1policy watch

this IssueInsideMessage From the Director General .......... 1Chandrajit Banerjee, Director General, cii

policy Barometer ......... 9

industry Voices .......... 11

Factfile ...................... 12

cEo Speak ...........................................................................................2

Focus: Action Agenda for the Infrastructure Sector

November 2012, Volume 1, Issue 8

PolicyI nfrastructure development,

undoubtedly, has been the cornerstone for sustaining

economic growth. at the same time it provides the much needed fillip for the economy. it is estimated that lack of good quality infrastructure impedes india’s GDp growth rate by 1-2 per cent per annum.

Since the last few years, india has seen an enabling environment for public private partnerships (ppps) across infrastructure verticals which has facilitated a major increase in ppp projects. Some key factors include:

• Enactmentofimportantlegislationslikethe Electricity act 2003; the amended National highways authority of india (Nhai) act, 1995 and the Special Economic Zones act, 2005.

• Constitution of new institutions likeregulatory authorities in telecom, power and airports Sectors, implementing authorities like Nhai and financial institutions like the infrastructure Development Finance company, the india infrastructure Finance company ltd. and so on.

the country has also witnessed significant capacity enhancement over the last two decades. importantly, investment in infrastructure as a percentage of GDp has risen from 4.9 per cent in 2002-03 to over 7.5 per cent in 2010 and is expected to

reach the target of 10 per cent of GDp by 2016-17.

approximately 37 per cent of the total investment envisaged in the 11th Five year plan came from the private Sector. Going forward, in the current plan period (2012-17), the Government is expecting US$ 453 billion out of a total investment requirement of US$ 970 billion to come from the private Sector.

however, there are some critical sector-specific issues which would need to be addressed to realize the true potential of ppps in the country. these include:

• Fasterclearances:Futureprojectscouldbebid out as Special purpose Vehicles (SpVs) with all sovereign clearances in place.

• Need to push,monitor and fast trackflagship infrastructure projects like western and Eastern Freight corridors and projects already announced by the hon’ble prime Minister earlier this year.

• Toaddressissuesrelatedtodryingupof liquidity, there is a need to support

infrastructure companies with high debt exposure seeking financial re-structuring etc. Dues to the private sector from the various Government institutions also need to be expedited.

• Specific issues related to the Powersector need to be addressed, especially in terms of fuel availability and also distribution sector reforms.

cii has drawn up a sustained agenda for policy advocacy this year and is currently in dialogue with all key stakeholders to discuss and arrive at a detailed roadmap for the sector.

this issue of policy watch takes an in-depth look at sectoral issues and seeks to outline some specific recommendations that cii would pursue in its dialogue with the various policy stakeholders in the Government. i hope that you will find it useful. n

Chandrajit BanerjeeDirector Generalconfederation of indian industry

Dr. Rajiv B Lall, chairman, cii National committee on infrastructure and Vice chairman & Managing Director, infrastructure Development Finance company ltdVinayak Chatterjee, chairman, cii National task Force on infrastructure projects-Monitoring & advocacy and chairman, Feedback infrastructure Services pvt. ltd.

Anil Sardana, chairman, cii National committee on power and Managing Director, tata power company ltd.Athar Shahab, chairman, cii core Group on Roads & highways and cEo, Uniquest infra Ventures private ltd.Rajiv Agarwal, chairman, cii core Group on ports and Managing Director & cEo, Essar ports ltd.Srinivas Bommidala, president, association of private airport operators (apao)

2 POLICY WATCH

CEOSpeak

What have been the key trends in infrastructure fi nancing?

Over the last fi ve years, during the 11th Five Year Plan period, about 95 per cent of the projected investment of US$ 500 billion (at 2006-07 prices) was achieved. This amounts to an average share of about 7 per cent of GDP compared to an average of 5 per cent achieved during the 10th Plan period. The key highlight of 11th plan was that approximately 37 per cent of the total investment envisaged came from the Private Sector. Private participation is now well established in many sectors such as Power, Telecom, Roads, Ports and Airports. This enables the Government to direct its resources more effectively to irrigation, water supply and sanitation, where private participation is yet to mature.

