Akshay

'We will give India an airport to be proud of'

The Rediff Interview | G V Sanjay Reddy, MD, MIAL

June 28, 2006
How many of us wiggle our nose each time we walk into Mumbai's Chhatrapati Shivaji International Airport? How often have we felt that apart from its nomenclature, the airport hardly possesses anything 'international'?

For those who would give anything for a better airport for India's commercial capital, here is a piece of good news: Mumbai International Airport Private Limited has been given the job of revamping and upgrading it as per the global standards.

MIAL is a 74:26 per cent joint venture company between GVK-SA consortium and the Airports Authority of India. The consortium comprises GVK, Airports Company South Africa Limited and Bidvest Group Limited.

MIAL managing director G V Sanjay Reddy spoke at length about his company's plans on the project in an e-mail interview with rediff.com's Indrani Roy Mitra.

While giving the Mumbai international airport a facelift, would you be following any particular model? If yes, what is that?

Mumbai International Airport Private Ltd has partnered with the best in the world to develop, design, construct, upgrade, modernise, operate, maintain, finance and manage Chhatrapati Shivaji International Airport (CSIA).

The development of the airport is going to happen in three phases. The first phase is the 100-day plan, which has been branded as Parivartan to signify the change that will be brought about in the initial days primarily focussed on a few areas.

Parivartan, which is currently underway will focus on specific areas of improvement which include:

Terminals

* Kerbside improvements and Terminal entrances
* Improved housekeeping & maintenance
* Toilet upgradation
* Signages, Flight Information Display Systems and Public Address Systems
* Transit facilities
* Terminal furniture
* Opening of the new wing of the Terminal 1B
* Fire Safety

Airside

* Regulatory Compliance
* Safety and Security

Beautification

* Cleanliness of all areas and facilities in the airport
* Landscaping

HR Initiatives

* Employee Communication
* Training
* Change Management

Cargo

* Improve overall facilities and services

The second phase of development would be to upgrade the existing terminals, including Terminal 1A and the Terminal 2, which is the international terminal.

The third phase will be to implement the Master Plan, which will include brand new terminal, runway and cargo complex.

What is the kind of investment you will have to make towards revamping the Mumbai airport? Where will you raise the money?

Over the next seven years, MIAL plans to invest Rs 5,800 crore (Rs 58 billion) towards the modernisation of CSIA.

The modernisation is being done with a debt-equity ratio of 80:20. Rs 4,000 crore (Rs 40 billion) will be raised through bank loans

What is the traffic at the Mumbai airport like? How do you see it changing over the next few years and what have you planned to accommodate the boom?

The Mumbai airport currently facilitates more than 500 aircraft movements per day, carries around 50,000 passengers daily resulting in handling about 37 per cent of India's air traffic. With over 17.66 million passengers last year and movement of over 490,000 tons of cargo per year, CSIA is the largest airport in India.

It is witnessing a phenomenal growth in traffic, which is much more than anticipated a few years ago. This necessitates the need for upgradation and development of new facilities at Mumbai, which is the top priority of MIAL.

The biggest problem for the Mumbai international airport happens to be lack of space. How do you plan to solve it? How will you counter the encroachment problem?

The space available to Mumbai airport is less as compared to the other international airports in India. This is one of the biggest challenges we have to counter. We will work closely with the government to resolve the encroachments issue.

MIAL has appointed Netherlands Airports Consultants B V (NACO), world's leading consultant in airport design, to assist us to develop the master plan for CSIA. We have also appointed Changi Airport from Singapore to review the master plan and also help in improving the operations and management of CSIA.

The Mumbai airport, as we all know, fails to meet the international standards. Revamping it, therefore, means starting from scratch. Please tell us how you have drawn up the priority-based to do list for the same?

MIAL's priority areas are included in Parivartan. These priority areas are the ones which can be immediately worked upon, improved and which are fundamental to passenger convenience such as cleanliness, kerbside traffic management, toilet upgradation, better signages, furniture, housekeeping and maintenance. We will simultaneously be focusing on employee communication which is equally important for the first 100 days.

What plans do you have for airport ground handling activities?

Currently, the ground handling is taken care of by the airlines and Cambatta. In due course, we will keep you informed if MIAL gets into this business.

Cargo is known to be the major revenue earner for Mumbai international airport. What plans do you have for better handling of cargo services?

As part of Parivartan, we are looking at developing and improving the cargo facilities. Over the time, we will look at a dedicated terminal for cargo operations.

To improve the facilities at the cargo complex, MIAL is looking at modernising and mechanising the entire cargo handling process, which will include handling, storage and retrieval. The plans will be completed in the next four months and we will implement the same in the next 12 months.

You mentioned during a press meet in Mumbai that you see the forthcoming Mumbai metro project facilitating communication to the airport. Could you please tell us what plans do you have in mind? Have you approached the Anil Ambani-backed project heads on this?

We are in talks with the government for linking the Mumbai airport to the Mumbai Metro so as to facilitate passenger movement. We have had no discussions with Reliance (Anil Ambani group) on this project.

