MEANING & SCOPE OF UNIT 1

INFRASTRUCTURE MANAGEMENT
INTRODUCTION
Definition:-
“The underlying foundation or basic framework (as of a system or organization)”.
It is a term used in a variety of disciplines.
It is the fundamental facilities and systems serving a country, city or other area
including the services & facilities necessary for its economy to function
CHARACTERISTICS ASSOCIATED WITH
INFRASTRUCTURE
Infrastructure facilities are generally available to large groups of people
 Infrastructure helps deliver essential services for the functioning of an organization
or society
Infrastructure helps achieve economic and social objectives
Infrastructure is the base upon which society and its activities rest
Examples of infrastructure are waterways, roads, etc
TYPES OF INFRASTRUCTURE
There are several types of infrastructure.
We will restrict to Physical infrastructure
Transportation Infrastructure
E.g: Roads, Bridges, Airports, Ports, Waterways
 Water and Sanitation Infrastructure
E.g: Water Supply Systems, Sewage treatment systems
Energy Infrastructure
E.g: Dams, power plants, power distribution and transmission facilities, pipelines
Telecommunication Infrastructure
 Housing, Facilities and Recreation
ROLE OF INFRASTRUCTURE
As a key driver for all round growth with enhancement in the efficiency level
Most infrastructure utilities touch the population at all levels
Up keeping of environment for safe living
Poverty alleviation as a consequence of overall development of productive sectors
Easy and cost efficient access to markets both for inputs and outputs possible out of
infrastructure development
SCOPE OF INFRASTRUCTURE ENGINEERING IN
NATIONAL /GLOBAL DEVELOPMENT
The importance of infrastructure is two-fold
Infrastructure is instrumental in promoting economic growth
Infrastructure also plays a role in alleviating poverty
Infrastructure is also directly related to economic growth
INFRASTRUCTURE, ECONOMIC GROWTH &
POVERTY REDUCTION
DIFFICULTIES IN PROMOTING INFRASTRUCTURE
INFRASTRUCTURE CRISIS
Infrastructure in developed countries is old, unreliable, inefficient and in need of
replacement.
Large portions of urban and rural populations in developing countries have
inadequate access to water and sanitation.
Power supply is non-existent or unreliable and people are faced with frequent
power-cuts.
Quality of road infrastructure is often bad, leading to long travel times and
increased vehicle maintenance costs.
Width of roads is also often a constraining factor leading to traffic jams and blocks
NEED FOR INFRASTRUCTURE
Urban population will grow from 36% to 50% by 2025
Growth in GDP is predicted to be 8-9% per annum
Road Traffic growth will be 15% per year
Air traffic is growing by 25% per year
Sanitation Coverage is only 35% currently
Good infrastructure can lower down all these problems and hence is needed
UPCOMING INFRASTRUCTURE PROJECTS AT
NATIONAL LEVEL
1. Sagarmala Project - It aims to promote port- led direct and indirect development
and provide infrastructure to transport goods to and from ports quickly, efficiently
and cost- effectively.
2. Bharatmala Project - Project linking India’s vast west-to-east land border from
Gujarat to Mizoram (i.e.) roadways
3. Mumbai Trans Harbour Link, Shivaji Memorial: This will be country’s longest sea
bridge at 22.5 km.
4. Arunachal Pradesh on rail map:
5. Setu Bharatam project: project aims to ensure highways without railway crossings
by 2019 and repair of 1,500 British-era bridges.
CONT…
6. Inland Waterways:
7. Chardham Highway Project:
8. Highest bridge of the world on river Chenab: The government is building the
tallest bridge in the world over river Chenab at Doda (359 metre above the river)
UPCOMIN GLOBAL PROJECTS
1st Tunnel for Ships in Norway – 1700 mt long
Mumbai Trans harbour link project – It is a sea bridge, length 22.5 km
Analemma Tower – New York – This tower is supposed to be build hanging from
an asteroid rather than supported on ground.