The investment over the last fi ve years in sectors such as Telecom, Roads and Highways and Oil and Gas pipelines was much higher than projected while in some sectors such as Power and Airports,it was marginally short of expectations. But overall the investment fi gures have been satisfactory, primarily due to the increase in Private Sector participation.

What is the total fund requirement for infrastructure development, including backlog and new investments, upto 2017? Which sectors, in your view, require the maximum proportion of funds?

The total fund requirement for infrastructure for the next five years (based on the latest data available) is projected to be around US$ 970 billion (at 2011-12 prices), if we are to meet our desired GDP growth targets. Investment in infrastructure as a percentage

of GDP would need to increase to about 10 per cent of GDP by 2017. With the success of private participation during the last five years, there would be increasing emphasis on the Private Sector to bridge the investment gap. In fact, the share of Private Sector investment would need to rise to about 46 per cent of the total investment in infrastructure in the 12th Five Year Plan.

The maximum proportion of funds would continue to be invested in sectors such as Power, Telecom, Roads and Highways, which would also obtain a higher proportion of Private Sector funding. Other sectors which require a large share of the funds would be Irrigation, Railways, Water Supply and Sanitation, where the bulk of the investment is expected to come from the public sector.

What are the key issues in infrastructure fi nancing?

While the investment requirements are huge, there are several bottlenecks in the system today which are making it difficult for the infrastructure sector to attract adequate capital / funding necessary to meet these investment requirements. For example, lack of fuel (especially coal) to keep up with the

Private Investment- Stimulating India’s Infrastructure Growth Story

Dr. Rajiv B LallChairman

CII National Committee on Infrastructure and Vice Chairman & Managing Director,

Infrastructure Development Finance Company Ltd

3policy watch

CEOSpeak

massive growth in generating capacity is causing huge problems for the power sector. power plants coming on stream do not have enough fuel to operate at plant load factors sufficient to service debt. this in turn makes lenders wary of supporting creation of new generating capacity. while we have been successful in attracting private capital and participants in the creation of new generating capacity, the rest of the system has not been able to keep pace with this growth, causing bottlenecks which affect capital flows and investor sentiment. another example is the telecom sector which is currently witnessing regulatory uncertainty, for which we have earnestly been looking for a resolution.

there are issues related to land and environment across sectors which need a balanced solution. also, we need to improve our regulatory capability to adequately balance the interests of all stakeholders, be

it the project developer or public.

assuming we are able to overcome these bottlenecks, the investment requirement in infrastructure is huge. access to international capital has become more difficult. we need to find ways to increase funding sources domestically as well. the insurance and pension industries need to develop.

What steps/measures have been taken by the Government to address these issues? What more needs to be done?

the Government needs to improve the sentiment for capital flows and take specific measures to remove some of the pressing bottlenecks which are hampering the overall investment climate. the Government has shown some resolve in addressing problems that have an administrative solution such as tightening processes

and procedures, but it needs to take bold decisions on wider issues such as the fuel shortages in the power sector. there is an urgent need to find a solution regarding the import of coal and resolving related compensation issues which would unlock over 10,000 megawatts (Mw) of ‘stranded’ capacity. likewise, some kind of resolution on gas pricing is required so that work can resume in the Krishna Godavari Basin (KG), and also finding a solution to create a blend of KG basin and imported gas is needed. in the telecom sector, decisions on the issues of spectrum pricing need to be taken care of in a manner which is acceptable to both investors and bidders.

the Government must not lose sight of the economic benefits the infrastructure sector has brought to the country and the focus need not be merely on maximising revenues for the Government. n

What are the key reasons for slowdown in the infrastructure sector? Which sectors have been most affected by this slowdown?

overall, the policy paralysis on the part of the Government and the inability to take decisions on the reform process has adversely impacted the infrastructure sector. this is in addition to the cumbersome approvals process for land acquisition and clearances from the Environment Ministry which has slowed the pace of infrastructure development, and has led to a decline in the project pipeline. For instance, from 2010 till as recently as last week, every land ’alienation’ process had to go to the cabinet for clearance. Similarly, in the Roads sector, for 17 months, the National highways authority of india (Nhai) was without a chairman. this does not augur well for a Government which had the most ambitious road programme in the world. however, fortunately now the pace in this sector has gained momentum.

the slowdown has impacted the power sector the most. the slowdown in the sector started almost two years ago in 2010 when, for the first time, the issue of coal shortages came up and the bankruptcy of discoms came to the fore. the combination of these two factors coupled with the fact that the Government was in a decision paralysis mode led to a huge slowdown in the thermal power sector.