There is talk that domestic airport at Mumbai will be shifted to Sahar. Will not that affect people, for there is a perennial jam in that area?

As per the master plan, the domestic terminals will be shifted to Sahar. In most parts of the world, domestic and international flights take off from the same airport. This is convenient for the passengers as well.

In order to facilitate better traffic movement into the airport, MIAL will be looking at developing an elevated expressway that directly connects from the Western Express Highway to the airport. We will also upgrade the existing roads close to the airport.

At the press meet, you also mentioned of building highways to ease Mumbai traffic congestion. Could you please elaborate?

There was no such mention.

As per your agreement with the AAI, you are supposed to absorb all the AAI staff for three years and after which at least 60 per cent of them. May we know what happens to the rest 40 per cent? Do you plan launching a VRS (voluntary retirement scheme)?

According to the operations, management, development agreement, 60 per cent of AAI employees will have to be absorbed by MIAL. We are not disturbing the existing setup. We are working closely with the existing staff and creating better facilities for the airport and employees. The rest of the 40 per cent will continue to remain with AAI.

When and how do you foresee the first phase of work to be over?

The first phase is Parivartan, which is already underway and is for a period of 100 days beginning May 3. It focusses on immediate areas of improvement.


Yours being a 30-year project, how do you see Mumbai airport 30 years down the line?

A world-class airport India will be proud of.



http://in.rediff.com/money/2006/jun/28inter1.htm

__________________
If at first you don't succeed, call it v1.0!

Akshay

Engineering SEZ may come up at foundry park in WB

KOLKATA: An engineering Special Economic Zone might come up at the proposed foundry park at Ulberia, West Bengal.

"We have proposed for an engineering SEZ to the Indian Foundry Association at the foundry park and they will take it up formally at their next meeting," EEPC chairman Rakesh Shah said here on Monday on the sidelines of a seminar on prospects of engineering export from eastern region.

The foundry park has been proposed on 600 acres and IFA had already proposed a SEZ.

"A special purpose vehicle would be formed in which EEPC will also be part of it besides IFA and the SEZ developer," Shah said.

The value of export of engineering goods from the eastern region stands at USD 2.9 billion out of a total national export worth around $19 billion.

Representatives from Orissa and Jharkhand had come with their presentations to seek investment. However, there was no representation from West Bengal at the investment seminar.

http://economictimes.indiatimes.com/...ow/1682427.cms

percentage_plyr

rt. now the IGI,N.Delhi airport is in quite a bad shape by international standards.

lets hope they wld do somethin useful in the next 5 yrs.

__________________
ALL RIGHT RESERVED, ALL WRONG AVENGED.

......and on the 8th day,God said,"OK,Murphy,now you take over!"

Akshay

India to use $15 Billion in infrastructure development – first nation ever to tap into Foreign Exchange Reserves!

Why is India so eager to spend $15 Billion from Foreign Exchange Reserve to improve infrastructure? The reason is simple, India earned this foreign exchange reserves through Western Companies transferring money to India for opening new shops in Bangalore, Mumbai and Delhi. India believes by investing some part of the same in infrastructure development, India will receive more foreign direct investment and after a while India will become a developed nation.

It is a very shrewd move. The Planning Commission will use about $15 billion from the foreign exchange (forex) reserves for the country's infrastructure development, the panel's head said here Thursday. The panel had held discussions with the finance minister and Reserve Bank of India (RBI) on making best use of the huge forex reserves, Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters. "Though the proposal appears unusual, it is very innovative in the light of serious infrastructure deficit faced by the country. The present circumstances are not normal. We have to do something unusual and innovative," Ahluwalia said on the sidelines of the 31st foundation day of the Indian Institute of Management here. Terming the current forex amount as very huge, Ahluwalia said out of the reserves of $120 billion, if $30 billion of non-resident deposits were set aside on the grounds that they were liquid liabilities and another $5 billion towards short-term deposits, the country would still have $85 billion reserves. "Even after fully covering all liquid liabilities, we will be still left with $85 billion forex funds, which is a very large sum of money. According to the former RBI governor (Bimal Jalan), about $60 billion forex reserves are adequate to meet our import bills.

"Hence our proposal is to use the balance $15 billion over the next three years to fill the infrastructure gaps, which are quite essential," Ahluwalia said. Hoping the panel's proposal would be accepted by the government, he said even if the country were to have $15 billion less in forex reserves, it would be worthwhile as it would create infrastructure equivalent to that value. "Our judgement is the return the economy gets from $15 billion in infrastructure would be much more than the returns we are getting in terms of interest earnings, which are a mere two-three percent."


http://www.indiadaily.com/editorial/10-29a-04.asp

Akshay

INFRASTRUCTURE IN INDIA REQUIREMENTS AND FAVORABLE CLIMATE FOR
FOREIGN INVESTMENT

ndia initiated an ambitious reform programme, involving a shift from a controlled to an open market economy showing signs of overheating because of basic infrastructure constraints, both physical and human. So far, the bulk of infrastructure was in the public sector. Public sector in India operating in a protected set up has been largely subsidised by the Government. Since the launching of reform, Government is trying to reduce its borrowing which means that further subsidization will not be possible. There is one area where there is a need for private sector and foreign investment to come in. Because of the long gestation period, and many social implications, the infrastructure sector compares unfavorably with manufacturing and many other sectors. For this, specific policies in this area are need to make infrastructure attractive. Clearly, there is a wide gap between the potential demand for infrastructure for high growth and the available supply. This is the challenge placed before the economy, i.e. before the public and private sector and foreign investors. This can also be seen as an opportunity for a widening market and enhanced production.


