Infrastructure in India: Challenges and Opportunities - Gajendra Haldea February 14, 2008 New Delhi - PowerPoint PPT Presentation

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Infrastructure in India: Challenges and Opportunities - Gajendra Haldea February 14, 2008 New Delhi

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Title: Infrastructure in India: Challenges and Opportunities - Gajendra Haldea February 14, 2008 New Delhi


1
Infrastructure in India Challenges and
Opportunities- Gajendra Haldea
February 14, 2008New Delhi
2
Infrastructure Deficit
  • Highways
  • 66,590 Km of NH (2 of network, 40 of traffic)
    only 12 Four-lane 50 Two-lane and 38
    Single-lane
  • Ports
  • Inadequate berths, rail / road connectivity and
    draft are constraints
  • Airports
  • Inadequate capacity Runways, aircraft handling
    capacity, parking space terminal buildings
  • Railways
  • Old technology saturated routes slow average
    speeds (freight 22 kmph passengers 50 kmph)
    low payload to Tare ratio (2.5)
  • Power
  • 13.8 peaking deficit and 9.6 energy shortage
    40 TD losses absence of competition and
    inadequate private investment

3
Scale of the Challenge
XI Plan Based on Physical Targets US 515.05
bn. Business as Usual US 371.3 bn.
X Plan Anticipated US 217.9 bn.
4
Projected Investment in Infrastructure
  X Plan X Plan XI Plan XI Plan
Sectors US billion Share () US billion Share ()
Electricity (incl. NCE) 72.96 33.49 166.63 32.35
Roads and Bridges 36.22 16.63 78.54 15.25
Telecommunication 25.84 11.86 64.61 12.54
Railways (incl. MRTS) 29.91 13.73 65.45 12.71
Irrigation (incl. Watershed) 27.88 12.80 64.34 12.49
Water Supply and Sanitation 16.20 7.44 35.93 6.98
Ports 3.52 1.61 22.00 4.27
Airports 1.69 0.78 7.74 1.50
Storage 1.20 0.55 5.59 1.09
Gas 2.43 1.11 4.21 0.82
Total US billion 217.86 100 515.05 100
Rs. crore 871,445 100 2,060,193 100
5
Projected Eleventh Plan Sector Share ()
6
Policy Challenges
  • Large capacity addition
  • Time-bound delivery under budgetary constraints
  • World class yet cost effective
  • Commercially sustainable yet affordable
  • Attracting private investment
  • Policy regulatory framework for PPPs
  • Optimal risk allocation
  • Institutional restructuring and reorientation
  • Financial support to PPPs

7
Division of Labour
  • Public Sector to continue, and even expand
  • - Especially in segments that cant be
    commercialised, such as rural
  • Reliance on PPPs for additionality improved
    efficiency
  • - In segments that can be commercialised, eg.
    roads, ports, airports rail concessions
  • Independent private investment whenever feasible
  • - Enable competition in power generation,
    airlines, container trains etc.

8
Stages of PPPs
  • I. Public sector provision of Infrastructure
    Command Control
  • - PPP is an exception
  • II. Introduction of PPPs The Transition
  • - Largely negotiated, often opaque
  • - Often driven by private beneficiaries
  • III. PPPs gain acceptability Enhancing welfare
    efficiency
  • - Transparent, competitive and fair
  • - Driven by the government good
    governance becomes the key issue
  • - Objective is to attract private capital
    in public projects
  • Indian PPP projects are in stage III

9
Governance Structure for PPPs
  • Constitution of a Committee on Infrastructure
    (CoI)
  • - Prime Minister is the Chairperson
  • - Ministers of Infrastructure Ministries
    Finance Minister and Deputy Chairman, Planning
    Commission are members
  • Empowered Sub-Committee of CoI chaired by Dy.
    Chairman, Planning Commission and represented by
    Ministries
  • Secretariat for CoI in the Planning Commission
  • Ministries retain their role but work closely
    with CoI to develop implement the vision for
    world-class infrastructure
  • Greater reliance on inter-ministerial
    inter-disciplinary dialogue to enrich outcomes
    eliminate conflicts of interest.

10
Instruments of Governance
  • PPPs integrated in the planning process
  • Constitution of Inter-Ministerial Committees
    (IMCs) under chairmanship of Cabinet Secretary/
    concerned Secretary
  • Specified tasks are assigned to IMCs with an
    agreed time frame
  • Involvement of experts in formulation of
    programmes processes
  • Consultations with stakeholders, including users
    investors
  • Simplification standardisation of documents
    processes

11
Instruments of Governance (contd.)
  • PPP Appraisal Committee
  • - Appraises recommends all PPP projects of
    the Central Government
  • - Chaired by the Finance Secretary
  • - Appraisal Unit in the Planning Commission
  • Empowered Committee/ Institution
  • - Approves proposals for Viability Gap
    Funding (upto 20 of capital costs)
  • - Chaired by Secretary/ Addl. Secretary,
    Department of Economic Affairs
  • - Appraisal Unit in the Planning Commission
  • India Infrastructure Finance Company (IIFC)
  • - Raises funds against sovereign guarantees
  • - Provides upto 20 of capital costs as
    long-term debt

