3L series Life long learning

1
3L series (Life long learning)

• Infrastructure Development in India with special
  reference to Kerala
• By
• Shri Babu Jacob
• (Former Chief Secretary to GoK
• Advisor to GoK)

2
Infrastructure definitions

• Oxford dictionary
• Basic structural foundation of a society or
  enterprise.
• roads, bridges, sewers etc regarded as a
  countrys economic foundation.
• Infrastructure services
• have some elements of public good in them
• generally exhibit significant positive
  externalities
• difficult to price fully to cover all costs
• contain elements of monopoly
• Externality (Microecon by Walter/Nicholson)
• An externality is said to exist when the
  activities of one agent directly affect the
  utility of production possibilities of another
  agent.
• Positive and negative externalities
• -India Infrastructure Report by Rakesh Mohan 1996

3

• high up-front costs, long pay-back periods.
• typically bulky and lumpy investments large
  initial capital, large pay-back periods,
  long-term finance
• The manner in which infrastructure
  investments are selected, designed, funded,
  implemented and finally operated would impart on
  the quality of the services and have major
  macro-economic implications for the country

4

• According to Tenth five year plan documents,
• a) Social infrastructure education, health
• b) economic infrastructure energy, transport
  infrastructure
• Urban Infrastructure Transport
  Infrastructure
• Water Supply Roads
• Sewage Sanitation Railways
• Urban Roads Ports
• Drainage Airports
  Solid Waste Management Inland
  Water Transport

5
Improving Transport Services to Facilitate
Economic Growth

• Excessive time/money spent on moving people and
  goods with annual GDP growth of 6.0-6.5
• Economic losses from congestion/poor roads high
  at 120-300 billion rupees (equivalent to
  US2.6-6.5 billion) a year.
• Exports less competitive due to inefficient and
  unreliable transport/ logistics systems.
• Indias infrastructure, a hindrance to business
  2/3 respondents of 1999 CII survey.
• Negative effects of poor transport felt by
  general pubic - social isolation/traffic
  accidents/motor vehicle emissions.

6
Road Transport and Highways

• Growing demand for door-to-door transport to
  boost road transport.
• Increased demand for road transport due to the
  inherent competitive advantage of road transport.
  
• and partly due to failure of other modes,
  especially rail, to attract the demand (that
  would otherwise be more suitable for them).
• Geographic coverage of Indias highway network,
  0.66 km of highway per square km of land area
  almost identical to United States 0.65
• and much higher than that of China (0.16),
  Mexico (0.16), and Brazil (0.20).
• Comparison very poor for India in terms of lane
  capacity/surface quality.

7
Demand for Transport and Transport Infrastructure

• 40 of Indias 661,000 rural villages not having
  all-weather access to markets and social
  services.
• 1990s - Indias economy grew by 6 to 7 percent a
  year, transport demand by 10 percent
• demand to continue at 10 growth rate.
• The road sector, 80 percent share of land
  transport demand grew _at_ 12 percent (freight) and
  8 percent (passenger).
• Rail transport demand growth slower at 1.4
  percent (freight) and 3.6 percent (passenger).
• This is not surprising all over the world, rail
  transport stagnates as a result of intense
  competition from road.
• Capacity of Infrastructure Support to expand
• to meet this high transport growth demand.
• Increasing demand for high-quality of services
  further enhances the level of infrastructure
  support.

8
Importance of Highways

• Essential for economic growth.
• Trade facilitation, export growth and
  globalization.
• Improve agricultural/industrial productivity.
• Improve living standards.
• Increase accessibility.
• Poverty reduction.
• Just in time inventory system, and fast service
  delivery.
• Better private sector productivity.
• Better health, education and community services.

