Chapter 11

Energy,
Infrastructure
Communications

and

As the growth of the economy in general and the manufacturing sector in particular is
largely dependent on creation of suitable infrastructure, the policy focus in India has
been on infrastructure investment. Such investment has increased manifold over time
with increased private-sector participation in the country. The Twelfth Five Year Plan has
also laid special emphasis on infrastructure development as quality infrastructure is
important not only for sustaining high growth but also ensuring that the growth is
inclusive. Large infrastructure investment during the last decade or so has helped India
emerge as one of the fastest growing economies in the world. However, over the past
few years, need has been felt to kick-start stalled infrastructure projects by stepping
up infrastructure investment, improving the productivity and quality of infrastructure
spending, removing procedural bottlenecks, and improving governance. In the current
perspective, the real challenge is not only to identify a core set of projects that are
crucial for accelerating overall economic growth but also to ensure channelization of
investment for such viable infrastructure projects and expedite their implementation by
addressing issues like delays in regulatory approvals, land acquisition and rehabilitation
in fast-track mode.

OVERVIEW OF PERFORMANCE
11.2 Availability of quality infrastructure is key for the
growth
of
industry
and
services.
From
the
infrastructure
development
perspective,
while
important issues like delays in regulatory approvals,
problems in land acquisition and rehabilitation, and
environmental clearances need immediate attention, time
overruns in the implementation of projects continue to
be one of the main reasons for underachievement in
many of the infrastructure sectors. According to the
Ministry of Statistics and Programme Implementation
(MOSPI) Flash Report for February 2014, of 239 centralsector infrastructure projects costing ` 1000 crore and
above, 99 are delayed with respect to the latest
schedule and 11 have reported additional delays with
respect to the date of completion reported in the
previous month. The additional delays in respect to
projects relating to the petroleum, power, steel, and coal
sectors are in the range of 1 to 26 months. The
total original cost of implementation of these 239
projects was about ` 7,39,882 crore and
their
anticipated completion cost is likely to be

` 8,97,684 crore, implying an

overall cost overrun of `
1,57,802 crore (21.3 per cent
of the original cost). The
expenditure
incurred
on
these projects till February
2014 was ` 4,10,684 crore,
which is
45.7 per cent of the total
anticipated cost.

Time overruns in the

implementation
of
projects continue to be
one
of
the
main
reasons
for
underachievement in many of
the
infrastructure
sectors.

19
3

Major
sector-wise
performance
of
core
industries and infrastructure services during
2013-14 shows a mixed trend. While the
growth in production of power and fertilizers
was comparatively higher than in 2012-13,
coal, steel, cement, and ref inery production
posted comparatively lower growth. Crude oil
and natural gas production declined during
2013-14.
Among
infrastructure
services,
growth in freight traf ic by railways and cargo
handled by major ports and the civil aviation
sector (except import cargo) has been
comparatively higher during 2013-14. In the
road sector the National Highways Authority of
India (NHAI) posted negative growth of 33
per cent during 2013-14 as compared to the
26.5 per cent growth during 2012-13.

ENERGY
According to the Twelfth Plan projections, total
domestic energy production will reach 669.6
million tonne of oil equivalent (MTOE) by 201617 and 844 MTOE by 2021-22. This will meet
around 71 per cent and 69 per cent of
expected energy consumption, with the
balance to be met from imports, projected
to be about
267.8 MTOE by 2016-17 and 375.6 MTOE by 2021-22.
Even though the domestic production of energy is
projected to increase, import dependence will continue
to be high, particularly for crude oil where nearly 78
per cent of the demand will have to be met from
imports by the end of the Twelfth Plan. Import
dependence for coal is also projected to increase from
18.8 per cent in 2011-12 to
22.4 per cent by the end of the Twelfth Plan. It is further
estimated that import dependence for coal, liquef ied
natural gas (LNG), and crude oil taken together in the
terminal year of the Twelfth Plan is likely to remain at
the Eleventh Plan level of 36 per cent.

Reserves
and
Generation

Potential

for

energy
resources
change
with
the
research
and
development (R&D) of
new reserves and the
pace
of
their
exploration.

Energy
Production
Consumption

and

In last four decades, i.e.

from 1970-71 to 201112,
the
compound
annual
growth
rate
(CAGR) of production of
the primary sources of
conventional
energy,
namely coal, lignite,
crude
petroleum,
natural
gas,
and
electricity (hydro and
nuclear) generation, was
4.9 per cent,
6.2 per cent, 4.2 per cent, 8.7 per
cent,
and
4.3
per
cent
respectively. In the same period,
consumption of coal, lignite, crude
oil in terms
of ref inery
throughput, natural gas (oftake), and electricity (thermal,
hydro, and nuclear) increased at
a CAGR of 4.9 per cent,
6.2 per cent, 6.0 per cent, 10.7
per cent, and 7.1 per cent
respectively.

Energy

The potential for energy generation depends

upon
the
countrys
natural
resource
endowments and the technology to harness
them. India has both non-renewable reserves
(coal, lignite, petroleum, and natural gas) and
renewable energy sources (hydro, wind, solar,
biomass, and cogeneration bagasse). As on 31
March 2012 Indias estimated coal reserves
were about 294 billion tonnes, lignite 42 billion
tonnes, crude oil 760 million tonnes, and
natural gas 1330 billion cubic metres (BCM).
The total potential for renewable power
generation as in March 2013 was estimated at
2,45,000 MW. The estimated reserves of nonrenewable and potential from renewable
ENERGY, INFRASTRUCTURE AND
COMMUNICATIONS

19
3

Even
though
the
domestic production of
energy is projected to
increase,
import
dependence
will
continue to be high,
particularly for crude
oil where nearly
78 per cent of the
demand will have to be
met from imports by
the end of the Twelfth
Plan.

19
4

ECONOMIC SURVEY
2013-14

19
4

Per capita energy consumption grew at a CAGR of 4.1 per

cent during this period. The consumption pattern of
energy by primary sources expressed in terms of peta
joules shows that electricity generation accounted for
about 57.6 per cent of the total consumption of all
primary sources of energy during 2011-12, followed by
coal and lignite (20 per cent) and crude petroleum (18.8
per cent).

POWER
Generation
Electricity generation by power utilities during
2013-14 was targeted to go up by 6.9 per cent
to 975 billion units. The growth in power
generation during 2013-14 (April-March) was 6.0
per cent, as compared to 4.0 per cent during
April 2012 to March 2013 (Table 11.1).
Category

Power
generation
Hydroelectric#
Thermal
Nuclear
Bhutan import

April-March
2011-12

2012-13

876.89
130.51
708.81
32.29
5.29

912.06
113.72
760.68
32.87
4.80

Growth (per
cent) (2012-13
to 2013-14)
967.1
6.0
Table 11.1 : Power Generation by Utilities
5
4
134.8
18.5
(Billion KWh)
5
8
792.48
4.18
34.27
4.14
5.60
16.7
5

201314

Source: Ministry of Power.

Note: #Includes generation from hydro stations above 25 MW.

In the thermal category, growth in generation

from coal, lignite, and gas-based stations was
of the order of 8.3 per cent,
0.3 per cent, and 33.4 per cent respectively. The
overall plant load factor (PLF), a measure of ef iciency of
thermal power stations, during April 2013 to March
2014 declined to 65.55 per cent as compared to a PLF
of 70.13 per cent achieved during April 2012 to March
2013.
The sector-wise and region-wise break-ups of the
PLF of thermal power stations from 2010-11 to
2013-14 show change over time as well as
region. The PLF of state-sector utilities
remained lower than that of private-sector and
central-sector utilities. The energy def icit
declined from 8.5 per cent in the terminal
year of the Eleventh Plan (2011-12) to 4.2 per
cent during 2013-14 and peak def icit from
10.6 per cent to 4.5 per cent.

Capacity Addition
The capacity-addition target for the Twelfth Plan
period is estimated at 88,537 MW, comprising
26,182 MW in the central sector, 15,530 MW
in the state sector, and 46,825 MW in the
private sector respectively. The capacityaddition target for the year 2012-13 was
17,956.3 MW, against which a record capacity
addition of 20,622.8 MW (20,121.8 MW

thermal and 501 MW hydro) was achieved

the highest-ever annual capacity addition. The
capacity- addition target for the year 2013-14
was 18,432.3 MW against which a capacity
addition of 17,825.1 MW has been achieved.

Ultra Mega Power Project Initiatives

The Ministry of Power launched an initiative for
development of coal-based supercritical Ultra
Mega Power Projects (UMPP) of

about 4000 MW capacity each. Four UMPPs, namely

Sasan
in Madhya Pradesh, Mundra in Gujarat,
Krishnapatnam in Andhra Pradesh, and Tilaiya in
Jharkhand, have already been transferred to the identif
ied developers and are at diferent stages of
implementation. The Mundra UMPP (5x800 MW) is
fully commissioned and is generating electricity. Three
units of the Sasan UMPP (3x660 MW) have been
commissioned so far. The remaining units of Sasan and
other awarded UMPPs are expected to come up in the
Twelfth Plan (except the last unit of the Tilaiya UMPP,
which is likely to come up in the Thirteenth Plan).

