CRISIL YOUNG THOUGHT LEADER -2011

India's Infrastructure, A boon or a bane

Submitted to : CRISIL Young Thought Leader

Submitted by: Sachet Parida

U110103@stu.ximb.ac.in
PGD-BM 2010-2012 , Xavier Institute of Management Bhubaneswar
12/15/2011

~1~ Executive Summary

Development of the infrastructure is one of the major tools to boost the economic growth and also serves as a key factor in determining the competitiveness of a nation. As an economy India has prospered in the past few decades. India still has a large infrastructure deficit and this is a critical constraint on our ability to achieve growth rate of 9-10%.This also reflects the country's colossal need for continued investment in transport infrastructure, electricity generating capacity and housing, as well as the build-up of industrial capacity. The Indian infrastructure story is being refashioned. Constrained by growing fiscal deficits and lack of expertise the infrastructure service is steadily moving away from the realm of government to that of private sector. Be it telecom , roads , ports and power private players are bring in investments and operating in a competitive environment, braided with economic regulations. The government is supporting this transition by devising investor friendly policys, establishing regulators and creating dedicated infrastructure funds. However in the last three years the infrastructure growth has slowed down due to lack of political will and policy turnaround to kick start the inclusive growth mandates. This dissertation attempts to address two issue related to governance which can increase the scope of private investments in the sector. The first issue deals with the obstacles e.g. land acquisition, obtaining environmental clearance, less accommodative public agencies, which the private players face in the implementation of the project. To address these problems the idea of a single ministry has been expounded. The solution offered is simple; however at some point the government has to take bold new initiatives and get the mother of all logjams moving. The second issue deals with achieving inclusive growth of infrastructure in the states by pulling in private sectors to address the aam aadmi concerns of sadak and paani. A model similar in line with the electricity distribution franchisee model has been explicated to empower the ULB`s and PRI`s and also to create an environment to bring private investments in infrastructure beyond the NH. Now that a new 5 year plan is being formulated, the time has come for the Government to take new, national approach to planning, funding and implementing the nation's future.

~2~ Contents
Executive Summary............................................................................................................................................. 1 Exhibits................................................................................................................................................................ 3 Economy and the Infrastructure Sector ............................................................................................................. 10 12th Five Year Plan and Issues to sorted before implementation. .................................................................... 11 Clearing the Red Tape Jungle to make way for Infrastructure .......................................................................... 11 Glocalisation of State`s Infrastructure The building blocks .......................................................................... 14 Conclusion ......................................................................................................................................................... 16 Bibliography ...................................................................................................................................................... 17

Tables and Figures

Table 1: Growth of GDP in India at Factor Cost (2004-05 prices), Source ( RBI, Planning Commission)........ 3 Table 2 : Overview of Physical Infrastructure, Source (World Development Indicators, 2011) ........................ 3 Table 3 : Investment in Infrastructure during 11th Five Year Plan (Rs Crore at 2006-07 prices) , Source Planning Commission.......................................................................................................................................... 3 Table 4 : Projected GCFI (Twelfth Plan) ,Source: The Planning Commission of India ..................................... 4 Table 5 : The projects approved by Cabinet Committee on Infrastructure during last year , Source (Press Information Bureau , 2011) ................................................................................................................................. 5 Table 6 : Projects in different sectors with Time and Cost overrun, Source (MoSPI, 2011) .............................. 6 Table 7 : Permissions, Procedures and Clearance Required for Setting up a Power Plant , Source (Chatterjee, 2011).................................................................................................................................................................... 6 Table 8 : Countries with single infrastructure ministry and WEF Rankings of Quality of overall infrastructure of the country, Source (World Economic Forum, 2010) ..................................................................................... 7 Table 9 : Road Network in India ,Source MoRTh , NHAI.................................................................................. 8 Table 10 : Status of PPP projects in State Highways, Source (Secretariat for Infrastructure, 2010) .................. 8 Table 11: State of Urban Infrastructure, Source (High Powered Expert Committee (HPEC) for Urban infrastructure services, 2011) .............................................................................................................................. 9 Table 12 : Status of implementation of the 74th Amendment, Source (CRISIL , 2009) .................................... 9

