Premium growth through roads, waterways and coastal shipping
As roads have a high GDP multiplier, it follows that investment in roads will spur high GDP growth. Waterways and coastal shipping have significantly lower freight costs, and so will boost growth over and above the impact of roads.
Road investment has grown exponentially in the last 3.5 years. All manner of roads are getting attention:
1. Rural roads are facilitating market access and social services, leading to agricultural growth & rural development.
¶⎆ Rural demand is a major source of new consumption.
2. NH development programme has connected Tier 1 cities. Later it connected Tier 2 cities, district HQ and state roads. State roads will soon get upgraded. Road widening, feeder roads, bypasses and ring roads are reducing congestion and increasing speeds.
¶⎆ NH development increases opportunity for profitable economic activity of firms & people.
¶⎆ NH fosters growth of powerful domestic companies and increases per capita incomes over a wider area.
¶⎆ Fast NH are diversifying centres of economic activity and stimulating growth of Tier 2 cities, districts HQs and towns.
3. Tunnelling through hilly areas gives shorter routes, safety and all-weather connectivity. City tunnels and flyovers disperse large traffic loads without disturbing local traffic. Bridges are a boon for local economies astride them. Eg. city bridges will help cities to expand on the other side of the river (eg Guwahati).
¶⎆ Tunnels, bridges & flyovers promote geographical expansion of economic activity.
4. Roads are centres of activity. Out-of-city warehousing, industrial parks, housing projects and roadside service centres are mushrooming where fast, comprehensive road connectivity is offered.
¶⎆ As a result, roads are spawning industrial parks and city growth.
5. Roads are integrating ports, railway hubs, airports, dry ports, border trading centres, SEZs, economic corridors, etc. This reduces logistic costs and selling price of products.
¶⎆ As such, it elevates consumption and exports.
¶⎆ Efficient logistics positively impacts on industrial clusters, which may grow into renowned centres of excellence/ industry (eg chemicals hub).
As roads have a high GDP multiplier, it follows that investment in roads will spur high GDP growth. Waterways and coastal shipping have significantly lower freight costs, and so will boost growth over and above the impact of roads.
Road investment has grown exponentially in the last 3.5 years. All manner of roads are getting attention:
1. Rural roads are facilitating market access and social services, leading to agricultural growth & rural development.
¶⎆ Rural demand is a major source of new consumption.
2. NH development programme has connected Tier 1 cities. Later it connected Tier 2 cities, district HQ and state roads. State roads will soon get upgraded. Road widening, feeder roads, bypasses and ring roads are reducing congestion and increasing speeds.
¶⎆ NH development increases opportunity for profitable economic activity of firms & people.
¶⎆ NH fosters growth of powerful domestic companies and increases per capita incomes over a wider area.
¶⎆ Fast NH are diversifying centres of economic activity and stimulating growth of Tier 2 cities, districts HQs and towns.
3. Tunnelling through hilly areas gives shorter routes, safety and all-weather connectivity. City tunnels and flyovers disperse large traffic loads without disturbing local traffic. Bridges are a boon for local economies astride them. Eg. city bridges will help cities to expand on the other side of the river (eg Guwahati).
¶⎆ Tunnels, bridges & flyovers promote geographical expansion of economic activity.
4. Roads are centres of activity. Out-of-city warehousing, industrial parks, housing projects and roadside service centres are mushrooming where fast, comprehensive road connectivity is offered.
¶⎆ As a result, roads are spawning industrial parks and city growth.
5. Roads are integrating ports, railway hubs, airports, dry ports, border trading centres, SEZs, economic corridors, etc. This reduces logistic costs and selling price of products.
¶⎆ As such, it elevates consumption and exports.
¶⎆ Efficient logistics positively impacts on industrial clusters, which may grow into renowned centres of excellence/ industry (eg chemicals hub).
India’s road ahead: Unlocking India's wealth potential
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- Jan 22, 2018
- Tunnelling in hilly areas and financeIndia’s road ahead: Achievements on the road front
REPLY Jan 22, 2018 - INDIAN ROADS PROGRAMME
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Despite India being the second largest road network in the world, there is a constant need for the network to evolve and add more roads to this network if we want to connect the ever-growing population of the country. At the same time, as was clear when the US suffered the crippling economic depression of the 1930s, there is nothing like road-building to provide jobs and to catalyse economic growth.
Road sector is taking India on a new level--------------------------------------------------------
Road carry more than 60% of all goods and 85% cent of total passenger traffic. Road infrastructure has been a major priorities for the Centre. The government assessed the increasing road traffic and allocated $10.13 billion for development of national highways in its budget FY 17-18. Nitin Gadkari, transport minister has catered to the rising demand and has came out with various schemes, policies and business-friendly strategies to further develop the road sector.
