yojana eng july 2009 om

YOJANA July 2009 1

C O N T E N T S

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July 2009 Vol 53

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Let noble thoughts come to us from every sideRig Veda

(Circulation) : pdjucir_ [email protected]

AGENDA FOR INCLUSIVE GROWTH .................................. 5

PRIVATE PARTICIPATION IN INFRASTRUCTURE SECTOR IN INDIA ................................ 7 Ravi Mital

J&K WINDOW .................................................................... 12

SEA PORTS : HARBOURING GROWTH .............................. 13 A P V N Sarma

NORTH EAST DIARY ........................................................ 16

NATIONAL HIGHWAYS : THE PATH AHEAD .................... 17 V K Sharma

MARKET-BASED FINANCING OF URBAN INFRASTRUCTURE ............................................................... 21 Chetan Vaidya

SUSTAINING URBAN INFRASTRUCTURE........................ 28 Usha P Raghupathi

SHODH YATRA A 'DROPOUT’ INNOVATOR ................... 31

IRRIGATION IN INDIA .......................................................... 34 Surinder Sud

DO YOu KNOW? ................................................................. 37

ULTRA MEGA POWER PROJECTS ..................................... 38 Umesh Kumar Shukla

BEST PRACTICES WATERSHED FOR INTEGRATED RURAL DEVELOPMENT .............................42

AIRPORTS SECTOR TAKING OFF ....................................... 45 D C Mehta

HEALTH INFRASTRUCTURE IN RURAL INDIA .............. 48 Urmilesh Singh

BOOK REVIEW URBANIzATION AND SOCIAL TRANSFORMATION ............................................... 51

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YOJANA July 2009 3

About the Issue

Few subjects in the policy debate have created as much convergence of interests as the topic of infrastructure development. Anybody who takes more than just a passing interest in the state of affairs of the economy will be convinced that

infrastructure development is vitally necessary.

Having said that, it equally true there are fewer areas where the plans have proved so difficult to execute. It is not a simple case of weakness in the rate of execution of government plans, whether at the state or at the centre. The challenges for developing infrastructure have stymied even the best intentions of the private sector too. The challenges are on all fronts. The key challenge is of course is generating resources to finance the projects, as infrastructure plans invariably demand huge expenditure. The Prime Minister led committee on infrastructure has estimated that it would take an investment of about Rs 25,00,000 crore ($500 billion) in the next five years. To put that number in perspective, it is three fourth the size of our annual GDP. But as of now we are able to spend not more than 3 to 4 % of our GDP for investment in infrastructure. This means we have to mobilise a huge amount of resources from the financial sector.

The other issue is the subject of returns from such investment. The public would be hard pressed to pay for all the bridges, water pipelines, roads and the true cost of electricity that developers would expect them to pay. But without such an assurance it becomes difficult for even government departments to raise such investments. In this context, the government and other agencies have to demonstrate to the public the necessity of such payments and yet be ready to partially pay for some of the costs from the exchequer.

We have already seen the benefits of good infrastructure. It is impossible to imagine the traffic chaos that would have resulted if the metro had not become operational in Kolkata and now in Delhi. Mumbai is racing against time to develop one such system and other cities are following suit. The development of the telecom sector has become so widespread that we may not realise that the success of the IT industry in India was made possible by it. But on the darker side, several key investments that can create employment and income across the country are not happening because of the lack of reliable power supply and of decent roads that can carry the produce of the farms and the industry from the producers to the markets in other states.

So we need to find the answers to these questions fast and in good time. The ensuing budget will be expected to answer many of these questions for the economy; answers that will also tell us how fast the economy develops on the growth path. In this issue therefore we take a detailed look at several of these topics and try to find answers to them. q




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YOJANA July 2009 5

PrESidENT SPEakS

In 2004 my Government had set before the country a vision of an inclusive society and

an inclusive economy. It worked diligently towards translating this vision into policies and programmes. My Government sees the overwhelming mandate it has received as a vindication of the policy architecture of inclusion that it put in place. It is a mandate for inclusive growth, equitable development and a secular and plural India. My Government is determined to work harder and better to realize these goals.

