Physical Infrastructure of India - October 2010

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This presentation gives a description of the level of physical infrastructure in India (October 2010)

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  • The installed capacity figures in respect of RES is based on statement dated 31.03.10 received on 28-05-10 from Ministry of Renewable Energy(MNRE) where cumulative Grid interactive power installed capacity has been indicated as 16817.04 MW. Reconciliation of installed capacity of Hydro capacity resulted in transfer of 135 MW from conventional to SHP-RESand retrieval of installed capacity of 67.20 from SHP-RES to conventional Hydro has resulted in net addition of 67.8 MW to SHP under RES. Also 30 MW of capacity in the nature of Waste Heat Recovery Power Plant at Goa Energy Private Limited under U&I category of RES Out of this installed capacity due to wind - (374.636 MW) and small hydro (110.79 MW) appearing in captive capacity has been deducted to arrive at installed capacity of utilities in respect of RES.(16817.04-485.43+67.8+30=16429.42).
  • Over 90,000 MW of new generation capacity is required in the next seven years
    - A corresponding investment is required in transmission and distribution networks
     
     
    Power costs need to be reduced from the current high of 8-10 cents/unit by a combination of lower AT & C losses, increased generation efficiencies and added low cost generating capacity
  • Problems to be overcome

    Inadequate power generation capacity;
    Lack of optimum utilisation of the existing generation capacity;
    Inadequate inter- regional transmission links;
    Inadequate and ageing sub- transmission and distribution network leading to power cuts and local failures/faults;
    Large scale theft and skewed tariff structure;
    Slow pace of rural electrification;
    Inefficient use electricity by the end users
    Lack of grid discipline
  • PETROLEUM INDUSTRY
    The Petroleum Industry can be broadly classified as Upstream and downstream. The upstream consists of exploration and production of crude oil while the downstream consist of refining the crude oil and marketing of the petroleum products. ONGC, OIL, RIL and Cairn India are the major players in the upstream sector while IOCL, BPCL, HPCL, RIL and Essar are the major players in the downstream sector.

    PETROLEUM SECTOR
    Petroleum sector has immense strategic importance because of their numerous use and hence countries try to attain self sufficiency or reliability in crude oil production. It is an important part of foreign policy of major countries. We in India are heavily dependent on imports(75%) and to mitigate this dependence various steps are been taken by the government.
  • The steps to boost crude oil production can be classified in 2 categories
    Domestic Production: through New Exploration Licensing Policy(NELP) which aims to accelerate the pace of hydrocarbon exploration in the country. 36 oil blocks were awarded to public and private companies in 2009 under NELP-VIII. The next round of NELP-IX is due in 2011 and the bids have already been invited for 34 blocks. Krishna-Godavari Gas discovery which is now producing 80 MMSCMD and Barmer Oil field in Rajashthan which is expected to yield 6.5 Bn Barrels/day were awarded under NELP.
    Overseas Acquisition: National Oil companies are been encouraged to acquire Oil field abroad. ONGC Videsh Limited (OVL) and the JV of OIL-IOCL and BPCL-Videocon are aggresively bidding for it. OVL has acquired 7 blocks while IOC-OIL have acquired 3 blocks abroad.
  • Currently the national refining capacity is 182 MMTPA out of which Reliance accounts for a third. Approximately 120 MMTPA is domestically consumed while the left is exported. RIL’ Jamnagar refinery is totally export oriented and thus while we are net importers of crude oil, we are also the net exporters of petroleum products. By the end of 2012 our refining capacity would be around 255 MMTPA a growth of 60% in the next 2 years.
  • Expansion Projects at Panipat, Haldia, Mumbai, Vizag and vadodra refinery
  • Teledensity is an important indicator of telecom penetration.
    It increased from 12.7% in March 2006 to 56.83% in June 2010.
    CAGR of 60% p.a. since 2004.
    India has the second largest wireless network in the world.
    Wireline connections declined in recent years.
    With increasing competition, ARPU has decreased while the customer base has expanded.

  • 3G Telecom Services: Presently, India is operating on 2G and 2.5G services. But with the integration of Indian Economy with world economy, Need of the hour is faster internet services to be available on mobile phones. 3G not only gives faster internet connectivity, but also other services like Video Conferencing, which will help Indian businessmen to be connected on the go. The government recently announced guidelines for penetration of 3G. This provides new opportunities to existing players and also for foreign players to enter the Indian markets.