Robust demand, higher investments, attractive opportunities and policy support has changed the face of the road sector in the country within three years. And with rapid growth in national and state highways, it is bound to grow exponentially.
The government is implementing various projects across the length and breadth of the country to solve woes of the common man. India has been constructing highways at a rate of 28km per day. In a bid to fulfil the ambitious goal, the target pace of road construction has been increased to 41km a day, making way for greater connectivity in no time.
National Highways Authority of India (NHAI) plans to build 50,000 km of roads worth $250 billion by 2022 as part of a long-term goal of doubling the length of the national highway network to 200,000 km.
In FY18, total number of road projects awarded would increase to 20,000 km, up from the year ago’s 16,000 km. Rs 7 lakh crore worth projects have been awarded by govt since taking charge in 2014.
Actions taken for ensuring seamless travel, better infrastructure and connectivity are:
Electronic toll collection: NHAI is taking steps such as facilitating Online sale of FASTags and offline sale through Common Services Centre (CSC) near toll plazas, to ensure availability of FASTags for Electronic Toll Collection
Different models: The type of PPP models used in road projects are BOT toll (build operate transfer) and BOT annuity. During the next five years, investment through PPP is expected to be $31 billion. HAM (hybrid annuity model) is a new EPC cum BOT annuity model, where 40% is paid during construction.
FDI in roads: Cumulative FDI inflows into the construction development sector, including roads and highways, stood at $24.54 billion till June 2017. This is expected to grow as the ministry has come out with business-friendly initiatives.
Infrastructure initiatives: Pradhan Mantri Gram Sadak Yojana is designed to pursue nation-wide rural connectivity, linking all the unconnected villages with fair weather roads.
Tax sops: Companies enjoy 100% tax exemption in road projects for five years and 30% relief over the next five years. Companies have been granted a capital of up to 40% of the total project cost to enhance viability.
Pradhan Mantri Gram Sadak Yojana (PMGSY)----------------------------------------------------------------
Roads are crucial for economic development. As majority of the Indian population depends on roads for freight or passenger traffic, it becomes a necessity to build a robust road network in rural and urban areas.
PMGSY was launched in December 2000 by PM AB Vajpayee. Under this scheme, rural road connectivity becomes a key component in development. By promoting access to economic activity and social services, rural roads will generate increased agricultural incomes and productive employment opportunities in rural India.
Since its launch, the state governments and the Centre have been working to achieve complete connectivity in India. Over the years, the efforts to connect rural areas have increased. The pace of road construction stood at 133km per day under PMGSY in 2016-17. This year too, the budget allocation came as a major infrastructural boost. In Budget 2017-18, Rs 19, 000 crore were allotted towards PMGSY.
PMGSY, a flagship scheme of the Ministry of Rural Development, in the first quarter of the present fiscal saw construction of a total of 10,556 kms, clocking an average of 117.28 kms per day. The progress in terms of length constructed in the present financial year is 18.51% of the total annual target. Also, in the Q1 of the current fiscal, 2,543 habitations were provided connectivity, translating into 15.31% of the annual target.
Meanwhile, PMGSY has also focused on use of non-conventional construction materials, such as waste plastic, cold mix, fly ash, jute and coir geo-textiles, iron and copper slag, cell filled concrete, panelled cement concrete, etc, and ‘Green Technologies’.
Growth of National Highway-------------------------------------
Never before has the scope of the roads sector been enhanced as with the current government, and under the stewardship of Nitin Gadkari, Union Transport minister.
Today, the National highways — which accounted for between 55,000-70,000 km out of 3.5 million km of roadways in India — has been expanded to around 200,000 km. This has become possible because roads that used to belong to the state have now been taken over by the central government.
What the present government did was to set up norms that would help decide which road should be treated as a national highway and which as a state roadway. The most critical parameter is the passenger car unit (PCU) count. If the count crosses a certain level, that roadway gets classified as a national highway.
When a state roadway gets reclassified as a national highway, two things happen. First, the entire maintenance budget for the highway moves from the state to the Centre. Second, you know that it is only a matter of time that this road will be widened to become a 4-6 lane highway. All of a sudden the centre’s pie for road development and maintenance has expanded manifold.
At the same time, unlike as in the past, the government has focused on building all weather roads – often using tunneling as one major solution – in the north and northeast of the country. Earlier planners had thought of building bridges. But environmental concerns, and security together tilted the scales in favour of tunneling – even though the cost of construction would be higher.
When added to government’s plans to develop waterways and coastal routes (including the promotion of coastal tourism), Bharatmala and the Sagarmala both combined, have the power to unleash much of the potential that exists in India. That is certainly something to be bullish about, if you are in the business of building and looking after roads.
REPLY Jan 22, 2018 - Nitin Gadkari lays down the roadmap
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For any nation, four things are crucial – water, power, transport and communications. They provide the thrust to industry and agriculture, and lead to employment generation and a rise in growth rate.