My government i s acu te ly conscious of the challenge of rising expectations. There would be ten broad areas of priority for my Government for the next five years.

l Internal security and preservation of communal harmony :

l Stepping up of economic growth in agriculture, manufacturing and services;

l Consolidation of the existing f lagship programmes for employment, education, health, rural infrastructure, urban renewal and introduction of new flagship programmes for food security and skill development;

l Concerted action for the welfare of women, youth, children, other backward classes, scheduled cas tes , scheduled t r ibes , minorities, the differently-

Agenda for Inclusive Growth

abled and the elderly along with strengthened social protection;

l Governance reform;

l Creation and modernization of infrastructure and capacity addition in key sectors;

l Prudent fiscal management;l Energy security and environment

protection;l Constructive and creative

engagement with the world and

l Promotion of a culture of enterprise and innovation.

My Government will intiate steps within the next hundred days on the following measures:l Early passage of the Women's

Reservation Bill in Parliament p r o v i d i n g f o r o n e - t h i r d reservation to women in State legislatures and in Parliament;

l Constitutional amendment to provide 50 percent reservation for women in panchayats and urban local bodies. Women suffer multiple deprivations of class, caste and gender and enhancing reservation in panchayats and urban local bodies will lead to more women entering the public sphere;

l Concerted effort to increase representation of women in central government jobs;

l A N a t i o n a l M i s s i o n o n Empowerment of Women for

implementation of women-centr ic programmes in a mission mode to achieve better coordination;

l A voluntary national youth corps which could take up creative social action around the river cleaning and beautification programme beginning with the river Ganga;

l Restructuring the Backward R e g i o n s G r a n t F u n d , which overlaps with other development investment , to focus on decentralized p l a n n i n g a n d c a p a c i t y building of elected panchayat representatives. The next three years would be devoted to t raining panchayat raj functionaries in administering flagship programmes;

l A public data policy to place all information covering non-strategic areas in the public domain. It would help citizens to challenge the data and engage directly in governance reform;

l Increasing transparency and public accountability of NREGA by enforcing social audit and ensuring grievance redressal by setting up district level ombudsman;

l S t r e n g t h e n i n g R i g h t t o in fo rma t ion by su i t ab ly amending the law to provide for disclosure by government in all non-strategic areas;

(This is an extract from the address of President of India Smt. Pratibha Devisingh Patil to the Parliament. We bring extracts relating to priority areas, agenda for 100 days and plans for infrastructure as outlined in the address.)




6 YOJANA July 2009

l S t r e n g t h e n i n g p u b l i c accountability of flagship programmes by the creation of an Independent Evaluation Office at an arm's distance from the government catalysed by the Planning Commission. It would work on a network model by collaborating with leading social science research organizations and concurrently evaluate the impact of flagship programmes and place it in the public domain;

l Establishing mechanisms for performance monitoring and performance evaluation in government on a regular basis;

l Five Annual Reports to be presented by government as Reports to the People on Education, Health, Employment, Environment and Infrastructure to generate a national debate;

l Facilitating a Voluntary Technical Corps of professionals in all urban areas through JNNURM to support city development activities;

l Enabling non government organisations in the area of development action seeking government support through a web-based transaction on a government portal in which the status of the application will be transparently monitorable;

l Provision of scholarships and social security schemes through accounts in post offices and banks and phased transition to smart cards;

l Revamping of banks and post offices to become outreach units for financial inclusion complemented by business correspondents a ided by technology;

l Electronic governance through Bharat Nirman common service

centres in all panchayats in the next three years;

Infrastructure is a fundamental enabler for a modern economy and infrastructure development will be a key focus area for the net five years.

P u b l i c i n v e s t m e n t i n infrastructure is of paramount importance. Bottlenecks and delays in implementation of infrastructure projects because of policies and procedures, especially in railways, power, highways, ports, airports and rural telecom will be systematically removed. Public-private partnership (PPP) projects are a key element of the strategy. A large number of PPP projects in different areas currently awaiting government approval would be c leared expeditiously. The regulatory and legal framework for PPS would be made more investment friendly. My Government will continue its special emphasis on infrastructure development in the North-East and Jammu and Kashmir and enhance connectivity to these regions.

Our fellow citizens have every right to own part of the shares of public sector companies while the government retains majority share-holding and control. My Government will develop a road-map for listing and people-ownership of public sector undertaking while ensuring that government equity does not fall below 51%.

My Government is firmly committed to maintaining high growth wi th low inf la t ion , particularly in relation to prices of essential agricultural and industrial commodities. It will steadfastly observe fiscal responsibility so that the ability of the Centre to invest in essential social and economic infrastructure is continuously enhanced.