Changes in Mega Power Policy

In

February 2014 the Government of India

approved changes in mega power policy for
provisional mega power certif ied projects. For
availing the benef it of a mega certif icate,
the developers of provisional mega projects
must tie up at least 65 per cent of installed
capacity/net capacity through
competitive
bidding and up to 35 per cent of installed
capacity/net capacity under regulated tarif as
per specif ic host state policy, as the case may
be and approved by the respective regulators
under long-term power purchase agreements
(PPA) with Discoms/state-designated agency.
This dispensation would be one time and
limited to the 15 projects (19,000 MW) that
are located in the states having mandatory
host state power to tie up policy of PPAs under
regulated tarif. Further the maximum time
period has been extended to 60 months from
36 months from completion of the date of
import of provisional mega projects (25
projects of 32,000 MW) for the purpose of
furnishing the f inal mega certif icates to the
tax authorities. Some of the recent initiatives
to augment power generation in the country
are provided in Box 11.1.

PETROLEUM
In order to meet the ever-growing demand for petroleum
products, the government has consistently endeavoured
to enhance exploration and exploitation of petroleum
resources, along with developing a concrete and
structured distribution and marketing system. Despite
this, crude oil production for 2013-14 remained
stagnant at around 37.8 million metric tonnes (MMT) as
against
37.9 MMT in 2012-13, showing a marginal decrease
of about
0.20 per cent. The bulk of crude oil production is
from ageing f ields, with the exception of the Krishna
Godavari (KG) deep-water
and Rajasthan blocks.
Production of crude oil was also afected by
environmental issues, bandhs/blockades, lower base

potential, and delay in production

from wells in some states. The
average natural gas production
for 2013-14 was about 35.4
BCM as against
40.7 BCM for 2012-13, showing a
decline of about 13 per cent.

Exploration
Oil and Gas

of

Domestic

India has an estimated

sedimentary area of
3.14 million sq. km,
comprising
26

sedimentary basins. A total of 254 productionsharing contracts (PSCs) have so far been
signed under nine rounds of New Exploration
Licensing Policy (NELP) bidding, of which 148
blocks are currently operational and the
remaining 106 have been relinquished by the
contractors. An area of 1.5 million sq. km

In order to meet the

ever-growing demand
for
petroleum
products,
the
government
has
consistently
endeavoured
to
enhance
exploration
and
exploitation
of
petroleum
resources,
along with developing
a
concrete
and
structured distribution
and marketing system.

Box 11.1 : Recent Initiatives for Augmenting Power Generation in

India
Automatic approval for foreign direct investment
Automatic approval (Reserve Bank of India [RBI] route) for 100 per cent foreign equity is
permitted in generation, transmission and distribution, and trading in the power sector
without any upper ceiling on the quantum of investment. The government on 22.08.2013 notif
ied its revised position on foreign direct investment (FDI) cap for power exchanges registered
under Central Electricity Regulatory Commission (CERC) Regulations 2010 as 49 per cent (26
per cent FDI+23 per cent foreign institutional investment [FII]) through automatic route.
Signing of fuel supply agreements The Cabinet Committee on Economic Afairs (CCEA) in
a meeting held on 21 June 2013 issued a directive to the Ministry of Coal/Coal India Limited
to sign fuel supply agreements (FSAs) for a total capacity of 78,000 MW, including tapering
linkage, which are likely to be commissioned by March 2015. With concerted eforts made in
this regard, FSAs have been signed for 160 units totalling capacity around 74,000 MW.
Allocation of new coal blocks to the NTPC
The National Thermal Power Corporation (NTPC) has been allocated four coal blocks (Banai,
Bhalumuda, Chandrabila, and Kudanali-Laburi) in August 2013 for power projects of 8460
MW.
Pass-through mechanism
Pass-through mechanism for the concluded PPAs has been approved by the CCEA (14,000
MW-Case I and Case II post 2009 plants) in June 2013.
The CERC/State Electricity Regulatory Commissions (SERC) have been advised to consider
the request of individual power producers in this regard as per due process on a case-bycase basis in public interest. The appropriate commission has been requested to take
immediate steps for the implementation of this decision of the government.
Incorporation of PPA condition for coal block allocation
The Ministry of Coal has issued letters to independent power producers (IPP) and state
governments for incorporating the PPA condition at the time of executing mining lease with
IPPs for coal block allocation so that the benef its of low cost coal can be passed on to the
consumers.
Independent Coal Regulatory Bill
The Independent Coal Regulatory Bill has been approved by the Cabinet on 27 June 2013.
The Ministry of Coal introduced the Bill in Parliament in December 2013. An executive order
for setting of coal regulation has been issued by the Ministry of Coal.
Third-party sampling and quality control mechanism
The Ministry of Coal/ Coal India Limited agreed to third-party sampling at loading points to
address the issue of coal quality in October 2013. A Coal India Limited (CIL)-appointed
agency for third-party sampling has been operational w.e.f. 1.10.2013.

has so far been awarded under the NELP, which

works out to almost 48 per cent of the total
sedimentary area in the country. Current average oil
production from the NELP blocks is about 6938 barrels
per day and gas production 14.13 million cubic metres
(MCMs) per day. Activities related to the tenth round
of NELP bidding (NELP-X) have been initiated. A total
of 86 blocks (30 deep water, 23 shallow water and 33
on land) have been tentatively proposed. Interministerial clearances are under way.

Domestic Exploration of Other Gaseous Fuel

Coal Bed Methane
India has the fourth largest proven coal reserves in
the world and holds signif icant prospects for
exploration and exploitation of coal bed
methane (CBM). Under the CBM policy, 33
exploration blocks have been awarded in
Andhra Pradesh, Assam, Chhattisgarh, Gujarat,
Jharkhand, Madhya Pradesh, Maharashtra,

Orissa, Rajasthan, Tamil Nadu, and West

Bengal. Of the total available coal-bearing
area of 26,000 sq. km for CBM exploration in
the country, exploration has been initiated in
about 17,000 sq. km. The estimated

CBM reserves in the country are about 92 trillion cubic

feet (TCF), of which only 9.9 TCF has so far been
established. Commercial production of CBM in India has
now become a reality with current production at about
0.45 million metric standard cubic metre per day
(MMSCMD).

Shale Gas
Shale gas can emerge as an important new source
of energy. India has several shale formations
which seem to hold shale gas. The shale gas
formations are spread over several sedimentary
basins such as Cambay, Gondwana, KrishnaGodawari onland, and Cauvery. The Director
General of Hydrocarbans (DGH) has initiated
steps to identify prospective areas for shale
gas exploration. A multi- organizational team
(MOT) of the DGH, Oil and Natural Gas
Corporation (ONGC), Oil India Limited (OIL),
and Gas Authority of India Limited (GAIL) has
been formed by the government to examine
the existing data set and suggest a
methodology for shale gas development in
India. Further, a memorandum of agreement
(MoU) between the Department of State,
USA, and Ministry of Petroleum and Natural
Gas has been signed for assessment of shale
gas resources in India, imparting training to
Indian geo-scientists and engineers, and
assistance in the formulation of regulatory
frameworks. Under the MOU signed with the
USA, the US Geological Survey (USGS) has
estimated the technically recoverable shale
gas resource for three basins as 6.1 TCF.
Further studies by the USGS are in progress.

Shale gas can emerge

as an important new
source of energy. India
has
several
shale
formations which seem
to hold shale gas.

Equity Oil and Gas from Abroad

In view of the unfavourable hydrocarbon demandand-supply balance in the country, acquiring
equity oil and gas assets overseas
is
important for enhancing energy security. The
government is
encouraging national oil companies to aggressively pursue equity
oil and gas opportunities overseas. Oil and Natural Gas
Ref ining Capacity
Corporation Videsh Limited (OVL) has produced about
The
Indian
ref
ining
8.357 MMT of oil and equivalent gas during 2013-14
industry
has
done
from its assets in Sudan, Vietnam, Venezuela, Russia,
exceedingly
well
in
Syria, Brazil, South Sudan, and Colombia. The estimated
establishing itself as a
oil and equivalent gas production target for 2014-15 is
major player globally.
about 8.155 MMT. The reasons for lower overseas
India is emerging as a
production are geopolitical problems in south Sudan and
ref inery hub and ref
Syria. Oil public-sector units (PSU), namely OVL, Indian
ining capacity exceeds
Oil
Corporation
(IOC),
OIL,
Bharat
Petroleum
demand.
The
last
Corporation Limited (BPCL), Hindustan Petroleum
decade
has
seen
Corporation Limited (HPCL), and GAIL have acquired
tremendous growth in
exploration and production (E&P) assets in more than 20
the
sector.
The
countries.

countrys ref ining capacity has increased from

a modest 62 million metric tonne per annum
(MMTPA) in 1998 to 215.07 MMTPA as on 1
April 2014, and comprises 22 ref ineries, with
17 under the public sector, 3 under the
private sector, and 2 in joint venture (JV). By
the end of the Twelfth Five Year Plan, ref
inery capacity is expected to reach

In
view
of
the
unfavourable
hydrocarbon
demandand- supply balance in
the country, acquiring
equity
oil
and
gas
assets
overseas
is
important
for
enhancing
energy
security.

