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Infrastructure UPSC STUDY NOTES
Infrastructure UPSC STUDY NOTES
INDIAN ECONOMY
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Infrastructure
Introduction
Infrastructure is the livelihood of an economy and a prerequisite for growth and development.
Goods and services that normally require more investment and are considered essential for the proper
functioning of an economy are known as the infrastructure of an economy.
Example: electricity, transportation, Communications, water supply, sewerage, housing, urban facilities,
etc.
There are three sectors that are considered part of critical infrastructure around the world, namely
electricity, transport and communications.
However, practical experience shows that planned and unplanned blackouts are the norm in cities and
the situation is even worse in most rural areas.
This means that power consumption has always lagged behind availability.
Technical loss
Commercial Loss
2.The gap between the average unit cost of delivery/Average Cost of Supply (ACS) and the
Average Revenue Realised (ARR)
These are the costs incurred by Discoms when purchasing electricity from electricity generators
and distributing them.
These are the costs that Discoms receives after the sale to end customers.
The remaining 75% is sold at prices well below the acquisition costs of the clubs.
Almost all countries avoid tariff increases due to associated political costs. Therefore, political resentment is
at the centre of business losses. Because of this, there is a gap between ACS and ARR.
As a result, by March 2015, Discoms accumulated losses were approximately Rs 3.8 lakh crore — more
than 3.5% of the GDP.
So, in order to make Discoms financially viable, UDAY scheme was launched.
Energy efficiency via steps like efficient LED bulbs, agricultural pumps, fans & air-conditioners etc
Eliminate the gap between ARR and ACS by reduced electricity costs, interest charges and blackouts in
the distribution sector.
Features of UDAY
UDAY is basically a reprogramming plan for DISCOMs and optional for states.
Attract states to actively participate in the program through incentives for implementing states.
75% of the debts of their respective DISCOMs are gradually assumed by the states through the signing of
a memorandum of understanding (MoUs) through the issuance of bonds.
The other 25% of the debt is issued by DISCOMs in the form of bonds (direct bearing on the state budget).
Achievements of UDAY
It was well received and many states joined the program.
Several states assumed the debts of their utility companies, thus improving their liquidity situation.
The government's UDAY program has helped the debt-laden discoms of 24 states reduce losses from
515.9 billion rupees to 369 billion rupees in 2018.
Participating countries have a 1% improvement in Technical and Commercial Aggregates loses (AT&C
loses) in Distribution.
Challenges in UDAY
High Aggregate Technical & Commercial (AT&C or Distribution) Losses
AT&C losses remain high, with some states reporting losses of more than 40%, far from the 15% target.
Larger Gap
Regulation requires DISCOMs to reduce to zero the gap between average cost of supply and average
revenue.
In several states such as Punjab, Jammu and Kashmir, Manipur and Goa, this gap has widened in recent
years. This is due to insufficient rate increases.
Mixed Progress
UDAY's operational efficiency goals, such as feeder metering facility, smart metering, and feeder
segregation, have yet to be fully achieved.
Electricity subsidies approved by state governments for breakdowns also appear to be inadequate.
As a result, Discoms reported financial losses of Rs 21,658 billion at the end of 2019, reversing the
downward trend since UDAY was launched.
State Burden
The proportion of disruption losses that states have to bear increased from 5% in 2016-17 to 50% in 2019
-20.
Railways
Indian Railways is the 4th largest railway network in the world by size with a route length of 70,000 Km
(approx).
Goal: To minimise travel time between the northern and southern parts of the state.
It connects Kerala's southernmost city and state capital (Thiruvananthapuram), with the state's
northernmost city (Kasaragod).
The Kerala Rail Development Corporation Limited is in charge of the project (KRDCL).
The Kerala Railway Development Corporation Limited (KRDCL), often known as K-Rail, is a joint venture
between the Kerala government and the Union Ministry of Railways.
It was designed and manufactured by Integral Coach Factory (ICF) at Perambur, Chennai under the Indian
government's Make in India initiative,
Its successor is also being developed under the name Train 20, which will replace the existing long-
distance trains in the coming years.
Delhi to Varanasi
Delhi to Katra.
It has GPS-enabled passenger information system, onboard Wifi and infotainment system.
Roadways
With a road network of approximately 5.89 million km consisting of National Highways, State Highways
and other highways, India has the second largest road network in the world.