Coordinated action for energy would be guided by the integrated energy policy. The effort would be to see that at least 13,000 MW of generating capacity is added each year through a mix of sources coal, hydel, nuclear and renewables. Village and rural household electrification and reduction in aggregate technical and commercial losses wil l continue to be given the highest priority. Competitiveness and efficiency in the power sector will be enhanced through time-bound measures , inc lud ing operationalising the provision of open access.

The pace of oi l and gas exploration will be intensified and India's oil diplomacy aggressively pursued. Reforms in the coal sector, for which a detailed blueprint has been prepared, will be pursued with urgency. The international civil nuclear agreements will be operationalised with various countries even as domestic sources of uranium are exploited and work continues on the indigenously designed fast breeder and thorium reactors.

My Government will ensure that our space programme which has achieved wide recognition continues to bring rich dividends to society in agriculture, tele-medicine, tele-education and by providing information to rural knowledge centres, besides contributing to telecommunication, television broadcast ing and weather forecasting. Several innovative initiatives commenced by government in the science and technology sector in the last five years and now under implementation will be further strengthened. q




YOJANA July 2009 7

Private Participation in Infrastructure Sector in India

iNfraSTruCTurE

H E N A T I O N A L Development Council (NDC) in its meeting held on May 20, 2006 passed the following resolution:

“Recognising that improvement in physical infrastructure has emerged as a common priority and increased private participation has now become a necessity to mobilize the resources needed to achieve its expansion and upgradation, the NDC observed that successful promotion of private participation in infrastructure requires a well-designed framework of policies in which investors have the assurance that standards of services will be maintained and concession will be transparently awarded and directed the Central Government to work towards evolving such a framework, which could be adopted by the States.”

The Eleventh Five Year Plan recognizes that adequate, cost-effective and quality infrastructure

T

The author is Adviser (Infrastructure), Planning Commission, New Delhi.

The Eleventh Five Year Plan recognizes that

adequate, cost-effective and quality

infrastructure is a pre-requisite

for sustaining the growth momentum

Ravi Mital

is a pre-requisite for sustaining the growth momentum and that investment in physical infrastructure would have to be increased from about 5 per cent of GDP during the Tenth Plan (2002-07) to 9 per cent of GDP by the terminal year of the Eleventh Plan period (2007-12).

The investment in infrastructure during the Tenth Plan was Rs. 887,842 crore which constituted 5.07 per cent of GDP. This included Rs 1,75,203 crore (2006-07 prices) of investment by the private sector. To overcome the infrastructure deficit, the Government has planned for an investment in infrastructure of Rs.20,56,150 crore during the Eleventh Plan period which would imply an investment of 9 per cent of GDP in the terminal year of the Plan (2011-12). This includes public sector investment of Rs. 7,65,622 crore in the Central sector and Rs. 6,70,937 crore by the States. It is envisaged that the private sector would invest Rs. 6,19,591 crore, including through

OVErViEw




8 YOJANA July 2009

attractive to investors and also seen to be fair to consumers, especially since many infrastructure projects have an element of monopoly. This calls for an environment in which either the market itself is competitive, giving consumers a choice among different suppliers, as in the case of telecommunications or freight container carriers; or concessions are given to the most competitive bidders in an environment where regulatory system limits user charges to reasonable levels and regulations set appropriate standards of service as in the case of airports, ports and roads.

The Eleventh Plan has also made an assessment of the deficit in various infrastructure sectors and set quantitative targets for these sectors. These targets are given below:

Policy initiatives to promote private participation

With a view to encouraging the development of infrastructure in general and private participation in infrastructure sectors in particular, a number of initiatives have been taken by the government. These are outlined below:

Committee on Infrastructure (CoI)

The Committee on Infrastructure (CoI) was constituted in 31st August, 2004 under the chairmanship of Prime Minister. Its members include the Finance Minister, Deputy Chairman Planning Commission and the Ministers in-charge of infrastructure ministries. The objective of COI is to initiate policies that would ensure time-bound creation of world class

Figure 1 : Investment in Infrastructure

Figure 2: Infrastructure Investment as a per cent of GDP

PPPs, during the Eleventh Plan period. This is 30 per cent of the projected total investment during the Eleventh Plan, as compared to 20 per cent realised during the Tenth Plan. The amount of investment in infrastructure and infrastructure investment as a percentage of GDP are shown in Figures 1 and 2 respectively.

