Infrastructure Development

Energy

Power Sector

The capacity addition is expected to be 24309 MW(60.4% of the Plan Target), largely due to shortfall in the private sector projects mainly on account of financial unviability of the SEBs resulting in delay in achievement of financial closures.

The financial position of the SEBs is a matter of grave concern. The commercial loss has mounted to the level of Rs. 20,000 crores.

The large investment flows may not materialise unless the important issue of commercial viability of SEBs is properly addressed and re-structuring/unbundling of SEBs initiated by several States, is expedited.

With the enactment of ERC Act, 1998, Electricity Regulatory Commission at Central level has been functional and 14 States have set up their SERCs at the State level. Six States have already re-structured/unbundled their respective SEBs into separate generation, transmission and distribution entities. The remaining States need to expedite their power sector reform/setting up of their SERCs.

Investment in Renovation and Modernisation has distinct cost advantage over new generation capacity. Therefore, efforts need to be made to expedite R and M works and life extension programme.

The captive power generation needs to be encouraged to reduce the large gap between demand and supply. With appropriate policies and institutional arrangements, power generated by such captive plants could be optimally utilized.

Tax concessions given for generation required to be extended to Transmission and Distribution companies to attract investment in these sectors.

In the context of developing hydro power, which is presently under declining trend, the Hydro Policy as approved needs to be implemented with all seriousness. Further, to boost the hydro power, the potential for pumped storage schemes also needs to be expedited to the full extent through certain financial incentives.

New and Renewable Sources of Energy

The socially oriented programmes of New And Renewable Energy Sources especially in the rural areas like biogas and improved chulhas should adopt an approach of taking the entire village instead of the present approach of providing energy systems on individual basis.

The systems and devices provided under the programme become non-functional in some cases. Due importance needs to be given to the defective systems for their repair/replacement and necessary funds are to be made available under the Plan for this purpose.

In order to absorb the electricity generated from renewable energy sources like wind, small hydro, bagasse co-generation and industrial/urban wastes by the electricity utilities and also to extend the facilities like buy-back, wheeling, banking and third party sale, it is necessary to have uniform guidelines for the SEBs in this regard.

Coal and Lignite

• Slower growth in production in the first two years due to lower economic growth and non-materialisation of new coal based thermal power generating capacity leading to lower demand.
• The shortfall in coal production capacity addition, may lead to a large gap in the tenth Plan and beyond unless the identified new projects (i.e.formulated and awaiting approval) are implemented.
• Bill to amend the provisions of Coal Mines (Nationalisation) Act, 1973 for facilitating private sector participation in commercial coal mining needs to be expedited.
• Expediting the setting up of Regulatory Authority for resolving disputes and allocation of coal blocks both for exploration and exploitation through separate rules under MMDR Act, 1957.
• Need to rationalise rail freight rates for coal movement.
• Urgent need to upgrade coal reserves to the proven and mineable category through detailed exploration.
• Need for revival of loss making coal companies by rationalisation of manpower and closing down of uneconomic mines etc.
• Need for streamlining project approval procedures.

Oil and Natural Gas Sector

Performance Highlights

• Petroleum products demand target is likely to be met.
• Crude oil production may fall short of the target by about 10%.
• Natural gas production may marginally fall short of target.
• Accretion to hydrocarbon reserves is significantly below targets.
• Refining capacity target is likely to be over achieved.
• Imports of oil may surpass the target of 85-90 million tonnes in 2001-02.
• Dismantling of APM and duty rationalisation slower than envisaged.
• Private participation/investment below expectation.
• Plan expenditure may be lower than the approved outlay.

Policy Options

Exploration activities need to be accelerated. The policy of offering exploration blocks under NELP may be continued. The frequency of bidding rounds under NELP needs to be increased.

Slowing down of atleast new grass root refining capacity in view of excess capacity.

The dismantling of APM to be implemented according to the approved schedule so as to have a free market and healthy competition.

The policy for marketing and distribution of petroleum products needs to be reviewed to encourage new entrants. Marketing rights for transportation fuel to be made conditional to a company investing Rs. 2000 crores in Exploration and Production, Refining, Pipelines or Terminals. Such investment should be towards additionality of assets and in the form of equity, equity like instruments or debt with recourse to the company.

Expeditious setting up of regulatory mechanism for downstream sector including pipelines and natural gas.

Transport

Railways

There has been sluggish growth in freight traffic while passenger traffic is growing at fast pace. The Ninth Plan target in respect of freight traffic will not be achieved while in case of passenger traffic, the achievement is likely to be more than the target.

In the first three years of the Ninth plan, the expenditure is likely to be 51 per cent of the approved Ninth plan outlay.

