platforms.
• Technological issues: Due to failure of assets like the signalling system and overhead power equipment, breakdowns of rolling stock, tracks, etc.
• High cost of service: The cost of service is almost double of what is being charged from the passengers.
  • Losing around more than 40% of what they spend on passenger trains.
• Comparatively unsafe: In 2018-19, railways recorded 16 deaths, 28 deaths in 2017-2018, and 195 deaths during 2016-2017.

 

Government Initiatives

1. Government Schemes

• Dedicated Freight Corridor: To generate substantial capacity for freight traffic by developing separate tracks on identified routes, e.g., Eastern and Western dedicated freight corridors.
• Mission 41K: Save Rs 41,000 crore in the next 10 years by generating energy-efficient solutions to have a lower carbon footprint.
• Mission Avataran:
  • Mission 25 Tonne: To increase revenue by augmenting carrying capacity.
  • Mission Zero Accident: Elimination of unmanned level crossings on broad gauge and equipping 100% High Density Network with Train Collision Avoidance System (TCAS).
  • Mission PACE (Procurement and Consumption Efficiency): To improve procurement and consumption practices to improve the quality of goods and services.
  • Mission Raftaar: High-speed trains like Antyodaya Express, Deen Dayalu Coaches, Humsafar, Tejas, UDAY (Utkrisht Double-Decker Air-conditioned Yatri).
  • Mission Hundred: At least a hundred sidings (low-speed track sections) will be commissioned in the next 2 years.
  • Mission Beyond Book-keeping: Establish an accounting system where outcomes can be tracked.

• Mission Capacity Utilisation: Efficient capacity utilisation of the two Dedicated Freight Corridors: Delhi-Mumbai and Delhi-Kolkata.
• E-tendering platform: Electronic reverse auction option has been introduced in stores tenders above Rs. 5 crore and works and services tenders above Rs. 50 crore.
• E-Receipts System (MERS) portal: Developed by CRIS to facilitate digital payments of inward receipts to Railways.

2. Human Resource Development

• Restructuring of the Railways Board: Merging of all central service cadres of Railways officers into a single Indian Railways Management Service (IRMS) to eliminate departmentalism.
• Project Saksham: Comprehensive upskilling exercise to upgrade skills and knowledge of all Indian Railways employees.
• Mission Satyanishtha: Sensitizing all railway employees about the need to adhere to good ethics and maintain high standards of integrity at work.
• Commandos for Railway Security (CORAS): A special task force to tackle threats to Railway passengers or establishments.

3. Policy Decisions

• National Rail Plan: To plan infrastructural capacity enhancement along with strategies to increase Indian Railways’ modal share.
  • Accelerated implementation of Vision 2024:
    • 100% electrification
    • Multitracking of congested routes
    • Speed upgradation to 130 kmph on golden quadrilateral and golden diagonal routes
    • Elimination of all level crossings on all golden quadrilateral and golden diagonal routes
• PPP model of Private Trains:
  • Sharing of Resources: Physical infrastructure such as railway tracks, signalling, and stations will remain under the control of Indian Railways, while the private sector will bring in their modern coaches for specific routes.
  • Payment Mechanism: Private sector will pay a haulage charge to the Railways for the use of its physical infrastructure and share the revenue with Indian Railways.
• Freight on Priority policy: Pushing an aggressive customer-centric approach to expand freight beyond traditional segments and attract new customers.

4. Technical Interventions

• Integrated Security System (ISS): To strengthen surveillance mechanisms with CCTV cameras, access control, personal and baggage screening, and bomb detection.
• Head on Generation (HOG) system: HOG-fitted trains draw electricity from overhead electric lines and do not require power from diesel generators.
• Modern Train Control System:
  • Automatic Train System
  • Electronic Interlocking System
  • Centralized Traffic Control System
• Shift to Renewable Energy: Railway Energy Management Company Ltd is installing solar projects along operational railway lines to inject solar power into the traction network.
• Other Initiatives:
  • Flexi-fare scheme: Dynamic pricing system where the base fare increases by 10% with every 10% of berths sold.
  • Rail Wire: Establishing fast and free Wi-Fi at all stations.
  • Mission Train 18: Rolling out a state-of-the-art indigenous semi-high-speed train.
  • SRESTHA: New R&D organisation to serve the future technology needs of Railways.

• SUTRA: A special unit for Transportation Research and Analytics.

5. Funding Mechanisms

• Rail India Development Fund (RIDF): Fund proposed to be set up with World Bank assistance.
  • Sovereign wealth funds and pension funds to be tapped.
• Loans from ADB to IRFC and MoR: Agreement signed by IRFC and MoR with ADB for a loan of USD 750 Million for Railway electrification projects.
• Rail Safety Fund: Rashtriya Rail Sanraksha Kosh to be utilized for track improvement, bridge rehabilitation work, improved inspection work, etc.

 

Ways Forward

• Structural changes in business management
  • Independent regulator to inspire private sector confidence and boost investment.
  • Rational restructuring of the tariffs.
  • Segregating passenger and freight businesses for focused attention.
  • Developing terminal infrastructure.
  • Sustained involvement of the private sector in operations and ownership of this sector.
• Technology Interventions
  • Anti-collision devices and ultrasound flaw detection machines to reduce accidents.
  • Artificial intelligence to make the flow of information free from human intervention.
• Logistic Changes
  • “Zero-based timetable”: In this concept, every train that enters the network is justified based on needs and costs.
  • Inter-city mail and express services: Needs to be developed as they constitute IR’s core passenger business.
  • Reducing transit time: New train sets at par with expectations of customers for faster and more frequent services.
• Committees and Recommendations
  • Bibek Debroy committee on Railway Modernisation:
    • Privatization of non-core functions (e.g., running schools, hospitals).
    • Switch to a commercial accounting system.
    • Restructuring of Railway zones.
  • Kakodkar committee on Safety reforms: Suggested investing Rs 1 lakh crore over a 5-year period and the creation of a statutory railway safety authority.

 

The time has come to modernize the Indian Railways, make it world-class, and a key driver of the country’s growth as it is a strategic resource for the nation. In the next five years, the Indian railway market will be the 3rd largest, accounting for 10% of the global market, and Metro rail is projected to make up 70% of the railway market in India. The mission should also aim to achieve a conversion of Indian Railways to ‘Net Zero’ Carbon Emission Railway and set a vision of making railways a 100% safe, fast, and reliable mode of transport for passengers and freight.

 

PRIVATISATION OF RAILWAY

Recently, Indian railways is moving towards privatization of its services. There has been a lot of debate in the public sphere about this step. Privatization of railways has benefits like improved efficiency, services, operations, etc. At the same time, it has disadvantages like it can’t provide affordable services, informalisation of jobs, revenue loss to the government in the form of a dividend, etc.

 

Current Incidents First step toward privatization: Recently, the Ministry of Railways has taken the first step towards privatization of railways by inviting Request for Qualifications (RFQ) to private players for the operation of passenger train services. Route to be operated by private players: On July 1, 2020, the Ministry of Railways announced that 151 trains in 109 pairs of routes will be operated by private sectors. It comprises just 5% of the 2,800 Express and Mail services operated by Indian Railways. Private trains will start operating tentatively in 2023 and in 12 clusters. Tejas express first private train: Tejas Express running between Lucknow and Delhi and recently, the Government of India privatized the Tejas Express running from Ahmedabad to Mumbai, which is operated by the IRCTC, an arm of Indian railways.

Data about Railways

• Stretch: In 2018 India had 68,443 route kilometers of railways as per data available with the World Bank.
• Passengers transported: In the fiscal year ending March 2019, Indian Railways carried 844 crores (8.44 billion) passengers and transported 123 crores (1.23 billion) tonnes of freight.
• Rank among the world: India is among the World’s four largest rail networks, along with Russia, United States, and China.
• Operations: Indian Railways operate not only passenger and freight trains but also operates schools and hospitals. Indian Railways is a major shareholder in 16 public sector undertakings (PSUs) and other organizations that are related to rail transport in India.
• Electrification: As of 1 April 2020, Indian Railways has electrified 58.49% or 39,866 km (24,772 miles) of the total route kilometers.
• Link of India railways: India has a railway link with Bangladesh, Bhutan, Nepal, Pakistan.

 

Arguments in favor of Privatization

1. Political

• Corruption under control: It will help control corruption in the sector which will eventually increase productivity and thus improve the profits. This can also ensure control of the pricing hike and keeping the rail fares under check.
• Political interference: The government may be reluctant to get rid of the workers due to political backing, which eventually involved job losses. Therefore, state-owned enterprises often compromise between inefficiency and inefficiency. Privatization will result in more efficiency.

2. Economic

• Balancing QoS with High Fares: The move would foster competition and hence lead to overall betterment in the quality of services.
• Normalisation of infrastructure: Private players in IR will result in increased competition and this will lead to a reduction in fare prices and improvement in other facilities to attract customers.
  • For example: Just like increased competition in the telecom sector.

• Increased competition: Often, privatization of state-owned monopolies occurs alongside deregulation—i.e., policies to allow more firms to enter the industry and increase the competitiveness of the market.
• Revenue: Selling state-owned assets to the private sector raised significant sums for the UK government in the 1980s.
• Loss in current operations: As per the report by CAG, the operating ratio of the railways was 101 percent for the fiscal year 2019-20. This means that if its income was 100 and expenditure was 101, the government reported the operating ratio to be 98.36 percent.
• Boost job creation: New investment by private players will lead to new job creations.

3. Infrastructure

• Improved Security: Private participation can lead to better accountability and monitoring, which can keep a check on rising accidents in railways.
• Better technological innovation: Private participation can lead to the infusion of modern technology and capacity building of Indian railways.
• Need under urbanization: With the rise in car ownership costs and rapid urbanization, there could be demand for greater utilization of public transport services. This provides a case for privatization of essential public transportation means like railways.
• Reduced transit time: Private players rely more on development and new technology, which will lead to punctuality and reduce transit time.
• Reduce demand-supply deficit: Today, railways face a demand-supply mismatch, causing waiting tickets to be canceled, which affects extra revenue.

 

Arguments against Privatization

1. Economic

• Connectivity issue: Railways provide nationwide connectivity to bring regional development. This may not be possible with privatization, as less popular routes could be neglected.
  • For example: Regions with rugged terrain and low population density like the Himalayan states and North Eastern states could become inaccessible.
• Issue of inclusiveness: Fare hikes could render railways out of reach for lower-income groups.
• Impact on the economy: Indian Railways is the backbone of India, providing low-fare transportation for agricultural and industrial trade. Privatization could negatively affect the Indian economy at large.
• Unemployment: This move could render thousands of railway employees in production and ancillary units jobless in the long run.
• Loss of dividend: The government would lose out on future dividends from the profits of government-owned railways.
• Economically rewarding: Infrastructure in developed countries was largely built by their governments. No private player has had the will or capacity to do it. Investment in railways is rewarding.
  • For example: As per an economic survey, if you invest Rs 1 in railways, it generates Rs 5 in the economy. The Chinese government invests 11 times more in infrastructure than India, and today, three Chinese public sector companies are among the top five in the Fortune 500 rankings.

 

2. Political

• Issue of accountability: The whole railway system cannot be handled by a single party or coordination will be very difficult if area-wise given to private parties, which may lead to accountability issues.
• Private monopolies: Privatization creates private monopolies and thus, it needs regulations to prevent abuse of monopoly power.
• Constitutional obligations: Providing cheap and affordable travel is the constitutional responsibility of the government. It will violate Article 19, which provides for free movement within the country; increased fare prices will affect this fundamental right.
• Trade unions: They have suggested the government not privatize Indian railways as it will affect the livelihood of many people. There may be resistance and protest from trade unions.

3. Strategic

• Short-term interest: To please shareholders, private players may seek to increase short-term profits and avoid investing in long-term projects.
  • For example: The UK is suffering from a lack of investment in new energy sources; privatized companies are trying to make use of existing plants rather than invest in new ones.
• Issue of Cross-Subsidization: Indian Railways tend to cross-subsidize passenger fares through freight revenue. This translates to below-cost pricing, making it difficult for private players to compete.
• Conflict of Interest: Currently, the Ministry of Railways is effectively the policy maker, regulator, and service provider. This is a clear conflict of interest and would undermine fair competition between private and government railway operations, impeding the efficient privatization process of Indian Railways.
• Complexity: The Indian rail network is the 4th largest in the world, making it very difficult to operate and manage. This is one of the reasons why the government struggles to maintain such a vast network efficiently.
• Global example: In Britain, railways are privatized but lack effectiveness, so Britain is planning to re-nationalize the railways.

 

Committee and Commission Recommendations

1. Bibek Debroy Committee (2015):

• Transition to Commercial Accounting: The financial statements of Indian Railways need to be redrawn, following principles and norms that are nationally and internationally accepted.
• The non-core functions of railways must be privatized: These activities include running hospitals and schools, catering, real estate development (including housing), construction and maintenance of infrastructure, and manufacturing locomotives, coaches, wagons, and their parts.
• Expansion of Indian Railways Manufacturing Company: Wagons are already produced by the private sector, and coaches and locomotives could follow.
• Encouraging Private Entry: Private entry into running both freight and passenger trains in competition with Indian railways should be allowed.
• Independent Regulator: Shift regulatory responsibility from the government to an independent regulator, as the private sector will only enter if there is fair and open access to railway infrastructure.

2. Sam Pitroda Committee report, 2011: Recommended attracting private investment in various areas of railways, such as stations and terminals, elevated rail corridors, high-speed rails, private freight terminals, leasing of wagons, loco and coach manufacturing units, and so on.
3. Planning Commission and Niti Aayog: The privatization of Indian railways has been recommended for many decades, by the erstwhile Planning Commission of India and now by Niti Aayog.

