Infrastructure in India

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At the present moment, India’s infrastructure sector can be termed as a fairly inadequate one – factors like the present economic condition and an ever-increasing population mean that there is an urgent requirement to modernize the sector and expand it as well.

In order to help the infrastructure come up at par with global standards it is essential to attract a lot of investment so that both quality and quantity issues can be addressed adequately, as per experts.

It is expected that by the end of 2012, India will receive investments amounting to 475 billion US dollars in the infrastructure sector. Experts feel that this domain has the maximum requirement and also similar capability to use all the investments it receives.

It is estimated that by 2017 India’s infrastructure will be comparable with the best if it receives the expected levels of investment. The infrastructure related investment planned in various sectors by 2012 end can be mentioned as below (the minimum approximate amounts have been provided):

  • Highway modernization – USD 75 billion
  • Railways development – USD 71 billion
  • Civil aviation – USD 12 billion
  • Telecom development – USD 32 billion
  • Irrigation system – USD 18 billion
  • Power development – USD 232 billion
  • Ports development – USD 26 billion
Additional investment of 91 billion US dollars has also been planned in the following sectors:

  • Tourism infrastructure
  • SEZ
  • Urban infrastructure
  • Water infrastructure
  • Rural infrastructure
  • Sanitation infrastructure
Both India based and international infrastructure funds will be able to invest in India’s infrastructure sector. The 11th 5-Year Plan ends in 2012 and following are its major targets:

Electricity
  • Capability to generate extra power of almost 90 thousand megawatts
  • Providing access to electricity to all households in the rural areas
  • Taking electricity to all hamlets that are without it
National Highways
  • Making six lanes in 6500 kilometers of the Golden Quadrilateral as well as other chosen National Highways
  • Making four lanes in 6736 kilometers in East-West and North-South Corridors
  • Making four lanes in 12109 kilometers across National Highways
  • Making two lanes in 20000 kilometers in National Highways
  • Creating 1000 kilometers of expressways
  • Setting up roads of 8737 kilometers. 3846 kilometers of this will include National Highways and will be constructed in the North East.
Rural Roads
  • Setting up rural roads for 165244 kilometers
  • Upgradation and renewal of 192464 kilometers of rural roads that cover 78304 habitations
Railways
  • Setting up specialized freight corridors within Ludhiana and Kolkata, and Mumbai and Delhi.
  • Introducing private companies in the container trains sector so that the rolling capacity and stock can be quickly added to
  • Establishing new railway lines across 10300 kilometers
  • Building more international standard railway stations and metro stations
  • Redeveloping and modernizing 21 railway stations
Ports
  • Adding capacity of 485 million MT in the leading ports
  • Connectivity between ports
  • Adding capacity of 345 million MT in the leading ports
  • Deepening channels
  • Establishing berths and jetties
  • Improving equipment for ports
Airports
  • Redeveloping and modernizing 35 non metro and 4 metro airports
  • Improving ATM/CNS facilities
  • Establishing 7 Greenfield airports
  • Setting up MRO and training facilities
  • Setting up 3 airports in the North East
IT and Telecom
  • Increasing subscriber base to 600 million
  • Achieving 200 million telephone connections in the rural areas
  • Providing broadband coverage to 20 million
  • Providing internet connection to 40 million
Irrigation
  • Creating 16 million hectares by way of major, minor, and medium irrigation works
Urban Infrastructure
  • Urban renewal projects to be carried on in certain cities
  • More than a million cities, important religious, historic and tourist spots, state capitals to be brought under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM)
Rural Infrastructure

Focus will be given on the following sectors as per the Bharat Nirman project:
  • Irrigation
  • Water supply
  • Roads
  • Electrification
  • Housing
  • Telecom connection
Real Estate and Construction
  • Developing retail and residential real estate
  • Establishing SEZs
  • Setting up environment friendly buildings
  • Infrastructure projects
Mining
In the mining sector the focus will be on the following areas:

  • Mineral exploration
  • Mineral processing
  • Mineral extraction
  • Mineral equipments and technology
Contribution of Infrastructure Sector to India GDP
The following table provides information on the contribution made by different infrastructure sectors of India in the 2011-12 fiscal:

Sector Contribution in INR crores
Mining and quarrying 108468
Electricity, water supply, and gas 98105
Construction 404617
Trade, transport, hotel, and communications 1462774

Prospects of India Infrastructure Sector
There are several reasons as to why the infrastructure sector of India can be regarded as a lucrative proposition for investments. The reasons for the different sectors may be mentioned as below:

Ports
India’s coastline stretches for 7517 kilometers and 76 percent of the traffic is controlled by the 12 major ports. These ports need to upgrade themselves to be in tune with the global standards and also deal well with the increasing amount of traffic.

Several ports are making plans to increase their capacity and this is inclusive of container terminals. The government has started the National Maritime Development Programme that will deal with 276 port projects and this includes infrastructural improvement as well.

Supposed to be completed by 2012, the aggregate investment for these projects has been estimated at INR 600 billion. The states, especially in western India, are looking for private companies to take part in the development of the smaller ports.

It was expected that by the end of 2011-12 fiscal Indian ports will deal with cargo traffic of 875 million tones (MT) compared to 520 MT in 2004-05. By the end of 2012 the yearly rate of increase in the amount of cargo administered by the ports is expected to be 19%.

