Evolving Perspectives in the Development of Indian Infrastructure
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EVOLVING PERSPECTIVES IN THE DEVELOPMENT OF INDIAN INFRASTRUCTURE EVOLVING PERSPECTIVES IN THE DEVELOPMENT OF INDIAN INFRASTRUCTURE Volume 2 Infrastructure Development Finance Company Limited ORIENT BLACKSWAN PRIVATE LIMITED Registered office 3-6-752 Himayatnagar, Hyderabad 500 029 (A.P.), India Email: [email protected] Other offices Bangalore, Bhopal, Bhubaneshwar, Chennai Ernakulam, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, New Delhi, Noida, Patna © Infrastructure Development Finance Company Limited 2012 First published 2012 All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Orient Blackswan Private Limited. ISBN 978 81 250 4666 0 Typeset in Minion 11/14 by Trendz Phototypesetters, Mumbai 400 001 Printed in India at Aegean Offset Printers, Greater Noida Published by Orient Blackswan Private Limited 1/24 Asaf Ali Road New Delhi 110 002 E-mail: [email protected] The external boundary and coastline of India as depicted in the maps in this book are neither correct nor authentic. CONTENTS List of Tables, Figures and Boxes vii List of Abbreviations xvii TRANSPORT 20 Port Sector Reform: Converting Capacity to Comply with Cargo Composition 395 21 Integrating Coastal Shipping with the National Transport Network 421 22 Financing the Development of Indian Highways 447 23 Public Private Partnerships in Indian Railways 457 24 Roads: Leading Indicators Show Ramp-up in Activity 475 25 Financing the National Highways Development Project 483 URBAN AND OTHER INFRASTRUCTURE 26 Water Sector Reform: Urban Water Supply and Sanitation— the Way Forward 503 27 Do “De Novo” SEZs Make Sense? Learning Lessons from China and India 529 28 Investing in Private Healthcare in India: Funding Robust Business Models 575 29 Base Paper for Revision of National Water Policy 2002 598 30 New Initiative—Bus Rapid Transit System (BRTS): Would a BRTS Work in India? 637 31 Options for Financing Urban Infrastructure 644 32 Land Pooling and Reconstitution: A Self-financing Mechanism for Urban Development 722 33 Market Borrowing by Small and Medium Urban Local Bodies Using a Pooled Fund Mechanism 731 34 Sewage Wastewater Recycling for Industrial Use 740 35 Green Office Buildings: Current Market Dynamics and Future Directions 751 vi | Indian Infrastructure: Evolving Perspectives INFRASTRUCTURE DEVELOPMENT AND FINANCING 36 Debt Market Reforms 763 37 Competitive Bidding For Infrastructure Services 768 38 Regulation: Only One Piece of the Infrastructure Jigsaw 811 39 The Political Economy of Infrastructure Development in Post-Independence India 827 40 Developing Physical Infrastructure: A Comparative Perspective on the Experience of China and India 867 41 Mineral Taxation in India: Current Issues and the Way Forward 932 42 Financing Infrastructure 958 43 Domestic Financing and Special Financial Institutions for PPP Projects 978 44 Infrastructure Development in India 999 45 Infrastructure Regulation in India: Experience and Roadmap for the Future 1010 LIST OF TABLES, FIGURES AND BOXES Tables Table 20.1 Major ports throughput—actual and projections 398 Table 20.2 Key performance parameters of major ports 404 Table 20.3 Proposed regulatory framework 416 Table 21.1 Distribution of coastal traffic across different ports 1998–99 422 Table 21.2 Share of coastal traffic at major ports 422 Table 21.3 Composition of coastal cargo 423 Table 21.4 Total coastal cargo handled and share of coastal to total in various ports 431 Table 21.5 The share of logistics cost in the value chain 432 Table 21.6 Desired services and modal choice along the west coast 433 Table 21.7 Port productivity parameters for coastal traffic at major ports 435 Table 21.8 Comparison of cabotage laws in various countries 443 Table 22.1 Road network in India 447 Table 22.2 Redefined NHDP 450 Table 22.3 Financing plan for NHDP 450 Table 22.4 Variance in traffic 452 Table 23.1 Typical risk allocation framework for railway projects 462 Table 23.2 Key sections of a concession agreement 467 Table 23.3 Means of finance for the project 469 Table 24.1 Upsurge in project award activity 476 Table 24.2 Progress of NHDP up to March 2010—over 60% yet to be awarded 478 Table 24.3 Project pipeline—a steady flow on per month basis 478 Table 25.1 Status of the National Highways Development Project as on November 2011 484 Table 25.2 Projected work plan for NHAI and shares of toll, annuity and EPC 486 Table 25.3 Assumptions on VGF, annuity and EPC cost streams 488 Table 25.4 Projected cash flows for NHAI until 2020 (Rs crore) 489 Table 25.5 Scenarios for projecting cash flows 490 Table 25.6 Financing cash flows using debt (Rs crore) 490 