 

Global Experiences

1. British
   • Scraping of franchise system: The British scrapped the existing rail franchise system and replaced it with a new one based on performance and reliability. It has not worked as fares are higher, there are more delays, and the franchising system is floundering, leading to high passenger dissatisfaction.
   • Safety on British railways: Has improved after privatization.
   • Cost cutting: Expectations of cost-cutting under private operation did not materialize.
   • Control: Government control has increased.
2. Japan
   • Benefit of privatization: They are able to bear the cost of upkeep and improvement in services.
   • Split in control: Splitting the legacy railways based on geographical area, not functions like tracks and trains, has helped manage the highly integrated operation of the railways.

 

Way Forward

• Need for a new framework: Privatization of railway operations will require a new institutional framework where infrastructure remains a government monopoly while there is a market for service providers.
• Bring independent regulator: Shift regulatory responsibility from the government to private players, improving efficiency and regularity of Indian Railways (IR).
• Modernization of Railways: Implement recommendations from the Bibek Debroy committee, such as expanding Indian Railways’ manufacturing company and corporatizing core functions of railways.
• Sustainable Pricing: Revisit the Indian Railways pricing model to make passenger and freight segments sustainable. Tariffs should be competitive with the cost of road transportation.
• Pseudo-privatization: Only operations of railways should be transferred to private players, while infrastructure remains with the government.
• Follow global best practices: Privatization of railways in Japan is a success story. The government can privatize railways based on the Japanese model with suitable modifications for local needs.
• Subsidies and tax incentives: To keep Indian Railways affordable for the lower strata of society (post-privatization), the government must offer subsidies and tax incentives to companies that provide low-cost services, similar to low-cost airlines, to these populations.

 

In the long run, this approach would not only make IR the largest but also the most efficient railway network in the world, fulfilling the objective and essence of Indian Railways as the “Lifeline to the Nation.” Railways should remain affordable as infrastructure for daily commuters above all else. Instead of speed and privatization, efficiency and affordability should be the primary focus.

 

PORT AND SHIPPING

India, by virtue of being a peninsular country with a long coastline of 7,500 km, has the natural advantage of developing ports. Imports of crude petroleum, iron ore, coal, and other essential commodities are all through the sea route.

 

Statistics/Data Ports and shipyards: 13 major ports and around 205 non-major ports operate on India’s coast along with 5 public and 20 major private sector shipyards. Trade by Sea: According to the Ministry of Shipping, around 95% of India’s trading by volume and 70% by value is done through maritime transport. Ports’ Performance Capacity: Registering a CAGR of 4.04% between FY14- FY20. Cargo Capacity: The total cargo handling capacity at major ports across India is over 1.5 billion metric tons in the fiscal year 2020. Cargo Traffic: In the last five years, major ports in India showed a CAGR of 4.74%. Ships: India has around 1,071 ships, with 722 coastal and 349 overseas ships. Fleet and tonnage India has the largest merchant shipping fleet among developing countries. India ranks 17th in the world in terms of gross registered tonnage (GRT) and 15th in terms of deadweight tons (DWT). Market Size: India’s key ports had a capacity of 1,560.60 MTPA (March 2021). FDI: Ports sector in India has received a cumulative FDI inflow worth US$ 1.63 billion between April 2000 and June 2021. Subsidy funding: Subsidy funding worth Rs.1,624 crore (Budget 2021) for a period of 5 years to Indian shipping companies to encourage merchant ship flagging in the country.

 

Significance of port and shipping infrastructure in India

1. For Economy

• Importance of shipping for economic growth: For instance, control of the seas is a key component of China’s Belt and Road Initiative (BRI), and 6 of the top 10 container ports in the world are in China.
• Integration into the global economic system: Ports are one of the primary components of the general transportation sector and are linked to the expanding world economy.
• Importance of related services in this sector providing employment: Pilotage, towing and tug assistance, emergency repairs, anchorage berth and berthing services, storage warehousing, maritime cargo handling services, customs clearance services.

2. For Development

• Port-led development: Refers to the development of port infrastructure as well as the linkages between the port and the hinterland area.
• Enhancement to blue economy: Through fishing, tourism, and passenger transport.
• Support of economic activities in the hinterland: Ports act as a crucial connection between sea and land transport.

3. For Environment

• Comparatively environmentally friendly: Railway transportation requires twice as much energy consumption, while road transportation requires ten times as much as sea conveyance.
• Cost-effective and efficient mode: In terms of load carried, seaway transportation is the cheapest and most effective transportation system compared to other modes.

 

4. For backward and forward linkages

• Port efficiency reflects other components: Such as container hourly loading rate, the average number of containers loaded per vessel, and waiting times.
• Ports as a key component of the logistics chain: Their operation has a direct effect on economic variables such as export competitiveness and final import prices, thus affecting economic development.
• Location of major industries in the coastal belts: In the vicinity of major ports, industries require a safe and cheap means of exporting finished goods and importing raw materials.
  • Ship-breaking industry: Indian shipbreaking industry has a global market share of 25%.
    • E.g.: Alang in Gujarat is one of the world’s largest shipbreaking yards.
  • Shipbuilding industry: The Indian shipbuilding industry currently accounts for a mere 1% of the global shipbuilding market.

5. For Trade

• Ease of doing business: Ports with high capacities to handle import/export of goods with low turnaround times and fast clearances are essential.
• Facilitates goods movement through export and import: Leads to increased consumer choice and provision of goods at competitive prices.
• Significant for internal trade: By providing livelihood to local communities, multimodal connectivity by rail, roads, and waterways, and a faster and inclusive approach in goods movement.

 

Challenges for port and shipping infrastructure in India

1. Economic Challenges

• Lack of investment and easy financing options: Due to a decrease in savings and investment rates, port development does not attract enough investment.
• Shipbuilding, repair, and ownership are not preferred businesses in India: The small ship-owning community in India prefers foreign registry instead of domestic registration.
• Manpower and labor issues: Lack of adequate training, declining manpower quality, and resistance to reform.
• Unhealthy competition: Development of multiple ports in close proximity handling similar cargo.
• Issues with PPP Model: Most port PPPs impose strict limits on what private operators are allowed to do.

 

2. Administrative Challenges

• Regulatory cholesterol: Delay in obtaining government approvals, environmental clearances, and compliance with coastal regulations.
• Lengthy inspection and scrutiny: Inspections and scrutiny remain lengthy for cargo and other shipping operations.
• Discriminatory provisions for Indian vessels: Foreign vessels are exempt from duty on bunker fuel, while Indian vessels have to pay this duty.
• Issues with Regulations:
  • Major and non-major ports fall under different jurisdictions.
  • Cabotage laws remain restrictive: Foreign-flagged vessels are not allowed to ship cargo from one Indian port to another.

3. Infrastructure Challenges

• Inadequate infrastructure and technology issues:
  • Lack of adequate berthing facilities and insufficient length for proper berthing of vessels at non-major ports.
  • Lack of adequate navigational aids, facilities, and IT systems.

• Inadequate port facilities: Port facilities do not match global standards due to inadequate cargo-handling equipment, insufficient dredging capacity, and lack of technical expertise.
• Sub-optimal transport modal mix: Lack of requisite infrastructure for evacuation from major and non-major ports.

4. Logistic Challenges

• Lack of carrying capacity: Maritime business community prefers to be agents rather than becoming ship owners or container liners themselves due to high transshipment and handling costs.
• Negligible freight and passenger traffic
  • Water transport accounted for 6% of freight transport in India.
  • Inland Water Transport (IWT) carries >2% of freight traffic and negligible passenger traffic.
• Weak hinterland connectivity: Between production centers and gateway ports leads to higher costs and delays.
• Port congestion: Due to container volume, shortage of handling equipment, and inefficient operations.
  • Example: Nhava Sheva port.
• High turnaround time: In Singapore, average ship turnaround time is less than a day; in India, it is over 2 days.
• Lack of capability: Most Indian container handling ports cannot handle large container vessels due to inadequate depth (minimum 18 meters).

5. Environmental Challenges

• Spillage or leakages and pollution from oil spills
• Dredging causes sedimentation affecting local productivity and fisheries.

6. Social Challenges

• Displacement vs. development: Port projects result in displacement, such as at Gangavaram Port in Andhra Pradesh and Mundra in Gujarat.
• Affects livelihood of fishing communities: Fishing communities suffer restriction of access to fishing grounds around ports.

 

Government Initiatives

1. Legislations

• Recycling of Ships Act, 2019: India has acceded to the “Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships.”
• Major Port Authorities Act 2021: Provides for the regulation, operation, and planning of major ports in India.
• Revised Model Concession Agreement: Provides private sector participation in port development and management.
• Coastal Economic Zone: For developing port-proximate industrial clusters, encouraging port-led development, and reducing logistics costs and time for goods movement.

2. Funding Mechanism

• Central Road and Infrastructure Fund: The Central Road Fund Act, 2000 was amended to include inland waterways for which the CRF could be used.
• Foreign Direct Investment (FDI): Up to 100% under the automatic route for port and harbor construction and maintenance projects.
• 10-year tax holiday: For enterprises that develop, maintain, and operate ports, inland waterways, and inland ports.

3. Policy Decisions

• National Maritime Agenda, 2010-2020
  • Increasing capacity: To create a port capacity of 3,200 MT to handle expected traffic.
  • World-class Infrastructure: To implement full mechanization of cargo handling and movement.
  • Strategically building ports: To develop 2 major ports to promote trade as well as 2 hub ports—Mumbai (JNPT), Kochi, Chennai, and Visakhapatnam.
• Maritime India Vision 2030
  • Rationalization of Port Charges: It will make ports more competitive and remove hidden charges levied by ship liners.
  • Maritime Development Fund: A Rs. 25,000-crore fund to provide low-cost, long-term financing to the sector.
  • Port Regulatory Authority: A pan-India port authority to enable oversight across major and non-major ports and provide structured growth for the sector.

4. Institutional Support

• Shipping Corporation of India Ltd. (SCI): Changed from a Private Limited Company to a Public Limited Company and conferred ‘Navratna’ status.
• Dredging Corporation of India Ltd. (MSIL), Visakhapatnam: Provides dredging services to major ports in India and is a Miniratna Category-1 PSU.
• Indian Maritime University (IMU): Established in Chennai with campuses in Chennai, Kolkata, and Visakhapatnam as a Central University.
• Center of Excellence in Maritime and Ship Building (CEMS): Set up by the Ministry of Shipping to provide industry-relevant skill development, equipping students with employable engineering and technical skills in the port and maritime sector.

5. Government Schemes

• Jal Marg Vikas project: Aims to develop National Waterways in India to reduce rail and road congestion, carbon footprint, and resource depletion.
• ‘SAROD-Ports’ (Society for Affordable Redressal of Disputes – Ports): Provides affordable and timely resolution of disputes in a fair manner with technical experts as arbitrators.
• Port Integrity Campaign: Aims to eliminate integrity issues and bottlenecks to trade during operations in Indian ports.
• Sagarmala program [2015]: Seeks to enhance the performance of India’s logistics sector by unlocking the potential of waterways and the coastline to minimize infrastructural investments.

6. Other Initiatives

• Port Community System (PCS1x): Cloud-based new-generation technology with a user-friendly interface to improve communication between maritime trade and customs.
• Project Unnati: Identifies opportunity areas for improvement in the operations of major ports.
• Port Enterprise Business System: Tech Mahindra won the contract to maintain an Enterprise Business System (EBS) to modernize and automate port processes for five central government-owned ports.
• Green Initiatives: As part of the Swachh Bharat Abhiyan, financial assistance is provided to major ports for green initiatives and to build capacity to combat oil pollution.

 

Way Forward

1. Administrative and Policy Changes

• Legislative Changes: New Merchant Shipping Bill to replace the Merchant Shipping Act, 1958, promoting ease of doing business, transparency, and effective service delivery.

• Improving ease of doing business
  • Enabling faster request processing in delivery of services.
  • Reduction in manual intervention.
  • Reduction in overall transaction time and costs.
• Expedite the completion of various projects under Sagarmala: Especially for improving port connectivity, setting up coastal economic zones (CEZs), and establishing new ports.
• Open up the dredging market: To attract more players in dredging activities to increase and maintain draft depth at ports to attract large vessels.
• Improving mechanism for cargo clearance: Single-window facility and fully mechanized cargo handling infrastructure to increase throughput.
• IWT should be integrated into multimodal/intermodal connectivity: Inland terminals with proper road and rail connectivity for an efficient logistics supply chain.
• Enhance technology use in ports
  • Technologies like big data and advanced GPS navigation systems should be optimally used.
  • Government plans to install 200 MW wind and solar power generation capacity at ports.

2. Multi-stakeholder approach

• Coastal communities should be made ship owners: To initiate carriage of cargo by shallow drafted small ships through coast and inland waterways.
• Focusing on multi-folded cargo growth to cater to domestic and international trade
  • Short sea and river voyages should be encouraged.
  • Shipbuilding and ownership should be encouraged by the Ministry.
• Regional cargo-specific ports: Developing the contributing ports to serve the regional transshipment hubs by improving small-ship coastal operations.
• Enhancing participation of private sector: Implement landlord port concept to leave the development, operation, and management of terminal and cargo handling facilities to the private sector.

3. Committees and Recommendations

• Vijay Kelkar Committee on PPP:
  • Review of the role and need of Tariff Authority for Major Ports (TAMP).
  • Review of MCA, quicker clearances, rationalized leases, and stamp duties.
• Niti Aayog’s Three-Year Action Agenda (2017-2018)
  • Increase competition through easing cabotage.
  • Explore creating deep-water ports or barges for ports with low drafts.

 

Case Study Model

• Gujarat Maritime Cluster in the GIFT (Gujarat International Finance Tec-City) City: A dedicated system to address logistics of ports and seaways. It consists of Gujarat-based shipping lines, freight forwarders, shipping agents, bunker suppliers, stevedores, and shipbrokers with chartering requirements.
• Vallarpadam Terminal of Cochin Port: Envisaged as the first trans-shipment port of India to be developed as the leading hub of South Asia.
• JNPT (Jawaharlal Nehru Port Trust): In 2021, JNPT launched a comprehensive solid waste management project as a part of its green port initiatives.