Figure 1 : Three phase of Infrastructure growth in the last decade, Source RBI................................................. 4 Figure 2 : Different financial indicators of Private listed infrastructure companies during the three phases , Source CMIE Prowess Database ......................................................................................................................... 4 Figure 3: Organization structure of The Ministry of Enterprise, Energy and Communications Sweden. ........... 8

~3~ Exhibits
YoY(%) FY06 FY07 FY08 FY09 FY10 FY11 GDP 9.52% 9.58% 9.34% 6.76% 7.96% 8.55% Agriculture
(Growth Rate)

Industry
(Growth Rate)

Services
(Including Construction, (Growth Rate)

Construction
(Growth Rate)

GCFI
(Growth Rate)

5.14% 4.16% 5.80% -0.15% 0.44% 6.61%

8.54% 12.89% 9.25% 3.96% 8.34% 7.79%

11.21% 10.11% 10.36% 9.54% 9.68% 9.22%

12.79% 10.33% 10.74% 5.44% 7.02% 8.07%

22.88% 22.56% 14.29% 16.88%* 14.97%* 16.86%*

Table 1: Growth of GDP in India at Factor Cost (2004-05 prices), Source ( RBI, Planning Commission)
Note : GCFI : Gross Capital Formation in Infrastructure , * indicates Estimated figures, Source ( RBI, Planning Commission)

Particulars Railways length (1000 km) Road length (million km) Air freight (million tons per km) Air passengers carried (million) Container port traffic (million TEUs) Electricity production (TWh) Electric power consumption (TWh)

1991 2000 62.46 62.76 2.35 3.32 493.10 547.65 10.72 17.30 0.15 2.45 315.63 562.20 255.65 408.43

2005 63.47 3.93 774.04 27.88 4.98 699.13 520.58

2008-09 Annual Average Growth Rate (%) 63.27 0.07 4.24 4.21 1235.16 4.06 54.45 7.39 7.89 266.01 830.13 5.67 645.25 5.45

Table 2 : Overview of Physical Infrastructure, Source (World Development Indicators, 2011)

Sectors Storage Ports (incl. Inland Waterways) Railways (incl MRTS ) Water Supply and Sanitation Road and Bridges Irrigation (incl Watersheds) Electricity Sectors Gas Pipelines Telecommunication Airports

Not Doing Well Original Projection Revised Projections 22,378 8,996 87,995 40,647 261,808 200,802 143,730 111,689 314,152 278,658 253,301 246,234 666,525 658,630 Performing Well Original Projection Revised Projections 16,855.00 127,306.00 258,439.00 345,134.00 30,968.00 36,138.00

Decline (%) 59.93 53.8 23.3 22.29 11.29 2.78 1.18 Increase (%) 655.3 33.54 16.69

Table 3 : Investment in Infrastructure during 11th Five Year Plan (Rs Crore at 2006-07 prices) , Source Planning Commission

~4~
25.00% 20.00% 15.00% 10.00% 1.00 5.00% 0.00% 2002-03 -5.00% 2003-04 2004-05* 2005-06* 2006-07* 2007-08* 2008-09* 200910* 201011* (E) (E) Real GDP growth (%) GCFI /GDP multiplier (x, RHS) 0.50 0.00 -0.50

Growth in real GDP and GCFI (at constant prices) and multiplier

3.00 2.50 2.00 1.50

Growth rate of GCFI

Figure 1 : Three phase of Infrastructure growth in the last decade, Source RBI

12.00 10.00 8.00 6.00 4.00 2.00 0.00 -2.00 -4.00 -6.00

Average ROA & ROE of the Sector

70.00 60.00 50.00

ROA ROE

Sectors Average PE and EPS

PE on BSE EPS

40.00 30.00 20.00 10.00 0.00

Figure 2 : Different financial indicators of Private listed infrastructure companies during the three phases , Source CMIE Prowess Database

GDP at market prices Rate of growth of GDP (%) GCFI as % of GDP GCF in infrastructure

2011E-12E 2012E-13E 2013E-14E 2014E-15E 2015E-16E 2016E-17E 63,479 69,193 75,420 82,208 89,606 97,671 9 9 5,713 9 9.25 6,400 9 9.5 7,165 9 9.75 8,015 9 10 8,961 9 10.25 10,011