307.37 MMTPA. Ref inery crude throughput (crude oil

processed) for 2013-14 was about 222.70 MMT as
against 219.21 MMT for 2012-13, showing a marginal
increase of about 1.59 per cent. During 2013-14, a total
of 68.4 MMT of petroleum products, valued at
` 3,71,143 crore, was exported against 63.4 MMT, valued at
` 3,20,090 crore, during 2012-13. Exports of petroleum
products during 2013-14 were higher by 7.9 per cent and
16.0 per cent in terms of quantity and value respectively,
as compared to the previous year.

NON-CONVENTIONAL ENERGY
Ethanol-blended Petrol
The government started the Ethanol Blended
Petrol (EBP) Programme in 2003. In 2006 it
was extended to the entire country, except the
north-eastern states, Jammu and Kashmir,
Andaman
and
Nicobar
Islands,
and
Lakshadweep. To boost the EBP Programme,
the government decided on 22 November
2012 that 5 per cent mandatory ethanol
blending with petrol should be implemented
across the country. Procurement price of
ethanol was henceforth to be decided
between oil marketing companies (OMCs) and
suppliers
of
ethanol.
The
OMCs
are
implementing the Programme in the notif ied
20 states and 4 union territories (UT) as per
the availability of ethanol.

New and Renewable Energy

The Planning Commission has indicated that the
Twelfth Plan
envisages development of
renewable
and
non-conventional
energy
sources to the tune of 5 MTOE by oil PSUs.
Accordingly, oil PSUs have taken various
initiatives for renewable energy by way of solar
and wind energy projects and for nonconventional energy by way of CBM, basincentred gas (BCG), and underground coal gasif
ication (UGC) projects during 2010-11 to
2013-14. MOUs for setting up of special
purpose vehicles (SPVs) on renewable energy
installations and of-grid applications have
accordingly been signed between the Ministry
of Petroleum and Natural Gas (MOPNG) and
Ministry of New and Renewable
Energy
(MNRE) on 25 February 2014.

COAL
The gap between demand and supply has
consistently been increasing. At the end of the
Eleventh Five Year Plan, the gap was about
100 MT and it has now increased to 145 to
150 MT. The report of the Working Group of
Coal and Lignite for the Twelfth Five Year Plan

projected
the
coal
demand in India to
grow at a CAGR of 7.1
per cent till 2016-17
and reach 980.5 MT
annually
under

realistic
demand.
With
a
projected
growth rate of
7.0 per cent, demand is expected to reach 1373
MT by [Link] overall long-term demand for coal
is closely linked to the performance of the end-use
sectors. In India, the main end-use sectors of coal are
thermal power generation (60 per cent), iron and steel
(7 per cent), and cement (5 per cent), apart from
irregular demand from the unorganized small-scale
sector comprising primarily the brick and ceramics
industry. Sharp deceleration in the production of
natural gas in the past two-three years has further
increased the energy sectors dependence on coal.

The overall long term demand for coal is

closely linked to the
performance
of
the
main end-use sectors,
thermal
power,
iron and steel,
and cement.

The performance of the coal sector in the f irst two

Sharp deceleration in
years of the Twelfth Plan has been subdued
the
production
of
with domestic production at 556 MT in 2012-13
natural gas in the past
and 566 MT in 2013-14. Overall domestic
two-three
years
has
demand for coal during these two years was
further increased the
in the range of 715-720 MT. Demand was
mainly driven by the power generation sector,
energy
sectors
whereas demand in the iron and steel and
dependence on coal.
cement sectors had moderate growth rates.
To f ill the gap between domestic demand and
supply, the country imported about 146 MT of
coal at a cost of
` 92,538 crore during 2012-13 and about 169 MT at a cost of
` 95,175 crore during 2013-14 (provisional). The cost
With stagnant domestic coal
of imports would have been much higher had there not
production, coal imports
been a slide in coal prices in the international markets
are likely to surge in
in the last two years. With the stagnant domestic coal
the
remaining
three
production, coal imports are likely to surge in the
years of the Twelfth
remaining three years of the Twelfth Plan. In terms of
Plan.
value, coal remains the third highest imported item after
petroleum, oil, and lubricants (POL) and gold and its
rising trend will keep putting pressure on Indias current
account balance. Table 11.2 gives f igures for production,
supply, and import of coal.
All India coal
Year

Produc- Of-take/
Nontion supply

2008492.76 489.1
09
2009532.04 7
513.8
10
0
2010532.70 523.47
11
2011539.95 535.3
12
0
2012556.40 569.76
13
2013565.64 571.0
14*
4
Source: Ministry of Coal.
Notes: *Provisional;

CIL

Import

Total
import
Coking

Produc- Of-take/
tion

supply

403.73 400.72
431.2
415.22
6
431.3 423.78
2
435.84
432.62
452.2 464.77
1
462.53
471.50

coking
21.08
24.69
19.48
31.80
35.56

37.92 59.00
48.57
73.26
49.43 68.92
71.05 102.85
110.2 145.78
2
168.50

RAILWAYS
The demands of a growing economy require Indian
Railways (IR) to expand its freight network,
increase its ability to carry higher freight per
wagon, and the ef iciency of the rail system
for faster delivery, and improve the reach and
quality of its passenger services. In order to
meet these challenges, and also keeping in
view the overall thrust of the Twelfth Five Year
Plan (2012-17), the policies of IR currently
focus on creation of additional capacity,
modernization
of
the
existing
network,
improvement
in
asset
utilization
and
productivity, and modernization of rolling
stock and maintenance practices to bring
about overall improvement in the quality of
railway services, while augmenting prof itability
and internal resource generation. The broad

Table 11.2 : Production, Of-take,

and Import of Coal from
2008-09 to 2013-14 (
million tonne)

objective of IR is to
develop a strategy to be
a part of an efective
multi-modal
transport
system and to ensure an
environment-friendly
and economically ef
icient
transport
movement.

Freight Performance of IR
Freight loading (excluding
loading
by
Konkan
Railways) by IR during
2012-13 was placed at
1008.09 million tonnes,
as against

969.05 million tonnes in 2011-12, registering an

increase of
4.03 per cent, with incremental loading of
39.04
million tonnes

The broad objective of

Indian Railways is to
develop a strategy to be
a part of an ef ective
multi-modal transport
system and to ensure
an
environment- f
riendly
and
economically ef icient
transport move- ment.

20
0

over 2011-12 levels. During 2013-14, IR carried 1050.18

million tonne of revenue-earning freight traf ic, as
against a revised target of 1052 million tonnes. The
freight carried shows an increase of
42.09 million tonnes over the freight traf ic of 2012-13,
translating into an increase of 4.18 per cent. Box 11.2
provides details of progress made on the Eastern and
Western Dedicated Freight Corridors.

Ministry in 2013-14. In
spite
of
several
constraints due to the
economic downturn, the
NHAI constructed 2844
km length in 2012-13, its
highest-ever
annual
achievement.
During
2013-14 a total of 1901
km of road construction
was
completed.
Box
11.4 outlines some of
the initiatives taken by
the
government
to
expedite NHDP projects.

High Speed Trains

The Ministry of Railways, in consultation with state
governments, has selected seven corridors for
carrying
out
pre-feasibility
studies
for
introduction of high speed passenger trains.
High speed train projects are highly capital
intensive in nature, requiring high passenger
volumes and high tarif to justify investment. A
business development study for the MumbaiAhmedabad high speed corridor has been
undertaken by French Railways. The study is
likely to be completed in 2014. A joint
feasibility study for the Mumbai- Ahmedabad
high speed corridor, co-f inanced by IR and JICA
was also initiated in December 2013 and is
likely to be completed in about 18 months.
Box 11.3 provides other initiatives taken by IR in
2013-14.

ROADS
India has one of the largest road networks in
the world, spread over 48.65 lakh km. It
comprises national highways, expressways,
state highways, major district roads, other
district roads, and village roads with following
length distribution (Table 11.3).

Financing of the NHDP

A

part of the fuelcess

imposed on petrol and
diesel is allocated to the
NHAI for funding the
NHDP.
The
NHAI
leverages this to borrow
additional funds from
the debt market. Till
date, such borrowings
have been limited to
funds raised through 54
EC (capital gains tax
exemption) bonds and
tax-free bonds. The

National Highway Development Project

The National Highways (NHs) with a total length of
92,851 km, serve as the arterial network of the
country. The development of NHs is the
responsibility of the Government of India, which
has been mandated to upgrade and strengthen
a total of 54,478 km of NHs, through various
phases of the National Highways Development
Project (NHDP). A total length of 21,787 km
has been completed till March 2014 under
various phases of the NHDP. The National
Highways Authority of India (NHAI) awarded
5083 km and 6491 km of road in 2010-11
and 2011-12 respectively for development.
However, the pace of awarding, which slowed
down due to various reasons in 2012-13
continued even during 2013-14. While in 201213, a total of 1116 km was awarded, 17
projects for a length of 1436 km with a total
project cost of ` 7256 crore have been
awarded in 2013-14. Also a length of 1172 km
of NHs was awarded under NHDP-IV in the
20
0

ECONOMIC SURVEY
2013-14

Box 11.2 : Dedicated

Project: Progress So Far

Freight

Corridor

The Eastern and Western Dedicated Freight Corridors

(DFC) are a mega rail transport project being
undertaken by the Ministry of Railways to increase
transportation capacity, reduce unit costs of transportation, and improve service quality.
Of the 1839 km of the Eastern DFC, which extends
from Dankuni near Kolkata to Ludhiana in Punjab, the
World Bank is funding 1183 km from Ludhiana to
Mughalsarai, in three phases. The loan agreement and
civil construction contracts for Phase-1, namely the
Khurja-Kanpur section, are already in position and
work is in progress.
For implemen- ting Phase-2,
namely the Kanpur- Mughalsarai section, a loan of
US $1100 million has been sanctioned.
For the last phase, i.e. the Ludhiana- KhurjaDadri
section, advance procurement action has been
initiated. For the 1499 km Western DFC, which extends
from Jawaharlal Nehru Port in Mumbai to Dadri near
Delhi, complete funding from the Japan International
Cooperation Agency (JICA) has been tied up, and
construction is in progress on the 625 km RewariIqbalgarh section and for 54 major and important
bridges
between
Vaitarana
and
Bharuch.

