INFRASTRUCTURE March 2021 For updated information, please visit www.ibef.org Table of Contents Executive Summary 3 Advantage India 4 Market Overview and Trends 6 Strategies Adopted 13 Growth Drivers and Opportunities 15 Key Industry Contacts 27 Appendix 29 2 Executive summary 2. INCREASING PRIVATE 3. IMPROVEMENT IN LOGISTICS SECTOR INVOLVEMENT . Private sector is emerging as a key player • The logistics sector in India is growing across various infrastructure segments, 10.5% annually and is expected to ranging from roads and communications to reach US$ 215 billion in 2020. power and airports. • India was ranked second* in the 2019 . Private investment into physical and social Agility Emerging Markets Logistics infrastructure is key to putting India in a high Index. growth trajectory, which will make it a US$ 5 trillion economy by 2024-25. Yearly private equity (PE) and venture capital (VC) investment in India is expected to 1. HIGH BUDGETARY surpass US$ 65 billion in 2025. ALLOCATION FOR INFRASTRUCTURE 4. RISING FOREIGN DIRECT INVESTMENT • In Union Budget 2021, the government has given a massive 2 (FDI) IN THE SECTOR push to the infrastructure sector 3 • FDIs in the construction by allocating Rs. 233,083 crore development (townships, (US$ 32.02 billion) to enhance the housing, built-up infrastructure transport infrastructure. and construction development • The government expanded the projects) and construction ‘National Infrastructure Pipeline (infrastructure) activity sectors (NIP)’ to 7,400 projects. ~217 1 stood at US$ 25.78 billion and projects worth Rs. 1.10 lakh crore 4 US$ 23.99 billion, respectively, (US$ 15.09 billion) were between April 2000 and completed as of 2020. December 2020. Note: * prepared by Agility for ranking emerging countries in terms of their logistics performance Source: Media sources, DPIIT, Equirius Capital, EY, National Infrastructure Pipeline 3 Advantage India 4 Advantage India 3. POLICY SUPPORT 2. ATTRACTIVE OPPORTUNITIES . In Union Budget 2021, to support initiatives such as ‘Housing for • Favourable valuation and earnings outlook makes this All’ and ‘Smart Cities Mission’, the government allocated Rs. sector an attractive opportunity. 13,750 crore (US$ 1.89 billion) to AMRUT and Smart Cities • Only 24% of the national highway network in India is Mission. four-lane, therefore there is an immense scope for . 100% FDI is permitted under the automatic route across various improvement. infrastructure sectors. • The Regional Connectivity Scheme (RCS) gives . In March 2021, the Parliament passed a bill to set up the National opportunity for development of airports. Bank for Financing Infrastructure and Development (NaBFID) to fund infrastructure projects in India. 4. INCREASING INVESTMENT . Huge investments in infrastructure (e.g., Reliance Digital Fibre Infrastructure Trust 1. ROBUST DEMAND 2 Investment of US$ 1 billion) • India is expected to become the 3 have provided momentum to third largest construction market overall PE/VC investments in globally by 2022. India. • India has a requirement of . The construction development investment worth Rs. 50 trillion and infrastructure activity sectors (US$ 777.73 billion) across received FDI inflows amounting infrastructure by 2022 for a 1 to US$ 25.93 billion and US$ sustainable development in the 4 23.99 billion, respectively, country. between April 2000 and December 2020. Note: UDAY - Ujwal Discom Assurance Yojana Source: Media Sources, DPIIT, PricewaterhouseCoopers 5 MARKET OVERVIEW AND TRENDS MARKET OVERVIEW 6 Performance of eight core infrastructure industries . The eight core infrastructure industries include coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity. Index of eight core Industries . In February 2021, the combined index of eight core industries stood 180 at 127.8. In October 2020, NITI Aayog and Quality Council of India (QCI) 160 launched the ‘National Program and Project Management Policy 140 158.5 Framework’ (NPMPF), envisaged to bring radical reforms in the way 155.5 152.6 infrastructure projects are executed in India. 120 145.7 135.2 133.6 131.6 . 129.4 124.4 On September 23, 2020, National Thermal Power Corporation Ltd. 123.9 100 120.5 113.5 (NTPC) announced plans to establish industrial parks inside its 113.1 109.8 power projects and has invited Expression of Interests (EOIs) from 80 Indian firms. 84.5 60 79.8 65.1 40 59.1 20 0 Coal Steel Overall Cement Refinery Products Crude Oil Crude Electricity Fertilisers Natural Gas Natural FY20 FY21* Note: *- Until February 2021 Source: Ministry of Commerce and Industry 7 Growth in infrastructure related activities . In February 2021, Prime Minister Mr. Narendra Modi dedicated the LPG import terminal to the country, a 348 km Dobhi–Durgapur Growth in infrastructure related activities in FY20 (in %) Natural Gas Pipeline section, which is part of the Pradhan Mantri 18 15.00 Urja Ganga project. 