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Mrunal (Economy 4 Newbie) Infrastructure - Roads, Railways, Seaports Etc Print
Mrunal (Economy 4 Newbie) Infrastructure - Roads, Railways, Seaports Etc Print
What is infrastructure?
In simple terms, things like roads, dams, power-plants,schools, etc. help you in your life and business = this is infrastructure. infrastructure is defined in dictionary as the underlying foundation or basic framework Broadly, infrastructure includes all public services from law and order through education and public health to transportation, communications, power and water supply, as well as irrigation and drainage systems.
Classification
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When Govt. opens more polytechnique, IITs,IIMs youll get better trained people to work in factories and business.thus,
Thus,
Suppose youre running a cybercafe. So, the shop, the computers and internet connection is your capital (=something that generates money.) But what if there is no electricity in 3 days per week?/ slow internet connection? = your business will be ruined. So, When Govt. opens more powerhouses, lays more telephone cables, sends more Satellites = your cybercafe will earn more money.
productivity of physical capital is improved by power and transportation etc economic infrastructures.
If youre a truck driver. If the roads are bad then? Trucks tyres,engine will need more servicing. If the roads are good then? youll be able to drive your truck faster and make more trips. Thus,
Infrastructure lowers the cost of producing a given level of output or, alternatively, can increase the amount of output produced by all other inputs for a given cost.
Infrastructure enables markets to work better. Transactions are made less costly and this increases the benefits of trade. For example, advances in transport and communications have considerably lowered storage costs by permitting producers to respond rapidly to changing consumer demands even in international trade. (this is referred to as modern logistics management). If youre running a factory, and there is no electricity 3 days per week, then youll waste lot of your money buying & running diesel generators & then youll sell your products at higher cost, to recover that money you wasted in diesel. Thus,
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Roads are divided into five categories for administrative purposes. 1. National highways, 2. State highways, 3. major district roads, 4. other district roads 5. village roads Central Govt. is responsible for maintaining the National Highways, other 4 types of roads are maintained by State Govt. Before LPG in 1991, only Govt. could invest in making roads. but after LPG, National Highways Act was amended in 1995 to allow private sector participation. NHAI (National Highways Authority of India) was created to build and upgrade national highways. Funds have been made available to the NHAI for its capital base through a tax on motor spirit and cess on diesel.
but yet
Sam Pitroda has pointed out the difficulty In old times (60s to 90s) when the land was cheap, Govt. didnot acquire it, so now it has to buy the land and pay very high prices per square meter + other compensation. (+ the pseudo-environmentalists)
Railways
Railways provide energy efficient form of transportation compared to roads. i.e. you want to send tonnes of wheat/coal from one state to another, itll consume more dieasel if you do it via trucks. railway services are intermediate inputs to production; any reduction in these input costs raises the profitability of production.
CROSS SUBSIDISATION
Traditionally, railways are seen as part of essential public service =railways should not be denied to even those who are unable to pay fully. (=poor people should also be allowed to enjoy railways= Garib Rath / Student concession pass etc.) But it doesnt fall from sky, if someone is enjoy something then somebody has to pay money for it, right ? so, freight charges* and upper class passengers ticket prices are set high,
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Railways earning
30 % from Passenge tickets 70 % from Freight traffic.* <*when you send physical items like wheat / coal = this is Freight>
Seaports
India has coastline of 7,000+ kms and 12 major ports (managed by Central Govt.| account for over 75 % of total cargo) 185 minor ports (managed by State Govt. |25% Cargo transported via them) After LPG, Private companies are allowed to participate in Development of these ports. If you want to export Wheat to S.Africa, then itll be expensive if you do it using aeroplanes. but cheaper via sea-routes.
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But first of all youve to transport the wheat grown in Punjab / UP/Haryana to Mumbais port via Railway/Trucks. Thus,
Ports require good inland connectivity (via rails/roads) so Efficiency of one infrastructure depends on other infrastructures.
Thats why, Government is investing in improving the road connectivity to major ports through the NHDP.
REGULATION of sea-ports
as you know, there is TRAI (Telephone regulatory Authority of India) as judge for telephone related matters. (otherwise BSNL will act as monopoly and pvt players like Vodaphone, Airtel wont get level playing field in spectrum allocation etc.) same way, for level playing field in sea-port operations Tariff Authority for Major Ports (TAMP) has been set up.
landlord ports
when cargo handling is done by private players, such ports are called landlord ports. (just like airport Management given to pvt players.) but in India all major ports are run by Port Trust made by central Govt. the concept of Landlord ports is not yet implemented in Major Ports. but A wholly private owned port of Pipavav is setup in Gujarat = this is Landlord Port. port of Sika ( Gujarat) accounts for the largest cargo handling among all ports in the country. (its connected to Reliance Refinery @ Jamnagar.)
Airports
Airports are under the management of Airports Authority of India. Private investments are to be drafted for the upgradation of the four major airports (Delhi Mumbai Kolkata and Chennai). greenfield airports under private ownership are coming up at Bangalore and Hyderabad. new airport promoted by Kerala State Government has come up in Kochi with private investor participation.
Problems
Tax on Aviation fuel = air-tickets costly. Big burden on tax payers, known as Air-India.
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Energy
estimated 80,000 villages yet to be electrified,
communication
New Telecom Policy (NTP) was introduced in 1999. its aim is to provide connectivity to all rural, hill villages & remote parts. + level playing field for pvt players.(against BSnL)
over 2,00,000 villages were unconnected (as of June 2002) Many rural / hill areas dont get adequate telephone/mobile connectivity because theyre high cost service areas =mobile companies dont earn enough revenues (income) to cover costs of operating in that area. Thus it falls on Govts shoulders to do that work. (thats why Govt. PSU BSNL exists.) > this is one of the arguments in favor of public sector undertakings = to serve the people where pvt players are not interested to work in. anyways, back to the topic:-
Niche Operators
It is assessed by TRAI that despite the USO support, existing big service providers would not be interested to serve about 50 per cent of the villages. To address this issue, TRAI in its Unified Licensing recommendations envisaged that the Short Distance Charging Areas with teledensity less than 1 per cent be notified as telecom-wise-backward areas. In these areas, niche operators, defined as the telecom service providers whose services are restricted to these backward areas only will be inducted. These operators are entitled for
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concessions of zero entry fees, lower license fees and funds. The scheme is aimed to promote local entrepreneurs who have the technical competence to provide communication solutions but cannot compete on equal footing with large operators.
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10th Plan talked about effectively using traditional Indian medicine system consisting of ayurveda, yoga, unani and siddha. These combined with homeopathy is named as AYUSH (was asked in mains 2009.) Generally Govt. funds are mostly spent on preventing the of communicable diseases.(AIDS, Cholera,Polio etc) + family planning schemes. But in 10th plan they talked about National Mental Health Programme (for mentally challanged) India has 1/6th of humans living in this world. By 2050 well be the country with largest population on earth. large population has its problem- drinking water, food etc.
Education
In todays speech, Obama said
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Thats why the physical infrastructure like heavy industries, dams, roads, bridges etc. is considered to be responsibility of the Govt. Problem when Govt. starts doing something = red tape, inefficiency, corruption. + nowadays Govt. doesnt have lot money to make new project. Thats why they talk about keeping the private players So we get PPP = public pvt partnership project. Then weve BOT= build operate transfer type of project. Ill talk about this two (PPP/BOT) in detail in another article.
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