ECONOMY

4. INFRASTRUCTURE
TRANSPORT

DATA & STATS

1. The share of transport sector in the GVA for 2017-18 was 4.77%. Among it, road
transport has largest share with 3% followed by railways [0.75%], air [0.15%] and
water transport [0.06%].
2. Logistic cost is around 14% of Ind’s GDP in contrast to 9% in US and 11% in Japan.
It aim to bring down to 10% by 2022.
3. World Bank’s Logistic Performance Index — Ind slipped to rank 44.

SIGNIFICANCE

1. Better the infra, lower the incremental cost [ICOR].

2. Target of 5 trillion economy require strengthening of Infra.
3. Infrastructure development will generate growth, employment and pull people out
of poverty.
4. Benefit EODB.
5. Developing Renewable Energy sector will help in mitigating climate.
6. Increasing urbanisation: 42% of population to live in urban areas in 2030 as
opposed to 31% now → require bridging of infra gap.
7. Reap Demographic Dividend.
8. Builds investor confidence.
9. Improve global competitiveness: Ind’s rank in overall infra quality is 70 out of 140
countries. This rank falls to above 100 in areas like water and electricity utility
infrastructure.

Better Logistic Sector → Reduce Transaction Cost → Inc competitiveness → Encourage export
& domestic consumption → Inc demand → Economic Growth.

ROADWAYS

Data & Stats

1. Road transport is estimated to handle 69% and 90% of the countrywide freight and
passenger traffic.
2. India has a road network of about 59.64 lakh km.
3. Road construction grew from 17 km/day in 2015-16 to 29.7 km/day in 2018-19.

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Significance

1. Help connect remote areas & interiors to main cities & towns which otherwise not
connected by railways.
2. Arteries for goods & passengers.
3. Complement other modes of transport.
4. Most important link in providing last mile connectivity.
5. Important from the point of view of national security & defence roads.
6. Harbinger of development and inclusive growth.
7. Robust transport for transporting perishable agricultural products.

Steps Taken

1. GoI in 2019 authorised NHAI to set up InvIT enabling NHAI to monetise

completed national highways with toll collection.
2. ₹1 trillion National Infrastructure Pipeline (NIP).
3. Dedicated Freight Corridor: high-speed and high-capacity railway corridor
dedicated exclusively for freight (goods and commodity) movement.
4. Bharatmala Pariyojana.
5. The National Highway Development Project (NHDP): development of high
quality highways. Under it, golden quadrilateral and North South – East West
projects developed.
6. Pradhan Mantri Bharat Jodo Pariyojana (PMBJP): linking of major cities to
National Highways.
7. Pradhan Mantri Gram Sadak Yojana (PMGSY): Construction of Rural roads.
8. Special Accelerated Road Development Programme for the North-Eastern region
(SARDP-NE).

Challenges

1. Land acquisitions → delays & political instability → Lower EODB → Project Ind as
soft state [Gunnar Myrdal].
2. Rehabilitation and environmental clearance.
3. High maintenance cost.
4. High Traffic risk → Major contributor in number of deaths owing to accidents.
5. Dead points on Highways.
6. Economic returns over a long period of time → deter private investment.
7. Lack of commercial bank funding.

Way Forward
1. ‘Asset reusing’ (also called capital recycling) to reinvest capital or assets in projects
which have potential.
2. Govt could establish a ‘Road Infrastructural Project Fund’ to smoothen funding.
3. Strengthening the bond market to broaden subsidising base.

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RAILWAYS

Data & Stats

1. Share of the Railways 0.75% of the total transport share in GVA.
2. Indian Railways (IR) with over 68,000 route km is 3rd largest network in the world.
3. According to WEF — Indian railways is 8th largest employer in the world.

