INFRASTRUCTURE MANAGEMENT

A CASE FOR MOULDING HOLISTIC PROFESSIONALS

ROLE OF INFRASTRUCTURE IN ECONOMIC DEVELOPMENT

Infrastructure is the mainstay of any economy, be it advanced, newly developed or
developing. It goes without saying that good infrastructure ensures good economic
progress and contributes positively to the well-being of the people. A World Bank survey in
one of India’s southern states shows that villages connected by roads have an average
income of Rs.29,000 whereas villages not connected have an average income of just
Rs.13,000.1 How the Interstate Highway System initiative, inaugurated in the ‘50s, helped
create the modern American economy is well known. Heralded as the greatest public works
project ever, it led, as promised, to an America that is more mobile, less plagued by
regional differences, and vastly wealthier than before. 2 India too is not without classic
cases. The Grand Trunk Road connects Calcutta with Amritsar, cuts into Punjab and the
Northwest Frontier Province of Pakistan and then through to Kabul in Afghanistan. The
highway was built by the 16th century ruler Sher Shah Suri to promote trade. The GT Road
still acts as the backbone of commerce across India.2a

INFRASTRUCTURE MANAGEMENT: WHAT DOES IT TAKE?

The process of infrastructure management is multi-dimensional and multi-disciplinary and, therefore, quite
complex. A successful infrastructure manager is expected to be a multifaceted professional skilled in a
variety of disciplines. The key roles an infrastructure professional is normally called upon to assume and
some of the essential skills it takes him/her to discharge those responsibilities efficiently, are shown in the
chart below:
Key Role Essential Skills
Mobilizing the project resources as well as Marketing, Business Development and
managing the funds wisely Financial Management skills

Ascertaining the technological soundness of Engineering and technical skills

the project
Evaluating the location-specific socio- Skills of a social scientist, especially skills
economic situations around the project site in Participatory Learning & Action (PLA),
Information, Education & Communication
(IEC), Community Mobilization, etc
Assessing the likely environmental impact Environmental Impact Assessment (EIA)
of the project skills

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Ensuring the sustainability of the project Motivational, organizational & capacity-
building skills

INFRASTRUCTURE MANAGEMENT: WHAT DOES IT INVOLVE?

Infrastructure management essentially involves a three-fold task:
 Developing new infrastructure that conforms to the latest international norms, using
state-of-the-art technologies
 Upgrading existing infrastructure to respond to ever-growing user demands as also to
match with and complement the new infrastructure being developed
 Sustained and proactive maintenance of the entire infrastructure system, an aspect that
has received little or insufficient attention in the past

IMPACT OF ECONOMIC LIBERALIZATION

The advent of economic liberalization, privatization & globalization, has kicked off the
process of drastic sectoral restructuring. Infrastructure management has been going
through ‘a consumer and commercial orientation that expects the sectoral managers to
improve their operational efficiency, introduce tariff reforms, shift from acting as service
providers to acting as facilitators, create autonomous and accountable utilities, and involve
the private sector.’3 It is imperative that every aspiring or practising infrastructure
professional keeps himself/ herself posted with these developments and trends, on a
continuing basis, to excel as a sectoral manager.

INNOVATIONS IN CRITICAL FACETS OF INFRASTRUCTURE

MANAGEMENT
An important spin-off from economic liberalisation is that path-breaking concepts,
frameworks and methodologies are being evolved, especially in the critical facets of
infrastructure management such as financing, contracting and regulation. There has been,
of late, a trend in infrastructure management towards market-based financing systems.
Different infrastructure projects need to be funded differently and the options now
available are several. These include Multilateral Financing, Consortium/ Syndication,
Centre/ State Government Guarantee with Financial Support, Take-out Financing, Long-
Term Borrowing, Securitisation of Receivables, Cash-flow Financing, Subordinate Debt
Financing, Special Purpose Vehicles, Venture Capital Funds, Project Initiation Funds and
so on.4 For project financing, it is absolutely essential to have comprehensive project

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reports (DPRs) with detailed project contents and realistic costing base and workable
implementation plans. Development financing agencies nowadays do offer innovative
Project Initialisation Funds (PIFs) to help project managers create well-structured projects
which are technically feasible, financially viable and bankable and environmentally
sustainable.

