Infrastructure Push: Indias Development Mantra

Pratap Padode
MD, ASAPP Info Global Services P Ltd.

Infrastructure development paves the way for rapid economic development of country. Pratap Padode provides an overview of the infrastructure development during the 5-year reign of the Modi government

India has its task cut out—first build infrastructure and in the process create jobs. Meanwhile, incentivize entrepreneurship such that it operates upon the built infrastructure to propel the economy forward. There is compelling evidence that infrastructure development has allowed the country to maintain a pace of growth which has kept pushing the needle towards enrichment.

Between 2008-12,Rs. 24 lakh crore were spent on infrastructure at 7% of GDP, while during 2013-17, Rs. 37 lakh crore were spent in infrastructure, registering a spend of 5.8% of GDP. Given the period from 2018-22, it is estimated that nearly Rs. 50 lakh crore would need to be spent to keep up the momentum at a spend of 5.3% of GDP. The allocation for infrastructure was increased by 21 per cent to USD 92.3 billion in the Union Budget 2018-19.

The foreign direct investment (FDI) received in construction development sector (townships, housing, built-up infrastructure and construction development projects) from April 2000 to December 2017 stood at US$ 24.67 billion, according to the Department of Industrial Policy and Promotion (DIPP). The logistics sector in India is expected to increase at a compounded annual growth rate (CAGR) of 10.5 per cent, from US$ 160 billion in 2017 to US$ 215 billion by 2020. In 2016, India jumped 19 places in the World Bank's Logistics Performance Index (LPI) 2016 to the 35th rank among 160 countries.

Metro Rail

There are 425 km of metro rail systems operational in the cities of Delhi, NOIDA, Gurugram, Kolkata, Mumbai, Chennai, Bengaluru, Hyderabad, Jaipur, Lucknow and Kochi and another about 684 km are under construction in various cities currently, while several others are being added.

Bharatmala and Sagarmala

The Economic Survey of 2018 listed Bharatmala and Sagarmala as important initiatives for highways and shipping sectors, respectively. The Survey said that under the Sagarmala, ports master plans have been finalised under which capacity expansion projects for 131 at project cost of Rs. 85,346 crore have been identified for implementation over the next 20 years.

On October 24, 2017, the Indian government approved the biggest ever Highway Development Plan for 83,677 kilometers of roads involving an investment outlay of US$ 107 billion by 2022. Around 80 percent of this funding is expected to come from the government. The 24,800 km Bharatmala Highway Programme is a part of this plan. The NHAI has already formulated the Detailed Project Reports (DPRs) for 10,000 km of the identified network.



The Bharatmala Highway Programme (Bharatmala Pariyojana) is an umbrella highway development project. It envisions boosting the efficiency of the National Corridor (Golden- Quadrilateral and North South - East West corridor) by decongesting its choke points by lane expansion, building new ring roads, bypasses, elevated corridors and logistics parks.

Phase-1 of this project has already been sanctioned. This entails laying out 24,800 kilometers of roads at an investment of over US$ 83 billion by 2022. This programme includes constructing 6,000 km long inter-corridor and feeder routes, 2,000 km of border and international connectivity roads, 5,000 km to be upgraded under the national corridor efficiency programme, 800 km of greenfield expressways, 9,000 km under the national highway development programme and 2,000 km of coastal and port connectivity roads. This will provide 50 national corridors as opposed to the six right now. With this, upto 80 per cent of freight shall travel along the Indian National Highways as against the 40 percent at present. The project shall connect 550 districts in the country through the National Highway linkages against the existing 300 districts.

As per the studies conducted under the Sagarmala Programme, it is expected that by 2025, cargo traffic at Indian ports will be approximately 2500 MMTPA while the current cargo handling capacity of Indian ports is only 1500 MMTPA. A roadmap has been prepared for increasing the Indian port capacity to 3500+ MMTPA by 2025 to cater to the growing traffic.



As part of Sagarmala Programme, more than 577 projects (cost: Rs. 8.57 Lakh Cr.) have been identified for implementation, during 2015-2035, across the areas of port modernization & new port development, port connectivity enhancement, port-linked industrialization and coastal community development. As of 31st March, 2018, a total of 492 projects (costing around Rs. 4.25 Lac crore) were under various stages of implementation, development and completion. Out of these 60 projects costing Rs. 11,336 crores have been completed, while 161 projects costing Rs. 237,115 crores are under implementation and 271 projects costing Rs. 177,112 crores are under development.