15 . In December 2020, Prime Minister Mr. Narendra Modi inaugurated 12 the 351-km ‘New Bhaupur- New Khurja section’ in the Eastern 9 Dedicated Freight Corridor (EDFC), Uttar Pradesh. 6 . In December 2020, the Cabinet Committee on Economic Affairs 3 0.82 0.26 (CCEA) approved three infrastructure proposals worth Rs. 7,725 0 crore (US$ 1.06 billion) to set up greenfield industrial cities to -3 enhance connectivity to major transportation corridors such as the -6 eastern and western dedicated freight corridors, expressways and -9 national highways. -8.06 -12 -10.95 . Freight earnings in FY20 stood at Rs. 113,480.65 crore (US$ 16.10 -15 billion), while its gross revenue stood at Rs. 174,660.52 crore (US$ 24.99 billion) in the same period. Railway earnings earning Cargo at Cargo Rail freight Rail . Cargo traffic handled stood at 707.4 million tonnes (MT) in FY20. ports major . Electricity production in India reached 1,252.61 BU in FY20. Electricity Generation National Highway Construction Highway National Note: Data is as per latest available information, P - Provisional Source: Economic Survey, Ministry of Railways, Indian Ports Association, Central Electricity Authority 8 Strong momentum in expansion of roadways . Highway construction in India increased at a CAGR of 21.44 between Road Construction per Day (km) FY16-FY19. In FY19, 10,855 km of highways were constructed. The Government of India aims to construct 65,000 km of national highways at a cost of Rs. 5.35 lakh crore (US$ 741.51 billion) by 2022. 40 . The Government will use plastic waste for the construction of roads. One 35 of the roads has been recently constructed with plastic waste near 34 Dhaula Kuan (New Delhi), while there are plans to construct Delhi- 30 Meerut Expressway and Gurugram-Sohna road. 30 . 28 In January 2021, the Government of India & NDB signed two loan 25 27 agreements for US$ 646 million for upgrading state highway network and district road network in Andhra Pradesh. 23 20 . The Ministry of Road Transport & Highways announced that it has achieved a milestone by constructing 12,205.25 kms of National 15 17 Highways in FY21 (until March 22, 2021), with construction of 34 kms per day and 1,205 kms more than the target (11,000 km) fixed for FY21 10 12 5 0 FY15 FY16 FY17 FY18 FY19 FY20 FY21* Note: E - Estimate, Figures are as per latest data available, *until March 22, 2021 Source: Ministry of External Affairs, Economic Survey-2019-20 9 Strong revenue growth for Indian railways . Revenue growth has been strong over the years. Indian Railways’ revenue increased at a CAGR of 2.57% in FY16-FY19 and reached Gross revenue trends over the years (US$ billion) US$ 27.71 billion in FY19. The gross revenue stood at Rs. 174,660.52 crore (US$ 24.99 billion) in FY20. 28.00 . In Union Budget 2021, an outlay of Rs. 110,055 crore (US$ 15.09 billion) was announced for Indian Railways, an increase of 53% YoY. 27.50 27.71 . The Ministry of Railways is working on a plan to earn Rs. 15,000 crore 27.00 (US$ 1.56 billion) over the next 10-20 years through rail display network (RDN), enabling real-time information to passengers. 26.50 . Indian Railways will require investment of Rs. 35.3 trillion (US$ 545.26 billion) by 2032 for capacity addition and modernisation. The capital 26.00 expenditure in the sector is expected to increase by 92% annually. 25.50 . Railways is leading India’s fight against climate challenge and is taking significant steps towards meeting its ambitious goal of being a net zero 25.69 25.00 carbon emissions organisation by 2030 and meeting India’s Intended Nationally Determined Contributions (INDC) targets. 25.02 24.50 24.99 . In November 2020, RailTel announced its highest ever consolidated 24.64 income of Rs. 1,16,600.50 lakh (US$ 1.56 billion) for the 2019-2020 24.00 fiscal year in its 20th Annual General Meeting. For March 2021, Indian Railways’ loading was 122.19 million tonnes— 23.50 a 24% YoY growth. Also, the Indian Railways earned Rs. 12,137.22 crore (US$ 1.65 billion) from freight loading—a 24% YoY increase. 23.00 FY16 FY17 FY18 FY19 FY20 Note: CAGR - Compound Annual Growth Rate, E - Estimates, P-Provisional, FY - Indian Financial Year (April-March) Source: Vision 2020, Ministry of Railways 10 Power generation capacity has increased at a healthy pace . In February 2021, the total thermal installed capacity stood at 379.13 GW, while renewable, hydro and nuclear energy installed capacity InstalledVisakhapatnam electricity port generation traffic (million capacity tonnes) (GW) totalled to 92.97 GW, 46.20 GW and 6.78 GW, respectively. CAGR^ 7.19% . Indian energy sector is expected to offer investment opportunities 400 worth US$ 300 billion over the next 10 years. On December 31, 2020, the Asian Development Bank (ADB) and the 350 Government of India signed a US$ 100 million loan to modernise and 379.13 upgrade the power distribution system to boost the quality and 370.11 356.10 efficiency of electricity supply in Bengaluru, Karnataka.