Revival Roadmap
ROADS & HIGHWAYS

Revival Roadmap

The government has crafted a comprehensive blueprint for the revival of Indian infrastructure, boosting confidence among industry stakeholders, says AAKANKSHA JOSHI.

For years, ambitious targets for infrastructure growth have been set by various governments. There is recognition of the urgent need for a comprehensive infrastructure backbone, underpinning the country´s economic growth and social goals. There is also recognition of the failure to meet these needs. From autopsies of stalled or abandoned projects, common themes emerge - difficulties in land acquisition, faulty planning, unavailability of financing, and unresponsive regulatory authorities, all leading to a slowdown in private investment.

It is natural that in addition to newer and increasingly ambitious targets, rectification or mitigation of the existing issues plaguing projects drives policies in the infrastructure sector.

Roads
To revamp road infrastructure, the government has undertaken various policy initiatives, some of which include:

  • Introduction of a Hybrid Annuity Model (HAM) under which the government infuses 40 per cent of the project cost during the construction phase, and the remaining 60 per cent in annual installments with interest, providing liquidity and sharing financial risks.
  • Providing one-time financial assistance to stalled projects, which at least 50 per cent of the work has been completed.
  • Compensation where delays are not attributable to concessionaires under the BOT model.
  • Introduction of an easier exit policy allowing developers to divest their entire equity and exit operational projects within two years from the start of operations. The resultant sale proceeds may be invested in highway and power projects or debt retirement for infrastructure projects.
  • Separation of civil cost from the land acquisition and other capital costs aimed towards faster appraisal and approval process.

Growth has been apparent since these initiatives have commenced, and there is increased interest in investment by private players.

Power
There is a thrust on augmenting capacity as well as strengthening distribution networks. The government is clearly aiming to meet its COP 21 commitments and an emphasis on renewables is apparent. Some important initiatives are:
 
  • Development of a trading platform for clean energy by the Ministry of New and Renewable Energy (MNRE) and Power Trading Corporation of India, to help states trade in renewable power.
  • State-wise action plans with yearly targets to introduce renewable energy technologies and solar rooftop panels to achieve 175 GW of renewable power by 2022.
  • Electrification of villages under the Deen Dayal Upadhyaya Gram Jyoti Yojana, aiming for electrification of 18,452 un-electrified villages by May 1, 2018.
  • Development of a new power tariff policy to facilitate, among others, (a) 24 x 7 supply to all consumers, (b) removal of market uncertainty by allowing pass-through for impact of any change in domestic duties, levies, cess and taxes in competitive bid project, and(c) promoting renewable energy and energy security by ensuring 8 per cent of electricity consumption (excluding hydropower), shall be from solar energy by March 2022.
  • Restructuring power distribution companies under the Ujwal DISCOM Assurance Yojana for their revival and financial turnaround, ensuring accessible, affordable and available power for all.
  • Development of new guidelines by the MNRE, allowing state governments to use unproductive and non-agricultural land for solar parks.

These policies strive to bring energy security, independence and efficiency, transform the grid, aid in ease of business and electrify every household.

Ports
Until recently, Indian cabotage norms allowed foreign ships or ships not chartered by non-citizens to trade at multiple ports on the Indian coastline only if specifically licensed by the Directorate General of Shipping (DGS). Licenses were granted only if suitable Indian-flagged tonnage were unavailable.

The government has now decided to relax the Indian cabotage policy effective from September 2, 2015, for a period of five years. A short-term policy could invite significant investment and interest, but an adequate gestation period for the returns on the heavy investment to flow is essential for effectiveness.

Waterways
As a primary step towards integrated development of inland waterways, the government has enacted the National Waterways Act, 2016, and declared 106 inland waterways as National Waterways, in addition to the existing five waterways, across 24 states. The government is now seeking to establish a multimodal grid with road, rail and port connectivity with river terminals on the National Waterways, wherever possible, and has further proceeded with Jal Marg Vikas, between Allahabad and Haldia, for navigation of at least 1,500 tonne vessels on the Ganga.

  • Committed in the promotion of coastal shipping and increasing the share of waterways transportation mode, a few steps taken by the government are:
  • Moderating manning and technical requirements for vessels operating within Indian territorial waters through a river sea vessel notification.
  • Declaring inland vessel limits for facilitating coastal trade operations.
  • Issuing coastal shipping rules for coastal vessels.
  • Advising major ports to introduce green channel for coastal cargo, priority berthing for coastal vessels, and construction of exclusive coastal berths.
  • Exempting customs and excise duty on bunker fuels for use by coastal vessels carrying certain kinds of cargo between two ports in India.
  • Abatement of service tax at 70 per cent for coastal shipping.
  • Simplification of customs procedures.