South China sea island – Artificial island is constructed turning them in to military &
logistical bases
Suez – Panama canal extension
MUMBAI TRANS HARBOUR LINK PROJECT ANALEMMA TOWER
INFRASTRUCTURE INDIAN SCENARIO
Energy Security and Improving Connectivity (both physical and virtual) are
emerging as the two major areas of infrastructure development in India
Recently, there has been a significant drive to emphasize on urban infrastructure
(metro rail systems, sanitation, bus rapid transport systems, waste management and
urban roads), renewable energy and connectivity (ports, railways).
CONT..
Actions taken in the 11th 5 year plan - 2007- 2012
The amount of money spent on infrastructure will be raised to 8% of GDP (earlier,
infrastructure spending was only 4.6% of GDP)
One Half of all new investments in the 11th plan will be in infrastructure
The planning Commission has estimated that a total investment of $450 Billion in
infrastructure is required over the next 5 years to meet India’s infrastructure needs
over 5 years
The 12th Five Year Plan of the Government of India mentions a need for Rs. 56.3
trillion (about $ 1 trillion) for development of infrastructure.
From the Five Year Plan, it can be noted (Figure 1) that the highest level of
investment is planned in the Power, Roads, Telecom and Railway sectors.
CONT…
CONT…
CONT… IIFC – INDIA INFRASTRUCTURE
FINANCE CORPORATION
The Govt. has set up the IIFC to help fund infrastructure projects in India. IIFC will be
owned by the government.
IIFC will lend money at low rates to public and private infrastructure projects. This
will help encourage more projects as the cost of financing is very low.
Since the loans that the IIFC takes are guaranteed by the government of India, IIFC
is able to borrow and lend at lower rates.
NEW SCHEMES TO AID INFRASTRUCTURE
The Government has initiated the Jawaharlal Nehru National Urban Renewal
Mission (JNNURM) to improve Urban infrastructure.
The Bharat Nirman program has been instituted to improve infrastructure in rural
areas.
TRANSPORTATION INFRASTRUCTURE
TRANSPORTATION SUBSECTORS
 Roads and Ground Transportation
 Airports
 Ports
 Railways
ROAD SECTOR
India has about 66.71 lakh km of road
network, which is the second largest in
the world.
The length of various categories of roads
is as under:
•National Highways: 1,46,145 km
•State Highways: 1,79,535 km
•Other Roads: 63,45,403 km
FLAGSHIP PROJECTS
Bharatmala Project - focuses on bridging critical infrastructure gaps through
development of 34,800 km of National Highways.
Delhi Vadodara Expressway
Hyderabad – Vishkhapattanam Corridor
Surat Chennai Expressway
Bengaluru Mysore Expressway
North Eastern Highway construction
NATIONAL HIGHWAYS – KEY PLAYERS & KEY
PROGRAMS
1. NHAI (National Highways Authority of India - a Government backed organization)
2. MoSRTH (Ministry of Surface Road Transportation and Highways - a Government
ministry)

PROGRAMS
1. NHDP (National Highways Development Program - conducted in seven stages)
2. Central Road Fund
SOMR GOVT REFORMS
 NHAI given more independence to select and implement projects in order to aid
speedy development of infrastructure
 100% Foreign Direct Investment permitted
 100% income tax exemption for a period of 10 years
 Automatic tolling proposed to reduce operational costs on toll-roads
 ISSUES & CHALLENGES WITH ROADS
Land Acquisition for road alignment
 This involves the political will to acquire tracts of land, compensate the existing landholders adequately and handover the land
to the project developers.
Very often this process is time-consuming and leads to delays.

Environmental and Societal Concerns regarding displacement of people, deforestation etc.

 NGOs and Special Interest Groups often raise these issues, (e.g. in the NICE corridor project in Karnataka) and this leads to
delays if these concerns are not effectively mitigated.

Ridership concerns, Tariffs

 The exact tariff that should be charged according to varying categories of consumers is a difficult decision that must be made.
In addition, there are always risks that by adding a toll- charge the ridership on the road might decrease leading to an
infeasible project.