The country's National Highway covers a total length of 1.32 lakh km and carries around 64.5% of road
traffic.
The scheme was introduced in 2000 by the then Prime Minister of India, Shri Atal Bihari Vajpayee.
Share of Union Government: State Government = 90:10 [In Northeast and Himalayan countries]
Eligibility
Unconnected settlements with a declared population size (500+ in the plains and 250+ in the north-
eastern states, Himalayan states, deserts and tribal areas according to the 2001 census).
Unconnected Habitation: It is a residential area with a population of a certain size that is at least 500
meters or more (1.5 km in the case of hills) from an all-weather highway or a contiguous residential area.
Core Network: It is this minimal road network (routes) that is essential to provide all eligible
households in selected areas with basic access to essential social and economic services through at least
one weather-independent road link.
Rural roads constructed by PMGSY will comply with Indian Roads Congress (IRC) regulations.
Hospitals
GrAMs are retail agricultural markets in close proximity to the farm gate,that promote and service
a more efficient transaction of the farmers’ produce.
The project started in 1998 under the leadership of Prime Minister Atal Bihari Vajpayee.
National highways represent only about 2% of the total length of the highways, but they carry around
40% of the total traffic throughout the country.
This project is managed by the National Highway Authority of India (NHAI) under the Ministry of Roads,
Transport and Highways.
The NHDP represents 49,260 km of construction of roads and highways to stimulate the economic
development of the country.
The government ended the NHDP program in early 2018 and consumed the ongoing projects as part of a
larger Bharatmala project.
Bharatmala Pariyojana
The Bharatmala Pariyojana is a centrally-sponsored scheme.
It is a funded Road and Highways project of the Government of India under the Ministry of Road
Transport and Highways.
Objective: To achieve an optimal allocation of resources for the comprehensive development of the
highway.
It is a program for the highway sector that focuses on optimizing the efficiency of freight and passenger
transport throughout the country.
Its objective is to close the gaps in critical infrastructures through effective measures such as:
Development of economic corridors, intermediate corridors and feeder routes, improve the
efficiency of the national corridor, border and international connection roads, coastal and port
connection roads and Greenfield Expressways.
It will build highways from Maharashtra, Gujarat, Rajasthan, Punjab, Haryana and then cover the entire
string of Himalayan territories - Jammu and Kashmir, Himachal Pradesh, Uttarakhand - and then portions
of borders of Uttar Pradesh and Bihar alongside Terai, and move to West Bengal ,
Sikkim, Assam, Arunachal Pradesh, and right up to the Indo-Myanmar border in Manipur and Mizoram .
Phase I
National Highways Authority of India (NHAI) has mandated the development of about 27,500 km of
national highways under Phase-I.
Phase II
Objective: To promote cities that offer basic infrastructure, a clean and sustainable environment and
their citizens through the application of "smart solutions".
The mission aims to promote economic growth and improve the quality of life through extensive work on
the social, economic, physical and institutional pillars of the city.
The focus is on sustainable and inclusive development by creating replicable models that serve as
beacons for other emerging cities.
Culture
Urban Environment
It is often used to provide public assets or public services through investment and / or management by
the private sector company over a period of time.
There is a well-defined risk distribution between the private sector and the public sector.
The private entity, selected on the basis of an open bidding process, receives performance-related
payments that meet specific and pre-established performance standards that can be measured by the
public entity or its representative.
PPP Models
Build Operate Transfer (BOT)
It is a conventional PPP model in which the private partners are responsible for planning, building,
operating (during the contract period) and transferring the facility to the public sector.
Private sector partners must raise funds for the project and take responsibility for its construction and
maintenance.
The public sector will allow private sector partners to collect revenue from users.
BOT Toll
The `Build-Operate-Transfer-Toll` was one of the first PPP models.
In addition to sharing the project costs (with the government), the private bidder had to build the
highway, maintain and operate and collect the toll for vehicle traffic.
The offer was for the private company that offered to share the maximum revenue from tolls with the
government.
The private part previously covered "all risks" related to - land acquisition, construction (damages),
inflation, cost overruns for delays and trade.
Unreasonable delays in acquiring land due to litigation, cost overruns and uncertainties in traffic flow
(commercial risk) etc.
BOT Annuity
This was an improvement over the BOTTOLL model
It aimed to reverse the declining interest of private companies in road projects by significantly reducing
the risk for private actors.
