[Infrastructure] PPP challenges & reforms, 3P-India, highway projects, Industrial corridors, DMIC vs DFC, Golden vs Diamond quadrilateral

Economy39 Comments

India Yearbook
  1. Prologue
  2. [Act 1] Infrastructure Corridors GK/theory
    1. C1: (Rail) Dedicated Freight Corridor Project
    2. C2: (Road) Industrial corridors: DMIC
    3. C3: Other industrial corridors
    4. C4: Golden vs. Diamond Quadrilateral
    5. C5: (Road) North South, East West corridor
    6. Budget 2014: industrial corridor announcements
  3. [Act 2] Road infrastructure
    1. R1: National highway authority of India (NHAI)
    2. R2: NHAI: Where do they get cash?
    3. R3: Highways in troubled areas
    4. R4: Budget 2014: Highways related announcement
  4. [Act 3] PPP & Infrastructure: challenges & reforms
    1. P1: Why infrastructure important?
    2. P2: Government role in Infra Development?
    3. P3:  PPP Challenges
    4. P4: PPP reforms: Economic Survey points
    5. P5: 3P India: Jaitley’s solution to PPP problems
    6. P6: Infrastructure Financing

Prologue

Economic Survey Ch11. Energy, Infrastructure and Communications. Total four subparts

  1. Energy & communication
  2. Roads, Industrial corridors, PPP, Infrastructure problems & reforms
  3. Shipping, aviation
  4. Railways infrastructure

Cover Economic Survey highways infrastructure PPP

[Act 1] Infrastructure Corridors GK/theory

For stupid MCQs: list of rail and highway corridors:

C1: (Rail) Dedicated Freight Corridor Project

Dedicated freight corridor map india

2005: By rail ministry + Japanese help
WesternEastern
~1500km~1800km
Jawaharlal Nehru Port in Mumbai to Dadri near Delhifrom Dankuni near Kolkata to Ludhiana in Punjab
Japan International Cooperation Agency (JICA)World bank funding
Starts: Dadri in UPLudhiana, Punjab
  1. Haryana
  2. Rajasthan
  3. Gujarat
  4. Maharashtra
  1. Haryana,
  2. Uttar Pradesh
  3. Bihar
Ends: J.Nehru Port near MumbaiDankuni, W.Bengal
  • Total 3000+ kms. ~96% land acquired.
  • Land compensation as per Railway Amendment Act’08

Benefits:

  1. Only electric trains =less greenhouse gases.
  2. More transportation capacity
  3. LESS unit costs of transportation

C2: (Road) Industrial corridors: DMIC

Map Delhi mumbai industrial corridor dmic

  • 2006: MoU India and Japan
  • 2008: DMIC Development Corporation as the implementing agency. (and NOT NHAI)

States covered under DMIC

  1. Delhi
  2. Haryana
  3. Uttar Pradesh
  1. Rajasthan
  2. Gujarat
  3. Maharashtra
  4. Madhya Pradesh
  • above six states list, as per PIB-April 2007. and in July 2007, Commerce ministry elaborated that it’ll pass through Madhya Pradesh as well.
  • Total length: 1483 kms
  • Railways designing (Western) Dedicated rail freight corridor to extract maximum leverage with DMIC.

C3: Other industrial corridors

Map industrial corridors in India

Industrial corridorStatesFunding
Chennai-Bengaluru-ChitradurgaKarnatakaAndhra PradeshTamil NaduJapan
Bengaluru-Mumbai Economic Corridor (BMEC)Maharashtra, KarnatakaUnited Kingdom
East Coast Economic Corridor (ECEC)linking Kolkata-Chennai-TuticorinADB
Vizag-Chennai Industrial Corridor (VCIC) Andhra Pradesh and TamilnaduADB
Amritsar-Kolkata Industrial Corridor (AKIC), 2014150-200 km band on either side of the Eastern Dedicated Freight Corridor (EDFC) in a phased manner. 7 states:

