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Infrastructure

Published on: Aug. 10, 2022, 6:37 p.m.
How infrastructure changed the face of India
  • Road to prosperity: India has the second-largest road network in the world, at about 6.22 million km

By Sajal Bose. Deputy Editor, Business India

Infrastructure is an important aspect of the economic development of a country, which cannot achieve rapid economic growth unless it has the appropriate infrastructure. During the colonial period, basic infrastructure such as water transport, railways, posts & telegraphs, and ports were developed. Some may argue that it served the colonial interest rather than the common people. But it has certainly shown that infrastructure is the key for a country’s progress. 

Post-independence, the Five-Year Plans focussed on many sectors in order to speed up the pace of development, but the movement was slow. The presence of a lopsided infrastructure resulted in the limited or slow growth of enterprises. The roads constructed then were poor and not connected to rural areas, which hindered the country’s development.

To improve the weak surface transport system, Calcutta was the first city to start an underground metro service, thanks to the then Railway minister from Bengal Gani Khan Choudhury, who pushed for it. Despite several difficulties, the project was successfully executed in 1984 for a stretch of only 3.40 km and it made history. Today, the subway network covers about 42 km.

At present, more than 15 cities have rapid transit (popularly known as metro) systems and many more are being constructed. The largest network is in Delhi – a distance of 349 km. Kolkata takes pride in the fact that it still operates its tram services, which began in 1902. 

Real industrial development began after liberalisation in 1991 and aimed at ending the licence-permit raj by decreasing government intervention in businesses, thereby pushing economic growth through reforms. The policy opened up the country to the global economy. It discouraged public sector monopoly and paved the way for competition in the market. Investments have steadily risen since then.

Infrastructure services were slowly but steadily moving away from the realm of government control to that of the private sector. Across sectors ranging from telecommunications and roads to power and ports, state-owned agencies are giving way to private sector entities operating in a competitive environment and subject to economic regulation where necessary.

Governments at both Central and state levels are actively engaged in managing this transition, devising appropriate policy frameworks and establishing suitable institutions such as the Central road fund and independent regulatory authorities in the power and telecommunication sectors. Infrastructure is mainly focussed on core areas like roads, railways, ports and power.

The road network has traditionally been the backbone of the country’s transport infrastructure. Former Prime Minister Atal Bihari Vajpayee believed that construction of arterial roads would trigger development. With this in mind, he launched two road projects – the Golden Quadrilateral and the Pradhanmantri Gramin Sadak Yojna. The Golden Quadrilateral connected Chennai, Kolkata, Delhi and Mumbai through a network of highways in 2000, while the Pradhanmantri Gramin Sadak Yojna was planned as a network of all-weather roads for unconnected villages across India.

Over a few years, more than 5,400 km of new highways were built across the country. It was the biggest infrastructure intervention in the road sector in postindependent India. Both projects proved to be an immense success and contributed to India's economic growth and development. Subsequent governments have also continued Vajpayee’s schemes. 

Today, India has the second-largest road network in the world, at about 6.22 million km. In 2020-21, these consisted of 136,440 km of national highways/ expressways, 176,818 km of state highways and 5,902,539 km of other roads. Nitin Gadkari, Union minister for road transport & highways, as also micro, small & medium enterprises, has given priority to infrastructure development and has set a target of Rs15 lakh crore ($206 billion) for road construction, including multi-modal hubs for logistic efficiency, for the next two years.

  • On fast track: More than 15 cities have Metro services

The Bharatmala Pariyojana, a new umbrella programme of the Modi government, accounts for 34,800 km of roads at a cost of $7.713 billion. It focusses on optimising the efficiency of freight and passenger movement across the country by bridging critical infrastructure gaps through effective interventions like development of economic corridors, inter corridors and feeder routes, border and international connectivity roads, coastal and port connectivity roads and green-field expressways. About 65 per cent of all goods and 86 per cent of the total passenger traffic use the road network in the country. Road transport also acts as a feeder service to railway, shipping and air traffic.

“Last mile delivery is now a reality for nearly all major towns and cities across India,” says Vijay Sankeshwar, founder-chairman, VRL Logistics, a national leader in logistic segment. “Abolishing the erstwhile multi-state tax regime with GST is the single most relevant development in the Logistics industry”. 

