1. Top initiatives of last year that will shape India 2016

Top initiatives of last year that will shape India 2016

From discom revamp and the Sagarmala ports project to Smart Cities and Amaravati, the government push for infrastructure augurs an upswing for the sector

By: | Updated: January 1, 2016 7:54 AM
From discom revamp and the Sagarmala ports project to Smart Cities and Amaravati, the government push for infrastructure augurs an upswing for the sector

From discom revamp and the Sagarmala ports project to Smart Cities and Amaravati, the government push for infrastructure augurs an upswing for the sector

The year 2015 will be remembered by infrastructure aficionados as the one when the NDA government unleashed a slew of initiatives that were directed at changing the landscape and ushering in a much-awaited revival. Here are 15 thrusts of 2015 that have the potential to significantly impact and influence activities and investments in the infra sector in 2016.

* National Investment and Infrastructure Fund: The NIIF, proposed in Budget 2015, demonstrates the NDA’s objective of creatively using off-budget resource raising measures. The NIIF is also a relevant vehicle to monetise the goodwill emanating from PM Narendra Modi’s successful diplomatic outreach efforts. The Cabinet has cleared an initial equity corpus of R20,000 crore which can be leveraged extensively. It is likely to be set up as a ‘fund of funds’ with three buckets—stressed projects, renewables and general investments—with the government holding a 49% stake in its management company.

* Roads uptick: The ministry of road transport and highways has instituted a bouquet of practical and remedial measures in 2015 to get the beleaguered roads sector to emerge again as a star in the infrastructure portfolio. These include an emphasis on EPC projects and the introduction of the hybrid annuity model for pursuing PPP projects. Further, there is funding top-up to financially stressed developers, an easier exit policy, concession period elongation option for delayed projects and the like. All these seek to take road construction from a low of 2 km per day a few years ago to around 14 km per day at present, and to a possible high of 30km per day in two years. In fact, 2016 appears well set to be a ‘rocking’ year for road construction companies.

* Discom revamp (UDAY): The Ujwal Discom Assurance Yojana enables transfer of 75% of the about R4.3 lakh crore outstanding debt of stressed discoms to states’ debt. States accepting UDAY and performing according to prescribed targets will also get priority funding through the Deendayal Upadhyaya Gram Jyoti Yojana and other schemes. Linked to this funding are some strict deliverables by discoms on improving their operational efficiencies. All this is expected to see enhanced activity in refurbishing and modernising electricity distribution networks across the country in 2016.

* Railway station development: The Cabinet has cleared the proposal for redevelopment of 400 railway stations through open invitation from interested parties under the PPP “Swiss Challenge” mode. This format would be quicker, as well as enable commercial development of real estate with innovative designs and business ideas. The railway minister says “it will be the world’s largest PPP programme” and is slated to get cracking in 2016.

* Inland waterways: Integration of 101 rivers into an inland waterways network and creation of a special purpose vehicle will allow the Centre to play a proactive role in what is otherwise a predominantly state subject. The Cabinet clearance for 101 National Waterways opens up opportunities for dredging, barge operations, terminal construction, storage and cruises. The year 2016 is expected to see a clutch of bids for investments and development.

* Regional air connectivity: The draft civil aviation policy aims to popularise air travel by improving regional connectivity. The proceeds of a proposed 2% cess on all domestic trunk routes are to be used to subsidise flights on small town routes. This is also expected to spur the development of a clutch of smaller airports in 2016.

* Revitalising PPPs: The Vijay Kelkar-chaired “Committee on Revisiting & Revitalising the PPP Model of Infrastructure Development” submitted its report to the government in November. It is expected to recommend swift action on setting up of advisory body “3P India” to get PPPs back on track. 3P India was first mooted in Arun Jaitley’s maiden Budget of 2014 and allocated R500 crore. It is expected to recommend a permanent institutional arrangement akin to a PPP Renegotiation Commission to address projects hit by “black swan” events. PPPs are expected to make a forceful comeback.

* Smart cities and urban rejuvenation: On June 25, the Prime Minister unveiled three flagship schemes—the Smart Cities Mission, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and the Pradhan Mantri Awas Yojana—at an event at the Vigyan Bhavan in the presence of 500 civic chiefs. The urban push was clear. While 2015 saw a heightened awareness of urban rejuvenation issues, 2016 is expected to see an upsurge in urban investments, including metro rails.

* Dispute resolution: The Public Contracts (Resolution of Disputes) Bill 2015 is expected to solve PPP and construction-related disputes speedily. According to the draft Bill, a tribunal is to be set up to settle disputes that plague government contracts, including vital infrastructure projects. The Bill proposes a 120-day limit for the completion of the arbitration process. The private sector expects a substantial amount of liquidity locked up with governmental systems to be released in 2016.

* Bullet train and high-speed rail: The Ahmedabad-Mumbai Bullet Train is clearly the face of a modernising railway system. Japan has offered to fund this $15 billion project with a very attractive financial package. It is also expected to spur activity along other identified high-speed rail corridors with participation of countries like France and China. Serious engineering and project development work, including land acquisition, is expected in 2016.

* Solar thrust: With reduced interest in coal and gas power generating projects, renewables have grabbed the attention of investors, developers and the government. Installed solar power is targeted at 1,00,000 MW by 2022. The Solar Energy Corporation of India—a 100% subsidiary of the ministry of new and renewable energy—has been set up to push this agenda. A surge of action on the ground, in 2016, towards implementation of solar projects is expected.

* Innovative railway finance raising: Indian Railways is clearly pursuing off-budget fund-raising doggedly. After LIC’s R1.5 lakh crore, the World Bank is working on a $30 billion package. These will be a major boost for the railway minister’s efforts to fund several big-ticket expansion projects, including for the debottlenecking of highly congested sections of the network. Capital expenditure in 2016 is thus expected to pick up substantially.

* Sagarmala ports project: The Sagarmala Development Company is being set up to develop new ports, including for coastal shipping, as well as facilitate port-based industries. The Prime Minister advocates a port-led development strategy to give the economy a competitive boost. The creation of this dedicated PSU would, hopefully, ensure quick implementation of many of the projects in 2016 with the participation of the coastal states.

* River-linking: A plan to interlink rivers is one of the largest public works programmes (estimated at R11 lakh crore) envisaged for the countryside. It aims to connect 37 rivers through 30 links, 14,900-km canals and 3,000 storages. Once completed, it will add 35 million hectares to the country’s irrigated land. Godavari-Krishna and Ken-Betwa links are ready to commence construction activity. Coupled with a sanction of R50,000 crore for irrigation in this fiscal, water-related infra activity is expected to see an upsurge in 2016.

* Amaravati: Andhra Pradesh’s brand new capital is slated to be India’s first real greenfield smart city with Chandrababu Naidu’s vision driving its development. The state government has notified this new capital region spread over 7,068 sq km. Singapore and Japan have offered financial and technical help. Robust planning, engineering and finance-raising is expected.

Overall, 2015 has seen concerted and coordinated action on setting the stage for a sustained infrastructure revival in 2016. Most infrastructure players concur that an upswing is in the offing.

The author is chairman, Feedback Infra

vinayak.chatterjee@feedbackinfra.com

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