20 Events that Shaped the Sector

Creating change, ushering in reforms

Indian Infrastructure recalls the 20 most noteworthy events, policies and programmes that shaped the sector in the past two decades. These ushered in path-breaking reforms, marked the commissioning of world-class projects, paved the way for private participation, created key institutions and redefined the art of infrastructure creation. A look at the key events that took place during the past 20 years…

Policy and fiscal incentives for promoting PPP in port development

The Ministry of Shipping (then the Ministry of Surface Transport) formulated the first set of comprehensive guidelines for private investment in 1996. Under these guidelines, the leasing of port assets, construction or creation of new assets, leasing of equipment for port handling and floating crafts, and pilotage and captive facilities for port-based industries were identified as areas for private sector participation. In 1998, the government allowed joint ventures to be set up to develop port facilities. Reforms allowing 100 per cent foreign direct investment with automatic approval (against 74 per cent earlier) followed in the same year. In June 2000, the government formulated the model concession agreement (MCA) to promote private sector participation in the sector.

NELP

The New Exploration and Licensing Policy (NELP) was launched in 1997, essentially as an improvement over the previous policy dispensation of offering exploration blocks to companies. The NELP came into effect in 1999, wherein acreages were offered to firms via a process of open global competitive bidding. The high point of this policy was that companies were allowed full cost recovery in their exploration projects. Under the NELP, the profit surplus, calculated as a residual after the subtraction of royalty and costs, is to be shared between the exploration and production company (or the contractor) and the government (owner of the block). Since 2000, 256 blocks had been offered for exploration and production. The last bid round took place in 2010. Of these, 254 blocks were awarded.

Revenue sharing regime in telecom

In July 1999, telecom service providers migrated from a fixed licence-fee system to a revenue-sharing regime, which allowed them to pay a percentage of their revenue as licence fees, instead of a fixed amount. This was beneficial as several telecom service providers, who had committed a large quantum of licence fees, were finding it difficult to achieve financial closure.

NHDP and GQ

The National Highways Development Programme (NHDP), lauded as the world’s largest PPP programme, was launched in 1999 with the aim of developing the national highway system, comprising 55,000 km of roads. One of the most important projects implemented under the NHDP was the Golden Quadrilateral (GQ), which formed a part of Phase I of the programme. Completed in January 2012, the GQ, spanning 5,846 km, connected Delhi, Kolkata, Mumbai and Chennai. It is the fifth longest highway project in the world, passing through 13 states.

Privatisation of DVB

At a time when the distribution segment in Delhi was reeling under AT&C losses of over 50 per cent and accumulated losses of over Rs 230 billion, the idea of privatisation of the erstwhile Delhi Vidyut Board (DVB) was mooted. Tata Power and Reliance owned-BSES were brought in to form joint ventures with the state government in 2002. In less than five years, the privatisation move showed remarkable results and the model is, till date, one of the biggest success stories of public-private partnership (PPP) in the country.

Electricity Act, 2003

The single most important legislative development in the power sector, the Electricity Act, 2003, completely changed the rules of the game for the power sector. In addition to liberalising and delicensing generation, it did away with the requirement for techno-economic clearances (except for hydropower projects), freed captive plants from controls, and allowed independent power producers to sell power directly to consumers without going through the state electricity boards, among other things. It was the sector’s first solid step towards an efficient and competitive electricity market.

AAI (Amendment) Act, 2003 and OMDAs for Delhi and Mumbai airports

The legal framework for the entry of private players in airport development and operations was established with the introduction of the Airports Authority of India (AAI) (Amendment) Act, 2003, which was notified in July 2004. The act allowed airports to be leased to private entities for development and operations. It also empowered the government to levy advance development fees for the development of existing airports and for setting up new airports. Greenfield airports at Hyderabad and Bengaluru were developed under this act. In 2006, operations, management and development agreements (OMDAs) were signed for the Delhi and Mumbai airports.

R-APDRP

The revamped version of the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) was launched in 2005 with a huge capital outlay of Rs 500 billion and the aim of bringing down aggregate technical and commercial (AT&C) losses to 15 per cent by the end of the Twelfth Plan period (2012-17). Even though the target was not met, there was a substantial reduction in AT&C losses and utilities were pushed to adopt basic IT and automation solutions.

MCA for PPPs in roads, and subsequent amendments

The launch of the MCAs redefined the way PPP projects were implemented in the road sector. The erstwhile Planning Commission officially published MCAs for PPPs in national highways (September 2005), state highways (September 2006), and operations and maintenance (O&M) of highways (October 2006). Post the incorporation of learnings from the shortcomings of the old MCAs, the Planning Commission published improved versions of MCAs – PPPs in National Highways (2009), National Highways (six-laning) (2009), State Highways (2009) and O&M of Highways (2009). In September 2015, the Ministry of Road Transport and Highways made further amendments to the MCA for build-operate-transfer (BOT) projects.

JNNURM/AMRUT

The biggest reform initiative in the urban infrastructure sector was the launch of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in December 2005. The programme was a game changer in that it recognised that India’s future now lay in its cities. Despite the fact that the programme was not a big success due to project implementation delays, lack of urban local body (ULB) capacity to implement projects and slow disbursal of funds, it brought the urban sector on the radar and provided an impetus to PPP projects in the water and sanitation sector. The focus was not only on capacity creation, but also on improving ULB capacity. The programme completed its normal tenure on March 31, 2012. Its tenure was subsequently extended twice to March 31, 2014 and further to March 31, 2017 for the completion of select ongoing projects. The current government decided to renew the scheme by launching the Atal Mission for Rejuvenation and Urban Transformation (AMRUT). The total outlay for the programme is around Rs 500 billion for five years. Under AMRUT, 500 cities and towns will be rejuvenated.