India’s programmes to build infrastructure and connect the country are picking up pace. The 2019 budget allocates $9.27 billion and the highest ever capital expenditure of $22.77 billion for the Indian Railways. 

India inherited the rail network after independence, and has progressively upgraded and improvement its operations. India’s production of indigenous steam locomotive engines commenced in 1950, with the setting up of the Chittaranjan Locomotive Works (CLW). Before CLW, Tata Locomotive & Engineering Co used to produce steam locomotives for railways for sometime; later, the company shifted into vehicle manufacturing. This was a clear example of Atmanirbhar Bharat, which began in that era. In order to connect important cities, many lines were re-routed and new lines constructed by Indian Railways.

Railway electrification

To control spiralling fuel bills, reduce dependence on imported fossil oil, increase the energy security of the nation, reduce pollution, and improve operational efficiency and operating ratios, electrification was a priority for the railways. Indian Railways has a total broad-gauge network of 64,689 km, out of which 45,881 km – about 71 per cent – had already been electrified by 31 March 2021. The government has envisioned total electrification of the railway network by December 2023 and has set an ambitious target of running the entire rail network on renewable energy by 2030. 

The Dedicated Freight Corridor Corporation of India Limited (DFCCIL), an undertaking by the Railway Ministry, has commissioned two projects – the Eastern Dedicated Freight Corridor and the Western Dedicated Freight Corridor. The Eastern Dedicated Freight Corridor (EDFC), runs from Ludhiana to Sonnagar, while the Western Dedicated Freight Corridor (WDFC) connects Jawaharlal Nehru Port Terminal (JNPT) to Dadri; their lengths of 1,337 km and 1,506 km respectively will be developed at the earliest, with these corridors witnessing some of the world’s largest freight operations.

So far, 1,110 km out of the total sanctioned length of 2,843 km of DFC has been completed. Its freight carrying capacity will be 13,000 tonnes -- up from the current 5,000 tonnes. The length of the goods trains will also increase from 700m to 1,500m. 

In 2017, the prime minister laid the foundation stone of his high-speed bullet train dream project, despite criticism by the Opposition regarding its feasibility. “Bullet train signifies India’s progress,” Modi had said. The high-speed train will run between Ahmedabad and Mumbai. This is being implemented with technical and financial assistance from Japan.

The high-speed railway, with an operating speed of about 320 kph, will cover a distance of 508.2 km in about two hours, as against seven hours at present. It is expected to become operational – or at least have a trial run – by 2026. Of the total project cost, 81per cent is in the form of a loan from Japan International Corporation Agency (JICA).

  • Ports infrastructure is being strengthened to boost trade

The Indian Railways is proactively moving towards privatisation, particularly in the rolling stock business, with modern technology and an emphasis on safety. The Kolkata-based Titagarh Wagon was awarded the contract to design and make lightweight coaches for Pune Metro Rail. “Our stainless-steel coach manufacturing facility will enable us to become a significant player in the upcoming stainless steel coach sector in India, as rail coaches made of stainless steel can minimise the impact of train accidents,” says Umesh Chowdhary, vice-chairman & managing director of the company. “The use of stainless steel in passenger coaches is a common practice in developed economies like US, Canada, Brazil and Japan. With our new facility, we will cater to this need of the Indian ecosystem.” 

A few railway stations, to be developed as per international standards, with modern facilities and passenger amenities using the PPP model, have been identified by the government. The Private Partnership Appraisal Committee has granted approval for the redevelopment of Gwalior, Nagpur, Sabarmati and Amritsar railway stations.

The Sagarmala Programme, on the other hand, focusses on connectivity by sea. It forecasts a role for multiple central ministries and agencies, as well as state governments. As of 30 September 2018, a total of 522 projects at a cost of $6.18 billion were under various stages of implementation, development and completion. The projects include port modernisation, new port development, port connectivity enhancement, port-linked industrialisation and coastal community development.

India has 12 major and 205 notified minor and intermediate ports situated along its 7,500 km long coastline, apart from a vast network of navigable waterways. According to the Ministry of Shipping, about 95 per cent of India's trading by volume and 70 per cent by value is done through maritime transport. The late Arun Jaitley had initiated the privatisation of ports when he was the finance minister in the Modi government. Today, private players have become the changing face of India’s exim trade in the port segment. They are fast and are able to efficiently handle the growing volumes of trade.