In addition to sharing the project costs, private player was responsible for the construction, maintenance
and operation of the highway projects without being responsible for collecting tolls on traffic.
Private actors were offered a lump sum amount (referred to as an "annuity") per year in compensation:
the party that bids for the minimum "annuity" used to maintain the project.
Private providers had no commercial risk (traffic) - but remained heavily exposed to other risks
(delays in land acquisition, inflation, cost overruns, construction).
The government invites bids from private players for technical knowledge.
The acquisition of raw materials and construction costs are borne by the State.
The participation of the private sector is minimal and is limited to the provision of technical knowledge.
One difficulty of the model is the high financial burden for the state.
The EPC (private entity) contractor is responsible for all activities from planning, procurement,
construction to commissioning and handover of the project to the government.
This is a PPP model for the development of infrastructure projects, especially roads.
HAM was introduced by the government to revitalize PPP in road construction in India.
Numerous stagnant projects block infrastructure projects and at the same time increase the non-
performing assets (NPA) of the banking system.
In India, the new HAM is a combination of BOT Annuity and EPC models.
The state will contribute 40% of the project costs during the first five years through annual
payments (annuity).
The remaining payment is made based on the assets created and the performance of the
developer.
According to HAM, the revenue collection would be the responsibility of the National
Highways
Authority of India (NHAI).
The government then publishes the details of the project and solicits suggestions from others interested
in carrying it out.
After receiving these offers, the original contractor has the opportunity to match the best offer.
Example:
Assume that Company A wins the first round of bidding by a quoting a price of ₹6,000 for item A.
This will be made public and a second set of bids would be invited. If Company B quotes ₹5,500 for
the same item, then Company A will be offered a second opportunity to match it.
If Company A steps up, then it will can bag the item A at ₹5,500.
Housing
Pradhan Mantri Awas Yojana – Urban
Launched: 25th June 2015, intends to provide housing for all in urban areas by year 2022.
Features
Address the urban housing shortage among the urban poor, including slum dwellers, by providing
a Pucca House for the eligible urban poor.
All houses under PMAY (U) have basic amenities such as bathroom, water supply, electricity and kitchen.
Mission promotes the empowerment of women by providing home ownership on behalf of female
members or in common names.
People with disabilities, older adults, SC, ST, OBC, minorities, single women, transgender and
other
weaker and more vulnerable groups in society are also preferred.
In-situ Rehabilitation of existing slum dwellers using land as a resource through private participation.
Provides subsidy to economically weaker section (EWS) and lower income group (LIG)
Aim: Provide a Pucca house with basic amenities for all rural families homeless or living in Kutcha or in
dilapidated houses by the end of March 2022
Beneficiaries: People belonging to SCs/STs, freed bonded labourers and non-SC/ST categories, widows or
next-of-kin of defence personnel killed in action, ex-servicemen and retired members of the paramilitary
forces, disabled persons and minorities.
Selection of Beneficiaries: Through a three-stage validation - Socio Economic Caste Census 2011, Gram
Sabha, and geo-tagging.
Cost Sharing: 60:40 in plain areas and 90:10 for North Eastern and hilly states.
The initiative will attract domestic and foreign direct investment to the Indian economy.
The NIP will meet all critical factors to help India achieve its goal of becoming a $ 5 trillion economy by
fiscal 2025.
It aims to invest more than ₹102 lakh crore in infrastructure projects by 2024-25.
The share of the Centre, States and the private sector will be in a ratio of 39:39:22 formula.
Investment needed: ₹111 lakh crore over the next five years (2020-2025) to build infrastructure projects
and drive economic growth.
Energy, roads, railways and urban projects are estimated to account for the bulk of projects (around
70%).
The centre (39 percent) and state (40 percent) are expected to have an almost equal share in
implementing the projects, while the private sector has 21 percent share.
Logistics
The supply chain's backbone is logistics (management of flows of goods from the point of origin to the
point of consumption).
Over the last five years, it has expanded at a compound annual growth rate (CAGR) of 7.8%.
Between 2019 and 2025, India's logistics market is expected to increase at a CAGR of 10.5 percent.
India's logistics business is projected to be driven by strong growth, which will be assisted by government
reforms, transportation sector development plans, rising retail sales, and the e-commerce sector.