“When I was a minister of Maharashtra state, I had kept in my office a statement of President John Kennedy – American roads are good not because America is rich, but America is rich because American roads are good—,“ Gadkari said.
Roads catalyse economic activity, investment, employment and land value goes up, there is planning for townships, industrial parks and this is why roads are vital for national progress.
At the same time, he expressed concern on traffic growth arising from a 22 per cent rise in car sales annually. He favoured waterways and coastal shipping instead of roads which he stated would not be able to keep up with traffic growth.
◘ In water transport, under Sagarmala, we aim to harness the 7,500 km sea front that our nation has been blessed with. We have 12 major ports and will build six more, along with 200 private and minor ports. We will link 111 rivers, of length around 20,000 km, and convert them into river ways. The total outlay of Rs 16 lakh crore includes Rs 4-5 lakh crore budget for modernisation, port mechanisation, port road connectivity and port rail connectivity. We have plans for our own railway, wherein a separate corporation will have a budget of Rs 1 lakh crore. We will build a line from Indore to Manmad and link Kasara directly to the JNPT. In Orissa, we are building a Talcher-Paradip line.
◘ In Maharashtra, we are creating four dry ports. Here again the railway connectivity and station will be our responsibility. We aim for all consignments from Gujarat to be offloaded at Bhayander, where we will create a minor port, and go to JNPT via barges. This will ease the Vasai bridge congestion. We are actively pursuing SEZ at JNPT, which would provide employment to 1.24-1.5 lakh people.
◘ We have 26 irrigation projects on the ground, especially in the suicide-prone areas. We aim to get Maharashtra from 18 per cent irrigation level to 40 per cent in two years.
◘ We are planning a diversion of sea-bound river water at Gujarat and Maharashtra— Rs 25,000 crore project. Once this is done, Mumbai is free of water concerns till 2070. Additionally no area in Maharashtra—Marathwada, Nasik, Nandurbar, Dhule, Jalgaon—will have water issues. Ganga-Cauvery will use underground pipes of 1,500 km, and resolve water issues for Tamil Nadu, Karnataka, Andhra Pradesh and Telangana, by similar diversion. There are 30 such river connectivity project for India.
◘ On the Brahmaputra, we are building jetties. Overall 60 locations are planned. We are working to improve the draft at Haldia. Alongside, we are building roads in Assam on an outlay of Rs 1 lakh crore. Contract awards are in progress. The NHIDCL has been created specifically for the North-East, with focus on hilly areas, the Kashmir border and the North-East. Tunnelling is the way to go and we have some major marquee projects and many more in the pipeline.
◘ For the BBIN plan—Bangladesh, Bhutan, Nepal, Myanmar— we have committed construction of 2,000 km at Rs 25,000 crore outlay with support from the Asian Development Bank. This will improve movement of exports, including to and from ports which Sagarmala will cover. One will ship material from Mumbai till the North-East via road to the Chittagong port, from where it would go to Agartala, or Bangladesh, or ever Myanmar. The South-East Asian market gets opened.
◘ In China logistics cost is 8 per cent, and in European nations and America it is 8-12 per cent cost. Ours is 18 per cent, which we aim to get to 12 per cent. This will boost our economy.
◘ With all our efforts, we (our ministry) plan to add 2-3 per cent to the national GDP. Let me make it clear that for Rs 7 lakh crore overall contracts till now, there is a zero tolerance policy for corruption and no one needs to meet me for any discussions.
◘ We are aiming to reduce time at checkpoints and toll points through vehicle identification technology and access control. Today a Delhi-Mumbai truck needs around 28 hours which, if we can bring down to 16 hours via technology, will improve asset utilisation and overall operator viability. A truck here runs 225-250 km daily vis-a-vis 650-700 km in America. We aim to get our figure to 400 km. With respect to access control with debit cards attached to the windscreens, this technology will be used by government vehicles as well. I have also offered my technology to other State Governments free of cost.
◘ Regarding Mumbai, we had resistance in construction of 55 flyovers and the Sea link but now they are congested too. But vehicles increase in multiples, and private transport is not an option. We must depend on public transport, preferably emission-free. We have an amphibian bus imported with us today, which is rotting in storage since six months, where we seek ramp creation permission to enter the water. Once permissions are in place, we have huge plans for cruise tourism which will be a good business model. I am willing to allot space for free for aeroboat factories. This will automatically include improved sea connectivity with adjoining areas. For Delhi we plan an airborne bus, but overall metro cost is somewhat expensive for a country like ours.
◘ Coming to MIHAN project in Nagpur, it is again doing well. Ramdev Baba (Patanjali) has initiated work on his Rs 5, 000 crore investment plan, which has job creation for 11,000 people. TCS has started work on its project. Today 13,500 people are employed there and I aim to raise this to 50,000 jobs. Anil Ambani’s joint venture with Dassault, and Saab venture with Adani will be accommodated over there. The Ambani venture can be a major global hub for Falcon components. The Tata venture anyway supplies Boeing parts from MIHAN.