Infrastructure development is capital intensive and requires huge resources. However, public resources available for investment in physical infrastructure are limited, as social sectors have a priority

in the allocation of budgetary resources. The strategy for the Eleventh Plan encourages private sector participation directly as well as through various forms of PPPs where desirable and feasible. It is expected that as in the case of telecommunications sector, competition and private investment will not only expand capacity but also improve the quality of service in Indian infrastructure.

Achieving high volumes of private investment in infrastructure is not easy. It is necessary to develop an environment which is both




YOJANA July 2009 9

infrastructure, developing structures that maximize the role of PPPs, and monitoring the progress of key infrastructure projects to ensure that established targets are realised. The COI has also initiated institutional, regulatory and procedural reforms. The CoI is serviced by the Planning Commission through the Secretariat for CoI. It held several meetings and gave direction to the entire policy framework for accelerating the growth in infrastructure sectors.

Empowered Sub-Committee of CoI

With a view to facilitating the functioning of the CoI, an Empowered Sub-Committee of the Committee on Infrastructure

(ESCOI) was constituted on 16th May 2005. The main objective of constituting this empowered committee was to accelerate formulation, review and approval of policy papers and proposals for submission to CoI; monitoring and follow up on implementation of the decisions of CoI; and undertaking such other actions as may be necessary in furtherance of the objectives of CoI.

Public Private Partnership Appraisal Committee (PPPAC)

With a view to streamlining and simplifying the appraisal and approval process for PPP projects, a Public Private Partnership Appraisal

Committee (PPPAC) has been constituted consisting of Secretary, Department of Economic Affairs as Chairman and Secretaries of Planning Commission, Department of Expenditure, Department of Legal Affairs and the Administrative Department concerned as members. The project proposals are appraised by the Planning Commission and approved by PPPAC. Until March 2009, the PPPAC has approved 94 projects involving an investment of Rs.84,406 crore.

Viability Gap Funding

Recognising that externalities engendered by infrastructure projects can not always be captured by project sponsors, a Viability Gap Funding (VGF) Scheme was notified in 2006 to enhance the commercial viability of competitively bid infrastructure projects which are justified by economic returns, but do not pass standard thresholds of financial returns. Under the scheme, grant assistance of upto 20 per cent of project capital costs is provided by the Central Government to PPP projects undertaken by the Central Government, State Government, Statutory entities and local bodies, thus leveraging budgetary resources to access a larger pool of private capital. An additional grant up to 20 per cent of project costs can be provided by the sponsoring Ministry or State Government. Upto March 2009, 139 projects, were approved with a total capital investment of Rs. 1,19,041 crore.

E m p o w e re d C o m m i t t e e /Institution

An institutional framework comprising an inter-ministerial

Infrastructure – Deficit and Eleventh Plan Physical TargetsSector Deficit Eleventh Plan TargetsRoads/ Highways

65590 km of NH comprise of only 2% of network; carry 40% of traffic; 12.4% 4-lanes; 50% 2-lanes; and 38% single-laned

6-lane 6500 km in GQ; 4-lane 6736 km NS-ES; 4-lane 20000 km; 2 lane 20000 km; 1000 km Expressway

Ports Inadequate berths and rail/road connectivity

New capacity:485 m MT in major ports; 345 m MT in minor ports

Airports Inadequate runways, aircraft handling capacity, parking space and terminal buildings

Modernize 4 metro and 35 non-metro airports; 3 greenfield in NER; 7 other greenfield airports.

Railways Old technology; saturated routes; slow speeds (freight:22 kmph; passengers:50 kmph); low payload to tare ratio (2.5)

8132 km new rail; 7148 km guage conversion; modernize 22 stations; dedicated freight corridors.

Power 1 3 . 8 % p e a k i n g d e f i c i t ; 9.6% energy shortage; 40% transmission and distribution losses; absence of competition

Add 78577 MW; access to all rural households

Irrigation 1123 BCM utilizable water resources; yet near crisis in per capita availability and storage; only 43% of net sown area irrigated.

Develop 16 mha major and minor works; 10.25 mha CAD; 2.18 mha flood control

Telecom/IT

Only 18% of market accessed; obsolete hardware; acute human resources’ shortages

Reach 600 m subscribers – 200 m in rural areas; 20 m broadband; 40 m Internet




10 YOJANA July 2009

Empowered Committee has been established for the purpose of appraising and approving projects for availing of the VGF upto 20 per cent of the cost of infrastructure projects undertaken through PPP. It has approved 44 projects in the State Sector and 1 project in the central sector involving a capital investment of Rs. 34,635 crore till March 2009.