Privatisation of Railways

A B
1 For
2 Profit orientation.
3 Adoptation of tech.
4 Improve efficiency →
Rail Safety.
5 Induce competition.
6 Bring professionalism
→ Quality of service.
7 Improve rail infra.
8 Save public money.
9 Inability of IR to meet
demand
1 Rakesh Mohan
0 Committee observed
that Indian Railways
over past decade
(1991-2002) has fallen
into a vicious cycle of
under investment.
Against
Cmmon's man transport → Social
obligation.
Job loss esp when massively staffed
→ huge impact.
May affect last mile conncectivity.
Unbalanced regional growth.
Not worked in other countries as
highlighted by Rakesh Mohan
Committee.
Absence of independent regulator
to create level playing field.
High saturation and over-utilized
capacity on popular routes
Unfair competition as railways tend
to cross-subsidize passenger fares
making it difficult for private players
to compete.

Constraints — Niti Aayog

1. Issue of Land Acquisition.

2. Cross subsidisation.
3. Compensating passenger fare with freight charges.
4. Congested networks.
5. Vinod Rai Committee — major challenge in Ind Railways is of departmentalisation.

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6. Negligible non-fare revenues and high freight tariffs.
7. Poor economics of scale.
8. Rail safety and poor quality of service.
9. Policy uncertainty.

Steps Taken

1. Dedicated Freight Corridor: high-speed and high-capacity railway corridor

exclusively for freight movement.
2. Dynamic pricing to inc railway revenue.
3. Adarsh station scheme to modernise railway stations.
4. National Rail Plan 2030 to provide long-term perspective to plan railway
development.
5. Disinvestment to few rail PSUs.

Way Forward

1. Timely completion of existing projects. Ex Dedicated Freight Corridors.

2. Allow private participation.
3. Rationalise fare structure and monetise assets to generate income.
4. Kakodkar Committee on Rail Safety — a] elimination of level crossings; b] switch to
Link-Hofmann Busch coaches and c] setup statutory body of Railway Safety
Authority.

BP
1. For Privatisation: Japan privatise railways with clause of public service obligation
i.e. govt has responsibility to ensure railway remain cheap by getting budgetary
funding.
2. Bibek Debroy Committee recommended splitting the roles of policy making,
regulation and divide railway in two independent org — One responsible for the
infra and other responsible for operating trains. It also suggested to increase
private investment in railways rather than privatise railways.

AIRWAYS

Data & Stats

1. Air transport (0.15%) of the total transport share in GVA.
2. India is the third largest domestic market for civil aviation in the world
3. The total passenger traffic (domestic & international) and air cargo handled at
airports from 2014-15 to 2018-19 to 3447 lakh and 3,562,000 tonnes resp.
4. In WEF Global Competitiveness Report 2018, Ind ranked 53/140 in air transport
infra.

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Issues

1. Private players in aviation industry is slipping from profitability cos — a] rise in ATF
[Aviation fuel] prices by 40% over last 1 yr and alone contribute 40% of operating
cost for airlines; b] Predatory pricing - Airline need to pay fee to airport for using
services which differ for low cost carrier & full cost carrier. It gives edge to LSC vis-
a-vis FSC in terms of fare.
2. Highly capital intensive.
3. Seasonal profitability — not run at full capacity throughout the yr.
4. Issues wrt maintenance, repair and overhaul [MRO] — It require huge
investment but necessary for large domestic market. Currently in Singapore, Dubai.
5. 6th Freedom — It allows international players dominate domestic market.
6. Lack of training facilities.

Steps Taken

1. UDAN.
2. FDI relaxation.
3. Airport Economic Regulatory authority of India [Amendment] 2019 — amendment
empowers AERA to bid out any new airport at a pre-determined tariff structure.

Way Forward — Niti Aayog

1. Enhance Infra.
2. Skiling manpower.
3. Promoting air cargo.
4. Ease regulatory environment.

SHIPPING

Data & Stats

1. Water transport (0.06%) of the total transport share in GVA.
2. Around 95% of India’s trade by volume and 68% in terms of value is transported by
sea.
3. Ind has 12 major ports and more than 200 minor ports.
4. Govt allowed 100% FDI in port construction and maintenance projects.

