INFRASTRUCTURE DEVELOPMENT IN INDIA

“Expanding investment in

infrastructure can play an

important counter cyclical role.

Projects and programmes [are]

to be reviewed in the area of

infrastructure development,

including pure public private

partnerships, to ensure that

their implementation is

expedited and does not suffer

from [the] fund crunch.”Mr. Manmohan Singh, Indian Prime Minister,

The Rangarajan Commission indicated six characteristics of infrastructure

sectors,

1. Natural monopoly2. High-sunk costs3. Non-tradability of output4. Non-rivalness (up to congestion

limits) in consumption5. Possibility of price Exclusion6. Bestowing externalities on society.

Definition

Government is committed to PPP mode-

Why? Maximizing investment Budgetary constraints Development of assets of world

class standards Improved maintenance and

management of assets Provision of efficient services Affordable prices through

greater competition Risk Sharing

Country Program Description

Brazil GrowthAccelerationProgram

This strategic investment program oversees and approves initiatives and public works investment. PAC, the first phase of the program launched in 2007, invested $349 billion in areas, including energy, urban infrastructure, sanitation, and transportation. PAC-2 is a $900 billion extension of the PAC program for 2011–2014.

CHINA 12th Five-YearPlan

The 12th Five-Year Plan, which began in 2011, is allocating some $1 trillion in infrastructure spending over five years. The program is developed by the Central Committee with help from the Ministry of Housing and Urban-Rural Development. Much of the investment willgo toward building high-speed rail, with a secondary emphasis on water supply, electricity, and highways

INDIA 11th and 12thFive-Year Plans

The 11th Five-Year Plan, which began in 2007, is developed and implemented by India’s Planning Commission. Of the plan’s estimated $500 billion in total infrastructure investment,one-third will flow to roads, including a project to upgrade, rehabilitate, and widen major highways in India. The rest will be spent on transit, water, electricity, and otherinfrastructure sectors. The country’s 12th Five-Year Plan, which runs from 2012 to 2017, will double the amount spent on infrastructure to $1 trillion.

Budget 2012-Infrastructure Sector gets major boost

Size – Power Sector•Generation capacity of 122 GW; 590 billion units produced (1 unit = 1kwh)

-CAGR of 4.6% over the last four years.

•India has the fifth largest electricity generation capacity in the world

-Low per capita consumption at 606 units; less than half of China

•Coal-fired plants constitute 57% of the installed generation capacity, followed by 25% from hydel power, 10% gas based, 3% from nuclear energy and 5% from renewable sources

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

Policy- Power sector•100% FDI permitted in Generation, Transmission & Distribution - the Government is keen to draw private investment into the sector•Policy framework in place: Electricity Act 2003 and National Electricity Policy 2005•Incentives: Income tax holiday for a block of 10 years in the first 15 years of operation; waiver of capital goods import duties on mega power projects (above 1,000 MW generation capacity)•Independent Regulators: Central Electricity Regulatory Commission for Central PSUs and inter-State issues. Each State has its own Electricity Regulatory Commission.

Major Players Capacity G T D

Public sector

NTPC 23,749 Yes No No

National Hydro Electric Power Corporation

3615Yes No No

NPC 2770 Yes NO No

Domestic Private sector

Tata Power 2203 yes yes Yes

RPG Group - CESC 1005 Yes yes Yes

Reliance Energy 885 yes yes Yes

International Private Sector

China Light and Power (CLP)

655 Yes No No

Marubeni Corporation

330 yes No No

•G - Generation •T - Transmission •D - Distribution

KeY Players-Power Sector

Opportunity•Over 150,000 MW of hydel poweris yet to be tapped in India

•India requires an additional 100,000 MW of generation capacity by 2012

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

•The implementation of key reforms is likely to foster growth in all segments:

- Unbundling of vertically integrated SEBs- “Open Access” to transmission and distribution network- Distribution circles to be privatised-Tariff reforms by regulatory authorities

•Opportunities in Generation for:

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

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

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

ROADWAYS

• Important Development projects

-The Golden Quadrilateral (GQ-5846 kms of 4 lane highway)

- North-South & East-West Corridor (NSEW-7142 kms of 4 lane highways)

- Four-laning of 12,109 km under NHDP-III

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

ROADWAYS (cont.)

Roadways (cont.)Investment plan

Railways

• About 64000 km of rail network

• Connects 7083 stations• Carry 2.20 crore

passengers & 2.50 million tones of goods everyday

• About 1.5 millions of workforce

• In 1947 rail network of about 53000 km• Added only 11000 km of network in last 65

years • Modifications like-

-Gauge changing-Electrification-Computerization-Double tracks

Railways

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

Investment Plan

• High speed rail travel• Raising the speed of regular passenger

trains from 100-130 khph to 160-200 kmph

• To develop 50 world class stations which can be recognized internationally

• Segregating passenger and freight tracks completely

MISSION 2020 OF INDIAN RAILWAYS

• Mega infrastructure project of USD 90 billion

• To connect Delhi & Mumbai through road and railway network of 1483 km

• Delhi, U.P., Haryana, Rajasthan, Gujarat, Maharashtra this states will be connected to form a corridor of international standard.

DMIC project

Oil & Gas

• India 5th largest Consumer of energy

• About 5.7 billion barrels of proven oil reserves.

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

Market Dynamics

Production

• Crude oil 31.87 MMT from April-Jan 12.