ENERGY, INFRASTRUCTURE AND

COMMUNICATIONS

20

Construction contracts for over 1

600 km are at an advanced
stage of award.
Approximately 96 per cent of
the land required for the
project,
excluding
the
Sonnagar-Dankuni section to
be implemented under publicprivate partnership (PPP), has
been acquired, and land
compensation award of ` 6110
crore, has been declared as
per provisions of the Railway
Amendment Act 2008.
National Highways/
Expressway
State Highways
Other Roads
Source:
Note:

92,851 km
1,42,687 km
46,29,462 km

Ministry of Road, Transport; and

Highways.
*Status as in May 2014.

Table 11.3 : Road Networks in India

20
1

Box 11.3 : New Initiatives by Indian Railways during 2013-14

Linking Kashmir Valley with the Jammu region: The Pir Panjal tunnel, the longest tunnel
in India, was opened successfully, establishing a railway link between Kashmir valley and the
Jammu region, in June 2013.
IR enters the one billion tonne select club: By achieving an originating freight loading of
1008.09 million tonnes (i.e. one billion plus) in 2012-13, IR entered the one billion tonne select
club, joining the Chinese, Russian, and United States railways. Under the freight-loading
strategy adopted by IR, special focus has been given to enhancing evacuation of coal from
CIL sources.
High Speed Rail Corporation of India Limited set up: The High Speed Rail Corporation
of India (HSRC) has been launched as a subsidiary of Rail Vikas Nigam Limited. The HSRC
has been set up to develop the high speed rail corridors in India in order to run passenger
trains at speeds up to 350 km per hour. It will undertake project activities such as
preparation of project-related studies and preparation of technical standards for the
Mumbai-Ahmedabad corridor and any other corridor decided by the government. It will
provide support to the government in f inalizing the f inancial and implementation models.
Facilitating the visually impaired: As a part of its social commitment to make IR more
passenger-friendly for diferently abled passengers, IR has decided to provide Braille
stickers in coaches to facilitate visually impaired passengers. It is planned to use stickers
with metallic base, with printed characters embedded on to the base. The Integral Coach
Factory, a production unit of IR, has developed the specif ication for integrated Braille
signages in coaches, in consultation with various blind associations, and inputs received
from the Research Design and Standards Organisation (RDSO).
Safety for women: In order to enhance the safety and security of women under the
Nirbhaya Fund Scheme set up by the Ministry of Finance, the Ministry of Railways has
proposed a pilot scheme for setting up an alert system in trains in select zones. The work was
awarded to the Centre for Railway Information Systems (CRIS) in October 2013, with a
completion period of 13 months, for conducting pilot projects in Central and Western
Railways.
Worlds First Ever 5500 HP Locomotive as a Pilot Project: IR has produced the worlds f
irst prototype 5500 HP diesel locomotive (WDG5), developed by Diesel Locomotive Works,
Varanasi, a production unit of IR. The locomotive will be able to achieve 100 kmph speed on
level track, with higher axle load. The 5500 HP WDG5 is primarily aimed at improving the
throughput with higher balancing speeds, and is already running as a pilot project in North
Central Railways.
Green Initiatives: (i) The Ministry of Railways and Rail India Technical and Economic Service
(RITES) Limited have formed the Railway Energy Management Company (REMC), a JV with a
shareholding pattern of 49 and 51 per cent respectively, for undertaking IR projects related to
harnessing green energy like solar and windmill power plants, power-trading activities,
transmission lines and power evacuation planning, energy conservation initiatives, ef icient
coordination in power generation through captive power plant, and energy audits. The
REMC will also facilitate faster execution of renewable energy and energy conservation
works, with the aim of generating green power and reducing the energy bill of IR. The REMC
has become functional and is working on setting up windmill and solar power plants, with about
40 per cent subsidy from the MNRE. To begin with, 200 railway stations, rooftops of 26
buildings, and 2000 level crossing gates will be covered.

government has also taken loans

for
f inancing
projects under the NHDP from the World Bank (US$
1965 million), Asian Development Bank (ADB) (US$
1605 million), and Japan Bank for International
Cooperation (32,060 million yen) which are passed on
to the NHAI partly in the form of grants and partly as
loan. The NHAI has also taken a direct loan of US$
149.73 million from the ADB for the Manor Expressway
Project.

Development
of
Roads
Extremism-affected Areas

in

Left

Wing

The government on 26 February 2009 approved

the Road Requirement Plan (RRP) for
upgrading of 1202 km of NHs and 4363 km
of state roads (total 5565 km) to two-lane at
a cost of
` 7300 crore in 34 left wing extremism (LWE)-afected
districts in Andhra Pradesh, Bihar, Chhattisgarh,

Jharkhand, Madhya Pradesh, Maharashtra, Odisha, and

Uttar Pradesh for inclusive growth of these areas.
Under the RRP, development of 2929 km length had
been
completed
till
2013-14
with
cumulative
expenditure of
` 3878 crore. The development of roads under the
programme is scheduled to be completed by March
2015.

20
2

Prime Ministers Reconstruction Plan for J&K

The Prime Minister announced a Reconstruction
Plan for Jammu and Kashmir during his visit to
the state in November 2004.
Construction of the Mughal Road, widening of the
Domel-Katra road (NH-1C), double-laning of the BototeKishtawar-SinthanpassAnantnag
Road
(NH-1B),
upgrading of the Srinagar-Uri Road (NH1A),
construction
of
the
Khanabal-Pahalgam
Road,
construction of
the Narbal-Aangmarg Road, and double-laning of the
Srinagar- Kargil-Leh Road (NH-1D) are the seven works
under this project amounting to ` 3300 crore. An
expenditure of around ` 2,996 crore
has already been incurred as on March 2014.

CIVIL AVIATION
Air Passenger and Cargo Traff ic
Domestic passenger traf ic handled at Indian airports
reached
122.43 million during April to March 2013-14. This is an
increase of 5.2 per cent over the domestic passenger
traf ic throughput of
116.37 million for the same period during 2012-13.
International passenger traf ic handled at Indian
airports was placed at
46.62 million during 2013-14 as against 43.03 million
during the corresponding period of the previous year,
thereby recording a growth rate of 8.34 per cent.
International cargo throughput at Indian
airports
during 2013-14 was 1.44 MMT as compared to
1.41 MMT during the previous year. During the
reference period, domestic cargo throughput stood
at 0.84 MMT as against
0.78 MMT, thereby recording an increase of 7.7 per
cent.

with an annual capacity

of 10 million and 4
million
passengers
respectively
were
commissioned
and
constructed.
To
augment
airside
capacity, extension of
the secondary runway
by 1032 m has also
been
undertaken.
Modernization of Delhi
and Mumbai Airports has
been undertaken by JV
companies and state-ofthe-art facilities have
been
provided.
Development of 35 nonmetro airports which
have been identif ied
based
on
regional
connectivity,
development of regional
hubs, etc., has been
undertaken by the AAI.
Out of 35 airports, work
has been completed at
33. Development work
for
Vadodra
and
Khajuraho Airports is in
progress.

Airport Infrastructure
The Airports Authority of India (AAI) is a major
airport operator managing 125
airports
across
the
country
including 26 civil
enclaves at defence airports and is also
entrusted with the sovereign function of
providing air traf ic services in India. To
enhance airport infrastructure
in India,
modernization
of
existing
airport
infrastructure in metro and non-metro cities
and construction of greenf ield airports were
contemplated.

20
2

Modernization of Kolkata Airport has been taken up

whereby construction of a terminal building
with a 20 million passenger capacity has been
commissioned and completed. In order to
increase airside capacity, the secondary
runway has been extended by 431 m.
Under modernization of Chennai Airport, new
domestic and international terminal buildings

ECONOMIC SURVEY
2013-14

Box 11. 4 : Initiatives Taken by the

Government to Expedite Projects under the
NHDP
Project Preparation
The NHAI has decided not to award projects till all preconstruction approvals are in place to avoid post- bid
delays and litigations.
Streamlining of Land acquisition
The process of land acquisition (LA) and collection of
data on this acquisition has been streamlined by
standardizing formats and collecting periodic data for
efective monitoring of the LA process.
Guidelines have been issued for streamlining the LA
process, inclu- ding those for continuation of the process
in case of projects that are foreclosed, thereby removing
any ambiguity and ensuring timely execution of preconstruction activities.
Streamlining of

Environment Clearances

The NHAI has taken several proactive measures and

ensured that for existing and future projects the process
of obtaining environment and forest clearances has been
relaxed signif icantly.
Dispute Resolution

built operate and transfer

(BOT)
projects
have
be
establish.
Several
contractors
and
concession- aires have opted
for the same and successfully
settled claims with the NHAI.
Exit for Equity Investors
The NHAI has allowed complete
exit to equity investors for all
concessions
post-completion
of projects. This move is
expected to unlock growth
capital
for
utilization
in
future projects and infuse
fresh capital into the sector.