    Mobile Number Portability: Allows any subscriber to change his service provider without changing his number. With MNP coming into place, telecom service providers will be forced to improve their quality of service to retain customers.

    VAS: The VAS industry in India generated revenue of US$ 1.2 billion in 2007–08 and is expected to reach US$ 4.0 billion by 2015. Major growth drivers for VAS in India • Increasing focus on localisation and availability of content in local languages• Development of M-Commerce applications, such as booking tickets and making bill payments• Availability of mobile TV and development of shows, films, etc., for the same

    WiMax: WiMax has been one of the most significant developments in wireless communication in the recent past. Since this mode of communication provides network access in inaccessible terrains at a speed of more than 4 Mbps, it is expected to be a major factor in driving telecom services in India, especially the wireless services. Thus, it will lead to the increased use of telecom services, Internet, value added services and enterprise services.

    Manufacturing: Vast range of telecom equipment, using stat-of-art technology manufactured in India. Factors such as facilitative policies, large talent pool in R&D and low labor costs can provide an impetus to telecom manufacturing industry in India.

    Enterprise Telecom Services: Telecom service providers are increasingly targeting enterprises by providing them dedicated services. Some of the key services include VoIP, dedicated telecom communication systems; IT infrastructure-enabled unified communication services, etc. This segment is expected to witness major developments as the demand or enhanced telecom infrastructure is increasing along with the growth in the information and communication technology (ICT) industry.

    Managed Service: Managed service is another segment that is attracting telecom companies. On account of the rapidly growing subscriber base, service providers find it difficult to
    manage their infrastructure and network. In such cases, they completely or partially outsource their infrastructure or network management operations.

    Rural telephony: As the government targets to increase rural teledensity to 25 percent by 2012, rural telephony will require major investments. This segment will boost the demand for telecom services, equipment, Internet services and other value-added services; thereby, offering great market opportunities for telecom players.
  • The government is implementing a program of connecting 66,822 uncovered villages under the Bharat Nirman programme. The government will invest US$ 2 billion to set up 112,000 community service centres in rural India to provide broadband connectivity in 2008-09.
    The Department of Telecommunications (DoT) has stated that foreign telecom companies can bid for 3G spectrum without partnering with Indian companies. Only after winning a bid, would they need to apply for unified access service licence (UASL) and partner with an Indian company in accordance with the FDI regulations.

    PAST POLICIES

    National Telecom Policy,1994: Availability of telephone on demand, provision of world class services at reasonable prices.

    Telecom Regulatory Authority of India: The Telecom Regulatory Authority of India (TRAI) was, thus, established with effect from 20th February 1997 by an Act of Parliament, called the Telecom Regulatory Authority of India Act, 1997, to regulate telecom services, including fixation/revision of tariffs for telecom services which were earlier vested in the Central Government.

    New Telecom Policy, 1999: Key features of the NTP 99 include:
    ·       Strengthening of Regulator.
    ·       National long distance services opened to private operators.
    ·       International Long Distance Services opened to private sectors.
    ·       Private telecom operators licensed on a revenue sharing basis, plus a one-time entry fee. Resolution of problems of existing operators envisaged.
    ·       Direct interconnectivity and sharing of network with other telecom operators within the service area was permitted.
    ·       Department of Telecommunication Services (DTS) corporatised in 2000.
    ·       Spectrum Management made transparent and more efficient.

    Broadband Policy, 2004: Recognizing the potential of ubiquitous Broadband service in growth of GDP and enhancement in quality of life through societal applications including tele-education, tele-medicine, e-governance, entertainment as well as employment generation by way of high-speed access to information and web based communication; Government announced Broadband Policy in October 2004.

  • The sources of funds of infrastructure are very much similar to the sources of funds for a corporate entity. The sources could be divided on the basis of instrument (debt and equity), institution offering funds (government institutions - like IIFC, banks and foreign investors) and promoters (government, private sector, or Public Private Partnership).

    With the economy of India growing at a fast pace, investments in infrastructure has become inevitable. 11th Five Year Plan has called for doubling the investments in infrastructure as compared to the previous 5 year plan. Investment to touch $1.48 trillion by 2017. The share of private investment (including PPP & non PPP) is expected to rise to 30% by the year 2012. There has been inflow of funds from international markets also. The major hitch which the infra industry faces is that of the mismatch between tenure of the funds and the tenure of the project. While the project’s tenure is around 12-15 years, most of the funds are allotted for a period of 7-10 years.

