State of the Sector

A snapshot of infrastructure sectors in Maharashtra

Maharashtra, the second largest state in India in terms of population and geographical area, has strong macroeconomic fundamentals that have enabled the state to become one of the top investment destinations in the country. The state’s GDP was 9.4 per cent in 2016-17, contributing to about 15 per cent of the country’s GDP. In the past five years, Maharashtra has more than doubled its foreign direct investment ($19.6 billion in 2016-17), improved the ease of doing business immensely, and put in place some concrete policy measures and institutions to monitor new industries and investments.

The Maharashtra Industrial Development Corporation has played a very crucial role in attracting investments into the state. In the past few years the state government has shown strong commitment towards developing its infrastructure. Today, the state counts on its strategic location and thus has high competence in areas such as ports, logistics, connectivity and skilled manpower. It has nearly 80,000 hectares of industrial land with power, water and the necessary infrastructure and has an urbanisation rate of about 45 per cent.

Going forward, the state has massive investments planned for augmenting its infrastructure. Some of the mega projects lined up are the Mumbai Trans Harbour Link, the Mumbai Coastal Road, the Mumbai-Nagpur Communication Expressway, the Nagpur and Pune metros, the Navi Mumbai International Airport (NMIA) and the Delhi-Mumbai Industrial Corridor. The centre has also recently approved projects worth

Rs 675 billion to improve urban infrastructure (with a particular focus on smart cities and metros) in the state over the next three years.

Indian Infrastructure provides a snapshot of the current state of key infrastructure sectors in the state…

Roads and highways

Maharashtra has sketched long-term plans for road development. The ongoing Road Development Plan (2001-20), which aims to augment the state’s road network to 337,000 km, is progressing well and so far about 90 per cent of the targeted length has been constructed.

The current road network in the state spans a length of about 300,000 km. These roads are maintained by the public works department and district councils. In the past one year, the state has introduced several initiatives to improve the pace of road development. In July 2016, the state cabinet approved the inclusion of provisions for the land pooling method in the Maharashtra Highways Act, 1955. In order to improve contractual practices, the Brihanmumbai Municipal Corporation made it mandatory for contractors to appoint quality supervisor engineers. It is now compulsory for contractors to have engineers with at least 10 years of experience in road construction.

Maharashtra has been one of the most proactive states in implementing policies to facilitate private investment in the road sector. It formulated the public-private partnership (PPP) policy and established a PPP regulatory authority in 1996.

The Maharashtra State Road Development Corporation (MSRDC) is the nodal agency for the implementation of big-ticket road projects in the state. The corporation is involved in planning, designing, financing, constructing and managing transport infrastructure projects. MSRDC has to its credit the completion of major projects such as the Bandra-Worli Sea Link, the Mumbai-Pune Expressway, and about 50 flyovers in Mumbai, among others.

As per India Infrastructure Research, private investment of about Rs 342 billion was being mobilised through 61 key projects (completed, under implementation and planned), as of February 2017. While 51 per cent of the private investment had been realised, 5 per cent has been mobilised and another 44 per cent was in the pipeline.

Urban transport

Urban transport services in the state, such as buses and trains, are constrained by limited coverage, and overcrowded, slow and inconvenient services. To address this issue, most cities in the state have launched projects for developing mass rapid transit systems, both bus and rail. Currently, bus rapid transit systems spanning a total length of about 29 km are operational in Pune and Pimpri Chinchwad.

Further, a metro rail system, spanning a total length of 11.07 km, is operational in Mumbai. In addition, Mumbai city also has a 8.26 km monorail network.

Power

Maharashtra has the largest power system across states in terms of consumers served, demand and state sector installed capacity.

In 2016-17, the state’s peak demand was nearly 22,500 MW. The state is self-sufficient in power with no energy deficit reported during the previous fiscal year, while the peak power deficit was only 1.4 per cent. In 2017-18, as per Central Electricity Authority’s projections the state is expected to have an energy and peak surplus of nearly 13 per cent and 15 per cent respectively. Overall the per capita power consumption in the state was higher than the national average at around 984 units in 2015-16. The total power consumption was around 116 BUs in 2015-16 and around 82 BUs in 2016-17 (up to December 2016).

Maharashtra has a favourable consumer mix as the state is highly industrialised – the largest consumer category is industrial (34 per cent share), followed by the agricultural and domestic segments.

The state’s generation capacity of 42,328 MW (as of March 2017) is the highest across all states. Most of the state’s power capacity is owned by the private sector (49 per cent), followed by the state (33 per cent) and central (17.5 per cent) sectors. The state genco, Mahagenco, is the state’s largest power generation company with a capacity of over 11,600 MW.