 

CLYDEBANK DECLARATION

During COP26, the United Kingdom led a coalition of 18 countries to join the first-ever framework to create zero-emission ocean shipping corridors, the Clydebank Declaration for Clean Shipping Corridors.

• Aim: Signatories agree to work together to support the establishment of green shipping corridors defined as zero-emission maritime routes between two or more port pairs.
• First-mover signatories: Include Japan, Canada, Chile, Costa Rica, the Republic of the Marshall Islands, the United States of America, and more.

 

Objectives

• Facilitate the establishment of partnerships: With participation from ports, operators, and others along the value chain to accelerate the decarbonization of the shipping sector and its fuel supply through green shipping corridor projects.
• Inclusion of provisions for green corridors: In the development or review of National Action Plans.
• Consider Environmental Impact: To ensure sustainability when pursuing green shipping corridors.

 

Importance

• Carbon Emissions: The shipping industry contributes to almost 3% of total global emissions.
• Protect Marine Environment: The declaration seeks to preserve and protect marine ecology by decarbonizing.
• Growing Expansion: On its current trajectory, maritime trade is projected to grow by as much as 130% by 2050 over today’s trade volume. Simply put, the world cannot stop the climate crisis without urgent action to decarbonize international shipping this decade.

 

AVIATION INFRASTRUCTURE

Airways play a vital role as modern means of transportation and are important for the growth of trade and commerce. The significance of airways multiplies during wartime, natural calamities, and disaster management. The travel and aviation sectors contribute significantly to the GDP of most countries and are critical for ensuring economic growth and development.

Statistics India is the 7th largest aviation market with 187 million passengers and is expected to become the 3rd largest by 2022. India’s scheduled domestic air transportation for passengers and goods grew by 14% and 12% respectively in 2018-19. India is ranked 53rd out of 140 countries worldwide in air transport infrastructure as per the World Economic Forum’s Global Competitiveness Report, 2018.

 

Significance of Aviation Infrastructure

1. Geographical

• Friendly weather conditions: India has clear weather for most of the year except for a short rainy season.
• Cartographic sweet spot: India’s central location connects Europe and West Asia on the western side with Southeast and East Asia on the eastern side.
• Landing sites: India has extensive plains providing suitable landing sites.

 

2. Economic

• Multiplier Effect: The aviation sector will deliver a return of $3 in the regional economy for every $1 invested, as per ICAO.

• Cheap labour: India has a good potential to be an East-West and a West-East hub because of its cheaper labour cost in comparison to Europe and America.
• Contribution to GDP: The aviation sector in India currently contributes $72 billion to GDP.
• Employment generation: It supports 1.31 million direct, indirect, and induced aviation jobs, which is expected to reach 4 million by 2035.
• Growth potential: India is now the 3rd-largest and fastest-growing aviation market in terms of domestic tickets sold.
• Investment potential: Government agencies project a requirement of around 250 brownfield and greenfield airports by 2020.
• Allied Sector Growth: Before COVID-19, the Maintenance, Repair & Overhaul industry was forecasted to grow by 10% by 2023.

3. Comparative Advantage

• Great switchover from Railways: The population in India is just breaking into the financial acceptable limits of flying.
• High Speed: It is the fastest means of transport, transporting passengers and goods within minimum time compared to other transport.
• Easy transport of costly and light goods: It is convenient to send costly, light, and perishable goods through air transport, which can’t be transported via road or rail.
• Free from physical barriers: Air transport is free from physical barriers like rivers, mountains, and valleys, ensuring seamless travel across the globe.

4. Strategic

• Useful in natural calamities: During earthquakes, floods, accidents, and famine, air transport is used extensively as rail and road are not very effective for rescue operations.
• Strategic Importance: It has great strategic relevance, which can be harnessed for internal and external security.
• Regional Connectivity: It boosts connectivity to smaller cities and northeastern states.

 

Challenges of Aviation Infrastructure

1. Infrastructural
   • Infrastructure Deficit: Inadequate hangar space and unavailability of land to expand airports at current sites, particularly in major cities.
   • Completion delays: Airport infrastructure development is often marred by delays due to the time taken for governmental approvals.
2. Structural
   • Lack of funds: The government is cash-strapped, even to fund the development of more airports under the PPP model.
   • Unstable consumer base: When airline ticket prices rise, people tend to switch back to railways and other modes of transportation.
   • Outsourcing of repair work: 90% of Indian MRO work is outsourced to foreign organizations in countries like Singapore, Dubai, UAE, and Sri Lanka, which raises maintenance costs.
   • Air Safety and Security: India’s air safety oversight is lower than that of Bangladesh, Maldives, Pakistan, Nepal, Sri Lanka, and North Korea, as per an audit by the International Civil Aviation Organization.
   • Lower capabilities of airports: Inefficient performance of air navigation management, air traffic control, and airline slots management.
3. Human Resource Constraints
   • Skill Deficit: Shortage and gaps in the availability of industry-recognized skills, from airline pilots and crew to maintenance and ground handling personnel.
   • Shortage of Pilots: In the last three years, the average number of foreign pilots is over 300 in India, and airlines are paying huge sums to them.
4. Economic
   • High Fuel Cost: Fuel cost amounts to 45% of operating charges in India compared to the global average of 30%.
   • Heavy Taxation: Aviation fuel prices in India are 60% higher than in ASEAN and Middle Eastern countries because of high central and state taxes.
5. Administrative
   • Poor Financial Health of Indian Airlines: Acquisition of new aircraft by making an unaffordable capital expenditure affected their ability to service debts.
   • Inefficient functioning of UDAN Scheme: The hinterland of the country is not yet completely connected to the aviation sector, with 134 routes under the scheme yet to be functional.
   • Procedural Complexities: Taxes and approvals by both central and state governments increase the transaction costs of the aviation sector.
   • Constructional delays: India builds airports after demand arises, which delays the growth of the aviation industry.
   • Stagnant cargo traffic: Despite declaring India a “Unilateral Open Sky” 25 years ago, cargo traffic is still in its infancy.

 

Government Initiatives

1. Government Schemes
   • Atma-Nirbhar Bharat Abhiyan
     • Six more airports will be auctioned under the Public-Private Partnership (PPP) model.
     • Route dispersal guidelines for optimal utilization of airspace and reduction in fuel use.
   • Ude Desh ka Aam Nagrik (UDAN) Scheme: To create affordable yet economically viable regional routes so that flying becomes affordable to the common man, even in small towns.
   • International UDAN: To connect India’s smaller cities directly to some key foreign destinations in the neighborhood to promote tourism and city development.
2. Policy Decisions
   • National Civil Aviation Policy 2016
     • Achieve 30 crore domestic ticketing by 2022 and 50 crores by 2027.
     • Increase domestic passenger traffic four-fold to 300 million by 2022.
   • Relaxed FDI Policy: 100% FDI is permitted via the automatic route in non-scheduled air transport services, MRO, flying training institutes, helicopter services, and seaplane services.
   • Seaplane Tourism: Promotion of seaplanes for the growth of tourism and regional connectivity along India’s 7,500 km coastline.
3. Technology Adoption
   • Digi Yatra Platform: Biometric digital processing system to avoid multiple checks of passengers at the airport.
   • GPS-Aided Geo Augmented Navigation (GAGAN): Provides additional accuracy for safety in civil aviation and has expansion capability for seamless navigation services across geographies.
   • No Objection Certificate Application System (NOCAS): Streamlines the online process for timely NOC for height clearances of buildings around airports.
   • e-GCA: Online platform to provide faster delivery of services & regulation oversight.
   • DigiSky: Online portal to meet civil aviation requirements for flying civil drones.
   • e-Sahaj: Online portal launched by the Civil Aviation Ministry to provide 100% security clearances.

 

Ways Forward

• Infrastructure Augmentation
  • Global hub for Aircraft Maintenance, Repair and Overhaul (MRO) services: To save costs and create liquidity for airline companies.
  • Convergence between civil MROs and defence sector: To create economies of scale and long-term benefits.
  • Enhance Aviation Infrastructure
    • Complete ongoing projects under the UDAN initiative in a time-bound manner.
    • Existing capacity of international airports should be augmented under the International UDAN initiative.
• Technology Adoption
  • Advanced research in aviation technologies: Via long-term plans to help create a manufacturing ecosystem in the country.
  • Latest technology should be adopted
    • Use of the latest technology is required for efficient operation of Air Traffic Control and Navigation systems.
    • Biofuel and solar power-based aircraft are the need of the hour.
• Resource Management
  • Multiple airports: More than one airport in cities will help ease traffic (e.g., London).
  • Efficient usage of AAI resources: Vacant real estate near Airports Authority of India (AAI) airports in major centers should be monetized to increase non-aeronautical revenues.
  • Address Shortage of Skilled Manpower: Collaboration between original equipment manufacturers (OEMs), industry, and educational institutes to assimilate the latest technology and management practices.
  • Privatization of Air India: Air India needs to be divested as soon as possible, and alternate channels must be sought to rehabilitate the employees.
  • Independent cargo policy needed: Poor-performing airlines must be shifted to cargo carrying.
• Structural
  • Aviation fuel under GST: All petroleum products, including Aviation Turbine Fuel (ATF), should be brought under GST.
  • Non-aeronautical revenues: Vacant real estate near AAI airports in major centers can be monetized to increase non-aeronautical revenues.
  • Make India a Transshipment Hub: Develop digital business enablers such as e-contracting, e-transportation multimodality, e-compliances, and an e-grievance redressal module.

 

Travel and aviation sectors contribute significantly to the GDP of most countries, making it essential to ensure economic growth and development. With airlines growing annually by 100, the size of domestic and imported Indian airline MRO is set to grow annually to Rs 21,600 crore in the next five years. The Central and State Governments should make a concerted effort for this sector to grow at a good pace. With the right policies and a relentless focus on quality, cost, and passenger interest, India would be well placed to achieve its vision of becoming the third-largest aviation market by 2020.

 

TELECOMMUNICATIONS

India is currently the world’s second-largest telecommunications market with a subscriber base of 1.20 billion and has registered strong growth in the past decade and a half. The telecommunication market includes three segments — wireless, wireline, and internet services. 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 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.

 

Statistics India is the second-largest country in terms of internet subscribers and has the world’s highest data usage. Tele-density (or the number of telephones per 100 population) of the Indian telecom industry is 90.45% (Rural: 57% and Urban: 161%), according to Economic Survey 2019-20. Globally, Average Revenue Per User (ARPU) fluctuates around 8-9 US dollars, whereas in India it is around 1.2 US dollars. Tariffs in India are among the lowest in the world, especially data prices, and calls are virtually free.

Significance of Telecom Sector in India

1. Economic
   • Revenue generator: Telecom is the second-highest revenue earner for the government after income tax and is expected to contribute as much as 90% of the government’s non-tax revenue.
   • Employment generation: The sector employs as many as 4 million people, more than half of whom are indirectly employed.
   • Growth potential: According to GSMA, the Indian mobile economy is growing rapidly and will contribute substantially to India’s Gross Domestic Product (GDP).
   • Upliftment of downtrodden: Mobility services have helped farmers and fishermen to get their produce to markets better and secure better prices.
   • Adjusted gross revenue payments: For the government, it means increased revenue collection to maintain fiscal deficit and undertake welfare measures.
2. Administrative
   • Lifesaver during the pandemic: Since the unavoidable lockdown due to the COVID-19 pandemic, in addition to the economy, health, and education are alive only by leveraging the power and enabling nature of telecommunications.
   • Facilitate good governance: All of the government’s flagship initiatives’ success depends on this sector.
     • E.g.: Digital India programme.
3. Technical
   • Connectivity revolution: It powered India’s IT giants and helped hundreds of millions of Indians to get onto the grid, giving them a chance to improve their prospects.
   • Technological front runner: The roll-out of broadband and internet services requires enormous investments to the tune of ₹2.5 lakh crore over the next 3-5 years for spectrum, technology, equipment, and fibre-optics backbone.

 

Challenges in Telecom Sector

1. Administrative

• Adjusted Gross Revenue (AGR) dues to the government: AGR includes all revenues from both telecom and non-telecom services, making telecoms debt-ridden. For example, Vodafone Idea alone has a debt of Rs 2.2 lakh crore.
• Unfair division of spectrum: ISRO and India’s defense forces demand a major share of spectrum, which may push back 5G network deployment by at least 5 years.
• Fluctuation in duties: Huge fluctuations in the duties on telecom equipment contribute to connecting the whole system from the central server to the consumer.
• Demand for more revenue: Recently, the Supreme Court allowed the government’s plea to recover adjusted gross revenue (AGR) of about Rs 92,000 crore from telcos, further adding to their stress.
• Timeframe of policy execution: The government has withdrawn a lot of things to benefit the telecom sector, but by the time it reaches the market, it becomes too late.

2. Infrastructural

• Low Broadband Penetration: As per a white paper presented on broadband at the last International Telecommunication Union (ITU), broadband penetration in India is only 7%.
• Limited Spectrum Availability: Available spectrum is less than 40% compared to European nations and 50% compared to China.
• Lack of fixed line penetration: Only around 25% of towers in India are connected with fibre networks, whereas in developed nations, it is in excess of 70%.
• Inadequate updation of technology: 5G Network requires towers connected to high-speed systems, which are not possible with the present radio systems.

3. Economic

• Lack of pacts with internet players: Over the Top (OTT) applications such as WhatsApp and OLA do not need permission or a pact with telecommunication service providers, which hampers revenue generation.
• High Right-of-Way (ROW) cost: Sometimes, state governments charge a huge amount for permitting the laying of fibre, etc.
• Forced consolidation of telecom companies: Declining ARPU, falling profits, and losses are prompting the Indian telecom industry to look at consolidation as the only way to boost revenues.
• Stiff and unfair competition: To attract more consumers, telecom companies offer lower tariffs in competition with each other, which does not generate much revenue.
• Financially unviable tariff system: Major telecom operators are reporting losses and financial stress.
• Private sector more stressed than government sector: Government service providers (BSNL, MTNL) and private providers (JIO, Vodafone-Idea, Bharti) have equal assets, but loans and equities of the private sector are much higher.

