Paper 1.11 Infrastructure - 10x10...

Paper 1.11 Infrastructure 2017

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A. Economic Development

(Extract from syllabus for contents in this document)

1.14 Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

CONTENTS

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1. 2. 3. 4.

1.14.1 Power Sector 1. 1.1 Ujwal Discom Assurance Yojana (Uday)

1.2 Economic Survey 2016 and 2017 , on

Power Sector potential and reforms

2. Solar Power

1.14.2 Roads and

Highways

3. 3.1 Green projects

3.2 National Highways Authority of India

(NHAI) projects

3.3 Bharat Mala project

3.4 Sagar Mala project

3.5 Proposal for developing export

infrastructure

3.6 Carriage by Road Act, 2007 and its

Rules 2011.

4. Oil and Petroleum sector

4.1 Preparing for future demand

4.2 Merging of India oil companies

4.3 Measure to encourage oil exploration in

India

4.4 Chabahar Special Economic Zone

4.5 Oil prices impact on India

4.6 Why oil prices are down?


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1.14.3 Ports 5. Ports

5.1 Cabotage Rules

5.2 Container expressways and roads and

highway links with ports

5.3 New port projects

1.14.4 Railways 6. 6.1 Indian Railways

6.2 Innovation Laboratories and MSME for

Indian Railways

6.3 Centre for Railway Information Systems

(CRIS)

6.4 Empowered Committee on Innovative

Collaborations

6.5 Station Re development Scheme

6.6 Two locomotive factories in Bihar

6.7 What passengers want

6.8 At a glance railways plan

6.9 Longest Railway bridge at Katni by 2021

1.14.5 Airports and

airlines

7. 7 Airports Authority of India (AAI)

7.1 Solar power in Airports Authority of

India

7.2 Marketing aviation turbine fuel in India

7.3 Special Purpose Vehicle or Air India

Funding for

Infrastructure

8. 8.1 IDFC Bank

8.2 National Investment & Infrastructure Fund

(NIIF)

8.3 Infrastructure Development Bank o India

Telecommunic

ations

9 9.1 TRAI ruling on differential pricing of data

ENERGY / POWER SECTOR


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Position as in 2016 at the time of introducing the Scheme

NOTE: DISCOM means Distribution Companies

1. Ujjwal Discom Assurance Yojna, is a voluntary turnaround plan for

discoms. States with financially sound power distribution companies and

undivided electricity departments had shown interest, for incentives like

concessional coal, power and finance that reduce costs. Gujarat, Madhya

Pradesh, Rajasthan, Chhattisgarh and Jharkhand have signed agreements

with the Union Ministry of Power to be part of the scheme, while Uttar

Pradesh, Bihar and Haryana were expected to sign similar memoranda of

understanding. “The measures taken (by NTPC) have reduced average

`energy charges' by 13.6% from Rs 2.06 per unit in September to Rs 1.78 in

December...The cost of purchase by state discoms is lower by Rs 300 crore

per month

1.1 Progress till early 2017 : 15 major states have joined. Together

these states account for 90% of the accumulated losses. The Yojna

turns each area in the network called `circle' into a separate business

unit. In the discom eitheran executive or superintending engineer, is

made responsible for meeting the supply target, maintain and

strengthen the lines to plug power loss, checking theft besides raising

and collecting bills. The Centre rationalises coal linkages and giving


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freedom to use their quota of coal supplies to raise output of more

efficient plants. It also helps in formulating uniform quality norms for

equipment for timely and cost-effective procurement. As in

December 2016, DISCOM was exporting 200 to 250 MW surplus

power to Jammu and Kashmir, Chhattisgarh, Gridco, Madhya Pradesh,

Meghalaya, and Orissa.

1.2 The company also swapped supply sources to bring down

transportation time and freight costs. It swapped coal source for

Mouda plant from Mahanadi Coalfields to South Eastern Coalfields

and Western Coalfields. For Ramagundam, coal source is being

changed from Singareni Collieries Company to MCL and Simhadri

unit is being switched from SCCL to ECL.

Note: Energy charges refer to fuel costs. A generation utility adds `fixed cost', essentially the cost of

plant and machinery , to arrive at the final tariff for discoms, who are supposed to pass on any

energy cost benefit to consumers.

