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

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

Infrastructure is the basic facilities needed for the functioning of a community or society. In other words, it is the basic physical or organizational structures needed for the operation of a society or enterprises. The 12th 5YP envisaged the investment requirement in infrastructure to the tune of $1trillion, with 47% of this fund coming from the private sector.

  1. Physical infrastructure:

  • Energy: coal, oil and natural gas, hydro, nuclear and renewable.

  • Transport: roadway, railway, airway and waterway.

  • Communication: telecom and postal services.

  • Urban: transport housing and civic amenities.

  1. Social infrastructure: (I will not cover this part)

  • Education

  • Health

Energy: India will produce 71% of its energy needs domestically by 2016-17, and 69% by 2021-22. The remaining will be met through import.

Integrated energy policy (IEP) 2031-32


2003-04 (%)

2031-32 (%)

Power generation 2012 (%), total-2,14,000MW




57 (1, 20,000MW)




0.6 (1,190MW)

Natural gas



9 (18,900MW)




18.5 (39,3240)




2.02 (4780)



12.5 (28,000MW)

Coal: India’s reserve as on March, 2012 was 293.5billion tones (40% proven and some 40bn tons proven) & Domestic production-540million tons in 2011-12 (import-100mn tons) need to increased to 795mn tons by 2016-17; even then there will be import need of 185mn tons.

  • IEP says present potential to last for 40years.

  • Mines & Mineral (development and regulation) bill 2011 for simple and transparent mechanism for granting of mining lease or prospecting license through competitive bidding; Coal forecasting, private participation and captive mining for merchant uses.

  • Pricing change from useful heat value (UHV) to Gross Calorific Value (GCV) in 20012 (grade I-VII: 15% ash & moisture content) - mainly Bituminous coal. Need to invest in super-critical boiler technology.

  • Liquefaction of coal: gasification to liquefaction (Sasol process in S. Africa and Fischer Tropsch process in Germany).

Oil & Natural Gas: 73% import dependent, 90% import by 2031-32. India’s Refining Capacity – 215mmt in 2013, exporting 60.84mmt of petroleum products worth $50bn (20 refineries: 17 public & 3 Pvt.).

Steps taken by the govt.:

  • New Exploration Licensing Policy (NELP), 1999- 177 oil & N. Gas discoveries in 39 NELP blocks.

  • Deregulation of prices: petrol, diesel-dual pricing, L.P.G- 9 cylinders/year, kerosene-direct cash transfer through ADHAAR, underway; import parity pricing system underway.

  • Pipeline Network (16 crude pipelines- 106MMT).

  • Vision 2015: Piped Natural Gas by re-gasification of Liquefied Natural Gas to 200 cities.

  • Rajiv Gandhi Gramin LPG Vitaran Yojana, 2009- 75% population by 2015 -5.5cr new connections

  • Rangarajan formula on gas pricing: KG-D6 gas price to go up to $8.4mbtu from $4.2mbtu by April 2014.

  • International effort: India-Oman (1100km) undersea pipeline, Turkmenistan-Afghanistan-Pakistan-India (TAPI-1700km) pipeline to transport 3billion cubic feet of natural gas per day.

  • Lost opportunities: Iran-Pakistan-India (IPI) pipeline and India-Bangladesh-Myanmar natural gas pipeline.

(Sweden has declared that they will have nothing to do with oil by 2050).

Hydro: potential of around 1, 45,000MW: environmental, and relief and rehabilitation issues. (157 projects-57,672MW, 38-mega dam with 320MW capacity, 12% free to Arunachal Pradesh).

Nuclear: 20 power plant running – 4780MW, two at Kudankulam (2000MW) yet to connect to grid, five under construction (3300MW)

  • Target-20,000MW by 2022 and 63,000MW by 2032.

  • Signed Civil Nuclear Energy Treaty with 9 countries (US, Canada, Russia, France, Kazakhstan, Mongolia, S. Korea, Argentina and Namibia).

Major Issue: Safety and Environment (Sweden, Germany and Japan will discard Nuclear Energy by 2040).

Other sources:

Coal Bed Methane (CBM): 4th largest proven reserved. 33 exploration block- Assam, Gujarat, Andhra Pradesh, Chhattisgarh, M.P, T.N, Odisha, Rajasthan… Production started – 0.28mmscmd (million metric standard cubic meters per day).