TOTAL CAPITAL NEEDS FOR INVESTMENTS

According to the India infrastructure Report (IIR), currently 5.5 percent of the GDP is invested in the infrastructure sector. This needs to be increased to 7 percent within the next three years and 8 per cent by 2005-06, by which time the annual level of investment in infrastructural facilities is projected to treble or rise even more, from the current level of Rs. 6000 billion (US$52 billion) by 2005-2006.

The total infrastructure investment requirements for the next five years again have been estimated in the report at about Rs. 4000-4500 billion (US$ 115-130 billion).

The task of finding such large amounts and thereafter deploying them productively calls for a close partnership between the public and private sectors, with a vital role reserved for foreign capital. To finance this large short fall, the domestic saving rate needs to be increased by a minimum of 26.7%. besides this has to be supplemented at the margin by FDI. However, this "margin is indeed very important since the role of foreign investment has to be read not only as a gap filler between saving and investment but also as a means for bringing better technology and management.



Further, for filling this gap, the ODA flow may not be very helpful in future, given the aid weariness of most developed countries. Hence, FDI may prove to be the prime substitute. But a sustained FDI inflow would call for the creation of a fair, open and rational tariff structure. Besides, the availability of critical infrastructure base is also becoming an essential precondition. The projected net foreign investment inflow includes both foreign direct and portfolio inflows. This will entail an increase from the current US $ 4-4.5 billion to about US $ 9-10 billion by 2000-01 and US $ 15-16 billion per annum by 2005-06. IIR's expectation is that about 40 per cent of external capital inflows could flow into the infrastructure sector. This is indeed a very ambitious target. The sustained inflow of such volumes of external capital would require an open foreign investment regime. Simultaneously, attention should be paid to keeping the macro-economic fundamentals stable.


THE ROLE OF FID IN INFRASTRUCTURE

The importance of infrastructure sector also follows from the fact that foreign investors are now looking at infrastructural development as a yardstick for directing their investments. In fact infrastructural development had taken precedence over wage levels in assessing the investment potential in developing countries. In India infrastructure sector itself is becoming an attractive investment area for FDIs.

Already there is a huge demand for funds from the manufacturing sector. On top of that is the demand from the infrastructure sector. Both draw heavily from the savings of the household sector. The growth of financial savings of household sector however is not rising fast. In this context, the importance of increased obligation of domestic saving needs underscoring.



GOVERNMENT POLICY FOR INVITING PRIVATE AND FOREIGN INVESTMENT

To encourage feign funds flow into the infrastructure sector, the Financing Ministry has allowed Foreign Institutional Investors (FIIs) also to invest in unlisted companies.

This was aimed at helping infrastructure companies as they would not be in a position to list their shares in the initial phase. FIIs now deploy 100 per cent of their funds in corporate debt. However, the Ministry has not dispensed with the 20 percent withholding tax on such investment as per the suggestions of the IIR report.

Speaking at the World Infrastructure Forum, John Taylor, Director, Infrastructure, Energy and Financial Sector Department, ADB, emphasised that the "counter guarantee" scheme was designed to cover specific risks including "discriminatory government action of various kinds, non-delivery of inputs or non-payment for output by State-owned entitles, availability of essential public services, changes in the agreed regulatory framework or tax regime, provision of essential complementary infrastructure, compensation or delays caused by government action or political uncertainty, transfer risks, foreign currency availability and convertibility."

In a bid to make the core sector attractive for FDI, the Cabinet Committee on Foreign Investment (CCFI) has modified the 49 percent cap on foreign equity in the infrastructure sector to render fund mobilisation easier. This major policy decision which will indirectly raise the foreign equity investment in infrastructure sector to well over 51 per cent it a domestic partner fails to meet his commitment from internal sources, including borrowing, should help the large industrial houses. The new mechanism is designed to over come the constraints for foreign equity cap in the infrastructure sector. Under the norms, companies operating in the sector can bring in equity through the mechanism of an investing company for the purpose of making investment in a licensee company n the service sector where there is a prescribed foreign equity cap.



INFRASTRUCTURE : THE RECENT BUDGET

Following were the specific proposals relating to infrastructure; 1) Telecommunications, oil exploration and industrial parks have been accorded the status of infrastructure; 2) the policy regarding oil exploration which was realised sometimes back was highlight; 3) The Finance Minister reiterated his commitment to many recommendations of the India infrastructure Report; and4) budgetary support to the National Highways Authority of India was enhanced from Rs. 2bn. to Rs.5bn. The Finance Minister opened up the health insurance sector to Indian private firms. Although, a small niche area, this is a significant move as it indicates the likely future deregulation of the sector.

