Integrated Approach

Timely building of infrastructure capacity key to meeting future demand

Venkatesh, Former Chief Executive and Managing Director, L&T IDPL

The four large airports in the country at – Mumbai, Delhi, Bengaluru and Hyderabad –have successfully catered to the demand and shown the way for airport modernisation in Kolkata, Chennai and several Tier II cities. In the port sector, several big ports were commissioned with private sector investments such as Mundra, Hazira, the Jawaharlal Nehru Port Trust, Jaigarh, Vallarpadam, Ennore, Chennai, Katupalli, Krishnapatnam, Gangavaram and Dhamra. This can be termed as the largest port capacity expansion in the maritime history of the world.

The road sector saw the implementation of the National Highways Development Programme and the Golden Quadrilateral project, which substantially augmented road infrastructure in the country. The Pradhan Mantri Gram Sadak Yojana and several initiatives at the state level too led to the creation of an extensive road network.

The power sector has also witnessed rapid strides. While additions to the installed fossil fuel-fired and renewable energy capacities substantially increased power generation, expansion of transmission line capacity and reforms in the distribution segment resulted in improved power availability. The telecom revolution is also worth a mention. Mobile penetration and mobility-driven applications have ushered India into the digital age in line with the global trends.

Meanwhile, rapid urbanisation and an increase in purchasing power has necessitated the development of a metro rail network across cities. Overall, 23 cities in India are executing/expanding their metro rail networks.

Shortcomings

The catching-up game continues. Large airports, and some major four/six-lane roads have already run out of capacity within 10 years of commissioning. Moreover, there are big question marks on the quality and safety parameters, especially in the road sector. The port sector also continues to suffer because of poor and inefficient connectivity.

The quality of power is a grey area in the urban as well as rural areas. Fluctuating coal supplies, a poor transmission network for renewables, and the perpetual difficulties faced by discoms raise questions on future demands resulting from economic growth. Meanwhile, issues such as non-performing assets in generating units, coal availability, and unadhered to power purchase agreements need to be resolved.

The poor financial health of the telecom industry has delayed the roll-out of upgraded networks limiting the speeds not being up to international standards.

Delays in the execution of metro projects have resulted in urban congestion and increased pollution. There has been limited success in providing 24×7 water, leading to overexploitation of groundwater. There has been very limited progress in the treatment of wastewater for recirculation to relieve the stress on water demand. With regard to Indian Railways, growth in terms of technology, connectivity and capacity has been very slow. Both the dedicated freight corridors facing cost and time overruns of significant magnitude. The inland waterways have got off to a good start after several failed attempts, but require enormous investments and integration with the rail/road transport to become successful.

Where do we go from here?  

Infrastructure demand forecasting and building capacity in advance can help sustain efficiency and productivity in a growing economy. A rolling plan, including the latest technology options, with a 15-20-year perspective needs to be formulated and reviewed every five years. The crucial aspects of the plan should include preparation of sensible detailed project reports, planning for both public and private finances in advance to meet the capacity addition requirements for the next 15-20 years, and innovative financing options backed by credible agreements that can survive the change in governments both at the central as well as state levels. The creation of a long-tenor bond market is also important. As the Fiscal Responsibility and Budget Management Act will place restrictions on public sector funding, there is a need to step up private sector participation across all sectors.

In order to ensure faster resolution of pre-construction hurdles like land acquisition and compensation, utility relocation and environmental clearances, all approvals must be in place before a bid is invited.

Quick time-bound resolution of NPAs across the infrastructure sector should be based on the “perform or transfer of ownership” principle. This implies the banking sector comes back to lend, but with improved processes based on the lessons learnt. One of the most crucial factors to ensure the time-bound delivery of projects is a faster and a sincere dispute resolution mechanism.

While the reasons for delays are known, the time is ripe to fix them. Standard simple measurement tools need to be published with rigour and emphasis.

In sum, an integrated approach is the need of the hour, irrespective of the political changes and upheavals at the central and state levels. Else the demand-supply gap will increase by the day leading to the erosion of at least 2-3 per cent of the gross domestic product.

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