Table 4 : Projected GCFI (Twelfth Plan) ,Source: The Planning Commission of India

~5~
Month Project Approved by Cabinet Committee on Infrastructure Project for two laning with/without paved shoulders of Tindivanam Krishnagiri section of NH-66 under NHDP Phase-III in Tamil Nadu Development of East Quay 1 (EQ1) berth by replacing the existing EQ1 berth and part of EQ2 berth for handling Steam Coal in the inner harbour of Visakhapatnam Port on Design, Build, Finance, Operate and Transfer(DBFOT) Approval for Upgradation of road from Vijayawada to Ranchi Project of six laning of Barwa Adda - Panagarh Section of NH-2 in the States of Jharkhand and West Bengal under NHDP Phase V Project of four laning of Barasat - Krishnagar Section of NH-34 in the State of West Bengal under NHDP Phase III Project of two laning with paved shoulders of Ambala-Kaithal section of NH-65 in the State of Haryana under NHDP Phase III Continuation of the Schemes of Conservation and Safety in Coal Mines and Development of Transportation Infrastructure in Coalfield Areas approved Setting up of the non-lapsable fund for expeditious completion of 'National Projects' in the North East

Nov-10

Dec-10

Jan-11 Feb-11 Mar-11 Apr-11

Four Laning of Nagpur - Wainganga Bridge section on NH-6 in Maharashtra Scheme for National Rollout of e-District Mission Mode Project Four Laning of Beawar-Pali-Pindwara Section of NH-14 in Rajasthan Four Laning of Kota-Teendhar (Jhalawar) Section of National Highway NH-12 in Rajasthan Six Laning of Ahmedabad - Vadodara Section of National Highway NH-8 in Gujarat Installation of 1000 MW lignite based New Thermal Power Project at Neyveli in Cuddalore District of Tamil Nadu by M/s. Neyveli Lignite Corporation Ltd Developing a Dry bulk Terminal off Tekra Near Tuna, on BOT basis at Kandla Port Trust

May-11

Jun-11

Four laning of Jabalpur- Lakhanandone section of NH 7 in Madhya Pradesh Four Laning of Panikoili Rimuli Section of National Highway NH 215 in Orissa Widening of road to 2-lane National Highway standards from Potin to Pangin on BOT (Annuity ) basis Widening of existing road to two lane National Highway Standards from Nechipu to Hoj in Arunachal Pradesh

Jul-11

Four Laning of Chhattisgarh/Orissa Border Aurang section on NH-6 in Chhattisgarh Four Laning of Walayar - Vadakkancherry section on NH-47 in Kerala

Aug-11 Sep-11

Four laning of Jabalpur-KatniRewa Section of NH-7 in Madhya Pradesh Four laning of Lucknow Sultanpur section of NH-56 in Uttar Pradesh approved Six laning of Kishangarh-Udaipur-Ahmedabad section of NH 79-A, NH-76 and NH-8 Four laning of Gwalior- Shivpuri Section of NH-3 in Madhya Pradesh Four laning of Shivpuri - Dewas Section of NH-3 in Madhya Pradesh

Oct-11

Four laning of Vijayawada-Machlipatnam section of NH 9 in Andhra Pradesh Four/two laning with paved shoulder of Birmitrapur-Barkote section of NH 23 in Orissa

Nov-11

Four laning of Solapur-Maharashtra/Karnataka border section on NH-9 in Maharashtra

Four laning of Mahulia-Baharagora-Kharagpur section on NH-33 and NH-6 in Jharkhand and West Bengal Table 5 : The projects approved by Cabinet Committee on Infrastructure during last year , Source (Press Information Bureau , 2011)

~6~
No. of project Projects with cost overrun % Increase No. base 2 29% 0 0% 5 46% 0 0% 0 0% 6 60% 4 78% 9 33% 92 82% 11 8 4 3 1 145 58% 8% 62% 102% 119% 64% Projects with time overrun Range No. (Months) 4 6-41 3 7-17 16 9-48 3 1-8 1 5-5 4 17-36 21 1-35 44 4-83 37 2-213 99 13 34 3 1 283 1-106 2-72 4-58 12-21 60-60 Projects with time & cost overrun % Increase Range base (Months) 29.03% 16 - 41 0.00% 0 51.74% 3 - 48 0.00% 0-0 7.58% 30 -30 62.58% 25-36 68.68% 3 -120 51.26% 13 - 90 193.63% 12 - 213 35.90% 29.38% 0.00% 102.40% 118.64% 74.50% 19 -90 6 -72 0-0 12 - 15 60-60