Table 25.7 Bonds issued for financing NHAI deficits 490 Table 25.8 Projected work plan for NHAI with a fast track roll-out 492 viii | Indian Infrastructure: Evolving Perspectives Table 25.9 Projected cash flows for NHAI until 2020 with fast track roll-out (Rs crore) 493 Table 25.10 Bonds issued to finance NHAI deficits in fast track roll-out with longer term debt 493 Table 25.11 Projected work plan with higher share of annuity and EPC contracts 494 Table 25.12 Projected cash flows for NHAI until 2020 with a modest roll-out and higher inflation (Rs crore) 495 Table 25.13 Bonds issued to finance NHAI deficits in modest roll-out with medium-term debt 495 Table 25.14 Sensitivity to key parameters in base scenario 497 Table 25.15 Arbitration awards until 2010 497 Table 26.1 Results for water utilities in selected Asian cities 506 Table 26.2 Sources of revenue for urban local bodies, 1997–98 507 Table 26.3 Options for private sector participation in water supply 516 Table 27.1 Comparing the two billionaires 541 Table 27.2 Employment creation in selected EPZs 558 Table 27.3 Impact of EPZs in select sub-Saharan African countries 559 Table 27.4 Impact of EPZs in select countries 559 Table 27.5 Trade in China’s five SEZs in the first five months of 2001 562 Table 27.6 Infrastructure projects with private participation in China 563 Table 28.1 Most private sector models are NPV negative, need to significantly manage operating costs 596 Table 29.1 Groundwater overexploited blocks 607 Table 29.2 Water rates for principal crops and year of revision (September 1999) 612 Table 29.3 Cost recovery in urban water supply 613 Table 29.4 Major private players and participation configurations 622 Table 30.1 Alternate mass transport systems 639 Table 30.2 Comparison of efficiency 641 Table 31.1 Revenue sources of municipalities 645 Table 31.2 Major sources of tax for some key municipal corporations 646 Table 31.3 Taxable municipal bonds 656 Table 31.4 Tax-free municipal bond issues 658 Table 31.5 Pooled bond issues 660 Table 31.6 Revenue powers of municipalities across major states in India (2004) 714 List of Tables, Figures and Boxes | ix Table 31.7 Cost recovery of WSS and SWM services for select municipal corporations covered under JNNURM 716 Table 31.8 Long-term credit rating of the ULBs/state pooled entities 718 Table 32.1 Actual TPS timeline 726 Table 32.2 Land use in TPS (sq m) 726 Table 32.3 Scheme cost: TPS 50 (Rs crore) 727 Table 32.4 Source of financing 729 Table 33.1 Financial summary of Pooled ULBs (%) 734 Table 33.2 Pooled bond interest spread over G-Sec (%) 735 Table 34.1 Levelized annual treatment cost, PPCL 744 Table 34.2 MFL and RCF current total treatment costs (Rs/kL) 746 Table 34.3 Levelized costs for treatment and pumping (Rs/kL) 747 Table 34.4 Levelized costs of supplying STW under different arrangements, including pipeline costs (Rs/kL) 748 Table 35.1 Valuation per square foot (Rs/sq ft) 758 Table 35.2 Comparison of net present value (NPV) of expenditure in green versus non-green office (Rs/sq ft) 758 Table 37.1 Comparison of actual conduct of bidding for Indian infrastructure services with this paper’s recommendations 784 Table 37.2 Characteristics of different types of bidding procedures 800 Table 38.1 Scope of regulatory agencies in selected countries 826 Table 39.1 Economic growth and infrastructure spending in post-Independent India (1951–2004) 832 Table 39.2 Eras of political economy in post-Independent India (1951–2004) 833 Table 39.3 Progress of road network (thousand km) 847 Table 39.4 Evidence of shortages 852 Table 39.5 Consumer goods ownership in India 856 Table 39.6 Targets and achievements under 20-year road plans (in km) 862 Table 39.7 Electoral results of Indian National Congress (INC) in Lok Sabha (1951–2004) 862 Table 39.8 Electoral results of Indian National Congress in state legislatures (1951–2004) 863 Table 40.1 Development of Infrastructure capacity—China and India 868 Table 40.2 China—macroeconomic indicators 869 Table 40.3 Infrastructure investment in 1998, 2005 and 2006 in GDP 870 x | Indian Infrastructure: Evolving Perspectives Table 40.4 Consolidated fiscal balance—China and India (in per cent of GDP) 871 Table 40.5 Structure of investment of national economy (per cent) 872 Table 40.6 Sources of funds for fixed investment in infrastructure, 2006 879 Table 40.7 ROE for China’s publicly traded coal and power companies (per cent) 889 Table 40.8 Development of road infrastructure in China (in ’000 km) 891 Table 40.9 Effective electricity tariff in China and India—2004 897 Table 40.10 Returns to power generation, transmission and distribution— China versus India 898 Table 40.11 Power capacity addition during the five-year plans— actual