Relevance: G.S paper III: Economy: Transport
Introduction:
- The Finance Minister introduced the Infrastructure portion of her budget primarily by referring to the National Infrastructure Pipeline (NIP) which has a five year vision with an investment of Rs. 102.51 trillion.
• Of this, the transport infrastructure investments consist of Rs. 19.64 lakh crore for roads, Rs. 13.69 lakh crore for railways sector, Rs. 1.43 lakh crore for airports, Rs. 1.01 lakh crore for ports, and parts of urban and housing (metro, public transport and Electric Vehicles), rural infrastructure (rural roads) and agriculture (storage infrastructure and refrigerated transportation). 
Key highlights about the investments in transport sector:
- Among roads, railways, airports and ports, the share of investment is 36%. If we include the other investments, it is likely to exceed 40%. In an overall sense, the transport infrastructure is the most significant investment in the NIP.
• About 20% (Rs. 19.5 lakh crore) of the total NIP investment is expected to take place during 2020-21. Towards this, the central budget has allocated Rs. 1.7 lakh crore for the transport ministries and Rs. 0.4 lakh crore for urban transport (Rs. 0.2 lakh crore) and rural roads (Rs. 0,2 lakh crore).
• The balance would come from internal accruals, borrowings, state funding and private funding.
• To ensure that such a funds flow happens, it is important that the policy direction is sustainable, and the use of funds is efficient.
• In the roads sector, the policy thrust is on increased categorization of national highways (from the current 1.3 lakh kms to 2.0 lakh kms), building expressways, increased use of electronic tolling and advanced technologies for traffic control.
• The Delhi-Mumbai expressway is getting immediate attention as also another 13,000 kms of upgradation of highways. This sector has experimented with different forms of PPPs, including Build Operate Transfer (BOT), Hybrid Annuity Model (HAM) and Toll Operate Transfer (TOT), enabling more projects to be undertaken.
• However, the roads sector is still affected by land acquisition and environmental clearances causing significant holdups and time over runs.
Rise of non-performing assets through projects:
- Many of the projects have turned into non-performing assets for lending institutions. Safety; which is a crucial outcome parameter for the road user, has still not been addressed comprehensively.
• On the matter of climate impact, the direction seems to be one of getting away from petrol and diesel and moving towards electric vehicles (EVs), though the pace of adoption is still open.
• In the rail sector, there has been some push towards reforms in the recent past. The idea of involving private sector participation in passenger trains is a welcome move.
• This was a reform that should have happened much earlier. The parallels in the other transport sectors like road, air and water where services have traditionally been in the private sector was waiting to be adopted.
• Over the years, there has been a thrust on improving technology and capacity in the railways. The outcome of these is projects related to the Dedicated Freight Corridor (DFC) and High-Speed Rail (HSR). There are also proposals for Semi High Speed Rail Corridors, though there is a debate on their real efficacy on existing corridors. The Western and the Eastern DFCs are under construction with parts of them already operational.
• The corridors are expected to be fully operational by 2022. This is expected to give a boost to freight movement on railways on the high demand routes and consequentially improve passenger train capacity on the conventional parallel routes.
Challenges:
- There are concerns about pricing and track access charges, and how it can be best leveraged to ramp up traffic on the DFCs. Another concern is the availability of rolling stock to utilise the DFC standards.
• While such rolling stock would be useful for pure DFC movement, there would be a difficulty for moving on the conventional railway lines.
• Depending on the experience of the DFCs, new dedicated corridors (which are already conceptualised) would be taken up.
• The HSR as a dedicated corridor is under construction between Ahmedabad and Mumbai.
• This would run the Japanese style bullet trains at a maximum speed of 320 kmph, bringing the best train time between these two cities from six hours to two hours.
• The subsequent corridors are being conceptualised, the experience of the first corridor would influence the way forward.
• India is expected to the fallback option, though with concerns from AAI regarding managing many loss-making airports.
• There could even be a question as to whether so many airports are required and if some of the intended locations can be served from neighbouring locations by road transport connectivity.
• In the port sector, Sagarmala is a large project-oriented scheme, which is not proceeding quite at the pace at which it was envisaged.
• The real issue may be one of nature of the need. Ports need modernisation for increased efficiency and infrastructure for better connectivity.
• Capacity additions through new locations may not be a need, unless it is for captive purpose.
• PPPs have made reasonable inroads into the Central government driven major ports, and more as private ports driven by State governments. In fact, there could possibly be a situation of excess capacity in the container domain.
• It could also be the ease for coal as the power sector moves away from coal to renewables.
• Some of the earlier PPPs are not able to do their best due to restrictive concession agreements. The restructuring of the regulatory regime which has been under discussion for a long time needs to be hastened. Connectivity issues on the land side, especially by rail, should improve both with the DFCs and the formation of the Indian Port Rail Corporation Limited (IPRCL). IPRCL was formed in 2015 to improve rail port coordination.
• The rural road infrastructure has improved significantly over the past two decades. Continuing allocations for this are a good budgetary policy. While rural roads are developing, the opportunities in agri-supply chain are yet to be fully exploited.
• The focus on cold chains including the announcement of the ‘Kisan Rail’ is a welcome move. Rail based reefer movement with multimodal connectivity can enhance the market reach of agricultural products including for exports.
• While the budget has appropriate announcements, as usual, execution needs attention. Else, we will be making similar announcements as has been done in the past.
Way forward:
- The current budget proposes a project preparation facility, actively involving students and faculty from Universities. Such an involvement is easier said and done. We need to find mechanisms to prepare and create awareness for the initiative.
• Structural solutions for focus like Sagarmala and coordination like Indian Port Rail and Ropeway Corporation Ltd. (IPRCL) could be used in appropriate contexts.
• Concession agreements and contracts need a lot more attention, both for sharpness and flexibility.
• The role of regulators becomes important, since the need is for ‘light-touch’ regulation with maturity.
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