Indian Economy, 5th edition (46 page)

Competition in the electricity sector has been augmented by having an
open access
system allowing a buyer to choose his supplier and a seller to choose his buyer. Open access at inter-state transmission level is now fully functional. The facilitative framework created by the Central Electricity Regulatory Commission (CERC) in this regard has provided the desired regulatory certainty for developers in terms of market access, and also payment security against default.
Central Transmission Utility (CTU)
which is responsible for granting connectivity, medium-term open access, and long-term access, has received 141 applications for connectivity involving generation capacity of 1,52,850 MW.

Trading of Electricity
is enabled through electricity traders and power exchanges. Power trading helps generation resource optimisation by facilitating trade and flow of power across the country with varied geography, climatic conditions, and natural resource endowments. It has helped in sale of surplus power available with distributing utilities and captive power plants on one hand and purchase of power by deficit utilities to meet sudden surges in demand. Short-term markets also provide generators with an alternative to sell power other than through long-term power purchase agreements (PPAs). The CERC grants inter-state trading licences.

National Electricity Fund (Interest Subsidy Scheme)
has been approved by to provide interest subsidy (Rs. 8,466 crore) on loan to the state power utilities, both in the public and private sectors, to improve the
distribution network
. The preconditions for eligibility to avail of interest subsidy are linked to the reforms in the power sector and the amount of interest subsidy is linked to the progress achieved in reforms.

AT&C Losses:
Due to lack of adequate investment on ‘transmission and distribution’ (T&D) works, the T&D losses have been consistently on higher side, and reached to the level of 32.86% in the year 2000-01.The reduction of these losses was essential to bring economic viability to the State Utilities (the SEBs). As the T&D loss was not able to capture all the losses in the net work, concept of
Aggregate Technical and Commercial (AT&C)
loss was introduced. AT&C loss captures technical as well as commercial losses in the network and is a true indicator of total losses in the system.

High technical losses in the system are primarily
due to
inadequate investments over the years for system improvement works, which has resulted in unplanned extensions of the distribution lines, overloading of the system elements like transformers and conductors, and lack of adequate reactive power support.

The commercial losses are mainly due to:

(i)
low metering efficiency

(ii)
theft, and

(iii)
pilferages

This may be eliminated by improving metering efficiency, proper energy accounting & auditing and improved billing & collection efficiency. Fixing of accountability of the personnel/feeder managers may help considerably in reduction of AT&C loss.

With the initiative of the Government of India and of the States, the
Accelerated Power Development & Reform Programme
(APDRP) was launched in 2001, for the strengthening of Sub Transmission and Distribution network and reduction in AT&C losses. The main objective of the programme was to bring Aggregate Technical & Commercial (AT&C) losses below 15% in five years in urban and in high-density areas – the loss as percentage of turnover was reduced from 33% in 2000-01 to 16.60% in 2005-06.

The APDRP programme has been
restructured
. The Restructured APDRP (R-APDRP) was launched in July 2008 as a central sector scheme for the 11th Plan (in order that reliable and verifiable baseline data of revenue and enegry in APDRP Project areas is attained over an IT plateform and that AT& C loss reduction is achieved on a sustained basis).

Development of Multifunctional Complex (MFC):
A new concept of development of MFCs with
budget hotels
was introduced in the
Rail Budget 2009-10,
so that important facilities may be available to rail users in a separate complex in the vicinity of the circulating area on station- a total of 198 stations have been identified by now.

In a major move to give further impetus to
railways’ modernization
plans, an Expert Group has been constituted under the Chairmanship of Shri Sam Pitroda to recommend ways and means of meeting the challenges of economic growth, the aspirations of the common man, the needs of changing technology, and the expanding market, while at the same time ensuring adequate focus on addressing the social and strategic requirements of the country consistent with Indian Railways’ national aspirations. The terms of reference of the Group involve outlining strategies for modernisation of Railways with focus on track, signalling, rolling stock, stations and terminals upgradation; using ICT for improving efficiency and safety; augmenting existing capacities of Railways through indigenous development; reviewing projects; and addressing PPP issues. The Expert Group is expected to submit its report by March 2012.