The Central Plan outlay for 1996-97 including mainly on infrastructure has not shown any improvement, Inspite of a near crisis situation in infrastructure. This may be result of hypothesis made by the Government all along; i.e. private sector will take over whenever Government vacates, thus solving the problem. The feasibility and pragmatism of this hypothesis remain to be watched.

Compared to the allocation on Central Plan outlay and their growth in 1995-96, the performance in 1996-97 was not significant. The growth rate in the energy sector which declined both in real and nominal terms in 1996-97. The 1997-98 budget support for this sector has virtually been negated by the impact of inflation when the real increase has become negative. The same scenario emerges in the budgetary support to communication in 1997-98 with respect to science, technology and environment, although the growth is definitely better than what was provided in the last five years, it still remains very low.

Besides, even if allocation in the sector is raised with a greater inflow of FDI and a large participation of private sector, the immediate problem will still remain, since, infrastructure is prone to long gestation. Consequently, the inadequacy of infrastructure will continue for quite some time, unless technology upgradation can be done in the infrastructure production, including construction activities, for reducing the gestation lags and simultaneously improving the quality of products. With this infrastructure constraint any indiscriminate growth may lead the economy to a situation of over-heating and a further rise in inflation.

This poses challenges before the sector in several areas :

i) Capital accounts convertibility could also lead to large funds kept by Indians abroad flowing into India. The various estimates have put the NRI funds abroad at & 150-200 billion

ii) India is not alone in seeking foreign funds in the core sector. China requires US $ 5000 billion in the next two decades. So does Korea. India has to complete with them.

iii) One of the key problems in the commercialization of infrastructure is allocation or risks. The successful design of a project involves correct demarcation and allocation or risks. So far, projects were opened upto the private sector without adequate feasibility studies. The result projects once considered viable turn unviable when the bidders find their costs shooting up. This needs correction.

iv) The other problem is that infrastructure demand for funds is mostly long term and can come from the insurance and pension funds. But, these two areas have not been opened up. Here early action is needs.

v) Official and private perceptions over the viability of a project vary often widely. Differences have to be narrowed.

vi) In an infrastructure constrained economy with a high interest rate any large programme of investment may add to inflationary potential unless gestation lags in the projects are reduce. Here comes the choice of an appropriate technology to reduce investment lags which in infrastructure projects in India are very high compared to that in many successful reforming countries.

vii) The report (IIR) says that on the basis of existing tariff levels, it will be possible for port authorities to service debt obligations and pay a reasonable return on equity. But there is a need to delegate adequate power to port trust to facilitate speedy creation and operation of assets.

viii) The Ports will have to upgrade the facilities to international levels. In the modernised ports, cargo would be mechanically handled; there would be special facilities for handling container and bulk cargo and computer-based cargo clearance including customs clearance.

ix) Similarly, the future of road development lies in finding out innovative ways of leveraging funds from the market to augment budgetary resources as also in adopting modern equipment-based technology leading to expeditious, construction of the much wanted roads.

INFRASTRUCTURE INDICATOR

Growth rate of six-core infrastructure industries picked up by 5.2% in November 20003 pushing up the overall growth rate in April-November 2003-2004 to 4.2%. the segments that did well in November 2003 included petroleum refinery (20%) and coal (6%) sectors. Power generation also picked up by 4.3% during the latest month. Manufacturing sector did even better with growth rates surging to 8.1% in November 2003, the highest recorded over the past 45 months.

Similarly, there was some improvement in growth rates in mining and electricity segments. But the trends have been fluctuating in the recent period in both these sectors. Growth of industry and the manufacturing sector in April-November 2003-04 is the highest recorded over the past six years and it almost rivals the peak levels of growth achieved in the mid nineties.

http://www.asiatradehub.com/india/intro.asp

Akshay

The importance of infrastructure for sustained economic development is well recognised in India. The country has made considerable progress in the last ten years in attracting private investment into the infrastructure sectors -- in telecommunications, ports and roads and in other individual projects. The sector is estimated to grow at a CAGR of 15 per cent over the next few years.

Clearly, it is a sector with colossal potential. According to the Economic Survey 2005-2006, India has the potential to absorb US$ 150 billion of foreign direct investment in the next five years in the infrastructure sector alone.
Construction sector

In India, construction is the second largest economic activity after agriculture. Investment in construction accounts for nearly 11 per cent of India’s Gross Domestic Product (GDP) and nearly 50 per cent of its Gross Fixed Capital Formation (GFCF). Fund injection into the sector could go up to US$ 124.65 billion by FY2010. Construction accounts for nearly 65 per cent of the total investment in infrastructure and is expected to be the biggest beneficiary of the surge in infrastructure investment over the next five years.
Roads

The Indian road network, the largest in the world aggregating 3.32 million km, consists of 65,569 km of National Highways, 1,28,000 km of State Highways, 4,70,000 km of Major District Roads and about 26,50,000 km of other District and Rural Roads.