9
National Highway Development Programme (NHDP)

• Golden Quadrilateral (GQ) 5846 km
• North-South East-West (NSEW) 7300 km
• 13146 km
• Rupees
  billion
• - fuel cess 200
• - MLA assistance 200
• Market borrowing 100
• PSP 40
• Total 540
• Addl. market borrowing 20
• PSP 20
• 580
• Re.1 /litre fuel cess Rs.340 b in 6 years
  9798 to 0203

10

• Fuel cess raised to Rs.1.50 per litre in 2003-04
• to raise additional Rs. 60 billion per year,
  distributed as follows
• split of 60 b /year
• PMGSY 25
• NHDP 20
• State highways 10
• Indian railways 5
• Additional new 10,000 km 4 lining of new
  corridors
• Private sector participation 1358 km/ over 30
  projects out of total of 7595 km of 146 projects
• GQ will save the economy Rs.80 b/annum

11
China Roads and Highways

• GDP growth ranging 15 to 8, 1990 to 2002
• Trend towards high value production
• Why road? for economic development
• Chinas road density low, 18.4km /100m2

Li Xinghua DDG, Ministry of Communications, PRC
12

• Total length 1.76 million km. Better than 2nd
  class 250,000 km.
• China is behind India, 89 road under quality
• 51 rural roads very poor
• Worlds No.1 in road accidents

13
1990s - rapid increase in investment on
roads Since 1995, still greater emphasis on road
development 1995-1998 highways investment
doubled, equivalent to previous 30 years
investment.
14
India

• 27 people live in Urban areas
• Higher population growth rate in Urban areas
• 57 of non-agro employment is provided by urban
  areas

Source Urban Statistics Handbook 2000, NIUA
15

• STRATEGIES AFTER 1998
• Expressway development
• Extension of highways to rural areas
• Linkage to backward areas
• Uniform national free way systems
• Improve capacity to create new technologies,
• reduce costs, increase safety.

Expressways
16

• 170,000 km highways being built, and 3000-4000 km
  of expressways annually.
• Special Emphasis on Urban Roads
• By 2008, Beijing to have 5 ring roads (against
  Tokyo planning 3 by 2011).
• Financing
• Government/Local body financing
• Loans National bonds 30 for road construction
• Foreign investments

17

• Chinas road network smaller than Indias, but it
  comprises over 25,000km four/six-lane
  access-controlled expressways linking the major
  cities, all built during the last 10 years.
• No expressway linkages for major economic centers
  in India.
• National highways are two/single/intermediate
  lane capacity only 3,000 km four-laned.
• State highways, 1 four-lane, 22 two-lane, and
  rest single/intermediate lane.
• other roads mostly single-lane.
• A quarter surfaced with (bitumen) / concrete,
• a fifth water-bound macadam
• rest unpaved.
• National highways
• over 25 in poor surface condition,
• Over 50 of state highways in poor / very poor
  condition.

18
Ports

• India has 12 major ports (handling 76
  sea-borne traffic) (2001)
• and 140 non-major ports in 9 States 4 UTs.
• Aggregate capacity of major ports 389.5 MTPA
• Coastal shipping limited
• Rated capacities 50-60 lower than ports
  elsewhere in Asia.
• Turnaround time high
• Equipment use on berths low-about 30-35 percent.
• Handling costs high - productivity of equipment
  being low.
• Mother container ships (Main line vessels) not
  able to call at Indian ports,
• adding to transport costs of exports and imports.
• 61 of Indian export/import containers
  transshipped offshore, in
• Colombo, Singapore and Salalah

19

• Cargo handling at 4 major ports (2004-05) 383.7
  MTP
• A growth of 11.3
• Chennai, Mumbai, New Mangalore, Paradip,
  Tuticorin, Kolkata traffic growth gt15
• Traffic growth of major and non major ports
  projected high container
• JNPT (established 1990) growing at 25 p.a
• 55 (in TEUs) of Indias container traffic
  through JNPT
• New Mangalore (15 p.a) and Paradip (11 p.a)
  also growing fast.
• Non major Ports Share of Traffic
• 1991 92 2003 04
• 8 25.4
• Gujarat non-major ports (60) handle 74 of
  non-major port traffic
• Forecasts
• Traffic through Indian Ports projected to grow 4
  to 6 times in 25 years