Atomic Energy Civil Aviation Coal Fertilisers Mines Steel Petroleum Power Railways Road Transport & Highways Shipping & Ports Telecommunications Urban Development Water Resources Total / Average

4 8 45 6 1 15 77 89 141 132 27 41 3 1 590

No . 2 0 7 0 1 2 15 9 17 10 7 0 2 1 73

Table 6 : Projects in different sectors with Time and Cost overrun, Source (MoSPI, 2011)

Project Related Land Acquisiton Fuel Linkage Enviormental and Forest Power Evacuation Water Other Operational Clearance Total

Estimated no of clearance 8 12 15 6 5 10 56

Table 7 : Permissions, Procedures and Clearance Required for Setting up a Power Plant , Source (Chatterjee, 2011)

~7~
WEF Rankings on Countries infrastructure Name of The Single Infrastructure Ministry Federal Department of Environment, Transport, Energy and Switzerland 1 Communications Singapore 3 Ministry of National Development Ministry of Ecology, Sustainable Development, Transport and France 4 Housing Sweden 7 Ministry of Enterprise, Energy and Communications Germany 9 Federal Ministry of Transport, Building and Urban Development Canada 13 Minister of Transport, Infrastructure and Communities Netherlands 17 Ministry of Infrastructure and the Environment Japan 15 Minister of Land, Infrastructure, Transport and Tourism Australia 34 The Department of Infrastructure and Transport Israel 47 Ministry of National Infrastructure New Zealand 48 Minister of Infrastructure Iran 75 Ministry of Infrastructure Tanzania 124 Ministry of Infrastructure Development India 91 Ministries In Charge of Various Infrastructure Planning Commission Minister of Power Minister of New and Renewable Energy Minister of Urban Development Minister of Communications and Information Technology Minister of Road Transport and Highways Minister of Heavy Industries and Public Enterprises Minister of Shipping Minister of Railways Minister of Rural Development Ministry of Environment and Forests Ministry of Steel Ministry of Coal
Table 8 : Countries with single infrastructure ministry and WEF Rankings of Quality of overall infrastructure of the country, Source (World Economic Forum, 2010)

~8~

Figure 3: Organization structure of The Ministry of Enterprise, Energy and Communications Sweden.

Road network Expressways National Highways State Highways Major District Roads Rural and Other Roads Projects roads Urban roads Village roads Total Length

km 200 70934 131899 467763 2,650,000

Percentage of total Length 0.01% 2.14% 3.97% 14.09% 79.80%

Percentage of total Traffic

Coordinating agency

40% MoST, BRO 40% State PWDs State PWDs 20% MoRD State PWDs Municipal corporations Zilla parishads

3320796

100%

100%

Table 9 : Road Network in India ,Source MoRTh , NHAI

Projects Status of State Highways Completed Projects Projects under Implementation Projects in the bid process Projects where feasibility study has commenced Projects in the pipeline for 2011-12

No. of Projects Cost Total Length % of Total State Projects (Rs. crore) of Road Highways 73 8,353 3,979 0.66% 62 56,406 4,862 0.81% 41 17,591 4,531 0.76% 44 38 258 13,601 12,557 108,508 3,781 3,367 20,520 0.63% 0.56% 3.42%

Table 10 : Status of PPP projects in State Highways, Source (Secretariat for Infrastructure, 2010)

