Untitled Document

India's Leading Infrastructur Companies 2013


I. Introduction

The Indian economy along with the overall global economic conditions has been passing through a turbulent phase during the past couple of years. Infrastructure has always played a key role in the country’s economic and financial development and continues to be the focus area for regaining growth trajectory. Although India has proved its potential in the past compared with its emerging market peers, in the current scenario, scaling up infrastructure investments has become crucial for restoring the economic growth momentum. The Indian government has adopted several measures to accelerate investments in this sector including PPP (public private partnership), incentives and tax holidays, FDI (foreign direct investment), and VGF (Viability gap funding) among others. However, slackening growth in infrastructure projects, which is partially accountable to the delayed clearances, land acquisition, slow implementation and environmental issues, continues to pose major challenges to this sector. During the year ending 2012-13, cumulative growth rate of eight core infrastructure sector industries in India slipped to 3.7% compared to 5% in 2011-12, due to contraction in output across sub-sectors such as power, steel, crude oil, natural gas, and fertilizers. On the other hand, refinery products managed to expand 11.9% compared to 3.1% in 2011-12. Cement and Coal too registered impressive growth.

II. Infrastructure Comparison of BRICS countries

The latest World Economic Forum (WEF) report titled “Global Competitiveness Report 2013-14” states that India’s transport, ICT, and energy infrastructure continue to be disproportionate to the needs of the economy, as also cited by the business community in the survey. However, the country’s well developed and sophisticated financial market remains its major strength.

Among the BRICS nations, India appears to be scoring the highest for its railroad infrastructure, while it acquired the lowest position in electricity supply. Despite losing some ground compared to previous year, China and South Africa continue to outweigh India in infrastructure development.

III. Current Scenario - Project expedition is the need of the hour

Investments to the extent of Rs 24.2 trillion spread across the eleventh five-year plan have largely been achieved because of strong performance in the Telecom, Roads, and Oil & Gas sectors. While crucial infrastructure sectors such as ports, railways, water supply, airports, and storage have underperformed. It was observed that core infrastructure sectors have been under pressure for failure to get projects off the ground. According to the RBI, as on June 1, 2013, delays in implementation were reported in almost 277 out of the 569 central sector projects with an estimated project cost of more than Rs 1.5 bn, resulting in cost overruns of nearly 18.8%. Further, the Mid-Year review of the eleventh five-year plan observed that though the financial investment closely meets the original projections, physical targets seemed to have failed.

A hawk-eye view of the overall project status in the last three years reveals a similar story. Though the projects shelved/stalled have shown reducing trend both in numbers and cost in 2013; the magnitude of outstanding projects continues to increase, thereby revealing high cost overruns faced by some of prominent sectors.

IV. Initiatives for development of infrastructure sector

1. Infrastructure targets for 2013-14: A press release from the Prime Minister’s Office (PMO) finalizing the infrastructure target for the year 2013-14 envisaged an investment of Rs 1.15 trillion in PPP projects across major infrastructure sectors.

2. Fast-tracking Infra Projects: In addition to the Cabinet Committee on Infrastructure (CCI), the PMO has set up a Project Monitoring Group to keep track of the stalled mega projects and ensure expedited clearance of such projects.

a. As on May 2013, some recent measures adopted to fast-track NHDP projects involved;
- Enhancing the ceiling of 4,000 km of four-laning in NHDP Phase IV to 8000 km, on Build Operate and Transfer (BOT) mode
- Ministry of Road Transport and Highways has been delegated the power to determine execution mode of the road projects
- Up gradation of 4,000 km of road projects permitted to be taken up on EPC basis

b. Between Mar-Apr 2013, CCI has cleared 31 NELP blocks, utilizing an already made investment of USD 13.42 bn. This clearance is also expected to bring in additional investment of about USD 2.5 bn in the 3-5 years span in exploration activities

c. In case of NHAI, fast-track dispute resolution mechanism in cases of legal disputes and financial claims arising in highways contracts was adopted.

3. Resolving issues in power sector: The power sector continues to reel under some persistent issues involving the demand-supply gap, financial losses of discoms, and coal shortages. In this scenario, the Central Electricity Regulatory Commission (CERC) has permitted several private power sector producers to raise tariffs. Further, efforts are made to not just enhance the installed capacity of electricity generation but also ensure growth in actual electricity generation.

4. Clearing bottlenecks in road development: The underachievement of the roads sector in 2012-13 was mainly due to slow environmental clearances, land acquisitions, and time/cost overruns. For addressing these issues, the government has adopted the EPC mode for building roads and is contemplating de-linking of environmental and forest clearances for road projects. It has also exempted some linear stretches from requirement of NOC from Gram Sabhas..

5. PPP for Railways: Based on recommendations from the Kakodkar committee and Sam Pitroda committee, PPP investment in railways has been adopted in the Twelfth Five Year Plan in areas including; elevated rail corridor, high-speed corridors, re-development of stations, logistics parks, private freight terminals and dedicated freight corridors (DFCs).

6. PPP in seaport: Private participation in the seaport sector has not largely met expectations. In order to facilitate investments in this sector for speedy development, the CCI has approved a proposal to delegate enhanced financial powers (up to Rs 5 bn from Rs 3 bn earlier) to the Ministry of Shipping for port projects in the PPP mode.

V. Conclusion

There is a pressing need to address infrastructure challenges to support macroeconomic growth and development. With limitations around the available resources, it is imperative for the government to leverage private sector resource and expertise. Both the central and state governments have envisaged ambitious plans and targets for developing infrastructure through PPP mode. In the forthcoming years, as the PPP strategy for infrastructure expands, it be equally crucial for the policy makers to evolve monitoring mechanisms to ensure fair and transparent implementation of such projects.