4. Structural

• Semi-rural and rural reach: Service providers incur high initial fixed costs to enter semi-rural and rural areas.
• Lack of investment: Recently, Jio has stopped investing in capital expenditure, but India still needs at least Rs 7 lakh crore more for better 4G accessibility.
• Systemic delay: Delayed rollout of innovative products and services due to an unfavorable environment caused by government policies and regulations.
• Absence of skilled labour: Lack of trained personnel to maintain and operate telecom infrastructure.

 

Government Initiatives in Telecom Sector

1. Policy Initiatives

• National Digital Communications Policy, 2018: To attract USD 100 billion worth of investments and generate 4 million jobs in the sector by 2022.
• National Policy on Software Products, 2019: Target to create 10,000 start-ups, 35 lakh jobs, and raise the contribution to 10% of GDP by 2025.
• Renaming of Telecom Commission: Telecom Commission was re-designated as the “Digital Communications Commission.”
• Quicker and Cheaper ROW Permission: Department of Telecom (DoT) advised the state governments to give quicker ROW permission and charge very little to service providers.
• Convergence with National e-Governance Plan: Department of IT aims to set up over 1 million internet-enabled common service centers (CSCs) across India as per the National e-Governance Plan.

2. Government Schemes

• Digital India Programme: Umbrella scheme to connect all sectors, such as healthcare, retail, etc., through the internet.
• Bharatnet Project: Connect all 2.50 lakh+ gram panchayats with broadband National Optical Fibre Network (NOFN).
• DDU Sanchar Kaushal Vikas Pratisthan Scheme: For youths to get telecom sector jobs training.
• Tarang Sanchar: Web portal launched by the DoT that provides information on mobile towers and EMF emission compliance.
• PM Gramin Digital Saksharta Abhiyan (PMGDISHA): For people from villages to get computer training.

3. Funding Mechanisms

• Universal Service Obligation Fund (USOF): For building mobile towers in left-wing extremist states to ensure universal access to mobile connectivity.
• Relaxed FDI Policy: FDI of up to 100% (49% through the automatic route) is permitted for infrastructure providers offering dark fiber, electronic mail, and voice mail.

 

Ways Forward

1. Policy Changes

• National Digital Communications Policy, 2018
  • Establish a National Digital Grid by creating a National Fibre Authority.
  • Common service ducts and utility corridors in all new city and highway road projects.
  • Removal of barriers to approvals.
  • Facilitating development of Open Access Next Generation Networks.
  • Collaborative institutional mechanism between the Centre, States, and Local Bodies for common rights of way and standardization of costs and timelines.
• Industry Status: Benefits of industry status in line with other infrastructure sectors in the country.
• Divestment: Tower assets need to be divested into separate companies to curb costs and focus on core operations.
• Pacts with Internet Players: Explore the option of revenue sharing agreements between internet players and telecommunication companies.
• Improve Affordability: Availability of affordable smartphones and lower tariff rates would increase tele penetration in rural areas.
• Focus on Rural Markets: Penetration of rural markets (72% of the population staying in rural areas) will be the key growth driver.

• Outsourcing: Non-core functions such as network maintenance, IT operations, and customer service need to be outsourced.
• Outcome-oriented investment: Invest the money coming after the government order in the telecom sector only so that consumers need not pay more and the revenues will be stabilized.

2. Administrative

• Flexibility on AGR: Accommodate the interests of the telecom operators, like extension of deadlines, foregoing interest on dues, so that the long-term vision is not compromised.
• Curb on predatory pricing: The government should fix a minimum price to save the industry from price wars.
• Lower License Fee: The license fee of 8% of the Adjusted Gross Revenue, including 5% as Universal Service Levy (USL), is one of the highest in the world.
• Practical Deadlines: The deadlines given by the government should consider current challenges faced by the telecom industry.
• Ease of Doing Business: The government needs to prepare the ground for easy right-of-way permissions and lower costs of rights-of-way.
• Longer period for interest collection: Governments should collect interests over a longer period, giving ample time for the telecom industry to overcome financial stress.
• Benevolent Approach: The government can do away with the penalty and the interest or reduce them as well.
• Convergence with Make in India: The government should incorporate Make in India in the telecom industry to boost manufacturing.

 

3. Technological

• New and efficient technologies: Technologies such as cloud computing and M2M must be adapted to enable networked devices to perform actions without manual human assistance.
• Widening the network area: Ensure last-mile connectivity through optical fiber instead of copper.
• Increase spending on R&D: To make India capable of manufacturing and exporting hardware components like mobile handsets, CCTV cameras, touch screen monitors, etc.
• Focus on innovations: Leverage the talent pool, which is bringing in a lot of new innovations in AI, blockchain technology, etc.

4. Strategic

• Invest in technology: Buying technology may cost more but will save foreign exchange over time.
• Infrastructure sharing: Operators can optimize their capital expenditures and focus on providing new and innovative services.
  • E.g., Telecom service providers share the cost of towers.
• Fair Tariffs: Keep the tariff rates sustainably high instead of trying to make them the cheapest in the world.
• Fair Competition: Ensure that there is no cartelization and no undercutting.
• Paradigm shift to manufacturing: Shift from service-oriented investment policies to manufacturing-oriented policies.
• Mergers: Government needs to merge private service providers and then provide funds to the merged entity, like it did with BSNL and MTNL, to revive them.
• Reduce reserve price for spectrum auction: Reasonable reserve prices for the market, ensuring “truthful bidding,” and not leading to a “winners’ curse.”

 

The telecom sector has many segments, creating avenues, bringing technologies, innovations, and employment, raising India to the global level. To make this industry sustainable and stop unfair trade practices and blind competition, industry itself, consumers, and government will have to share the burden together. The sector must look for a holistic approach with convergence to bring convenience to the customer. It is a very strong component in our growing economy and deeply rooted in the system with various allied sectors. New and better ways should be found for asset optimization and revenue generation.

 

ADJUSTED GROSS REVENUE (AGR) CRISIS

In 1999, the government gave an option to licensees to migrate to the revenue-sharing fee model. Under this, telcos were required to share a percentage of their adjusted gross revenue (AGR) with the government as an annual license fee (LF) and spectrum usage charges (SUC).

Issue:

• Department of Telecom’s Stand: AGR includes all revenues (before discounts) from both telecom and non-telecom services.
• Telcos Stand: AGR should comprise only revenue accrued from core services and not dividends, interest income, or profits from the sale of any investment or fixed assets.

 

Implications of Supreme Court’s 2019 Order

• On Telecom Companies: Increased liability means losses and erodes the telecoms’ net worth, impacting retail investors.
• On Telecom Sector: This could potentially lead to Vodafone Idea’s exit and the creation of an Airtel-Jio duopoly, which may not augur well for competitiveness.
• On Banking Sector: The AGR issue has triggered panic in the banking industry, given that the telecom sector is highly leveraged. The mutual fund industry with exposure to telecom will also see erosion in value.
• On Consumers: Possibility of the creation of a duopoly will impact competition negatively.

 

2021 Update

Context: Several telecom companies opted for a government offer to convert interest on deferred spectrum auction payments and adjusted gross revenues (AGR) into equity.

Example: Vodafone Idea opted to convert interest on deferment of AGR and spectrum instalments dues of about ₹16,000 crore into equity. After the conversion, the government will own 35.8% of Vodafone Idea.

 

Benefits of the Move

• Government Equity: The government can sell these shares at the appropriate time and thereby receive the amounts due.
• Protect Employee Interest: Employment protection of existing people and generating future employment opportunities, encouraging investment, and reducing regulatory burden on Telecom Service Providers (TSPs).
• Protecting Firms from Bankruptcy: Government equity is also helping companies to stay afloat, at least without filing for bankruptcy.

• Complicated tax regime: Multiple State and Center taxes lead to considerable loss of time in transit on roads.

LOGISTICS SECTOR

The logistics sector broadly comprises the road transport sector (consisting of unorganized small businesses, trucking fleets, and large transport companies), the storage and warehousing sector, and finally third-party logistics (3PL). It is the interplay of infrastructure, technology, and new types of service providers that will define whether the logistics industry can help reduce their logistics costs and provide effective services.

Statistics/Data Logistics cost in India: $293 billion amounting to 14% of GDP, while it is 8.14% of GDP in the US, according to Economic Survey 2019-20. In 2018, India was ranked 44th in the Logistics Performance Index, a measure through which the World Bank ranks countries based on their logistics performance.

 

Significance of Logistics Sector in India

1. Economies of scale: Improving the sector would facilitate a 10% decrease in indirect logistics costs leading to a growth of 5-8% in exports.
2. Multiplier Effect: Leading industries such as automotive components, pharmaceuticals, cement, textiles, FMCG, and e-commerce depend hugely on warehousing and logistics.
3. Consumption booster: Rise of e-commerce logistics and increased domestic consumption will lead the way for the industry in the coming year.
4. Growth potential: It has grown at a compound annual growth rate (CAGR) of 7.8% per cent during the last five years.
5. Employment generation: The Indian logistics industry provides employment to more than 22 million people.
6. Supply chain management: It is used to plan and coordinate the movement of products timely, safely, and effectively.
7. Enhanced Distribution Network: Good logistics system with different logistics operators helps to optimize the time and distribution chain.
8. Cost Reduction: Due to automated facilities and other globalized distribution systems, transport costs and handling costs can be reduced.

 

Challenges of Logistics Sector in India

1. Infrastructural

• Over-dependence on road transportation: Nearly 60% cargo moved by road and 32% by rail due to over-saturated rail networks and high rail tariffs.
• Inefficient road transport system: Poor road infrastructure, multiple checkpoints, and traffic congestion make roads a poor choice.
• Inadequate logistics infrastructure: Poor material handling infrastructure and fragmented warehousing.
• High turnaround times for ships: Due to overcrowded berths and delay in cargo evacuation and unloading at berths.

2. Administrative

• Government Regulations: Carriers face significant compliance regulations imposed by the government of state and other authorities.
• Multiple regulatory and policy-making entities: Regulations exist at a number of different tiers and is imposed by national, regional, and local authorities.

3. Structural

• Non-standardization: Automation of processes is yet to develop in the industry due to its fragmentation.
• Absence of skilled labour: Lack of adequate training institutions has led to a shortfall in skilled management and client service personnel.
• Higher transaction cost: According to Economic Survey 2019-20, logistics cost in India is 14% of GDP while it is 8.14% of GDP in the US.
• Red-tapism induced delays: Redundant documentation and involvement of multiple agencies at ports and borders result in about 70% of the delays.
• Insufficient integration: Poor integration of transport networks, information technology, and warehousing and distribution facilities.

 

Government Initiatives

1. Policies and Rankings

• Infrastructure status to warehousing and logistics: Companies in the logistics sector can access funds at lower cost, longer tenure, and enhanced limits.
• 100% FDI through automatic route: 100% foreign direct investment (FDI) in the storage and warehousing sector under the automatic route.
• Draft National Logistics Policy, 2020
  • Reduce the cost of logistics to 10% from 14% of GDP.
  • Improve India’s rank in LPI to <30.
  • Logistics employment: create additional 10-15 million jobs.
  • Single point for all logistics in the country.
  • Strengthening warehousing industry and improving cold chain efficiency to reduce agricultural losses to <5%.
• Logistics Ease Across Different States Index: To rank states for the support they provide to improve logistics infrastructure within their respective jurisdictions.

2. Umbrella schemes

• Digital India: Digitisation will make innovations in supply chain management easily available to a large number of players, thus increasing the efficiency of the sector as a whole.
• Make in India: Centre and state governments collaborated to update archaic laws that have been impeding the growth of the manufacturing industry in India.

3. Infrastructural schemes

• Industrial corridors: To promote manufacturing clusters by connecting them to ports and consumption hubs via roads, railways, and inland waterways.
  • E.g.: Delhi-Mumbai Industrial Corridor (DMIC), Amritsar-Kolkata Industrial Corridor (AKIC), Chennai-Bengaluru Industrial Corridor (CBIC).
• Sagarmala Project
  • Doubling the share of seaways in the transport mix over the next decade.
  • Facilities are being developed over a 2000-metre waterfront, and the logistic area comprises 400 acres.
• Multi Modal Logistics Park (MMLP)
  • Freight aggregation and distribution hubs to bring down overall freight transportation costs.

• Road, air, railways, and waterways connectivity to facilitate smooth transition of freight across transportation modes and reduce lead times.
• Modern mechanised warehousing space.
• Services like customs clearance and warehouse management systems to reduce the inventory holding cost.

4. Legislations

• Goods & Services Tax (GST)
  • Improved turnaround time for trucks enabling them to cover longer distances every day so that transporters can carry out their business with a smaller fleet.
  • Reduction in inventory carrying costs and working capital requirements leading to significant financial savings.
  • Reduced inventory levels reduce the overall warehousing space required, which would lead to significant savings in real estate cost.
• National Logistics Efficiency and Advancement Predictability and Safety Act (NLEAPS)
  • To modernise and formalise the logistics services and promote digitisation in the sector.
  • To reduce the logistics cost from the present 14% of the Gross Domestic Product (GDP) to less than 10% of GDP.

5. Institutional Framework

• Logistics Division in the Department of Commerce: To improve existing procedures, identify the bottlenecks, and introduce technology-based interventions.
• Logistics Data Bank (LDB) project: Tracks movement of containers through rail or road till the Container Depot and uses RFID tags.

 

Ways Forward

1. Technological

• Emphasis on other transport infrastructure: Building world-class road networks, integrated rail corridors, modern cargo facilities at airports, and creation of logistics parks, which need to be given a status of Special Economic Zones.
• Technological advancement in warehouses
  • Smart Warehouses where all gadgets and devices are connected to each other via the Internet (Internet of Things).
  • Artificial Intelligence enables logistic players to automate the supply chain and collate firsthand insights like tracking, backend operations, inbound and outbound functions.
  • Autonomous transport can save up to 20% fuel costs by supporting transportation, warehousing operations, and last-mile deliveries.
• Integrated Logistics Portal: An e-marketplace to connect buyers, logistics service providers, and government agencies such as customs, port community systems, port terminals, shipping lines, railways, etc.