20
Railways

• Rail carries mostly bulk freight
• such as iron, steel, grain and cement.
• Non-bulk freight just 2-3 of ton-km
• With trunk highways improving, competition from
  road transport to intensify.
• Capacity constraints faced on high-density
  corridors.
• Dedicated freight corridors being planned between
  Metro Cities.
• Increasing maintenance backlog publics
  operational efficiency down
• arrears in track renewal up from 3,500 km to
  12,200 km in 10 years.
• Insufficient track and rolling stock maintenance
  accidents levels/derailing/operating costs.
• Speed of freight trains low average of 23 km an
  hour,
• speed to have increased to 40-50 km an hour.
  (with electrification and modern locomotives)

21
IndiaSanitation - 1

• According to WHO, Improved Water Supply and
  adequate sanitation would give
• 25 to 33 fall in diarrhoeal diseases in
  developing countries 4 billion cases are
  reported every year
• decreased incidence of intestinal worm
  infestation 10 of population resulting in
  affected in developing counties,
• malnutrition, anemic retarded growth
• controlling blindness due to trachoma

22
IndiaSanitation 2

• Poor hygiene sanitation cause of 9 of all
  deaths
• 2nd largest contributor to the burden of disease
  in India
• 70 of all diseases are water-borne
• A big economic burden on people
• Among 180 countries, India ranks
• 133rd in water availability, and
• 120th in water quality
• Water Supply in Urban areas - 70.1 coverage
• Sanitation in Urban areas - 25.5 of
  households do not have a latrine
• Toilets connected to sewerage system in Urban
  areas 22.5 (Rural 1)

23
IndiaSanitation 3

• Survey of 7 major Indian cities
• only 2 had fully covered UG sewerage system and
  high sewage network densities.
• 3 have no functioning STP.
• 4 treat only 48-59 of waste water
• untreated water finds its way into tanks, lakes
  and rivers.

24
KeralaUrban Population
Trend of Urban Population - 1971-2001
25
Keralas Cities

• Poor householders satisfaction levels
• Public transport - 73
• Water - 60
• Sanitation - 55
• Road infrastructure - 54
• Solid waste management systems- 46
• Drainage facilities - 16
• based on baseline socio-economic primary data
  collected through extensive sample household
  survey

26
Keralas Cities 1

• Thiruvananthapuram, Kollam, Kochi,
• Thrissur, Kozhikode
• Water supply
• Water high priority for all households across
  five cities
• In Thrissur the poor rank water as second
  priority and the non-poor rank water as fourth
  priority.
• The poor categories of Thiruvananthapuram and
  Kollam also rank water as first priority
• In Thiruvananthapuram, about 59 of households
  have household water connections. But in Kollam
  only 14.
• 54 of the poor in five cities depend on a public
  water facility
• Only 18 of the poor in five cities have their
  own water facility compared to 61 of the
  non-poor category. 28 of the poor in five cities
  depend on a neighborhood facility for water
  whereas only 15 of the non-poor depend on such a
  facility.

27
Keralas Cities 2

• Sewerage and Sanitation
• Sewerage and sanitation is ranked as the third
  most desired service in all the five cities,
• Proportion of households with
• Own toilets 79
• the poor in Thrissur and the non-poor in
  Thiruvananthapuram ranked it as second in
  priority.

28

• Sewerage non-existent or not functioning
  adequately.
• Status of sanitation and sewerage poor in all
  cities.
• Three of the five project cities Kollam, Thrissur
  and Kozhikode don not have underground sewerage
  system
• Thiruvananthapuram and Kochi are inadequately
  covered (30-50).
• On-plot sanitation and septic tanks are not
  maintained.

29
Keralas Cities 3

• Drainage
• No city having a designed, interconnected
  network of drainage channels with clear disposal
  points.
• Urban drains poorly maintained and often blocked
  by an accumulation of silt and un-collected
  municipal solid waste, causing water logging and
  flooding in congested city areas.
• The problem exacerbated by un-controlled
  development and encroachment in drainage channels
  and ineffective maintenance of the drainage/
  sanitation facilities.