Coordination with other ministries

Several mechanisms have
been established to ensure
better
coordination
with
other
ministries,
namely
Railways,
utilities-owning
departments / ministries, etc.
to ensure smooth execution of
projects.

Mechanisms for speedy resolution of long pending disputes

in engineering procurement and construction (EPC) and

ENERGY, INFRASTRUCTURE AND

COMMUNICATIONS

20
3

20
3

Investment by Foreign Airlines

Subsequent to Government of Indias decision to permit
foreign airlines to invest in Indian scheduled air
transport service operators, up to a limit of 49 per
cent of their paid-up capital, proposals of M/s Air-Asia
and Tata-Singapore Airlines for initial no objection certif
icates (NoC) have been approved. The validity of in
principle approval for import of aircraft by scheduled
operators has been revised from 5 years to 10 years
on account of longer delivery schedule of aircraft by
manufacturers.

PORTS
Cargo Traff ic at Indian Ports
During 2013-14 (April to March) major and non-major ports
in India accomplished a total cargo throughput of
around
980.49 million tonnes reflecting an increase of 5.0 per
cent over 2012-13. This can mainly be attributed to an
increase of 1.8 per cent in the cargo handled at major
ports. In contrast, traf ic at non- major ports grew at
around 9.6 per cent during 2013-14 as compared to 9.8
per cent in 2012-13 (Table 11.4). During 2013-14,
Ennore Port recorded the highest growth in traf ic (52.9
per cent) followed by Paradip (20.3 per cent), Kolkata
Dock System (8.7 per cent), New Mangalore Port Trust
(6.3 per cent), Cochin Port (5.3 per cent), Mumbai Port
(2.0 per cent), Haldia Dock Complex (1.5 per cent), and
[Link] (1.4 per cent). Negative traf ic growth
was reported by Visakhapatnam (-0.9 per cent),
Jawaharlal Nehru Port Trust (JNPT) (-3.3 per cent),
Chennai Port (-4.3 per cent), Kandla (-7.0 per cent), and
Mormugao(-33.7 per cent).
Traf ic handled

2012-13
Major ports

201314
55548
8
(56.7)

2012-13
-2.6

201314
1.8

9.8

9.6

(41.5)

42500
0
(43.3)

933657

980488

2.2

5.0

(100)

(100)

545790
(58.5)

Non-major ports

All ports

Growth over
previous
year/period

387867

Source: Indian Ports Association

Commodity-wise Cargo Traff ic at Major Ports

11.36 At a broad commodity level, during 2013-14, coal,
POL, and other cargo traf ic posted growth of 20.6 per
cent, 0.6 per cent, and 0.5 per cent respectively. The
traf ic in iron ore recorded negative growth of 13.0
per cent primarily owing to a ban on mining of iron
ore. Fertilizer traf ic also declined during 2013-14 by

Table 11.4 : Traf ic Handled at

Ports (000
tonnes)

7.0 per cent over the previous year. In terms of

composition of cargo traf ic handled at major ports
during 2013-14, the largest commodity group (by
percentage share in total cargo handled) was POL (34
per cent) followed by other traf ic (22 per cent),
container (21 per cent), coal (19 per cent), and iron ore
(4 per cent).

Total container traf ic at major ports decreased both in

terms of tonne and twenty foot equivalent units (TEUs)
by 4.3 per cent and
3.2 per cent respectively during April 2013 to March
2014. During this period JNPT emerged as the leading
container-handling port with a 48.2 per cent share in
terms of tonnage and 55.8 per cent in terms of TEUs.

TELECOMMUNICATIONS
The
Indian
telecom
sector
has
registered
phenomenal growth during the past few years
and
has
become
the
second largest
telephone network in the world, next only to
China. A series of reform measures by the
government,
innovations
in
wireless
technology, and active participation by the
private sector played an important role in
the growth of the telecom sector in the
country. The details of the number of
telephones,
teledensity,
and
other
key
indicators of the telecommunications sector are
given in Table 11.5.

2012

1 Total telephones (million)

2 Rural teledensity (per cent )
3 Urban teledensity (per cent )
4 Overall teledensity (per cent )

A
series
of
reform
measures
by
the
government,
innovations
in
wireless
technology, and active
participation
by
the
private sector played an
important role in the
growth of the telecom
sector in the country.

2013

201
4
951.35
898.02
933.0
2
39.26
41.05
44.0
1
169.17
146.64
145.4
Table 11.5:
Telephone675.2
Connections and Teledensity
78.66
73.32
3
12.41
-5.61
3.9

(at end March)

5 Growth in total telephones

(over previous year) (per
Source:
cent ) Department of Telecommunications.

Spectrum Auction
The government announced the National Telecom
Policy (NTP) in 2012. This is an initiative for
creating a conducive policy framework for
growth of the sector and for triggering an
eco- system for inclusive growth. NTP-2012
envisages adequate availability of spectrum
and its allocation in a transparent manner
through a market-related process. The auction
of spectrum in the
800 MHz, 900 MHz, and 1800 MHz bands was conducted in March
2013. During this auction, there was one successful
`
61,162
crore
obtained
bidder in the 800 MHz band, who won 3.75 MHz of
through auction of spectrum
spectrum in each of eight service areas, namely Delhi,
was
Kolkata, Gujarat, Karnataka, Tamil Nadu, Kerala, West
27.6 per cent more than the
Bengal, and Uttar Pradesh (West). However, no interest
value of the spectrum on ofer
was expressed in bidding for spectrum in the 900 MHz
at reserve price.
and 1800 MHz bands. As a result, spectrum auction in the
900 MHz and 1800 MHz bands was conducted during
Unif ied Licence
February 2014. In the 1800 MHz category, 307.2 MHz
With a view to achieving the
out of 385.2 was sold. In the 900 MHz band, 46 MHz
NTP-2012 objective of
was put up for auction in the Delhi, Mumbai, and Kolkata
creating one nation-one
service areas and all was sold out. The total amount of
licence across services

and service areas, the Department of Telecom

has f inalized guidelines on unif ied licence.

NTP-2012 envisages adequate

availability of spectrum
and its allocation in a
transparent
manner
through
a
marketrelated process.

As per these guidelines, the allocation of spectrum is

delinked from the licence and has to be obtained
separately as per prescribed procedure, i.e. bidding
process. Only one unif ied licence is required for all
telecom services in the entire country. Authorization for
various services (like access services, National Long
Distance services, international long distance services,
internet service provider [ISP] services) will be required
separately. A single authorization for the unif ied
licence (all services) category will cover all telecom
services except ISP (B) and ISP(C) services. The tenure
of such authorization will run concurrently with the unif
ied licence. Besides the entry fee for various telecom
services has been reduced substantially.

Mobile Communication Services in LWE-affected Areas

In June 2013 the government approved a proposal
to instal mobile towers at 2199 identif ied
locations
in
nine
LWE-afected
states
(Andhra
Pradesh,
Bihar,
Chhattisgarh,
Jharkhand, Maharashtra, Madhya Pradesh,
Odisha, Uttar Pradesh, and West Bengal) at a
cost of ` 3046 crore. The work has been
awarded to Bharat Sanchar Nigam Limited
(BSNL) and funding for the project will be met
out of the Universal Service Obligation Fund
(USOF) for f ive years.

Rural Wireline Broadband Scheme

For providing wireline broadband connectivity up
to village level in rural and remote areas, the
USOF signed an agreement with BSNL under
the Rural Wireline Broadband Scheme to
provide wireline broadband connectivity to
rural and remote areas by leveraging the
existing rural exchanges infrastructure and
copper wireline network. The speed of each of
the broadband connections shall be at least
512 Kbps. Under this scheme, BSNL is to
provide
8,88,832
wireline
broadband
connections
to
individual
users
and
government institutions and set up 28,672
kiosks over a period of six years, i.e. by 2015.
The estimated subsidy outflow is ` 1500 crore.
As on 31 March 2014, a total of 5,89,783
broadband connections had been provided and
14,186 kiosks set up in rural and remote the
areas. The subsidy disbursed till 31 March
2014 under scheme was
` 329.55 crore.

URBAN INFRASTRUCTURE
Urban Infrastructure and Governance
The Jawaharlal Nehru National Urban Renewal
Mission (JnNURM) was launched by the
Ministry of Urban Development for a seven-

year period (i.e. up to March 2012) for

encouraging cities to initiate steps for
bringing about improvements in their civic
service levels in a phased manner. The
government extended the tenure of the
Mission for two years, i.e. from 1 April 2012
to 31 March 2014. Besides this, in January
2013, the government also approved a
transition phase for launching of new projects
under the JnNURM. The components under
Urban Infrastructure and Governance (UIG),
sub-mission of the JnNURM, are urban renewal,
water supply (including desalination plants),
sanitation,
sewerage
and
solid
waste
management, urban transport, development
of

heritage areas, and preservation of water bodies. Revised

allocation for the UIG sub-mission for the Mission period
is ` 31,500 crore. A sum of ` 5500 crore (budget
estimates-BE) had been provided for the year 2013-14.
As on 31 March 2014 under the f irst phase of the
JnNURM, 538 projects at a total cost of ` 60,201 crore
had been sanctioned under the UIG sub-mission with
additional central assistance (ACA) of ` 27,655 crore, of
which ` 21,119 crore was released to the 65 mission
cities across 31 states/UTs.