AIRPORT SECTOR - NEW AIRPORTS UNDER
CONSTRUCTION
Panvel | Navi Mumbai International Airport
•Area: 1,160 hectares
•Estimated Cost: Rs. 16,700 crore
Bhiwadi Greenfield International Airport, Alwar
•Area: 2058 hectares
•Estimated Cost: Rs. 10,670 crore
•Rajiv Gandhi International Airport Expansion, Hyderabad
•Estimated Cost: Rs. 6,300 crore
 ISSUES IN AIRPORT INFRASTRUCTURE
Bangalore airport faced some problems initially
  Airport PPP policies had not been evolved and AAI (Airway authority of
India) policies indicated that private ownership was not possible in this sector
  These policies have since been modified and the route has been cleared for
private investment in this sector
In terms of PPP
  Major portion of the revenue accrues from leasing airport space to retail
outlets as compared to revenues from airlines
  Landside and airside operations can be privatized, but air traffic control
cannot be privatized.
 A new regulator is being mooted for this sector to oversee the interactions
between AAI, the private airport operator and the airlines
PORT SECTOR
A Large Increase in Port Handling Capacity is planned
 More ports have been and are to be added
 Increase in Container terminals to the tune of INR 10,000 Crore is planned
 JNPT (Jawaharlal Nehru Port Trust) alone is planning to spend 3000 Cr in
expanding capacity.
the objectives in the port sector are to increase capacity of existing ports and to add
new ports in order to decrease turnaround time of ships berthed and to increase
productivity
CONT…
TAMP (Tariff Authority for Major Ports) is the regulator in this sector and does a good
job specifying fair tariffs.
Plans are a foot to improve Road and Rail connectivity to ports thereby reducing
transportation costs on goods and making the port sector more attractive.
Plans are being made to Corporatize Ports to increase operational efficiency
 Will lead to independence from a Central Authority like Port Trust of India.
 Finds favor with port operators.
RAILWAYS – DEVELOPMENT OF RAIL TRANSPORT
•Introduction of Electric Trains:
•Expansion of the Network:
•Modernization: The introduction of modern technologies like computerized
ticketing, high-speed trains, and digital information systems has improved the
efficiency and user experience of rail transport.
•Safety Measures: Indian Railways has implemented various safety measures,
including advanced signaling systems and automated gates at crossings, to reduce
accidents and enhance passenger safety.
•Private Participation: The government has encouraged private participation in the
railways, leading to the introduction of private trains and other services. This has
brought in more competition and improved service quality.
FUTURE PROSPECTS
High-Speed Rail: Projects like the Mumbai-Ahmedabad High-Speed Rail Corridor are
set to introduce bullet trains in India.
Dedicated Freight Corridors: These corridors will separate freight and passenger
traffic, improving the efficiency of both.
Green Initiatives: The Indian Railways is focusing on sustainability by introducing
solar-powered trains and reducing its carbon footprint.
Digital Transformation: The railways are embracing digital technologies, including
mobile apps for booking, real-time train tracking, and online services.
Public-Private Partnerships: The government is exploring more public-private
partnerships to attract investment and improve the quality of rail services.
DEVELOPMENT OF SOCIAL INFRASTRUCTURE IN
INDIA
Comprises of
 HEALTH
 EDUCATION
 DRINKING WATER SUPPLY
 SANITARY CONDITIONS
 SOCIAL & PERSONAL SERVICES
 HEALTH
There has been a development in all types of pathology: Allopathy, Ayurveda, Homeopathy and
Unnani.
These data reveal that over a period of 50 years i.e. 1951 to 2000, number of doctors per lakh
of population have increased by three fold
17 doctors in 1951 to 52 doctors per lakh of population. This gives an annual growth rate of only
2.43 per cent.
Number of beds for lakh of population have increased from 32 in 1951 to 101 in 2000, which
gives an annual growth rate of 2.56per cent.
Number of hospitals have increased from 0.75 in 1951 to 1.66 in 2000. This gives a growth rate
of only 1.73 percent per year.
EDUCATION
Number of schools (these are primary, middle, high and higher secondary and
senior secondary schools) have increased from 2.31 lakh in 195 1 to 11.56 lakhs in
2000.
 This gives an annual growth rate of about 3.22 per cent.
EXPENDITURES
The data reveal that expenditures on education in terms of per capita increased
from mere Rs.5 in 1950-51 to Rs.564 in 1999-2000, an increase of more than 9 per
cent per annum.