Likewise is the arrival of innovative instruments such as Public-Private Partnerships

(PPPs) and Public-Private Finance Initiatives (PFIs). Just a decade ago, it was almost a
tenet of faith that infrastructure services were best provided by the state. However, with
liberalization and technological upgradation, private sector participation in infrastructure
services gained momentum. Today, public private partnership has emerged as a vital tool to
build, manage and operate infrastructure services efficiently. 5 PPPs have brought in their
wake a variety of options in contractual arrangements: Build-Operate-Transfer (BOT),
Build-Operate-Own-Transfer (BOOT), Build-Operate-Lease-Transfer (BOLT),
Rehabiltate-Operate-Transfer (ROT), Design-Build-Finance-Operate-Transfer (DBFOT),
and so on.

Some of the key issues that have been impacting the participation of private capital and
management in infrastructure projects in India, are: (i) pre-determined capital outlay
commitnments imposed on the concessionnaire; (ii) conditions relating to the limits
imposed on the monopolistic character of the facility being managed by the
concessionnaire; (iii) interfacing issues between the concessionnaire and the concessioning
authorities, especially those which also involve direct interaction of the concessionnaire
with the end-user/ customer; (iv) regulatory framework; retention or absorption of existing
employees; and (v) step-in rights – lender’s protection6

These days, novel methods for raising infrastructure project resources are also being
evolved. In the US, ‘Municipal Bonds’ account for nearly 70 per cent of the capital
financing for infrastructure. The Municipal Bond Route is being experimented with in
India too. Some ULBs in cities like Ahmedabad, Hyderabad, Bangalore, Mumbai, etc. do
have some good experience of raising resources through Municipal Bonds. There have
been new developments in the areas of bidding and procurement too. The ‘Swiss Challenge
Approach’, for example, is an innovative tool that ensures transparency in awarding a
project to any promoter or utilities entity, when sufficient competitive bids are not

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received. The Govt of India has thus initiated the ‘City Challenge Fund’ for facilitating the
States and ULBs to implement the reform agenda.

The government’s reform agenda has also brought in sound regulatory authorities for
various sectors (CERC/SERC, IRDA, TRAI, NHAI, etc). These regulatory bodies have
stakeholder participation to regulate prices, promote operating efficiency, specify and
monitor service standards, ensure asset quality, promote efficient use and effective
response to consumer views.

In keeping with the prevailing atmosphere of reformation and restructuring, State

Governments have now started formulating their own infrastructure policies. A case in
point is the ‘New Infrastructure Policy’ unveiled by the Govt of Karnataka in July 2004.
Notably, it has been developed around the following seven ‘touchstone’ principles:

i. Efficient use of existing assets and optimal allocation of additional resources

ii. Payment for services
iii. Equitable contractual structures
iv. Transparent process of procurement
v. Fair regulatory framework
vi. Enabling institutional infrastructure
vii. Sustainable incentives and concessions

SOME RECENT SECTOR-SPECIFIC TRENDS

Roads & Highways
Since the onset of liberalisation in 1991, sweeping changes have taken place in policies,
approach and regulatory regime in the roads and highways sector. The introduction of ‘cess
on fuel’ proved to be a revolutionary initiative that has transformed the scenario and
provided the much-needed impetus to improvement and expansion of the road network.
Further, private sector participation in highways is also growing gradually. With a
conducive policy framework in place and specific measures by the government to augment
finance, the road and higway sector presents the most lucrative business and investment
opportunities in India.

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Ports
The Port sector has been going through a major transformation phase. The private sector
participation is gradually picking up both in major and minor ports, providing much
needed additional resources, increasing competition, bringing about higher productivity
and focussing on quality of services.