30

• Status of urban population in terms of basic
  services 1991

31

• Kerala Cities
• Citizen perception of Infrastructure priorities

32

• Municipal Accounting systems
• ULBs need a blend of Government and commercial
  (enterprise) accounting systems
• modern municipal financial accounting system
  being followed internationally
• Current practice in Indian ULBs
• Only captures inflow and expense of cash
• Does not capture information on
• financial position and debt servicing capability
• asset liability profile and efficiency
• Consequently, Risk return profile of Municipal
  bond cannot be estimated
• Capital budgeting mechanism also absent

33

• Revamping Municipal Accounting System
• TN experience
• Institution of Chartered Accountants of India
  (ICAI) has issued technical specifications for a
  new double-entry based accounting system for
  Municipal bodies.
• Most State Governments yet to implement.
• All Municipal bodies (5 city corporation 102
  municipalities) converted from single entry cash
  based accounting system to double entry accrual
  based accounting system.
• done in 3 years (1998 2001)
• Third phase conversion to fund based accounting
  system i.e. wedlocking between budget code and
  account code items.
• secondary markets to be created to facilitate
  cost analysis and cost at micro level

34

• Financing ULBs for Urban Infrastructure
• 50 countrys GDP is from urban areas
• ULB revenues 4.6 of
  Central revenue
• 8 of States revenue
• 0.6 of GDP
• Urban Infrastructure Funding Requirement
  estimated at US43 billion over 5 years (Rakesh
  Mohan Committee)
• Municipal bonds (MBs), the primary source of
  finance of ULBs in USA
• In India, of approximate 3700 ULBs, only 50 are
  credit worthy enough to access domestic capital
  markets.
• The proposed Pooled Finance Development Scheme
  (PFDS) to support States to establish pooled
  financing structure
• To give credit enhancement
• Securitization of future flows
• a means of raising affordable sustainable
  finance for Local Governments
• US AIDs Financial Institution Reforms
  Expansion (FIRE) Project is working with
  Government of India to set up State level pooled
  finance mechanism for small and medium ULBs to
  access capital markets

35
Keralas Cities
Rs. Crores
City Corporation Revenues Year 2002-2003
36

• Municipal Bonds
• In 2001 Government of India announced this
  scheme of tax free MBs for infrastructure
  development
• -compulsory credit rating Amended IT Act 1961)
• - Minimum maturity 5 years exempted interest
  from bonds of MBs from IT
• Only 11 ULBs have come forward to borrow a total
  of Rs.750 cr.

37

• First tax free MB issued by Ahamadabad Municipal
  Corporation (1998) Rs. 100 cr.
• for water supply sanitation project
• first Municipal bond without a state guarantee
• first fully market based system of local
  government finance.
• Second bond by Hyderabad (2002) Rs.82.5 cr. 7
  year tenor, 8.5 interest
• Bonds since issued Without State Government
  Guarantee by
• Nashik
• Nagpur
• Ludhiana
• Indore
• Madurai

38

• TN Water Sanitation Pooled Fund (WSPF)
• Rs.30.4 cr for 14 municipalities raised through
  pooled finance mechanism
• Only issue of its kind in Asia to finance small
  Water Sanitation Projects
• 9.2 annual interest rate
• 15 year maturity
• 15 year equal annual redemption
• puttable at 10 years

39

• Multi Layered Credit Enhancement Mechanism
• WSPF model
• Each ULB to set apart monthly payment equal to
  1/9 of annual payments into escrow account and
  transfer to WSPF in 10th month
• WSPF can intercept State transfer payments
• 2nd change Bond Service Fund (BSF)
• a State funded Rs.6.9 cr reserve fund 1.5 times
  annual debt service
• Third level of security
• US AID guarantee of 50 of bonds principal
  through DCA (Development Credit Authority) to
  replenish BSF if needed. The issue was privately
  placed.
• Escrow mechanism has Government guarantee

40
The Kerala Transport Project

• A Strategic Option Study (SOS) on road network of
  5,700 km
• SOS identified 2,810 km of high priority roads
• Feasibility study of the technical, environmental
  and social aspects of the selected roads
• Analysis of feasibility to establish economic
  return for upgrading
• 600 km identified out of 2810 kms for upgrading
  plus 1000 km for pavement improvement

41
Inland Waterways

• Navigation length of 14,500 km of rivers and
  canals
• Inland water transport very limited, and
  declining in many states.
• Only 5,200 km of major rivers and 485 km of
  canals currently suitable for mechanized crafts.

42

• THANK YOU