  • There are 5 infrastructure sectors among the top 10 sectors which receive the FDI funding. These 5 sectors amount to 28% of the total FDI funding to the economy.
  • PPP is an arrangement between private and public sector, which brings the funds of the public sector and the expertise of the private sector together. It has been a very successful initiative and has undertaken 180 projects till June 2010. It mainly invests in roads and highways, though it has invested in all the other sectors also. The government has fastened the process of approval of such parternerships through setting up Public Private Partnership Appraisal Committee.

    India Infrastructure Finance Company was set up in the year 2006 to address the mismatch of the tenure of funds and the tenure of the project. It funds up to 20% of the capital costs of the project. There is a direct clearance for PPP projects. Purely private projects could also raise funds from IIFC, but with stricter norms. IIFC is funded by various sources, and it raises money on the backing of government guarantees.
  • Physical Infrastructure of India - October 2010

    1. 1. Presented By: GROUP - 26
    2. 2. POWER PETROLEUM RAILWAYS ROADS AVIATION PORTS TELECOM Stimulus Measures to improve infrastructure to combat economic downturn Allocation for many infrastructure projects in Union Budget 2009-10 Current Highlights Vastly under capacity •It takes Longer to take freight from Delhi to Mumbai than Mumbai to foreign ports. •Many Large programs, but not one National Plan •And on and on! •Up to 2015, goods traffic is expected to rise at 15% /year •Do we have the roads?
    3. 3. • New Network of Roads and Flyovers connecting with Domestic and International Terminals Roads • Delhi Metro Railway System connecting the NCR region Railways • Domestic and International Airport Beautification and Expansion Airport CWG 2010- Boost to Delhi Infrastructure
    4. 4. Size Structure POWER •Majority of Generation, Transmission and Distribution capacities are with either public sector companies or with State Electricity Boards (SEBs) • Private sector participation is increasing especially in Generation and Distribution - Distribution licences for several cities are already with the private sector - Many large generation projects have been planned in the private sector • Generation capacity of 164 GW (5th in the world); CAGR of 4.6% over the last four years • Low per capita consumption at 606 units; less than half of China •T & D network of 5.7 million circuit km – the 3rd largest in the world Current Scenario 57%25% 10% 3% 5% % of power generation Thermal Hydel Gas Based Nuclear Other Renewable Sector MW % State 80844 52.5 Central 51867 34 Private 32124 13.5 Total 164835
    5. 5. POWER •Large demand-supply gap: All India average energy shortfall of 7% and peak demand shortfall of 12% • The implementation of key reforms is likely to foster growth in all segments: Unbundled SEBs; Open Access networks; privatised distribution circles; Tariff reforms •Opportunities in Generation for: Coal based plants(imported coal); Natural Gas/CNG based turbines; 150 GW Hydel power potential; MRO of old plants; Private/ foreign player entry in NPPs •Opportunities in Transmission network ventures - additional 60,000 circuit km of transmission network expected by 2012 •Opportunities in Distribution through bidding for the privatisation of distribution in thirteen states that have unbundled/corporatised their State Electricity Boards – expected to take place over the next 2-3 years Total investment opportunity of about US$ 200 billion over a seven year horizon Future Potential
    6. 6. Positive Outlook POWER • 100% FDI permitted in Generation, Transmission & Distribution - the Government is keen to draw private investment into the sector •Policy framework in place: Electricity Act 2003 and National Electricity Policy 2005 •Incentives: Income tax holiday for a block of 10 years in the first 15 years of operation; waiver of capital goods import duties on mega power projects (above 1,000 MW generation capacity) •Independent Regulators: Central Electricity Regulatory Commission for Central PSUs and inter-State issues. Each State has its own Electricity Regulatory Commission. Policy Initiatives Major Players currently