For promoting port-led industrialization, 14 Coastal Economic Zones (CEZs) covering all the Maritime States and Union Territories have been proposed. CEZ perspective plans have been prepared and Detailed Master Plans will be prepared for 4 pilot CEZs (in Gujarat, Maharashtra, Tamil Nadu and Andhra Pradesh) in the first phase of development.

Roads

Apart from the Highway Development Plan and the Bharatmala Programme, the government also plans to spend around US$ 154 billion under Centre’s flagship Pradhan Mantri Gram Sadak Yojana (PMGSY). Specifically, these funds will be spent on building new roads, including in areas affected by the Left-wing extremism (LWE), and upgrading the existing ones. Besides this, the funds would be spent on linking all the 65,000 habitations that were not connected in the first 15 years of the programme, and also on upgrading the already built roads.

During 2014-17, a total of 1,20,136 km of rural roads were built as against 80,472 km during 2012-15. The Government of India had planned to construct around 59,000 km of roads in rural areas by March 2018 at the rate of almost 150 kilometers a day (a rate matched only in 2009-10 when 60,117 km were built), even though it has set a target of building 57,000 kilometers officially. In 2016-17, the government was able to construct 47,500 kilometers of roads.

Inland waterways

Domestic waterways are more cost effective as well as environmentally-friendly means of transporting freight. The cost of transporting coal via coastal shipping is one-sixth of the cost of transporting it by railways. National waterways are being given due priority akin to national highways. Jal Marg Vikas Project on National Waterway I on river Ganga with the technical and financial assistance of World Bank is under planning stage. This is Rs. 5,369 crore project. The government has enacted the National Waterways Act, 2016, through which it has declared 111 waterways.

The total expenditure on inland waterways was roughly Rs. 1,300 crore from 1986-2013. Since 2014 till date, the government has spent more than Rs. 2,000 crore.

Indian Railways

Indian Railways (IR) has posted its best ever freight loading in FY18, allowing it to post total traffic earnings of Rs. 1.65 lakh crore, an increase of Rs. 10,000 crore over the total traffic revenue of FY17. However, the share of Indian Railways in freight transportation has come down to 28% from 60% a few years ago.

Railways has earned Rs. 1.17 lakh crore through freight loading in FY18, a rise of Rs. 8,000 crore over FY17. The passenger revenues stood at Rs. 48,000 crore, compared with Rs. 46,000 crore in FY17. Overall, IR transported a record 1,162 MT of freight in 2017-18 compared with 1,109 MT in the previous year. The freight loading target for 2018-19 is 1,216 MT. Wagon capacity has remained untended and poor delivery schedules has weaned freight to roads. To provide for a larger pool of funds for the planned expenditure, IR has secured assured investments to the tune of US$ 23.19 billion at attractive terms from Life Insurance Corporation of India. The Ministry of Railways has planned to electrify 37,844 route km of the balance broad gauge routes which will help save US$ 6.34 billion over the next ten years in energy costs by the year 2021-22.

  

Now, with the imminent Dedicated Freight Corridor (DFC) on the anvil, railways are set to regain their mojo. : The first 190-km stretch of the DFC — touted as one of the biggest infrastructure projects, at a cost of Rs. 81,459 crore, undertaken in India — from Ateli to Phulera in Rajasthan was opened on August 15, 2018. The work to build the two dedicated freight corridors — the Eastern DFC (from Punjab to West Bengal) and the Western DFC (from Uttar Pradesh to Maharashtra) — is in full swing. Over 98% of the land has been acquired and almost all contracts for projects, ranging from building of bridges to electrification, have been awarded. The Dedicated Freight Corridor Corporation is gearing up to set up more than 100 railway stations and terminals — all of these "specially designed" – along the 3,360 km long, muchdelayed network linking the eastern and western seaboards to the northern heartland.

Besides, the DFC will have as many as 12 private freight terminals, 15 private sidings and 10 goods sheds to cater to over 300 million tonnes of traffic a year from 2020-21. Passing through nine states and 60 districts, the project will have 48 stations and junctions along the Western DFC and 58 in the Eastern DFC.