◘ Regarding finance to purchase and ply cargo vessels, we have MoU with a Russian company, to start their manufacturing here. We planned a similar agreement with a British hovercraft company at Goa. Such companies typically have client financing arrangements and lines of credit. Now we have government approval for shipbuilding getting an industry status. A subsidy scheme is now getting in place. India has finance arms of large groups catering to automobile purchases, the same can evolve here. The finance ministry is not with me, but we will find some way out.
◘ Samruddhi is an eight-lane economically relevant project, however, in the long-run we need to shift priorities to waterways, railways and then roads. In Delhi-Mumbai corridor, we want to make one lane both side as an electric highway and the plan is to run trucks on electricity.
◘ Regarding electric cars, we already have 200 electric taxis in Nagpur, going to 1,000. Electric cable charging option is there. Mumbai today has a running cost of Rs 110 per km for their BEST buses. Nagpur has ethanol buses with a cost of Rs 78. For electric buses, we are looking to negotiate a cost of Rs 60. But capital cost of electric buses is Rs 1.50 crore, for diesel buses Rs 25 lakh and for ethanol buses Rs 80 lakh. We are looking at the London Transport mode, where there are nine operators, as a good option. It is the private operator who makes the investment in chosen buses. Separate decks for separate facilities, long-distance routes – hospitality and luxury will be a discouragement to private cars. India needs more than ten lakh buses and a model is needed. Our ministry is working on it. Delhi is a case study of what pollution can do and therefore ethanol is a sustainable alternative. We are looking at bioethanol from bamboo, we could harvest large land tracts in the North-East. Like in the American continents, cars here could have flex engines running on both petrol and bioethanol.
◘ Today we have 285 tonnes cement booked in the Rs 120-140 per bag range. Terms are cash and carry, no intervention, no scope for corruption. Let us appreciate that we as a ministry take up 40 per cent of total domestic cement production. I have told the suppliers that we are vital for you, please forego your black marketing habits. I have the mandate to operate ten cement factories of the government, and if it comes to that, we will market quality cement at Rs 120 per bag and set the market.
Sagarmala in Mumbai: 24 companies with Rs60,000 in JNPT SEZ----------------------------------------------------------------
Union Shipping and Ports Minister Nitin Gadkari today said 24 companies have offered to invest over Rs 60,000 crore in a special economic zone adjoining the country’s largest container port JNPT.
“Twenty-four companies have already offered to come and set up ventures in JNPT SEZ who will use it for exports. This will create employment for 1.25-1.50 lakh people,” Gadkari said.
Prime Minister Narendra Modi had laid the foundation for the facility months after being sworn-in in May 2014 and the government was targeting to create 1.50 lakh jobs in the facility. Without disclosing the name of the company, Gadkari today said one of the companies has said it “on an affidavit” that it alone will invest Rs 6,000 crore and create employment for 40,000 people.
The comments from the minister came in the backdrop of recent media reports that said Taiwanese contract manufacturer Foxconn may be one of the interested companies, which will create the high number of jobs for mobile handset manufacturing at the facility.
The government was also hopeful of getting Tesla, arguably one of the most respected companies in the world, to the SEZ, but Gadkari had recently said the battery and transport major is not interested.
JNPT, which has also awarded an over Rs 7,900-crore project to more than double its container handling capacity, is investing Rs 4,000 crore in the SEZ which is supposed to be spread over 277 hectares.
Gadkari today said works of over Rs 2 lakh crore have already started under the ambitious ‘Sagarmala’ project and added that port-rail connectivity will alone witness investment of Rs 1 lakh crore under the project. He said the ministry is constructing the Indore-Manmad railway line at an investment of Rs 6,000 crore and is also looking to connect neighbouring Thane district’s Kasara and JNPT directly.
In order to reduce the container traffic passing through the financial capital and suburbs, it has asked for land near Vasai on the outskirts, from where the containers can be sent directly on barges to JNPT via the water route, he said.
It is also investing Rs 1,000 crore to build a cruise terminal in the financial capital, Gadkari said, adding that the first of the Mumbai-Goa cruise ships will be sailing before the end of December.
http://www.freepressjournal.in/mumbai/indiasroadahead-live-updates-nitin-gadkari-prominent-panelists-discuss-indias-road-ahead/1184396REPLY Jan 22, 2018 - Government to soon unveil policy on methanol blending in petrol
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Government will come out with a policy that calls for 15 per cent blending of methanol in petrol to make fuel cheaper and also reduce pollution.
”I am announcing the policy in the upcoming Parliament session,” said Gadkari.