National Highways account for only about 2 per cent of the total length of roads, but carry about 40 per cent of the total traffic across the length and breadth of the country. Considering the importance of the National Highways and the rapid increase in traffic, the Government has taken up the National Highways Development Project (NHDP), which consists of the following components:

* NHDP Phase-I: The Golden Quadrilateral (GQ; 5,846 km) connecting the four major cities of Delhi, Mumbai, Chennai and Kolkata
* NHDP Phase-II: The North-South and East-West Corridors (NS-EW; 7,300 km) connecting Srinagar in the north to Kanyakumari in the south, including spur from Salem to Kochi, and Silchar in the east to Porbandar in the west
* Port connectivity and other projects — 1,157 km
* NHDP Phase III-A (4,015 km): 4-laning of over 4000 km in the year 2005 approved at an estimated cost of US$ 4.9 billion.

Future plans

The Government has set ambitious plans for upgradation of the National Highways in a phased manner in the years to come. The details are as under:

* 4-laning of 10,000 km (NHDP Phase- III) including 4,000 km that has been already approved. An accelerated road development programme for the North Eastern region.
* 2-laning with paved shoulders of 20,000 km of National Highways under NHDP Phase-IV.
* 6-laning of GQ and some other selected stretches covering 6,500 km under NHDP Phase-V.
* Development of 1,000 km of express ways under NHDP Phase-VI.
* Development of ring roads, bypasses, grade separators, service roads, etc. under NHDP Phase-VII.

Ports

India, with an extensive coastline of 7,517 km (including the Andaman & Nicobar islands), has 12 major ports and 187 minor ports. The 12 major ports carry about three fourths of the total traffic, with Vishakapatnam being the top traffic handler in each of the last five years.

During 2004-05, Indian ports handled a total estimated traffic of over 500 million tonnes. Up to December 2005, cargo handled by major ports registered a 12.4 per cent growth, compared to 11.3 per cent observed in 2004-05. There has been an impressive growth of container traffic of 14.2 per cent per annum during the five years ending in 2004-05. Half of the world’s traded goods are containerised and this proportion is expected to increase further.
Airports

Addressing the need for more efficient airports, the Indian Government has begun an aggressive drive to modernise existing airports. The international airport in Delhi and Mumbai are being upgraded with private sector participation. To ease matters further, the FDI cap in the sector has been moved to 49 per cent.

For the upgradation exercise, a joint venture will be formed in which the Airports Authority of India (AAI) and other public sector units will hold 26 per cent equity and the balance 74 per cent will be held by a strategic partner. The AAI has now identified 25 non-metro airports for development. These include Agatti, Aurangabad, Bhopal, Bhubaneswar, Coimbatore, Indore, Khajuraho, Nagpur, Patna, Port Blair, Rajkot, Trichy, Vadodra, Varanasi and Vishakhapatnam.
Railways

The Indian Railways, which boasts of being the world’s second largest rail network under a single management, has been one of the biggest contributors to the rise of industry and the change in the economic landscape of the country for over 150 years.

Of the two main segments – freight and passenger – of the Indian railways, the freight segment accounts for roughly two thirds of its revenues.
Telecommunications

India’s telecommunications story in many ways epitomises the new India. The image of young Indians with slick mobile phones has become a metaphor for economic growth in country. With rapid growth in the telecommunication sector, tele-density levels have surpassed all targets set by the Government. The total number of telephones (basic and mobile) rose from 22.8 million in 1999 to more than 125 million at the end of December 2005.

While 21.83 million telephones were added during 12 months of 2004-05, the first nine months of 2005-06 saw an addition of 27.47 million phones. Overall, tele-density has risen from a mere 2.32 in 1999 to 11.32 in December 2005.

The FDI scenario in the sector has also been on a roll. The Government allows 74 per cent of FDI in the sector and the total FDI approved up to September 2005 was US$ 9.3 billion. Some of the major investors are Hutchison, Singtel, AT&T and Distacom. Telecom major Vodaphone has announced its entry into the sector with the acquisition of 10 per cent shares in Bharti Televentures for a consideration of 1.5 billion. The agenda for having world renowned Telecom and IT companies set up their R&D/manufacturing base in India, has been aggressively pursued to ensure timely delivery, high quality, cost effective supplies and very good after sale services.
Power

India’s power market is the fifth largest in the world with an installed generation capacity of 123 GW, generation of more than 600 billion kWh, and a transmission & distribution network of more than 6.3 million circuit km.

With economic development in the country, per capita electricity consumption is bound to increase. The Government has taken significant policy initiatives to improve conditions for attracting private investment and FDI in the power sector. Broadly, 100 per cent foreign equity participation is allowed under the automatic approval route in all segments of the industry. For large generation projects, the Mega Power Policy extends incentives, such as capital import duty concessions, and the waiver of local levies to improve cost attractiveness, and a tax holiday for a period of 10 consecutive years out of 15 years from commencement.

http://www.ibef.org/economy/infrastructure.aspx

Akshay

Investment storm in India's ports
By Arun Bhattacharjee

NEW DELHI - The euphoria that has taken over India as it experiences its highest ever foreign reserves, a projected 8 percent growth in agriculture, 6 percent in industry and a 7 percent gross domestic product increase - likely to touch 8 percent - hides the growing concern over a drop in the country's export growth.