Simultaneously, there has been a sharp de-cline in gas production from the Krishna-Godavari D6 basin from 60 million metric standard cubic meters per day (mmscmd) to little less than 30 mmscmd currently, which has adversely impacted the 18,000 Mw gas based capacity in the country. in addition, there is no gas available for new gas-based power projects. however, the share of ppp in overall infrastructure development has gained significant momentum over the last few years.

How have PPPs evolved in India in the infrastructure segment?

Given the huge investment requirements, ppps are the cornerstone of the Govern-ment’s policy to enhance infrastructure de-velopment in the country. amidst all this, with india today easily being the world’s largest ppp market (according to the world Bank statistics), ppp is a happy story in the country. this has happened because suc-cessive Governments in the country, from as early as 1995 onwards, have taken or-

Vinayak Chatterjeechairman

cii National task Force on infrastructure projects-Monitoring & advocacy

and chairman, Feedback infrastructure Services pvt. ltd.

Public Private Partnership: Rewriting India’s Growth Story

4 policy watch

chestrated steps to shift the economic focus towards ppps. the share of ppps in overall infrastructure development has picked up. For example, the share of ppps in the 10th Five year plan stood at 20 per cent. this in-creased to about 37 per cent in the 11th plan and in the 12th plan it is targeted at 50 per cent. this represents a fundamental shift in the tectonic plates of india’s eco-nomic infrastructure.

What key factors have driven PPPs in the country?

on the Government’s side, a huge degree of capacity building has been done. First, new institutions like regulatory authorities

in telecom, power and airports and implementing authorities like Nhai were created. policy guidelines like Standardized Model concession agreements have been drafted across all sectors to induce private Sector participation. private Sector responded admirably to the opening up of this new horizon and re-geared itself to adapt to this new paradigm. Dedicated financial institutions like the infrastructure Development Finance company, the india infrastructure Finance company ltd were also created to meet the funding requirements. clearly, many ducks stood in line for the ppp movement to have reached where it has reached.

What are the key measures that need to be taken on an urgent basis to step up the pace of infrastructure development in the country?

First and foremost, the Government must get all the requisite clearances in place before it bids out a project. this will, in one stroke, remove all degrees of uncertainty in the project and minimise the risk of non-performing assets. there is also a need to create truly independent regulatory bodies so that the burden of creating the right policy framework shifts from the Government to the independent regulators.

the Government also needs to play a very proactive role in land acquisition for infrastructure projects as this is one of the key bottlenecks which is impeding progress.

importantly, in my personal view, huge coordination is required in infrastructure development within the Government. with 19 institutions at the centre (16 Ministries and 3 other entities-the planning commission, prime Minister’s office and the cabinet Secretariat), there is a lot of coordination required among the Ministries and 29 State Governments. there is clearly a need for an infrastructure Ministry. with the creation of this Ministry, red-tapism will not increase as there are a lot of Ministries that can be combined together. For instance, the coal and power Ministry could be merged into a single Ministry.

these steps and some other measures will help de-bottleneck infrastructure development and step up the pace of infrastructure growth in the country. n

CEOSpeak

5policy watch

What is the current status of fuel availability for the power sector? How is this impacting the sector in terms of parameters like plant load factor, costs and stranded assets?

the availability of fuel (both coal and gas) has become a challenge today, and if the issue is not dealt with properly, it would be a lost opportunity for india. this shortage has also led to apprehensions that the ambitious capacity addition targets of 90 to 100 Gw in the current plan period (2012-17) may not be met and may also cause avoidable stress on assets already built/committed by the private sector. this brings us back to the discussion that the country needs a well-planned ‘Energy Security policy,’ the lack of which has led to haphazard development.