~9~
State of Urban Water Service Delivery 64 per cent of urban population is covered by individual connections and standposts in India, compared with 91 per cent in China, 86 per cent in South Africa, and 80 per cent in Brazil Duration of water supply in Indian cities ranges from 1 hour to 6 hours, compared with 24 hours in Brazil and China and 22 hours in Vietnam Per capita supply of water in Indian cities ranges from 37 lpcd to 298 lpcd for a limited duration, while Paris supplies 150 lpcd continuously and Mexico 171 lpcd for 21 hours a day State of Urban Sewerage and Sanitation 4861 out of the 5161 cities/towns in India do not have even a partial sewerage network Almost 50 per cent of households in cities like Bangalore and Hyderabad do not have sewerage connections About 18 per cent of urban households do not have access to any form of latrine facility and defecate in the open State of Solid Waste Management Waste collection coverage ranges from 70 per cent to 90 per cent in major metropolitan cities, and is less than 50 per cent in smaller cities , Waste collection in Kunming (China) is 100 per cent, in Belo Horizonte (Brazil) 95 per cent, and in Quezon City (the Philippines) 99 per cent Less than 30 per cent of the solid waste is segregated Scientific disposal of waste is almost never practised State of Urban Transport and Roads Public transport accounts for only 22 per cent of urban transport in India, compared with 49 per cent in lower middle income countries. Share of the public transport fleet in India has decreased sharply from 11 per cent in 1951 to 1.1 per cent in 2001 Road density (km per sq. km) is 9.2 in Singapore, 9.7 in Curitiba, 21.8 in Seoul, 10 in Johannesburg, 3.8 in Chennai, and 19.2 in New Delhi
Table 11: State of Urban Infrastructure, Source (High Powered Expert Committee (HPEC) for Urban infrastructure services, 2011)

Area Constitution of local bodies Reservation of seats Regular conduct of elections Setting up Ward Committees Setting up District Planning Committees Setting up Metropolitan Planning Committees Transfer of 12th schedule functions Transfer of urban planning Transfer of water supply Constituting State Finance Commissions

Benefiting Urban Population 100% 100% 97% 60% 88% 32% 59% 57% 61% 100%

Table 12 : Status of implementation of the 74th Amendment, Source (CRISIL , 2009)

~ 10 ~ Economy and the Infrastructure Sector

India has come a long way from being an agrarian economy and Hindu growth rate figures to have a GDP of Rs 48,778 bn (at the end of FY11) and having growth rates hovering around the 8% territory in the past years ( Table 1). Contributing to this growth is India's infrastructure which has experienced rapid growth over recent years. One of the indicators of infrastructure is the Gross Capital formation in Infrastructure (GCFI) (Planning Commission, 2011) . Between FY01 and FY08 average real growth in GCFI was an impressive 12.86% year-on-year (y-o-y). Speaking in physical terms today we have 70,934 km of highway compared to 31,700 km 20 years ago and in power we can expect record generation, it is almost expected to double from the current 177 gigawatt to 300 gigawatt by 2015 (A snapshot is given in Table 2 ) . Based on GDP growth and GCFI growth the industry in the last decade can be segregated into three phase (Figure 1). Phase 1 (FY02 FY05): This was the staring phase of the Tenth Five-Year Plan. The NDA government gave massive impetus to the National Highway Development Programme , introduced act`s like New Telecom Policy(NTP 99) and Electricity Act 2003 to bring in huge investment and development of the infrastructure. In India, GCF in infrastructure until the end of the 10th Plan was estimated at 4-5%. In this phase While GDP growth averaged at 6.4%, GCPI growth averaged at 9.40%. Phase 2 (FY05 FY09) : These were the years when the government constrained by fiscal deficits, and overwhelmed with social sector deliverables, started to look at idea of PPP model of investments. Schemes started getting announced for rural roads, rural electricity distribution, and drinking water. Many of them got packaged in the Bharat Nirman program of the UPA government. While GDP growth was high and declined later, GCPI growth decelerated rapidly. The GCPI/GDP multiplier declined to a low of 1.55x in FY09. Phase 3 (FY09 FY11) : Post the global slow crisis with a slowdown in the economic growth in FY09, for a state strapped for resources (both financial and managerial) , the PPP solution got accepted. The planning commission did path breaking work in creating frameworks, and the finance ministry stepped in to provide slew of boosters from viability gap funding (VGF), to tax concessions to tax building support. It is know well acknowledged that our Indian framework of PPP, often referred to as MCA`s (Model Concession Agreements) are among the best structured in the world. However the country also witnessed controversies in the award process of many such PPP projects and also came to grapple with pitfalls of non-transparent decisions. These factors could have led to a

