View: What India should do to improve infrastructure
The recent news that India plans to open 100 new airports by 2024 is both ambitious and commendable. That said, large-scale infrastructure push whether in airports or any other sector will have to overcome challenges that are being faced across the infrastructure horizon in India. More importantly, common pitfalls such as retroactive contract changes must be avoided in the process of infrastructure creation.
It needs to be underscored that the challenges that Indian infrastructure must overcome are neither new nor exclusive to India. But, a re-examination of the problems is critical to further looking for solutions that can exacerbate infrastructure creation.
Firstly, issues around contract enforcement such as Power Purchase Agreements (PPAs) must be reduced to the minimum. Litigations resulting from retroactive changes in contracts that have been signed years back seriously affect the capacity of the infrastructure sector to attract the required capital. The recent problems that renewable energy companies in Andhra Pradesh have faced once again bring to the fore the issues around contract enforcement in India.
While litigations in business in general, especially in complex infrastructure projects, is a concomitant of normal proceedings, the revision of existing PPAs that were assigned via open auctions creates serious impediments for capital sourcing for Indian infrastructure. Not only are such issues negative for the existing investors in the projects, but also send wrong signals to prospective investors who are contemplating investments in India. Such contract enforcement issues significantly reduce the "bankability" of infrastructure projects, an outcome that militates the aim of rapid infrastructure creation in India.
Secondly, it is essential for India to ensure that infrastructure and infrastructure-related businesses have ease of access to inputs at appropriate price levels, so that the businesses created can deliver the infrastructure service sustainably and at prices that reflect the real value of the asset.
The appropriate input prices for infrastructure requires balancing a multitude of factors such as a fair price for the inputs (such as land), a price that allows a sustainable business, a price that will enable customers access to a service at charges deemed reasonable, profits to the entrepreneurs, sustainable projects especially for lenders and the long-term prospects of the sector. At the least, one must realise that the different objectives cannot all be improved upon concurrently. However, all are critical and, more importantly, in the long-run aggressively pursuing one aim at the cost of the others renders the projects in distress, thereby putting at risk the interest of all stakeholders. Balancing the various objectives will be even more vital going forward as all stakeholders need to get a fair deal.
Thirdly, a renewed focus is needed on the "pricing" of the infrastructure service to the end-user. Once again, the "appropriate level" of user charges will require balancing the interests of the various stakeholders. The "pricing" refers to the toll-road charge, electricity charge, airport user charges etc. While the charges are essential for specific projects to deliver returns, the charges must be sustainable from a long-term perspective and reflect to a large degree the economic value the end-user derives from the usage of the asset. Most importantly, if infrastructure services are intended to be provided free of cost, with significant subsidies or with full user-charges, then the go nment must plan for financing for the project with clarity around what components are to be financed by the budget and what components are to be funded by investors. Determining the appropriate level of user-charges is essential for the financial sustainability of the projects.
Essentially, "price" for the infrastructure service rendered is the core value that determines the cashflows of any project. Therefore, a precise evaluation of the risks and issues that the cashflows face is critical for long-term infrastructure creation. For instance, for a toll-road, the toll-tax paid must be evaluated on a variety of benchmarks including but not limited to the convenience of the toll-road relative to alternatives, the long-term sustainability of the toll-charge, a reasonable estimate of toll-charge hikes priced into the future etc. While determining the appropriate level isn't an easy task, a lack of focus on the long-term financial sustainability of projects runs the risk of rendering projects to suffer once the asset is operational.
Most importantly, it is vital to note that contract enforcement, right price of infrastructure inputs and the appropriate user charges are all intertwined and contribute significantly towards the availability of financing and rapid infrastructure creation. The eventual aim is to create bankable infrastructure projects that can financially sustain themselves over the life of the asset to create value for all stakeholders involved.
译文来源：三泰虎 http://www.santaihu.com/48722.html 译者：Joyceliu
It is a common culture in Our country .. bid low and get the project first .. then delay the project and ask for hike in the bid value as recurring cost os priced has gone up over the years .
India need to develop it''s debt market for starters. India need to fetch very long term investments from sovereign/pension funds across the world. India can''t rely on high cost long/short term borrowings from Indian banks to build infrastructure. Money is the biggest problem. Indians prefer to save by investing in precious metal/ real estate and the liquidity isn''t available in banks to support the Infrastructure development.
- B. Swadeshi
Issue 5% tax free bonds of Rs 20lac crore of 20 years duration repayable as infrastructural services provided lice electricit, wate, road, railways,telecommunication etc and not by cheque. First year liability Rs 2 lac crore after 1 year reducing to Rs 105000 crore in last year.
Who will subscribe to this $300 Billion worth of Bonds? Indians? FIIs who would find this interest rate unattractive?
MAKE LAND ACQUISITION EASY AND RATIONALISE THE PRICES NO INDUSTRIALIST WANTS TO MEET THE FATE OF TATAS AS IN WEST BENGAL.