Besides, the Government also needs to create the enabling policy framework wherein the use of imported fuels would be dealt with properly, especially in terms of its commercial dispensation.

What proportion of coal requirements of the Indian Power sector are currently met by imports? How has this impacted the economics of the sector? What are the likely future trends in this space?

only 310 million tonnes (Mt) of coal is estimated to be supplied to the power sector by coal india limited (cil) against the committed 347 Mt in 2011-12, which has added to the jump in imports. Further, imports have risen sharply in 2011-12 on account of commissioning of imported coal-based plants during the year. as per planning commission estimates, to meet the requirement of 1403 billion units (BU) and peak load of 197,686 mega watt (Mw) at the end of 12th plan period, coal requirement will be around 842 Mt.

thus, coal imports need to be continued to bridge the shortfall in indigenous coal supplies to stations designed on indigenous

coal, in addition to the requirement for stations based on imported coal.

What steps need to be taken in particular to address the issues of acute fuel shortages and distribution inefficiencies?

presently, the country is burdened with an overall peak power shortfall of about 11 per cent and a situation where the distribution framework is almost at the brink of collapsing. in today’s environment, power sector reforms are critical for providing the impetus to economic growth of the country.

we need to focus on Fuel Security and the Government needs to take the following steps to achieve it:

•EvolveaNationalEnergySecurityPolicy

•Rationalize existing coal linkages tooptimize distances of rail movement

•Resolve Fuel Supply Agreement (FSA)issues currently plaguing 11th plan projects

• Strengtheninstitutionalmechanismsandfacilitate fast-track clearances for coal mining projects through a single-window inter-ministerial body.

• Developaconduciveandenablingpolicyframework by introducing an indepen-dent coal regulator to oversee mine plan-ning and development, adherence to in-vestment plans and compliance with the production schedule.

the distribution ppp model is a good route to bring private investments in the distribution business and should be implemented across states. the sector has been plagued by high distribution losses (as high as 35-40 per cent) and low billing recovery, which has resulted in poor financial health of the utilities.

How, in your view, is this sector likely to evolve over the next few years?

the way forward for the power sector is to accelerate distribution reforms as this would have a direct impact on the sector’s commercial viability and would ultimately benefit the consumers and generators. Going ahead, unbundling has to be done on priority and open access to transmission strengthened. a nominal tariff increase will also be a significant step. n

Fuel Availability Crucial for Addressing the Shortages in India’s Power Sector

Anil Sardanachairman

cii National committee on power and Managing Director,

tata power company ltd.

Coal Requirement During 2016-17 842 MT

coal availability from

a. cil 415 Mt

b. Singareni collieries company limited (Sccl) 35 Mt

c. captive blocks allocated to power utilities 100 Mt

d. coal to be imported by thermal power Stations (tpSs) designed for imported coal

54 Mt

Total availability 604 MT

Shortfall 238 MT

CEOSpeak

6 policy watch

CEOSpeak

What is the current status of the roads & highways sector? Do you think the sector will achieve the set targets?

there is a slowdown in award as well as execution of projects. the private sector has been shying away from the bids that have been offered. i don't think the target for this year will be achieved. Urgent steps are needed to bring the growth momentum back into the sector.

What have been the key reasons for the lack of Private Sector participation in the roads & highways sector this year compared to the last year?

Delays in land acquisition and forest clearances, rising input prices, high interest cost and lack of support from equity markets are the primary reasons. capital locked in disputes has further tightened the situation for developers.

What are the specific recommenda-tions that CII has been suggesting to the Government to address some of the issues mentioned above?

we are recommending that notification under Section 3D should be published for 100 per cent of the land prior to issuance of Request for proposal (RFp). physical possession of 80 per cent of the land should be granted to the concessionaire prior to the declaration of the appointed Date and the balance within 90 days of the appointed Date.