He said methanol is made from coal and costs only Rs 22 per litre as against the prevailing price of about Rs 80 per litre for petrol. China is making methanol for just Rs 17 per litre.
“So costs will come down and so will pollution," said Gadkari.
Minister is attempting to run 25 buses entirely on the fuel. He said Swedish auto major Volvo will bring a special engine to the financial capital which runs on methanol and factories near Mumbai, such as Deepak Fertilisers and RCF will make methanol.
Gadkari said ethanol should also be used more widely and has suggested to his cabinet colleague in-charge of the petroleum ministry to look at this rather than building petrol refineries that cost over Rs 70,000 crore. According to minister, total investment opportunity on ethanol alone is Rs 1.50 lakh crore.
Hilly areas road infrastructure------------------------------------------
Gadkari expressed concern over the speed of projects under the Defence Ministry-led Borders Roads Organisation and added that his ministry has started the the National Highways and Infrastructure Development Corporation for the same.
The newly formed company will be undertaking works worth Rs 1.5 lakh crore in strategically important locations like north east India, he said.
The government is targeting to increase the the total amount of works awarded by the NHIDCL to 3,000 km in FY18, up from 800 km in FY17, he said.
Subsurface engineering is the buzzword--------------------------------------------------------------
Newer technologies have not only helped address India’s infrastructure issues but also helped in many other domains, said Union Minister for Transport, Nitin Gadkari, while inaugurating a School of Subsurface Engineering by MIT World Peace University (MIT-WPU).
“There is huge potential for subsurface engineering in highway tunnel projects in India. In Jammu & Kashmir alone, there are about 20 tunnel projects currently being implemented, which could absorb subsurface engineers,” he said.
Bustling Infrastructure-------------------------
Today, more than 950 kilometres of projects in India are already under execution, while over 2,500 kilometres of projects are at the planning stage. There is, indeed, a severe shortage of skilled manpower or subsurface engineering experts.
“India is at a take-off stage in its infrastructure and civil projects in sectors as diverse as transport, hydro power, irrigation and sewage. Although, there are professionals in subsurface engineering, India is facing a dire deficit in terms of skill. We at MIT-WPU recognise this gap, and have therefore introduced this platform to formally teach subsurface engineering at this new school,” said Rahul Karad, Executive President at MIT World Peace University.
Why Tunnelling?------------------------
While open works may be simpler to execute, these offer limited scope for expansion. There is a severe shortage of land to meet the transport and infrastructure demands of tomorrow. Litigation over land ownership and environmental clearances are making things tougher. “The land below the surface does not belong to people. Simultaneously, with the introduction of new technologies, tunnelling in the subsurface is increasing and has gained increased acceptance,” said Prassana Gode.
There are a number of ongoing tunnelling projects in the Himalayan region and elsewhere in India and each project starts with a study of the topography. “Underground investigation in India has become better through use of the latest geo-physical techniques, which help to avoid surprises and optimise construction activities,” informed Vijay Kanjlia.
“In some projects, however, geological investigations have continued over 20 long years and yet, when under execution, problems were encountered,” said Vinod Kumar, adding “for instance, a project in Jammu and Kashmir was initiated in 2003, and tunnelling was intended to be completed by 2008. It is still not done and the date has been extended to 2022.”
Paretkar said there has to be a balance.
“The Rohtang tunnel changes every 50-100 metres. It is full of surprises in spite of all the investigations. Therefore, there needs to be a limit to the time taken for geological investigations. There must be a balance between planning and execution,” he said.
Tendering Process---------------------------
Most tunnelling projects in India are executed through contractors and any project, small or big starts with the tendering process, which is a big challenge. “We have been in construction in India since the last four years and the expectations from tendering contract practices are not realistic,” said Hans Eartl of D2 Consult.
Adding to it, Shashikant Limaye said, “In Kolkata, contracts were once awarded without having the land in hand for which the contractors waited for two and a half years. Once they started the work, it was completed in 66 days. Naturally, the delays caused escalation in costs.”
Selection of Tunnel Boring Machines (TBMs)---------------------------------------------------------------------
Tunnelling through boring machines is expensive and the use of latest technology in tunnelling entails high initial costs, which the job owner is required to bear. On the other hand, the contractor is required to indemnify the owner against any possible damage to buildings on the surface during the construction. Timely completion ultimately justifies the high cost of equipment. Delays lead to cost overruns.
“Selection of TBMs is important as use of the right mechanised equipment helps to speed up the work in difficult terrains, especially hard rock, and ensures higher productivity. However, there is no concept of TBMs in India. Discussions on selection of TBMs is necessary,” said Parnetkar.
With expansion of cities underground, tunnels cutting through hard rock and mountains are a complex engineering marvel with specific manpower needs.
With urbanisation and growing congestion, expansion of cities to ease transport needs is going underground.
