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ESSENTIALS OF BUSINESS ENVIRONMENT

Chapter 23
INFRASTRUCTURE

Chapter 23 Infrastructure Learning Objectives  Understand the role of infrastructure in the development of our economy  Trace the growth of energy with its various components  Make a SWOT analysis of electricity  Trace the growth of transport agents and make SWOT analysis of railways. Aswathappa . road and shipping  Trace the growth of communication facilities and make a SWOT analysis of this vital sector  Rank India among other countries in respect of infrastructural facilities Himalaya Publishing House Essentials of Business Environment K.

Chapter 23 Infrastructure  Social overheads (another expression for infrastructure) possess four features:    Public goods-available to everybody Externalities-services or benefits far exceed the cost-pricing is a problem Monopolies-these are utilities which tend to be single owned Public sector-owned and operated by government Himalaya Publishing House Essentials of Business Environment K. Aswathappa .

6. * Power and responsibilities neatly divided between centre and states. Essentials of Business Environment Himalaya Publishing House K.Nov. Electricity Act. with separate generation. * Declining share of hydro-power. Oct. Strengths * Elaborate organisational framework for the growth of electricity has been provided by the Electricity (Supply) Act. Latter looks after generation and distribution. Weaknesses * Very low plant load factors. 2003. * Vast network of generation. 22. * Too much subsidy burden on state electricity boards. * Numerous amendments to permit private participation in power generation.SWOT of Electricity A. co-ordination and regulation. Remedies * Formulate unambiguous guidelines for private sector investment and ensure speedy clearance * Expedite formulation of guidelines for private participation in transmission and distribution * Create autonomous regulatary authorities at the central and state levels * Corporatise SEBs. 1948. building in pre-determined tariff increases. transmission and distribution facilities spanning the length and breadth of the country * Joint ventures among states in power generation. Former confines itself to planning. 1996) . B. Now. transmission. Chapter 23 Infrastructure strengths. Aswathappa (Source : Remedies from Business Today. and distribution segments * Set cost-based pricing for each consumer group. weaknesses and remedies (electricity) * * * * Incompetent and corrupt electricity boards Frequent and heavy load-shedding Capital intensive but starved of funds Heavy losses during transmission and distribution C.

**Ministry of Railways.596 63.Chapter 23 Infrastructure Indian Railways Compared with Chinese The Long and Short of it China Indian Railways* Railways** 1950 2003 1950-51 2002-03 Route km 22.212 93 543 Freight tonne km (billion) 39 1.of passengers (million) 157 973 973 4.724 44 356 Average lead (km) 395 780 470 656 (Source: *Tiedao Zhishi. Aswathappa . India) Himalaya Publishing House Essentials of Business Environment K.161 73.971 Total passengers km (billion) 21 479 63 515 Average journey length (km) 135 492 52 104 Freight carried (million tonnes) 100 2.122 No.002 53.

October-November.Chapter 23 Infrastructure SWOT of Railways Strengths. so as to reflect real costs * Make commercial use of railway property by selling or leasing it. Strengths * Historical advantage. through freight charges. Aswathappa .85 percent of track being inherited from the British * Largest in Asia and the third largest in the world * Substantial electrified tracks * Competitive advantage in project consultancy and construction * Agenda for national integration B. Weaknesses * Ever increasing traffic load * Inadequate finance * Low productivity * Low speed of goods as well as passenger trains * Poor service to the passengers * Absence of suitable transportation policy * Too many social objectives * Unslite Travel C. Remedies * Corporatise with detailed terms of reference approved by the Parliament * Unbundle disparate operations like transportation of freight and passengers and equipment-manufacture * Corporatise all manufacturing units and privatise them gradually * Commercialise passenger services by abolishing all free travel.Essentials 1996) of Business Environment Himalaya Publishing K. and privatise ticket-checking * Phase out cross-subsidisation of passenger fares. to the private sector (Source:House Remedies from Business Today. Weaknesses and Remedies (railways) A.