For the major ports a capacity increase of 545 MT has been planned – for the smaller ports it is expected to be 345 MT. By the end of 2012, port traffic is expected to go up to 1350 MT. In the same period container cargo is assumed to increase by 18 percent every year.

For the period between 2007 and 2012, an investment of 9 billion dollars has been projected for the smaller ports - for the bigger ports it is supposed to go up to 16 billion dollars.

Airports
It had been expected that by 2012 the passenger traffic would increase by almost 20 percent and in the same period passenger traffic was expected to go up by more than 100 million – the cargo traffic in the same period was supposed to exceed 3.3 million tons. The airports at Kolkata and Chennai are supposed to be upgraded through joint ventures.

Railways
In Asia, India has the biggest managed rail network and on a global scale it occupies the second position. 11 thousand trains operate on a daily basis in India and the track length is more than 100,000 kilometers. The minimum freight carried every day is 1.25 million tons and at least 13 million passengers travel everyday in India by train.

The railways sector offers a lot of scope for public-private partnerships and includes the following:
  • Commercial usage of rail space like stations for example
  • Private investments in railway rolling stocks
  • Private investments in railway infrastructure
The Golden Quadrilateral is expected to be improved so that it can be used to operate freight and passenger trains at greater speeds. The connectivity between rail and ports is supposed to be bettered as well. Multimodal corridors are also supposed to be developed in the remote corners of the country.

Power
At present the electric power stations in India are supposed to have a capacity of 220,000 mega watts as per the latest 5 year plan. The average yearly power shortage on a yearly basis is 8 percent.

The Union Government is expected to build UMPPs (ultra mega power projects) for capacity addition. The nuclear power capacity is also supposed to be increased to 10,000 MW in the same period.

Telecom
In the last couple of years India has seen a commendable growth when it comes to telecom penetration but the usage in the rural areas is still limited to 5 percent at the most. In the Asia-Pacific area, India is numero uno with regards to minutes of usage (MOU) per month.

The subscriber base of Indian telecom industry has an approximate CAGR of 50% and it has also high rates of mobile phones sales on a weekly basis. The mobile devices available in this South Asian country are also among the most economical in the world.

Roads
India’s total road length is nearly 3.3 million kilometers and this includes approximately 128,000 kms of state highways and 65,569 kms of national highways. This also makes it one of the leading countries globally in this regard.

However, only 47 percent of the total road network is paved. This is an important statistic as the roads are responsible for almost 85% of passenger and 65% of freight traffic.

In the past decade the authorities have planned many important projects to develop the highways and several of these are in their initial phase. The private sector can play an important role in this as is evident from the fact that projects with such participation have progressed quickly. These roads have also improved in terms of signages, toll collection, and other relevant facilities.

Construction
The construction sector is responsible for almost 7% of India’s GDP and is preceded by only agriculture in this regard. This sector can be broken up as such:

  • Infrastructure development: 54%
  • Residential activities: 5%
  • Industrial activities: 36%
  • Commercial activities: 5%
Following are the main entities of the sector:

  • Construction contractors
  • Material suppliers
  • Equipment suppliers
  • Solution providers
The yearly growth rate of this sector is almost 30%, which is pretty commendable and this is one sector that has seen a lot of private and governmental investment. The sector’s investment potential has been calculated at 860 billion US dollars.

Hydrocarbon
It is assumed that by the end of 2012 the petrol usage in India will go up by almost 300 MMT thanks to greater industrial requirement and more cars. The estimated investment in this sector for the next 5 to 10 years is going to be US$ 100 billion. An extra refining capacity of around 110 million tons will also be needed by the end of 2012.

Natural gas is a major area for investment. The private sector can also invest in the following infrastructural activities:

  • Jetties
  • Oil movement
  • Storage tanks
  • Petro-products
The Union Government has allowed 100 percent private investment in the sector as oil imports take up the biggest slice in India’s imports and the step allows the national authorities to address the situation. Other important steps like delicensing, rationalization of prices and deregulation.

Joint ventures in this sector are allowed in the following activities:

  • Infrastructure development
  • Refining activities
  • Marketing
Top Infrastructure Companies in India
Following are the leading infrastructure companies of India:

  • Larsen & Toubro
  • Gayatri Projects Ltd
  • Jaiprakash Associates
  • Ramky Infrastructure
  • Lanco Infratech
  • IL&FS
  • Reliance Infrastructure Limited
  • Consolidated Construction Consortium Ltd
  • GMR Infrastructure
  • Madhucon Projects
  • Punj Lloyd
  • Pratibha Industries
  • IVRCL
  • MARG Group
  • Hindustan Construction Company
  • Vascon Engineers
  • NCC
  • ARSS Infrastructure Projects
  • Gammon India
  • JMC Projects (India)
  • Simplex Infrastructures Limited
  • Ashoka Buildcon
  • GVK Power & Infrastructure Limited
  • Unity Infraprojects
  • IRB Infrastructure
  • SPML Infra
  • Afcons Infrastructure Ltd
  • Ahluwalia Contracts (India)
  • Patel Engineering
  • Shriram EPC

Last updated On: 27th June 2012



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