12
Important Reports under Implementation
  • Model Concession Agreements in highways, rail
    ports
  • Guidelines for Pre-Qualification of Bidders (RFQ)
  • Guidelines for Invitation of Financial Bids (RFP)
  • Guidelines for formulation, appraisal approval
    of PPP Projects
  • Guidelines for financial support to PPP projects
  • Scheme for financing infrastructure projects
    through the IIFC
  • Financing Plan for National Highway Development
    Programme

13
Important Reports under Implementation
  • Manual of Specifications and Standards for two
    lane highways
  • Report on Restructuring of NHAI
  • Financing Plan for Airports
  • Report on the Delhi-Mumbai Delhi-Howrah Freight
    Corridors.
  • Report on Road Rail Connectivity of Major Ports.
  • Report on streamlining of Customs procedures at
    Ports.
  • Report on streamlining of Customs procedures at
    airports

14
Highways
  • 46,000 km to be developed by 2012 59 bn
  • PPP programmes approved so far 21,036 km
  • 6-laning of 6,500 km of GQ Other NH
  • EW NS Corridors 4-laning of 6,736 km
  • 4-laning of 6,800 km in selected sections on BOT
  • 1,000 km of new expressways
  • Safety
  • Setting up of Directorate of Safety Traffic
    Management
  • Setting up of a dedicated road safety fund

15
Highways Enabling framework
  • Financing plan firmed up
  • Cess on motor fuels ( 1.7 bn per annum) and toll
    revenues to finance the programme
  • Viability gap funding upto 40 of capital costs
  • Model Concession Agreement for PPPs adopted
  • DBFO approach to be followed
  • PPP projects to have larger stretches (100 km or
    more)
  • Restructuring of NHAI being undertaken

16
Ports
  • New berths to add capacity of 830 MT by 2012
  • Capital dredging for deepening of draft
  • Estimated investment 22 bn, including state
    sector ports
  • Model Concession Agreement finalised
  • Perspective plan for 20 years and Action Plan for
    7 yrs on way
  • Rail Road connectivity projects in progress
  • Enhanced powers delegated to Port Trusts
  • Simplification of Customs procedures in progress

17
Airports
  • High growth in traffic about 20 per annum
  • Likely investments by 2012 8 bn
  • PPP in Bangalore, Hyderabad, Delhi Mumbai in
    progress
  • 10 Greenfield airports 35 other airports to be
    developed
  • Upgradation of CNS-ATM Equipment
  • Model Concession Agreement being finalised
  • Transparent tariff setting Airport Economic
    Regulatory Authority to be set up
  • AAI to be restructured

18
Railways
  • SPV for Dedicated Freight Corridor being set up
  • Likely investment US 10bn
  • JICA feasibility study has been completed
  • Competition in container train movement
    introduced 15 concession agreements signed
  • Technology upgradation and modernisation for
    higher operating efficiency
  • Transformation from bulk transporter to
    multi-modal transporter
  • PPP envisaged in new routes, railway stations,
    logistics parks, cargo aggregation warehousing
    etc.

19
Scheme for financial support to PPPs
  • Leveraging scarce budgetary resources for
    addressing critical gaps in private sector
    financing
  • Economically justified but financially unviable
    projects
  • Long gestation periods
  • Inability to increase user charges to commercial
    levels
  • Viability Gap Funding upto 20 of capital costs
  • Bidding for minimum capital grant based on
    pre-approved concession agreement and project
    specifications
  • Power, roads, ports, airports, railways, water
    supply and urban transport

20
India Infrastructure Finance Company Ltd.
  • Lack of long term debt in capital markets
  • SPV to provide long term debt to viable
    infrastructure projects
  • Direct lending to PPP and public sector projects
  • Refinance for private projects
  • Funds to be raised from domestic and external
    markets on strength of government guarantees
  • Reliance on lead bank for appraisal and lending
    operations
  • Guarantee limit of Rs.10,000 cr. (2.5 bn) per
    annum

21
Initiatives at State level
  • States are initiating similar programmes
  • State PPP projects can avail of upto 20 of
    capital costs as VGF grant from Central
    Government
  • They can also avail of 20 of capital costs as
    long-term loans from IIFC
  • Technical assistance being provided by Planning
    Commission
  • Assistance for capacity building being provided
    by the Finance Ministry

22
Way forward
  • Reliance on PPPs for infrastructure development
    public sector to also continue
  • Creating an enabling environment and framework
    for maximising private investment
  • Standardising documents and processes for
    reducing transaction costs and accelerating
    investment flows
  • Leveraging budgetary resources multi-lateral
    assistance for PPPs
  • Accelerated roll-out of PPP projects
  • Objective is to create world class infrastructure

23
Thank You
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