Make land acquisition easy how? Would you sell your land to go nment at go nment quoted price for a project?
LAND AQUISITION IS CRITICAL THE STUPID LOGIC OF LAND PRICING SMALL PARCELS LIKE 500 SQ METRES GETV 10 TIMES THE VALUE OF BIG PARCELS OF 5000SQ MT KNOWING THAT OUR FARMERS ARE CROOKEDLY INNOVATE AND OPPORTUNISTS THEY DIVIDE LARGE PARCELS OF LAND SAY 5000 SQ M INTO 10 SMALL PARCELS OF LAND OF 500SQ MT INTO FAMILY MEMBERS AND RELATIVES INCL DOGS AND COWS AND CLAIM 10 TIMES THE PRICE.THIS FAULTY AND STUPID LAND ACQUISITION PRICING SHOULD BE STOPPED FORTHWITH.
if infra is boosted, how will feku manage money to buy MP and MLA?
STATES DO NOT PAY DUES TO DISCOMS UNDER GUISE OF PAUCITY OF FUNDS BUT SPLURGE ON LUXURIES LIKE CARS RENOVATION OF BUNGALOWS LOAN WAIVERS TO THE FARMERS MANY OF WHOM ARE RICH FOREIGN TOURS ETC .SUCH A DISGRACE.
make a quality roads first then talk about airports.
When was the last time you traveled on Highways/expressways?
India need to invest in infrastructure but economy slow down is mainly because purchasing power of common man is crippled. Better increase wages of employees in organised & unorganized sector. Revise Basic pension of pensioners. Banks have significantly reduced deposit interest rates, it is hard blow upon those who live on Bank interest income. Enhance deposit insurance cover
Just Another Indian
Why waste money on all these, just dig caves and have fun, that''s where anyway our supreme leader is taking us sooner or later.
Infrastructure spending, planning and implementation of N.D.A Govt is very imaginative, practical and result orientated. The new Andhrapradesh govt is is cancelling contracts of ongoing projects and going for reverse tendering without reason or rhyme, retrograde step.
Very good points - the sadly, the culture of wilful default of contractual commitments emanates from Government department and agencies. To address this, the Government must immediately amend the law and require arbitrators and courts to deliver a judgement within 4 months of filing of a case on contractual commitments - further, the persons responsible for the violation of contractual commitments should be banned from working for the Government or a PSU in any role.
It is the final cost of service the infrastructure provides to general public is very high in India .Why it is so ? As all basic amenities such as Land ,Spectrum , Coal , Petroleum , electricity ,Water etc are charged at very high rate .Govt should try to find out ways to reduce these costs .Once these cost are reduced it will spur the wheel of development automatically .considering our population there is no dearth of people who will use these infrastructure facilities .
In the year 1947, India''s Infrastructure was much Advanced than China . But why today, India is far behind China ??
Because we chose to walk on socialist economy path until 1990 until we got bankrupt. China on the other hand started liberalizing it''s economy in 1970-80s. But still all hail the Italian Dynasty - the morons who lacked even the slightest vision but deserved to the ruling class of this country.
Indians are dishonest cheaters,selfish,manipulative and very corrupt by nature.Nothing will happen unless character of people change
In Europe/Canada, countries charge as much as 50% income tax but in return they provide almost free education/healthcare/quality of life. Problem with Indians is they want to pay 0 taxes and want to enjoy the world class facilities that too free of cost.
if India has to buy Mig/Rafale/Ak47 etc over and over again from developed nations then why infrastructure and roads are built and operated by domestic contractors with inferior quality material due to nexus with politicians? Why can''t there be federal agencies to monitor quality and pricing checks and why India is burning billions and trillions every year and don''t bring in simple technologies that all other developed and even Asian countries like Singapore/Malaysia/Thailand use? How long this co ption will go on for decades? Gandhi/Nehru,/Savarkar/Sardar Patel saved us from British but who will save us from our own corrupt politicians and Babus?
NHAI does transparent bidding for it''s every project. The whole process is clearly defined and is done online with very limited intervention from Babus. Indian go nment should not run corporations but only do governance. That''s the source of co ption for Babus.
We are still in the Roti, Kapada aur Makaan stage thanks to our booming population. Even now we read of social workers arranging second hand clothes and food for the hungry masses. People have to still move from their native places to search for jobs in distant parts of our country. Bonded labour still exists. Nothing much has changed. Only the percentages. Development is there but still leaves lot to be improved.
There are only two things that are holding back India from growing at 12 %1. Enforcement of contracts - lakhs of crores of productive capital are stuck in arbitration and court cases - many times forcing weaker companies to collapse and saddling the banks with huge NPAs.2. Labour reforms - Many businesses today need to rapidly scale up and scale down - and hence need to be able adjust workforce size quickly
INDIA SHOULD NOT DO ANYTHING N LET THE WORLD COUNTRIES ECONOMIES DO THE NEEDFUL TO THEIR REQUIREMENTS.....???