For future projects, procurement of all environmental consents should be done prior to the issuance of RFp.

the current provisions stipulate that where the stretch is more than 30 km long and right of way being procured is more than 20m, the Environment clearance from Ministry of Enviornment and Forests (MoEF) is mandatory. we are recommending that the same should be increased to 100 km and 60m respectively.

we are also requesting the Government

to exclude road side plantation from the

purview of Forest Rights act, 2006.

the Government should favorably consider

the proposal to allow easier exit to

initial investors to facilitate unlocking of

development capital. in addition, urgent

steps are needed to resolve outstanding

disputes and release capital for growth.

we have seen a fair amount of positive

movement on all these issues in recent

months and we hope concrete action would

be forthcoming soon. n

Roads & Highways Sector: Reinvigorating the Growth Momentum

Athar Shahabchairman

cii core Group on Roads & highways and cEo, Uniquest infra Ventures private ltd.

7policy watch

CEOSpeak

What is the current status of the Ports sector? Do you think the sector will achieve the set targets?

the current rate of growth of the ports sector is much below its potential. however, we believe that the sector will be able to achieve the set targets as cargo through ports is expected to increase significantly on account of a surge in the indian economy simultaneously with growth in the manufacturing sector.

the Government needs to announce some key policy measures to accelerate the investment in the sector. at present, several projects are delayed due to the slow bidding process and delays in obtaining environment clearances and land acquisition. it is imperative that due attention be also accorded to the issue of tariff Regulation at Major ports and the ‘captive User policy’. this would help create the required capacity at the indian ports.

What have been the key reasons for lack of Private Sector participation in the Ports sector this year compared to the last year?

During the last one year, not many new big projects have come up for bidding. Most of the projects which are under the bidding process currently are those which were invited for bid earlier but had not got much response from bidders or had been delayed due to some reasons.

there are projects which are currently not attractive but can be made attractive by changing the tariff and some of the bid conditions. the port trusts need to show more flexibility in packaging of the projects to make it attractive; otherwise required investment in the sector will not flow.

What are the specific recommenda-tions that CII has been suggesting to the Government to address some of the issues mentioned above?

Few important bills and policies related

growth of the ports sector and industrial development of the country. currently, port based industries account for 30-40 per cent of the cargo at indian ports, which can be further increased if this policy is implemented. cii has submitted its recommendations to the Government on new ‘captive User policy’ to make it conducive and attractive for the port based industries.

cii is of the view that tariff at the Major ports should be deregulated as the tariff based on project cost estimated by the port authority is much lower than the actual cost incurred and this is adversely impacting terminal performance and efficiency. currently, only Major ports and private terminals operating therein are subject to tariff regulation, whereas the non Major ports are exempted. however, there is intense competition amongst these ports for the same cargo. n

Port Sector: Strengthening the Enabling Framework for PPPs

Rajiv Agarwalchairman

cii core Group on ports and Managing Director & cEo, Essar ports ltd.

to the ports Sector are in the process of formulation and cii has given its recommendations to the Government on these policies.

policies like ‘captive User policy’ for allotment of waterfront and land to port based industries will play a big role in the

8 policy watch

Airport Infrastructure: Creating a Win-Win Scenario for Stakeholders

Srinivas Bommidalapresident, association of

private airport operators (apao)

CEOSpeak

What is the current status of the airport sector? Do you think the sector will achieve the targets?

the Government of india (Goi) has taken a number of initiatives to open the sector for private participation in modernizing the existing/Brownfield airports as well as for setting up of new Greenfield airports. Because of these liberalizations private participation has been allowed at the Delhi and Mumbai Brownfield airports and three new Greenfield airports have been set up at cochin, hyderabad and Bangalore in ppp mode. an amount of US$ 13 billion is planned for 12th Five year plan, of which US$ 10 billion is expected to be generated by the private Sector. 35 non-metro airports have also been identified for modernization and upgradation. the hon'ble prime Minister has set a target for 3 Greenfield airports to start in this financial year - Navi Mumbai, Goa and Kannur requiring approximately US$ 5 billion investment.

having said this, i must also mention that the sector is faced with several challenges. airports being capital intensive projects require long gestation periods to break-even. however impediments such as funding constraints, an unfavorable tax regime, risks and uncertainties about traffic growth, lack of a stable policy and regulatory frame work, delays in land acquisition and environmental clearances and most importantly, the health of airlines have put the viability of airport projects under threat. looking at the pace of progress made so far, i am concerned about

our collective ability to achieve completion of these projects within the stipulated cost and time, unless the concerned Ministries and relevant agencies work with a common objective and purpose.