Urban Infrastructure Development Scheme

for Small and Medium Towns
The Urban Infrastructure Development Scheme for Small and
Medium Towns (UIDSSMT) is 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. For obtaining assistance under
the UIDSSMT, states and urban local bodies (ULB) ULBs
need to sign memorandums of agreement committing to
the implementation of the reforms. Revised allocation for
the UIDSSMT for the Mission period was ` 11,400 crore.
From its inception in December 2005 till March
2014 a total of 801 projects across 668 towns and
cities at a cost of ` 13,866 crore with ACA commitment
of ` 11,197 crore had been sanctioned. A sum of `
4488 crore (BE) was provided for the year 2013-14. Out
of the committed ACA of ` 11,197 crore, ` 9996 crore had
been released till 31 March 2014. During April 2013 to
March 2014 ` 2919 crore was released as ACA under
the UIDSSMT.

STREAMLINING ENVIRONMENTAL CLEARANCES

Institutional Factors
There is need for better and more efective coordination
amongst various central ministries/ institutions regarding
integration of environmental concerns at the inception/
planning stage of a project. Any fragmentation of
current policies across several government agencies
with difering policy mandates may also need to be
addressed.
Lack
of
trained
personnel
and
a
comprehensive database also leads to delay in many
projects. Most of the state government institutions are
relatively small and sufer from inadequacy of technical
staf and resources. Although the overall quality of
environmental impact assessment (EIA) studies and
implementation of the EIA process have improved over
the years, institutional strengthening measures such as
training of key professionals and staf ing with proper
technical persons are needed to make the EIA
procedure a more efective instrument for environment
protection and sustainable development. The Ministry of
Environment and Forests (MoEF) has recently taken a
number of initiatives for streamlining environment
clearance (EC) processes (Box 11.5) so as to enhance
capacity for environmental governance.

Committee under the Director

National
Environmental
Engineering Research Institute
(NEERI) has examined further
simplif ication of procedures
including doing away with the
existing categorization of projects
into categories A and B; relaxing
general conditions relating to
distance of project from state
boundaries,

There is need for better

and
more
efective
coordination
amongst
various
central
ministries / institutions
re- garding integration
of
environmental
concerns
at
the
inception/planning stage
of a project.

Box 11. 5 : Initiatives for Streamlining Environment Clearance

For linear projects, the requirement of obtaining Stage-I Forest Clearance (FC) before
issuing EC has been dispensed with.
Linear projects involving forest land have been exempted from Forest Rights Act (FRA)
clearance subject to certain stipulations.
For mining projects that have already obtained EC under EIA Notif ication 2006, the
requirement of obtaining EC at the time of mine renewal has been dispensed with.
For mining projects involving forest land, all state governments have been requested on 1
February 2013 to obtain approval under the Forest (Conservation) Act 1980 for diversion of
entire forest land in the mining lease within a period of two years. For such existing mining
leases, the project proponents have been asked to obtain the necessary approval within a
period of two years, failing which the mine lease area would be considered as the area
containing non-forest land and the forest land for which FC is available.
For highway expansion projects, the requirement of obtaining terms of reference (TOR) has
been dispensed with. Further, the conditions for obtaining EC for national highway expansion
projects have been relaxed. Now only those expansion projects will require EC where the
expansion is greater than 100 km involving right of way or land acquisition greater than 40
m on existing alignments and 60 m on realignments or bypasses.
Guidelines have been issued for categorization of category B projects into B1 and B2. B2
projects do not require public hearing and preparation of EIA reports and therefore taking
decisions on EC of such projects is quicker. All category B projects are decided at state level.
For UMPPs, the EC could now be considered without linking it with the requirement of obtaining
EC and Stage- I FC of linked coal mine.
For one-time expansion in existing coal mine projects, exemption from public hearing was
earlier allowed for capacity expansion up to 25 per cent. Recently it has been further
relaxed. For projects with capacity of up to 8 million tons per annum, the limit has now
been increased to 50 per cent or incremental production of up to 1 MTPA, whichever is
more.
Forests (Conservation) Amendment Rules 2014 have been issued stipulating timelines for
processing of FC applications at each level in the central and state governments. Simplif ied
format for submission of application for obtaining FC for prospecting activities in forest areas
has been prescribed.

critically polluted areas, etc.; and guidelines to expert

appraisal committees (EACs)/state-level expert appraisal
committees (SEACs) for exempting from EIA and public
hearing in respect of expansion projects. The Committee
has since submitted its report which is under
examination in the Ministry.

INFRASTRUCTURE DEVELOPMENT
PERSPECTIVE

IN

INDIA: A MACRO

The need for infrastructure development for

economic prosperity and global integration
cannot
be
overemphasized.
Lack
of
infrastructure not only results in reduced
economic output, it also translates into
additional costs in terms of time, efort, and
money for accessing essential services such
as
health care
and education. Rapid
economic growth in recent years has put
enormous pressure on existing infrastructure,
particularly
in
transport,
energy,
and
communications. Unless it is signif icantly
improved, infrastructure will continue to be a

bottleneck for growth

and an obstacle to
poverty reduction. In
other
words,
the
challenge is to ensure
strong, sustainable, and
balanced
development
through integration of
economies
with
environmentally
sustainable
development
of
infrastructure. In order to
ensure
accelerated
growth
in
the

infrastructure sector, the government has

taken several initiatives in the recent past
(Box 11.6).

The challenge is
to
ensure
strong,
sustainable,
and
balanced development
through integration of
economies
with
environmentally
sustainable
development of infrastructure.

Box. 11.6 : Recent Initiatives for Development of the Infrastructure Sector in India
The following initiatives have been taken in the recent past in order to ensure accelerated growth in the
infrastructure sector:
(a) Harmonized Master List of Infrastructure Sub-sectors: To resolve the issue of uniform def inition
of infrastructure, a Harmonized Master list of Infrastructure Sub-sectors has been drawn up and
published in the Gazette of India dated
7 October 2013. An institutional mechanism has been set up under the chairmanship of the Secretary,
Department of Economic Afairs, with representation from the Planning Commission, Department of
Revenue, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance
Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority
(PFRDA), and concerned ministry for updating the master list and revisiting the sub-sectors outside the
master list on the basis of well-def ined principles.
(b) Infrastructure Financing
(i) The Cabinet Committee on Investment (CCI) set up under the chairmanship of the Prime Minister on
2 January 2013 to expedite clearances and decisions on large infrastructure projects, cleared
303 projects with aggregate investment of ` 6,95,437 crore up to end February 2014.
(ii)Infrastructure Debt Fund: The government has conceptualised infrastructure debt funds (IDF) for
sourcing long-term debt for infrastructure projects. Potential investors under IDFs may include ofshore institutional investors, of-shore high networth individuals (HNIs), and other institutional
investors (insurance funds, pension funds, sovereign wealth funds, etc.). An IDF can be set up either
as a trust or as a non-banking f inancial company (NBFC). The income of IDFs has been exempted
from income tax. So far, two IDF-NBFCs and f ive IDFmutual funds (MFs) have been operationalized.
(iii)
Tax-free Bonds: The government has attempted to broaden the corporate bond market
by according tax-free status to infrastructure bonds for addressing the specif ic needs of
infrastructure def icit, especially in sectors such as roads, ports, airports, and power, which are
essential for economic growth in any country. During f inancial year 2013-14, the government has
allowed issue of tax-free bonds amounting to ` 50,000 crore, to central public sector undertakings
(CPSUs), for a period of 10, 15, and 20 years.
(iv)
Municipal Borrowing: With a view to deepening the bond markets for infrastructure f
inance, draft guidelines/ framework has been prepared for issuance of municipal bonds in India.
(c) Public-Private Partnership Initiatives in India
The Government of India is promoting public-private partnerships (PPP) as an efective tool for bringing
private-sector ef iciencies in creation of economic and social infrastructure assets and for delivery of
quality public services. By end March 2014 there were over 1300 projects in the infrastructure sector
with a total project cost (TPC) of ` 6,94,040 crore. These projects are at diferent stages of
implementation, i.e. bidding, construction, and operational.
(i) Viability Gap Funding for PPP Projects : Under the scheme for f inancial support to PPPs in
infrastructure (Viability Gap Funding [VGF] Scheme), 178 projects have been granted approval with
a TPC of ` 88,697 crore and VGF support of ` 16,894 crore, of which ` 1455 crore has been
disbursed.
(ii)
Support for Project Development of PPP Projects: The India Inf rastructure Project
Development Fund (IIPDF) was launched in December 2007 to facilitate quality project development
for PPP projects and ensure transparency in procurement of consultants and projects. So far 53
projects have been approved with IIPDF assistance.
(iii)
National PPP Capacity Building Programme: The National PPP Capacity Building
Programme was launched in December 2010, and has been rolled out in 16 states and two central
training institutes, i.e. the Indian Maritime University and Lal Bahadur Shastri National Academy of
Administration. The roll-out in the respective institutes commenced in 2011-12. So far, 160 training
programmes have been conducted to train over 5000 public functionaries who deal with PPPs in
their domain.
(iv)
Online toolkits for PPP projects for f ive sectors are available on the Department of
Economic Afairs, Ministry of Finance, website on PPPs, i.e. [Link]. The PPP toolkit is a
web-based resource that has been designed to help improve decision making for infrastructure
PPPs in India and to improve the quality of infrastructure PPPs that are implemented in India.

