Infrastructure in four years of Modi govt: A thumbs up for better connectivity

The Narendra Modi government has been trying to leverage roads, railways and waterways to bring India's logistics costs down to 8%

Jyotika Sood, Utpal Bhaskar
Updated26 May 2018
The roads ministry also introduced an asset monetization model in India, referred to as the toll operate transfer (ToT), which is now expected to provide a template for other infrastructure sectors. Photo: Mint
The roads ministry also introduced an asset monetization model in India, referred to as the toll operate transfer (ToT), which is now expected to provide a template for other infrastructure sectors. Photo: Mint

New Delhi: Over the years, the speed of road construction had become the benchmark for India’s infrastructure creation. Now, the Narendra Modi government has set in play a new integrated infrastructure programme, which involves building of roads, railways, waterways and airports.

The centre has also been trying to leverage roads, railways and waterways to bring India’s logistics costs down to 8% to make the economy competitive. Since long, India has been grappling with high logistics costs of 14% (as a percentage of cost of the product), which make exports uncompetitive vis-à-vis those of China, where logistics costs add up to just about 8-10%.

With several large conglomerates and infrastructure companies weighed down by debt, the onus of creating infrastructure was on the centre.

On its part, the NDA government did not lack ambition as was evident when the road construction target of 45km per day was set for the current financial year, from 27km achieved per day in 2017-18. The average rate of highway construction was also raised from 14km per day, with the pace of land acquisition improving.

In the process, the government has revived the highway sector, which was reeling under stress and lack of private investment. The road ministry under Nitin Gadkari took a raft of measures, including terminating projects, de-risking them and introducing the hybrid annuity model (HAM), wherein the government provides 40% of the project cost to the developer to start work, while the remaining investment has to be made by the developer.

Analysts are, in fact, enthused by the work done. “Ordering and construction of National Highways has increased to all-time highs of 17,055 km and 9,829 km, respectively, in FY18,” Bank of America Merrill Lynch wrote in a 20 April report. “Funding is not an issue in the near-term; and the pace and process of land acquisition has improved.”

Given the need for resources to boost its ambitious infrastructure programme, the government is also exploring an independent financial institution to cater exclusively to the roads and highways sector. The roads ministry also introduced an asset monetization model in India, referred to as the toll operate transfer (ToT), which is now expected to provide a template for other infrastructure sectors.

The government has also set ambitious plans, such as the Sagarmala (ports) and Bharatmala (roads), to improve its transport infrastructure. While the total investment for the Bharatmala project was pegged at Rs10 trillion—the largest ever outlay for a government road construction scheme—the country has envisaged Rs8 trillion of investment until 2035 under the Sagarmala programme.

The civil aviation policymakers have also taken several steps to boost airport capacity and improve regional connectivity to meet the rising demand for air travel. It also planning to ease rules on cancelling air tickets.

This, at a time, when India’s civil aviation market is growing at 19% over the last four years, and projected to be the third largest in the world by 2025, after the US and China.

To put the required physical infrastructure in place, the Airports Authority of India has set a capital spending target of over Rs20,000 crore till FY22.

Over 70 un-served or under-served regional airports are being developed under the regional connectivity scheme with various concessions to airlines. This, along with a project to step up capacity under the NextGen Airports for Bharat (NABH) Nirman, is expected to help increase the number of air passengers from 265 million in 2017 to about one billion in 10-15 years.

Gireesh Chandra Prasad contributed to this story.

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