Delhi Mumbai Industrial Corridor Development Corporation

The DMIC project was conceptualized to be developed in phases. Out of the total 24 investment nodes, eight nodes have been taken up for development as industrial cities under the first phase. The initial phase of work in six of the eight nodes— at Dholera (Gujarat), Shendra-Bidkin (Maharashtra), Vikram Udyogpuri (Madhya Pradesh), Nangal Choudhary (Haryana), Greater Noida (Uttar Pradesh) with deadlines between 2019 and 2022 — are scheduled to be completed on time.

With an envisaged investment of $100 billion by 2040, the 1504-km DMIC across six states was intended to be developed as a ‘global manufacturing and trading hub’. The project was one of the important measures announced by the government to help drive the share of manufacturing in the country’s GDP to 25% by 2022 from roughly 16% now.



High Speed Rail

A project offering opportunities for investment will be the USD16.7 billion High Speed Rail (HSR) line from Mumbai to Ahmedabad, also termed as the ‘Bullet Train’. The foundation stone for the HSR line has been laid and construction is expected to be completed by 2022.

Aviation:

The Indian government is planning to invest US$ 1.83 billion for development of airport infrastructure along with aviation navigation services by 2026. The construction of Navi Mumbai airport began in February 2018, which is expected to be built at a cost of US$ 2.58 billion. The first phase of the airport will be completed by end of 2020.

The Government of Andhra Pradesh is to develop greenfield airports in six cities-Nizamabad, Nellore, Kurnool, Ramagundam, Tadepalligudem and Kothagudem under the PPP model.

AAI will invest Rs. 15,000 crore (US$ 2.32 billion) in 2018-19 for expanding existing terminals and constructing 15 new ones. Regional Connectivity Scheme (RCS) too has been launched under the policy.

Urban Infrastructure

Housing: The Pradhan Mantri Awaas Yojana (Urban), PMAY (U), launched in June 2015, aims to ensure "Housing for All by 2022" by providing financial assistance to the beneficiaries. The total number of number of houses being funded under the PMAY (U) is 54,95,443.

As per the ministry's official figures, 8.55 lakh houses have been completed till August 2018 this year since the launch of PMAY (U) while work is underway on 30.4 lakh units across the country. The government has set a target of one crore houses to be constructed in urban areas across the country over a period of seven years from 2015 to 2022.

Smart Cities: The Government of India launched the Smart Cities Mission in June 2015. Under the Mission, 99 cities have been selected so far. While 20 cities were selected in Round 1 in January 2016, 13 cities in Fast-track Round in May 2016, 27 cities in Round 2 in September, 2016, 30 cities in Round 3 in June 2017 and 9 cities in Round 4 in January 2018.



A total investment of Rs. 2,03,979 crore has been proposed by these 99 Smart Cities in their Smart City Plans. So far,

• 86 Smart Cities have incorporated their Special Purpose Vehicles (SPVs) and 62 cities have procured Project Management Companies(PMCs). Till now, projects worthRs. 5,265 crore have been fully or partially completed

•Work orders have been issued for projects worth Rs. 15,992 crore (under implementation)

• Tenders issued for projects worth Rs. 19,070 crore

• Projects worth Rs. 98,989 crore are under DPR stage

AMRUT (Atal Mission for Rejuvenation & Urban Transformation)

The scheme was launched by Prime Minister Narendra Modi in June 2015 with the focus to establish infrastructure that could ensure adequate robust sewage networks and water supply for urban transformation by implementing urban revival projects.

So far,Rs. 6,000 crore have been allocated for the AMRUT mission during 2018-19 as against last year’s allocation of Rs. 5,000 crore, an increase of 20%. Till January 31, 2018, the implementation status of the mission is as under:

• Work on 308 projects worth Rs. 186 crore have been completed.

• Contracts for 1,632 projects worth Rs. 34,187 crore have been awarded.

• Furthermore, 784 projects worth Rs. 12,903 crore are at tendering stage, DPRs have been approved for 1,159 projects worth Rs. 11,178 crore and DPRs for 871 projects worth Rs. 14,014 crore are under preparation.



Conclusion

India is headed to becoming one of the fastest growing construction markets as per a research report released by UK-based economist Graham Robinson. Calling India the “sleeping giant,” Graham Robinson, one of the world’s leading global construction economists, predicted that India will overtake Japan as the world’s third largest construction market by 2030. Like Chinese construction companies that are now the largest in the world, the Indian construction industry is going to experience “a complete transformation in size, scale and technical ability” over the next 15 years, he said.

These views are shared by Pratap Padode, MD, ASAPP Info Global Services P Ltd