Per capita expenditures on health have increased from Rs.2 to Rs.96, an annual
increase of about 8 per cent between 1950-51 and 1999-2000.
Finally, on social security per capita expenditures between 1950-51 and 1999-
2000, have increased from Re.1 td Rs.69, an increase of about 10 per cent per
annum
URBAN INFRASTRUCTURE IN INDIA - SCENARIO
By 2025, 50% of India’s population will live in cities, half of them in slums
This will place great stress on existing infrastructure for water, power, urban
transport, sanitation etc – more infrastructure has to be built and existing
infrastructure has to be upgraded.
Increase in the sales of vehicles due to this trend is shown below
URBAN WATER SUPPLY SCENARIO
Water availability in urban settings has been decreasing over the years
URBAN GOVERNANCE – 3 TIER SYSTEM
Traditionally, the state government had a major influence on urban
infrastructure.
No clear demarcation of powers existed between state and local
(municipal) levels and so state governments ended up taking most of the
decisions regarding urban infrastructure
The central govt. provided tax concessions, training and guidelines and
fitting central plans such as the National Urban Transport Policy with
schemes such as the Jawaharlal Nehru National Urban Renewal mission
The municipal governments had the least powers
PROBLEMS WITH EARLIER MODEL
Funding for urban areas comes from the center or the state
Due to lack of on-the-ground knowledge on the part of these agencies, the wrong
groups or wrong projects often get funded
Conflicting programs at the state and central level do not align, leading to
misdirected flow of funds
Bureaucracy at these levels reducies progress
NEW MODEL OF GOVERNANCE
74 TH CAA – 12 TH SCHEDULE (74 TH AMENDMENT)
The 74th Constitutional Amendment Act, seeks devolution of powers to local bodies.
The Urban local bodies (ULBs) will be in charge of the functions depicted in the box
in the next slide, which has been taken from the India Infrastructure Report
The 74th Amendment gives more power, responsibilities, and the ability to raise
funds, to control revenues and to deliver projects, to municipalities
Main sources of finance for municipalities are taxes (Land + Building taxes) State
govt mandates the tax rates rates
Another source of finances are fund Transfers from States and the Center This can
happen at the discretion of state govts
CONT…
State Finance
Commission (SFC)
is a body with
responsibilities to
ensure that
municipalities
have adequate
revenues for their
operations.
Funding from the
Center can be
direct to the ULB,
or can come
through the state
governments.
 MUNICIPAL REFORMS
A Model Municipal Law (MML) has been mooted. Under this law, municipalities should be
granted powers and responsibilities for the following items:
Municipal bodies must have elected representatives and not nominees
Municipal bodies must have executive powers
Guidelines for financial management such as preparing balance sheets, training on debt
limitation policies should be provided.
Accounting for different sectors should be maintained separately
Raising funds through taxes
Implementing infrastructure and services
Approving small projects
Regulatory oversight
OTHER REFORMS
E-governance initiatives have been introduced in several states to make the process
of interaction with government easier, and to increase transparency and
accountability of the government
UIDSSMT – Urban Infrastructure Development Scheme for Small and Medium Towns
was initiated to improve urban infrastructure
JNNURM - Jawaharlal Nehru National Urban Renewal Mission was launched recently
to enable cities to improve their urban infrastructure.
THE ROAD AHED – SYSTEMATIC CHANGE IS
REQUIRED
We need to ensure that
Too many agencies do not handle the same sector (no duplication or fragmentation)
Regulator, implementer and policy makers exist and they are independent
Stakeholders are involved
Capacity is built at Municipal level
Performance incentives and org. restructuring are emphasized
Reforms and Municipal independence are promoted
There needs to be independence between the policy makers, the implementors and
the regulators to ensure transparent functioning.
CONT…
An ideal
framework can be
the following which
is adapted from
the India
Infrastructure
Report.
Fiscal flows are
assured, institutions
are strengthened,
the public is
involved, and
services are
decentralized
RURAL INFRASTRUCTURE - SCENARIO
71% of Indians live in rural areas
52% do not have access to power
10% have no access to drinking water,
91% have no access to toilet facilities
 Average distance to all weather roads is 2 km
 244 million rural people are “poor”
 Compared to 80 million urban poor
HOW CAN INFRASTRUCTURE HELP?
