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Strengthen the backbone

The massive development for infrastructural facilities will require a minimum investment of $ 150 billion to be incurred over the next decade if India is to attain 8 per cent GDP growth per year, writes KK Birla.

india Updated: Aug 08, 2006 04:25 IST

Infrastructure is a very wide term. It means basic, physical and organisational structures needed for the operation of a society or enterprise. The requirements of infrastructure that cover the main requirements of the nation are water resources, power, telecommunications, roads, railways, ports, civil aviation and urban infrastructure.

The massive development for infrastructural facilities will require a minimum investment of $ 150 billion to be incurred over the next decade if India is to attain 8 per cent GDP growth per year. The setback to the development of infrastructure was caused by the Industrial Policy Resolution of 1956. Infrastructure was reserved exclusively for the public sector. The government took on its shoulders the responsibility for the development of infrastructure. It did not realise the heavy burden that it would have to bear to keep a sizeable growth in the GDP. This sector should have been opened to both public and private sectors.

The years following the opening up of the economy to the private sector in 1991 have been important. As industrial production started improving, the central and state governments realised that the infrastructure was woefully behind the requirements. Many top foreign companies wanting to start industrial units in India got a rude shock when they found that our infrastructure was in a pitiable condition.

Towards the improvement of infrastructure, China and other countries with emerging economies, such as South Korea, Malaysia, Thailand and Singapore, have taken the lead. Roads, water supplies and power availability and quality are fully comparable in these countries to those in the developed world. Take the example of ports. The turnaround time for ships in India was 8.5 days. With modernisation, this has come down to 3.5 days. In Singapore, it is only eight hours. Not only that. It is disgusting to find that even in Delhi, the capital of the nation, there are constant shortages of power and water supply almost 60 years after Independence.

Considering that massive investments are required, it is clear that infrastructure can’t develop speedily unless the private sector is fully involved. Against this background, here are my comments on some important segments of infrastructure:

Water Resources: Most countries are facing great hardships in water supply. As the demand for water increases, the problem becomes increasingly grave. Hence countries are making plans on how to meet the water requirement.

Here, we have a lot to learn from Israel and the UAE. There is no big lake or river in either of the two countries. Rainfall is very meagre. But they have installed huge equipment to desalinise sea water into potable water. It is a costly process. But when there is a problem, one has to face it head on. Today Israel and the UAE have no water shortage.

Tamil Nadu is an Indian state facing acute shortage of drinking water. In the 2004 Budget, the Finance Minister stated that “it was proposed to install the first large desalination plant near Chennai in the state sector and more such plants will be installed along the Coromandel coast”. Issues relating to selecting the appropriate technology, funding, agency to manage the plant, etc. are still under discussion. Progress has been slow. Once these teething problems are sorted out, such plants can be replicated in states along the coastal lines facing a shortage.

It is a matter of serious concern that water availability is dropping very sharply. During Independence, the available water was 5,000 cubic metre (CM) per capita. This has now come down to 2,000 CM. India has 16 per cent of the world’s population, but our water resources amount to only 4 per cent of global fresh water resources. Unless we take drastic steps, water scarcity will become acute by 2020.

The quality of water, too, has considerably deteriorated. The government is taking several steps towards preventing the pollution of rivers, lakes, etc. While industries have now become fully conscious of their responsibilities of keeping water and the air pollution-free, this spirit has yet to reach the general public.

Take the case of keeping the Ganga and Yamuna pollution-free. The government under Rajiv Gandhi took note of the problem and sanctioned a vast sum of money to clean the Ganga. Steps were taken, but there was no visible improvement whatsoever. In some cities the polluted water was treated before it flowed into the Ganga. But crores of people who live in villages along the Ganga were callous about their public responsibilities. Thus, pollution took place all along the river, barring industrial areas.

In respect of the Yamuna, the Supreme Court went to the extent of ordering all the polluting factories to shift outside Delhi. Even then, the situation remains as bad as ever. Only with the cooperation of the general public can the lakes and rivers be made and kept pollution-free.

Agriculture, a means of subsistence for over 70 per cent of our people, is a gift of the monsoons. Unfortunately, we don’t make proper use of the monsoon water. On an average, 4,000 billion cubic metre (BCM) rainfall takes place in India, of which only 17 per cent is utilised. Irrigation projects provide about 200 BCM of water. The total potential is of 384 BCM and needs to be exploited as fast as possible to liberate agriculture from the vagaries of the monsoons.

The demand for water was estimated at 634 BCM in 2000. This will increase to 813 BCM for 2010 and 1,093 BCM in 2025. The total water potential is 1,132 BCM. Hence, efforts have to be made to achieve this target. Side by side, every effort has to be made to discourage wasteful use of water and every Indian should be taught the benefits of water harvesting.