India Infrastructure Finance Company Limited (IIFCL)

India Infrastructure Finance Company Limited (IIFCL) was set up as a non-banking company for providing long-term loans for financing infrastructure projects that typically involve long gestation periods. The IIFCL provides financial assistance up to 20 per cent of the project cost both through direct lending to project companies and by refinancing banks and financial institutions. Upto one-half of the lending by IIFCL can also be in the form of subordinated debt, which often serves as quasi-equity. IIFCL raises funds from both domestic and overseas markets on the strength of Government guarantees. Upto March 2009, IIFCL has raised Rs.15,700 crore. It has approved 88 projects with a total investment of Rs. 1,47,092 crore of which IIFCL lending will be Rs.18,720 crore. It has disbursed Rs. 4,891 crore upto March 2009. Of the 88 projects sanctioned by IIFCL, financial closure has taken place in 78 projects involving an investment of Rs. 1,15,689 crore.

Advisory Services

Implementation of PPP projects requires appropriate advisory services in terms of preparation of

project agreements, structuring of projects, etc. Planning Commission has operationalised a scheme for technical assistance to project authorities by way of appointing consultants for them. The Ministry of Finance has also created an India Infrastructure Project Development F u n d ( I I P D F ) t o p r o v i d e development expenses, including cost of engaging consultants for PPP projects.

Foreign Direct Investment

100 per cent Foreign Direct Investment (FDI) under automatic rou t e i s pe rmi t t ed fo r a l l infrastructure projects.

Tax Exemption

The Government has provided several incentives such as tax exemption and duty free imports of road building equipment and machinery to encourage private sector participation. Also, 100 per cent exemption on income tax is available for a period of 10 years.

Model Documents

PPP projects typically involve transfer or lease of public assets, de l ega t i on o f Gove rnmen t authority for recovery of user charges, operation and/or control of public utilities/services in a monopolistic environment and sharing of risk and contingent liabilities by the Government. The terms of the project agreements as well as the bidding process for award of concessions are usually complex because of the nature of the risks and the involvement of many participants in PPPs including project sponsors, lenders, Government agencies, and regulatory authorities. The use of

standard documents streamlines and expedites decision-making by the authorities in a manner that is fair, transparent and competitive. The CoI has, therefore, mandated the adoption of model documents such as concession agreements and other bid documents for award of PPP projects. All projects that are based on such documents benefit from fast-track appraisal and approval

As par t of the aforesaid initiatives, Model Concession Agreements have been published for national highways, state highways, Operation & Maintenance of highways, Operation of Container Trains, Non-metro airports, Urban Rail Systems, Greenfield Airports, re-development of Railway Stations, new port terminals and a long-term procurement-cum- maintenance contract.

Standardised guidelines and model documents that incorporate key principles relating to the bid process for PPP projects have also been developed. Guidelines for the pre-qualification of bidders along with a Model Request for Qualification document have been approved by the CoI for application to all PPP projects. Guidelines for inviting financial bids on the basis of a Model Request for Proposal Document (RFP) have also been approved and published. Similar model documents for procuring the services of consul tants and advisers have also been published.

Other reform initiatives

CoI has identified several areas for reform of processes and guidance to project authorities. The




YOJANA July 2009 11

following Reports and Guidelines were finalised under the aegis of CoI.

• Guidelines for Financial Support to PPPs in Infrastructure (VGF Scheme)

• Guidelines on Formulation, Appraisal and Approval of PPP Projects (PPPAC)

• S c h e m e f o r F i n a n c i n g Infrastructure Projects through the India Infrastructure Finance Company Ltd. (IIFCL)

• Report of the Task Force on the Delhi-Mumbai and Delhi-Howrah Freight Corridors

• Report of the Committee of Secretaries on Road Rail Connectivity of Major Ports

• Report of the Core Group on Financing of the National H i g h w a y s D e v e l o p m e n t Programme

• Report of the Task Force on Financing Plan for Airports

• Report of the Inter-Ministerial Groups on Customs Procedures

and Functioning of Container Freight Station and Ports

• Report of the Task Force on Financing Plan for Ports

• Manual of Specifications and Standards for Two-Laning of Highways through PPPs

• Manual of Specifications and Standards for Four-Laning of Highways through PPPs

