TRANSPORT INFRASTRUCTURE DEVELOPMENT

REPORT IN INDIAN CONTEXT: ISSUES AND

CHALLENGES INVOLVED

Subject: Supply Chain Management

Faculty: Dr. Shipra Sharma

Submitted by:
Jyoti Rawal
 ACKNOWLEDGEMENT

In preparation of this assignment, I had to take the

help and guidance of some respected persons, who
deserve the deepest gratitude. As the completion of
this assignment gave me much pleasure, I would like
to show our gratitude Dr. Shipra Sharma, Supply Chain
Management Faculty, of Nift Kangra, for giving me
good guideline for assignment throughout numerous
consultations. I would also like to expand my gratitude
to all those who have directly and indirectly guided me
in making this assignment.

I also thank Nift Kangra for giving me such an

opportunity to explore more with constant learning.
My thanks and appreciations also go to our classmates
in developing the assignment and people who have
willingly helped me out with their abilities.
 TRANSPORTATION INFRASTRUCTURE
India, which has the world's second largest road network, the world's fourth largest rail
network, and the world's 16th largest maritime country, has received significant impetus
for expanding infrastructure. The government has devoted a large portion of fiscal
stimulus to infrastructure spending by launching priority megaprojects (freight corridors,
high-speed rail, expressways), creating a multiplier effect on the economy.

Roads
India has the world's second-largest road network, spanning 5.89 million kilometres
(kms). This road network transports 64.5 percent of all goods in the country and 90
percent of total passenger traffic in India. Road transportation has gradually increased
over the years as connectivity between cities, towns, and villages in the country has
improved.
 Development:

Mr. Nitin Gadkari, Union Minister of Road Transport and Highways, announced in
August 2021 that the Bharatmala Pariyojana—the ambitious road and highways
project that aims to build highways from Maharashtra, Gujarat, Rajasthan, Punjab,
Haryana, and then cover the entire string of Himalayan territories—would launch
1,080-km (road construction) projects worth Rs. 25,370 crore (US$ 3.4 billion) in
Gujarat.

The Ministry of Road Transport and Highways set aside Rs. 165 crore (US$ 22
million) for FY22 under the Economic Importance and Inter State Connectivity
Scheme (EIC&ISC) in July 2021.

The Ministry of Road Transport and Highways granted a 162-kilometer road

highway (New NH-365BG) as part of the Bharatmala Pariyojana's economic corridor
in July 2021, with the goal of connecting Andhra Pradesh and Telangana via a
robust road infrastructure that supports speeds of 100 kilometres per hour. The
project will cost Rs. 2,600 crore (US$ 350 million) in total.

Ports
India has 12 major ports and 200 minor/intermediate ports (under state government
administration). The Jawaharlal Nehru Port Trust is India's largest major port. India is one of
the top five ship recycling countries, accounting for 30% of the global ship recycling market.

Development:
The Indian government's flagship Sagarmala programme for port-led
industrialization, with a greater emphasis on inbound and outbound connectivity,
presents significant opportunities.

Under this programme, the government intends to develop port-proximate

industrial capacities near the coast by establishing 14 coastal economic zones
across all of India's maritime states and union territories. Furthermore, 35
potential port-linked industrial clusters in the energy, materials, discrete
manufacturing, and maritime sectors have been identified.

The projects identified under Sagarmala Programme are expected to have the
following impact:
Mobilization of over $58 bn of infrastructure investment
Double the share of inland and coastal waterways in the modal mix from 6%
Reduce time for export by 5 days
Boost merchandise exports by $110 bn
Create 4 mn new direct jobs and 6 mn indirect jobs
 The proposed development of several passenger and freight terminals along
national waterways has given inland waterway development a boost. These
proposed waterways would connect to the dedicated freight corridors and the
Sagarmala project, and would span 24 states and two union territories. These
connections would accelerate the movement of goods through a dense multimodal
transportation network, allowing for seamless movement between waterways,
dedicated freight corridors, and road transport.

Railways
In 2021, Indian Railways' freight revenues are worth $16 billion.
The railway sector in India aspires to contribute about 1.5 percent of the country's GDP by
constructing infrastructure to support 45 percent of the economy's modal freight share. The
Indian Railways increased freight revenue by 3% in 2020-21, while the quantity of goods
loaded increased by 1.93 percent.

Development:
Two Dedicated Freight Corridors (DFC), one on the Western route (Jawaharlal
Nehru Port to Dadri) and another on the Eastern route (Ludhiana to Dankuni),
have been fast-tracked.
The railway sector in India has the highest ever planned capital expenditure of
$29.5 bn in 2021-22
The average speed of freight trains has increased to 45.6 kmph in March 2021,
marking an 83% increase over the previous year
Railway Electrification works completed on a total of 6,015 Route kms during
2020-21

Air freights
The air cargo industry has begun to make a comeback. Overall international freight traffic
increased by 58 percent from April to September 2021-22 compared to April to September
2020-21. Domestic freight traffic increased 72.1 percent from April to September 2021-22 to
April to September 2020-21. Covid-19 had a significant impact on the industry in 2020-21, as
air freight traffic fell by 25.7 percent from 2019-20 to 2020-21.