FINANCING INFRASTRUCTURE
Recent Trends in Credit
Infrastructure Sector

Flow

to

the

The India Infrastructure Finance Company Limited

(IIFCL) was set up in 2006 for providing longterm f inancing for infrastructure projects that
typically involve long gestation periods. The

IIFCL funds viable infrastructure projects

through long-term debt as well as ref inance
to banks and f inancial institutions for loans
approved by them. During 2013-14, the IIFCL
mobilized long-term
resources
primarily
from multilateral and bilateral

institutions like the ADB, World Bank, and KfW

aggregating
` 1605 crore as compared to ` 1080 crore raised
during 2012-13. During 2013-14, the IIFCL:
i) successfully mobilized ` 9840.74 crore through
tax-free bonds issue as against ` 10,000 crore
allocated to the IIFCL.
ii)signed an agreement with the ADB for another
line of credit for US$ 700 million and also
executed a Finance Contract Agreement with the
European Investment Bank (EIB) for a line of
credit of Euro 200 million.
iii)
sanctioned two more pilot transactions for
proposed bond issuance of around ` 1417 crore
taking cumulative sanctions for four transactions
amounting to around ` 2200 crore under its
Credit Enhancement Scheme (pilot basis).
iv)
further disbursed ` 1058 crore under the
Take-out Finance Scheme taking cumulative
disbursements from 27 banks/ f inancial
institutions to ` 3819 crore.
v) was allowed to ofer f inancial assistance to PPP
projects with tenors longer than other consortium
lenders and remain as sole lender, if necessary, after
other lenders are paid. This will enable spreading the
debt repayments over a longer period which will benef it
PPP infrastructure projects with improved liquidity,
better viability, and reduced restructuring risk.

Deployment of Gross Bank Credit

The latest available data on gross deployment of
bank credit to major infrastructure sectors
shows that the rate of growth of bank credit
moderated from an average of 44.8 per cent
in 2011-12 to
17.7 per cent in 2013-14 (Figure 11.1) . Power had an
over 50 per cent share in total credit flow to
infrastructure. However, the rate of growth of credit to
this sector also moderated from an average of
48.6 in 2010-11 to 25.0 per cent 2013-14. Both in
terms of share in total credit to infrastructure and rate of
growth, the telecom sector witnessed consecutive
decline in the last three years (Table 11.6 and Figure
11.1).

Infrastructure total of
which
(i) Power

201011
463658

201112
574794

201213
676264

(`
crore)
201314
794991

231467

30132
7
89930

369596

460087

92450

89098

(ii) Telecommunications

88432

(iii) Roads

81556

(iv) Other Infrastructure

62203

10136
2
82175

Figure 11.1 : Growth Rate (Avg. of 12

monthly y-o-y) of Credit to
Infrastructure
Sector

12277
146486
8
11.6: Sectoral Share
91440Table99319

Share in total infrastructure ( per cent)

(i) Power

49.92

52.42

54.65

57.87

(ii) Telecommunications

19.07

15.65

13.67

(iii) Roads

17.59

17.63

18.16

11.2
1
18.43

(iv) Other Infrastructure

13.42

14.30

13.52

12.49

of Credit: Infrastructure

Source: RBI, Absolute f igures pertain to average of monthly outstanding.

21
8

Foreign
Direct
Infrastructure

Investment

into

Major

The government has put in place a liberal

foreign direct investment (FDI) policy, under
which FDI up to 100 per cent is permitted
under
the
automatic
route
in
most
sectors/activities. Further, the FDI policy is
reviewed on an ongoing basis, with a view to
making it more investor-friendly. Signif icant
changes have been made in the FDI policy
regime in recent times to ensure that India
remains an increasingly attractive investment
destination. As a result, total FDI inflows into
major infrastructure sectors registered a
growth of 22.8 per cent in 2013-14 as
compared to a contraction of 60.9 per cent
during 2012-13. Sectors recording positive
growth
included
railway-related
components,
telecommunications,
air
transport (including air freight), and power
(Table 11.7).

Signif icant changes

have been made in the
FDI policy regime in
recent times to ensure
that India remains an
increasingly
attractive
invest- ment
destination.

Sector

20092010- 2011- 2012- 201310

12
13
14
Power
1271. 11
1271. 1652.3
535.6 1066.0
79
77
8
8
8
Non-conventional energy
622.5 214.4 452.1 1106.
414.2
2
0
7
52
Petroleum & natural gas
265.5 556.4
2029.9
214.8 5112.
Table 11.7 : Financial Year-wise
3
3
81997.2 303.8
0
23
Telecommunications
2539.2
1664.
1306.9
FDI
6
50
Flows to
Air transport (including air freight)
136.6 4 31.2 715.8 5 45.95
Infrastructure
0
2
9
(US$
Sea transport
284.85
300.
129.3 64.6
20.49
51
Ports
65.41
10.9 60.00 20.00 million)
0.31
2
Railway-related components
34.43
70.6
42.2
29.8 236.93
6
7
5
Grand Total
10578.92 6192. 9690.0 3793.
4657.2
73
6
14
Source: DIPP, Ministry of Commerce and Industry.
Note: 1. Amount includes the inf lows received through SIA/FIPB
route, acquisition of existing shares, and RBIs automatic route
only.
2. Variation in data due to reclassif ication of some sectors.

CHALLENGES AND OUTLOOK

The Twelfth Five Year Plan lays special emphasis
on development of the infrastructure sector
including energy as an imperative for
sustaining high growth and also ensuring that
the growth is inclusive. According to the
Twelfth Plan projections, during the Plan
period, i.e. 2012- 17, an investment of US$ 1
trillion is required in the infrastructure sector in
India. About half of this is expected to come
from
the private sector. While
large
infrastructure investment during the last
decade or so has placed India in the global
league of fast growing economies, concerns
have been raised over the past few years about
stalled infrastructure projects. Stepping up
infrastructure
investment,
improving
productivity and quality of infrastructure
spending, removing procedural bottlenecks,
ENERGY, INFRASTRUCTURE AND
COMMUNICATIONS

improving governance,
and
above
all
maintaining consistency
in
governments
infrastructure policies are
some issues that need
to
be
urgently
addressed
in
this
context. Some sectorspecif ic issues that
need consideration are
now discussed.

Power
The capacity-addition target
for the Twelfth Plan
period is estimated at
88,537 MW. Against this
target,
38,583
MW
capacity
has
been
21
8

added till April 2014, which constitutes 43.6

per cent of the target envisaged in the Twelfth
Plan. The individual targets achieved by the
centre, states, and private sector during this
period

While
large
inf
rastructure investment
during the last decade
or so has placed India
in the global league of f
ast
growing
economies,
concerns
have been raised over
the past few years
about
stalled
infrastructure projects.

Power generation f rom

additional
capacity
generated during the
Twelfth Plan critically
depends on ensur- ing
fuel supply (coal as well
as
gas),
improving
the f inancial health of
the
state
electricity
boards
(SEBs),
and
making PPAs of IPPs
eco- nomically viable.

21
0

ECONOMIC SURVEY
2013-14

21
0

are 30.5 per cent, 47.2 per cent, and 49.7 per cent
respectively. However, power generation from this
additional capacity critically depends on ensuring fuel
supply (coal as well as gas), improving the f inancial
health of the state electricity boards (SEBs), and
making PPAs of IPPs economically viable. All these
factors also afect the capital expenditure programme
in the power sector.
Private developers may not be able to f inance
projects if coal linkage issues are not
resolved
and
there
are
delays
in f
inalization of fuel supply agreements (FSA).
While some decisions have been taken for
restructuring Discoms f inances, these may
need to be monitored and implemented in
spirit. There is also a need to initiate
sustained and meaningful SEB reforms by
focusing on areas like tarif rationalization,
minimizing AT & C losses, and linking
incremental funding to SEBs with the
reforms process undertaken by them. The
power sector cannot deliver on its social
commitments unless it is commercially and f
inancially viable. To improve the f inancial
health of the distribution utilities, measures
are required for strengthening governance
standards of Discoms, rationalizing the tarif
structure, and optimizing procurement cost of
power.