• Report on Restructuring of NHAI

• Guidelines for Pre-Qualification of Bidders (RFQ) for PPP projects

• Model Request for Proposal Document (RFP) for PPP projects

• An Approach to Regulation in Infrastructure

• Institutional Mechanism for Performance Monitoring of PPP projects

• Guidelines for Selection of Consultants

Independent Regulators

The Eleventh Plan vision

of private investment in the infrastructure sector will require significant improvements in the quality of governance. The Government has consti tuted i n d e p e n d e n t r e g u l a t o r s i n the power, telecom and civil aviation sectors. Tariffs in the port sector are also fixed by an independent authority. The role of independent regulators is particularly evident in the infrastructure sectors where economic policy changes have led to a shift from the earlier system, where infrastructure was provided almost exclusively b y t h e p u b l i c s e c t o r, t o a system where private suppliers o f i n f r a s t r u c t u r e s e r v i c e s are actively encouraged. For initiating further improvements in the regulatory structures and practices, the government has approved a paper titled “Approach to Regulation”, which has since been published by the Planning Commission. q

(E-mail : [email protected])

YOJANAForthcoming

Issues

August 2009 &

September 2009

Yojana’ will bring you the Budget 2009-10 in its August 2009 issue. Along with budget highlights, there will be articles from sector experts on how the budget is likely to impact certain important sectors.

The September 2009 issue of ‘Yojana’ will be devoted to the Education Sector in India – what have been the major policy initiatives in this area, our important milestones and the challenges we are faced with.




12 YOJANA July 2009

J&k wiNdOwBan on polythene soon in the Valley

Bamboo sector to get boost

The government had decided to implement the law, which bans the use of polythene. The law would be initially implemented in some specific areas of the Valley like towns, notified areas and tourist places.

The government, is also looking to introduce the jute and paper bags, which would serve as an alternative to the polythene.

The J&K Agro Industries in collaboration with an Italian firm were developing the biodegradable jute bags and government had already provided Rs 20 lakhs for it. The ban would be effective when the jute bags are manufactured locally and made available to people.

The government is also committed to restoration the Dal Lake and other water bodies. An Anti-pollution rally was held recently and a fleet of rafting boats, canoes and motorboats participated in the river Jhelum. The event was a part of the campaign to create awareness among masses about preserving the water bodies. Polythene is a biggest source of pollution. It has destroyed water bodies which are the back bone of tourism. q

(Courtesy : The Greater Kashmir)

The state government of J&K has submitted a proposal worth Rs. 7.58 crore under National Bamboo Mission to the Union Ministry of Agriculture to promote growth of bamboo sector in the State.

Out of the approved programme of Rs. 2 crore, Rs. 50 lakh were received for implementing the programme during the year 2008-09. Bamboo Mission Programme was extended to J & K in 2008-09 fiscal and is being implemented through Departments of Agriculture, Social-Forestry, State Forest Research Institute (SFRI) and the Forest Department.

The objective of the Mission is to envisage marketing of bamboo and bamboo-based handicraft, development and dissemination of technologies through a seamless blend of traditional wisdom and modern scientific knowledge, as well as generate employment for skilled and unskilled labourers.

The major focus of the programme is to establish bamboo nurseries, training of farmers and field functionaries, establishment of Kissan and Mahila Nurseries, management and improvement of existing bamboo forest and plantations.

Five centralized nurseries, three mahila nurseries and four kissan nurseries have been established by various departments to produce bamboo seedlings for plantation during the coming monsoon. This step is expected to cover both forest and non-forest area including agricultural lands.

About 40 farmers and field functionaries were sent for training at FRI, Dehradun. In the meeting, SBSC approved annual programme for the year 2009-10 for Rs. 727.35 lakh, which will be sent to the Union Ministry of Agriculture for its consideration. q

(Courtesy : The Greater Kashmir)




YOJANA July 2009 13

Sea Ports : Harbouring Growth

iNfraSTruCTurE

NTERNATIONAL TRADE is the cornerstone of global economy. Exchange of goods amongst countries widens the choice of supply

and ensures that production takes place where it is the cheapest and the best. This is reflected in the intensification of globalization and the fact that world trade is growing faster than the world output. World trade relies on cheap and secure transport. Seaborne trade plays a key role in this context since an estimated 90% of global trade by weight takes place by seaborne mode. As trade grows, the demand for maritime transport also grows.