Development:
In February 2021, Kannur International Airport in Kerala opened its 1,200 square
metre cargo complex with an annual capacity of 12,000 metric tonneswhich is now
aiming to become the air cargo hub for the region by exporting goods to the Gulf
region and even to the US by beating other airports with its advantages.
Kolkata airport has recently opened an international courier terminal to facilitate
express cargo clearance from the airport itself. This will enable direct export and
import of courier, which had to be routed via Delhi or Mumbai till now and req­u­ir­ed
additional two days in transit.

The SpiceJet management will provide cargo service from Gwalior to Ahmeda­bad,
Mumbai, Bengaluru, Hyderabad, Kolkata, Jam­mu, Pune and Jaipur.
MAJOR ISSUES:

India invests a fraction of what other developing countries do in transportation

infrastructure. India, for example, has historically invested about 1% of GDP in
transportation infrastructure, whereas China increased its investments from 4.7
percent in 2014 to 6.5 percent in 2017. Even developed countries with more
developed infrastructure, such as France and Japan, spend about 1% of their GDP
each year on transportation infrastructure

Inadequate roads:
India only invested $38 billion in highway development between 2014 and 2018, or about
0.35 percent of its GDP, whereas China has consistently invested about 1.5 percent of its
GDP in highways. 2 The country's roads are being strained due to an insufficient supply of
infrastructure investments compared to demand. Furthermore, roads are India's most
important mode of transportation, accounting for 65 percent of all freight movement, and
highway congestion and slower operating speeds result from limited capacity. Because
congested roads result in a loss of 8 to 10% of travel time, network improvements such as
new expressways to augment the capacity of congested corridors, as well as new
economic corridors, and urban decongestion, are critical.

Social welfare obligations:

Governments are frequently obligated to subsidise public services at the expense of
businesses, as is the case with railways, which subsidise passenger journeys through
freight operations. Raising the cost of transporting freight by rail reduces the appeal of
that mode of transportation, resulting in a modal shift away from railways, limiting the
government's ability to generate revenue, and limiting investments that could expand
capacity, resulting in poor service on major routes.

Insufficient airport capacity:

In the coming years, India's aviation infrastructure will face a significant supply and
demand gap. Although programmes like the UDAN regional airport development are
addressing regional connectivity issues, airport capacity expansion remains a challenge,
particularly in the metropolises of Delhi and Mumbai, which account for nearly half of
India's total air traffic. Large cities will likely require at least two to three airports in the
future to alleviate traffic congestion while also providing world-class amenities to
passengers. The development of new greenfield airports in Navi Mumbai and Jewar
illustrates this approach and represents positive steps in the right direction.

Lack of public–private partnerships:

Because India is a developing economy with limited financial resources, rapid
transportation infrastructure development will necessitate private sector involvement.
However, the difficulty and uncertainty of enforcing a "user-pays principle," as well as the
risks of enforcing contracts, creates revenue uncertainty.
CHALLENGES IN CAPTURING THE TRANSPORT
INFRASTRUCTURE OPPORTUNITIES:

Government authorities:
IInfrastructure coverage and quality are hampered by issues such as project funding,
clearance delays, land acquisition delays, and concessionaire and contractor non-
performance.
Because of the large upfront capital investment required, the main challenge for
government agencies is securing project funding. Typically, infrastructure development
costs are incurred in the first two to three years, with revenue from the project in the form
of user fees collected 20 to 30 years after the project is launched. As a result, a large-scale
infrastructure push will necessitate a mix of public and private funding up front.

Concessionaires and contractors:

Challenges around project funding, timely clearances, disruptions in operations, and user-
fee collection impact viability for concessionaires and contractors.
The main issue for concessionaires is effective capital management. It is critical to have a
comprehensive portfolio perspective that reduces risk while increasing profitability.
Furthermore, the availability of credit from financial institutions to undertake large projects
is a significant barrier to generating interest in infrastructure projects. Recently, the market
credit crunch has harmed concessionaires, particularly small to mid-size concessionaires,
when it comes to raising capital, causing project delays.

Financial institutions:
Lack of a strong legal and regulatory framework for early and efficient dispute resolution
and challenges in infrastructure valuation have limited the participation of financial
institutions.
Investing in assets with revenue realisation risks is a constant source of concern for
financiers. It is a difficult task to identify potential risks associated with infrastructure
projects and to value the risk factor in the project appraisal. Non-performing assets can
result from overlooking an important risk or overvaluing the project. The problem of
stalled projects and non-performing assets is well-known, and it continues to plague
infrastructure-focused financial institutions.
References:

https://www.kearney.com/infrastructure/article/?/a/harnessing-the-opportunities-in-
india-s-transportation-infrastructure
https://www.ibef.org/industry/roads-india.aspx
https://indianinfrastructure.com/2021/11/08/air-freight-trends/
https://www.investindia.gov.in/sector/ports-shipping