Coal
Based on the sectoral analysis carried out by
various committees and institutions in the
recent past (including the report of the Working
group for the Twelfth Plan on Coal and
Lignite), the demand and supply projections
of the coal sector, and the current status of
the coal mining, the following initiatives need
to be expedited on priority basis:
Action points to accelerate coal production in
the short term:
Building critical feeder routes for coal: The
implementation of key infrastructure projects for
evacuation and movement of coal will be of critical
importance for enabling a step up in coal
production. In order to transport coal from the
pithead, three critical railway lines have been
identif ied which include Tori-Shirvpur-Kathutia
(90.7 km) in North
Karanpura in Jharkand,
Jharsuguda-Barpalli-Sardega (53 km) in Ib valley,
Odisha, and BhudevpurKorichapar-Dharmjaigarh
(180 km) in the Mand-Raigarh coal f ields in
Chattisgarh. Work on these critical routes needs to
be expedited.
Clearing pending environment and forest
clearances as well as rehabilitation issues

that
have
stalled
coal
production by private captive
blocks and CIL subsidiaries
on priority basis.
Permit
commercial
coal
mining
by
the
private
sector: A Bill to amend the
Coal Mines (Nationalization) has
been pending in the Rajya
Sabha since 2000 and its
passage needs to be expedited
to permit private-sector entry
into coal mining. In view of the
deceleration in the coal prices
in the global market, the
government needs to have a
stable long-term coal-mining
policy to attract private-sector
mining
once
the
Act
is
amended.
Since
mining
involves huge sunk cost, the
government should allow only
limited
number
of
large
domestic
companies
with
proven

Challenges in the Coal Sector:

1. Building critical feeder routes for coal.
2. Clearing pending enviro- nment and forest
clear- ances and rehabi-litation issues.

[Link]
commercial
coal
mining by the private
sector.
4. Restructuring of CIL.

21
2

track record to compete with CIL and also to bring in

the latest technology and skills.
Restructure CIL: CIL is a holding company with
seven wholly owned coal-producing subsidiary
companies and one mine planning and consultancy
company, namely Central Mine Planning and Design
Institute Limited (CMPDIL). It encompasses the whole
gamut of identif ication of coal reserves and detailed
exploration followed by design and implementation
and optimizing operations for coal extraction in its
mines. The
T. L. Shankar Committee on Road Map for Coal Sector
Reforms had recommended restructuring of CIL during
the Twelfth Plan. The process needs to be pushed
through swiftly.

Roads
Of late, f inancing of road projects has also run into
difficulty
as
leveraged
companies
implementing road projects are unable to raise
more debt in the absence of fresh equity. In
current market conditions these f irms are
unable to raise new equity. Exit conditions,
therefore, need to be eased in such a
manner that
promoters can sell equity positions after construction, passing on
all benef its and responsibilities to entities that step
in to take over the project. Promoters can then use the
equity thus released for new projects. Further, the toll
should have correlation with users capacity to pay as
well as reasonable payback for the f inancing entities.
From the lending institutions perspective, keeping in
view of the asset-liability mismatch issue, there is a need
to design new f inancing products so as to avoid undue
burden on the developer. Going by international
practice, concepts like traf ic trigger and reequilibrium discount could be examined to see
whether they can be applied to address some of the
problems of the Indian road sector. A traf ic trigger
clause in the contract implies that if a certain volume of
identif ied traf ic is reached, the concessionaire is
obligated to increase roadways capacity in order to
maintain a minimum level of service to users. The reequilibrium discount is used to reduce tarif when
performance parameters are not being met. A table of
discounts is pre-def ined in the contract. The discounts
represent the resources that are not invested as a
result of a failure to meet performance parameters.

Telecommunications
Keeping in view the role of a robust telecom
network in e-governance and delivery of public
services, provisions for state-of- the art IT
facilities in urban areas and creation of a digital
highway and an action plan covering areas
like policy change, regulations,
physical
infrastructure, and tax/f iscal need to be put in
21
2

place in due course of

time. To start with,
policy
for
better
spectrum management
through
trading
and
sharing
of
spectrum
needs to be looked into
so as to bring down the
cost of spectrum. This
may also pave the way
for a liberal merger and
acquisition policy as has
been
demanded
by
stakeholders from time
to time. With a view to
lowering the entry/ exit
barrier, there is also a
need
to
look
into
separation of telecom
networking
from
services. Further, local
manufacturing,
research,
and
entrepreneurship needs
to be promoted with
government assistance.
Other issues requiring
attention
include
strengthening a

ECONOMIC SURVEY
2013-14

21
3

Exit conditions therefore needs to be

eased in such a manner that promoters can
sell equity positions after construction,
passing on all benef its and responsibilities to
entities that step in to take over the project.
Policy
for
better
spectrum management
through
trading
and
sharing of spectrum
needs to be looked into
so as to bring down the
cost of spectrum.

ENERGY, INFRASTRUCTURE AND

COMMUNICATIONS

21
3

national f ibre optic network, nationwide mobile number

portability and rural telephony.

PPP
As highlighted in Economic Survey 2012-13,
global experience indicates that PPPs work
well when they combine the ef iciency and
risk assessment of the private sector with the
public purpose of the government sector.
They work poorly when they rely on the ef
iciency and risk assessment of the government
sector and the public purpose of the private
sector. India should be careful not to
undertake PPPs that do not apportion risks
and
responsibilities
sensibly.
Moreover
flexibility needs to be built into arrangements
so that the contract can be withdrawn and
put up for rebid when the private party
underperforms. The early success of PPP
projects in India was mainly due to the
meeting of obligations by the stakeholder(s)
in
a
timely
manner
as
well
as
implementation of projects over reasonable
timelines. However with economic slowdown,
lower-than-expected demand for services and a
sharp rise in input costs has started resulting
in failure of contracting parties to meet their
obligations
as
stipulated
in
the
PPP
agreements. As a result, the infrastructure
gap has widened over the last few years. A
model that depends on private capital may
be dif icult to implement if the companies
executing
infrastructure
projects are
f
inancially stressed and not in a position to raise
more funds in the absence of radical
restructuring. Further, the execution, operation,
and maintenance capacities of implement- ing
agencies also need to be assessed and
strengthened. The role of banks and f inancial
institutions also needs a relook from the due
diligence and appraisal perspective. Last but
not the least, the ability of PPPs to become an
ef icient means of delivering public services
will also crucially depend on the intention and
spirit of all contractual parties to honour their
respective commitments.

Infra Financing
Long-term f inance for infrastructure projects is
one of the issues that need to be addressed in
the context of the limitation of banks to f
inance such projects. Infrastructure projects,
given their long pay-back period, require longterm f inancing in order to be sustainable and
cost efective. However, banks which have
been the main source of funding for such
projects are unable to provide long- term

funding,
given
their
asset-liability mismatch
and the ceiling on their
exposure
limits.
To
address the problem of
asset-liability mismatch,
banks have a tendency
to lend on floating rate
basis which more often
than not results in
escalation
of
project
cost because of interest
rate
fluctuations.
Further, non-availability
of products for hedging
foreign exchange risks,
especially long tenor
loans as well as high
cost of such hedging
could
be
deterrent
factor(s) in meeing the f
inancing need of the
infrastructure sector in
the country. Absence of
a
well-developed
corporate bond market
has put additional burden
on banks to meet the
funding requirements of
the corporate sector. A
robust and transparent
issuance and
trading
process, uniform stamp
duty across states, a
well-devised
credit
enhancement
mechanism,
an
integrated trading and
settlement

With
economic
slowdown,
lower-thanexpected demand for services and a sharp
rise in input costs has started resulting in
f ailure of contracting parties to meet their
obligations as stipulated in
the
PPP
agreements.

Long-term f inance for

infrastructure projects is
one of the issues that
need to be addressed in
the
context
of
the
limitation of banks to
f inance such projects.
A
robust
and
transparent
issuance
and
trading
process,
uniform
stamp
duty
across states, a welldevised
credit
enhancement
mechanism,
an
integrated trading and
settlement mechanism
are some of the issues
which
need
to
be
suitably addressed for
the development of the
corporate bond market
in
India.

mechanism are some of the issues which need to be

suitably addressed for the development of the corporate
bond market in India.
Recognizing the constraint of incremental f inancing, banks
have been permitted take out f inancing through the
IDF route. IDFs have been put in place to channelize
long-term debt from other sources, including domestic
and foreign investors. Through innovative means of
credit enhancement, policy interventions, and tax
incentives, IDFs are expected to provide long-term
low-cost debt for infrastructure projects by tapping into
sources of savings like insurance and pension funds that
have hitherto played a comparatively limited role in f
inancing inf rastructure. By ref inancing bank loans of
existing projects, IDFs are also expected to take over a
fairly large volume of the existing bank debt that will
release an equivalent volume for fresh lending to
infrastructure projects. Besides augmenting debt
resources for f inancing infrastructure, IDFs could also
ref inance PPP projects after their construction is
completed and operations have stabilized. It may,
however, be argued that after assuming risk till the long
gestation projects come on stream and start generating
revenues, banks may not be willing to trade good
credit-risk projects for greenf ield projects with much
higher risk as envisaged under IDFs.
In the current global context, post the withdrawal of the
stimulus package in the USA and other advanced
economies, a major challenge for emerging market
economies (EMEs) including India is to better equip
themselves to face tight global f inancial and
monetary conditions. However, in the background of
unconventional monetary policies being adopted by
developed countries and volatile capital flows, another
challenge for EMEs is to devise unconventional
development f inancing products with active support
from multilateral development banks as well as
international f inancial institutions for meeting the
funding requirements of their infrastructure sector. The
objective should be to devise mechanisms that can
ensure flow of funds, especially if investments from
conventional sources are not adequate for meeting the
requirements of the infrastructure sector.