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Infrastructure
W
ith the rapid growth of the economy inrecent years the importance and theurgency of removing infrastructure constraints haveincreased. Traditionally, power, railways, roads,ports, airports and telecommunications were theexclusive domain of the government. Policy haschanged gradually over the past two decades underthe pressure of rising gaps between demand andsupply of infrastructure and deteriorating quality ofassets. Government has made an effort to facilitatethe entry of private enterprise into this sector throughchanges in the legal framework. A role for privatesector participation has also been facilitated bytechnological change that allow unbundling ofinfrastructure, so that the public and the privatesectors can take up the components most suitedto their capacities. Government continues to investsignificant sums in areas where private participationis minimal or not forthcoming. It will continue toplay a lead role in infrastructure development duringthe Eleventh Plan.9.2.The public good character of parts of theinfrastructure makes it necessary to adopt aneclectic approach to the participation of the publicand private sectors. Roads are the classic ‘publicgood’ on account of non-rivalness and non-excludability in use. However, as demand expands,and an inter city road becomes a high densityhighway, pricing and exclusion can becomeeconomically feasible thus changing the characterof the service from ‘public good’ to ‘private good’.Many types of infrastructure therefore have a mixof public good and private good character, with themix generally weighted towards the former in ruraland remote areas and towards the latter in the largetowns and metro areas.9.3There is also a need to distinguish betweenphysical infrastructure and infrastructure services.
CHAPTER9
Most infrastructure services are non-tradable innature. For these reasons, the stock ofinfrastructure services may not be readilyaugmented through imports as in the case of othergoods and services. Many infrastructure facilitieshave a significant component characterized bydeclining costs, leading to a “natural monopoly”situation. Though the extent of such monopolymay vary, such situations usually warrant theregulation of the pricing of such services. Inessence, therefore, the public and private goodcharacteristics of infrastructure may varydepending on various factors that include the sizeof investment, geographical location, demand andsupply conditions, the stage of development andtechnological factors. There is a consensus thatwell designed infrastructure projects with goodimplementation can yield positive externalities andspin-offs for other sectors. Infrastructure also hasbackward and forward linkages with the rest ofthe economy.9.4This chapter examines the progress madein the growth of power, transport, communicationand urban infrastructure in India during 2007-08with a focus on the policy initiatives taken towardscapacity augmentation through public and privateinvestment and through public-private partnershipsand on the challenges that lie ahead in developingphysical infrastructure.
Review of 2007-08
9.5The overall performance of theinfrastructure during April-December 2007-08presents a somewhat subdued picture comparedto the corresponding period of last year. Growthin electricity generation has decelerated to 6.6per cent from 7.5 per cent in the correspondingperiod in 2006-07. The transport sector presents
 
207
INFRASTRUCTURE
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April-December 2007-08 as compared to thecorresponding period of the previous year whilethe performance of coal shows a marginalimprovement (Table 9.1).
POWER
Overall Performance during 2007-08
9.6Electricity generation by power utilitiesduring 2007-08 was targeted to go up by 7.2 percent to 710 billion KWh. The growth of powergeneration in April-December 2007 was lower thanthe targeted growth rate. While growth in all threesegments, that is, thermal, hydro and nucleargeneration, slowed down, nuclear power generation,in particular, showed the sharpest decline duringthe current year in comparison to the correspondingperiod last year (Table 9.2).
Power deficit
9.7The deficit in power supply in terms ofpeak availability and of total energy availabilityduring the current year was 14.8 per cent and 8.4per cent, respectively. While shortages are beingexperienced by each region, they are more acutein the North-Eastern and the Western Region.(Table9.3)9.8In the case of the thermal power sector,the State, Central and private sector plants reporteda plant load factor (PLF), a measure of efficiency,of 70.2, 85.4 and 92.5 per cent, respectively, duringApril-December 2007-08. The PLF in each of thesesectors as well as in every region has improvedover time. However, there is a marked variationacross the regions (Table 9.4).