2. Structural

• Measure the sector’s performance at regular intervals: To provide evidence to the policymakers so that a favorable policy environment is created.
• Trained manpower: Essential both for the third-party logistics sector as well as the manufacturing and retailing sectors.
• Prioritize research and development: Encourage the use of indigenous technology, which can make the industry cost-competitive and bring improvement in service.

 

3. Boost capital availability

• Infrastructure status opens new funding avenues: External commercial borrowings (ECB), longer tenure funds from insurance companies, pension funds, sovereign funds, fresh loans from the India Infrastructure Financing Co. Ltd (IIFCL).

• Venture capital funds: Logistics industry has been on the radar of global venture capitalists (VC) who have been scanning the Indian markets to make their next big move.

4. Administrative

• One Nation, One Tax, One Permit: Incentivise trucking industry by introducing a new institutional framework to improve the ease of doing business in the country.
• Supply Chain Cost Reduction:
  • Moving to a vendor-managed inventory model wherever it was possible to do so
  • Replace the outdated manual yard management process with a new, digital solution using RFID tracking

 

Case Studies

• Relay trucking introduced by Rivigo: It has immense scope for growth especially with the advent of GST.
• Big Basket venture (hyperlocal model) by Future Group: On-demand needs of customers are met through local offline shops via a digital platform.
• Insta Intelligence automation tool by Wipro: Big data is used to reduce inefficiencies in last-mile delivery, provide transparency to the supply chain, optimize deliveries, protect perishable goods, and automate the entire supply chain.

Logistics and warehousing play an indispensable role in the transportation of goods across the country. It supports procurement, manufacturing, and distribution services which collectively build robust economies. The rise of e-commerce logistics and increased domestic consumption will lead the way for the industry in the coming years.

 

POWER SECTOR

Power is an essential constituent of infrastructure affecting economic growth and welfare of the country. In the last two decades, India’s power generation capacity has increased considerably. This is mainly due to the delicensing of power generation in 2003, which enabled unlimited participation of private players.

Statistics/Data India is the third-largest producer and second-largest consumer of electricity worldwide. Installed power capacity: India has an installed power capacity of 395.07 GW, as of January 2022. Electricity to GDP elasticity ratio in India is 0.8, as per Economic Survey 2016-17. Coal-based power: Coal-based power installed capacity in India stood at 203.9 GW in January 2022 and is expected to reach 330-441 GW by 2040. Renewable energy: As of January 2022, India’s installed renewable energy capacity stood at 152.36 GW, representing 38.56% of the overall installed power capacity. Solar energy is estimated to contribute 50.30 GW, Wind power is estimated to contribute 40.1 GW, Biomass: 10.17 GW, Hydropower: 46.51 GW. FDI inflow: Total FDI inflow in the power sector reached US$ 15.84 billion between April 2000–December 2021, accounting for 2.77% of the total FDI inflow in India. City Gas Distribution Network: Geographical areas covered: There are 228 geographical areas authorized by PNGRB in 27 States and Union Territories. Area covered: Approximately 53% of the country’s geographical area. Population covered: Approximately 70% of the population.

 

Significance of power sector in India

• Plays a unique role: In achieving national targets and international commitment, and more importantly, to supply clean energy, air, and water to its people.
• Importance as an index: For measuring the development level of a nation as it improves the quality of life of human beings.
• Increasing demand: Massive addition to the installed generating capacity is required for efficient and effective Production of Goods and Services.
• Backbone of industrial & agricultural growth: As electricity is one of the convenient, efficient, and versatile forms of commercial energy.
• Private sector participation: Currently, private utilities generate about 46% of the country’s power, followed by state utilities (30%) and central generating utilities (24%).
• Great potential: Due to the vastness in its geographical region and the presence of natural resources, the Indian power sector is one of the most diversified in the world.
• Importance of efficiency: Energy efficiency brings a variety of benefits such as reducing greenhouse gas emissions, reducing demand for energy imports, and lowering our costs on a household and economy-wide level.
• To make Indian industry globally competitive: Availability of reliable and quality power at competitive rates and exploit the tremendous potential of employment generation.
• For rural development: Supply of electricity at a reasonable rate to rural India is essential for its overall development.

 

Challenges of power sector

1. Administrative
   • Policy Paralysis: Fuel cost pass-through, competitive bidding guidelines are not in consonance with National Electricity Policy and Electricity Act.
   • Differential rate of electricity: Different consumers purchase electricity at different rates based on their consumption category resulted in insufficient revenue realisation.
2. Infrastructural
   • High transmission losses
     • India’s aggregate technical and commercial losses average about 32% of electricity while it is only 6–11% among developed countries.
     • 1% reduction in transmission losses can save about 800 MW in capacity.
   • Decline in capacity utilisation: Plant Load Factor (output of a thermal power plant compared to the maximum output it could produce) has declined from 78% in 2009–10 to 61% in 2018–19.
   • Outdated infrastructure: Old and inefficient plants and lines resulted in low growth and transmission rate in electricity generation and transmission.
   • Low-quality rural electricity
     • Government initiatives to provide electricity to households are limited to illumination alone.
     • 7% of villages receive electricity for one to four hours a day.
   • Malware attack on electricity grid: Chinese malware targeted Mumbai’s electricity grid, causing a power outage in 2020.

1. Economic
   • Unviable financing environment: Lending rates have increased from the time of project appraisal resulting in project cost overrun.
   • Poor financial health of state discoms: Populist tariff schemes, AT&C losses and operational inefficiencies resulted in humongous outstanding debts in State Discoms.
2. Systemic
   • Unavailability of fuel: Coal supplied by CIL is limited to around 65% of the actual coal requirement of coal-based thermal power plants.
   • Interstate river water disputes: Unavailability of water to operate hydro plants due to river water disputes among states.
   • Uneven distribution of renewable energy: Consumers are reluctant to buy renewable electricity in states with less renewable energy capacity due to high tariff costs.
   • Demand-supply gap: Central Electricity Authority had estimated that India had an energy surplus of 4.6% while states like Chhattisgarh, Odisha, and Uttar Pradesh continue to face peak deficit.
   • Inaccessibility to power: India has one of the lowest per capita power consumptions in the world, with about 300 million people having no access to electricity.
   • Dependence on fossil fuel: India’s over-dependence on coal as 60% of the generated power comes from thermal power plants, creating environmental problems.
   • Free electricity and political giveaways:
     • In several states, it is considered impossible to charge farmers for power consumption.
     • Most of the power lines connected to pump stations are directly connected to household and other industrial purposes.

 

Government Initiatives

1. Policy initiatives

• Draft Connectivity and General Network Access to the Inter-State Transmission System Regulations, 2022: GNA is a non-discriminatory access to the inter-state transmission system. It is in sync with the concept of “one nation, one grid”.
  • Advantages: It will ensure that a generator focuses only on producing power and the consumer on buying it. Further, it will do away with unnecessary contracts between power producers and the bulk consumers for delivery of power. Hence, support investments in the power sector due to less hassle.
  • Challenges: It may be difficult to forecast the demand for power due to variability in supply as well as demand by consumers.
• Draft National Electricity Policy 2021
  • To make electricity available to all households in the next five years.
  • Covers multiple areas—grid operation, power markets, regulatory process, energy efficiency, optimal generation mix, transmission, distribution, and many more.

 

2. Government Schemes

• Ujwal DISCOM Assurance Yojana (UDAY): State governments can take over 75% of discom debt and pay back lenders by selling bonds while for the remaining 25%, discoms will issue bonds.
• Deendayal Upadhyaya Gram Jyoti Yojana (DUGJY)
  • Metering at all levels (input points, feeders and distribution transformers)
  • Micro grid and off grid distribution network & Rural electrification
  • Strengthening of sub-transmission and distribution network
  • Feeder separation
• Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya scheme): To provide infrastructure for providing electricity to all households in the country
• Grid Connected Rooftop & Small Solar Power Plants Programme and Off-Grid & Decentralised Solar Applications: Both the schemes are for promoting installation of solar rooftop systems
• One Nation, One grid: To integrate five regional grids catering to electricity demands of each region
• Scheme of Asset Management and Debt Change Structure (SAMADHAN): To prevent the liquidation of stressed power projects by pushing banks to take over the debt of power plants that are experiencing difficulties.
• Solar power park in PPP mode: Odisha plans to set up a large 1,000-MW solar power park under public-private partnership (PPP) mode involving an investment of about Rs 6,500 crore
• Ultra-mega power projects (UMPP): They are coal-based thermal power projects that have 4,000 MW generation capacity
• UJALA (Unnat Jyoti by Affordable LEDs for All): With a target to distribute 770 million LEDs across 100 cities to become the largest LED distribution program in the world
• 24×7 – Power for All: To provide 24×7 power available to all households, industry, commercial businesses, public needs, and any other electricity-consuming entity and adequate power to agriculture farm holdings
• Integrated Power Development Scheme (IPDS): Strengthening of sub-transmission and distribution network and metering of distribution transformers / feeders / consumers in the urban areas
• National Smart Grid Mission: For smart electrical grid based on state-of-the-art technology in the fields of automation, communication and IT systems
• TARANG, UJALA, VIDYUT PRAVAH, GARV, URJA and MERIT
  • The initiatives were launched keeping in line with the Digital India initiative.
  • They primarily seek to enhance transparency in the power sector
• Green Energy Corridors Project: Grid-connected network for the transmission of renewable energy produced from various renewable energy projects.
• City Gas Distribution Network (CGD): CGD network is the interconnected network of pipelines to make supply of natural gas in the form of piped natural gas (PNG) to domestic, industrial or commercial premises and CNG for use as auto-fuel in a specified geographical area.
  • Recent development: Petroleum and Natural Gas Regulatory Board has invited electronic bids under ‘11A CGD Bidding Round’. Once finalized it will cover 98% of the country’s population.
  • Benefits: CNG is a cleaner fuel, hence keeps air pollution in check. Further, due to high ignition temperature it is unlikely to ignite and cause injury.
  • Challenges: Demand side issues arise due to lack of gas-based equipment’s coupled with subsidy on LPG and safety concerns of pipeline disincentivizes consumers. Further, the variable gas pricing policy which is dependent on external factors [such as consumption pattern in USA, Canada, etc.].

3. Funding Mechanisms

• Power System Development Fund (PSDF): It has been awarded a budget of 604 crores for modernizing power and energy transmission and distribution
• Budget 2022-23: 16,000 crores proposed by the central government for power and renewable energy sector

• Joint Indo-US PACE Setter Fund: A contribution of US$ 4 million from each side to enhance clean energy cooperation.
• Relaxed FDI policy: Government has delicensed the electrical machinery industry and allowed 100% foreign direct investment (FDI) in the sector.
• PLI Scheme: In the Union Budget 2022-23, the government allocated Rs. 19,500 crore (US$ 2.57 billion) for a PLI scheme to boost the manufacturing of high-efficiency solar modules.

4. Legislations

• Electricity Act, 2003: Consumers can buy power from any power generating plant through non-discriminatory access to transmission and distribution lines.
• Coal Mines (Special Provisions) Act, 2015: To provide for allocation of coal mines and help tackle the issue of fuel shortage for power generation.
• Electricity (Rights of Consumers) Rules, 2020: National minimum standards for the performance parameters of DISCOMS without urban-rural distinction and the need for automatically compensating consumers.

 

5. Institutional Framework

• Power Grid Corporation: In charge of planning, implementation, and maintenance of the interstate transmission system and operation of national and regional power grids.
• Energy Efficiency Services Limited (EESL): Aims to create market access for efficient and transformative solutions that create a win-win situation for every stakeholder.
• Bureau of Energy Efficiency (BEE): A statutory body responsible for the improvement of energy efficiency of the economy through various regulatory and promotional instruments.

 

Ways Forward

1. Policy Changes
   • Outcome-oriented investment: Invest the money coming after the government order in the telecom sector only so that consumers need not pay more and the revenues will be stabilized.
   • Need for balancing power: Since renewable energy sources are intermittent in nature, a balancing power is vital to support the grid and even out the fluctuation.
     • For e.g.: If solar energy is utilized in a particular area, it will need an alternate source for the night-time requirement, through gas or hydro-based power.
   • Promoting renewable energy: As per NITI Aayog, pricing should be in a way that the buyers are indifferent between conventional and renewable energy resources until grid parity is achieved.
   • Larger liquidity infusion: It must go hand-in-hand with credible plans to pay down growing debt.
   • Elimination of cross-subsidies: Each consumer category should be charged what it costs to service that category.
2. Administrative
   • Subsidy Reforms: For agriculture, the direct subsidy per acre of land through Direct Benefit Transfer (DBT) may be considered instead of providing separate subsidies for fertilizers, electricity, crop insurance etc.
   • Tariff reforms: Introduce performance-based incentives in the tariff structure.
   • Strengthening regulators: Personnel policy for CERC must be provided with its own cadre with adequate promotional prospects and better amenities to those working under the commission on par with their job profile.
   • SERC reforms
     • SERCs should assess the SoP reports of DISCOMS and revise their regulations more frequently.
     • SERCs should organise public processes to help consumers raise their concerns.
   • Concession to renewables: Greater concessions to renewable power developers to promote green energy.
   • Monitoring of Supply: India needs real-time monitoring of supply at the end-user level.
   • Quality and maintenance services: Adequate demand estimation and respective power procurement will go a long way in reducing load shedding.
   • Customer Service: Radically innovative approaches such as the proposed prepaid smart meters and last-mile rural franchisees to improve customer service and revenue collection.

