7/18/2016 Heads-Up 2016: Infrastructure sectors in 2015 and what to look for this year | The Indian Express

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Heads-Up 2016: Infrastructure sectors in 2015 and what to look for thisyear

Heads-Up 2016: Infrastructure

sectors in 2015 and what to
look for thisyear
Infrastructure building in various sectors, slow in 2015, is expected to
pick up this year, especially in roads; rural development projects are still
waiting for the passage of the land bill.

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Published:January 1, 2016 12:20 am

Infrastructure building in various sectors, slow in 2015, is expected to pick up this

year, especially in roads; rural development projects are still waiting for the
passage of the land bill (http://indianexpress.com/tag/land-bill/). What made
headlines on the infrastructure sectors in 2015 and what to look forin 2016.

(Roads)

New route to contracts

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The surface of a road in Delhi during the summer of 2015. Praveen Khanna

Looking back

A new contract method holds the key to renewed attempts by the government in
drawing private players back to the highways sector. After finding it difficult to
award highway sections to private developers, the government shifted from the
BOT (build, operate, transfer) model to the government-funded EPC (engineering
procurement construction) and introduced the new method the hybrid annuity
model for projects granted from October 1. Under the new model, the National
Highways Authority of India will provide an initial grant up to 40 per cent of the
cost and the developer has to chip in with the rest and complete the project.

In August, the Cabinet Committee on Economic Affairs cleared a proposal to allow

infrastructure companies to divest 100 per cent of their equity after two years of
completion of construction for all projects given under the BOT model, irrespective
of when year the contract was handed out.

Data from India Ratings and Research a unit of Fitch Ratings shows that 21
highway projects worth Rs 26,000 crore failed to attract bids over the last two
fiscals. As a result, NHAI had to fall back on EPC contracts to plug the gap.

Disputes too are hampering completion of projects. Data from the road ministry
shows 112 cases involving Rs 25,000 crore were pending under arbitration between
the NHAI and developers till end-April 2015. Added to this is the fact that an

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underdeveloped bond market has forced PPP road projects to mainly depend on
debt from commercial banks Rs 1.67 lakh crore till February 2015, up 384 % from
FY08.

Looking Forward

A challenging target for project awards through the public-private-partnership

route is likely to be set for the coming fiscal at close to 5,000 km of highway
sections worth over Rs 45,000 crore. These include bids for the proposed Bharat
Mala project that entails road development along the international borders and the
countrys coastline and the Char Dham connectivity project that envisages linking
up the religious tourism circuit.

A bigger challenge is the task of managing project risk in older projects. An

estimated 7,500 km of highway projects have being deemed to be at high risk of not
being completed, including 5,100 km under construction and 2,400 km operational
sections that were awarded mostly between fiscals 2010 and 2012 on the BOT
format.

One thing that did not happen

Despite a concerted push from the government, there was limited participation by
private players in the highways sector.

(Railways)

Slow off tracks, aim at speed

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Mumbais CST station is lit up during Republic Day, 2015. (Express photo by Pradip Das)

Looking back

Though 2015 began with the Rail Budget stressing long-term capital investment and
enhancement of capacity, the Railways battled massive slowdown through the year.
A deal with LIC for a loan of Rs 1.5 lakh crore over five years was a landmark but
the Railways has drawn only Rs 2,000 crore from that. The decline in passenger and
freight business also left earnings short of estimates.

Contracts for locomotive projects in Madhepura and Marhowrah to Alstom and GE,
and the deal with Japan for Indias first bullet train corridor between Ahmedabad
and Mumbai with a loan from Japan, served as a silver lining for 2015.

Railway Minister Suresh Prabhu made the entire passenger interface of railways
responsive on social media sites, especially Twitter. Many passengers got their
complaints addressed simply by tweeting to Prabhu.

Looking forward

In 2016, the Rail Budget is likely to focus on more passenger-friendly initiatives

instead of long-term infrastructure building. This year trains across India will get
new passenger coaches with world-class interiors that are being manufactured in
Bhopal. Gatimaan Express, a semi high-speed service, is expected to start between

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Delhi and Agra. But the Pay Commission may put some pressure on Railways to
increase fares.

One thing that didnt happen

Despite its claims of a revamp and proposing an annual investment plan of Rs 1

lakh crore in the Rail Budget, the Railways pace of capital expenditure has been
extremely slow throughout the year. The PMO sent a letter to Prabhu in September,
asking him to speed things up.

(Rural Development)

Land bill stays stuck

Sonia Gandhi (http://indianexpress.com/pro le/politician/sonia-gandhi/) leads march of MPs against

land bill. (Source: Express photo by Praveen Khanna)

Looking back

2015 saw three futile attempts by the government to get its clauses on the land bill
in through the ordinance route, before it finally gave up and decided to wait for the
report of the S S Ahluwalia-led joint parliamentary committee. While the NDA
governments attempt to exempt five categories of projects, such as industrial
corridors, affordable housing, defence, rural infrastructure and infrastructure

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projects, including public-private partnership, from the mandatory consent and

social impact assessment requirement has not found favour with panel members,
the committee is yet to arrive at a consensus on three of the 14 contentious clauses
in the amended Bill.

Despite PM Narendra Modi (http://indianexpress.com/profile/politician/narendra-

modi/) dismissing NREGA as the living monument of the failure of Congress
(http://indianexpress.com/tag/congress/)-led government to tackle poverty in 60
years, the success of the scheme as an anti-poverty intervention led to his Rural
Development Ministry increasing the number of work days under NREGA from 100
to 150 in drought- or calamity-hit areas. According to the Social Economic Caste
Census data, 74.49 per cent rural households survive on less than Rs 5,000 every
month. Over the next year this data will be extensively mined for use across many
of the schemes of the ministry.