Significance
1. Ind strategically located.
2. Inc trade → EG.
3. Well developed port system help Ind being part of global value chain esp in
background of growing importance of Indo-Pacific sea region.

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4. Water transport is cheaper: road cost per km is Rs 2.50, rail - Re 1 and waterways is
around 25 paisa.
5. Low carbon footprint as compared to other modes of transport.
6. Seamless connectivity w/o any issue of congestion & accident.
7. Socio-eco benefits: No issue of displacement and rehabilitation.

Issues

According to Bureau of Research on Industry & Economy Fundamentals [BRIEF], following

problem affecting Ind’s port sector:

1. Infrastructural bottlenecks — Lead to congestion, low penetration of inland

shipping.
2. Poor operational efficiency.
3. Roads continue to be dominant mode of transport, followed by rail. Waterways
contribute only 6%.
4. Most of the ports lack capability to handle large vessels due to inadequate depth.
5. Weak linkage of road & rail transport to ports.
6. Capital Intensive.
7. Regulatory issues — bureaucracy, involvement of multiple agencies.
8. Ecological impact & threat to species.
9. No presence of industry in vicinity of ports.

Steps Taken
1. Major Port Authorities Bill 2020 — aim to provide autonomy to Ind’s major ports
and improve their efficiency and competitiveness.
2. Sagarmala — developing ports as engines of growth. It deals in modernising port
infra, improve port connectivity, create coastal economic zones.
3. Jal Vikas Marg on river Ganga.
4. Ro-Ro Projects — Ex Ghogha-Dahej project in GJ.

Way Forward — Niti Aayog

1. Corporatisation of ports — improve efficiency.
2. Open up ‘dredging market’ and attract more players.
3. Tech usage.
4. Timely completion of trans-shipment projects.
5. Enhance connectivity and facilitate access to capital.

STEPS TAKEN

1. National infrastructure plan — Under it, govt planning to invest ₹102 lakh crore in
infrastructure sector in the next five years to achieve the GDP target of $5 trillion by
2024-25.

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2. Multi Modal Transport: built under Jal Marg Vikas Project on R. Ganga. Under it
goods moved using different modes of transport.
3. National Infrastructure Investment Fund (NIIF) with an initial corpus of Rs
40,000 crore.
4. Nat Highways Authority of India (NHAI) launched Masala Bonds for raising capital
for funding infra projects in Ind.
5. Relaxation in External Commercial Borrowing (ECB) norms.
6. Masala Bonds to source infra funding.
7. Infrastructure Investment Trusts/Real Estate Investment Trusts.
8. E-way Bill and implementation of GST: unify Indian market and reduce entry
barriers and facilitating market by tech.
9. Draft National Logistic Policy aim to drive eco growth and trade competitiveness
through cost effective logistic n/w.
10. LEADS Index [Logistic Easy Across Different States]: to reduce the logistic
bottlenecks at state level.

CHALLENGES

1. India don’t have proper definition of Infrastructure. According to the Rangarajan

Commission [National Statistical Commission], Infra contains master list and as per
the time & policy needs, new sub-sectors are created under it.
2. Poor operational efficiency.
3. Institutional Issues — weak regulatory body.
4. Lack of private sector funding.
5. Geographical Issues: Ind’s difficult & varied terrain.
6. Environmental clearance delays, protest by the displaced populations and hurdles
due to local politics.
7. Lack of co-operation at the state level, which is a big hurdle since land acquisition
is the state’s business.
8. Financingof infrastructure projects is biggest issue in India.
9. Long gestation period:Large infrastructure projects can take several years—
sometimes even decades—to complete and turn profitable.
10. No level playing field b/w private and public sector.

WAY FORWARD

1. Niti Aayog: Allow private players and shift towards international standards for
increasing efficiency & to ensure compatibility.
2. Vivek Debroy Committee: a] Govt must reduce rail freight tariff structure on select
roots, b+ Intro ‘one nation, one permit, one tax system’ and c+ Independent logistic
department within commerce ministry.
3. Disaster resilience- by adopting the knowledge and expertise through the Coalition
for Disaster Resilient Infrastructure (CDRI).