  • Punjab, Haryana, Uttarakhand
  • Uttar Pradesh, Bihar, Jharkhand
  • West Bengal
Govt.ofIndia

C4: Golden vs. Diamond Quadrilateral

Golden QuadrilateralDiamond quadrilateral
19992014
under NHAIunder Rail budget
To connect four main cities of India Delhi-Kolkata-Chennai-Mumbai. ~6000km lengthTo connect major metros through High Speed Rails.
(length wise, longest to shortest)

  1. Kolkata-Chennai
  2. Delhi Kolkata
  3. Delhi Mumbai
  4. Chennai Mumbai
Proposed routes

  1. Mumbai-Ahmedabad
  2. Howrah-Haldia
  3. New Delhi-Patna
  4. Hydrabad-Chennai

C5: (Road) North South, East West corridor

Under NHAI, to connect following
NorthSrinagar (Kashmir)
SouthCochin (Kerala), Kanyakumari + Salem (TN)
EastSilchar (Assam)
WestPorbandar (Gujarat)

Budget 2014: industrial corridor announcements

National Industrial Corridor Authority

  • to coordinate the development of the industrial corridors,
  • with smart cities
  • linked them all using transport connectivity
  • HQ Pune. (100 cr allotted)

Additionally: Three new smart cities in the Chennai-Bengaluru Industrial Corridor region:

Names not important except for profile based interview Q.
PonneriTamil Nadu
KrishnapatnamAndhra Pradesh
TumkurKarnataka
  1. Amritsar Kolkata Industrial master planning will be started.
  2. Bengaluru Mumbai Economic corridor (BMEC) and Vizag-Chennai will be developed.

[Act 2] Road infrastructure

Type of roads
NameResponsibility ofConnects
National HighwaysUnion GovernmentState capitals
State highwaysState GovernmentState Capital to District HQ
district roadsZila ParishadDistrict HQ to tehsil and Blocks
village roadsGram PanchayatVillages to neighboring towns

 

Lengthwise: (numbers not important but ranking is)
other roads>46 lakh kms
state highways1.4 lakh kms
national highways / expressways~93,000 kms

R1: National highway authority of India (NHAI)

  • Statutory body under ministry of road transport and highways
  • it’s responsible for national highways’ development, maintenance and management
  • Three main projects
    • National Highway developmental Project (NHDP)
    • Golden quadrilateral
    • north-south + East-west corridors
  • NHDP phase 6 started from 2013.

R2: NHAI: Where do they get cash?

  • 1999: Government imposes CESS on petrol and (high speed) diesel.
  • Rate: 2 Rupees per litre
  • This FUEL CESS money goes to Central Road Fund (CRF) [in public accounts and NOT in consolidated fund of India].
  • from CRF, money goes to four places:
    1. state highways
    2. rural roads
    3. rail over bridges
    4. NHAI’s national highway Development Program. (0.50 paisa from every two rupee)
  • NHAI also borrows fund by issuing bonds in Debt market.
  • World bank, ADB, JICA also gives them fund, mostly used for LWE areas.

R3: Highways in troubled areas

a.k.a. fodder for GS3 (mains)
SARDP-NE
  • In North East region- to connect state capitals, district HQ and remote places
  • NHAI provides 2lane/4 lane connectivity upto State capitals
  • build atleast 2 lane highway between state capital to district HQ
  • Connect all strategically important border area/remote places.
  • full name: Special Accelerated Road Development Programme in North East (SARDP-NE)
2004
  • Prime Minister’s Reconstruction Plan for J&K.
  • Construction of the Mughal Road (joining Jammu and Kashmir.)
  • double-laning of the Srinagar-Kargil-Leh Road (NH-1D)
2009
  • Road Requirement Plan (RRP) to make two-lane state roads and national highways in LWE areas.
  • Andhra Pradesh, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra, Odisha, and Uttar Pradesh

 

Highway reforms: Already taken
PBJYFDI and tax reliefs
  • Pradhan Mantri Bharat Jodo Yojana (2004)
  • Permitted PPP BOT (Build operate transfer) mechanism in highway construction.
  • To join state capitals with important tourism and economic centers.
  • 100% FDI permitted in road sector.
  • 100% tax exemption for companies doing highway widening projects
  • Private developers given right to collect and retain toll.