REPLY Jan 22, 2018 - Panel discussion on India’s Road Ahead: likely path to success
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The unfolding opportunity--------------------------------------------
Sudhir Hoshing, Joint MD, IRB Infrastructure: We have 35 years of experience in the sector. We started with a few thousand rupees, and we vividly remember how a contract of Rs 4 crore was a major achievement. Today each project talks of 1,000 km and above, instead of 50-100 km sizes. For the sector, the real game-changer was the implementation of the Golden Quadrilateral plan by the Vajpayee government in 1999-2004. In terms of size, I can say that the previous plan of such a big scale was the Grand Trunk Road renovation and extension, by Sher Shah Suri (in the 16th century).
Rajat Gupta, Director, McKinsey and Company: We are building 50,000 km of rural roads in a year, spending around Rs 30,000-50,000 crore. This is a huge connector and poverty alleviator, and this programme is going really well. Money is flowing to the executing agencies, the progress is being monitored, when you travel to the interiors you can see it panning out.
Indranil Pan, Economist, IDFC Bank: We always think that India is running a sprint, whereas actually it is running a marathon. Today infrastructure integration is visible and wealth creation scope is enhanced on a large scale. It is likewise an employment multiplier at all levels— direct, indirect and induced employments.
I looked at some data points from a working paper of the International Labour Organization, reflecting the employment multiplier and types of employments, which were quite startling. Type one is the direct employment multiplier, which can be talked of in GDP terms. Type two is the second round in direct employment multiplier, which emerges out of the demand that the construction industry on roads and other projects actually can generate.
Then there is another type—an induced multiplier, which is the inference that whoever is working on that project would not have had that work opportunity earlier, and since he has gainful employment now, the consumption bias of the economic can improve to that extent.
The study looked at two states, Gujarat and West Bengal, and what emerged was that Gujarat saw type one and type two multipliers at 2.6 and 5 respectively while for West Bengal it was as high as 3 and 8. While not getting into the discussion of why there is a difference, it is clear that GDP multipliers are quite high and it is also statistically proven that road-driven GDP growth is higher in the case of road-building in rural areas. India’s rural areas are ripe for growth—there is much arable land, there is good quantum of produce. Roads can enable the marketable surplus to reach areas of demand and get proper value realisation. It will have a strong positive impact on the profitability of farming in general.
Another impact of road-building is improved access of rural areas to education and healthcare facilities. These two are vital constituents of life and from an economic sense their deprivation is a drag on individual productivity and national GDP. Once there is an improvement in this area, it will have a huge long-term positive impact on the regional GDP, if not the national GDP. Our agricultural GDP growth fluctuates— it may be 8 per cent or go negative. With better linkages, we could enable a more stable agri-sector growth, especially with the research in the Krishi Kendras coming up as well, and ease out stress on farmers.
CP Joshi, Secretary, Roads, PWD: Today Maharashtra has around 95,000 km length of roadways. The enhancement plan includes upgradation of existing national highway network, as well as co-ordinated selection of tourism and industrial locations and enhancement of road network for those places. The programme includes upgradation of 10,000 km of state highways, and construction of 14,000 km of new roads.
The investment requirement through the HAM (Hybrid Annuity Model) model would be met. With almost 60 per cent (across two years) coming from the government where the money is very much in place. The remainder 40 per cent of investment is through deferred annuity payments over ten years. We aim to provide are toll-free roads of international standards. The HAM model was the path breaking initiative from the Maharashtra government.
Change in approach required--------------------------------------------
Rajat Gupta: What is amply clear from the Minister’s speech is that there is a deluge of infrastructure projects coming up, and that this pipeline is moving at different levels of progress. We need to start thinking about infrastructure in a more integrated way and focus on optimisation. There has been a notification from the Ministry of Commerce, for creation of a department which is overall in-charge of logistics for a national logistics strategy and other such dimensions.
In India, 60 per cent of goods movement take place via road, whereas this is below 50 per cent in most other nations. Regarding the coastal shipping, China moves 24 per cent of goods traffic this way. Today, India’s railways have 18 per cent share in long-distance container movement, which should move to 25 per cent. Obviously, we have a long way to go and solutions will be intermodal in nature. Road transport share must be brought down to 50 per cent in a goods traffic growth scenario.
Similarly in aviation, passenger demand in aviation has doubled in six years to 225 million currently. In the next 10 years it could further triple. Against that, look at the top 20 airports, 12 out of them are today clogged either on the runway side or in the terminal side. By 2021, all the 20 will be short of capacity. I hope there is a Hawai Mala coming, which will fill needs of travellers and create opportunities for vendor businesses.
On inland waterways, the ecosystem needs to develop. Is the software component capable for collection and taxation requirements? Not likely. A lot of procedures need to be in place – taxation, cabotage and so on. There is a strategy planning element to be put in— China’s exports travel around 150 km to get to the coast, whereas for India the figure is 700 km.