E-commerce is another significant category that is projected to help the logistics business grow over the
next few years.
Logistics Performance Index (LPI) is an interactive benchmarking tool to help countries to identify the
challenges and opportunities in their retail logistics performance and what they can do to improve their
performance.
The National Logistics Policy adopted by the Government of India in 2021 aims to promote the smooth
movement of goods throughout the country.
It will focus on various areas such as process reengineering, digitization, focus on multimodal
transportation, EXIM trade, etc. and it will seek to improve logistics in the central sectors.
Effective implementation of the policy would help boost trade, increase export competitiveness, and
improve India's ranking on the logistics performance index.
Maritime Sector
Sagarmala Project
The Sagarmala Programme is an initiative by the government of India to enhance the performance of the
country's logistics sector.
Nodal Ministry: The Union Shipping Department has been designated the Node Ministry for this
initiative.
To do this, state governments would establish Sagarmala state committees chaired by the prime minister
or the minister of ports.
A Sagarmala Development Company (SDC) is established at the central level, which provides capital
support to support various Special Purpose Vehicles (SPV) in the establishment of various projects.
Renewable Energy
India is the fourth largest energy consumer after the United States, China and Russia, but it does not have
abundant energy resources.
Therefore, it must meet its development needs by using all available indigenous resources of coal,
uranium, oil, hydroelectric power, and other renewable resources.
Meeting the energy needs to achieve economic growth and at the same time meeting the energy needs
of the population at affordable prices is, therefore, a great challenge.
It requires sustained efforts to increase the energy efficiency of while increasing household energy
production as much as possible.
The use of world's proven coal, oil and natural gas reserves must be restricted to prevent the planet from
warming beyond the average temperature rise of 2 ° C.
Many of the country's large power plants face severe coal shortages.
Renewables will address the challenges of power shortages, which cost Rs 4.2 million a year.
But when you consider that providing electricity for everyone means having it available 24 hours a day,
365 days a year, rather than four hours a day, the government has long missed its goal.
Renewable energies are the order of the day and can offer what India needs.
60 GW from wind
10 GW from Bio-power
There is also a target for installation of Rooftop Solar Projects (RTP) of 40 GW by 2022 including
installation on rooftop of houses
National Solar Mission is a major initiative of the Government of India and State Governments to promote
ecologically sustainable growth while addressing India's energy security challenge.
National institute of solar energy is created as autonomous institution under Ministry of New &
Renewable Energy (MoNRE) is apex body for R&D.
Establishment of solar parks and ultra major solar power project and enhancing grid connectivity
infrastructure.
Sustainable rooftop implementation of Solar transfiguration of India (SRISTI) scheme to promote rooftop
solar power projects in india.
70% Subsidy on installation of SPV power plant in NE States and 30% in other regions.
100% FDI allowed for renewable energy generation, distribution, and manufacturing projects.
NIP was launched with 6835 projects and has been expanded to cover 7400 projects.
So far around 217 projects worth ₹ 1.1 lakh Cr have been completed.
Govt has proposed setting up a development finance institution National Bank for Financing
Infrastructure and Development (NBFID).
Asset Monetization
A National Monetization Pipeline (NMP) of potential brownfield infrastructure assets will be launched.
Its aim is to unlock the value of Brownfield projects through private sector participation, transfer of
revenue rights in lieu of project ownership, and use of generated funds to build infrastructure across the
country.
NMP announced that it would create a clear framework for monetization and provide potential investors
with a list of assets that earn investment interest.
The Union budget 2021-22 has identified the monetization of the operation of public infrastructure
facilities as a key instrument for financing sustainable infrastructure.
Railways
Indian Railways has prepared a National Rail Plan 2030.
Dedicated Freight corridor – DFC (Western and Eastern) will be commissioned by 2022.
Urban Infrastructure
Govt to launch PPP models to promote private bus operators to operate and maintain 20000
buses in urban areas.
Two new technologies – MetroLite and MetroNeo to provide rail metro services at a much lower
cost.
Power Infrastructure
Govt will be putting in place a framework to provide choice for the consumers to choose from more than
one electricity distribution company.
Hydro energy Mission 2021-22 for generating hydrogen from green power sources.
India has implemented the Recycling of Ships Act 2019 and has acceded to Hong Kong
International Convention (Hong Kong International Convention for the safe and environmentally
sound recycling of ships).