~ 11 ~
shortfall of 5 per cent in investment targets for the infrastructure sector during the 11th Five-Year Plan (Table 3). According to estimates of Planning Commission GCFI is expected to scale to 8.37% of GDP by 2012, yielding an average GCFI at 7.6% of GDP for the entire period of the 11 th Five Year Plan. A similar phase wise trend arises on an analysis of the financial indicators of private sector companies engaged in the business of infrastructure construction (Table 4 : Projected GCFI (Twelfth
Plan) ,Source: The Planning Commission of India

Figure 2). With the estimated GCFI growth remaining below the 2005-06 level the infrastructure in

the country is in the process of consolidation phase. The government needs to analyze what has gone
2011E-12E 2012E-13E 2013E-14E 2014E-15E 2015E-16E 2016E-17E 63,479 69,193 75,420 82,208 89,606 97,671 9 9 5,713 9 9.25 6,400 9 9.5 7,165 9 9.75 8,015 9 10 8,961 9 10.25 10,011

GDP at market prices Rate of growth of GDP (%) GCFI as % of GDP GCF in infrastructure

wrong. New ideas are flowing in fast and furiously .While implementing the ideas government should keep in mind the 12th plan theme of Faster, Sustainable and More Inclusive Growth. To achieve previous growth levels a lot depends upon the government to deliver on the 12th Plan.

12th Five Year Plan and Issues to sorted before implementation.

If one were to go by the estimates for the 12th 5 year plan by Planning Commission the GDP growth is likely to be in high trajectory of 8-10% (Table 4). In order to sustain the momentum and to achieve a GCPI/GDP multiplier ratio of 2.5x the GCPI needs to be pushed from current levels of 7% of GDP to levels of above 10% of GDP which is the GCPI of some fast-growing economies (The Economist, 2011). The Twelfth Plan envisages $1000 billion investments and around 50% of investments are expected to come from the private sector. The need to tap private investments while highlighting the role of the government is imperative to achieving the overall target investment. The private investors however are concerned about risks stemming from a convoluted and incoherent legal framework for PPP`s , a government that is slow in implementing policies, a complex bureaucracy which is slowing down planning and tendering processes, unclear and ineffective land clearance regulations which are delaying projects. It is for the same reason the draft approach paper for the Twelfth Five Year plan has highlighted the governance issues which needs to be addressed by the final plan (12th Plan

~ 12 ~
Draft , PC, 2011). In the next sections some approaches have been highlighted to address some of these issues.

Clearing the Red Tape Jungle to make way for Infrastructure

If one has to go by the planning commission`s number the PPP investments (assuming PPP stands as a surrogate for private capital inflows) are estimated to account for a little over 30.0% of total investment in infrastructure in the Eleventh Plan . So number of PPP for 11th plan period should be to the tune of Rs 616,261crore. However, India has currently 1,017 PPP projects accounting for an investment of Rs. 486,603 crore (12th Plan Draft , PC, 2011). Assuming that this is really and wholly true, nearly at the end of the plan we are just 80% of what is required. Coming to new project creation, out of the 106 cases considered by the Cabinet Committee on Infrastructure (CCI) in 2010, 56 were approved. In 2009, 34 out of the 49 cases examined by the CCI were approved. Going by last one year`s data we have only 30 approved cases (Table 5). Moving to the status of the existing project, 590 central sector projects, totaling Rs 7.75 lakh crore, were being monitored in the quarter of April June 2011. The approved completion schedules or anticipated date of completion do not exist for 283 project .After accounting for 283 projects which are delayed (Table 6) and 9 projects which are running ahead of schedule , there are only 138 projects (24 % ) left which are hopefully running on time . (MoSPI, 2011). The above point sums up the failure of the Government as a project creator and implementer. Infrastructure projects being generally monopolistic and in the public domain the private sector cannot create projects; it can only bid for them. The government has to play the role of a visionary entrepreneur and has to be a project creator. It cannot sit back and relax after creating investor friendly policies. A research paper (Singh, 2010) which analyzed the major causes of project delays, revealed that effect of learning and innovations on reducing cost overrun has declined over time, second that due to imperfect techniques and contractual incompleteness some delays and cost overruns are inevitable, however the major cause of delays are organizational failures which also frequently triggers yet another form of contractual failure. Expanding the point further, Government departments being hierarchical are inherently weak in inducing the desired efforts from the people involved, which results in organizational failures within the sponsoring ministry itself. In addition to this, different departments are responsible for different project activities which make projects vulnerable to interorganization failures. For example, to setup a power project in India requires 56 odd permissions (Chatterjee, 2011) , which is given by wide spectrum of authorities of the government (Table 7).