Airports
The National Civil Aviation Policy (NCAP) 2016, was issued by the Ministry of Civil Aviation (MoCA) with the objective of enhancing regional connectivity by revival of the un-served and under-served airports on a ´demand-driven basis´. Under the NCAP:

  • A Regional Connectivity Scheme has been developed.
  • Development of airports by state governments, private sector, or in the public-private partnership mode has also been encouraged.
  • Future tariffs at all airports would be calculated on a ´hybrid till´ basis.

Additionally, in June 2016, the Foreign Direct Investment Policy, 2016, was amended to permit 100 per cent foreign direct investment (FDI) in brownfield airport projects under the automatic route. This policy change has been made in order to aid in the modernisation of existing airports, which is another area that the government has focused on.

While the government seems to be taking steps in the right direction as regards development of airports, it still has to grapple with a few issues. Airports in metro cities struggle to cope with air passenger traffic and crowded runways, while airports in smaller cities have been languishing for want of better infrastructure. The idea of projects on a ´plug-and-play´ basis mooted in the budget for FY2015-2016, is yet to be implemented.

Railways
A few key initiatives in the railway sector are:

  • For the improvement of rail connectivity and private sector participation, the Ministry of Railways has come up with numerous schemes and policies, such as, Automobile Freight Operator, R2CI policy and R3i policy.
  • The Dedicated Freight Corridor Corporation of India Ltd has been set up for maintenance of dedicated freight corridors along the eastern and western parts of India, with estimated cost of the project at $16.5 billion.
  • Indian Railways and Google have partnered to create India´s largest network of free Wi-Fi across 400 railway stations, pan India, in the first phase. The second phase would involve providing Wi-Fi connection on running trains.
  • Metro projects have been approved in various cities like Pune, Ahmedabad, Nagpur and Lucknow, and existing networks are being strengthened.

Conclusion
The current government clearly seems to have crafted a blueprint for the revival of Indian infrastructure. Confidence is surely rising, especially given the turnaround in the highways sector. However, patience would be key, as longstanding concerns inch towards resolution before the groundwork for exponential growth in infrastructure shows result.

About the author:
Aakanksha Joshi
is a Partner at the Energy & Infrastructure, Hospitality, and Corporate & Commercial practices of Economic Laws Practice (ELP). She has extensive experience in corporate, energy and infrastructure, commercial and real estate law.