India’s key ports had a capacity of 1,561 million tonnes per annum (mtpa) in 2020-21. In 2021-22 (until February), key ports in India together have handled 650.52 million tonnes (mt) of cargo traffic. India's merchandise exports in 2021-22 stood at $417.8 billion – up 40 per cent from the previous year. In October 2021, India’s merchandise exports grew 43.05 per cent y-o-y to reach $33.65 billion. Under the National Perspective Plan, six new mega ports will be developed in the country.

The shipping industry is moving towards mega-size vessels, with over 40 per cent of the order book in the next 3-5 years including ships with a capacity of 20,000 TEU and above. While a capesize vessel requires 18m plus draft, drafts at Indian ports vary widely – from 7m to 20m. Therefore, Indian ports need to focus on increasing draft availability according to their respective cargo profile. Considering the evolving shipping market, ship sizes, and cargo profile, it is essential for Indian ports to further strengthen port infrastructure and drive a greater share of global exim trade. Infrastructure should be planned carefully, analysing cargo trends and forecasts.

  • Air travel for the common citizen was a luxury till two decades back. But entry of private operators in the sector has changed the game

Power for all

The Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India, the third largest electricity producer in Asia. It increased its electricity generation capacity from 1,362 MW in 1947 to 395,600 MW as of 2022. The government of India's focus on attaining ‘power for all’ has accelerated capacity addition in the country.

In order to meet the increasing demand for electricity, a massive addition to the installed generating capacity is required. The government emphasises rural electrification, but 13 per cent of remote villages in India still do not have access to grid-connected electricity. They use non-grid sources or don’t use electricity at all.

India has witnessed the fastest rate of growth in renewable energy capacity addition among all large economies. India’s installed renewable energy capacity is the fourth largest in the world. The government is committed to increase the use of clean energy sources and is already undertaking various large-scale sustainable power projects and promoting green energy heavily. Renewable energy also has the potential to create employment opportunities at all levels, especially in rural areas.

To facilitate renewable power evacuation and reshaping the grid for future requirements, several Green Energy Corridor (GEC) projects have been initiated. The GEC Project aims at synchronising electricity produced from renewable sources, such as solar and wind, with conventional power stations in the grid.

The first component of the scheme, Inter-state GEC with target capacity of 3200 circuit kilometre (ckm) transmission lines and 17,000 MVA capacity sub-stations, was completed in March 2020. The second component -- Intra-state GEC with a target capacity of 9,700 ckm transmission lines and 22,600 MVA capacity sub-stations -- is expected to be completed this year.

India's installed renewable energy capacity (including hydro) was 158.12 GW as of April 2022, accounting for 39.43 per cent of the nation's total installed power capacity. The installed capacity for renewable energy has increased over the last few years, at 15.92 per cent CAGR during 2016-22.

ICRA expects a renewable energy capacity addition of 12.5 GW in 2021-22 and 16 GW in 2022-23. Power generation from solar and wind projects are likely to be cost-competitive relative to thermal power generation in India in 2025-30.

According to the data released by the Department for Promotion of Industry & Internal Trade (DPIIT), FDI inflow in the Indian non-conventional energy sector stood at $11.62 billion during April 2000-March 2022. Since 2014, the renewable energy sector in India has seen investments totalling more than Rs5.2 lakh crore ($70 billion).

Adani Green Energy Ltd (AGEL) has acquired SB Energy India for $3.5 billion to strengthen its position in the renewable energy sector in India. Reliance Industries has announced an investment of Rs75,000 crore ($10.07 billion) in the green energy segment.

With regards to government initiatives, the allocation for the Solar Energy Corporation of India (SECI: which is responsible for the development of the entire renewable energy sector) stood at Rs1,000 crore ($132 million) in the Union Budget 2022-23. The government has also allocated Rs19,500 crore ($2.57 billion) for a PLI scheme to boost manufacturing of high-efficiency solar modules.

  • India has emerged as one of the fastest-growing aviation markets in the world

India has launched the Mission Innovation CleanTech Exchange, a global initiative that will create a whole network of incubators across member countries, to accelerate clean energy innovation. At the COP-26 Summit in Glasgow, Prime Minister Modi had pledged to boost India's renewable energy generation capacity to 500 GW and satisfy half of India's energy needs through renewable sources by 2030.