~ 13 ~
Successful execution of infrastructure project is highly dependent on joint and timely efforts of the departments involved. To find a solution we need to look at the governments of Japan, France, Netherlands, Italy and even Tanzania. These countries have merged various infrastructure ministries to one single ministry (Table 8). The operating philosophy is to make infrastructure happen within a clear time bound manner with one single institution in the government taking full responsibility of project creating, monitoring and giving clearances. The concept of CCI should be done away with and a full scale ministry should be carved out from Secretariat for Infrastructure. If the political scenario of the country does not permit the creation of a single ministry maybe the government should adopt the model of Sweden where the ministry has three minsters for different infrastructure sectors in a single ministry and who are assisted by a common legal, planning, administration, research and analysis and budget division (Figure 3). However ideally we should have a single minister of infrastructure who has past records as a doer and who should be able to drive the bureaucracy to perform. He should be supported by a secretary who understands the infrastructure and would have worked in the ministries of ports, airports, highways, power and even railways. The bureaucrats in the ministry should be doers and persons with an impeccable service record. If necessary, candidates could be recruited from the market. The role of such an ministry would be to set directions, create a project pipeline, and also draft and improve policies for projects that fall within the scope of ports, airports, highways and power. Through its various support agencies it should ensure inter-sectorial coordination for clearance. In fact the ministry should be given power to act as a single window and provide clearance for critical projects of national importance like the Delhi Metro, Ganga Expressway .The ministry should have separate agencies for project monitoring, pursing and monitoring investments in infrastructure. There should also be an agency dedicated to improve the policies with respect to PPP`s by encouraging learning and innovations. The work of the ministry should be reviewed by the Prime minster and weekly updates rather than quarterly and annually should be made available to the nation. The important issues that this ministry should concentrate now are making the processes in the sector more transparent, address the gaps in financing and outline the role of government in the process of land procurements. The ministry should take steps to establish mandatory regulatory bodies for different infrastructure sectors, at central and state level, depending upon the maturity or the needs of the sector. It should come out with a national level framework for regulators which will bind upon the center and the states to ensure regulatory autonomy, empowerment, accountability and

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transparency. To ensure fair and efficient dispute resolution arising from appeals from various sector regulators the ministry should take steps to establish a quasi-judicial Central Appellate Tribunal .To hear the consumers complaints proper Infrastructure Ombudsman should be established. The Government has already come out with a draft policy on PPP, and the ministry along with the regulators should ensure that the private operators are discharging their

responsibilities as per the concession agreement, it should set the standards for various projects, allocate the risks and also identify the termination mechanisms. The government should pass the bill which will bring the PPP`s under CAG`s statutory audit , the ministry should maintain a database of the pre-bid and post completion credit ratings of the projects .It should be the single entity which should be responsible for answering any RTI queries raised for a project. The ministry should also take steps in increasing the width and depth for infrastructure financing and explore role of securitization in infrastructure financing. Assuming that the Land Acquisition, Resettlement and Rehabilitation bill get passed as it is currently, the ministry should redefine the lands for public purpose and act as a land bank to provide land, with the cost accounted for , to PPP players building bus terminals, sports stadia and hospital (Chatterjee, 2011).

Glocalisation of State`s Infrastructure The building blocks

The length covered by PPP projects (with status completed, implementation and project in bid) for the state highways and major district roads, which constitute around 18 per cent of the country's total road network, and handling nearly around 40 per cent of the total road traffic, is just 2.5% of the total state highways network (Table 9, Table 10). These roads contribute significantly to the economy of mid-sized towns and rural areas and to the country's industrial development by enabling movement of industrial raw materials and products from and to the hinterland. Even though significant expenditure has taken place there is no proper framework the states follow. The states generally have a implementing agencies to identify, develop and execute projects, PPP Cell which provides all hand-holding support and an Committee on Infrastructure headed by Chief Secretary to approve PPP projects .The issues in governance were exposed after the Ganga Expressway project ran into a series of land acquisition and environmental issues .In this case to attract investments the state government even had provided incentives like leasing land for commercial development. In rural road infrastructure under PMGSY commendable work has been done in past few years, however there are issues of operation and maintenance of the assets created which are not provided in the scheme and also there are cases of corruption and leakages.