What are the key issues in the development of upcoming Greenfield Airports as well as modernisation of existing airports?

the indian aviation sector is witnessing an uncertain phase on account of multiple factors. the key issues are:

• Viability of airports - Reasonable rate of return is not available to the investors.

• the levy of aDF as well as increase in airport charges has been a matter of public scrutiny, despite being upheld by the honorable Supreme court.

• currently applicable till regime and the Regulatory philosophy adopted by the Regulator has been challenged by the airport operators.

• the threat of caG and Rti applicability to ppp projects.

• inordinate delays in bidding, land acquisition and other environmental clearances which delay projects.

• the prevailing tax regime is not favourable towards new investments.

• lack of a structured National civil aviation policy, a National ppp policy

and a modern set of act and Rules to govern the sector.

• Financial / Funding constraints.

What are the specific recommenda-tions the Association of Private Air-port Operators (APAO) have been sug-gesting to the Government to address some of the issues mentioned above?

the growth in passenger and cargo traffic requires significant investments in construction of new Greenfield airports, expansion and modernization of existing airports, improvement in associated infrastructure, better air space management and multi modal access to the airports. apao has been suggesting the following:

1. ppp being an important approach for development of infrastructure in the country needs conducive policies to ensure sustainability, economic viability and orderly growth of the sector.

2. Regulatory policies should be in synchronisation with government and sectoral policies. there should be a clear and well defined tariff policy and tariff determination methodology which addresses the concern of investors.

3. the Ministry should ensure that the outstanding dues payable by air india to the private airport operators are paid in time.

4. availability of long term debt at moderate interest rate is required to address financing concerns.

5. adopt a Dual till regime in the country which will ensure affordable tariffs to the end customer.

6. the issues and challenges in land acquisition, environmental clearances and connecting infrastructure must be addressed on a priority basis.

7. all strategically located major ppp airports must be converted into aviation hubs.

8. Keep ppp airports out of the purview of caG and Rti.

9policy watch

Fifteen Infrastructure Sector Recommendations for ‘Short Term‘

Policy Barometer

Investment Outlook Recommendations

• Visible infrastructure projects order-book down from US$ 110 billion to about US$ 75 billion.

• De-growth of around 27 per cent in capital Goods / Equipment order-book linked to infrastructure sector.

1. For existing projects, set-up an iNFRa FaSt tRacKiNG BoaRD with aggressive and consensual political leadership; and staffed with high caliber officials to micro-track and resolve impediments project by project, at a granular level. the proposal to set up a National investment Board (NiB) is indeed a welcome step, which will enable fast clearance for the major infrastructure projects.

2. Future projects should be bid-out as Special purpose Vehicles (SpVs) with all sovereign clearances packaged in. Securing sovereign clearances cannot be made the core competence of the private sector. State agencies should play their role as the first p of the public private partnership. the way bids are structured and awarded needs to be refashioned. in the existing format, practically all permissions and clearances become the responsibility of the private Sector. the concerned Ministry, or bid sponsor, sees its role largely as the licensor or concession awarder. this needs to change. Future bidding systems should ensure that the sponsor secures most, if not all, of the permissions prior to award of bids. this is a huge shift in public systems mind-set, and is clearly the only real solution. also, bid values are likely to be much higher as private Sector will factor in reduced risks.

3. clear Urea Fertilizer policy to immediately open up approximately US$ 4.66 billion new projects.

4. Get public Sector Units (pSUs) with surplus cash and inadequate projects pipeline to move on capacity enhancements / new projects.