Gas/Chathrate Hydrates: Methane Gas trapped inside ice in coastal sea, ocean sediments, polar seabed, and permafrost (around 300mt deep in temperate region and nearer in polar region).

Shale Gas: 2012 – draft policy for the exploration and exploitation: “Shale Gas in India: look before you leap”. It is being considered by a group of ministers. India is believed to have technically recoverable resources of 96 trillion cubic feet (tcf) of wet shale gas.

  • Ministry of Petroleum and Natural Gas (MoPNG) has identified 6 basins as potentially shale gas bearing: Cambay, Assam-Arakan, Gondwana, Krishna-Godavaari, Kaveri and the Indo-Gangetic basin. MoPNG has signed a MoU with the Deptt.of states USA.

  • US geological survey: India has recoverable resources of 6.1 trillion cubic feet (tcf) in 3 of the 26 sedimentary basins.

  • ONGC: 34 tcf in Damodar basin alone with 8tcf recoverable (47tcf- total conventional reserves)

  • Procedure: hydro-fraction or fracking- horizontal drilling by injecting a mixture of water, chemicals (guar gum…), and sand into the well at very high pressures (8000psi-pounds per square inch) to create a no. of fissures in the rock to release the gas. It requires minimum land area of 80-160 acres and 3-4 million gallons per well (11,000 – 15, 000 cubic mts of water).

  • TERI- india will be a water stressed country by 2030, so the result might not be as dynamic as in the US.

  • next 15-20 years, consumption of water will increase by 50%, supply by 5-10%; resulting in to the scarcity of water.

  • Possibility of contamination of aquifer (both surface and sub-surface) from hydro-fracturing fluid disposal.

Nuclear Fusion: ITER-international thermonuclear experimental reactor, Cadarache, France; started in 2005-07 to be completed by 2018. It has 7 member countries: Japan, China, India, S. Korea, US, Russia and EU. 50MW input power to produce 500MW output.

Renewable Energy: Potential – 89,760MW, present installed capacity-28,000MW & plan to double renewable energy generation by 2017.

Small Hydro: less than 25MW, 3496MW installed with potential of 15,000MW.

  1. Bio-fuel: 5% (earlier 10%) blending target, Brazil-25%.

  • Bio-diesel (mono alkyl esters of long chain fatty acid): jatropha, karanj, Mahua, Soyabean oil…

  • Ethanol (water soluble alcohol–30% oxygen): Bagasse (2239/5000MW), Corn, Sorghum, Potatoes, Wheat, Sugarcane.

  1. Solar: Photo Voltaic (363MW) and thermal (800MW) - 1000MW by 2013

  • JN National Solar Mission – 20,000MW grid connection by 2022.

  • Major issue: Gallium, Arsenic, Selenium, Indium and Tellurium getting depleted.

Wind: more than 18,000MW in operation, and total capacity of 49,130MW.

  • Rare Earth Elements (REE) use in magnets in Wind Mills is available mainly in China.

Tidal and Wave Energy: ocean currents are the store house of infinite energy. West coast of India is the most favorable region for harnessing this energy.

Geothermal Energy: when the Magma from the interior of earth comes out on the surface, tremendous heat is released. This heat energy can successfully be tapped and converted to electrical energy. Also the hot water that gushes out through the geyser wells is used in the generation of thermal energy. Himalayan region has major potential.

Bio-energy/ Biomass: energy derived from biological products which include agricultural residues, municipal, industrial and other wastes (1200MW/17,000MW).

Waste to Energy (WtE) incineration – Okhla – 16MW has taken off but yet to connect to Grid, Ghazipur- 10MW, Narela-Bawana – 36MW

Ministry of New and Renewable Energy’s (MNRE) flagship program on ‘energy recovery from urban and industrial waste’, announced in May 2011 aimed to generate 84MW of power from waste by providing subsidies upto Rs 10cr to developers.

Negative effect of WtE incineration:

  1. WHO: Dioxins are one of the “dirty Dozen” – a group of dangerous chemicals known as persistent organic pollutants (POPs) - potential of causing cancer.

