Infrastructure Development (Yojana 2021) (Download PDF)

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Infrastructure Development

Dimensions that enable infrastructure development.

Infrastructure Development

Project Structuring

  • Electricity Boards were vertically unbundled into Generation, Transmission and Distribution Companies.
  • Roads got bundled with other activities to increase scope for revenue generation like food courts, petrol pumps and even real estate developments.
  • Airports development is ‘bundled’ to include both aeronautical and non-aeronautical activities.
  • Creation of a Universal Obligation Fund by the Telecom Sector.
  • In the road sector, initial PPP structuring was attempted on the Build-Operate-Transfer model.
  • Viability Gap Funding, a capital subsidy-based bid model was structured.
  • Hybrid Annuity Model was brought in due to more projects started getting vulnerable to toll revenue-based risk.
  • Toll Operate Transfer Model, the bidder was not subject to construction risks but only revenue risks.

Project Evaluation: Financial, Economic and Risks

  • Evaluations that include identification of risks and risk mitigation/management plans.
  • Financial models became more important along with social cost benefit analysis and risk management plan.

Sourcing of Funds

  • Private funding, revenue models, partial govt. support through viability grants.
  • Emergence of equity by promoters, third party equity, bank financing, insurance and pension funds, multilateral agency funding, foreign direct investments.

Tendering and Bidding Process

  • More structured documentation and processes.
  • Documents bring multiple stakeholders together with focus on anticipating issues.
  • Bidding process is also more consultative and manages expectations.
  • The currently ongoing privatization of certain Passenger Train Operations is an example of openness, transparency, and responsiveness.
  • Better risk allocation, transparency and monitorability.
  • Ports has moved from royalty to revenue share to enable better risk allocation.
  • Airports have moved from revenue share to per passenger fee to ensure better monitoring.
  • Roads have moved from concessional period to viability gap funding/lump sum payments to revenue share to annuity receipts.

Agreements

  • Binds the relationship between the authority and concessionaire.
  • Agreements have got sharper on competition, scope increase, other revenue sources, tariff setting, ownership and change in ownership, common use versus captive use, targeting the poor and dealing with consequent financial non-viability and conditions for step in termination or transfer.
  • Recognition and need for mor careful thought on outcome specifications, time frames, review triggers, termination conditions and internal consistency.

Project Management

  • Vulnerability to land acquisition and environmental clearances have affected greater professionalism and technologies.
  • Evolution of construction management.
  • Professionals being trained at the post-graduate level.
  • Construction under ‘brown field’ conditions.

Post-Project Issues

  • Facilitating the concessionaire to face operating challenges has increased over time.
  • It is an important issue.
  • The original goals of competition or conflict of interest need to be considered.
  • Providing a healthy platform for buy and sell of concessions.

Regulation and Dispute Resolution

  • Many regulator institutions have been set up.
  • The Telecom Regulatory Authority of India.
  • The Central and State Electricity Regulatory Commissions.
  • Tariff Authority for Major Ports.
  • Airport Economic Regulatory Authority.

Areas that need regulation:

  • Licensing
  • Environment
  • Safety
  • Security
  • Tariff
  • Service levels
  • Dispute resolution

Railways and Road Safety are still under-regulated areas.

NIP (National Infrastructure Pipeline)

  • Ministry of Finance.
  • Envisages an investment of ₹ 111 lakh crore in infrastructure in the six fiscal years until 2020 - 25.
  • Investment of ₹ 57 lakh crore in the preceding seven fiscal years.

Status of Projects

Status of Projects

Overview of the NIP

Annual investment phasing (₹ crore)

Annual Investment Phasing (₹ Crore)

Excludes Power Sector and Some States with phasing not provided.

  • Large states yet to provide adequate data are Gujarat, West Bengal, Rajasthan, and Bihar.
  • Projected peak in annual phasing of investment spend in FY 20 - 21, however could spill over to FY 23 - 25.
  • Conceptual stage projects include in expressways, freight corridors, river-interlinking and renewable energy.
  • Implementing agency Centre (39 %) , State (39 %) and Private (22 %) .
  • Under Implementation-19 %
  • Under Development-31 %
  • Conceptual Stage-42 %
  • Unclassified-8 %

Public Private Partnerships (PPPs)

  • For increased stake holding and financial additivity.
  • To deliver high quality customer-oriented infrastructure.
  • Two critical players the Public side called the Authority and the Private side called the Concessionaire.
  • Share of private investment out of the ₹ 57 lakh crore was 27 % .
  • NIP expects a more realistic 21 % .
  • The government has tried to create a large vision by having infrastructure projects listed under schemes like:
    • National Highways Development Project.
    • Pradhan Mantri Gram Sadak Yojana
    • Sagar Mala
    • National Infrastructure Pipeline, etc.

Conclusion

Concession Agreements have yet to mature by providing trigger-based review mechanisms.

Conflict of interest have been recognized (need to be addressed) :

  • Policy maker versus regulator.
  • Regulator versus operator.
  • Level playing field with a strong incumbent.

- Published/Last Modified on: May 11, 2021

International Relations/Organizations, Agriculture/Agro Industries, Govt. Schemes/Projects, Yojana

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