The opportunity in this space is immense when you factor in the Bharatmala and Sagarmala projects. We will see new industries emerging—sand manufacturing, the aircraft MRO business. Manufactured sand is not an industry that exists in India, but we are not going to build this level of infrastructure out of river sand. MRO for aircraft is a new industry that will get created, today we do itsy-bitsy amounts of it. Same is the case for even non-core service activities at transit points like stations and airports.
Between 2002 and 2012, the EPC business went up tenfold, and companies which were Rs 300-500 crore could grasp an opportunity to grow to Rs 3,000-5,000 crore. I am hopeful this scale of growth will happen again.
CP Joshi: Maharashtra has been a leading state of India. We have implemented the first expressway and have connected lands across rivers and creeks through bridges. In three years, Maharashtra will be among the best road networks in India. Maharashtra has the honour to have their Vice President in the Indian Roads Congress, which is a parallel body of specifications, known internationally.
Anil Taneja, CEO, India Infrastructure Finance Company Ltd: It is important that betterment of habitats should have been planned in conjunction with development of urbanised areas. My focus would be on the rural areas right now, but then 56 per cent of Maharashtra is urban. Hence initiatives must be taken to regulate construction, and simultaneously find ways and means to improve current conditions, and also manage the future through smart cities. That initiative has been taken, and governing bodies have been formed, not only for smart cities but in cities like Pune and Mumbai city. Simultaneously, MSRDC has been mandated to look after the agro hubs.
We have adopted a 2040 vision— what infrastructure is needed to be in place that has been the debate in government. If you meet officials in Urban Development, you will come to know many other things. Whatever we do is a small part of all this. The CEO of Smart Cities could explain in more detail the government initiative for the urban spaces.
Funding the dream--------------------------------------------
Rajat Gupta: Today there are only a handful of EPC contractors who have revenue size of Rs 1,000 crore and above. Against that, we are looking at 5-10 times order pipelines of some individual players. Forget technical aspect of execution, the question then is— is the balance sheet and net worth up to required standards for the financial aspect of execution? Normally you build projects, build surplus, enhance net worth and go to the next level of activity. But when projects are coming so fast down, how do we rate such businesses for financing?
Second is the scale of individual work orders. Today, we are talking of expressway and ring road projects, which are individually in the size of Rs 10,000-20,000 crore. That, in historical perspective is a huge rise and funding is not necessarily through government sources or toll income monetisation. New funding mechanisms have to be developed.
Anil Taneja: IIFC today finances up to 20 per cent of project cost in direct lending terms, plus an additional 10 per cent in take-out financing. It is our considered view that finance today will not be a problem for India’s infrastructure projects, with the presence of dedicated government bodies like IIFC. You may recollect the recent international agency upgrade of India’s rating. IIFC’s UK arm is on hand to provide dollar financing, through the USD 5 billion line that they can access. We are on the lookout for building a pipeline of eligible projects.
The current government’s thought and implementation have increased optimism among investors. Today we have access to 50 billion JPY from the Japan International Co-operation Agency, and a USD 250 million line from the European Investment Bank. The calls for sovereign guarantee as a backup for lender comfort are no longer there, because we are ‘AAA’ entity. We can also look at refinancing of completed projects. We also enhance the project rating through our presence, and then the project can access soft loans from the market on its own strength.
A decade back, if a road project contractor would go to a bank for financing, he would be laughed at. They would ask – what is the project collateral? Today, the existence of infrastructure finance companies, the improvement in ease of doing business, tie-ups with agencies, all contribute to comfort in fund-raising. The numbers given are Rs 1 lakh crore coming in from PPP-type projects, another Rs 2.19 lakh crore from the government side— bonds and so on. Another Rs 34,000 crore coming in from TOT that is monetisation of toll projects. Beyond that is Rs 2 lakh crore through other schemes like EPF. That is how the Rs 7 lakh crore estimate for Bharatmala is built up.
Sudhir Hoshing: There was a time when everything was build– operate– transfer (BOT) and then a time when everything was EPC. In such cases, competition becomes extreme and when the dip comes, it is very severe. So people get into trouble. Now when there is the mixed HAM model, both types of players can be involved.
Technical evolution & challenges--------------------------------------------
Rajat Gupta: From user viewpoint, optimisation is a challenge. In China, 1,400 km of container movement takes 5-6 days and for India the figure is 7-14 days. The variance at the upper end is disturbingly high.
Sudhir Hoshing: We have witnessed changes in execution, wherein labour element has been substantially replaced by mechanisation, even as the scale of operations has grown multi-fold. We have studied execution methods of different countries. I especially went to see sites across many countries— how are they doing their work and how are we going about it, where are we getting delayed. I went to China. I went to the U.S. and to European countries. I found no difference. We can safely say that India is on par in terms of level of technology and mechanisation in the execution process. Similarly after demonetisation, we have seen cashless collection go up from 1 per cent to around 25 per cent in some places. Earlier the debate was that for an underdeveloped nation like India, is it necessary to invest in roads? Today, be it roads, metro systems or other transport mechanisms, such debates no longer happen.