1.3 Updated position as in February, 2017.


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Graphic on progress as in February 2017

2. The Economic Survey 2016 and 2017 on Power Sector Reforms

2.1 For the Power Sector the Economic Survey 2016 saw huge potential

for rationalising power tariffs so as to improve the economics of

supply and distribution. It stated that there was much scope to have a

more complete national market for power and reduce costs. But the

vexed politics of power, gross populism and giveaways could nullify

all the tariff reforms.

2.2 The fact is that the plant load factor (utilisation rate) of power plants

has come down to about 60%, in part due to reduced off take by

financially weak distribution companies (discoms). Opening access to

enable efficient power producers to distribute directly could bring

down the peak rates.

2.3 Also, tariffs for industrial and commercial users remain inflated and

current multiple tariff schedules are highly complex. Simplification to


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2 or 3 rates would lead to better customer response to pricing. In

tandem, what is proposed is residential sectors subsidise prices for

consumers with lower power consumption, so as to be cost-neutral. It

should stem revenue leakage for good.

2.4 But in practice, the reality is that there exists a vested interest in

promising free or near-free power, as a routine form of patronage.

Transparency and regular disclosure in power, along with metering of

distribution transformers is needed through quarterly publication of

power utility accounts. Thus, both the economics and politics of power

need policy focus

2.5 State power distribution companies have sharply reduced commercial

losses and interest costs, giving a promising start to Power Minister

Piyush Goyal's Uday scheme that aims to set right electricity

distribution, the biggest bottleneck in the sector.

2.6 The average power generation cost in the country has also come down

by 13% to `2.77 per unit in the three-month period ending June from

`3.19 per unit during April-June of 2015, a senior power ministry

official said.


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2.7 Preliminary data available with states for the first quarter of the

current financial year shows that most states have reported reduction

in the aggregate technical and commercial losses, which include

electricity that goes unbilled due to non-metering and pilferage. The

commercial losses in Jharkhand have declined to 31.8% during the

three month period from 41% before joining Uday , showed the

provisional data available with the state.

2. SOLAR POWER

2.1 India wants to achieve 1 lakh MW of solar power by 2022. The

major projects expected to be completed by April 2016, are in Andhra

Pradesh, Telangana, Tamil Nadu and Madhya Pradesh.

2.2 India's cumulative installed capacity of solar power reached 5,547 MW

by end of last month, latest government figures show. Rajasthan leads

with 1,264 MW, followed by Gujarat with 1,024 MW and Madhya

Pradesh with 679 MW.


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1.14.2 Roads and Highways

3 Roads and Highways:

3.1 Sixteen Green Expressways to be built :

a) Andhra Pradesh : Amravati to Hyderabad

b) Bengal : Guwahati to Kolkata (1,000km)

c) Gujarat: Ahmedabad to Vadodara; (93 km)

d) Maharashtra : Vadodara to Mumbai. (379km)

Other projects:

3.2 National Highways Authority in India (NHAI): has proposed using

space technology for planning and monitoring of conflict zones and

putting in place mitigation measures.

3.3 To reduce incidents of human animal conflicts, an environment

ministry's draft wildlife conservation plan, has suggested identification


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and documentation of wildlife species that regularly come into such

conflict. Two highway stretches Haridwar to Dehradun and Sitarganj

to Tanakpur in Uttarakhand, involve construction of three elephant

underpasses on Haridwar to Dehradun stretch and constructing an

elevated road on a portion of Sitarganj Tanakpur highway, which

passes through a tiger corridor.

3.4 Two mega highways totalling 13,000 km Tawang to Vijaynagar

Frontier Highway and East West Industrial Corridor, in Arunachal

Pradesh , is also planned.

3.5 Bharat Mala: The 2.6-lakh crore Bharat Mala project envisages

construction of 25,000 km of roads along India's borders, coastal

areas, ports, religious and tourist places as well as over 100 district

headquarters.

3.6 Sagarmala Project seeks to develop 7,500 km of India's coastline.

This is to be the first phase in developing a 'Blue Economy', that will

connect all the 1,300 islands and 280 lighthouses in India.. We are

planning to develop eight major ports, for which work on three started

in 2016. Dry ports and 27 industrial clusters, Rs 8 lakh crore

investment, plus Rs 4 lakh crore for rail and road connectivity with

ports. The biggest problem in our exports is our logistics cost. It is

18% of the total, while for China it is just 8%. For European countries,

the chunk is 10% to12%.