Table 9.2Power Generation by Utilities (Billion kWh)
Category2005-062006-07April-DecemberGrowth
a
(%)2006200720062007
1. Power Generation
b
617.5662.5493.3525.97.56.6i)Hydro-electric101.3113.491.8100.713.89.8ii)Thermal497.2527.6385.6407.46.15.7iii)Nuclear17.218.613.612.83.0(-) 5.7Memorandum ItemPLF in %73.676.875.377.2
a
April-December;
b
Excludes generation from captive and non-conventional power plants and thermal power plants below20 MW units and Hydro power plants below 2 MW but includes import of power from Bhutan.
a mixed picture, with a deceleration in the growthof railway traffic and an acceleration in the growthof traffic through ports and in air cargo. The highlycompetitive telecom sector has maintained itsphenomenal growth rates for addition of newconnections. The production of universalintermediates like steel, cement and petroleumshowed a distinctly weaker performance during
Table 9.1Infrastructure & Universal Intermediates —Output Growth (%)
(April-December)2006-072007-08
a
1
Power
Electricity generated7.56.62
Transport
Railway (freight)9.78.2Ports (cargo)8.312.5Air - Export cargo-1.36.7Air- Import cargo19.621.5Air - Passenger traffic (Inter.)11.812.7Air- Passenger traffic (Dom.)37.024.13
Telecom
Wireless connections46.944.5Total telephones33.732.6(including Fixed)4
Universal intermediates
Coal4.54.9Steel11.16.4Cement10.57.0Petroleum - Crude6.10.3Petroleum – Refinery13.27.5Natural Gas-1.72.2
a
ProvisionalSource:Items - 1, 2, 4: Capsule report onInfrastructure performance: Ministry ofStatistics and Programme Implementation,3 - Department of Telecommunications.
 
208
ECONOMIC SURVEY 2007-2008
website:http://indiabudget.nic.in
Coal and gas input for the power sector 
9.9The power sector is a major consumerof coal using about 78 per cent of the country’scoal production. Coal-fired thermal units accountfor around 62.2 per cent of total power generationin the country. Thus, coal continues to be themainstay for the power sector.
Table 9.3 Power supply position – all-India
PeriodPeakPeakPeakPeakEnergyEnergyEnergyEnergyDemandmetDeficit/DeficitRequirementavailabilityDeficit/DeficitSurplusSurplusSurplusSurplus(MW)(MW)(MW)( % )(MU)(MU)(MU)( % )
9th Plan end81,55571,262-10,293-12.65,22,5374,83,350-39,187-7.52002-0381,49271,547 -9,945-12.25,45,9834,97,890-48,093-8.82003-0484,57475,066-9,508-11.25,59,264 5,19,398-39,866-7.12004-0587,90677,652-10,254-11.75,91,3735,48,115-43,258-7.32005-0693,25581,792-11,463-12.36,31,7575,78,819-52,938-8.42006-071,00,71586,818-13,897-13.86,90,5876,24,495-66,092-9.6Apr-Dec 20071,06,62490,793-15,831- 14.85,43,3944,97,793 -45,601-8.4
Source: Central Electricity Authority’s (CEA) Power Scenario at a Glance (January 2008)
Table 9.4Thermal plants load factor
(figures in per cent)Category2002-032003-042004-052005-06April-December200520062007
i)State Electricity Boards (SEB)68.768.469.667.164.969.570.2ii)Central Sector77.178.781.782.180.382.285.4iii)Private Sector76.980.585.185.486.788.292.5
REGIONS
Northern75.476.377.176.875.079.180.2Western75.875.178.676.274.575.879.5Southern86.483.484.178.275.380.881.8Eastern52.156.960.464.663.267.768.6North-Eastern14.814.015.016.116.216.118.6
All-India72.272.774.873.671.575.377.2
Source : Ministry of Power
9.10The total consumption of coal by the powersector in 2006-07 was 302.5 million tonne (MT).Of this, about 9.7 MT was imported in 2006-07.About 7.3 MT of coal has been imported in 2007-08 (up to December 31, 2007). Apart from bridgingthe demand - supply gap, blending of importedhigh quality coal with high ash domestic coal helpsthermal power stations to adhere to theenvironmental stipulations of using coal with lessthan 34 per cent ash content (Table 9.5).
2
   P   e   r   c   e   n   t
Years
GDPGrowth
Growth in GDP and power generation
46810
Figure 9.1
PowerGeneration
2    0    0    0   - 0   1   2    0    0   1   - 0   2   2    0    0   2   - 0    3   2    0    0    3   - 0   4   2    0    0   4   - 0    5   2    0    0    5   - 0    6   2    0    0    6   - 0   7   
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