Indrajit Banerjee, Deputy GM, Afcons: Our order book today contains quite a few projects to be implemented in hilly terrain— Jammu and Kashmir, Himachal Pradesh, the North East. The major challenge here is that the Himalayas are a young mountain range in geological terms and therefore we don’t know what challenges can emerge. A proper geo-technical study is in order alongside the DP submission, which honestly is not a common occurrence. Secondly, a young mountain range can spring its own surprises. Be it Rohtang or Zoji La, from avalanches to water incursions, we have to face many unplanned element in the execution process. Other physical challenges include altitude, climate, snow-capped environment, changes in soil types and their impacts on both manpower and mechanical assets.
In all this, the formation of contract agreements is another operational difficulty, if the process here is one-sided in nature. Initially what happens is that the bureaucrats preparing the contract just think that the contractors are trying to mint money, which as you can see is not an accurate assessment in the context of our operations. What is needed is a win-win situation because once the contract is signed between two parties, we have to follow the terms. The agreement is the Bible which we have to follow, and whatever the DPR information available, whatever the challenges coming up – all must be tackled.
Our key success always remain standard in any project—execution time, method and cost—but the uncontrollable factors are many. Impact of different factors—from delays to loss of vehicles to avalanche damage on sites to hazardous operating conditions—reflect on project investment returns and yet there is not much that can be pre-stated in the bid.
In technology terms, we are at par with global standards. There is a need to scale-up and technology absorption experience. If we are looking at tunnelling of 8,000-9,000 km in the next 6-7 years, we have to grow our resources. Today we are suffering from quality scarcity in implementation, which will be mitigated with time.
Indranil Pan: Whether all initiatives would show a big GDP upside immediately – I do not warrant that. As I said, this must be looked at as a marathon. And rather than having huge volatile swings and encountering problems, it is better to have a curve going slightly and steadily upward. That would, in my opinion, enable sustainable wealth generation.
Sudhir Hoshing: Going forward, the travel process will see more ease and fewer issues. On the bad side, we see that with more lanes being added, the frequency of accidents has gone up, be it over-speeding or drunken driving cases. At some level, it indicates that the approach to driving has to be changed. I very emphatically want more roads and those roads to be very safe. Overseas, for getting a driving licence, there is a proper curriculum which has to be studied and then the licence exam should be attempted. That is how people there approach driving, and that is how we can see more of safe roads.
Rajat Gupta: Coming to new models, you may have heard of a logistics company called Rivigo, valued close to a billion dollars in three years of operations— the largest buyer of trucks in India today. They have innovated in two ways. They basically have a relay driver model so that the driver comes back home in say zero to one night of staying out. They also have put the Internet of Things to use— for tyre pressure, fuel, telemetry and so on. They have been able to halve the transportation time.
Samruddhi rollout and implications--------------------------------------------
C P Joshi: While we cannot dispute the model shifts towards waterways, the fact is that, even with speedy implementation, it will take a decade to come up. So till that time roads have to sustain. If I want to maintain and increase the competitive advantage that Maharashtra has, then the road conditions must be the best. Therefore, we are coming up with the Samruddhi corridor and also developing a better state highway network.
Kiran Kurundkar, Joint MD, MSRDC: Samruddhi project is conceptualised as a super commercial expressway for Maharashtra. In the 701 km corridor, it will cover ten districts, 26 tehsils and 392 villages. Starting from zero at Nagpur, we reach Aurangabad district border at 575 km, beyond that is a backyard, a black hole –Buldhana, Amravati, Wardha.
Beyond Wardha again there is some development, but in between is the suicide zone of Maharashtra. The soil there is rich but irrigation is limited and so farmers are dependent on a single crop which again cannot be transported to bigger markets due to linkage limitations. This expressway will provide the opportunity of being able to market their produce in APMC at Navi Mumbai or other cities.
When all these 24 rural districts of Maharashtra come on this four-lane expressway, they will be immensely benefited. Likewise, for a container to reach JNPT from Nagpur takes 40 hours, and passenger traffic time is 16 hours. We are targeting the container transit time to be 16 hours and the passenger traffic to come down to 7-8 hours.
The primary purpose and focus of the Samruddhi project is the development of agro-prosperity. Agro-prosperity would mean more processing units, cold storages coming up, logistic hubs evolving etc. All these would generate employment. Our study shows each hub would generate around 20,000-25,000 jobs, which today are not available in those backyards of Maharashtra.
REPLY Jan 22, 2018 REPLY Jan 23, 2018
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