Airports
The world over, governments are leasing out airports to private investors who can not only
manage the airports more professionally but are able to raise non-aeronautical revenue
from duty-free shops, entertainment centres, etc. This minimizes the aeronautical charges
to the airlines which in turn could be passed on to the customers thereby leading to an
increase in traffic. Though largely dominated by the public sector and somewhat insulated
from market exigencies, the Indian airport sector too, of late, has been making attempts to
replicate such models.
Housing
The shortage of housing units in India is estimated to be 22.90 million. More than 90% of
this shortage is in low cost housing sector intended for economically weaker sections. The
Govt of India has committed to providing ‘housing for all’. Towards this end, the
Government has pledged to facilitate construction of 20 lakh additional housing units
annually and has started various innovative schemes for poor and economically weaker
sections, both in rural and urban areas.
Urban Development
In recent years, the government has given a thrust towards boosting urban sector
development. The Union Budget 2002-03, recognizing hundreds of cities as “engines of
growth” has proposed to kick start urban sector reforms by establishing three ‘reform-
linked’ incentive funds: Urban Reform Incentive Fund (URIF), City Challenge Fund (CCF)
and Pooled Finance Development Scheme (PFDS). The Funds which are intended to
provide assistance to the states and cities based on their performance in reforming Rent
Control Laws, Repealing Urban Land Ceiling Acts, rationalising Stamp Duties, revising
Municipal Laws as well as providing credit-enhancement to assist local bodies to access
market borrowings on a credit-worthiness basis, are important initiatives in urban
development

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Most of the ULBs in India do not have a management information system at city level. It is
essential for urban local bodies to maintain a good database at ward and zonal levels to aid
decision-making. Recognizing the importance of such a database, the Eleventh Finance
Commission has allocated Rs.29 million for the creation of database for ULBs.
Overcoming informational constraints would also allow benchmarking of service delivery.
Performance measurement is an essential tool for determining the efficiency, efficacy, cost-
effectiveness, and timeliness of services being provided by the municipal body. Municipal
performance measurement also helps in prioritizing the issues and problems faced by the
local bodies before the policy-makers. For the municipal bodies, the aim is clear: to make
them accountable such that the services being provided by them are commercially viable
and self-sustaining.**

Environmental Infrastructure
Environmental infrastructure consists of basic services like water supply, sewerage, and
solid waste management. The current approach for the management of the environment
infrastructure emphasises development of water resources and construction of new
infrastructure under a top-down and supply-oriented approach. Further, inefficiencies in the
institutional structures have also contributed to poor and unreliable services, and user
dissatisfaction. In the recent years, there have been many policy initiatives both at the
Centre and in some States, which emphasised a demand-driven participatory approach. It is
envisaged that a demand-driven approach would allow prioritization of projects to ensure
that investments could be targeted. In addition, a participatory approach would ensure
stakeholders’ ownership of these schemes facilitating an easier transfer to users after
execution of the projects.6a
Rural Development
PURA as Growth Centres7: More than 72 per cent of India’s population lives in rural areas.
Even after 50 years of India’s planning and achievements, large segments of rural India
still suffer from underdevelopment, largely due to scarce employment opportunities,
inadequate infrastructure facilities and poor physical connectivity. As per Census of India
2001 estimates, potable water supply was accessible to only 81 per cent of rural
households. Only 22 per cent had toilet facilities and 56 per cent were left uncovered by
electricity. Roughly 14 per cent of the 6,07,491 villages in the country have no phones.
Inadequate transportation facilities, poor road networks, and lack of storage facilities have
resulted mostly in every sale of farm produce being a distress sale.

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Development, so far, has been biased in favour of urban India. Private investments have
flowed into the urban centres mainly due to large economies of scale and high returns. On
the contrary, developments in rural areas are dependent on meagre government allocation.
Thus, developing innovative strategies to transform rural areas into vibrant and prosperous
growth centres is the need of the hour.

PURA is conceptualised as a modern rural cluster with a

population between 1 to 3 lakh to be created by integrating

villages by a ring road. The PURA cluster will have cost-effective

infrastructure of international standards and non-farm job

opportunities. Thus it will lead to planned urbanisation in a rural

ambience. HUDCO has committed Rs.30-50 crore for PURA.