Central Pollution Control Board and Chennai based Non-profit org. Global Alliance for Incinerator Alternatives (GAIA) revealed life threatening levels of particulates and toxic chemicals including Dioxins which is 30-40 times above permissible level in Okhla, Delhi. Those who live close to incinerator since 2009 are experiencing incidences of cancer and low birth weight.

  1. The United States environmental protection agency (USEPA) recognizes incinerators emit 2.5 times more carbon dioxide per MW than coal fired power plants.

  2. Cost twice the cost of Nuclear Energy, and incinerator relies heavily on govt. fiscal and financial incentives.

  3. US largest WtE company, Covanta, recently announced its plan to conclude operations in the U.K., whereas, the Municipal Corporation of Hyderabad announced its plan to construct India’s largest incinerator using Covanta’s technology. Europe is committed to ending the land-filling and incineration of recyclable waste by 2020. Aiming instead to implement a resource-efficiency strategy that will boost a circular economy; where, all waste is treated as a resource rather than requiring expensive infrastructure to dispose of it.

(Sustainable waste management option; prevent, reuse and recycle).

Alternative: Plasma Gasification of municipal waste.

  • Yoshii, Japan – 24tonne per day – running for decade released less than 1% to that of incineration plants.

  • 200 municipal solid waste gasification plants under construction or in operation globally.

  • India: Pune & Nagpur, 68 tons each/day commercial plants employing this technology have been disposing of medical and other hazardous wastes.

  • British Airway partner Solena (US based bio-fuel co.) to set up plants that will gasify 1300 tons/day of London’s solid waste to use as ATF.

Challenges in power sector: total installed capacity-2, 14, 000MW; Industrial sector-45%, domestic-22%, agriculture-17% and commercial-8.9%); Transmission & Distribution Loss (India-24%, world average-15%, US & EU-4%, China-7%), Power theft (20,000cr annual loss), under pricing and subsidies. The overall power shortage-8.6% and peak shortage of -9%.

Power sector reform:

  1. Power discipline: unbundle by amending states electricity act (central electricity act, 2003 amended)

  2. Merchant sale of electricity

  3. Integrated energy policy 2031-32

  4. 1% cut in consumption – Rs1000cr saving in the economy.

Initiatives taken in Power Sector:

  • 4UMPP, coal-based of 4000MW: Sasan-MP, Mundra-Gujarat: three units of 800MW commissioned in 2012, Krishnapatnam-A.P, Tilaiya—Jharkhand.

  • Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), 2005: rural electrification program to provide free connection (202lakh achieved by 2012) to BPL household.

  • National Grid: inter-regional transmission capacity of 27,750MW connected to Northern, western, eastern and NE region in a synchronous mode operating at the same frequency and same mode with southern region.

  • Open Access: buyer to choose supplier & vice-versa at the interstate level is now fully functional, facilitative framework created through the central electricity regulatory commission (CERC), 2008.

  • Bachat Lamp Yojana (BLY) Scheme: Replacement of incandescent bulb by CFL (in the long run by LED).

  • 11th plan target-62,374MW, achievement: 54,964MW. 12th plan target: 88,537MW.

Other initiatives in energy sector:

  • National Energy Fund: 0.1% Cess of turnover in energy products for companies worth Rs100cr.

  • National Mission for Enhanced Energy Emission (NMEEE): to save 23 million ton oil equivalent in 5 years.

  • Energy Conservation building Code

Energy Security: it means having access to the requisite volumes of energy at affordable prices, i.e., supply must be impervious to disruptions and sufficient quantity must be available in time from variety of sources.


  1. Telecom: 2nd largest telephone network after China.

National Telecom Policy 2012:

  • To secure affordable, reliable and high quality telecom and broadband services across the country.

  • One nation-one license across services area.

  • One-nation full mobile no. portability and work towards free roaming

  • Rural Tele-density from 39- 70% by 2017 and 100% by 2020 (total telephone in 2012-951 connections with 96.7% wireless, urban tele-density-169%, overall- 78.66%)

  • Telecom, broadband connectivity as basic necessity and work towards ‘right to broadband’.