1. Technological
   • New and efficient technologies: Technologies such as cloud computing and M2M must be adapted to enable networked devices to perform actions without manual human assistance.
   • Managing the demand for power: Introduce 100% metering-net metering, smart meters, and metering of electricity supplied to agriculture.
   • Prepare a clean energy technology strategy: The India strategy should identify relevant “breakthrough technologies,” establish the funding mechanisms and create the ecosystem for partnerships.
   • Develop own systems for photovoltaics (PVs) and batteries: India must develop its own world-scale, competitive, manufacturing systems for photovoltaics (PVs) and battery storage.
2. Strategic
   • Provide 24X7 power for all
     • Accurate monitoring of power supply at the end-user level.
     • Quality and maintenance service of the discoms, including efficient transmission, reduce load shedding and shutdowns.
     • Human error should be reduced by ensuring tech-driven billing, metering, and collection.
   • Invest in technology: Buying technology may cost more but will save foreign exchange over time.
   • Promote cross-border electricity trade: To utilize existing/upcoming generation assets.
     • E.g. SAARC Electricity Grid.
   • Privatisation: Privatize our distribution sector by creating joint ventures with the government.

Case Study Model

1. Power sector reforms in the UK
   • All the 12 distribution utilities established in 1989 were privatized barring the nuclear electricity.
   • Retail competition was introduced in 1990 and was extended to all consumers in 1998.
2. Odisha: Outsourced infrastructure maintenance in rural areas to franchisees.
3. Maharashtra: Introduced village-level coordinators to address local-level challenges.

 

The power sector plays a vital role in the economic growth and development of the country. As an economy that is energy import-dependent, fossil-fuel-based India must balance between the rising demand for energy and an unhealthy strong linkage between this demand and environmental pollution. Improving the performance of this sector through efficient government interventions should be made the top priority of the government.

STATE OF DISCOMS

Tamil Nadu state Discom filed a power tariff revision petition in Tamil Nadu Electricity Regulatory Commission proposing to hike power tariffs by 10% to 35 in July 2022.

DISCOMS

• Power generation, transmission & distribution are the 3 main processes involved in the power sector.
• Distribution is done by the Power Distribution Companies (DISCOMs), which connect power producers to households.
• DISCOMs companies connect the power generator to retail consumers.
• Power is a concurrent list subject in the Indian Constitution, and the responsibility for distribution and supply of power to consumers lies with the state governments.
• The financial situation of the DISCOMs has been a real concern for the government.

Data Loss in Discom: Most power DISCOMs incur losses every year. The total loss was estimated to be ₹90,000 crore in the financial year 2020-21. (NITI Aayog report on Power Distribution Sector) Estimates: Estimates suggest that for the fiscal year 2020-21, combined losses of the discoms are ₹2.1 lakh crore without subsidies and grants, which mount to ₹3.0 lakh crore when arrears are included (RBI + PRS report).

 

Challenges Faced by the Power Sector DISCOMs

1. Economic
   • Huge losses: According to the NITI Aayog report, most power DISCOMs in the country incur losses every year. Total loss was estimated to be ₹90,000 crore in the financial year 2020-21. Due to these accumulated losses, DISCOMs were unable to pay for generators on time.
   • Profitability: The gap between the average cost of supply by DISCOMs and the average revenue realized stands at ₹0.49 per unit due to a lack of regular and commensurate tariff hikes.
   • Poor Cash Flow: DISCOMs companies collect payments from consumers against their energy supplies. Due to irregular cash collection and shortfalls, often due to payment delays from consumers, DISCOMs are unable to make timely payments for their energy purchases from generators.
   • Determination of tariff rate: DISCOMs companies are not hiking their tariffs in line with increased electricity production costs. This is because most of them are owned by state governments, and to make electricity affordable to citizens, elected governments do not hike tariffs due to political reasons. There are also frequent delays in the tariff determination process.
   • Competition from Renewable Energy: Increasing competition from solar power, whose tariff has come down to ₹3 per unit compared to ₹6 per unit, has led to financial rigidity and losses for DISCOMs.
   • Impact of COVID-19: The COVID-19 pandemic has shattered incoming cash flows to DISCOMs. The lockdown disproportionately impacted revenues from commercial and industrial segments.
2. Technical
   • Lack of SMART metering: Various levels in the distribution chain (the feeder, the distribution transformer, and the consumer) have not been fully metered. As a result, it is difficult to identify loss-making areas and take corrective action.
   • High Aggregate Technical and Commercial (AT&C) losses: AT&C loss reflects the loss due to theft, energy loss during transmission and distribution, and inefficiency in billing & commercial loss such as inefficiency in collection & default in payment.

1. Administrative and Political
   • Lack of independence of DISCOMs: State government-owned distribution companies lack the competence and independence to work efficiently, which is another reason for their poor functioning and losses.
   • Power as poll promise: Political parties during election campaigning often promise to give free power to farmers, residential households consuming up to 300 units, small traders, small shop-owners, among others. It is one of the major reasons for the losses of DISCOMs.
   • Difference in objectives: While the Ministry of Finance is concerned about the financial situation of the discoms, the Ministry of Power (MOP) has the mandate to pursue objectives that are politically popular (access and quality) and increase renewable capacity.
     • For example, the MOP has given higher priority to infrastructure building over financial sustainability, which has become a major concern for the MOF.
   • Regulation of Power Finance Corporation (PFC)/Rural Electrification Corporation (REC): On the one hand, these are regulated by the RBI as NBFC. On the other hand, these have been used to pursue the government’s quantity targets on access, quality, and renewable capacity. Therefore, the MOP will be reluctant to impose hard budget constraints on the discoms, which creates moral hazard and disincentives for discom reforms.
   • Free-bee culture: The state governments are involved in greater freebie-ism like offering free electricity in the power sector. Therefore, lending to discoms has become a Ponzi dynamic which leads to under-recovery by the discoms.

 

Measures taken for Power Sector reforms

Various steps have been taken by the government over the years to resolve the problems being faced by the DISCOMs companies. Some of them are:

• Ujjwal DISCOM Assurance Yojana (UDAY Scheme): Ujjwal DISCOM Assurance Yojana (UDAY) was launched in 2018 with the objective to improve the financial position of DISCOMs. State governments took over 75% of the debt of their DISCOMs, issuing lower-interest bonds to service the rest of the debt.
• Revamped Distribution Sector Reform scheme: It was announced in budget 2021-22 by the union government in order to improve the financial health and operational efficiency of DISCOMs. Under this scheme, AT&C losses will be brought down from 21-22% to 12-15% by 2025-26. Operational efficiencies of discoms will be improved through the installation of smart metering and upgradation of the distribution infrastructure.
• Liquidity schemes: To help these DISCOMs companies, the central government in 2020 announced a Liquidity Infusion Scheme (Aatmanirbhar Bharat Abhiyan), under which loans of ₹1,35,497 crore have been sanctioned. As of December 2021, a total of ₹1.03 lakh crore has been disbursed to DISCOMs.
• Green Tariff Policy: Union Government is working on a ‘Green Tariff Policy’ with the objective of reinforcing India’s green energy credentials. Green Tariff Policy will help DISCOMs companies supply electricity generated from clean energy projects at a cheaper rate as compared to power from conventional fuel sources such as coal.

Best Practices (source: NITI Aayog Report on Power Sector Reform) Delhi Dedicated Corporate Strategy Planning and Performance Management Group to formulate a long-term strategic plan A Strategic Leadership Team (SLT) maintained focus on action plans and planned deliverables through corrective and preventive actions Technology Measures: GIS Mapping of assets, AMR meters, tamper-proof static meters, SCADA Control Systems Due to these reforms AT&C loss has reduced from 45% in 2001-02 to 9.1% in 2018-19 Haryana Aggressive installation of smart meters leading to elimination of manual intervention in meter reading has led to decline of AT&C loss from 27% in 2012-13 to 18.1% in 2018-19 Andhra Pradesh Management Measures: Focus was on deploying reforms and long-term strategies to reduce power bills and attract private investments in the power sector. Strong collaboration among state government, regulator and utilities Technology Measures: HVDS System, Energy Efficient Pump Programme, DTR Replacement using Vehicle Tracking System, OMS applications to monitor feeder interruptions, complete replacement of electro-mechanical meters with high-accuracy electronic meters Due to these reforms AT&C loss reduced from 18% in 2007-08 to 10.55%xiv in 2014-15 Gujarat Feeder separation and focus on infrastructure development Anti-theft programmes coupled with consumer-centric billing and payment initiatives to make payment seamless Due to these reforms AT&C loss reduced from 18% in 1996-97 to 14% in 2018-19

 

Way forward

• Stimulus: There is a need of larger liquidity infusion so that the entire electricity chain can be reformed
• Rationalise subsidies: free electricity needs to be eliminated from those who do not deserve such support (i.e. Big farmers) and it needs to be given to those who really deserves like (i.e small and marginal farmers)
• Regulatory Reforms: The state governments need to promote transparency, autonomy and competence of the State Electricity Regulatory Commissions (SERC). De-politicization of DISCOMS is a necessity for the revival of DISCOMs
• Renewable Energy Integration Reforms: DISCOMs need to accommodate an increasing amount of renewable energy from generators.
• Improving AT&C losses: Many DISCOMs need to improve their billing efficiency through installation of better and smart metering.
• Privatisation of DISCOMS: Only 10% of India’s population is served by private distribution licensees. Hence, good Corporate Governance and higher private participation in distribution hold out the possibility of greater efficiency.
  • For example: It is an experiment that has yielded positive results in many cities, including Delhi, Mumbai, Kolkata and Ahmedabad. Before it was privatised in 2002, AT&C losses in the national capital were at a high 53% and the government was subsidising discoms to the extent of Rs 12,000 crore every year. After privatisation losses came down, and today Delhi has one of the lowest AT&C losses among DISCOMs in the country at just 8 per cent.
• Greater autonomy for state-owned discoms: Most of the DISCOMs companies are owned by state governments. There are very a few private DISCOMs. higher private participation in distribution has potential to bring transparency and efficiency in DISCOMs
• Greater transparency: For this, the next finance commission should recommend that the state government should ensure that discoms losses and debts are reflected in their state government balance sheet.
• Simplicity in tariffs: Most states have more than a hundred tariff rates, which leads to large costs and zero benefits. The central government and the central regulator should nudge/persuade their respective state government counterparts to have tariff schedules.
  • For example, one for agriculture, one for industry and commerce, and say 3-4 for households.
• Smart metering: There should be a target for smart metering of the entire system, including agriculture. This has the potential to improve financial performance and reduce inefficiency and corruption.
• No Cross-subsidization: The state government must eliminate rampant cross-subsidization. For example, Industrial and commercial consumers should pay tariffs close to the costs of procuring power by the discoms and not the costs that make up for losses elsewhere in the system, like below-cost pricing for agricultural consumers and households consumer in a state.

 

India has made impressive strides in increasing access to the electricity and in expanding renewable capacity. But financial health of the DISCOMs is rapidly deteriorating. In recent , several initiatives have been taken by government to address the challenges in the power sector. These include structural changes in the regulatory framework as proposed by the UDAY scheme and Electricity (Amendment) Bill, 2021 to address financial issues being faced by companies distributing electricity.

OIL SECTOR

Petroleum also known as crude oil and oil is a naturally occurring, yellowish-black liquid found in geological formations beneath the Earth’s surface. It is commonly refined into various types of fuels. India is the world’s third-largest consumer of oil with 85 per cent of its crude oil and 34 per cent of its natural gas requirements is being fulfilled by imports.

Statistics/Data India consumes around 5 million barrels of crude oil every day Of that, it imports approximately 4.5 million barrels/day making the country the third-largest crude market in the world India’s oil demand is projected to reach 10 million barrels per day by 2030, from 5 million barrel per day in 2020. Around 50% of imported oil is sourced from Saudi Arabia, Kuwait, Abu Dhabi, Iran and Iraq Currently, India has 11 days of reserve cover (5.33 million tonnes) with plans to increase it to 24 days (11.83 million tonnes) India can save ₹10,700 crores for every $1 drop in oil prices as 80% of its energy requirements is met by imports from the international market Extent of Oil-Bearing Strata in India Sedimentary rocks: 1 lakh sq.km. or 42% of India Marine basins of Mesozoic and Tertiary times: 10 lakhssq.km. Total continental shelf of probable oil-bearing rocks: 2 lakhssq.km. Mumbai High, the Khambhat Gulf and the Assam are the most productive areas

 

Significance of Oil Sector in India

• Growth potential: According to Economic Survey 2017-18, $10 per barrel increase in oil price can decrease the GDP by 0.2-0.3%
• Remittance and energy security: Civil unrest in oil economies can impact oil supply line to India and the Indian diaspora who are responsible for around $80 billion forex as remittances
• Foreign Debt: According to Economic Survey 2017-18, $10 per barrel increase in oil price can increase CAD by $9-10 bn
• Strength of Rupee: An increase in the import bill widens the trade and current account deficits which tend to put pressure on the rupee
• Inflation in the economy: According to Economic Survey 2017-18, $10 per barrel increase in oil price can increase the WPI inflation by 1.7%
• Fiscal impact: Higher oil prices mean more revenue for the states as tax is ad valorem
• Influences economic decision making: Oil and gas sector are among the eight core industries in India and plays a major role in for all the other important sections of the economy.
• Export capability: The country is not only self-sufficient in the refining capacity for its domestic consumption, but also exports a sufficient quantity of petroleum products.