India's export growth has slipped by 5.07 percent over a 12 percent growth projection last year, and if one goes by the projection made by the Federation of Export Organization, India's export growth in 2004 has to be 17 percent to cover the shortfall in 2003 and sustain economic growth. The Commerce Ministry maintains that the shortfall will be covered in the last quarter, but traders disagree.

One of the reasons for these doubts, cited by M Rafeeque Ahmed, president of the association, is poor port facilities, which delays maritime trade and leads to failed deadlines. Indian ports are so congested that shipping companies charge more from the exporters for the downtime due to the long waits involver. It takes between 15 to 30 days for a berth to become available at Kolkata port. The ports at Chennai and Mumbai are no better. Even the many export processing zones that have been built around the ports to boost exports have not reached their full potential as supply lines continue to be blocked.

India is under pressure from major shipping lines, apart from the need for better port facilities, to meet the challenges of globalization and the growing need for specialized port facilities, including bulk carriers, mostly for petroleum and liquefied natural gas. Once the automobile sector was liberalized, demand for petroleum shot up, resulting in a demand for bulk imports to meet the shortfall, given that the country hardly produces 30 percent of its energy needs.

Although the Ministry of Shipping is trying to improve cargo clearance and berthing facilities by adding offshore container terminals, funds for port development continue to be a problem, despite a government commitment for US$22 billion. Although the effort to privatize the country's airports was slowed down by bureaucratic delays, the government is spending the $22 billion to build, expand and modernize seaports with locally generated resources. The southern port of Kochi has been selected to have foreign government partners develop the port into a container transshipment terminal. Foreign investment to the tune of $438 million is being sought as well for the development of Jawaharlal Nehru Port Trust. Development and modernization of other southern and western ports will cost $3.29 billion.

Also on the sick list are 27 ports, but those requiring immediate modernization are Mumbai and Kandla on the west coast, Vishakhapatnam in Andhra Pradesh, New Mangalore in Karnataka, Ennore in Tamil Nadu, Haldia in West Bengal and Paradeep in Orissa. To serve the sand-choked Kolkata Port, a container terminal has to be built at Sagar Island, 170 kilometers from Kolkata.

With the World Trade Organization dateline of 2006 for liberalized imports, the deadline for developed ports seems to be yesterday, and India is aware that to become the projected fourth-largest global economy by 2020 it will need modern infrastructure in every area.

The government believes that one way to meet fund requirements could be through persuading foreign governments to invest in the modernization and development of India's ports. Singapore, the United Kingdom and the Netherlands have been approached with proposals allowing them to hold equity in Indian ports. A Shipping Ministry official explains that the idea is compatible with recent trends. "If Singapore Airlines or some others are permitted to hold equity in government-owned airlines, why can the foreign governments not hold equity in government-owned sea ports?" he questions.

But the reality is, India has not yet allowed shares of Air India or Indian Airlines to be owned by foreign airlines or governments. To make an exception in the case of its ports, the government would have to amend its traditional investment rules, a time consuming process which needs the sanction of parliament; an unlikely possibility as parliament will not be in session beyond February 5 in preparation for general elections expected between the end of March and early May.

A law ministry official says that India may succeed in allowing foreign equity in ports without parliament's approval as Indian port authorities are independent corporate bodies that generate their own revenue from port charges and government subsidies.

Infrastructure spending nowadays is not confined to the central government level. The states are raising funds and asking for support. Opposition Congress Party's Sheila Dikshit, the second-term chief minister of Delhi, is ready with a blueprint that will be made public before March of next year to make New Delhi a global city.

Work started in 2001 to globalize the capital city with an underground railway system costing $1.49 billion, the building of a "sky train" network backed by 17 overpasses and broad road networks to smooth Delhi's congestion created by 1.5 million motor vehicles. As Delhi prepares for the Asian Games in 2008, the central government assures that investment for infrastructure need not be held up for want of funds. The central government is spending $38.4 billion on the superhighway network.

Following a Soviet model of development in the 1950s and 1960s, India went for heavy industry, steel plants and mining projects on a grand scale to provide the industrial infrastructure and lay the foundation for its industrial development. But the government-owned industrial behemoths failed to generate profit due to poor management, bureaucratic control, lack of fund infusion and modernization, and highways, airports and seaports received very low priority during this period.

Now it appears that things might change.