  • Affordable and reliable broadband on demand by 2015 (175mn-2017, 600mn-2020 from 2mbps to 100mbps)

Present status: TRAI begged the total no. of internet subscribers in India as of March 31, 2013 at 164.81 million and broadband penetration-1%; 12mn, 7/8 access internet through mobile, expected to cross 165mn by March 2014. However, comScore put the no. of internet users in India at 74 million. Net users spend the most time on Facebook, followed by LinkedIn and twitter. While the most unique visitors sites is Google, and the most popular site for news is Yahoo.

Broadband policy 2004: 22.8mn internet subscribers including 13.7mn broadband by 2012.

  • Substantial transition to new IPv6 by 2020

National Optic Fiber Network (NOFN)-2.5lakh broadband connections to gram panchayat for e-health, e-education, e-governance, funded under universal service obligation fund (USOF)-7310 towers set up by 2012. USOF has also signed an agreement with the BSNL to provide rural wire-line broadband connectivity with a speed of 512Kbps.

Village Public Telephones Scheme has covered 97% of villages.

Two years after the Department of Telecom (DoT) decided to set up a telecom equipment testing lab at the Indian Institute of Science (IISc), Bangalore to address security issues, foreign vendors have now refused to share their design details with the premier academic institute as it could hurt their business interests. This sudden turn of events will now further delay the setting up of a full-fledged ‘Telecom Testing and Security Certification Centre’ (TTSCC), which should have become fully operational by April 2013. It will also hurt India’s preparedness towards creating the ‘Telecom Security Directorate’ as mandated by the National Security Council. TTSCC could be established under the DoT.

  1. Postal Services: Amongst the largest network in the world in terms of area covered and people served. It has broadly 4 service areas:

  1. Communication services – letters, post cards…

  2. Transportation: Parcel logistic post…

  3. Financial: saving banks, life insurance…

  4. Premium value added services: speed post, business post, retail post…

Project Arrow launched in 2008: IT driven project to modernize the Post Offices to become part of core banking solution and real time banking services, better mail delivery, remittances, insurance, saving, Speed Post-One India One Rate Scheme for just Rs.39 for any consignment weighing up to 50gms (Leasing out land, develop shopping complexes in postal departmental land, etc. are the other initiatives).

Transport: Road, Railways, Waterways and Airways.

Civil Aviation: 15 international airports out of the total 187 airports (manage by the Airport Authority of India, set up in 1994). Construction of airports through PPP: IGI T3 – Delhi, Hyderabad, Bangalore and Greater Mumbai and Completely Pvt.-Kolkata & Chennai.

  • Operators: 15 scheduled operators including 2 regional and 2 cargos, around 419 aircrafts (Directorate General of Civil Aviation).

  • 9th largest in the world with 18% CAGR: 142 million passengers (14mn international) - 5% of travelling population, 1.6 million tons of air cargo.

  • Worldwide Revenue-$671bn in 2012, just 1% profit, 2013-1.6% (10.6bn), need 7 to 8% profit to cover capital cost.


1st flight: Allahabad to Naini, 1947 – four service providers


Nationalized: Domestic-Indian Airlines & Air India International: merged in 2007-70% completed.


Open Sky Policy for Cargo


Kingfisher (operation operation from 2005-2012: loss making)


Jet Airways-Air Sahara; KFA- Air Deccan; merged.

Issues: Aviation Industry - $20bn debt.

  • Strict Entry Rules: At least 5 fleet- Rs 50cr, next 2 fleet-2cr paid up capital, International Route: 5years experienced plus 20 fleet, 10% capacity in route II to be employed in route I (need to fly non-profitable route), Route preferences to national carrier (Paris-exclusive for Air India).

  • High Excise duty on ATF: 4-40%, costing 45% operating cost (33% world average). Monopolies of the 4 state own suppliers. Import will save 25-30% of the ATF cost.

  • Forged Pilot license: 14, and substandard pilot training schools.

  • Air India Problems: Rs 5000-7000cr annual losses and 42,000cr since 2006. Retirement age 60years; large expatriate pilots recruited with 40% higher salary. Ordered 50 Boeing (27 Dreamliner 787) & 40 Airbus aircrafts; 6 Boeing 787 delivered on Jan2013 which constitute 4% of AI’s total capacity (Delhi-Paris, Frankfurt, 3 domestic and 1 Standby). Indian Pilot’s Guild-AI employees’ (440)-Boeing; Indian Commercial Pilots Association-IA employees’ (700)-Airbus; strike for parity of pay.