 

Challenges of Oil Sector

1. Economic

• Fiscal challenges: Heavily-taxed retail fuel prices have touched record highs threatening the demand-driven recovery
  • According to Economic Survey 2017-18, $10 per barrel increase in oil price can increase the fiscal deficit by 0.43% of GDP
• Import dependence: India imports about 84% of its oil and relies on West Asian supplies to meet over three-fifths of its demand
• Volatile oil prices: Oil-producing countries like Saudi Arabia limited its oil production by 1 million barrels per day to strengthen crude oil prices.
  • Supply Side Issues:
    • Reduction in Shale production in the US due to natural disasters.
    • OPEC’s cartelisation of prices to suit their requirements.
    • The Ukraine-Russia war and sanctions on Russian oil have also caused supply shocks to many areas.
  • Demand Side Issues:
    • Post-COVID resurgence in the economy has created a higher demand for oil.
    • Growing economies increase demand for energy in general and especially for transporting goods and materials from producers to consumers.
    • Russian sanctions distort the supply, as they close more oil wells, the demand for oil surges.
• Vulnerable to external shocks: As one of the largest crude-consuming countries, the unpredictability of actions by oil-producing countries has the potential to undermine consumption-led recovery

2. Administrative

• Ease of doing business: Major private players based abroad show lack of interest in exploration and production in India due to long delays in the operationalization of production even after allocation.
• Plethora of approvals: Requirement to get key approvals to begin production including environmental clearances, DGHC approval, etc.
• Lack of clarity in SPR: Strategic Petroleum Reserve (SPR) arrangement between the oil refineries and the Union or state governments is not specified well.
• Ambiguity surrounding mobilisation process: Lack of transparency around SPR holdings is compounded by the ambiguity surrounding the mobilisation process.
• Impractical taxation policy: When global crude oil prices fall and prices slide, the government slaps fresh taxes and levies to ensure that it rakes in extra revenues.

3. Systemic

• Low productivity: Most of India’s crude oil production comes from aging wells that have become less productive over time.
• Oligopoly of oil majors: Crude oil production in India is dominated by ONGC and Oil India which acquire most of the blocks that are put up for auction in India.
• Steady decline in India’s crude oil production: Lack of new oil discoveries in India coupled with a long lead time to begin production from discovered wells.
• Storage capacity and quality mismatch: There is a shortage of storage capacity in India and a mismatch between the quality of West Texas Intermediate (WTI) and the requirements of our refineries.

4. Political

• War and Conflict: War and conflicts result in lowering investments and supply shocks for oil and other commodities, thus making the oil sector suffer.
  • Example: Ukraine-Russian conflict has created a demand surge and also create supply shocks and Russian oil has come under sanctions.
• Climate obligations: Climate policies are introducing new uncertainties on both the supply and demand sides. Climate targets could leave a lot of energy resources as ‘stranded assets’.
• Internal Issues: With lower incomes, governments in oil-producing countries can no longer lavish subsidies and other perks on their local populations. This might lead to domestic instability and repression.
  • Example: The countries that appear most immediately vulnerable to internal instability are Venezuela, Ecuador, Nigeria, Brazil.
• Reliability on Large Producers: Since the large producers are pumping so much oil, they have less spare capacity.
  • Example: Saudi Arabia’s spare capacity has roughly halved since 2009. This could mean that any de-escalation of Saudi-Iranian tensions, for example, could lead to a price shock.

 

Government Initiatives

1. Innovations

• XP100 petrol variant: Developed by Indian Oil with octane number 100 to put India in an elite group of countries having access to such high-quality oil.
• Winter Diesel: Introduced by Indian Oil Corp. Ltd. specifically for high-altitude regions and low-temperature regions such as Ladakh, where ordinary diesel can become unusable.
• BS-VI fuel: Much lower sulphur content than BS-IV fuel to equip vehicles with better catalytic converters that capture pollutants.

• National Data Repository: To facilitate potential investors to take informed decisions based on the geo-scientific data of hydrocarbon resources in the country.

2. Policy Initiatives

• Hydrocarbon Exploration and Licensing Policy (HELP):
  • Open Acreage Licensing Programme: Option for companies to select the exploration blocks on their own without having to wait for the formal bid round from the government.
  • Single license: To explore conventional and unconventional oil and gas resources to propel investment in and provide operational flexibility to the investors.
  • Petroleum Exploration Licenses: Central Government has granted PELs for all the offshore blocks and also recommended the same to all the concerned State Governments for all on-land blocks.
• FDI policy: 100% Foreign Direct Investment (FDI) in many segments of the sector, including natural gas, petroleum products and refineries among others.
• Strategic Petroleum Reserve (SPR) Programme: Underground storage capacity for petroleum and related products in Mangalore, Vishakhapatnam and Padur for safeguard against shortages or supply disruptions.
  • India has 87 days of reserves.

3. Government Schemes

• Ethanol Blended Petrol (EBP) Programme: To promote the use of alternative and environment-friendly fuels and to reduce import dependency for energy requirements.
• Sanrakshan Kshamta Mahotsav (Saksham): To sensitize the masses about conservation and efficient use of petroleum products, which will lead towards better health and environment.

4. Institutional Framework

• Petroleum and Natural Gas Regulatory Board: Tasked with regulating, refining, processing, storage, transportation, distribution, marketing, and sales of petroleum products and natural gas.
• ONGC Videsh Ltd. (OVL):
  • Tasked with prospection, exploration, production of oil in blocks acquired overseas.
  • It contributes about 14.5% and 8% in India’s Oil production.

5. Funding Mechanism

• Viability Gap Funding: Bids are made as to requirement for funding from government and one whose requirement for state funding is least is awarded the project.

6. International Collaboration

• Motihari-Amalekhgunj petroleum pipeline: To transport fuel from Barauni refinery in Bihar to Amalekhgunj in Nepal.
• Joining of Advanced Motor Fuels: International platform to promote collaboration in R&D for developing advanced motor fuels/alternate fuels to improve fuel efficiency and reduce GHG emissions.

 

Ways Forward

• Reduce levies on oil production: Reduce levies including oil cess, royalties, and profit petroleum especially when crude oil prices are below $45/barrel.
• Joint investment by government and private sector: To cover trading, crude purchases, co-freighting.
•  Introduce transparency and accountability with respect to SPR: The procedures, protocols, and facts about Indian SPR storage require greater public and parliamentary scrutiny, just like India’s other strategic reserves.
• Efficient SPR mobilization: By laying out designated roles for different agencies and process clarity to avoid redundancies in times of crisis.
• Diversification of SPR holdings: Based on geographical location, storage location, product type, form of ownership, etc.
• Storing oil abroad

• Operationalise, modernise, and add oil tanking facilities at Trincomalee in Sri Lanka.
• Strategic partnership with Oman (Ras Markaz) for oil storage.

• Empower the oil traders and remove bureaucratic control: India cannot leverage the current market conditions of low and volatile oil prices to its national advantage unless we empower the traders and leave them unencumbered from bureaucratic control.
• Ensuring energy justice: Access to energy must be affordable and reliable for socio-economic transformation to take place.
• Transitioning towards Greener Fuel: Though the oil sector today is indispensable for growth, it can be made cleaner with the use of products like Ethanol.

• Example: India, in its pursuits of becoming carbon neutral by 2070, brought forward its 20% ethanol blending target.
• Ethanol also helps in:
  • Reducing oil imports.
  • Cutting down air pollution.
  • Offering economic and employment opportunities for farmers.

 

Energy is and will remain vital to India’s aspirations for growth. As India depends on imports for over 80% of its oil requirements, oil prices have wide implications for the financial health of India. Safe oil supply lines are essential for its energy security. There is a need to remove the bureaucratic hurdles in our PSUs, increasing storage capacity, sound financial planning by the government, and an institutional basis for an integrated energy policy.

COAL SECTOR

Coal is variously referred to as the ‘black gold’, ‘black diamond’ etc., in reference to its value in driving the economy. Coal is the most important and abundant fossil fuel in India. It accounts for 55% of the country’s energy needs. The country’s industrial heritage was built upon indigenous coal.

Classification of Coal

It is formed from dead and decaying plant matter over a period of millions of years by a process called coalification. Different types of coal are:

1. Peat: It is the partially decayed plant material.
2. Lignite (Brown coal): Carbon content = 40% to 55%.
   • Lowest grade of coal.
   • It gives off the most smoke because of high moisture content.
   • It is used for electricity generation.
3. Bituminous coal (Black coal): Carbon content = 60% to 80%.
   • Higher grade of coal than lignite.
   • It is used in manufacturing coke and in power generation.

1. Anthracite: Carbon content = 80% to 95%
   • Highest grade of coal with the highest calorific value.

 

History of Coal Sector in India

• 1774 – EIC started the commercial exploitation of the Raniganj Coalfield.
• 1956 – National Coal Development Corporation was set up.
• 1971-1972 – Nationalisation of the coking coal mines.
• 1973 – Nationalisation of the non-coking coal mines.
• 1991 – Captive mining only – mining for own use only and cannot be sold to other players.
• 2014 – Cancellation of coal mines allocations after 1993 following Supreme Court verdict.
• 2018 – Auctioning of coal mines on the basis of the highest price/tenure.
• 2019 – Cabinet approved 100% FDI via the automatic route for coal mining.
• 2020 – Commercial mining of coal allowed with 41 blocks to be offered to the private sector.

 

Statistics/Data India’s Coal Reserves India is one of the top 5 countries when it comes to coal reserves (more than 300bn tonnes). Geologically, there are 3 major Gondwana coal formations (bituminous) in India: Raniganj, Jharia, and Bokaro. Export – Import Data It is the 2nd largest coal-producing nation in the world (729 MT in 2018-19, after China). It is also the 2nd largest coal importer (235 million tonnes (MT) in 2018-19, after China). Coal Composition About 99% of the coal deposits in India are of the bituminous variety, mainly non-coking coal. This is a reason for India’s import dependence in the sector. About 1% of the coal deposits in India is of the lignite type; the largest lignite deposit is in Tamil Nadu, also found in Gujarat, J&K, and Puducherry.

 

Significance of the Coal Sector in India

• Domestic Energy Needs: Coal is the most abundant fossil fuel, accounting for 55% of the country’s energy needs.
• Growth in Secondary Sector: The coal sector (including coal-powered electricity generation) accounts for 10% of the Index of Industrial Production (IIP).
• Backward and Forward Linkages: Major industries that drive the Indian economy, like iron and steel, aluminum, cement industry, etc., are dependent on the coal sector.
• Source of Revenue: State-owned Coal India, the world’s largest coal mining company, is a major source of revenue for state coffers through dividend payments and taxes.
• Cheapest Source of Energy: It is by far cheaper than nuclear, natural gas, and oil.
• Easier to Mine and Transport: Unlike crude oil & radioactive materials, coal is mined and transported with much ease.

 

Challenges of the Coal Sector in India

1. Economic Challenges
   • Parallel economy run by coal mafia: Contributes to the coal black market, diversion of good quality coal, expropriation of government lands, etc.
   • Import dependence on high-grade coal: Majority of India’s coal production is non-coking coal; coking coal has to be imported.
   • Restrictive policies: Leads to artificial shortages, limiting manufacturing sector choices to shift inputs or import coal.
   • Domino effect: Disruption in supplies significantly impacts productivity in steel and power industries, which depend on the coal sector.
     • Example: The 2018 power crisis in Tamil Nadu was due to a coal supply shortage.
2. Administrative Challenges
   • Bureaucratic inertia: Delay in clearing coal mining impedes realization of reserves’ actual potential.
   • Lack of transparency: Allocation of coal blocks faces arbitrariness and lack of transparency (e.g., 2014 coal scam).
   • Shift to renewable energy: Global push toward renewables could counteract initiatives to increase coal production.
3. Technology Challenges
   • Low productivity: Unscientific mining methods lead to productivity decreases.
   • Lack of R&D in coal sector: Poor level of technological upgradation and adoption.
   • Capital intensive: High operational and maintenance costs, low international investment, and high dependence on state bank debt.
   • Infrastructure challenges: Poor railway links to evacuate coal from hinterlands.
4. Environmental Challenges
   • Source of pollution: Severely affects the atmosphere with coal particulate pollution.
   • Water usage: Low-grade coal requires washing, which uses much more water and causes pollution.
   • Destruction of forests: Example: Chhattisgarh Legislative Assembly resolution to cancel coal mining blocks in Hasdeo Aranya, an ecologically sensitive area.
5. Social Challenges
   • Hazardous to miners: Wall failure, roof collapse, gas poisoning, explosions pose risks. Diseases like black lung disease and silicosis are common in nearby residents.
   • Displacement of tribal communities: Haphazard mining leads to the displacement of tribal people from forests and agricultural lands.

 

Recent Reforms Announced in the Coal Sector

 Government Initiatives in the Coal Sector

1. Government Schemes
   • SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India): For auction and allotment of coal linkages, leading to affordable power, access to coal, and accountability in the allocation of coal.
   • PM Khanij Kshetra Kalyan Yojana: To provide for the welfare of areas and people affected by mining-related operations.
   • UTTAM (Unlocking Transparency by Third Party Assessment of Mined Coal) app: For all citizens and coal consumers to monitor the process of third-party sampling of coal across CIL subsidiaries.

 

1. Policy Changes
   • New Coal Linkage Policy: To ensure adequate supply of fuel to power plants through reverse auction.
   • Online Coal Clearances System: Provides a single-window access to investors for submitting online applications for all permissions, clearances, and approvals granted by the Ministry of Coal.
   • Coal Allocation Monitoring System (CAMS): To monitor the allocation of coal by CIL to States, States to State Nominated Agencies (SNA), and SNA to such consumers in a transparent manner.
2. Legislations
   • Coal Mines (Special Provisions) Act, 2015: Enabled allocation of coal mines through transparent auctions.

 

Benefits Associated with Recent Reforms

• Equitable system of revenue-sharing model: Revenue shared with the government depends on price, benefiting both parties.
• Simplified and faster processing: The process of mining plan approval has been simplified, reducing the approval time from 90 days to 30 days.

• Attract Foreign Firms: Global coal mining firms can now invest and introduce their best practices.
• Adversaries of India are tactfully avoided: Foreign entities with no land borders with India can bid (to keep China out).
• Reduced Imports: Indian industry can invest in a commodity business that provides an opportunity to substitute 135 MT coal imports.
• Revenue to the resource-crunched government: It is estimated that the first round of commercial auctions will spawn about Rs 33,000 crore of dividends to the government.
• Boost Economy and Employment: Commercial mining will provide investment opportunities and save precious foreign exchange.
• Increased job opportunities: It is expected to create employment generation for more than 2.8 lakh people.
• Better Utilization of resources: Mines will be auctioned based on economic efficiency rather than giving it to a single captive user.
• Benefits State governments: Economies of coal-bearing states like Jharkhand, Chhattisgarh, Madhya Pradesh, Maharashtra, and Odisha will grow since all the revenue from these auctions will accrue exclusively to them.
• Plugging Supply Gap: Commercial mining of coal can increase the domestic production of coal and bridge the supply gap.
• Competition brings productivity: It will lead to the induction of new technology and competition in the sector.