* Several missing links.3 million across the country. * Relatively low vehicle density per km.Road Transport-SWOT Strengths. * Earmark a proportion of the state’s levies on vehicles and fuels for road maintenance. Problems * Only 1.86 percent by state highways and 92. * Veritable death traps. weak culverts and inadequate road pavement enroute. stretching for almost 3. * Ease the burden on railways. 1996) Essentials of Business Environment Himalaya Publishing House K. Except the national highways. (Source: Remedies from Business Today. Weaknesses and Remedies (Road transport) A. * Encourage private sector participation in highways by institutionalising buildoperate-transfer schemes. Strengths * One of the world’s largest. using the toll system for cost recovery. 5. * Increasing pollution. unbridged river crossings. * Set up a financing mechanism for funding road construction. the condition of other roads is pathetic. * Create a highway development fund as an extra-budgetary development fund for funding highways. Aswathappa . Chapter 23 Infrastructure * Lack of adequate finance.54 percent by district and village roads.6 percent of road strength is occupied by national highways. C. B. * Remote parts of the country are still not connected. Oct-Nov. Remedies * Allocate additional resources for upgrading and widening existing national and state highways. * Amend the loans to allow for Right of Way in land acquisition for laying roads.

1996) Essentials of Business Environment Himalaya Publishing House K. ship board personnel. * Unbundle activities like cargo B. Remedies * Long coastline of over 5700 kms and almost the whole of foreign trade * Amend the Major Port Trust Act. has been introduced because of decanalisation. Strengths C. * Initiate restraining programmes to * Undue hardships to ship owners due to reduce labour resistance to private conversion of FOB items into CIF which sector participation. passing across the seas. Weaknesses handling and warehousing into profit * Limited cargo handling capacities of centres. (Source: Remedies from Business Today. of the port trust boards from Rs. increase in sea-borne trade.Shipping-SWOT Chapter 23 Infrastructure Strengths. the developing countries and 14th in * Raise the capital expenditure ceiling the world in shipping tonnage. 1963. Aswathappa . * Fund starving. Weaknesses and Remedies (Shipping) A. * Abolish the need for PIB approvals * Huge potential in the wake of India becoming one of the signatories of the for private projects that do not need WTO.200 crore. Oct 22-Nov 6. to allow private sector BOT * Largest merchant shipping fleet among projects at the 11 major ports.5 * Skilled and competent managerial and crore to Rs. There will be considerable port trust investment. themselves under the BOT system. ports * Allow port-based businesses to * Challenge from containerisation which create captive facilities for is highly prevalent in advanced countries.

B. Strengths * Huge potential for expansion. Weaknesses * Waiting period of nearly two years to get new connections * Poor maintenance. Weaknesses and Remedies (telecommunications) C. (Source: Remedies from Business Today. Oct 22-Nov 6. * Convert the DoT into a holding corporation. * High technology. * Rapid growth in the last couple of years with annual growth of 13 percent between 1984 and 1994 and 20 percent thereafter.Telecommunication A.97 phones per 100 towns people ahead of China and Indonesia. * Privatisation efforts not successful. * Replace the Indian Telegraph Act. Remedies * Accelerate the clearance process for private sector entry into basic telecom services. Chapter 23 Infrastructure Strengths.66 percent of exchanges are digital. 1996) Essentials of Business Environment K.218 faults for 100 lines every year. Aswathappa Himalaya Publishing House . * Offer incentives to private telecom companies for meeting connection and low-fault targets. * Relatively high density with 7. with its subsidiaries operating services in different circles. * Resolve disputes between private operators and the DoT over longdistance connections immediately. 1885 with a new Act incorporating the impact of technology changes.

1994) Himalaya Publishing House Essentials of Business Environment K.a.Chapter 23 Infrastructure Comparisons Critical Comparisons Per capita energy used* Telephone lines % of paved roads per 1. Aswathappa .Korea 2569 Indonesia 303 Thailand 614 USA 7662 *Equivalent to kg oil (Source : World Development Report.000 persons in good condition 6 20 8 18 63 30 89 n. 66 85 310 70 6 30 24 50 545 85+ India 235 Pakistan 223 Brazil 681 Malaysia 1445 Mexico 1525 S.