Akshay

India Port Report: 10 Years of Reforms and Challenges Ahead

Published by I-maritime Consultancy Private Limited, Mumbai. I-maritime’s consulting division provides comprehensive solutions specifically tailored to address the needs of its clients. These solutions seek to address issues related to finance, marketing and business development, human resources, operations and IT, and organization management. The services offered include preparing business plans, feasibility reports, entry strategies,
traffic studies, market research, financial appraisals, equity research etc. in the ports, shipping, shipyards and logistics sectors.
India Port report by I-maritime, Mumbai presents a broader prospect of Indian port sector with a public policy prospective and has integrated focal points of different business entity like, shipping lines, port authority, port operators, logistics agencies and types of cargo transported by individual ports. This report has discussed the port history before and after the liberalized era and has broadly discussed the 10 years of the reforms and challenges ahead.
The report says that the problems with the major ports in India have been seen because of political pressures, lack of autonomy, lack of incentives, excess of bureaucracy and hierarchies’ rigidities. The report also admits the fact that the last 10 years of globalization and economic reforms opened different ways to different sectors and port sector has diversified
accordingly and has made significant improvement. One of the reasons for diversification of this sector was to increase the export and import relations with other countries and decreasing the public monopoly to make this sector more efficient by allowing the private companies to invest in this sector. This created the urgency of standard cargo handling equipments, modernization of the port systems and transforming this sector from laborintensive to autonomous system in order to decrease the turnaround period and thus increasing the efficiency of ports.

Read the rest of the report at

http://129.3.20.41/eps/le/papers/0506/0506001.pdf

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Roads & Highways

With a total length of approximately 3.3 million kilometres, India has the second largest road network in the world. Roads have played a vital role in transportation and also enhancing trade. The government has taken initiatives to improve and strengthen the network of National Highways, State Highways and roads in major districts and rural areas. In terms of private sector participation in road projects, the government has received an encouraging response from private investors, both foreign and domestic.

• Estimates show that Indian roads carry almost 67 per cent of freight and 8 per cent of passengers annually.

• In India, road traffic is growing at a considerable pace. According to estimates, traffic on roads is growing at a rate of 7 to 10 per cent per annum. The growth in the number of vehicles has been around 12 per cent per annum.

• The Indian road network is divided into three main categories:

• national highways (interstate) covering over 58,000 kilometres.

• state highways covering approximately 200,000 kilometres.

• rural and urban roads covering nearly 3 million kilometres.

• The national highways cater to about 45 per cent of the road transport demand in the country. The government has embarked upon an integrated National Highways Development Programme (NHDP). A major part of NHDP is the Golden Quadrilateral project. It entails upgrading and widening of 6,000 km of highways connecting the four major metropolitan cities of Delhi, Mumbai, Chennai and Kolkata.

• The government is also undertaking the North-South and East-West Corridor projects. These projects comprise about 7,000 Kms of highways connecting Srinagar (North) with Kanyakumari (South) and Silchar (East) with Porbandar (West).

• The number of foreign investors in the Indian road sector has been increasing over the years. The following is a summary of contracts under implementation:

Category of Firms No of contracts Awarded cost (INR billion)

Indian firms 85 104.55

Joint ventures (Indian & 35 61.15

foreign firms)

Foreign firms 12 19.74

Total no of contracts 132 185.44

Policy Initiatives

The government has adopted a roads development policy setting out the guidelines for investment in highways. In order to meet the huge investment requirements in the sector, the government has taken a number of measures to attract private sector participation.

• The government has permitted 100 per cent foreign equity (up to US$ 306 million) in construction and maintenance of roads, highways, tunnels etc.

• In order to share project risks, the government, through the National Highways Authority of India (NHAI), can acquire equity stakes up to 40 per cent in build-operate-transfer (BOT) projects.

• Promoters are permitted to charge toll tax on certain projects. These toll taxes are indexed to the wholesale price index.

• Road projects are entitled to corporate tax holidays for 10 years.

• The government permits duty free import of high capacity equipment required for highway construction.

• The government also facilitates investors with feasibility study, land acquisition, resettlement and rehabilitation, etc.

• Earlier, most of the private sector investments were through the build-operate-transfer schemes. Now many of the recent projects are being bid on a toll collection system to finance the project. This new scheme has generated considerable interest among private investors and operators.

• Model Concession Agreements (MCA) for large BOT Projects costing more than US$ 20 million, small BOT Projects costing up to US$ 20 million and annuity-based projects, have been finalised. It is expected that in the coming years, private sector participation will grow significantly.

Opportunities

• To augment resources, the Ministry of Road Transport and Highways has taken a lead in private sector participation in road infrastructure projects. At present 34 National Highways projects costing about US$ 1120 million are in different stages of construction or in operation.

• The NHDP project is one of the largest road sector projects being pursued by the government. The private sector is expected to play a significant part in this.

http://morth.nic.in

Policy initiatives in Roads sector

• FDI upto 100% under automatic route is permitted in projects for construction and maintenance of roads, highways, vehicular bridges, toll roads.

• Private sector participation in the highways sector is under the Build Operate and Transfer (BOT) concept.

• Streamlining the process of the award of tenders so that the whole process is finalised within 40 days from closing date of tenders.

• A concession agreement for BOT projects under annuity payment scheme has been finalised.

• Amendment of National Highway Act for expeditious land acquisition, procedural change for environmental clearance, enhanced delegation of power to Ministry for expeditious clearance of the projects.

• As per Central Road Fund Act 2000, the distribution of total of 100% cess on petrol and 50% cess on diesel would be: 57.5% for National Highways, 30% for State roads and 12.5% for road over/under bridges and safety works on Rail-Road Crossing. The remaining 50% of the cess on diesel is to be used to develop rural roads.