R4: Budget 2014: Highways related announcement

  • Expressways in parallel to Industrial Corridors. This will help faster transport of goods across country.
  • more funds for NHAI (>37k.cr) and North East road Development(3k.cr)
  • Will built 8500 km highway in FY2014

[Act 3] PPP & Infrastructure: challenges & reforms

from the points given in Economic Survey:

P1: Why infrastructure important?

  1. Population + Economic growth= heavy pressure on Transport + Energy + communications.
  2. So, if these 3 not improved = GDP bottleneck + poverty rise + costly essential services.
  3. Without environmentally sustainable infrastructure= No inclusive growth
  4. Lack of infrastructure = Poor GDP growth rate

P2: Government role in Infra Development?

Role of Government in infrastructure Development

Government role in infra = three angles: planning, contracting, and regulating.

State#1: Planning

  • Planning = the decision to build an element of infrastructure.
  • Requires inter-relationships between multiple elements: e.g. where there is a port, there will be a requirement for railway lines and roads
  • Political considerations inevitable in the planning process.
  • As an example, political authorities may decide that it is important to build transportation infrastructure in backward states, or in states with greater law and order problems, even when their economic viability is lower.

Stage#2: Contracting

  • The task of giving contract to a private producer for building infrastructure.
  • survey recommends creating a new agency for drawing the complex PPP contracts, and prevent future litigations.

Stage#3: Regulating

Once an asset is working, autonomous body must regulate the infrastructure Usages and service charges

  1. to prevent market failure
  2. to prevent monopoly of any private/public company
  3. to provide level playing field between public and private sector companies

P3:  PPP Challenges

  • 1300 projects worth ~7 lakh crore by the end of March 2014
  • These projects are at different stages of implementation, i.e. bidding, construction, and operational.
PPP worldwidePPP in India
  • combines private sector efficiency
  • With public purpose of Government.
  • combines Government’s efficiency
  • with private companies’ “public purpose”
  • =#EPICFAIL

PPP infrastructure problem in India 3p-India

  1. In India, Initial PPP projects were successful (early 2000s), because private companies finished within deadline. Many highways, ports, airports successfully working.
  2. With booming Indian economy (before sub-prime crisis), the private companies started “overleverage” i.e. creating assets on borrowed money beyond a sustainable level. Even companies with modest balance sheets started bidding for big PPP projects beyond their “aukaat”.
  3. They had hoped, the booming economy would ‘reward’ their risk taking ability e.g. lot of highway traffic = we’ll mint crores via toll collection.
  4. They had hoped even in worst case scenario, Government would redraw the PPP contracts – extending deadlines or allowing them to collect more toll charges.
  5. But with subprime crisis, global economic slowdown, these companies couldn’t finish projects on time, OR sustain the losses (because expected traffic did not come.)
  6. They couldn’t raise fresh loan / equity /capital / finance because of the slowdown.
  7. Government did not help them. In fact Government aggravated the problem by stalling environment clearance, policy paralysis, corruption, rent seeking etc.
  8. Even when PPP contracts were redrawn, matter was stuck in courts because of corruption allegations.
  9. Result= #epicfail, bank NPA increased.