JNNSM

Started in early 2010, the Jawaharlal Nehru National Solar Mission (JNNSM) is a flagship programme of the Ministry of New and Renewable Energy to promote solar energy. Over the course of time, the solar power target was increased from 20 GW to 100 GW by 2022. In January 2018, cumulative solar installations in the country crossed the original target of 20 GW, four years ahead of schedule. The key achievements of the mission have been the launch of a solar park scheme, the implementation of a large-scale rooftop solar programme, and the promotion of canal top and floating solar plants. The continued push by the government is one of the key factors in bringing down solar power tariffs from Rs 12 per kWh in 2010 to sub-Rs 2.50 per kWh in 2018.

Unified licensing regime

After multiple rounds of consultations and deliberations, the Department of Telecommunications, in August 2013, issued the much-awaited guidelines for unified licences, which replaced the long-standing unified access service licence (UASL) regime. Unlike the UASL regime, which required operators to buy a separate licence for each service, the revised norms allowed them to offer a number of services (including internet TV) under one licence. Further, the new norms mandated delinking spectrum from operational permits and allowed companies to offer services using any technology. The move has facilitated ease-of-doing business in the telecom sector.

Sagarmala programme

Launched in July 2015, the Sagarmala programme is the government’s most ambitious programme for the port sector till date. This was the first time that the government’s focus shifted from port development to port-led development. Between 2015 and 2035, more than 500 projects, involving an investment of about Rs 8 trillion, will be implemented under the four focus areas of the programme – port modernisation and new port development, port connectivity enhancement, port-linked industrialisation and coastal community development.

UDAY

The Ujwal Discom Assurance Yojana (UDAY) has been one of the most critical power reforms in recent times. Operational for nearly three years now, the scheme has helped reduce discom losses, AT&C losses and the revenue gap. The industry’s hopes for the distribution segment’s revival are pinned on this scheme.

PMAY

In 2015, the government launched the Pradhan Mantri Awas Yojana (PMAY), a massive campaign to provide housing to all citizens by 2022. The scheme envisages the building of 20 million houses to meet urban housing needs by 2020. Later, in 2016, a rural component was added to PMAY, under which 10 million houses will be built by 2019. In the past two years, PMAY has been instrumental in generating the much-needed activity in the affordable housing space in the country.

Smart Cities Mission

Launched in July 2015, the Smart Cities Mission (SCM) aims to develop 100 smart cities in the country by deploying smart solutions to provide core infrastructure and a decent quality of life for citizens. Under the mission, a total of 5,151 projects, involving a combined investment of over Rs 2 trillion, have been proposed by 99 cities (selected under four rounds). Projects being implemented under the SCM include affordable housing, integrated multimodal transport, creation and preservation of open spaces, and waste and traffic management.

HAM and TOT models

In 2016, the Cabinet Committee on Economic Affairs (CCEA) approved the hybrid annuity model (HAM) to be considered as one of the modes for implementing highway projects. Sharing of financial risks between the government and private players is the primary advantage of the HAM model. At a time when the interest of lenders as well as developers in pure BOT contracts has almost dried up, the launch of HAM has successfully led to an increased pace of project awards in the national highways segment between 2015-16 and 2017-18. To make the model more attractive, the government has permitted the National Highways Authority of India (NHAI) to disburse its contribution in the early stages of construction rather than in the later stages, as was originally proposed.

In August 2016, the CCEA authorised the NHAI to monetise public-funded national highway projects under the toll-operate-transfer (TOT) model. This model is aimed at garnering long-term funds for the ministry. The award of the first bundle attracted a bid price that was 1.5 times NHAI’s estimated value of the project bundle. The launch of this model has also opened up the prospect of monetising brownfield assets in other sectors.

IBC, 2016

Deemed as a transformational law for speedy resolution, the Insolvency and Bankruptcy Code [IBC], 2016 has brought a significant change in the power-sharing equation between creditors and debtors. The IBC focuses on a turnaround plan with a deadline, which, if not met, results in liquidation. All the existing schemes for the resolution of stressed assets have been subsumed under this, giving primacy to the IBC.

NCAP, 2016

The National Civil Aviation Policy [NCAP], 2016, comprehensively covered 22 areas such as MRO, ground handling services, helicopters and charters, bilateral traffic rights and route dispersal guidelines. The Regional Connectivity Scheme, encapsulated under the NCAP, 2016, aims to provide connectivity to unserved and under-served airports by reviving airstrips as no-frills airports, at an indicative cost of Rs 500 million to Rs 1 billion.

OALP

Introduced in June 2017, the Open Acreage Licensing Policy (OALP) replaced the NELP regime, which had been in existence for over 18 years. The OALP regime gives oil and gas (O&G) companies the freedom to select blocks or areas to explore and produce O&G after studying the seismic data available in the National Data Repository. The new policy framework provides a revenue-sharing model for O&G blocks. It also provides marketing and pricing freedom for the O&G produced. Under the first round of OALP (OALP-I) held in May 2018, 110 e-bids were received for 55 blocks. An Empowered Committee of Secretaries cleared the award of blocks offered under OALP-I in August 2018.

(The above listing is in chronological order.)

 

 

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