Fuel-wise, thermal power dominates the state’s installed capacity, with a share of nearly 72 per cent. Renewables account for the second largest share in its installed capacity at nearly 18 per cent. Hydropower and nuclear power capacity account for 7.8 per cent and 1.6 per cent respectively. Capacity added by the state during 2016-17 was 820 MW.

Of the state’s installed renewable capacity of over 7,362 MW (as of October 2016), wind power constitutes the majority share with over 4,600 MW of projects. Maharashtra’s overall renewable energy potential is nearly 79,568 MW.

Maharashtra State Electricity Transmission Company Limited (MSETCL) is the state transmission utility with a network of 43,700 ckt. km and 110,864 MVA of transformer capacity. Besides MSETCL, there are seven other transmission licensees responsible for intra-state transmission in Maharashtra. The state has four distribution licensees engaged in supplying electricity to the end consumers namely Maharashtra State Electricity Distribution Company Limited (MSEDCL), Reliance Infra, BEST and Tata Power Company. Of these, MSEDCL is the state-owned distribution company responsible for providing electricity to consumers across the state except Mumbai, having a share of nearly 82 per cent in terms of energy sold.

The state has also joined the central government’s discom turnaround scheme, the Ujwal Discom Assurance Yojana (UDAY). Under the scheme, MSEDCL’s aggregate technical and commercial (AT&C) loss targeted by 2018-19 is 14.39 per cent. As of March 2017, the state’s AT&C losses were nearly 18.3 per cent. The gap between the cost of power supply and revenue realised from consumers for Mahadiscom is

Re 0.22 per unit, down by 8 per cent from pre-UDAY levels. The discom’s outstanding debt (medium- and short-term debt) as of September 2015 stood at Rs 66.1 billion. Bonds issued by the state so far have been worth Rs 49.6 billion.

Under the Integrated Power Development Scheme , nearly 255 towns in Maharashtra are proposed to be covered for system strengthening. The state has been sanctioned nearly Rs 24.1 billion under the scheme, of which Rs 2.64 billion has been disbursed. Under the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Rs 21.74 billion has been sanctioned to the state, of which Rs 2 billion has been disbursed. The state does not have any unelectrified villages. In terms of household electrification, around 12 million households (out of 13.9 million households) have been electrified under the DDUGJY.

Ports

Maharashtra’s coastline of 720 km has two major ports – Mumbai and the Jawaharlal Nehru Port Trust (JNPT) – and 48 non-major ports. The ports in the state account for around 10 per cent of the total capacity at Indian ports.

As per the latest estimates for overall port traffic for 2015-16, the state accounted for around 15 per cent of the total traffic at Indian ports and a 23 per cent share in the traffic handled on the west coast of the country.

From 2011-12 to 2015-16, the cargo traffic at these ports grew at a compound annual growth rate (CAGR) of 2.07 per cent. The overall growth was led by the non-major ports, which witnessed a CAGR of 9.66 per cent, compared to 0.65 per cent for the two major ports.

In 2016-17, major port traffic in the state stood at 125.07 million tonnes (mt) compared to 125.13 mt during 2015-16, a negative year-on-year growth of 0.05 per cent. JNPT, with a capacity of 5.88 million twenty-foot equivalent units (TEUs), is the biggest container handling port in the country, accounting for around 55 per cent of total container traffic at Indian ports.

Besides, Mumbai, with around 40 mt of liquid cargo handled in 2015-16, is the second highest liquid cargo handling port among major ports, after Kandla. Also, the port is emerging as a major destination for cruise tourism. During 2016-17, 51 cruise vessels called at the port. Of the total cruise vessels anchored at five major ports in the country, Mumbai port accounts for a share of about 32 per cent.

With regard to non-major ports, the Maharashtra Maritime Board (MMB) is the nodal agency for the regulation and development of such ports. The policy for maritime development in Maharashtra was introduced in 1996 and subsequently revised in 2000, 2002 and 2010. The last revision, which came in January 2016, will be valid for five years. The policy emphasises integrated port development by creating inland connectivity through road, rail and water transport networks. The policy will also be applicable to those contracts that MMB had signed earlier with private developers for building greenfield ports, captive jetties, multipurpose jetties and shipyards.

The experience with private participation has been mixed. In the past decade, three greenfield non-major port projects developed through PPPs have become fully/partially operational. These are JSW Jaigarh, Angre and Dighi ports. From 2011-12 to 2015-16, the traffic handled at JSW Jaigarh grew at a CAGR of 13.25 per cent. Dighi port, which commenced commercial operations in 2011, recorded 6 mt of traffic during 2015-16. On the flip side, projects such as Rewas port, for which the concession agreement was signed in 2002, are yet to take off.