5. push heavy-duty public expenditure projects like western + Eastern Freight corridors, irrigation and hydro and other projects in Railways, ports, airports, Urban transport and the hydrocarbon sectors. Galvanizing US$ 18.6 billion worth of action here is eminently do-able.

Financial Issues

• in 2010, aggregate debt under corporate Debt Restructuring (cDR) related to the infrastructure sector was US$ 0.96 billion. in 2012, the figure stands at US$ 3.12 billion.

• impaired assets (Net Npa + Restructured) assets in case of some pSU banks have gone up as high as 9 per cent.

• Drying-up of liquidity (Debt + Equity).

6. allow 2 opportunities for restructuring for infrastructure and construction companies against the current norm of 1; and facilitate an easier cDR regime.

7. Release dues to the private Sector from public systems (estimated to be over US$ 18.6 billion). this relates to amounts where dispute resolution and arbitration proceedings are technically over, as well as routine payments held-up for lack of will to take release-related decisions.

10 policy watch

Policy Barometer

Land and Environment

• Restrictive covenants in parliamentary Standing committee on land, and Definition of infrastructure.

• Fuzziness of policy and delayed clearances still holding-up a huge number of projects on account of environmental clearances.

8. Vis-à-vis parliamentary Standing committee recommendations - the Government must not agree with the ‘linear’ definition of infrastructure and allow ‘eminent domain’ for ppp projects also. on March 1, 2012, the cabinet committee on infrastructure approved a harmonized list with 29 sub-sectors of infrastructure. this list leaves out large land-agglomerated projects with trunk infra requirements. these should be included.

9. Setup a one-time Special Board for immediate clearance of stuck projects. approval must be accelerated for those coal mining operations, the development of which has been held up on account of environmental regulations.

Power

• ‘Stranded assets’ (shelved + delayed + non-operational) of approximately 30,000 Mw of coal-fired plants on account of fuel-linkages.

10. Resolve compensation issues related to imported coal to unlock 10,000 Mw plus capacity stranded on this specific problem, as well as push for overall coal imports by coal india / Government pSUs, with coal india as “aggregator”; leading to pooled-pricing and tariff-pass through.

11. coal iNDia: the pMo must ensure proper coordination between coal india and the Railways to make sure that the evacuation of coal from the pit heads and ports is efficient. coal india requires close oversight and should be held accountable for efficiency improvements on a quarterly basis. coal india should be encouraged to boost its mining capacity by allowing private operators (MDos) to mine on a contractual basis for coal india, as well as immediately be handed over the de-allocated coal blocks.

• Gas supply from KG D6 has dropped from 60 mmscmd to nearly 30 mmscmd. as a result, the plant load Factor (plFs) of most of the gas based power plants have dropped from 75 per cent to nearly 40 per cent. New plants under construction would find it difficult to get any gas. Most of these gas-based projects would turn into a huge chunk of Npas unless something is done soon.

12. it is important to work on pooling of domestic gas with imported lNG, so as to balance out the supply and pricing. currently, the free capacity at the hazira / Dahej lNG terminals is limited, but could be enhanced once Dabhol terminal comes into play. there are sales tax related issues, which need to be sorted out in lNG supply. it is imperative that we resort to cSt of 2 per cent on gas supply as against charging state level applicable sales tax both at entry point and supply point. there are some court cases with respect to this which need to be addressed. till then lNG supply from Gujarat to other states will be very expensive and hence not feasible.

• Bankruptcy of Discoms. 13. announce a comprehensive policy on debt-restructuring of Discoms linked to strict reform measures, especially adopting ppp / Franchisee model for distribution so as to improve customer services and reliability of supply. Government has agreed to restructure loans worth US$ 353.3 billion which will definitely boost investors morale.

• tardiness of Regulatory Decisions. 14. issue guidelines to Regulators for adopting Bulk-power purchase portfolio, so that inclusion of Nuclear, hydro, Renewables, imported coal, imported Gas, Domestic coal, Domestic Gas, etc. all contribute to a diversified power base, pooled pricing and national energy security.