3.7 Proposal for developing export infrastructure:


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3.8 An effort is on to dilute the obligation placed on transporters to

discharge their job with responsibility and accountability, brought

about by the Carriage by Road Act, 2007, and its rules notified in

2011.

3.9 The Act of 2007 and the rules of 2011, the gap being explained by

frenetic lobbying by transporters to avoid progressive changes in terms

of registration, overloading and safety and accountability to

consignors and consignees, were well conceived efforts to bring the

country's logistics up to the requirements of a globalising economy

4 Oil and Petroleum sector


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4.1 State companies may join hands to set up India’s largest oil refinery

in Maharashtra. The 60 million tonne a year refinery will require an

investment of Rs 1.5 lakh crore, prompting state firms, which

usually compete with each other, to join hands.

4.2 The biggest refinery any state firm has ever built in the country is

of 15 million tonne. By bringing together resources and competence,

the state firms plan to put their best behind a project that would help

meet future fuel demand rapidly rising with the economy.

4.3 IOC, BPCL, HPCL, EIL and others will put their best in a project

that would help meet future fuel demand rapidly rising with

economy Indian Oil Corp (IOCL) may take a 40% stake in the

country’s largest refinery project slated to come up on the western

coast in Maharashtra, while two other state refiners Bharat

Petroleum (BPCL) and Hindustan Petroleum (HPCL) may own

20% each, according to officials. Engineers India (EIL) may have a

5% stake and the balance will be split between the financial

institutions and the state of Maharashtra.

4.4 This proposal has been included in the Budget 2017. As refining

is a low margin business, the refinery complex will have a

petrochemical plant, especially since the demand for petrochemical

has been rapidly rising. Indian Oil Corp is the largest refiner in

India with an installed capacity of about 80 million tonne per annum.

The country has a total capacity of about 230 million tonne, with

about 80 million tonne capacity owned by the private sector.

22.02.2017

4.5 India is a net exporter of petroleum products but rising domestic

demand and lower international prices have slowed exports. The export

of petroleum products was down 18% in December and 11% during


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April December 2015. The domestic consumption of petroleum products

grew 9.5% from April to December.

4.6 This proposal has been included in the Budget 2017. As refining is a

low margin business, the refinery complex will have a petrochemical

plant, especially since the demand for petrochemical has been rapidly

rising, an executive at Indian Oil Corp had said last month. Indian Oil

Corp is the largest refiner in India with an installed capacity of about 80

million tonne per annum. The country has a total capacity of about 230

million tonne, with about 80 million tonne capacity owned by the private

sector.

4.7 Measures for exploring oil in India

4.8 Chabahar project : India has offered to invest up to $20 billion in new

petrochemicals complexes, fertiliser plants and liquefied natural gas

(LNG) facilities in hydrocarbons-rich Iran. Chabahar Special Economic

Zone, and is also seeking long-term natural gas supplies on mutually

attractive terms. Natural gas is the cleanest fossil fuel by far and Iran,

which has the world's second-largest gas reserves, is geographically

close to western Indian ports. The draft project was to have been

finalised by October 2016, but till January 2017, the proposal was

awaited from Iran.


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4.9 Price of Oil: Falling prices of Oil from the 2014 peak of $115 was

paved with blessings for India. But when oil plunges below $30 a barrel

it creates problems also. See graphic on next page

4.10 Why are prices down?


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5 Ports

5.1 What is the latest status on cabotage rules? The government last month

said all ports that further transport inland at least half of their total

container volumes, will be entitled to apply for cabotage relaxation.

Cabotage charge has been partly done away with in the western region

and in some segments. Based on that, will extend it to other segments.

5.2 Container expressways in Gujarat and Roads and Highways to

interlink with ports and shipping .

a) Hyderabad to Mumbai JNPT,

b) Hyderabad to Bengaluru,

c) Bengaluru to Chennai.

d) Mumbai to Nagpur,

e) Delhi to Katra,

f) Delhi to Lucknow.

g) Delhi to Meerut Delhi to Jaipur.