  • Dreamliner Boeing 787: 210-290 passengers, 16,000km non-stop, 20% more fuel efficient. But due to overheating of brakes, A/C problems, electrical fires, cracked cockpit window, battery malfunction…50 dreamliners were grounded globally.

Steps taken:

  • Air India: Rs 30,000cr ($6bn) debt restructuring plan.

  • DGCA: to phase out Expatriate pilots in 9 months.

  • Direct import of ATF & FDI up to 49%: (Jet Airways-Etihad (24%), Air Asia India, Spice Jet- Emirates/ Tiger Airways, Indigo- Qatar Airways).

  • Unbundled services: check-in baggage above 15Kg, preferential seats, meals/snacks, carriage of sporting equipment and musical instruments will bear extra charges.

Railways: Introduced in 1853 between Bombay & Thane: 34Km.

  • Freight: 1.025billion metric tons in 2012-13 (china, US & Russia), 2011-12: 969mmt. Earnings: 30% passenger tickets and 70% freight.

  • Budget 2013-14: Rs 63,363cr (Revenue-Rs.57, 863cr, 2.3% of GDP): 16 zones.



Earnings: passenger %

Goods %

Total %


N. Delhi





Mumbai CST




Southern central





Northern central





Broad gauge



Meter gauge



Narrow gauge



Major Issues:

  • Cross-subsidy: Garibh rath/student concession/pass…and freight charges & upper class ticket set high.

  • Competition from other modes of transport: Road-4-6 lane, expressway & golden quadrilateral & waterway- coastal shipping, pipelines, and cheap airplanes.

Steps required:

  • Gauge conversion

  • Doubling of existing single lanes

  • Electrification

  • Pvt. Participation in wagon & coach manufacture

  • Running Duranto express-long distance train.

Steps initiated:

  1. Dedicated Freight Corridor (DFC):

Eastern DFC 1839 Km: Dankuni, Kolkata-Ludhiana, Punjab (target-2017, WB-66% funding)

Western DFC 1499Km: JNPT Mumbai- Dadri/Rewari, Delhi-UP (target-2016, Japan International Cooperation Agency-77% funding).

  1. Adarsh Station: drinking ware, waiting rooms, dormitories (60/980 stations)

  2. Anbhumati Coaches: Latest modern milieu

  3. Computerized unreserved ticketing system

  4. Kisan Vision Project: Cold storage, temperature controlled perishable cargo centers through PPP

  5. Linke Holfmann Bush (LHB): Better riding comfort, speed, longer life, amenities, controlled discharge toilet: implemented in 14 Rajdhanis, 12 Shadabdis, and 11 AC Duranto Coaches.

  6. Bio-toilets: 8 trains running with 436 bio-toilets, DRDO to complete it by 2016-17.

  7. GPS system & RFID (radio frequency identification device) technology for tracking railway trains.

  8. Onboard fire-detection & fire fighting equiptment.

Feasibility study underway:

  1. DFC: East-West (Kolkata-Mumbai), North-South (Delhi-Chennai), East Corridor (Kharagpur-Vijayawada), South Corridor (Goa-Chennai), and Chennai-Bangalore freight corridor.

  2. High Speed Rail Corridors: 160-200Km/hr; High Speed National Rail Authority (NHSRA) Constituted.

  • Delhi-Chandigarh-Amritsar

  • Pune-Mumbai-Ahmedabad

  • Hyderabad-Chennai

  • Chennai-Ernakulum

  • Howrah-Haldia

  • Delhi-Patna

  1. Biometric VCD: Driver’s Vigilance Telemetry Control System.

Small wrist-watch like device to monitor driver’s posture, pulse, etc. constantly. If the driver consumed alcohol and is half asleep in the cabin, station manager would get alarmed and automatically stop the train. Russia has been using for Loco-pilots (train pilots)

  1. Train Collision Avoidance System (TCAS): Combination of GPS & Radio Frequency

Applies brakes without pilots and avoid collision of human errors, rain, fog, sabotage…

(Anti-Collision Device-Raksha Kavach was invented by Rajaram Bojji and patented by Konkan Railway Corporation Ltd).

