New Heights: Initiatives and opportunities in infrastructure development in Tamil Nadu

Initiatives and opportunities in infrastructure development in Tamil Nadu

Tamil Nadu’s infrastructure sectors are among the most developed in the country. The Tamil Nadu Vision 2023 document, released in 2014, envisioned three goals for the state – increasing per capita income of the residents to $10,000 per annum by 2023, attaining a high standard of social development and providing high quality infrastructure. The plan laid out aspirational targets with respect to infrastructure. It envisaged investment in infrastructure to the tune of Rs 115 trillion and identified 217 major projects across 11 sectors. Targets of increasing infrastructure spending from 5 per cent to 11.5 per cent of the gross state domestic product by 2023 have also been set. Moreover, 42 per cent of the financing for infrastructure projects is expected to come from the private sector.

Progress so far

Logistics infrastructure in the state is supported by a road network of over 253,000 km. Road transport accounts for 65 per cent of freight traffic and 85 per cent of passenger traffic. Further, the state also boasts of four major ports and 22 minor ports. It has good air connectivity with four international and three domestic airports. It also has an extensive rail network which is further augmented by suburban and metro train facilities for commuters.

PPPs for road construction

Of the state’s total road network, national highways span 5,324 km while state highways span a length of 11,830 km. Around 99 per cent of the national highways are two-laned while 41 per cent are multi-laned. Also, 98 per cent of the state highways are either two-laned or multi-laned.

The state also tested the waters with the public-private partnership (PPP) model for highway development. At present, road projects spanning around 174 km are being undertaken through the PPP mode. All these roads are proposed to be four-laned. Further, the state has also laid out plans to take up road projects spanning 1,187 km through the PPP route. These include 275 km of core road network identified in the Chennai-Kanyakumari Industrial Corridor [CKIC] Influence Zone, 617 km of high density corridors and 295 km of roads included in the Vision 2023 document. Further, roads spanning 359 km have also been identified to be taken up under the toll-operate-transfer (TOT) model.

Well-developed rail network

To facilitate passenger and cargo movement, the state has a well-established rail network which spans 4,181 km and has 690 railway stations. Further, the state capital Chennai also has a good quality suburban railway network connecting it to suburban areas and neighbouring cities. To ease the commute for its citizens, Phase I of the metro rail spanning 35.3 km has already been operationalised in the city.

Emphasis on renewable energy

Tamil Nadu is a power-surplus state and its installed power capacity has grown at a compound annual growth rate of 8.72 per cent from 14.09 GW in 2008-09 to 29.9 GW in 2017-18. Of the total installed capacity, around 37 per cent comes from renewable sources, followed by 15 per cent from power purchases, 14 per cent from thermal sources, 8 per cent from hydro sources and 26 per cent from other sources. In terms of renewable power generation, Tamil Nadu is among the top nine regions across the globe.

The state government has been investing quite heavily in both power generation and transmission projects and in 2018-19, a total of $2.16 billion was allocated to the energy sector. In order to increase transmission capacity in the state, the Tamil Nadu Transmission System Improvement Project is being undertaken at a cost of $771.38 million with assistance from the Japan International Cooperation Agency (JICA). The state is also home to the Kamuthi solar plant, which is one of the largest solar power plants in the world. Consisting of 2.5 million individual solar modules, it is capable of generating 648 MW of electricity. Also, Aralvaimozhi in Kanyakumari district has the largest wind power capacity in the country at 1,500 MW. Further, the state is implementing the Green Energy Corridors project at an estimated cost of $247.25 billion with assistance from KfW Development Bank.

Upgrading industrial infrastructure

Presently, two industrial corridors, namely, the Chennai-Bengaluru Industrial Corridor (CBIC) and the CKIC are being developed in the state. The CKIC will be undertaken in two phases at an estimated cost of $19.5 billion. While Phase I entails development of two nodes spanning 10,650 hectares, another four nodes are planned under Phase II. Land acquisition for Phase I is currently in progress. The development of the corridor is being funded by the Asian Development Bank. The CBIC envisages the development of one node at the Ponneri Industrial Area entailing a total investment of $5.45 billion. It is being funded by JICA. The Ponneri node will also be developed as a National Investment Manufacturing Zone (NIMZ) in three phases, at an estimated cost of Rs 327.13 billion.

The development of industrial corridors is being undertaken by two agencies – the State Infrastructure Promotion Corporation of Tamil Nadu (SIPCOT) and the Tamil Nadu Industrial Development Corporation (TIDCO). The former is primarily involved in the formation of industrial complexes by providing basic and comprehensive infrastructure facilities for industries to set up their units, while the latter identifies and promotes the establishment of large- and medium scale industries within the state in association with the private sector. So far, SIPCOT has developed 10 industrial complexes, eight industrial parks, seven sector special economic zones and three industrial growth centres. At present, it has 5,024 acres of land readily available for allotment to new units and the acquisition of another 9,030 acres of land is under way in Sriperumbudur, Hosur, Oragadam, Cheyyur and Thoothukudi.

Meanwhile, TIDCO has several industrial park projects in the pipeline. It is developing a polymer industrial park in Tiruvallur district at an estimated cost of Rs 2.64 billion. Other key projects being taken up by TIDCO are a medical park in Kancheepuram district, Ticel Biopark III in Coimbatore, an aerospace park in Vallam-Vadagal, a multimodal logistics park near the Kamarajar and Kattupalli ports and an NIMZ spanning 5,458 hectares in Ramanathapuram. Further, TIDCO, in collaboration with GMR Infrastructure, is also establishing a special investment region spanning 2,101 acres in Krishnagiri.

Opportunities on the table

The state offers huge investment opportunities across various sectors. With regard to the road sector, plans to construct new roads through the build-operate-transfer (BOT) mode as well bid out various stretches via the TOT model, augurs well for the private sector. Further, maintenance of existing roads and reconstruction/restoration of existing bridges is another area for private participation. The setting up of an intelligent transport system is another domain where huge investments can be mobilised.

The aviation sector also offers ample opportunities for investment in the form of greenfield airport development, modernisation and restructuring of existing airports and development of a maintenance, repair and overhaul facility. Similarly, development of brownfield and greenfield ports, redevelopment of existing terminals and establishment of a state-of-the-art maritime university are the core investment areas in the port sector.

Apart from sector-specific expenditure, around Rs 4.06 billion will be invested for the development of the Tamil Nadu commerce hub. In addition, the development of business hubs in Chennai is also expected to offer huge investment potential.

The way forward

For the future, the Tamil Nadu government is focusing on the development of infrastructure through the PPP model. The state’s well-developed industrial infrastructure and skilled manpower is expected to drive growth. Further, the presence of agencies such as the Tamil Nadu Guidance Bureau will facilitate private participation as well. Net, net, with the wide array of infrastructure development opportunities available across sectors, the state is certainly an attractive destination for potential investors.

Based on a presentation by M.A. Siddiqui, Secretary, Expenditure, Government of Tamil Nadu, at the India Infrastructure Forum 2019