5.2 Ports Plan : The government has drawn up a multiyear plan to

modernise, revamp and overhaul the port sector. Infrastructure even in

India’s major ports is lacking due to which container traffic needs to

be re shipped to Colombo. The plan is to raise India's port capacity

from 1,400 million tonnes per annum to 3,000 MTPA by 2025, ramp

up logistics and port connectivity, and line up rail and high way

projects to remove glaring infrastructural deficits. The Maritime India

Summit in Mumbai garnered firm investment commitments that

reportedly add up to $12 billion, with another $60 billion potentially in

the pipeline. The Sagarmala project of the shipping ministry does

envisage port-based or port-proximate industrial and manufacturing

enclaves and it has also identified 27 potential coastal clusters to boost

value addition. The norms set by the Tariff Authority for Major Ports

(TAMP) The Major Port Trusts Act, 1963, needs amending such that

the ports are managed under the Companies Act.

5.3 New ports projects


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6 RAILWAYS

6.1 Indian Railways, a $25 billion industry that caters to 8 billion people

annually and runs the world’s fourth largest railway networks.

For freight, India plans to review its railway freight tariff structure,

expand the freight basket and build more terminals in a bid to recoup

the industry's fast shrinking share in cargo transport vis-à-vis other

modes of transport. It also proposes to develop three dedicated freight

corridors, draft a freight train timetable, increase the average speed of

freight trains to 50 km per hour and build rail side logistics parks and

warehouses.

Growth journey of Indian Railways included in last Railways Budget

of 2016


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6.2 Innovation Laboratories to be opened in all Railway Laboratories and

MSME to be involved in manufacturing for Indian Railways under

Make in India scheme

6.3 Centre for Railway Information Systems (CRIS) One of the products

that were launched then was Rail Radar, which provides visual

information on status of trains by locating them on Google Maps.

6.4 Empowered Committee on Innovative Collaborations, has enabled

the Indo-Japan 98,000crore deal on the Bullet train, signed in

December, 2015. It is now taking up solar energy, industrial parks and

road sector projects that use inventive and never-tried-before

technology and solutions. The project gets 80% of its funding as a 50-

year loan from the Japanese, at a rate of interest of 0.1%

6.5 The Station Redevelopment scheme to develop 400 identified

railway stations under the innovative Swiss Challenge method. The

basic plan was to develop stations into commercial hubs along with all

the amenities for passengers. Gomtinagar in Lucknow and

Bhubaneshwar in Orissa are likely to be developed by Navratna PSU

National Buildings Construction Corporation (NBCC).

6.6 Two new locomotive factories are being built in Madhepura and

Marhowra in Bihar under `Make in India' initiative.


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6.7 What passengers want from railways

6.8 At a glance Railways Plan to Reorganise, Restructure and Rejuvenate

Indian Railways.


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6.9 Longest Railway bridge by 2021 : Katni in Madhya Pradesh will

have India's longest railway bridge of 14 km on the up line and 7 km

long on down line , making the total length 21km. Called the Katni

grade separator, this will be 3 ½ times longer than the 4.62 km

Vembanad rail bridge in Kerala that connects Edappally and

Vallarpadam in Kochi. Both goods and passenger trains will use the

bridge. At present, due to traffic congestion, goods trains are cleared

only after 2 to 4 hours via New Katni Junction.

7 Airports

7.1 Solar power in Airports Authority of India (AAI): which runs 125

airport, is planning to generate its own solar power at six airports, in

Hubli, Belgaum, Bhubaneshwar, Varanasi, Lucknow and Madurai.

There have been delays due to lack of agreement between the AAI

and power distribution companies over net metering arrangements.

Net metering enables residential and commercial customers that

generate electricity from sunlight to feed whatever power they do not

use into the grid and get their electricity bills adjusted accordingly.

7.2 Marketing aviation turbine fuel (ATF) : India's rapidly expanding

jet fuel market is expected to be the third largest by 2020, For a

licence to market transport fuel in India, a company must have

invested or proposed to invest Rs. 2,000 crore in exploration and

production, refining, pipelines or terminals in the country. BP , one of

the world's largest aviation fuel marketer with a presence in 50

countries and scores of airlines, airports and military organisations as

clients, has been given ‘in principle’ approval in January, 2016, to

market aviation turbine fuel (ATF) in India.


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7.3 Special Purpose Vehicle for Air India: Founded in 1932, Air India’s

Balance Sheet in 2016 17, has a debt of Rs 45,000 crore, with an

interest servicing liability of Rs.4,000 crore per annum. It is working

on creating a Special Purpose Vehicle to hold debt and assets ,

especially for non aircraft related debt. Non aircraft related assets

such as land and building are proposed to be leveraged to clean up the

balance sheet.