Findings from a survey in Nigeria indicate the infrastructure in rural areas
can
Increase employment and income
Increase efficiency and productivity
Increase access to resources
Improve health and therefore productivity
For instance, if water supply is augmented, water-related health diseases
can be reduced
ISSUES IN RURAL AREAS
Rural Population Density is very Low - 15.75 times lower than urban areas in
the case of India.
As a result, economies of scale cannot work in rural areas, since the fixed costs
(costs of installation) are very high and the variable costs (costs per user) are
quite low.
For instance, since there are fewer telecom users who are spread very far
apart, many more telecommunication towers will be needed.
The low number of users per tower makes this an uneconomic proposition.
CONT…
Population Size is in rural areas is Low
More than 20 times lower than urban areas in the Indian context
Purchasing power is also very low
CONT…
The previous two slides indicate that the purchasing power of rural people is also
quite low due to reduced income.
 In many cases it is as much as 3 times lesser than in urban areas
SOLUTIONS
We need to look for “Local Solutions” in rural areas and not large “Network Based”
solutions
Septic tanks,
 Mobile Phones,
local power generators etc will work better in rural areas give the scale of investment and use

Sanitation and Treatment plants, phone lines and power grids might not work since
the costs might outweigh the demand
Subsidies are needed to achieve break-even for investments in rural areas due to
lack of economies of scale and reduce consumption power
Micro-finance and micro-lending can play a part in generating finances for small
scale projects that will make a difference in rural areas
GOVERNMENT INITIATIVES
Bharat Nirman Program has been introduced to provide infrastructure in rural areas
Rs. 186,900 Crores outlay planned in 2006
Other schemes such as the
Pradhan Mantri Gram Sadhak Yojana for rural roads,
 the Accelerated Rural Water Supply Program for rural water and sanitation,
the Rajiv Gandhi Vidyukranthi Yojana for rural electrification etc have been
introduced
Objectives include giving power to 125,000 villages
4000Cr outlay is planned to connect rural roads
CONT…
Universal Service Obligations (USO) exists in the Telecom sector to raise funds for
rural phone connectivity
NREGS (National Rural Employment Guarantee Scheme) has been floated to
provide at least 100 days of guaranteed employment to improve the economic
conditions of some people in rural areas
PURA (Provision of urban amenities in rural areas) scheme has been floated to
Provide Urban Amenities in Rural Areas
Rural Infrastructure Development Fund (RIDF) has been set up by NABARD to the
tune of 60,000Cr
WAYS TO RAISE FUNDS IN RURAL
INFRASTRUCTURE
Central Govt Grants
Micro Finance Institutions and NGOs
Multilateral Bank loans
Community pooling of resources
Commercial Bank loans
SPECIAL ECONOMIC ZONES
These are the zones where business and trades laws differ from the rest of the country
The aims of the zones include: increased trade, increased investment, job creation and
effective administration.
In SEZ, financial libertarian policies are introduced.
These policies typically regard investing, taxation, trading, quotas, customs and labour
regulations.
The creation of special economic zones by the host country may be motivated by the desire
to attract foreign direct investment (FDI)
The benefits a company gains by being in a Special Economic Zone may mean it can
produce and trade goods at a globally competitive price.
SEZ IN INDIA
Asia's first EPZ (Export Processing Zone) set up in Kandla in 1965.
The Special Economic Zones (SEZs) Policy was announced in April 2000.
This policy intended to make SEZs an engine for economic growth supported by
quality infrastructure complemented by an attractive fiscal package, both at the
Centre and the State level, with the minimum possible regulations.
SEZs in India functioned from 1.11.2000 to 09.02.2006 under the provisions of the
Foreign Trade Policy
The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005
which received Presidential assent on the 23rd of June, 2005.
The SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February,
2006.