What PURA offers How PURA minimizes costs

• At least 50 per cent saving in • Reduces infrastructure lengths – Low

infrastructure costs capital costs
• Market large enough to support quality • Rural location – Low real estate costs
urban services • Distributed business district – Low
• Commercial transformation of rural areas congestion costs
• Creating new jobs • Minimal daily commuting – Low
• Empowering rural areas to compete with transport costs
cities • Good environment – Low pollution costs
• Reversing rural urban migration • Choice in ring alignment – Low
• Developing modern habitats with rural monopoly costs
ambience
• Eliminating congestion
• Distributes business all round the ring
road

PURA in ‘Mission Mode’: The President, Dr. A. P. J. Abdul Kalam, an acknowledged

PURA evangelist, has stressed the need to implement PURA in ‘mission mode’ to drive

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growth in far-flung areas and said at least 100 PURA complexes need to be launched by
the end of 2006. Dr. Kalam made this appeal while inaugurating a two-day national
workshop, ‘Vision 2020 for a Developed India: PURA as Growth Centres’, organized at
IIT, New Delhi. The President observed that now was the time to work out and embark on
the development of specific PURAs in every state. He noted that certain states like
Chattisgarh had taken the lead and created viable PURA models. There was a need to
consolidate all these experiences and launch at least 100 PURAs before the end of 2006 by
the collaborative effort of societal organisations, educational institutions, bankers,
industrialists, entrepreneurs, and the Government. Dr. Kalam suggested that the
participants of the workshop formulate a plan of action for preparing detailed project
reports of the hundred PURAs within the next six months and launch the PURA complexes
in phases during the second half of 2006.

MAJOR INITIATIVES IN INFRASTRUCTURE-CENTRIC GOVERNANCE

For most developing countries, this is likely to be the infrastructure investment and
augmentation decade. India alone is expected to invest Rs. 9 lakh crore (US$200 billion)
on infrastructure over the next decade. The country is believed to have the capability to
attract US$150 billion of foreign investment in infrastructure over the period. The
government is also working towards the creation of a transparent and independent
regulatory framework for the infrastructure sector, based on international best practices.
The ambitious economic growth rate of 8 per cent, which India’s Tenth Plan seeks to
achieve, is mainly linked to conspicuous improvements being planned for and
implemented in the infrastructure sector, including the creation of a climate conducive to
investors. In keeping with the top-most priority being given to the infrastructure sector, the
government has constituted a committee, under the chairmanship of the Prime Minister, to
closely monitor the progress in all key infrastructure projects, on a quarterly basis.

In November last year, the Centre also approved the setting up of a Special Purpose
Vehicle (SPV) for financing viable infrastructure projects to fund road, port, airport and
power projects to improve the country’s infrastructure. The fund will have a corpus of
Rs.10,000 crore in this fiscal year ending March 2006 and the Centre will give a guarantee
for borrowing by the new firm. The new firm, India Infrastructure Finance Company Ltd.

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(IIFCL), will raise resources from the domestic market as well as through external
commercial borrowings. The IIFCL will be incorporated as a company under the Company
Act, 1956.9

NEED FOR TRAINED INFRASTRUCTURE MANAGERS

While no one can deny the emphasis that the government has been laying on infrastructure
requirements, there is a serious apprehension about the implementation of the proposed
mega projects. Recent press reports indicate that there were as many as 605 such projects
under implementation in different infrastructure segments as of end-June 2004. The
anticipated cost of the 605 projects was Rs. 2,67,815 crore, while the aggregate expendi-
ture incurred up to that period was Rs. 1,05,146 crore. It is interesting to note that the
original cost of these 605 projects was Rs. 2,20,362 crore with the overall cost overrun to
original cost being 21.5 per cent. The range of delays was from one month to 156 months
with reference to the latest approval/schedule. Analysis of causes for cost escalation
revealed a medley of factors ranging from underestimation of original cost, escalating cost
of environmental safeguards and rehabilitation measures, spiralling land acquisition costs,
changes in project scope to monopolistic pricing by vendors of equipment and services.
Most of these factors also held good for time overrun of the projects. There were other
factors too, like delays in finalisation of detailed engineering, geological surprises and
teething troubles in pre-commissioning.

With its focus firmly on infrastructure development, it is imperative that the Government
addresses the cost and time overruns, in order to see the projects launched without further
loss of time and money. This is where the need for taking a fresh look at Infrastructure
Management arises. It is not difficult to discern that the immediate requirement of the
Indian economy is a pool of trained quality infrastructure personnel, who have the ability
and grit to
 convert the huge investment promises on paper into quality infrastructure facilities;
 manage and sustain high infrastructure service levels; and
 upgrade the existing infrastructure facilities and improve the service levels by adopting
better management practices.