8 Institutions for financing Infrastructure:

8.1 Infrastructure Development Finance Corporation: IDFC was

founded in 1997 as a private sector lender by a consortium of public

and non-state investors, focused on giving money to infrastructure

companies. In October, 2015, the assets and liabilities of the lending

business were transferred to the bank and the non bank related

business housed in IDFC Ltd. These include asset management

business IDFC Mutual Fund, IDFC Securities and IDFC Alternatives.

8.1.1 IDFC Bank has a balance sheet of Rs. 73,450 crore and a net

worth of Rs.13,320 crore, primarily funding large corporate

clients. It began operations with 23 branches, of which 15 are in

rural areas in the Hashangabad, Khandwa and Harda districts of

Madhya Pradesh. It will also service rural areas as a microfinance

institution.

8.1.2 In January, 2016, IDFC Bank is in advanced negotiations to

purchase Royal Bank of Scotland's corporate banking portfolio in a

deal of Rs. 3,000 crore.


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8.2. National Investment and Infrastructure Fund (NIIF) for

Rs.40,000 crore, will be funded half through the Budget and

half from private investors. It would be an umbrella fund with

several components. “NIIF would be a fund of funds. So there

will be multiple alternate investment funds underneath...There

could be a stressed assets fund, renewable energy fund,

brownfield projects fund.... (all) sponsored by the NIIF.

8.2.1 Sebi has already approved the setting up of the NIIF, as a

Category II Alternative Investment Fund (AIF) on December

28, 2015. Large greenfield projects could also be taken up by

the fund in various sectors. Besides sponsoring funds, the NIIF

could also invest directly in project. There was a full pipeline

of greenfield, brownfield as well as stressed projects. Some key

transportation projects could be taken up initially by the NIIF

for funding.

8.2.2 An investment management company will operate under the

aegis of the NIIF. India Infrastructure Finance Co has been

appointed as the investment adviser and IDBI Capital Market

Services Ltd as an adviser to NIIF Trustee Ltd initially for six

months and one year, respectively. The company would be

responsible for taking investment decisions of NIIF corpus.

8.2.3 A governing council would be headed by the Finance Minister.

Other members include the secretaries of economic affairs and

financial services, SBI Chairperson, former Infosys executive

TV Mohandas Pai and Hemendra Kothari.

8.2.4 As in February 2017: National Investment & Infrastructure

Fund (NIIF) proposed in Budget 2016 is yet to start functioning

as in February 2017. It will undertake financing of major

infrastructure projects such as the building of roads and bridges.


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8.3 Infrastructure Development Bank o India:

8.4 The government is all set to bail out IDBI Bank with a`. 3,000-crore

capital infusion to help it maintain a healthy capital-adequacy ratio

and pursue credit growth. The government has already said it is still

open to bring down its stake in the bank to below 50%.DBI Bank's

lending portfolio is mostly in corporate segment and that is one of the

major reasons for surge in its bad loans. The bank holds stake in IDBI

Federal Life Insurance, IDBI Capital Market Services and NSE,

among others. In his budget speech, FM Arun Jaitley announced ` .

10,000 crore towards capital infusion for 2017-18. This is the last

installment under the seven-pronged revamp plan dubbed Indra

Dhanush announced in 2015, where . 70,000 crore was allocated to`

wards bank capitalisation plan over four years.

9. Telecommunication

9.1 Telecom Regulatory Authority of India (TRAI) ruling on differential

pricing of data: Telecom regulator prohibited differential tariffs for data

services, terming them as “discriminatory“ in a move that strongly

supports innovation and the start up culture . Internet consumers across

the country will continue to enjoy equal pricing for accessing all kinds

of data online. Also, telecom companies will no longer be able to

subsidise in house content or strike deals with application providers for


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giving their services free or at a discount. A penalty of Rs 50,000 per

day, in case of a violation by a Telco, with a cap at Rs 50 lakh is also

stipulated.

9.2 However, there is still no clarity over important issues such as traffic

management on the internet and areas such as data throttling and the

control of internet speed in the transmission of content on the

internet. These are also seen as ways to control the internet by the

telecom providers and falling against the spirit of net neutrality .

9.3

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