Infrastructure Deficit
description
Transcript of Infrastructure Deficit
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% T&D losses;
absence of competition; and inadequate private investment
3
Scale of the Challenge
Projected Investment in Infrastructure
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
02-03
03-04
04-05
05-06
06-07
07
-0808
-0909
-1010
-1111
-12
US
$ B
n.
X Plan
XI Plan:Businessas Usual
XI Plan:Projected
X Plan:
Anticipated: US $ 217.9 bn.
XI Plan:
Based on Physical Targets: US $ 515.05 bn.
Business as Usual: US $ 371.3 bn.
4
Projected Investment in Infrastructure X Plan XI PlanSectors 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 217.86100
515.05 100
Rs. crore 871,445 2,060,193
5
Projected Eleventh Plan Sector Share (%)
Electricity32%
Roads 15%Telecom
13%
Railways13%
Irrigation12%
Water Supply and Sanitation
7%
Ports4%
Airports2% Gas
1%
Storage1%
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 can’t 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