Looking forward

The deadline for the completion of rural connectivity through all-weather roads
under the Pradhan Mantri Gram Sadak Yojana has been advanced by three years
from 2022 to March 2019. The budget for next year is expected to be Rs 4,000 crore
with stress on using locally available non-conventional materials for the road-work.

To plug leakages in payments made under NREGA, from January 1, 2016, the
government will try out electronic wage transfer in Kerala and extend it to rest of
the country from April. Also the ministry plans to focus on quality asset creation
instead of mere generating jobs.

By the end of January 2016, the ministry is expected to come up with its Integrated
Cluster Action Plan for the development of 300 rurban clusters with an outlay of
Rs 5,142 crore. The first set of 100 such clusters would be chosen from the most
backward districts and developed in 2016 itself. Under the scheme, rural clusters
with a population of 25,000 to 50,000 people would be provided infrastructure boost
and skill training with the aim of promoting economic activity and stemming heavy

migration to urban areas. Though 833 million Indians (68 per cent) live in rural
areas, Census 2011 recorded a sharp decline in the overall growth rate of Indias
rural population.

One thing that didnt happen

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Immediately after the PM launched the Housing for All scheme, the urban aspect of
it involving building of two crore houses was rolled out, with 4.23 lakh houses
(/)
being sanctioned till date by the Ministry of Housing and Urban Poverty Alleviation.
However, the Ministry of Rural Development that is expected to execute the rural
component of the mission, by constructing three crore houses by 2022, is yet to get
its plan sanctioned by the cabinet. Even if the mission is launched early in 2016, the
ministry will have to construct much more than its previously intended 40 lakh
houses annually so as to meet the seven-year completion target.

(Telecommunications)

Wider networks

Home Minister Rajnath Singh (http://indianexpress.com/pro le/politician/rajnath-singh/) and Delhi

police chief B S Bassi at the launch of a mobile app for womens safety. (Source: Express photo by
Prem Nath Pandey)

Looking back

The
year just ended saw the government approving changes in spectrum trading
rules, providing smaller, loss-making telecom operators the option to exit. Spectrum
trading and sharing saw the merger of Reliance Communication and Sistema
Shyam Teleservices, and sale of spectrum to Idea Cellular by Videocon
Telecommunications.

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In November, the Telecom Commission agreed in principle to new norms suggested

for a cap on spectrum cap for operators. The telecom regulatory authority has
(/)
suggested the cap be based on all available spectrum including unsold spectrum
and spectrum surrendered by the operator rather than the current practice of
basing it on the spectrum auctioned to all the operators.

In a landmark policy change, TRAI had decided service providers would require to
pay subscribers Rs 1 per call drop experienced on their network, subject to a cap of
Rs 3 a day per subscriber. The Cellular Operators Association of India, the
Association of Unified Telecom Service Providers of India and 21 telecom operators
went into appeal but the court hasnt stayed the decision.

Looking forward

Reliance Jio Infocomms launch of 4G (http://indianexpress.com/tag/4g/) services in

March is expected to usher in higher competitive pricing among the four major
telecom players, including Bharti Airtel, Vodafone and Idea.

Analysts say telecom operators, however, will continue to focus on rolling out 2G
services, especially in rural areas, as demand for 4G services will be limited to
major cities.

The proposed changes in spectrum cap norms will facilitate more trading deals. The
penalty for call drops will also be effective this year, unless Delhi High Court rules
against the regulatory authority TRAIs order.

One thing that didnt happen

Call drops and net neutrality, big issues last year, remain unresolved debates
heading into 2016.

(Aviation)

Policy ready for takeoff

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(/)

Old Logo of Air-India makes way for new in Mumbai. (Source: Express photo by Kevin DSouza)

Looking back

Helped by falling global crude oil prices and growing traffic in 2015, aviation is set
to get a shot in the arm with the Cabinet expected to clear a new policy in January.
The year saw a dramatic turnaround of Spicejet after its former co-founder Ajay
Singh decided to step in and invest Rs 800 crore. It also saw the entry of Vistara, a
joint venture between Tata Sons and Singapore Airlines, besides a reversal of
Indias downgrade to category II by the US Federal Aviation Administration, and the
listing of IndiGo.

Looking forward

Proposals including tax breaks, a regional connectivity scheme, no-frills airports

and rationalisation of jet fuel cost are likely to be great facilitators for unleashing

the potential of the sector, said Dhiraj Mathur, executive director, PwC. He said the
new policy should help improve volumes and demand.

An upfront subsidy to airlines is proposed on certain routes to cap cost of travel at

about Rs 2,500 per hour. With no-frills airports proposed at over 401 unused
airstrips, domestic air traffic is expected to go up to 300 million by 2022 from 70

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million now.

(/)
If all goes well, we may see another year of 18-20% growth in domestic traffic and
around 8-10% in international traffic. This may take us closer to our vision of being
the third largest aviation market in 2020 and the largest in 2030, said Amber
Dubey, partner and head of aerospace and defence, KPMG. States including Delhi,
Maharashtra, Karnataka, Tamil Nadu and Bengal should reduce the VAT on air fuel
and reap the benefits of higher traffic and tourism, he said.

The selection process for developers of Navi Mumbai and Goas Mopa airport is
expected to conclude (in 2016), Dubey said.

One thing that did not happen

Plans to modernise airports of Kolkata, Chennai, Jaipur and Ahmedabad that were
to start this year did not fructify.

(Reporting by ENS Economic Bureau, Avishek G Dastidar, Shalini Nair, Aanchal

Magazine, Shruti Srivastava)

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