The government should also study the possibility of encouraging recycling of used water, and simultaneously initiate steps for water quality management. The water tables in various parts of the country have fallen alarmingly. This problem again can be handled only with the full co-operation of the people. By harvesting water, the water level increases. By constructing ‘anicuts’ to small dams, water supply improves. In villages, by digging ponds in several areas, the water table improves. What is required is the will to preserve water.

The National Water Policy 2002 encourages private participation, giving top priority to drinking water. However, not much success has been achieved in this direction. Karnataka has taken the initiative to hand over the operation and management of water and waste network in small towns to the private sector. Various schemes have been implemented and various others are under consideration. But these will succeed only when the Centre and the states work in harmony. In all such matters whole-hearted cooperation of the public is essential, for which the public has to be properly educated.

Some time ago, it was suggested that the rivers of the north and the south be joined to provide the country with a huge potential for water resources and to prevent flooding. The government and the Planning Commission should study this innovative scheme from all angles. Foreign consultants, too, should be appointed for the purpose. This revolutionary project will require 20-25 years for completion. But once completed, it will change the face of India. In fact, one might say a new nation will be born.

Power Development: In this sector, development is pathetically behind schedule. Generally, 1 per cent increase in GDP necessitates 1.5 per cent increase in power generation. In the last 15 years, the GDP has increased at the rate of 6.4 per cent per year on an average, while power generation has gone up by only 4.1 per cent a year. Had power development been at least as per the norms, the situation would have been better.

The Ninth Plan had targeted an additional generating capacity of 40,245 MW. Only 19,013 MW (47.21 per cent of the target) was achieved. The task of the Planning Commission is not only to make plans but to goad states to see that they are implemented. To achieve the target, there should be constant dialogues between the Planning Commission, the Centre and the states. This production shortfall has been responsible for the power deficit of 40 billion KWH. There are various reasons for the existing shortfall:

a) Constant delays in the implementation of the projects.
b) Existing capacity of production not being fully utilised, the power factor being less than 70 per cent.
c) The absence of adequate inter-regional transmission lines, leading to a surplus in some areas and a deficit in others.
d) Huge transmission losses due to an inefficient and antiquated transmission and distribution network.
e) Subsidised prices in rural areas. In some states, free supply to farmers has resulted in havoc while the wasteful use of electricity has made the State Electricity Boards bankrupt.

Realising that power development was beyond its capacity, the government allowed the private sector to get involved in this sector. The Tenth Plan envisages the following expansion plans in hydro, thermal and nuclear sectors :

a) Hydro: 14,393 MW
b) Thermal: 25,416 MW
c) Nuclear: 1,300 MW
...Total (approx):41,000 MW
The Plan targets and the achievements of the 10th Plan:
.......... Targets Achievement
[includingnon-Plan Projects]

Centre 22,832 17,097
States/UT 11,157 11,103
Private7,121 3,090
Total 41,110 31,290

The private sector’s performance was very unsatisfactory. Private sector projects were delayed as SEBs were bankrupt. Besides, investments in power generation, transmission and distribution should be made more attractive.

In the coal sector, not much has been achieved qualitatively. Indian coal has a very high ash content. Hence additional investments have to be made to lower the ash content. In view of the rising oil prices, many countries have started looking to other sources of energy. Some options:

Nuclear Power: Development of nuclear power constitutes over 16 per cent of global energy generation. Despite its high capital cost, it has become economical and, if power plants are properly commissioned, is pollution-free. Apart from the capital cost, a nuclear plant involves additional expenditure in respect of waste disposal, commissioning, etc. However, under the Kyoto Protocol, subsidised finance for clean development would be available, reducing nuclear plant costs substantially.

There are certain risks implicit in nuclear generation. Sweden, Germany and Belgium have passed laws to abandon nuclear energy. However, France, which produces 79 per cent of its energy requirements through nuclear power, and other countries like Japan (29 per cent), Britain (20 per cent), the US (19 per cent) have no plans of abandoning it. What is necessary is that, first, high priority be given to ensure that the design and engineering of nuclear power plants are of top quality; second, ample care be taken to make sure that the nuclear plants function smoothly.

Non-Conventional Energy: India is endowed with a large sustainable resource base that can generate considerable amount of non-conventional energy like wind energy, solar energy, both thermal and photovoltaic, bio-mass, etc. So far, development has not been promising and non-conventional energy contributes less than 750 MW to total energy generation.

Progress has been made in Tamil Nadu, which accounts for nearly half of the total installed capacity for wind power. In the ten years, 2002-12, the investment requirement is Rs 1 million crore in power generation, transmission and distribution. The private sector can do wonders provided their genuine problems are attended to.

Power development is capital intensive. The government has laid down two targets for this sector- power availability for all by 2012; and electrification of all villages by 2007. Of the total investment in infrastructure, nearly half will be in the power sector. If conditions are created so that foreign investment is encouraged and their genuine grievances redressed, development in the power sector- perhaps the most abused sector- can take place rapidly.

(To be continued)
The writer is a former Rajya Sabha member

First Published: Aug 08, 2006 04:25 IST