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4. Attracting foreign and private capital into infra.
5. Strengthening the municipal bond markets in India.

CONCLUSION

1. 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.
2. There is a need to develop a robust bond market for infrastructure companies,
speedy resolution of infrastructure disputes, optimal risk sharing through better
and balanced PPP contracts, and sanctity & enforceability of contracts.

POWER SECTOR

DATA & STATS

1. India is the third largest energy consumer in the world after USA and China with a
share of 5.8% of the world’s primary energy consumption.
2. Ind stands 4th in wind power, 5th in solar power and 5th in renewable power
installed capacity.
3. Thermal power accounts for about 63% (with renewable energy- 23% and Hydro-
12.4%) of total installed capacity and roughly half of the generation capacity is in
the private sector.
4. India’s installed capacity for power generation recorded a compounded annual
growth rate (CAGR) of 8.9%, an increase from 124 GW to 344 GW between 2006
and 2018.
5. ES 2018-19: India lagged behind in energy usage and is around 1/3rd of global
average.
6. Renewable Energy: Ind announced 175 Gigawatt (GW) targets for renewables by
2022 and already achieved 83 GW. India also aims to increase the target till 450
GW.
a. 38% of India's installed electricity generation capacity is from renewable
sources (136 GW out of 373 GW)
b. Wind Power: 38,124.15 MW (42.7%)
c. Solar Power: 36,050.74 MW (40.4%)
d. Biomass Power: 10,145.92 MW (11.4%)
e. Small Hydro Power: 4,739.97 MW (5.3%)
f. Waste-to-Power: 168.64 MW (0.2%)

ISSUES IN POWER SECTOR

1. Poor financial condition of power distribution companies (discoms).

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2. Delays in adoption of tariff — no time limit has been prescribed.
3. Non-performance of the contract created uncertainty, upset investment decisions
and adversely affect ease of doing business.
4. Non Functional State Electricity Regulatory Commissions (SERCS).
5. Existence of multiple committees for selection of the posts of Chairpersons and
members.
6. Operational inefficiencies due to huge technical and commercial losses (AT&C),
primarily caused by power theft, poor payment collection procedures.
7. Decline in demand during lockdown.
8. Economic Policy Uncertainty: ambitious targets in NDC but not backed by any
forward looking policy. This is further complicated by contradictory statements wrt
targets and govt continue dependence on coal sector to fulfil energy
requirements.

STEPS TAKEN

1. GoI released its roadmap to achieve 227 GW capacity in renewable energy

(including 114 GW of solar power and 67 GW of wind power) by 2022. The Union
Government of India is preparing a 'rent a roof' policy for supporting its target of
generating 40 gigawatts (GW) of power through solar rooftop projects by 2022.
2. Draft Electricity (Amendment) Bill 2020: It amend Electricity Act, 2003.
a. Electricity Contract Enforcement Authority to enforce performance of
contracts.
b. Enable state as well as central power regulators to specify transmission
charges under open access.
c. Cost reflective Tariff and Simplification of Tariff Structure.
d. Proposes a National Renewable Energy Policy (NREP).
e. Renewable Purchase Obligations (RPO) to include Hydro energy sources.
3. Govt planning to privatise discoms: privatisation of discom, for ex in Delhi
inc revenue and improved consumer services.
4. Bailout package of ₹90,000 crore as part of a ₹20 trillion stimulus package to
revive the economy to be given to discoms against state govt guarantees.
5. Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) aiming for universal
household electrification by providing last-mile connectivity.
6. Atal Distribution System Improvement Yojana (Aditya)—to cut electricity losses
below 12%.
7. One-time relaxation in working capital borrowing limits imposed under Ujwal
Discom Assurance Yojana (UDAY).
8. Govt launched Kusum and FAME schemes to reduce dependence on non-
renewable fuels.

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