• Projects for widening of existing National Highways have been exempted from environmental and forest clearances.

• Thrust to accelerated implementation of Prime Minister’s National Highways Development Project (NHDP) from petrol and diesel cess and additional fund raising measures for NHAI.

• Phase I of the National Highways programme to be substantially completed by December 2003.

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PM inaugurates Bangalore elevated highway project

Bangalore: Prime Minister Manmohan Singh Saturday laid the foundation stone for a 10 km expressway project here that is expected to provide world class road connectivity to India's IT city.

Touted to be the first of its kind, the corridor will have a four-lane elevated highway to ferry thousands to their workplace in the electronics city and a six-lane highway on the ground to link Hosur across the state border to Tamil Nadu.

The Rs.4.5-billion project, being executed under the public-private partnership by the National Highway Authority of India (NHAI) and the Karnataka government, is to be completed in 24 months and ease traffic snarls on the national highway (NH-7).

Flagging off the project, Singh said the state-of-the-art expressway would symbolise what Bangalore has come to represent the world over.

"You are on the highway of rapid progress in our country, while many other regions continue to remain behind, moving slowly. The elevated highway will enable those who function in a fast-moving and rapidly growing economy to keep pace with the competition they face in a globalised world," Singh said in his address. About 5,000 people had gathered to witness the event.

In order to ensure that Bangalore maintains its global brand and competitive edge, the prime minister said the central government had taken several initiatives to provide world-class road connectivity around the city.

The ministry of surface transport is involved in making the Bangalore-Nelamangala stretch of NH-4 into a six-lane one, including a four-km elevated corridor. The four-lane Bangalore-Devenahalli section of NH-7, where the international airport is coming up, is being made into six-lane. The Bangalore-Kolar section of NH-4 will have four lanes.

These projects will facilitate travel to and from Bangalore and remove the bottlenecks that have been slowing the increasing vehicular traffic on the national highways in the region.

"The urban landscape of India is changing rapidly. In the coming years, about 40 percent of our population will be residing in urban areas. These urban areas must be seen as engines of growth, as places where there are economies of scale and scope and hence, as hubs of economic, commercial and social activity," the prime minister said.

"As the benefits of urbanisation spread into rural areas and as rural development brings urban facilities to rural areas, the nature of commuting between town and country will change," Manmohan Singh pointed out.

In a veiled attack on the opponents of development projects, the prime minister said some people had wrongly poised the question of development as a conflict between city and village.

"This is a false notion. No country can develop if its villages do not develop. Mahatma Gandhi told us all, very wisely and sagely, that India lives in its villages. So it does today. When we seek the modernization of our economy, when we seek to build an industrialised country, when we seek to create a knowledge economy - all of this must benefit both the town and country, both city and village. And it can. The roads and highways are the means to achieving it."

Regretting that the existing road system did not as yet cater to the growing demands of urban and rural areas, Manmohan Singh said the benefits of development had to move beyond the limited confines of cities to the vast hinterlands so that millions could also become partners in progress.

"Today, we see poor people from villages coming into cities for work. Tomorrow, we could see economically better off people living in rural areas commuting to the city for pleasure rather than business. We could see increased demand for better quality public transport between town and country. There will also be greater demand for rapid transport between production centres and markets. We need to strike a balance to ensure uniform growth and all-round development."

Besides Minister for Shipping, Road Transport and Highways T.R. Balu, Karnataka Governor T.N. Chaturvedi, Chief Minister H.D. Kumaraswamy, his deputy B.S. Yediyurappa and former chief minister and opposition leader N. Dharam Singh were present on the occasion.

http://www.newkerala.com/news3.php?a...lnews&id=13400

Akshay

Andhra Pradesh State Highway Project

Full report on

http://www-wds.worldbank.org/externa...multi0page.pdf

http://www-wds.worldbank.org/externa..._3980420172522

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Read the Worldbank sponsored Roads and highway projects in India

http://www.worldbank.org.in/external...&piPK=64027228

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Signing : Lucknow Muzaffarpur National Highway Project

he Government of India and the World Bank today signed a loan agreement of US$620 million to upgrade the stretch of National Highway No. 28 between Lucknow in the State of Uttar Pradesh and Muzaffarpur in the State of Bihar on the East-West National Highway Corridor. Mr. Madhusudan Prasad, Joint Secretary, Department of Economic Affairs, Ministry of Finance, Government of India signed on behalf of the Government of India. Mr. Nirmal Jit Singh, Member (Technical) signed on behalf of the National Highways Authority of India. Mr. Michael F. Carter, World Bank Country Director, India, signed on behalf of the World Bank.

The project is the fourth World Bank loan to support the Government of India’s National Highway Development Project and will help reduce transport costs which are hampering national economic activity in the country as well as contribute to opening up access to the more remote and poor North East of the country.

Road transport plays a significant role in India’s economy, carrying 80 percent of the land transport demand. The total length of the national highway network is about 65,000 km. This accounts for less than 2 percent of the total road network, but carries over 40 percent of the road traffic. As a result of steady economic growth over the last decade, traffic on the national highways has grown by 6 to 7.5 percent per year.

“This section of