The government has crafted a comprehensive blueprint for the revival of Indian infrastructure, boosting confidence among industry stakeholders, says AAKANKSHA JOSHI. For years, ambitious targets for infrastructure growth have been set by various governments. There is recognition of the urgent need for a comprehensive infrastructure backbone, underpinning the country´s economic growth and social goals. There is also recognition of the failure to meet these needs. From autopsies of stalled or abandoned projects, common themes emerge - difficulties in land acquisition, faulty planning, unavailability of financing, and unresponsive regulatory authorities, all leading to a slowdown in private investment. It is natural that in addition to newer and increasingly ambitious targets, rectification or mitigation of the existing issues plaguing projects drives policies in the infrastructure sector. Roads To revamp road infrastructure, the government has undertaken various policy initiatives, some of which include: Introduction of a Hybrid Annuity Model (HAM) under which the government infuses 40 per cent of the project cost during the construction phase, and the remaining 60 per cent in annual installments with interest, providing liquidity and sharing financial risks. Providing one-time financial assistance to stalled projects, which at least 50 per cent of the work has been completed. Compensation where delays are not attributable to concessionaires under the BOT model. Introduction of an easier exit policy allowing developers to divest their entire equity and exit operational projects within two years from the start of operations. The resultant sale proceeds may be invested in highway and power projects or debt retirement for infrastructure projects. Separation of civil cost from the land acquisition and other capital costs aimed towards faster appraisal and approval process. Growth has been apparent since these initiatives have commenced, and there is increased interest in investment by private players. Power There is a thrust on augmenting capacity as well as strengthening distribution networks. The government is clearly aiming to meet its COP 21 commitments and an emphasis on renewables is apparent. Some important initiatives are:   Development of a trading platform for clean energy by the Ministry of New and Renewable Energy (MNRE) and Power Trading Corporation of India, to help states trade in renewable power. State-wise action plans with yearly targets to introduce renewable energy technologies and solar rooftop panels to achieve 175 GW of renewable power by 2022. Electrification of villages under the Deen Dayal Upadhyaya Gram Jyoti Yojana, aiming for electrification of 18,452 un-electrified villages by May 1, 2018. Development of a new power tariff policy to facilitate, among others, (a) 24 x 7 supply to all consumers, (b) removal of market uncertainty by allowing pass-through for impact of any change in domestic duties, levies, cess and taxes in competitive bid project, and(c) promoting renewable energy and energy security by ensuring 8 per cent of electricity consumption (excluding hydropower), shall be from solar energy by March 2022. Restructuring power distribution companies under the Ujwal DISCOM Assurance Yojana for their revival and financial turnaround, ensuring accessible, affordable and available power for all. Development of new guidelines by the MNRE, allowing state governments to use unproductive and non-agricultural land for solar parks. These policies strive to bring energy security, independence and efficiency, transform the grid, aid in ease of business and electrify every household. Ports Until recently, Indian cabotage norms allowed foreign ships or ships not chartered by non-citizens to trade at multiple ports on the Indian coastline only if specifically licensed by the Directorate General of Shipping (DGS). Licenses were granted only if suitable Indian-flagged tonnage were unavailable. The government has now decided to relax the Indian cabotage policy effective from September 2, 2015, for a period of five years. A short-term policy could invite significant investment and interest, but an adequate gestation period for the returns on the heavy investment to flow is essential for effectiveness. Waterways As a primary step towards integrated development of inland waterways, the government has enacted the National Waterways Act, 2016, and declared 106 inland waterways as National Waterways, in addition to the existing five waterways, across 24 states. The government is now seeking to establish a multimodal grid with road, rail and port connectivity with river terminals on the National Waterways, wherever possible, and has further proceeded with Jal Marg Vikas, between Allahabad and Haldia, for navigation of at least 1,500 tonne vessels on the Ganga. Committed in the promotion of coastal shipping and increasing the share of waterways transportation mode, a few steps taken by the government are: Moderating manning and technical requirements for vessels operating within Indian territorial waters through a river sea vessel notification. Declaring inland vessel limits for facilitating coastal trade operations. Issuing coastal shipping rules for coastal vessels. Advising major ports to introduce green channel for coastal cargo, priority berthing for coastal vessels, and construction of exclusive coastal berths. Exempting customs and excise duty on bunker fuels for use by coastal vessels carrying certain kinds of cargo between two ports in India. Abatement of service tax at 70 per cent for coastal shipping. Simplification of customs procedures. Airports The National Civil Aviation Policy (NCAP) 2016, was issued by the Ministry of Civil Aviation (MoCA) with the objective of enhancing regional connectivity by revival of the un-served and under-served airports on a ´demand-driven basis´. Under the NCAP: A Regional Connectivity Scheme has been developed. Development of airports by state governments, private sector, or in the public-private partnership mode has also been encouraged. Future tariffs at all airports would be calculated on a ´hybrid till´ basis. Additionally, in June 2016, the Foreign Direct Investment Policy, 2016, was amended to permit 100 per cent foreign direct investment (FDI) in brownfield airport projects under the automatic route. This policy change has been made in order to aid in the modernisation of existing airports, which is another area that the government has focused on. While the government seems to be taking steps in the right direction as regards development of airports, it still has to grapple with a few issues. Airports in metro cities struggle to cope with air passenger traffic and crowded runways, while airports in smaller cities have been languishing for want of better infrastructure. The idea of projects on a ´plug-and-play´ basis mooted in the budget for FY2015-2016, is yet to be implemented. Railways A few key initiatives in the railway sector are: For the improvement of rail connectivity and private sector participation, the Ministry of Railways has come up with numerous schemes and policies, such as, Automobile Freight Operator, R2CI policy and R3i policy. The Dedicated Freight Corridor Corporation of India Ltd has been set up for maintenance of dedicated freight corridors along the eastern and western parts of India, with estimated cost of the project at $16.5 billion. Indian Railways and Google have partnered to create India´s largest network of free Wi-Fi across 400 railway stations, pan India, in the first phase. The second phase would involve providing Wi-Fi connection on running trains. Metro projects have been approved in various cities like Pune, Ahmedabad, Nagpur and Lucknow, and existing networks are being strengthened. Conclusion The current government clearly seems to have crafted a blueprint for the revival of Indian infrastructure. Confidence is surely rising, especially given the turnaround in the highways sector. However, patience would be key, as longstanding concerns inch towards resolution before the groundwork for exponential growth in infrastructure shows result. About the author: Aakanksha Joshi is a Partner at the Energy & Infrastructure, Hospitality, and Corporate & Commercial practices of Economic Laws Practice (ELP). She has extensive experience in corporate, energy and infrastructure, commercial and real estate law.

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