With this issue, we celebrate our 25th anniversary. We take this opportunity to reflect on how the infrastructure sectors have progressed in India over the past 25 years. And how our own magazine and organisation have grown over these years.
25 years ago, in 1998, the economic growth unleashed by the liberalisation reforms of 1991 was beginning to slow down. There were many reasons for the slowdown, including tight money policy and changes in government. But the most important factor was that the growth of infrastructure had not kept pace with the growth in the economy. Instead of providing a fillip to growth, infrastructure (or the lack thereof) had become the biggest bottleneck.
Indian industry was starved of power. We were paying the highest rates in the world for telecom services. Hauling goods from the point of production to ports was an expensive odyssey, with neither roads nor railways able to bear the load. The ports themselves were not gateways but choke points. The airports were an embarrassment. Municipal services and urban infrastructure were getting worse not better. Given all this, Indian businesses could not be globally competitive, playing the game with their arms and legs tied.
The reason for the poor state of infrastructure was not a lack of interest on the part of prospective investors or a lack of demand on the part of prospective customers. It was the policies of the government, or the lack thereof. They were not clear, transparent or consistent. Decision-making was slow and the clearance process slower. Ministries and government agencies worked at cross-purposes, not in coordination. The process of reform was often subverted by public sector monopolies. There were no truly autonomous and independent regulators who could balance the interests of service providers and consumers or level the playing field between the public and private sectors. Import duties were high, with the government not sure what it considered more important – maximisation of customs revenue and protection of public sector units, or the availability of low-cost infrastructure. The tariffs for public services were irrational, driven by vote bank cross-subsidies, and distorting the price structures.
The fiscal deficit had driven the cost of capital to unaffordable levels, with Indian project promoters expected to pay 17-21 per cent in rupee debt. Privatisation was going nowhere, six years after the formation of a disinvestment commission. The capital markets were severely underdeveloped, for debt or equity. Through a combination of policies, the government had managed to keep foreign insurers and domestic pension funds out of the reach of infrastructure developers.
Over the past 25 years, much has changed, and most of it for the better. Today, we pay almost the lowest telecom rates in the world. Electricity is still expensive for industry, but is available. Goods are moving faster with world-class highways, new expressways and now, dedicated rail freight corridors. The major Indian airports compare with the best in the world. The performance at ports has improved considerably, with the new private ports offering truly world-class services. The natural gas transmission and distribution network is on the way to covering more than 90 per cent of the population. Almost a dozen cities now have metro rail services, though urban transport is still highly inadequate. More households have access to water, but the quality and quantity leave much to be desired. Waste management is just beginning to be addressed, though landfills are piling high.
The policies are, for the most part, clearly defined and consistent. Decision-making is, in most cases, not as slow. Clearance processes are much faster. There is better coordination between government agencies and ministries, even before Gati Shakti begins to deliver.
There has been significant progress in privatisation, though less than what is needed and not in all sectors. There are still concerns about greenfield PPP projects, with concession agreements somewhat lopsided with private developers being asked to bear more risk than they should or can. The government has been more successful in monetising operational assets though, through avenues such as InvITs and TOT. The monetisation has also allowed it to offer more budgetary support to infrastructure development.
The tariffs for public services are still not rational, with continuing high levels of subsidies and cross-subsidies. High import duties are also threatening to make an appearance again.
Regulation is a bit of a concern. Not all regulators are independent or autonomous, or sometimes even fully competent, staffed or properly resourced. This is especially true at the state level. The role of the regulators is especially important to ensure competition and choice. Privatisation should not lead to the replacement of public monopolies with private monopolies.
The cost of capital is lower than it was 25 years ago, but is still high. The infrastructure bond market is still underdeveloped. Insurers and pension funds have dipped their toes, not plunged in. The entry of sovereign development funds and efforts of entities such as IIFCL, NIIF and NaBFID are certainly helping. Financing infrastructure may still be somewhat expensive but is somewhat easier today. There is certainly greater overseas interest in investment in India in general, and maybe infrastructure in particular. This is partly due to geopolitics and partly due to the growth of the Indian economy. But also because of the investor experience so far and the future market potential.
Overall, while we have made significant progress over the past 25 years, we need to accelerate the speed of infrastructure development if we have to achieve the developed economy status by 2047. But as we try to speed up development, it is also important to try to minimise the carbon footprint in each of the infrastructure sectors. Development and decarbonisation need to go hand in hand.
A bit about our own journey and this issue. In 1998, we were a small publisher. Indian Infrastructure was only our second magazine, after Power Line. Today, we are a full-fledged B2B media company focused on infrastructure, working not just in India but across the world. We have more than 20 publications and websites, organise almost 100 conferences a year and produce over 50 research reports annually.
Over the next few years, we intend to focus a bit more on decarbonisation and sustainability. We also hope to take better advantage of our digital platforms to seek, feature and amplify the views of all stakeholder groups.
In this issue too, we have tried to feature the views of all stakeholder groups – policymakers, developers, operators, investors, regulators, consultants, lenders, technology providers and industry analysts. There are interviews with key union ministers, views of leading CEOs and perspective from top experts. There is also analysis, for each infrastructure sector, of the progress made over the past 25 years as well as a spotlight on future opportunities and challenges. There are recaps of key events, milestones, projects and programmes. And discussions on the changes we can expect and the strategies we need to adopt.
We hope you will find this special commemorative issue useful, interesting and enjoyable.
Finally, and most importantly, a big thank you to all our readers, contributors and advertisers. Without your support, we could not have made it this far. Every subscription, every write-up and every ad has helped. We hope you will continue to provide that support.