More problems in PPP

  1. No integrated planning: ports that lack railway lines or power plants that lack coal supplies
  2. Corporate bond market is not developed. Companies rely on banks for finance. higher interest rate = more chances of NPA

P4: PPP reforms: Economic Survey points

  1. for future highway PPP contracts do following:

PPP reforms- traffic trigger equilibrium discount

Traffic triggerre-equilibrium discount
  • It is a conditional clause in the PPP highway contract.
  • If traffic increases beyond a limit,  the private developer is required to increase road capacity – to maintain minimum level of service.
  • Another conditional clause in PPP highway agreement.
  • If the private developer cannot provide minimum level of services to road user, he’ll have to reduce the toll-fees.
  1. overleveraged companies can’t finish highway projects, so
    • simplify corporate debt market regulation, to help them get fresh capital
    • Allow them to “EXIT”, let new player takeover the project.
  2. Highway tolls should have correlation between
    • reasonable profit for the private player
    • users’ capacity to pay
  3. Setup a Separate institute for designing PPP contracts. (Budget 2014 implemented this)
  4. Division of work
    • infrastructure construction work should be handed over to giant companies having expertise in construction
    • After the asset is built, the operation work / toll collection work should be given to another company having expertise in “operation part”.

P5: 3P India: Jaitley’s solution to PPP problems

What was the problem?

  1. PPP projects often run into time and cost over runs
  2. then private players want more share from profit/revenue
  3. PPP contract doesn’t provide that

This problem leads to

  1. private player compromises service quality
  2. private player goes for court litigation
  3. Government demands bribes to rework the PPP contract to help the distressed private company

Budget 2014 Solution?

  1. Budget 2014 announced new institution called 3P India (500 cr provided)
  2. 3P India will ensures proper PPP contract-making with  proper grievance redressal mechanism
  3. 3P India will not provide funding / finance to any PPP projects.

P6: Infrastructure Financing

  • 12th FYP projections: ~1 trillion USD investment necessary for infra. Development. 50% of that expected to come from private sector.
  • To achieve this, Government has taken following initiatives
Bank loansflow rank: power > roads > Telecom
FDIflow rank: Telecom > Power > Renewable energy
IDFinfrastructure debt fundFor long term loans to infra. projectsIDF can be setup either as an NBFC (2 exist); or a Mutual fund (5 exist)
IIFCL
  • India Infrastructure Finance Company Limited (IIFCL)
  • Long term finance to infra. projects with long gestation period
IIPDFIndia Infrastructure Project Development Fund (IIPDF) under Economic Affairs department.
InvITsREITsDiscussed under chapter 13=> rural and urban infrastructure segment.
Municipal bondsGovernment has simplified municipal bond norms, to help’em raise funds for urban infra. Development
Tax free bonds2013: Government allowed the PSUs to issue tax free bonds worth 50,000 cr. for infra. Development
PPP training
  • national PPP capability building program at LBSNAA and other institutes
  • Finance ministry launched PPPinindia.com website- for better Decision Making.

Mrunal recommends

  1. (free) NCERT, NIOS, TN-Books
  2. Environment by ShankarIAS
  3. Indian Polity M.Laxmikanth (Hindi | English)
  4. Art & Culture by Nitin Singhania (Hindi | English)
  5. Spectrum: Modern History (Hindi | English)
  6. Bipin Chandra: Post Independence
  7. Fast-track to Arithmetic Rajesh Verma
  8. MK Pandey’s Analytical Reasoning
  9. Disha’s Topicwise Paperset (Hindi | English)
  10. School Atlas
  11. Mains: Language papers
  1. (free) NCERT, NIOS, TN-Books 4 History,Geo,Sci
  2. Indian Polity M.Laxmikanth (Hindi | English)
  3. Spectrum: Modern History (Hindi | English)
  4. Maths: Quantam CAT Sarvesh Kumar
  5. Objective General English SP Bakshi
  6. Word Power made Easy -Norman Lowe
  7. Topic wise Solved Paperset by Disha


So far 39 Comments posted

  1. parth

    @mrunal sir will u post budget also?

  2. param

    Thank you very much mrunal sir

  3. Vedprakash

    Mrunal sir,can we expect some posts apart from economy for prelims as u have made us quite comfortable in it by ur excellent posts.i know u have certain limitations but pls at least suggest imp. Areas of other sub.pls reply this time.

  4. basavaraj nayak

    Thanks sir

  5. ENIGMA

    thnx a lot sir

  6. Anshuman

    This is inspirational ! You are working really hard .Can’t ask for more.
    Thanks a lot for all the help.