Oil and gas

Maharashtra is one of the key states in India that have notable oil and gas infrastructure. With regard to exploration and production, the state has the Bombay High field in its offshore waters, one of the earliest hydrocarbon discoveries in the country. It is being run by the Oil and Natural Gas Corporation, but of late has been facing extraction issues owing to the ageing of the asset. The state has two refineries, one each of Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited, with a total refining capacity of 19.5 mt (representing over 8 per cent of the total installed refining capacity of the country).

The state also has a liquefied natural gas (LNG) terminal at Dabhol, operated by Ratnagiri Gas and Power Private. Recently, GAIL (India) Limited, one of the promoters of the LNG facility, decided to invest Rs 10 billion to make Dabhol an all-weather facility by 2019. As far as gas transportation is concerned, the state has the Dabhol-Bengaluru pipeline which spans 315 km (total pipeline length). Maharashtra’s city gas distribution is also quite well developed and is dominated by Mahanagar Gas Limited. It ranks second after New Delhi and Gujarat. The state has 245 compressed natural gas stations and over 1 million piped natural gas connections.

Airports

Maharashtra is home to key Indian airports, including Mumbai’s Chhatrapati Shivaji International Airport (CSIA), Pune airport and Nagpur airport. The CSIA alone accounted for an around 30 per cent share in the total traffic at India’s joint venture airports in 2016-17, reflective of its importance in the civil aviation sector. Cumulatively, Maharashtra’s airports (Mumbai, Nagpur, Pune, Aurangabad, Juhu and Nanded) recorded traffic of 54.34 million passengers in 2016-17, a growth of 10.4 per cent over 2015-16.

In a landmark move, in February 2017, a decade since it received in-principle approval, GVK-led Mumbai International Airport Limited (MIAL) emerged as the lowest bidder for the NMIA project. The project is being touted as one of the biggest greenfield projects in the pipeline, entailing an investment of Rs 160 billion. It will be implemented on a design-build-finance-

operate-transfer basis, where MIAL will hold 74 per cent equity while the Airports Authority of India and the City and Industrial Development Corporation of Maharashtra will hold 13 per cent each. Phase I of the airport is likely to be operational by 2019 and is expected to handle 10 million passengers annually.

Meanwhile, in another major development, Maharashtra became the first state to sign up for the government’s ambitious Regional Connectivity Scheme. Accordingly, the government will fast-track the development of airports at Shirdi, Nanded, Akola, Jalgaon, Solapur and Kolhapur. Of these, the civil works of the Shirdi airport project stand completed as of May 2017 and the airport is likely to be operational by July 2017. Further, with regard to the establishment of the Multimodal International Passenger and Cargo Hub Airport at Nagpur (MIHAN), in April 2017, the Ministry of Home Affairs granted security clearance to the qualified bidders. With this, MIHAN India Limited is now expected to expedite the bidding process and is likely to invite request for proposal bids from the qualified bidders.

Water

With rising urbanisation and the continuing expansion of city limits, the challenge of delivering basic services in Maharashtra is growing rapidly. Urban local bodies in the state are developing new infrastructure and upgrading existing facilities to provide basic civic services to their citizens.

The water supply and sewerage infrastructure in most cities in Maharashtra is characterised by obsolete and faulty pipeline networks, high non-revenue water supply, and insufficient treatment capacity. The total treated water supply stands at about 11,196 million litres per day (mld). The state generates about 8,957 mld of sewage, the highest among all Indian states. As against this, it has a sewage treatment capacity of 5,290.36 mld.

With respect to management of municipal solid waste (MSW), Maharashtra generates about 26,820 metric tonnes of waste per day. However, it lacks adequate MSW collection and treatment infrastructure. Only 11 per cent of the total wards in the state undertake 100 per cent door-to-door collection. Further, only 10 per cent of the total waste generated is treated.

However, in the past three to four years, there have been some visible improvements in terms of both infrastructure creation and service delivery. Over 4,964 mld of water supply treatment capacity has been added in various cities. Besides, sewage treatment capacity has also been enhanced by 259 mld. The state has also implemented several MSW management projects, and has declared 116 of its cities as open-defecation-free. It is also receiving funds under centrally sponsored schemes such the Swachh Bharat Mission, the Atal Mission for Rejuvenation and Urban Transformation and the Smart Cities Mission. These schemes have driven the progress of projects across these sectors.

Summing up

With the encouraging pace of project development across sectors, Maharashtra is set to witness high growth in creation of infrastructure in the times ahead. As the existing infrastructure gaps provide an opportunity for improvement, big-ticket projects are expected to catalyse the overall development. Noteworthy budget outlays from the centre as well as support from the state government are certainly a big positive for the state.

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