No significant step has been taken to rationalize the tariff structure. There is a need for re-balancing the tariffs of Indian Railways to reduce the rate of cross subsidization. Rail Tariff Authority on the lines of Telecommunication Regulatory Authority needs to be set up with the mandate to fix tariff on rational basis.

The tendency of Indian Railways to spread resources thinly over a large number of projects continues to be an area of concern. There is an urgent need to prioritize the very large existing portfolio of on-going projects.

The financial health of the railways deteriorated in the first three years of the Ninth Plan due to sluggish growth in freight traffic and implementation of recommendations of 5^th pay commission.

There is need for change in the investment strategy with higher priority to be given to augmentation of the capacity on high density corridors apart from increasing the investment for ensuring the safety and reliability of services.

Safety of rail operation has become an area of concern. The majority of accidents are due to human failure. Proper training and motivation of labour force would improve safety of rail operations.

Introduction of technology, timely replacement and renewal of tracks and maintenance, both corrective and preventive also need urgent attention.

If the railways are to increase or even retain their existing share particularly in freight traffic, it is necessary to explore alternative method of doing business. The increase in efficiency and responsiveness to the clients is possible only through increased focus on specific businesses by unbundling track management of rail freight and passenger operation and production and by introducing private sector participation.

Involving private sector in provision of certain infra-structural facilities through special purpose vehicles and setting up of Indian Railways Catering and Tourism Corporation are steps in right direction.

The scope of private sector participation needs to be enlarged by following consolidated approach rather than piecemeal efforts.

Roads and Road Transport

Process of strengthening and expanding the road system to meet passenger and freight traffic requirements is underway.

Self-financing capacity has improved through levy of cess on fuel.

Proceeds amounting to Rs. 5,800 crore per annum from this source will accrue to proposed Road Development Fund. Since this fund would not be sufficient to meet the huge requirements of roads sector, it would be necessary to augment the fund by raising levy on fuels periodically and through other direct and indirect user charges.

The National Highway Development Project is progressing on schedule. At the commencement of the Ninth Plan about 1100 kms of National Highways was multi laned (mainly 4 laned). In the Ninth Plan civil works for multi laning (mainly 4 laning) of National Highways aggregating to over 6000 kms would be awarded.

A number of steps have been taken to encourage private sector participation in the road sector. Private sector has been awarded 20 projects at an estimated cost of Rs. 1000 crores. For the development of State roads, a number of projects have been taken up with the participation of private sector. These include Ahmedabad-Mehsana, Vadodara-Halol highway and Mumbai-Pune expressway.

National Highway Authority of India has developed Kotputli-Amer section of National Highway-8 as toll road. A private agency is collecting tolls on contractual basis.

Integration and coordination of various Centrally Sponsored and State programmes for rural roads and eliminating of duplication of efforts to avoid wastage of limited resources is essential.

Financial performance of State Road Transport Undertakings continues to be unsatisfactory. There is urgent need to improve productivity of State Road Transport Undertakings through measures like replacement of over aged buses, improvement in the productivity and management practices together with timely and adequate increase in fares , reduction in bus staff ratio and reimbursement of concessions by State Governments.

There is a need to encourage private sector to provide safe and reliable passenger services to meet the growth demand.

Ports

Ninth Plan target of capacity creation likely to be achieved.

Thirteen private sector / captive user port projects of 54 million tones capacity with an investment of Rs. 3926 crore have already been approved and they are at different stages of implementation. Thirteen more projects involving private and captive user participation with an investment of Rs.4000 crore are in pipeline.

Though the productivity of terminals have improved , there is a long - way to go to reach a situation when berths should await for cargo.

Progress of private sector participation is satisfactory .

Corporatisation of major ports is progressing at very slow pace. It needs to be expedited.

Civil Aviation

Although the losses of Air India decreased from Rs. 181.01 crore in 1997-98 to Rs. 89.75 crore (Revised Estimates) in 1999-2000, the physical and financial performance of airlines has not been satisfactory.

Indian Airlines experienced turn around in their financial performance. The company started earning profits from 1997-98 after incurring losses for 8 years since 1989-90.

The process of restructuring the existing airports of Delhi, Chennai, Mumbai, and Calcutta through long term lease to make them World class need to be expedited.

A new airport at Nedumbassery near Cochin has been constructed and commissioned in May, 1999, by Cochin International Airport Limited, a company promoted by Kerala State Government with equity participation from a large number of non-resident Indians and other financial institutions. This is the first of its kind which has been completed with the initiative of State Government.

Government has also approved in principle, setting up of new airports at Bangalore, Hyderabad and Goa with private sector participation. State Governments will be selecting concerned joint venture partners for construction and operation of new airports.

Capacity shortages in passenger traffic have been noticed on several international sectors connecting India There is an urgent need to mitigate the capacity constraints through appropriate measures including liberal grant of traffic rights to the international carriers having regard to the fleet limitations of Air India.