In order
to attract private capital
for accelerated construction of fixed rail infrastructure, GoI has formulated PPP investment models. A comprehensive draft policy is under the consideration which would replace the existing Railways Infrastructure for Industry Initiative (
R3i
) and Railways Policy for Connectivity to Coal and Iron Ore Mines (
R2CI
) policies for private investments in rail connectivity projects.

National Highways Development Project (NHDP):
About 22 per cent of the total length of National Highways (NHs) is single lane/ intermediate lane, about 53 per cent is two lane standard, and the balance 25 per cent is four lane standard or more.

Financing of the NHDP:
A part of the
fuel cess
imposed on petrol and diesel is allocated to the NHAI for funding the implementation of the NHDP. The NHAI leverages the cess flow to borrow additional funds from the debt market. Till date, such borrowings have been limited to funds raised through 54 EC (capital gains tax exemption) bonds and the short-term overdraft facility. Government has also taken loans for financing projects under the NHDP from the World bank (US$ 1,965 million), Asian Development Bank (US$ 1,605 million) and Japan Bank for International Cooperation (32,060 million yen) which are passed on to the NHAI partly in the form of grants and partly as loan. The NHAI has also availed a direct loan of US$ 149.78 million from the ADB for the Manor Expressway Project.

Special Accelerated Road Development Programme for North-East region (SARDP-NE)
aims at improving road connectivity to state capitals, district headquarters, and remote places of the north-east region. Development of roads in Left Wing Extremism
(LWE)
-affected areas in the states of Andhra Pradesh, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra, Odisha, and Uttar Pradesh is continuing; Prime Minister’s Reconstruction Plan
(PMRP)
for Jammu and Kashmir, launched in November 2004.

Pradhan Mantri Gram Sadak Yojna (PMGSY):
Launched to provide single all-weather road connectivity to eligible unconnected habitations having population of 500 persons and above in plain areas and 250 persons and above in hill states, tribal (Schedule V) areas, desert (as identified in the Desert Development Programme) areas, and LWE-affected districts as identified by the Ministry of Home Affairs. Rural roads has also been identified as one of the
six components
of Bharat Nirman which has the goal of providing all-weather road connectivity to all villages with a population of 1,000 (500 in the case of hilly or tribal areas).

The Eleventh Plan had envisaged accelerated efforts to bring the NH network up to a
minimum two-lane
standard by the end of the
Twelfth Plan
and for removing existing deficiencies. In order to make a visible impact, the work would be taken up for upgradation on a corridor concept. These corridors would include strengthening (in adjoining reaches) in addition to widening to two-lane/two-lane with paved shoulder standards in order to have better facility over long continuous stretches.

Civil Aviation:
Airport infrastructure development continues to be a matter of concern. Upgradation of many airports, including construction of new terminals, upgradation in 18 non-metro airports, for improving air navigation services the Airport Authority of India (AAI) installing the new ATS automation system. In order to address issues concerning viability of the civil aviation sector, particularly the airline industry, a Working Group was constituted on 12 December 2011 under the chairmanship of the Secretary civil aviation. Their major recommendations were:

(a)
state governments should rationalise the value added tax (VAT) on aviation turbine fuel (ATF),

(b)
foreign airlines be permitted to invest in domestic airlines undertakings,

(c)
direct import of ATF by airlines for their own consumption be allowed,

(d)
airlines should be asked to prepare their turnaround plans,

(e)
fare structure should be reviewed by airlines to cover the cost of their operations.

(f)
an economic regulatory framework suggested with regard to excessive/predatory pricing by 31 May 2012.

