₹100 trillion infrastructure plan to roll out over 5 years

The capital expenditure for infrastructure is likely to touch  ₹100 trillion in five years,
The capital expenditure for infrastructure is likely to touch 100 trillion in five years,

Summary

  • The blueprint would include a 20-trillion master plan to develop 50,000 km of expressways, 2 trillion towards development of port infrastructure, and a 10-12 trillion plan to upgrade the railway network, among others.

New Delhi: A grand plan to build India’s infrastructure to a new level is in the works. Such a blueprint would work towards leveraging the vast amounts of money being pumped in by both the central and state governments, as well as the private sector, three people aware of the development said on condition of anonymity.

“The proposed blueprint will seek to build on the momentum gained in infrastructure creation and is expected to be a defining feature of the Modi administration’s third term in office," one of the people cited above said.

This person said the capital expenditure (capex) for infrastructure is likely to touch 100 trillion in five years, which would be used to transform India’s ports, airports, roads and other utilities.

The blueprint would include a 20-trillion master plan to develop 50,000 km of expressways, 2 trillion towards development of port infrastructure, and a 10-12 trillion plan to upgrade the railway network, among others.

The objective is to expand existing infrastructure as well as build new capacities, and create showcase projects that measure up with the best in the world, the first person cited above said. Such projects would be aimed at further economically integrating rural and urban areas, reducing travel time and logistics costs, stimulating growth, and enhancing the standards of living over the next five years.

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To be sure, infrastructure investments have been loaded in the recent past as well. For FY25, the Centre allocated 11.11 trillion for its own infrastructure capex and 3.9 trillion as grants to states for asset creation, according to data from the finance ministry.

Private sector capex is much more. In the nine years to FY23, private sector investments have remained around 36-40% of the gross fixed capital formation (GFCF) in the economy, while that of central and state governments together accounted for 12-14%, per finance ministry data.

Detailed figures for FY24 are expected in January. In the coming fiscal, governments’ share in capex is expected to go up, given a 17% annual increase in budget allocation.

Queries sent on 4 December to the ministry of finance, NITI Aayog, the Prime Minister’s Office, and the ministries of railways; road transport and highways; and ports, shipping and waterways remained unanswered till press time.

Shailesh K Pathak, an infrastructure expert and former CEO of L&T IDPL (Infrastructure Development Projects Limited) and secretary general of industry body FICCI, said NDA 3.0 should continue its good work in construction under the national infrastructure pipeline. “Over half of infra construction is in states and cities. Urban Infrastructure should get much more attention, specially from state and city governments," Pathak said.

The national infrastructure pipeline (NIP) aims to build infrastructure projects and stimulate economic growth. The total investment required for the NIP is estimated to be 111 trillion over the period 2020-2025.

Plan for roads

In roads, development will move away from plain vanilla highways to access-controlled expressways—a type of road that is designed for high-speed traffic with controlled access and egress points. A 20-trillion master plan to develop 50,000 km of these modern roads would be unveiled, with work on at least 25,000 km targeted for completion in the next five years, the second person cited above said.

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The person added that the objective is to provide an expressway network at 100 km from any point in the country. Also, several projects would be relaunched under the built operate and transfer (BoT) model to attract private investment in roads.

The National Highways Authority of India (NHAI) has prepared a pipeline of 53 projects spanning 5,214 km, which require investments of 2.1 trillion to be developed through BoT. The aim is to have at least a third of highways to be built by the private sector under this model, the second person cited above said.

Shipping and ports

A third person aware of the developments said that for shipping, the blueprint will emphasize the creation of world-class port infrastructure both in terms of size and facilities. In addition, a mega shipbuilding policy would be unveiled together with a 25,000 crore maritime development fund that would aim to make country a global hub for shipbuilding.

Two mega ports and transshipment hubs at Vadhavan in Maharashtra and Galatea Bay in Great Nicobar will be taken up for completion in the next five years, the third person added.

Also read | Shipping industry likely to get 25,000-crore boost

Also, six major ports of the country are proposed to be scaled up to the status of mega ports with the target of putting Indian ports in the list of top 50 ports globally. These ports are Deendayal and Tuna Tekra port cluster; Jawaharlal Nehru – Vadhavan port cluster; Cochin – Vizhinjam port cluster; Galathea South Bay Port; Chennai – Kamarajar – Cuddalore port cluster; and Paradip and other non-major ports cluster.

Picking up pace

For the railways, India’s largest transporter, the transformation would be towards improving speed, comfort and safety for both for passengers and goods.

Accordingly, a mega plan to scale up the Vande Bharat scheme in all its formats is being put in place: passenger chair car, passenger sleeper, Vande Bharat Metro and Vande Bharat Parcel would be launched. Also, missions on track renewal and signalling would be launched along with manufacture of hydrogen trains in the country.

Airports are also being planned in smaller towns and cities while existing infrastructure would be modernised.

Coastline and waterways

The blueprint will further expand the scope of the Sagarmala project, which was launched in 2015 to boost India’s logistics sector performance by unlocking the potential of the country’s coastline and waterways.

Currently, there are 802 projects worth investment of more than $65 billion for implementation under the Sagarmala Programme by 2035, per data from the shipping ministry. Out of these, 228 projects worth $14.6 billion have been completed, and 260 projects worth $27 billion are under implementation. All these would be targeted for completion over the next five years.

Also read | Centre plans capital support for building inland waterways ships

The focus will not only be on infrastructure development but also building capacities that takes the country further on path of aatmanirbharta and reduced dependence on imports.

Industry feedback

A revised version of the NIP should be prepared with revised targets for priority sectors including roads, urban transformation, smart cities, railways, power and renewable energy, said D.K. Srivastava, chief policy advisor at EY India.

“Investment targets for all the three major investors, namely central government, state governments and their respective public sector undertakings, and private sector should be recast after evaluating their performance in financing the earlier NIP," said Srivastava.

Given past experience, Srivastava recommended a revision of the earlier NIP shares of 39%, 39% and 22% for GoI, states and private sectors, respectively, to 45%, 35% and 20%, “to realise 100-trillion investment over the next five years".

Pathak added that along with infrastructure development, contract enforcement as well as contract management should be improved “The former is about the judicial ecosystem, and the latter about capacities in government entities handing contracts," he said.

Lekha S. Chakraborty, professor at National Institute of Public Finance and Policy (NIPFP), said that in a fiscal federalism setup, states are equal partners in ensuring growth, and continuing capital expenditure (capex) transfers to state governments is crucial.

“There should be no sudden reversal of capex, as it will have adverse growth consequences. However, there is concern about social infrastructure in health and education, which should also be increased for better human capital formation, but not at the cost of curtailing capex. This requires a blueprint for a fiscal consolidation path and deficit targets to keep fiscal policy accommodative, especially when the RBI is maintaining high interest rates for inflation containment," said Chakraborty.

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Up to October end, the central government made 4.6 trillion of capital expenditure, or 42% of its full year allocation, compared to nearly 55% in the year-ago period, as the June quarter this year was marked by national polls, a period when the administration focuses on electoral process.

A person informed about discussions in the government said that with the increase in fund allocations, schemes are now reaching the saturation point in their fund absorption capacity.

The blueprint echoes the vision of infrastructure creation previously set in motion by the first NDA government under the late Prime Minister Atal Bihari Vajpayee between 1999 and 2004, the period that saw roll out of the Golden Quadrilateral project connecting Delhi, Mumbai, Chennai and Kolkata as well as the flagship rural roads scheme. Vajpayee’s 100th birthday falls on 25 December.

 

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