IR requires Rs.16, 000cr to implement all these steps.

Kakodkar Committee Railway Safety – 1lakhcr

Sam Pitroda Committee on modernization of IR – 5.6lakhcr

IR Vision 2020: Annual outlay of Rs 1.4lakhcr is required over a decade with estimated annual gross budgetary support of Rs.50, 000cr by the central govt. need to fix the 15,000 unmanned level crossings which is responsible for 40% of the accident in 2011, in the next 5yrs.

Water Ways: Shipping-95% of India’s trade volume and 68% in terms of value.

Seaports: 13 major ports accounted for 74% of the cargo transport (12 govt. & 1 corporate owned-Ennore port), 187 notified intermediate and minor ports. Two new major port being proposed: Sagar in W.B & in A.P to add 100million tones of capacity.

Commodity transport in terms of volume: POL (petroleum, oil & lubricants)> Container Cargo> Other Cargo> Coal.

Inland Waterways:

NW1: Allahabad-Haldia: 1620Km, 1986

NW2: Sadiya- Dhubri: 891Km, 1988

NW3: Kottapuram-Kollam: 205Km, 1991

NW4: Kakinada-Pondicherry: 1095Km, nov.2008

NW5: Talcher-Dhamra(Brahmani river): 623Km, nov.2008

NW6: Lakhipur-Bhanga (River Barak)-target; 1st phase 2016-17 & 2nd phase 2018-19: 121Km, 2013

Road: NH-2% of the total roads NH/Expressways-70,000Km, State Highway-1,54,522Km: National Highway Authority of India (NHAI)

National Highway Development Project (NHDP);

  1. Golden quadrilateral: 5846 completed

  2. NS-EW: 7142/6053

  3. NHDP phase III-VII: 39809/5959

  4. Port connectivity: 380/368

  5. SARDP-NE: 388/49

  6. Other NHs: 1390/964

  7. NH34: 5.5/

Total – 55,460/19,239 completed till December 2012.

New Initiatives:

  • Engineering Procurement & Construction (EPC): contact for far flung areas not viable under BOT (toll). 100% govt. funding-to reduces cost and time overrun.

  • Introduction of Radio Frequency Identification (FRID)

  • Less than 5hectare areas not to insist on environment clearance by MoEF.

  • Select highway projects to private players under Operate, Maintain and Transfer (OMT).

Urban Infrastructure:

JNNURM (65mission cities) was launched for 7yrs, but it has been extended till April 2014. Its sub-components under the Unban Infrastructure and Governance (UIG) include: Urban renewal, water supply, sanitation, sewerage and solid waste management, urban transport, development of heritage areas, and preservation of water bodies. It has also emphasized on 3 key mandatory pro-poor to enhance the capacity of urban local bodies:

  1. Internal earmarking within local body budgets for basic services to the urban poor.

  2. Earmarking at least 20-25% of developed land in all housing projects (both pvt. & public) for the economically weaker sections/low income groups.

  3. Implementation of seven-point charter for provisioning of 7 basic entitlements/services.

The Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT): a sub-component of the JNNURM for development of infrastructure facilities in all towns and cities other than the 65 Mission Cities covered under its UIG sub-mission. So far it has covered 672 towns and cities under UIDSSMT.

Urban Transport: under JNNURM, proposal for Bus Rapid Transit System (BRTS) have been approved in Ahmedabad, Bhopal, Indore, Jaipur, Pune-Pimpri-Chinchwad, Rajkot, Kolkata, Surat, Vijayawada and Vishakapatnam. Purchase of 15,260 bus have been approved and till nov.2012, more than 12,620 modern intelligent transport system (ITS)-enables low-floor and semi-low-floor buses have been delivered to the states/cities.

Metro Rail Projects: NCR-3rd phase 103.5Km started, Bangalore-42.3Km by dec.2013, Kolkata-14.67Km by 2015, Chennai-46.5Km by 2015, Kochi-25.6Km, Mumbai-42.94Km, Hyderabad-71.16Km and Jaipur-7Km.