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In the case of developing urban infrastructure, even after the 74th amendment and JNURM schemes state of urban service delivery in Indias cities and towns is far poorer than is desirable for Indias current income levels (Table 11). The one reason is the failure of full scale implementation of the 74th amendment which is also happens to be the key reform conditionality under JNURM. To summarize an assessment by the Crisil Infrastructure Advisory team even though a system of democratic governance and electoral system are in place , the financial devolution is poorly implemented and financial relationship between the state and the local bodies is still unresolved also there has been a lag in setting up institution like DPC`s and MPC`s. This issue has also been highlighted in the approach report to the 12th plan where the issue of funds control under PRI`s and role of MPC and DPC are also discussed. So in the 12th we can expect the government will be concentrating on the urban and rural infrastructure and initiating more number of PPP`s in the soft sectors like water, sewerage and waste management sector. The solutions to the above mentioned problem can be adopted from the framework of Franchisee Model for Electricity Distribution. Every state should have an independent Utility Regulator for the soft sectors which will be similar in line with the SERC`s. The standard job of the regulator should be to ensure that service standards are met and that user charges cover costs within a framework which is spelt out in a transparent manner. Like the distribution utilities the urban local bodies and the PRI`s in the state should file their revenue requirements before this regulator. The recommendation of the 13th finance commission should be implemented and funds should be automatically transferred to local governments through a percentage of the divisible pool of taxes being converted into a grant-in-aid. India can also lessons of financial devolution from South Africa, where the local bodies can set their own rates for property tax and user charges and they also get finances from the center in the from Equalization grants and Municipal Infrastructure Grants. Next these bodies should also identify potential projects for PPP under their jurisdiction and pass it to the regulator. The utility regulator should make a list of PPP project for each district/division and pass it on to the PPP project cell of the state. The state PPP cell should bundle together state highways, MDR`s and rural roads along with the soft sector projects for a district and form a single logical package. As the traffic in the road in the district will be less the annuity model can be implemented. Depending upon the investments the local bodies will also provide funds. If the local bodies do not have a proper setup for collecting user charges the concessionaire should be entrusted with this task after a proper revenue sharing arrangement is done. Depending upon the number of urban bodies under the projects and the revenues collected the project can also be converted to BOT model. The concession period could be fifteen years which would include two years of construction and thirteen

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years of operation and maintenance. Provision should be there to enable concessionaires employ NREGA beneficiaries in the project. This package will now be attractive to smaller contractor groups in the state. The state government however should encourage an SPV formed by a joint venture of local industrialists, and entrepreneur whose direct business interests are furthered by the development of the area and a listed infrastructure contractor who will be able to bring the required technical expertise. These concessionaires will now act as Franchisee of infrastructure in the district. The infrastructure ministry should motivate state governments to get involved in this huge PPP opportunity which address the concerns of both rural and urban infrastructure across the length and breadth of the country. If this is implemented successfully it can bring the private sectors investments to the 98% of the roads outside the purview of NH and aam aadmi areas of water and sanitation.

Conclusion
The world is taking notice of our sterling execution of the Delhi metro project, bidding of the UMPP project and creation of India-shining airports at Bangalore, New Delhi, Mumbai and Hyderabad. India`s highways development program was the largest such development programme in the world. The Indian Railways turnaround case study made it to ivy-league business schools. African nations like Nigeria are impressed with the reduction of AT&C losses in Delhi post privatization and want to replicate the model. It will take time for world to take notice and our infrastructure rankings will certainly improve however the solutions which we need to implement should be innovative and bold. We are also currently obsessed with creating infrastructure assets, partly due to our own needs and also perhaps being spurred by China`s investment which in absolute and relative terms are more than ours. The government should not forget the theme of inclusive growth and how the aam aadmi benefits from the high quality but profitable services that these assets generate. After all there should be a difference between the ways the dragon and the elephant dance to the tune infrastructure, and all it takes for the world to look at the elephant is innovation and inclusiveness.

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