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

[Act 1] Infrastructure Corridors GK/theory

For stupid MCQs: list of rail and highway corridors:

C1: (Rail) Dedicated Freight Corridor Project

2005: By rail ministry + Japanese help

Western	Eastern
~1500km	~1800km
Jawaharlal Nehru Port in Mumbai to Dadri near Delhi	from Dankuni near Kolkata to Ludhiana in Punjab
Japan International Cooperation Agency (JICA)	World bank funding
Starts: Dadri in UP	Ludhiana, Punjab
Haryana Rajasthan Gujarat Maharashtra	Haryana, Uttar Pradesh Bihar
Ends: J.Nehru Port near Mumbai	Dankuni, 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

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

States covered under DMIC

Delhi Haryana Uttar Pradesh

Rajasthan Gujarat Maharashtra 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

Industrial corridor	States	Funding
Chennai-Bengaluru-Chitradurga	KarnatakaAndhra PradeshTamil Nadu	Japan
Bengaluru-Mumbai Economic Corridor (BMEC)	Maharashtra, Karnataka	United Kingdom
East Coast Economic Corridor (ECEC)	linking Kolkata-Chennai-Tuticorin	ADB
Vizag-Chennai Industrial Corridor (VCIC)	Andhra Pradesh and Tamilnadu	ADB
Amritsar-Kolkata Industrial Corridor (AKIC), 2014	150-200 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 Quadrilateral	Diamond quadrilateral
1999	2014
under NHAI	under Rail budget
To connect four main cities of India Delhi-Kolkata-Chennai-Mumbai. ~6000km length	To connect major metros through High Speed Rails.
(length wise, longest to shortest) Kolkata-Chennai Delhi Kolkata Delhi Mumbai Chennai Mumbai	Proposed routes Mumbai-Ahmedabad Howrah-Haldia New Delhi-Patna Hydrabad-Chennai

C5: (Road) North South, East West corridor

Under NHAI, to connect following

North	Srinagar (Kashmir)
South	Cochin (Kerala), Kanyakumari + Salem (TN)
East	Silchar (Assam)
West	Porbandar (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.

Ponneri	Tamil Nadu
Krishnapatnam	Andhra Pradesh
Tumkur	Karnataka

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

Name	Responsibility of	Connects
National Highways	Union Government	State capitals
State highways	State Government	State Capital to District HQ
district roads	Zila Parishad	District HQ to tehsil and Blocks
village roads	Gram Panchayat	Villages to neighboring towns

 

Lengthwise: (numbers not important but ranking is)

other roads	>46 lakh kms
state highways	1.4 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

PBJY	FDI 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?

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 worldwide	PPP in India
combines private sector efficiency With public purpose of Government.	combines Government’s efficiency with private companies’ “public purpose” =#EPICFAIL

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:

Traffic trigger	re-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.

2. 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.
3. Highway tolls should have correlation between
   • reasonable profit for the private player
   • users’ capacity to pay
4. Setup a Separate institute for designing PPP contracts. (Budget 2014 implemented this)
5. 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 loans	flow rank: power > roads > Telecom
FDI	flow rank: Telecom > Power > Renewable energy
IDF	infrastructure 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
IIPDF	India Infrastructure Project Development Fund (IIPDF) under Economic Affairs department.
InvITsREITs	Discussed under chapter 13=> rural and urban infrastructure segment.
Municipal bonds	Government has simplified municipal bond norms, to help’em raise funds for urban infra. Development
Tax free bonds	2013: 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.