Achievements of the govt. in Infrastructure sector in the last few years:

  1. Special purpose Vehicle (SPV)

India Infrastructure Finance Company (IIFCL) set up in 2006 for long term projects by providing up to 20% of the project cost both through direct lending to project companies and by refinancing banks and financial institutions. It raised fund both from domestic and international market on the strength of govt.’s guarantees. At the end of 12th plan it will become a catalyst for mobilizing resources for financing infrastructure by providing guarantees for bonds issued by private infrastructure companies rather than expanding its direct lending operations. This would enable mobilization of insurance and pension funds, external debt, and household savings.

Infrastructure Debt Fund (IDF): tax free bonds up to Rs.50, 000cr- 1st IDF NBFC set up by ICICI, BoB, CITI, and LIC.

Rural Infrastructure Development Fund (RIDF): RIDF-XIX in 2013-14 to Rs.20, 000cr for warehouse, god-own, cold storage, silos…

Viability Gap Funding (VGF): 20% cost to be borne by the govt. with a corpus of Rs.2000cr; 13 new projects qualified under VGF-cold chains and post harvest storage, education, health, and skill development, NIMZ, oil/gas/LNG storage facility, irrigation, telecom, infrastructure in agri. Market…

PPP: toll, annuity, VGF, Negative grant…BOT-expressway, BOO-Mobile tower, BOOT- highway, DBOT (design built operate transfer), DBFO (design built fund operate), BLT (built lease transfer)

WB report- India received almost half of Pvt. Participation in Infrastructure (PPI) since 2006, in developing countries, and 98% of the total regional investment with a total investment of $20.7 billion in 2011. By end dec.-2012, there were 900 PPP projects in infrastructure sector.


  • Resources requirement: 47% pvt.; FDI- decline in inflow in the last few years due to regulatory uncertainties, slower growth, and delays in acquisition of land; Long term resources-Banking, Insurance, Pension…

  • Pricing: subsidy, under-pricing, cross-subsidization…

  • PPP model: sufficient?

  • Govt. inefficient spender

  • Dovetailing- Planning Commission

  • Apolitical

## ONGC acquisition of Crude oil asset abroad: (Indian companies investment commitment to date in overseas market-$100billion, actual investment-$25billion)

Overseas oil assets don’t constitute energy security-neither ONGC Videsh Limited (OVL) nor its Chinese counterpart actually brings any significant quantities of oil from any of its overseas assets. Most of OVL’s overseas oil production is sold in the local or international markets and the company is compensated in cash payments. Gazprom was nominated the sole export agency for gas exports from Sakhalin. As for gas, OVL does not bring to India even a molecule of gas produced in its own fields in Sakhalin, Vietnam or Myanmar. China fares better in this regard, primarily because it has had the foresight to build transnational gas pipelines. Even in the case of producing fields, equity participation is subject to certain contractual terms with the host government. Sharing equity with other partners as in a consortium or joint venture is also subjected to the terms of the consortium or joint venture agreement or the operating agreement between parties.

August: OVL acquired 10% stake in Mozambique gas field from Anadarko Petroleum Corp of US. It also acquired in June, along with OIL, 10% stake in the same block from Videocon Group, and 2 blocks each in Columbia and Bangladesh.

Types of participation:

Production sharing agreements-usually has an express provision with the host government wherein the foreign investor can take his share of production in kind (ownership of the mineral vests with the host government, except in the U.S. impose Domestic Market Obligations where the operator is required to sell part or all the production to the local market). Sometimes, the domestic market has prior claim and only surpluses can be exported. Certainly OVL can exercise its option to take its profit share ex ante and bring the oil or gas to India wherever it is able to do so.

Service contracts- envisage only a pre-determined fee, not a share in production,

  • If the circumstances allow it, OVL can swap its equity oil with other buyers, for example; it can swap Sakhalin/Venezuelan oil with Japan and divert oil bound for Japan from the Persian Gulf region to our ports.

  • When international prices of crude/gas reign high, a risk-free asset whose production/development costs are reasonable can make an excellent investment option, provided we have not paid a higher-than-competitive price for acquiring the asset.

References: Indian Economy by Dutt & Sundaram and Ramesh Singh, India year book, Economic Survey, The Hindu, Times of India, Yojan and, Union Budget.

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