Maritime Agenda 2010-2020:
The
objective
of the Maritime Agenda 2010-2020 is not only creating more capacity but setting up ports on a par with the best international ports in terms of performance:

(i)
A target of 3,130 MT port capacity has been set for the year 2020. More than 50 per cent of this capacity is to be created in the non-major ports as the traffic handled by these ports is expected to increase to 1,280 MT.

(ii)
This enlarged scale of operation is expected to reduce transaction costs considerably and make Indian ports
globally competitive.

(iii)
Proposed investment in major and non-major ports by 2020 is expected to be around Rs. 2,96,000 crore.

(iv)
Most of the investment to come from the private sector including foreign direct investment FDI ( up to 100 per cent under the automatic route is permitted for construction and maintenance of ports), around 96 per cent, private sector to fund most of the projects through PPP or on ‘build operate transfer’ (BOT) or ‘build operate own transfer’ (BOOT) basis.

(v)
Private-sector participation will not only increase investment in the ports infrastructure, it is expected to improve operations of the ports through the induction of the latest technology and better management practices.

(vi)
Public funds will be mainly deployed for common use infrastructure facilities like deepening of port channels, rail and road connectivity from ports to hinterland, etc.

Urban Infrastructure:
Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has been launched by the Ministry of Urban Development for a seven-year period (i.e. up to March 2012) to encourage cities to initiate steps to bring about improvements in a phased manner in existing civic service levels. The components under the sub-mission Urban Infrastructure and Governance (UIG) include urban renewal, water supply (including desalination plants), sanitation, sewerage and solid waste management, urban transport, development of heritage areas, and preservation of water bodies.

The UIDSSMT
(Urban Infrastructure Development Scheme for Small and Medium Towns)
is a
sub-component
of the JNNURM for development of infrastructure facilities in all towns and cities other than the 65 Mission cities covered under UIG (Urban Infrastructure and Governance) Sub-mission of the JNNURM. For obtaining assistance under the UIDSSMT, states and urban local bodies (ULBs) need to sign MoAs committing to implementation of the reforms.

Under the pilot scheme,
Urban Infrastructure Development in Satellite Towns around Seven Mega-Cities,
launched in 2011-12 to contribute towards amelioration of basic services in these towns. For the north-eastern region, the
North Eastern Region Urban Development Program
was launched in November, 2009 with Asian Development Bank (ADB) assistance. The project aims to assist the states of Tripura, Mizoram, Sikkim, Meghalaya, and Nagaland to address challenges of urban development in their capital cities.

Urban Transport
is one of the key elements of urban infrastructure. As compared to private modes of transport, public transport is energy efficient and less polluting. The public transport system helps improve urban-rural linkages and access of rural/semi-urban population in the periphery to city centres for the purposes of work without proliferation of slums within and around cities. National Urban Transport Policy (NUTP), 2006
aims
to ensure accessible, safe, affordable, quick, comfortable, reliable, and sustainable mobility for all – under which several projects of ‘bus rapid transit system’ (BRTSs) and ‘Metro Rail Projects’ have been sanctioned by may 2012.

Financing Infrastructure:
Net bank credit to infrastructure had a healthy growth of 48.4 per cent per annum during 2006- 11 but it turned negative 2011-12 and was around 61 per cent of 2010-11 – power and telecom sectors saw significant reduction. FDI inflows registered 23.6 per cent growth in 2011-12 with power (43.6 per cent), non-conventional energy (338 per cent) and telecommunications (499 per cent) the preferred sectors for foreign investors- ther sectors, however, failed to share the buoyancy in FDI inflows.

ENERGY PRICING

The economic role of rational energy pricing can hardly be under-estimated. Rational energy prices provide the right signals to both the producers and consumers and lead to a demand-supply match, providing incentives for reducing consumption on the one hand and stimulating production on the other. Aligning domestic energy prices with the global prices, especially when large imports are involved, may be ideal option as misalignment could pose both micro- and macroeconomic problems.