• Job creation and capacity Utilization amongst private and public sector power Equipment Manufacturers.

15. announce a decision on the ‘level-playing field’ between imported and indigenous power equipment suppliers; or we put at serious risk a clutch of nationally relevant private and public sector investments; and transfer ‘job creation’ to other countries. the decision to levy 21 per cent duty (5 per cent basic customs, 12 per cent counterveiling and 4 per cent special additional duty) is indeed a step in the right direction.

11policy watch

Industry Voices

there has been a drastic reduction of 35 per cent in the visible order book. an additional 30 per cent of the visible order book is dependent on strong policy decisions, which if not taken, are likely to adversely impact the sector. as a result, a large number of companies in the infrastructure segment are opting for corporate debt restructuring, and the pace has gone up by almost three fold in the first quarter alone and is likely to be ten times higher for the whole year. this in turn may lead to an increased risk of non-performing assets. the gravity of the situation needs to be recognized and urgent measures are required, else we may find ourselves at the cusp of a financial crisis.

Ajit Gulabchandchairman, cii National committee on Urbanisation & Future cities and chairman & Managing Director, hindustan construction co. ltd.

Economic slowdown and the rise in commodity prices have made it difficult for infrastructure companies with large debt exposures. in today's environment, companies with a diversified portfolio, low leverage and a strong balance sheet are likely to cope better than the others. Given the low activity levels in the domestic market, infrastructure companies could also focus on international markets and explore business opportunities in regions like west asia and africa, which are currently betting big on infrastructure development.

M S Unnikrishnanchairman, cii National committee on capital Goods & Engineering and Managing Director & cEo, thermax ltd.

infrastructure development catalyses economic growth. however, over the last two years, the industry’s efforts to bridge the yawning infrastructure deficit in the country have been constrained due to the slow pace of reforms and delays in the multitude of approvals and challenges in land acquisition. while the Government’s decision to set up a project clearance Board for fast tracking big ticket energy and infrastructure projects and addressing regulatory issues faced by these projects is a step in the right direction, the industry will need to adopt a wait and watch approach to see whether projects actually move from the drawing board to reality.

GV Sanjay Reddychairman, cii Southern Region and Vice chairman, GVK power & infrastructure ltd.

with an economic growth target of 7-8 per cent for the current Five year plan, infrastructure development, whether driven by the public or private sector, is critical to expedite economic growth. while, at present, the infrastructure sector and the country are battling a slowdown, in my view this is likely to be only a temporary setback and both infrastructure development and economic growth will revert to a strong growth path. however, a conducive policy framework, a more efficient clearance process and access to low cost funds are prerequisites to step up the pace of infrastructure development in the country.

K. Venkataramananchairman, cii Manufacturing council and chief Executive officer & Managing Director, larsen & toubro ltd.

12 policy watch

Factfile

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Projected Investment in XII Plan US$ Billion

Sector Projected Investment Private Sector Contribution

Electricity (incl. NcE) 329.3 173.2

Roads & Bridges 173.4 55.5

telecommunications 166.6 146.4

Railways (incl. MRtS) 105.13 23

irrigation (incl. watershed) 81 ---

waters Supply & Sanitation 39.13 0.94

ports (incl. inland waterways) 30.25 26.17

airports 13.38 10.64

oil & Gas pipelines 22.65 10.6

Storage 8.98 6.42

Total 970 453

Source: planning commission, Government of india

Investment in Infrastructure as per cent of GDP (at 2006-07 prices)

YearsTenth Plan

(Actual)

Base Year of XI Plan (2006-07)(Actual)

2007-08(Actual)

2008-09(Actual)

2009-10(Actual)

2010-11(Actual)

2011-12(RE)

Total Eleventh

Plan

public investment 3.91 4.17 4.29 4.79 4.55 4.59 4.35 4.51

private investment 1.11 1.43 1.93 2.50 2.24 3.73 2.92 2.71

Total Investment 5.02 5.60 6.22 7.29 6.79 8.32 7.27 7.22

Source: planning commission, Government of india

Sector - wise Investments in Infrastructure