MAIN OBJECTIVES OF SEZ
1. Generation of additional economic activity
2. Promotion of exports of goods and services;
3. Promotion of investment from domestic and foreign sources;
4. Creation of employment opportunities;
5. Development of infrastructure facilities;
SEZ RULES PROVIDE FOR
Simplified procedures for development, operation, and maintenance of the Special
Economic Zones and for setting up units and conducting business in SEZs
Single window clearance for setting up of an SEZ
Single window clearance for setting up a unit in a Special Economic Zone
Single Window clearance on matters relating to Central as well as State
Governments
Simplified compliance procedures and documentation with an emphasis on self
certification.
INCENTIVES & FACILITIES OFFERED BY SEZ
Duty free import/domestic procurement of goods for development, operation and
maintenance of SEZ units
100% Income Tax exemption on export income for SEZ units under Section 10AA of
the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the
ploughed back export profit for next 5 years.
Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
External commercial borrowing by SEZ units up to US $ 500 million in a year without
any maturity restriction through recognized banking channels.
Exemption from Central Sales Tax.
CONT…
Exemption from Service Tax
Single window clearance for Central and State level approvals
Exemption from State sales tax and other levies as extended by the respective State
Governments.
INFRASTRUCTURE FINANCE
MAJOR SOURCES OF FUNDING
There are broadly two major sources of financing for infrastructure projects:
 public finance and
 private finance
 PUBLIC FINANCE
The budgetary resources from government to fund the infrastructure projects come from two
major categories of the sources:
 tax collection and
public sector borrowings.

 Borrowings from the market are in the form of either government stock or bonds.
The other source of revenue for the government is in the form of tax collection and duties besides
aids and donation, though this forms a small portion of public finance.
Taxes are levied by governments on income, payroll, property, and goods and services.
For instance, taxes and duties imposed by the government can be in the form of income tax,
value added tax, vehicle excise duty, capital gains tax, custom duties and stamp duty.
 CONT…
In addition to this, dedicated funds are also created by government for development of specific
infrastructure sectors by imposing various types of duties.
For example, a dedicated central road development fund has been created in India by charging a
duty of INR 1 per liter of motor spirit and INR 1 per liter of high speed diesel oil.
Funding of the infrastructure projects is normally through the traditional route where the public
finance is used to finance the activities of the projects over the entire lifecycle.
Public finance is also nowadays used to leverage private finance in case of infrastructure project
funding.
PRIVATE FINANCE
private finance has also been used to fund infrastructure projects to a limited extent
in both developed and developing countries.
Governments provide public finance for development of infrastructure projects with
the goal of meeting the social and economic objectives.
On the other hand, private sector participates in infrastructure projects and
provides private finance with the objective of furthering their business interests.
Maximizing the return on their investment into infrastructure projects have been
amongst the key business interests of private sector.
CASH FLOW PROFILE
 CONT…
The lifecycle of an infrastructure projects can be divided into three major phases of appraisal, construction and
operation & maintenance.
The shape of the cash flow profile is influenced by the time taken in finalizing the various objectives and
achieving the milestones of the projects as they affect the timing of the cash outflows related with the project.
During the appraisal and construction phases of the project lifecycle, cash flow is negative in nature on account
of the expenditures incurred towards the execution of appraisal-related studies such as feasibility study,
engineering design, and construction of the infrastructure facilities.
Commissioning of the completed infrastructure facilities marks the commencement of project operation phase.
The provision of infrastructure services will generate revenues for the project along with the expenditures for
operation and maintenance of the facilities.
The cash flows in this phase is the net project revenues after deducting the operation and maintenance
expenditures.
 SOURCES OF FUNDING
Ordinary equity is one of the most common forms of private finance to infrastructure projects.
Most of the project activities executed in the appraisal stage are financed typically with the equity capital
The return on the equity capital is paid in the form of dividends.
Dividends are paid from the retained earnings left after settling the project related expenditures relating to
operation & maintenance and paying the debt claims.
Bonds are another type of financial instruments, which are treated as debt instruments, through which private
finance is provided to infrastructure projects through the capital markets.
The par value, coupon, and maturity are the important characteristics of a bond.
The par value is the amount the bondholder will receive on maturity of the bond and coupon is the interest rate at
which the bondholders will receive the annual interest income.
Thank you!