Infrastructure is a key driver of the overall development of Indian economy. It is seen that investments in infrastructure equal to 1% of GDP will result in GDP growth of at least 2% as infrastructure has a “multiplier effect” on economic growth across sectors.
According to Economic Survey 2018, India will need about USD 4.5 trillion in the next 25 years for infrastructure development.
Challenges faced by infrastructure projects in India:
- Political and regulatory risk:
- Many approvals. ( at every stage )
- Contract terms
- Asset specific regulations.
- Denial of payments
- Land acquisition:
- local resistance
- Too lengthy durations
- Environmental Impact Assessment
- Access to financing
- Delay in implementation and execution
- One size fits all approach. ( HAM, BOT etc. should be tried )
- Capacity of private players
- Twin Balance sheet problem
- Poor dispute resolution
- Poor pre-construction planning
- Geographical and ethnic issues. For example, Polavaram Project
Measures needed:
- Land acquisition:
- Relaxing transfer regulations for government lands.( taken already )
- Follow up stakeholders.
- Fast-track policy and regulation reforms for
enhanced implementation:
- Strong performance management systems.
- Transparent and accurate tracking mechanism.
- Performance linked incentives and penalties.
- Dispute resolution:
- Setting up single quasi-judicial authority.
- Statutory law to resolve disputes between authorities and private developers.
- Eliminate Regulatory Cholesterol:
- Performance Review Unit – powers to gather information from nodal agencies on clearances and incentivise or regulate this.
- Facilitating funds:
- Setting up of Infrastructure Debt Funds(IDFs)
- Reduction in ‘withholding tax’ on the interest paid on IDF bonds.
- Private-Public Partnerships: Allowing the private sector into some former fully government-owned infrastructure sectors, such as telecommunications and domestic civil aviation, has produced exemplary results. Early experience with private involvement in these areas is generally positive, but outcomes under contracts need careful monitoring.
- Independent authorities and facilitators:
- Project Monitoring Group (PMG) to track frozen projects and remove bottlenecks.
- The PMG has already been successful in resolving more than 200 of the projects referred to it, worth nearly 30% of the value of all projects, according to the World Bank.
Measures in recent budget to boost infrastructure:
- National Common Mobility Card
- Ease of Travelling: Inter-operable transport card runs on RuPay card and would allow the holders to pay for bus travel, toll taxes, parking charges, retail shopping.
- Roadways:
- Massive push given to all forms of Physical Connectivity via: Bharatmala (road and highways project) and Sagarmala projects (national water port development connectivity scheme), Pradhan Mantri Gram Sadak Yojana (PMGSY), Jal Marg Vikas and UDAN Schemes, Industrial Corridors and Dedicated Freight Corridors.
- State road networks to be developed in 2nd phase of Bharatmala project.
- National Highway Programme (NHP) to be restructured to ensure a National Highway Grid, using a financeable mode.
- Waterways:
- Jal Marg Vikas Project: Under it Navigational capacity of Ganga to be enhanced through multi modal terminals at Sahibganj and Haldia and a navigational lock at Farakka by 2019-20.
- Ganga Waterways: 4 times increase in next 4 years estimated in cargo volume on Ganga, leading to cheaper freight and passenger movement and reducing import bill.
- Railways:
- For Railway Infrastructure during 2018-2030, Rs.50 lakh crore investments is needed.
- Public-Private-Partnership (PPP) proposed for development and completion of tracks, delivery of passenger freight services and rolling stock manufacturing.
- 657 kilometers of Metro Rail network has become operational across India.
- e-vehicles:
- Outlay of Rs. 10,000 crore for 3 years approved for Phase-II of FAME (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles) Scheme.
- Upfront incentive proposed on purchase and charging infrastructure.
- Under FAME Scheme only advanced-battery-operated and registered e-vehicles to be incentivized
- Aviation:
- Policy interventions to be made for development of Maintenance, Repair and Overhaul (MRO), to achieve self- reliance in aviation segment.
- Government will be laying a Regulatory roadmap for making India a hub for aircraft financing and leasing activities from Indian shores.
- Power:
- To be provided to states at affordable rates ensured under ‘One Nation, One Grid’ and package of power sector tariff and structural reforms to be soon announced.
- Undesirable duties on captive generation or open access sales for industrial as well as other bulk power consumers to be removed under Ujjwal DISCOM Assurance Yojana (UDAY).
- Blueprints to be made available for water grids, gas grids, i-ways, and regional airports
- Gas:
- Implementing HLEC (High Level Empowered Committee) Recommendations which is- Addressing low utilization of gas plant capacity due to paucity of Natural Gas.
- Retirement of old & inefficient plants.
- Housing:
- Model Tenancy Law to be finalized and circulated to all states in country.
- To promote rental housing appropriate reform measures are to be taken up.
- For public infrastructure and affordable housing on land parcels held by Central Government and Central Public Sector Enterprises (CPSEs), a joint development and concession mechanisms to be used
Infrastructure financing:
- Effective asset monetization strategy.
- Credit Guarantee Enhancement Corporation to be set up in FY 2019-2020
- To deepen the market for long term bonds Action Plan to be put in place with focus on infrastructure.
- Proposed transfer/sale of investments by FIIs (Foreign Institutional Investor)/FPIs (Foreign portfolio investment) (in debt securities issued by IDF-NBFCs) to any domestic investor within specified lock-in period
- To enable securities exchange (or stock exchange) to allow AA rated bonds as collaterals
- Social stock exchange:
- Electronic fund raising platform under regulatory ambit of SEBI (Securities and Exchange Board of India)
- Listing social enterprises and voluntary organizations
- To raise capital as debt, equity or units like a mutual fund
- Annual Global Investors Meet to be organized by Government in India, using National Infrastructure Investment Fund (NIIF) as an anchor to get all three sets of global players (pension, insurance and sovereign wealth funds).
- The statutory limit for FPI investment in a company is suggested to be increased from 24% to sectoral foreign investment limit. Also, option to be given to the concerned corporate to limit it to a lower threshold.
- FPIs to be permitted to subscribe to listed debt securities issued by Real estate investment trusts (REITs) and Infrastructure investment trusts (InvITs).
- NRI-Portfolio Investment Scheme Route is proposed to be merged with FPI Route.
Conclusion:
If proper effort is made in expanding education, health facilities, and physical infrastructure and improving their quality by increasing budgetary allocation and improving governance, it will go a long way in reducing poverty, improving human development, and reviving and sustaining high rates of economic growth in India.
UPSC CSE Notes 