    7. 7. PETROLEUM Upstream Exploration and Production • ONGC, RIL, Cairn India, OIL Downstream Refining and Marketing • IOCL, BPCL, HPCL, RIL, Essar Strategic Importance Foreign Policy 75% Imported Petroleum Industry Petroleum Sector
    8. 8. Steps to Boost Crude Oil Production PETROLEUM • NELP-VIII:36 blocks awarded in 2009 • NELP-IX: Bids invited for 34 Blocks for 2011 • KG Basin: 80 MMSCMD • Barmer Oil field: 6.5 Bn barrels/day NELP • National Oil companies encouraged to acquire oil fields abroad • OVL, IOC-OIL, BPCL-Videocon • OVL 7 blocks; IOC-OIL 3 blocks Overseas Acquisition
    9. 9. Refining Capacity PETROLEUM 120 MMTPA Domestically Consumed 60 MMTPA Exported 180 MMTPA Refining Capacity 0 50 100 150 200 250 300 Year 2010 Year 2012 In MMTPA
    10. 10. PETROLEUM Grass root refineries by IOCl, BPCL and HPCL at Paradip, Bina and Bhatinda Expansion projects at Existing Refineries Expansion by Reliance and Essar Ashok Leyland, Nippon Denro and Soros Foud entering Refinery Business Capacity Expansion
    11. 11. ROADSANDHIGHWAYS The Golden Quadrilateral (GQ-5846 kms of 4 lane highways) •Highways/Expressways constitute about 66,590 kms (2% of all roads) and carry 40% of the road traffic •Annual growth projected at 12-15% for passenger traffic, and 15-18% for cargo traffic •Opportunity or Threat? Investment in road sector during the Eleventh Plan is projected at $ 78.50 billion India has an extensive road network of 3.3 million kms - the second largest in the world
    12. 12. Potential Road development is recognised as essential to sustain India's economic growth The Government is planning to increase spends on road development substantially with funding already in place based on a cess on fuel A Rs.41,200 crores (US $ 5 billion) project plans to lay 6 lane roads over 6,500 kms of National Highways on the Design Build Finance and Operate (DBFO) basis - in Golden Quadrilateral and other high traffic stretches. ROADSANDHIGHWAYS
    13. 13. Size and Structure Launch of New Trains •Izzat Scheme–Uniformly Priced Monthly Season Tickets(MSTs) •Matrabhumi Train Services – Targeted at only Ladies •Yuva Trains – Targeted at unemployed youth Up gradation of Passenger Amenities RAILWAYS •Computerization of Passenger and Freight Services •Development of Adarsh Stations - Basic Facilites like drinking water, toilets •Multi-functional Complexes –shopping, food stalls, restaurants •World’s Largest Number Of Employees •Third Largest Rail Network in the World •Owned and Controlled by Indian Government – Headed by Mamata Banerjee Current Scenario
    14. 14. Usage of Bio-Fuel Establishment of Rail Land Development Authority Improvement of Financial Health RAILWAYS •Largest Consumer of High-Speed Diesel (HSD) currently •Potential for B10 blend – 10% bio-diesel in HSD oil •Plantation of Jatropha curcas on vacant Railway Land • Utilization of vacant Railway Land and air space • Setting up of Infrastructural Projects - Generate Employment •New milestone in incremental freight loading this year by carrying 5.70mTonnes •Hiving off Non – Core Activities Future Potential
    15. 15. Dedicated Freight Corridors •Investment – Rs. 22,000 crores •Western and Eastern High Density Routes Privatization of Container Trains •Monopoly of CONCOR –public sector entity till now •14 applicants for container train operation Tariff Rationalization RAILWAYS • Methodology for indexing the fare structure to line haul costs •Introduction of commercial accounting and information technology systems National Rail Vikas Yojana •Strengthening of the golden Quadrilateral to run more long-distance mail •Strengthening of rail connectivity to ports •Development of multi-modal corridors to hinterland Policy Initiatives
    16. 16. AVIATION In 2004-05, Indian airports handled 60 million passengers and 1.3 million tonnes of cargo •Passenger traffic grew at over 22% in 2004-05 over 2003-04; Cargo grew at 21.6% over the previous year 100 million passengers p.a. by 2010 Cargo to cross 3.3 million tonnes by 2010 100% FDI is permissible for existing airports; FIPB approval required for FDI beyond 74% 100% tax exemption for airport projects for a period of 10 years ‘Open Sky’ Policy of the Government 100% FDI under automatic route is permissible for greenfield airports. •Total 125 airports in India. • 11 International airports.