It is expected that, by 2040, about 49 per cent of the total electricity will be generated by renewable energy, as more efficient batteries will be used to store electricity, which will further cut the solar energy cost by 66 per cent from the current level. 

India’s aviation industry, by and large, is untapped, with substantial growth opportunities. Air travel for the common citizen was a luxury till two decades back. But entry of private operators in the sector has changed the game. Air Deccan was the first low-cost, no-frill airline, which started its operation in India aiming to cater to the commoner.

Several others have joined the move now. The players, who operated efficiently, have gradually increased their operational scale, which the rest could not sustain and have been struggling, due to sharp rise of fuel price and other factors. 

The air connectivity has improved not only to the cities but also with the small towns across the country and new airports have been built and, some upgraded, to ease the passenger traffic flow. India has emerged as one of the fastest-growing aviation markets in the world. The domestic traffic in India has more than doubled from about 61 million in 2013-14 to, say, 137 million in 2019-20, registering a growth of over 14 percent per annum.

India’s aviation industry is expected to witness a flow of Rs35,000 crore ($4.99 billion) investment in the next four years. The Indian government is planning to invest $1.83 billion for development of airport infrastructure, along with aviation navigation services, by 2026. India aims to have 220 new airports by 2025, informs Jyotiraditya Scindia, minister for civil aviation. Cargo flights for perishable food items will also be increased to 30 per cent, with 133 new flights in the coming years.

UDAN takes off

UDAN, a regional airport development programme of the government of India, is a part of the Regional Connectivity Scheme (RCS) to upgrade underserviced air routes. Till launching of UDAN in 2016, India had 74 airports having scheduled operations. But, within four years under UDAN, four rounds of bidding under RCS-UDAN have taken place and 153 RCS airports, including 12 water aerodromes and 36 helipads have been identified for operation of RCS flights.

During the last four years after commencement of the scheme, 948 valid awarded routes have been allotted to various airlines, out of which 389 RCS routes, connecting 62 unserved and underserved airports have been operationalised so far. 

  • By 2040, about 49 per cent of the total electricity is expected to be generated by renewable energy

To improve efficiency and performance, service quality, encourage greater investment and to reduce government influence, the Airports Authority of India (AAI) has awarded six airports – Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangaluru – for operations, management and development under PPP (to Adani) for a lease period of 50 years.

In 2006, AAI had leased out Delhi and Mumbai Airports also to private players. As per National Monetisation Pipeline (NMP), 25 AAI airports have been earmarked for asset monetisation over 2022-25 -- Bhubaneswar, Varanasi, Amritsar, Trichy, Indore, Raipur, Calicut, Coimbatore, Nagpur, Patna, Madurai, Surat, Ranchi, Jodhpur, Chennai, Vijayawada, Vadodara, Bhopal, Tirupati, Hubli, Imphal, Agartala, Udaipur, Dehradun and Rajahmundry. Monetisation stipulates an annual traffic flow of 0.4 million. But, despite all hypes and projections to privatise even small airports, there is apprehension of low profitability.

Besides creating the right infrastructure, the government of India has signalled the beginning of a new era of mobility for India. Global technology trends and India’s rapidly growing economy have led to a focus on the electrification of transportation as the primary technology pathway to achieve this transformation, spearheaded by Gadkari. 

An increasing government focus on EVs as the primary technology pathway for future mobility has been bolstered by industry initiatives. Established and new industry players in automotive, charging infrastructure, batteries and mobility services have been making investments and forging partnerships to develop and test new products and business models.

“India’s sustained focus on growing its underdeveloped infrastructure is crucial,” says Sunil Kumar Chaturvedi, chairman & managing director, GainwellCommosales, a provider of caterpillar construction, mining and power solution. “Multiplier effect of infrastructure investment is well-known and India must invest $5.5-6.0 trillion in ramping up its infrastructure over the next 30 years to bridge the existing gaps and create room for pushing further economic growth”. 

To sum it all, the success of Prime Minister Modi’s ‘Make in India’ concept depends on the right infrastructure for manufacturing competitiveness. Infrastructure also contributes to job creation, which is the key challenge for Modi as India celebrates 75 years of independence.

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