  7. AKS

    MANY MANY THANX SIR……

  8. sathya

    thanks for the lessons sir, ur providing valuable service for the aspirants:-)

  9. risha

    Mrunal Sir,will you finish publishing all the articles of the survey before csat?

  10. amit singh

    thanks a ton mrunal bhai….u r a true social worker …….

  11. niranjan

    thanking to0 the core

  12. Gokul

    Plz posts rest parts chapter 8,9,10. I am eagerly waiting.

  13. Rajesh Kumar

    Dear Sir,Greetings of the day! Your articles are very useful I Like all these articles.

  14. manish

    map usage is acing on the cake. as usual kudos to mrunal ji

  15. Hriti

    sir itne saare khatarnaak articles chaap rahe ho..with big pictures..vatt laga rahe ho aap!!

    “things to do ” is increasing each day

  16. sudhir

    Thanks ..a lot ..sir ji…

  17. OPTIMUS PRIME

    SIR I M FOLLOWING YR BLOG FRM LAST ONE YEAR ,I HAVE NEVER COMMENTED ON ANY BLOG……….. THOUGH I M A TECH SAVVY………..BUT FOR ONLY U

    U ARE JUST PV=nRT (IDEAL) MAN ,WHO JUST WANTS TO HELP OTHERS…………..HATTS OFF TO U ………..TC

  18. swapnil

    plz post current series articles…
    dat r most needed nw..enough comfort wid economy coz of ur videos n lectures…thanx fr it…

  19. sweta

    Thank you Sir

  20. Neha

    Awesome work Mrunal Sir…Thanks a lot.

  21. sunita

    wowwwwwwwwwwwwww….besttttttt everrrrrr

  22. satish

    does any body have vajiram & ravi test series for paper 2 in pdf format

  23. Prajesh

    Thank You very much sir!! 🙂

  24. Bhavya

    Hi guys I want one clarification regarding best coaching institute for philosophy among vision IAS pathanjali and mitra IAS for English medium and also I want single sharing room for pg or hostel for girls with food facility in Karol bath or old rajindhernagar.my budjet is below 10000.I am from andhra pradesh.please help me guys regarding this because I am unaware of Delhi I googled for hostels but it was flooded up with information I could not find any within my requirements.

    1. Thomas

      Bhavya go for patanjali. I had philo. Gave mains didnt get through interview. If you want a single room your will have to shell out 10000. Because having stayed in rajinder nagar i know that being a girl you need adequate security and a drunk landlord or a family is problematic. There are many single old ladies preferrably go for their rooms. Also better not to stay on third or fourth floor. Saying this with experience. Any other help you need let me know. And please dont go by the info on the net.

    2. संकल्प

      For Hindi- Patanjali
      For English- Mitra

      But overall Patanjali good in Indian, Western nd Religion…
      Mitra good in Social nd political..
      No one hav all in one type package, some pros. Cons. In all coaching…
      U should take some demo classes n then decide..

      1. bhavya

        thank you sankalp.

  25. neha

    @bhaviya I m preparing from vajiram this er I also need room partner..currently living in mayor vihar phase one .I have 2 rooms..20 min running time in metro

  26. neha

    @mrunal sir..nobody teaches like u..you are the best

  27. Abhishek

    Sir, what about 20 marks English….suppose if i m not attempting that…then will that affect my result?

    i m confused please clear over this.

    1. Dhrumil soni

      unless UPSC declares it ,it is there in the syllabus.one has to attempt that…so if u don’t attempt it,it will affect ur result

  28. Vasant Hegde

    Guys nervous…:( Do all feeling same or only me???

  29. vaibhav sharma

    marvellous

  30. shubham pandey

    dear sir, i am unable to understand the meaning of 100percent FDI in railway. Actually, i am not acquainted with the basic concept of the FDI. Could u help me please ?

  31. sachin

    Mrunal sir….. You work is really commendable ! Seriously.

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