 

Challenges associated with recent reforms

• Federal Challenges: Jharkhand approached SC against the Centre’s decision of commercial mining, claiming it violates Schedule-V, which refers to the ‘scheduled areas’.
• Social Impacts: Need for assessment of the social impact on the huge tribal population and vast tracts of forest land in the state.
• Weak Investment Appetite: Negative global investment climate due to Covid-19 is unlikely to fetch reasonable returns proportionate to the value.
• Vulnerable to Foreign Control of resources: Covid pandemic and liquidity crunch within the domestic industries might make them uncompetitive in the auction process compared to the global players with huge resources.
• Destruction of wildlife corridors: One of the proposed auction sites of a mine is near Maharashtra’s Tadoba-Andhari Tiger Reserve.
• Dominance of Coal India: Proposed commercial coal mining regime will find it difficult to compete with Coal India as companies are in long-term purchase agreements with it.
• Environmental and economic costs: Doing away with the regulation requiring power plants to use “washed” coal will have to burn more coal to produce the same energy with increased emissions.
• Rising NPAs of thermal power plants: Commercialisation of coal may lead to further rise of NPAs in an already stressed sector.
• Difficult to achieve INDC targets: India’s promise of limiting the share of non-fossil fuels to 40% will be difficult to achieve.
• Immense competition from renewable energy: Government’s aggressive promotion of green energy may be acting against these reforms.

 

Way Forward

1. Single-window clearance process: For coal mines to ease the commercialization of coal.
2. Early resolution in land acquisition-related issues: To ensure timely operationalization of coal mines.
3. Investment in infrastructure
   • Commercial mining projects can be aided with investment in initial infrastructure settings, which is more capital intensive than mining.
   • Creating funds to support overseas acquisition to supplement domestic resources.
4. Promote research in the sector: Steps need to be taken to promote research and exploration activities and modern underground mass production technologies.
5. Technology upgradation measures to be imposed: To improve productivity and recovery from the coal mines.
6. Increasing production and competition: By leveraging higher producing mines to enable more world-scale operations.
7. Revisit coal grades pricing mechanism: From grades based on coal mined to grades based on coal desired for end use.
8. Listing of CIL and awarding Maharatna status: It is expected to infuse better corporate management in the company.
9. Pollution must be kept within the limit: As India’s coal is high in ash content, coal beneficiation should be done to reduce the ash content and improve its grade.

With the government’s efforts to push renewable energy due to international conventions on climate change, increase in carbon cess and other initiatives for lesser use of coal, there is a need for “Vision 2030 for the coal sector,” which takes into account the environmental factors such as reduction of carbon footprint and abatement of global warming as per SDG 7.

 

NATIONAL INFRASTRUCTURE PIPELINE (NIP)

NIP is a first-of-its-kind initiative to provide world-class infrastructure across the country and improve the quality of life for all citizens. It will improve project preparation, attract investments (both domestic & foreign) into infrastructure, and will be crucial for attaining the target of becoming a $5 trillion economy by FY 2025. It covers both economic and social infrastructure projects. NIP includes economic and social infrastructure projects in sectors such as Energy (24%), Roads (19%), Urban (16%), and Railways (13%) amount to around 70% of the projected capital expenditure in infrastructure in India.

Statistics/Data According to the Global Infrastructure Outlook, 2017, the estimated global infrastructure investment requirement is $94 trillion between 2016 and 2040, of which, around half of it is required in Asia alone (primarily by China, India, and Japan). While the demand for infrastructure is growing at about $4 trillion per annum, the supply is growing at only $2.7 trillion each year, leading to a deficiency of about $1.5 trillion on a per annum basis. Sectors such as Energy (24%), Roads (19%), Urban (16%), and Railways (13%) amount to around 70% of the projected capital expenditure in infrastructure in India during the fiscals 2020 to 2025. It is estimated that India would need to spend $4.5 trillion on infrastructure by 2030 to sustain its growth rate.

Significance of National Infrastructure Pipeline

1. Economic
   • Goal of $5 trillion economy by 2024-25: India needs to spend about $1.4 trillion (Rs. 100 lakh crore) over these years on infrastructure through the National Infrastructure Pipeline so that lack of infrastructure does not become a binding constraint on the growth of the economy.
   • Poor infrastructure: India’s growth potential has not been achieved mainly due to poor infrastructure in various sectors which could be overcome by the National Infrastructure Pipeline.
   • Investment: India can’t achieve high growth without investment, and NIP could build investor confidence as identified projects are likely to be better prepared, exposures less likely to suffer stress given active project monitoring, thereby less likelihood of NPAs.
   • Shift towards a service-based economy: The share of agriculture will decrease to 8% from the current 15%.
   • Economic growth: It is estimated that India would need to spend $4.5 trillion on infrastructure by 2030 to sustain its growth rate, and NIP could make this happen in an efficient manner.
   • Employment: Well-planned NIP will enable more infrastructure projects, grow businesses, create jobs, improve ease of living, and provide equitable access to infrastructure for all, making growth more inclusive.
   • Agricultural benefits: Irrigation and rural infrastructure projects would account for 7.7 lakh crore each under NIP for strengthening agricultural and rural infrastructure.
   • Credit: Government needs to invest from its own resources to give a push to the economy as there’s a lack of private investment due to the ongoing NPA crisis and lack of credit creation in the economy.
   • Improves government revenues: Well-developed infrastructure enhances the level of economic activity, creates additional fiscal space by improving the revenue base of the government, and ensures the quality of expenditure focused on productive areas.
2. Social
   • Inclusive growth: Availability of quality infrastructure is a prerequisite to achieving broad-based and inclusive growth on a sustainable basis.
   • Emphasis on ease of living: Safe drinking water, access to clean and affordable energy, healthcare for all, modern railway stations, airports, bus terminals, and world-class educational institutes are priorities.
   • Urbanisation: Currently, only 31% are living in urban India. 42% of the population is going to live in urban areas by 2030, for which growth in infrastructure sector is indispensable.
   • Increasing working-age population: It is estimated that India will have a 1.03 billion workforce in 2030, and a boost to the infrastructure sector could generate the much-needed jobs.
3. Environmental
   • Climate change: Providing for disaster resilience through improved infrastructure is a need of the hour as the number and intensity of disasters are increasing annually.
4. Systemic
   • Supports developers: Provides a better view of project supply, provides time to be better prepared for project bidding, reduces aggressive bids/failure in project delivery, ensures enhanced access to sources of finance as a result of increased investor confidence.
   • Helps banks/financial institutions (FIs)/investors: Builds investor confidence as identified projects are likely to be better prepared, exposures less likely to suffer stress given active project monitoring, thereby less likelihood of NPAs.
   • Better projects: NIP will ensure that infrastructure projects are adequately prepared and launched, which will ensure a better view of project supply, more time for project bidding, reduced aggressive bids, and enhanced access to finance due to increased investor confidence.
   • Connectivity: Road projects will account for Rs. 20 lakh crores, and Rs. 14 lakh crores are for railway projects to increase connectivity in India, especially in rural areas.
   • Increases accountability and transparency: By facilitating real-time assimilation of data from the Central and State Governments, Urban Local Bodies, Banks and Financial Institutions, PE funds, and private investors, both local and foreign, on one platform.
   • Partnership of major stakeholders: It has planned to invest more than Rs. 102 lakh crore on infrastructure projects by 2024-25, with the Centre, States, and the private sector to share the capital expenditure in a 39:39:22 formula.
   • Building new as well as modification: It also includes both greenfield and brownfield projects.

 

Challenges

1. Economic
   • Finance challenges: Government resources like tax money are not adequate; therefore, there is a need to raise money capital from the private sector and foreign investments.
   • Repayment challenges: Announcing freebies like free electricity to get political mileage increases the economic stress on infrastructure as the borrowed money is to be paid back.
   • Need for additional funds: Risks during project implementation due to stalled or languishing projects or shortfall in funds for maintenance.
   • Banking crisis: Banks are recovering from NPA problems, and the crisis will worsen if they are pushed to fund for NIP.

1. Systemic
   • Massive initiative: The scale of the pipeline is massive, and its implementation will not be easy for which coordination among various levels of government is a must.
   • Land acquisition: It is a big challenge for the completion of infrastructure projects as the rehabilitation of millions of people will also not be easy.
   • Design challenges: India lags behind countries like China, which focus more on the design stage than any other stage to enhance the standards of their infrastructure.
   • Bidding challenges: Many companies are awarded contracts in corrupt ways through crony capitalism without scrutinizing the past record of the bidder.
   • Construction challenges: NIP dashboard does not address issues such as land acquisition delays and litigation issues, which slow down the implementation of the project.
   • Delay in execution: Getting approvals are very difficult in terms of land access, environmental clearances, and impending litigation in court delays the infrastructure projects.
   • Operational challenges: A lot of foreign investment is available for completed assets, but new projects are not looked at by the foreign investors. E.g.: Delhi and Hyderabad metro rail.
   • Time and cost overruns: Due to delays in project implementation and procedural delays, lesser growth rate than expected may result.
   • Ease of doing business: Lengthy procedures in land acquisition and payment of compensation.
2. Environmental
   • Environmental concerns: Infrastructure projects often require clearing of forests, translocation of endangered animals, etc. E.g.: Road-railway-power projects in Mollem National Park, Goa.

 

Government Initiatives

• Task Force: Constituted to draw up the National Infrastructure Pipeline (NIP) for each of the years from financial years 2019-20 to 2024-25.
• India Investment Grid website: To provide real-time information on large-scale government infrastructure projects which will aid potential investors and companies in making an informed decision regarding investments.
• National Infrastructure Pipeline (NIP) dashboard: It is a digital platform to ensure data and updated information for investments across various sectors are shared and evaluated by the concerned departments.

 

Way Forward

1. Based on the Atanu Chakraborty task force on NIP
   • Investment needed: ₹111 lakh crore over the next five years (2020-2025) to build infrastructure projects and drive economic growth.
   • Distribution of funds: Energy, roads, railways, and urban projects are estimated to account for the bulk of projects (around 70%).
   • Centre-state partnership: The centre (39%) and state (40%) are expected to have an almost equal share in implementing the projects, while the private sector has 21 percent share.
   • Asset sales: Monetisation of infrastructure assets and aggressive push towards asset sales.
   • Funding mechanism: Setting up of development finance institutions.
   • Setting up committees with specific tasks: Committee to monitor NIP progress and eliminate delays, a committee at each ministry level to follow up on the implementation process and a committee in DEA for raising financial resources for the NIP.
2. Others
   • Strengthening the municipal bond market to raise money for public projects—such as constructing roads, bridges, schools, or other infrastructure initiatives—is imperative.
   • Dashboard should be made more actionable by providing information about upcoming projects in addition to the data on investments for economic analysis.
   • Private consultants could be used in designing and determining techno-economic feasibility of infrastructure projects initiated by the government.
   • Online bidding can be a viable option to bring about transparency in bidding.
   • Cooperation between the states and centre should be prioritised while dealing with issues like land acquisition and environmental clearance as it causes delays and high costs.

 

The key to any successful economy is a robust infrastructure with an equally strong supply chain. This holds true for India as well with its ambition to become a $5 trillion economy by 2025. Thus, a key up-gradation of the existing infrastructure will be the key in raising India’s competitiveness to meet its target. NIP will enable robust marketing of the pipeline of projects requiring private investment through the India Investment Grid (IIG), National Investment & Infrastructure Fund (NIIF). It will enable a forward outlook on infrastructure projects which will create jobs, improve ease of living, and provide equitable access to infrastructure for all, thereby making growth more inclusive.

OTHER INFRASTRUCTURAL INITIATIVES

• Ude Desh Ka Aam Nagrik (UDAN): To make air travel affordable & cheaper for all and widespread, to boost inclusive national economic development, job growth, and air transport infrastructure development of all regions and states of India.

• Bharatmala: An umbrella program for the highways sector that focuses on optimizing efficiency of freight and passenger movement across the country by bridging critical infrastructure gaps through effective interventions like development of Economic Corridors, Inter Corridors and Feeder Routes, National Corridor Efficiency Improvement, Border and International connectivity roads, Coastal and Port connectivity roads, and Green-field expressways.
• Setu Bharatam: To make all National Highways free of railway level crossings by 2019 to prevent the frequent accidents and loss of lives at level crossings.
• Char Dham Highway Project: The proposed highway will complement the under development Chota Char Dham Railway by connecting the four holy places in Uttarakhand states including Badrinath, Kedarnath, Gangotri, and Yamunotri.
• INFRACON Portal: It acts as a kind of bridge between consultancy firms working in the road engineering and construction sector and domain experts and key personnel who are deployed both for project preparation and supervision.
• ePACE (Projects Appraisal & Continuing Enhancements): An online integrated Management Information System that brings projects from all wings of the Ministry under a common platform, ensuring their effective and real-time tracking.
• INAM PRO: Web-based application that brings together infrastructure and material providers and the prospective buyers on a common platform.
• VIKALP – Alternate Train Accommodation Service (ATAS): Passengers who have booked tickets in other mail or express trains can avail the option of traveling in premium trains to their booked destinations with no extra cost.
• Sagarmala: To reduce logistics cost for foreign and domestic trade with minimal infrastructure investment.
• Atal Mission for Rejuvenation and Urban Transformation (AMRUT): To provide basic civic amenities like water supply, sewerage, urban transport, parks to improve the quality of life for all especially the poor and the disadvantaged.
• Smart Cities: Aim is to develop 100 cities all over the country, making them citizen-friendly and sustainable.
• Heritage City Development and Augmentation Yojana (HRIDAY): To preserve and revitalize the soul of the heritage city to reflect the city’s unique character by encouraging aesthetically appealing, accessible, informative, and secured environments.