• Natural Gas 40157 MCM

• 1.04 million barrels per day

• Gas 50 BCM

Consumption

• Diesel 1.44 million b/d.• Petrol 388000 b/d.• Gas 58 BCM

Developments & Investments

• KG Basin-Reserves of 56.6 BCM.• Reliance Industries J- 3 mega

petrochemical Project• IOCL to set up refinery in Gujarat• ONGC & IOCL seeking refinery options

in Srilanka• Petronet LNG Ltd planning to set up its

third terminal in the east coast of India.

Government Initiatives• Indian Government has encouraged Saudi

Arabia to get involved in the country's petroleum upstream and downstream sector

• OPaL's Petrochemical project at Dahej, OMPL's Petrochemical project at Mangalore, IOC's LNG project at Ennore, Bharat Petroleum Corporation's LNG terminal at Kochi, Hindustan Petroleum Corporation's grass-root refinery in Visakhapatnam.

Road Ahead

• Mr S Jaipal Reddy, Junior Oil Minister, India, expects investments worth US$ 75 billion in South Asian nation's oil and gas sector from April 2012 to March 2017

• Eventually, the development plan will also cut India's import bill.

Telecommunication

• 3rd largest in the world & 2nd largest in

Asia.

• Mobile subscriber base-936.12

million.

• Overall Tele- density 77.57%

• Broadband Subscriber 13.42 million

Market Dynamics

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

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

Key developments & Gov. Initiative

• Complaint centre by TRAI• Hybrid power• Easier & standardized municipal laws for

Towers• Subsidy for Solar panels & use of

nonconventional resource of energy.• Increased trend of sharing infrastructure.

NEED FOR INFRASTUCTURE DEVELOPMENT IN AIRPORTS

• Air traffic has increased rapidly in recent years,

although this slowed in 2007.

• A number of Indian airlines have faced challenging

market conditions in 2008

• Indians are still flying in much greater numbers.

• Estimates made in 2007 by the Indian

Government’s Committee on Infrastructure suggest

that passenger traffic will grow at a CAGR of over

15% in the next 5 years

AIRPORT DEVELOPMENT PLAN(During the XI Plan Period 2007 12)‐

• Main Objectives

– To boost Infrastructure in Aviation sector.

– To provide World Class infrastructure facilities.‐

– To meet the increased demand by enhancement

of Aircraft/Cargo handling capacity.

– To provide safe Air Traffic Services.

– To achieve efficiency by improving Air Traffic Flow

Management.

INVESTMENT BY AAIXI Plan (2007 12)‐

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

– Credit Rating• Awarded AAA stable by CRISIL and L AAA byICRA for AAI Bonds.• Awarded A1+ by ICRA for Short‐term Loan/Commercial Papers

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

STEPS TAKEN BY GOVERNMENT FOR DEVELOPING AIRPORTS

NEED OF DEVELOPMENT OF PORTS• With 12 major ports and 187 minor ports, 7,517 km long

Indian coastline plays a pivotal role in the maritime transport helping in the international trade

• Increasing connectivity with inland transport networks is challenges currently facing India’s ports

• which have seen massive swells in the amount of goods transported.

• Traffic is estimated to reach 877 million tonnes by 2011-12, and containerised cargo is expected to grow at 15.5% (CAGR) over the next 7 years.

• India’s existing ports infrastructure is not sufficient to handle the increased loads – cargo unloading at many ports is currently inadequate, even where ports have already been modernised

STEPS TAKEN BY GOVERNMENT FOR DEVELOPING PORTS

• An estimated investment of around $22 billion is targeted for port

projects in the five year period from 2007-12.

• The National Maritime Development Programme includes 276 projects,

with a required investment of about $15 billion over the next ten years,

with private investment targeted at around $8 billion.

• Projects related to port Development will provide a major opportunities

for E&C companies.

• Recent deregulation of the sector now permits 100% FDI, and an

independent tariff regulatory authority has been set up to facilitate

projects at major ports.

Infrastructural requirement scenario in India

• Urban population is expected to grow about 50% by 2025

• Growth in GDP is predicted to be 8-9% per annum

• Road Traffic growth will be 15% per year• Air traffic is growing by 25% per year• 101,000 MW of new power needed by

2012• Sanitation Coverage is only 35% currently

Steps taken in the 11th 5- year plan 2007-2012

Actions taken in the 11th 5 year plan – 2007-2012:• The amount of money spent on infrastructure will be raised to 8% of GDP (earlier, infrastructure spending was only 4.6% of GDP)• One Half of all new investments in the 11th plan will be in infrastructure• The planning Commission has estimated that a total investment of $450 Billion in infrastructure is required

over the next 5 years to meet India’s infrastructure needs.• Port capacity will be increased from 520MT to 800MT• 60000 MW of new power is to be added by 2012

Steps taken for infrastructural development

• IIFC - India Infrastructure Finance Corporation

1. Setup to fund infrastructure funds in India & is owned by government.

2. Will lend money at low rates to public and private infrastructure projects

3. Would be able to borrow at low rates as they are guaranteed by GoI.

• Government has started the Jawaharlal Nehru National

Urban Renewal Mission (JNNURM) to improve Urban infrastructure

Conclusion

• Infrastructure inadequacies in both rural and urban areas are a major factor constraining India's growth.

India needs a lot more infrastructure to meet its needs.

• The government is focusing on this and has created a set of programs and reforms aimed at addressing this issue.