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PROMISING EMPLOYMENT AVENUES
Obviously, with the country’s infrastructure sector set to grow exponentially, there are a
large number of promising career opportunities awaiting such trained techno-managerial
hands with a passion for infrastructure. Going by media reports, L & T, a frontline
infrastructure provider, alone, for instance, plans to recruit as many as 500 professionals
this year. The company faces an attrition rate of 250 engineers each year. Further, it has
been identified that there are as many as 350-400 such organizations in the country today.
The cumulative executive-level opportunities they are likely to create would, thus, be quite
sizeable.

With infrastructure development getting a renewed focus, the demand for professional
certified in project management in India is expected to shoot up over 1,00,000 in the next
five years, from the existing 8,500 professionals. According to Mr. Gregory Balestrero,
CEO of the US-based Project Management Institute, most of the 8,500 certified
professionals in the country today are in the IT sector. In the last one year, he said, the
number of certified project managers doubled in the country. Even by conservative
estimates, there was a potential of 1,00,000 such professionals by the next five years. This
would be driven by ongoing projects in infrastructure, highways and power among others –
where there would be a demand for professionals who could improve the project
performance on parameters, such as managing costs and deadlines, achieving the value
deliverables and mitigating risks. The Government’s National e-Governance Plan has about
25 programmes proposed under it that were meant to deliver various applications and
services at both Central and State levels, Mr. Balestrero observed. Someone had to oversee
the management of these projects to ensure that they did not compete against each other for
resources.8

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VTU-STEM MOU FOR PGDIM PROGRAMME
It was against the above setting that Karnataka’s prestigious Visvesvaraya Technological
University (VTU) and the Centre for Symbiosis of Technology, Environment &
Management (STEM), Bangalore, concluded a Memorandum of Understanding (MOU), on
June 1, 2005, for the institution of a unique first-of-its-kind Post-Graduate Diploma in
Infrastructure Management (PGDIM) Programme. STEM is a not-for-profit multi-
disciplinary professional Society with nearly two decades’ standing in Development
Research, Consultancy & Training. As per the MOU, the programme is being delivered by
the VTU through the School of Management for Infrastructure and Development Strategies
– India (MINDS), a Division of STEM.

PGDIM - FIRST PROGRAMME OF ITS KIND

The first of its kind, the PGDIM Programme offers a unique scientifically structured
curriculum tailored to meet the demands of the infrastructure sector, as outlined in the
preceding paragraphs, as also to suit the aspirations of young professionals, without
replicating the efforts of existing schools of business management. The Programme is of
one year’s (three trimesters’) duration. It is designed to provide good training in the area of
‘Infrastructure Management’ to the selected candidates so that they gain the required
competence to be employed in prestigious infrastructure projects. The curriculum is well-
planned, involves intensive practical training, and is designed to mould holistic
infrastructure managers, ready to take up challenging managerial responsibilities in the
sector. The emphasis of the programme is on

 Planning Tools;
 Project Management;
 Contract Management;
 Infrastructure Finance;
 Information & Communication Technology (ICT) Applications;
 Geographical Information Systems (GIS);
 Strategic Environmental Impact Assessment (SEA); and
 Interactive sessions with corporate leaders from the infrastructure sector.

I am happy to inform the august assembly that the first Batch of PGDIM is already in full
swing at MINDS and is going through the Second Trimester.

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References:
1
CII Handout on ‘Suminfra 2003’
2
Justin Fox: “The Great Paving”, SPAN, May-June 2005
2a
Sudipt Arora: “Indian Highways: Planning for Prosperity”, SPAN, May-June 2005
3
Indo-USAID Financial Institutions Reform and Expansion (FIRE-D) Project handout
4
V. Suresh: “Financing Urban Infrastructure”, Good Governance India, Nov-Dec 2004
5
CII website
6
CII: Discussion Paper on Sustainable PPPs in Infrastructure Development released on
the occasion of SUMINFRA 2004
6a
Kaushik Deb & Yamin Qaisar Durrani, Environmental Infrastructure in India: Status and
Issues, TERI
7
Brochure on 'National Workshop on Vision 2020 for a Developed India: PURA as Growth
Centres'
8
The Hindu Business Line
9
Deccan Herald, Nov 4, 2005
**Kaushik Deb & Yamin Qaisar Durrani, Environmental Infrastructure in India: Status
and Issues, TERI

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