    17. 17. PORTS •12 major ports •200 non-major ports •95% of India’s exports & imports moved by sea •Traffic estimated to reach 877 million tonnes by 2011-12 18 Billion investment 100% FDI Automatic Route PPP on BOT basis 100% IT exemption for 10 years 5% of World Exports(2020)
    18. 18. Present Statistics TELECOM Total Subscribers (Wireless+Wireline) 671.69 million Urban Subscribers 452.59 million (67.4%) Rural Subscribers 219.09 million (32.6%) Teledensity 56.83 Urban Teledensity 128.20 Rural Teledensity 26.43 33.69 52.22 98.77 165.11 261.07 391.76 0 50 100 150 200 250 300 350 400 450 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 SUBSCRIBERS(inmillions) Source: trai.gov.in 0 5 10 15 20 25 30 35 40 45 50 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Revenue(USbillion$)
    19. 19. New Growth Horizons for Telecom service providers TELECOM TELECOM 3G Telecom Services Mobile Number Portabili ty Value added Services WiMax Manufac turing Enterprise Telecom Services Managed Service Rural Telephony
    20. 20. TELECOM MAJOR POLICY INITIATIVES • 100% foreign direct investment (FDI) • FDI ceiling in telecom services raised to 74% • Introduction of a unified access licensing regime for telecom services on a pan-India basis • Mobile Number Portability. • Bharat Nirman programme. • Bidding for 3G spectrum by foreign companies. TARGET SET BY THE GOVERNMENT • 800 million connections by the year 2012. • 200 million rural subscribers by 2012. • 20 million broadband connections by 2010. • Broadband coverage for all secondary & higher secondary schools and public health care centres by the end of year 2010. • Achieving exports of 10 billion during 11th Five year plan. • Quadrupling production in 2010.
    21. 21. Sources of funds for infrastructure projects are very much similar to those for a corporate Sources of Fund Instruments Debt Financing Equity Financing Institutions Govt. Institutions Banks Foreign Investors Promoters Government Private Sector PPP FINANCINGOFINFRASTRUCTURE •11th Five Year Plan (2007-2012) calls for more than doubling the financial outlay for infrastructure •Share of private investment in total to rise from 17% to 30% by 2012 •Key foreign players include 3i, Blackstone, Citigroup, Macquarie •International funding also comes from ADB, World Bank, etc •Mismatch of funding period – major hitch Facts about Infrastructure Financing
    22. 22. Many Infrastructure sectors have consistently featured in the top 10 sectors in terms of FDI fundings Rank Sector 2010-11 (April- August) Cumulative Inflows (April ’00 - August ‘10) % age of Total Inflows (In terms of US$) 1 SERVICES SECTOR 1,260 24,862 21% 2 COMPUTER SOFTWARE & HARDWARE 458 10,330 9% 3 TELECOMMUNICATIONS 1,054 9,985 8% 4 HOUSING & REAL ESTATE 539 8,895 7% 5 CONSTRUCTION ACTIVITIES 294 8,347 7% 6 POWER 677 5,305 4% 7 AUTOMOBILE INDUSTRY 114 4,710 4% 8 METALLURGICAL INDUSTRIES 613 3,743 3% 9 PETROLEUM & NATURAL GAS 218 2,883 2% 10 CHEMICALS 146 2,642 2% Source: Department of Industrial Policy & Promotion Ministry of Commerce and Industry FDIINVESTMENTININFRASTRUCTURE
    23. 23. Key sources of funds in India are initiatives like PPP and institutes like IFCL FINANCINGOFINFRASTRUCTURE  180 projects undertaken till date  Projects undertaken mainly in Roads & transport sector  Introduces private sector expertise and cost reducing technology  Fast approval through PPPAC 0 2 4 6 8 10 12 14 16 2006 2007 2008 2009 2010 (Till June) 1.4 3.9 14.4 11.1 7.5 Projects under PPP (in $ billions) Source: PPP India Website Public Private Partnerships  Addresses need for long term debt  Funds up to 20% of capital costs of project  Raises funds, on Govt. guarantees, from domestic & external markets  Direct approval for PPP projects India Infrastructure Finance Company 1.4 2.2 0.1 Private (Non PPP) PPP Public Sector (in $ billions) Composition of IIFC Funding Source: PPP India Website
    24. 24. Group - 26 Anubhav Agarwal Pradeep Tewani Preethi Natarajan Osama Abdullah Sidharth Srninivasan Surbhi Jain

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