Ports are economic and service provision units of remarkable importance since they act as points for the interchange of two transport modes- maritime and land, either rail or road. Ports are India’s gateways to the world. India’s coastline of about 7517 Kms is spread on the western and eastern shelves of the mainland

I

The author is Secretary (Shipping), Ministry of Shipping, Road Transport & Highways,

With initiatives being taken for development of ports it is hoped

that the port sector would be able to

meet the challenges of the international traffic demand and match world class

standards

A P V N Sarma

as also along the sea islands. The coastline is studded with 12 Major Ports besides 200 Non-Major Ports. While the major ports come under the administrative purview of the central government, the responsibility for the development and management of the non-major Ports rests with the respective maritime states/ union territories.

The 12 Major por t s a re at Kolkata/Haldia, Paradip, Visakhapatnam, Chennai, Ennore, Tuticorin, Cochin, New Mangalore, Mormugao, Mumbai, Jawaharlal Nehru Port at Nhava Sheva, and Kandla. Port Trust Boards have been set up for the administration, control and management of 11 of these 12 ports, except Ennore Port, which has been incorporated as a company under the Indian Companies Act, 1956. The Department of Shipping under the Ministry of Shipping and Road Transport and Highways in the Government of India is responsible for the development of the major ports with the objective of

ViSiON




14 YOJANA July 2009

providing necessary and adequate cargo handling capacity to meet India’s EXIM trade requirement, a major portion of which is borne by the sea route.

There has been a tremendous increase in the traffic handled by Indian ports in the last ten years. The traffic increased at a CAGR of 7.4% from 227.26 MT in 1996-97 to 463.78 MT in 2006-07. In the 10th Plan the traffic increased at a CAGR of 10 % from 287.59 MT in 2001-02 to 463.78 MT in 2006-07. The non-major ports handled 185 MT in 2006-07 which was 28% of the overall sea borne trade. In spite of the global slowdown, the cargo carried by major ports in 2008-09 was 530.35 MT which is higher by 2.1% in comparison to the cargo of 519.3 MT carried during the financial year 2007-08. There has been an impressive growth in the cargo related to fertilizers, thermal coal, petroleum, oil and lubricants.

Development Initiatives

The increase in traffic requires a concomitant increase in capacity of the ports. Accordingly, the capacity of major ports is planned to be enhanced to 1016 million tonnes per annum (MTPA) to cater to a projected traffic of 708 MTPA under the Eleventh Five Year Plan. Major ports have identified projects covering the entire gamut of activities, namely, deepening of channels/berths, construction and reconstruction of berths/jetties, floating jetties, rail and road connectivity projects, procurement, upgradation and modernization of equipment and other schemes in order to meet the capacity requirement. The Government

has also put in place a scheme for private sector participation in major ports for handling bulk, break bulk and multipurpose and specialized cargo, warehousing and public storage facilities, dry docking and ship repair facilities. In addition, all the 12 major ports have formulated Port Business Plan, with a 20 years perspective , as well as Action Plan for a seven year period with a view to transforming them into ports with world class facilities. The total proposed outlay for the Eleventh Plan period for the major ports is Rs.17551.24 crores, of which the Gross Budgetary Support (GBS) component is Rs.2056.98 crores. In view of the resource constraint in the public domain, active public private partnership (PPP) is envisaged for the purpose. Private sector investment is anticipated to the tune of Rs.36868.24 crores.

To encourage private sector participation, it is essential to have an enabling policy framework. The Department of Shipping has already put in place an independent tariff regulator to take care of the interests of all the stake holders. A new Model Concession Agreement (MCA) has been approved by the government, bringing in several refinements and improvements over the earlier Model Licence Agreement of 2000. The tariff setting mechanism has also been modified with tariffs being set upfront before the projects are bid out on a revenue sharing basis. Guidelines in this regard have already been issued. New Model Bidding documents viz. Request for Qualification and Request for Proposal have been approved by the government.

A N a t i o n a l M a r i t i m e D e v e l o p m e n t P r o g r a m m e (NMDP) has been finalized to implement specific programmes/schemes. Under the Programme, specific projects to be taken up for implementation over a defined period have been identified. Total investment involved under the Programme is Rs.1, 00,339 crores. Out of this, Rs. 55,804 crores are for the Port Sector and the balance is for the Shipping and Inland Water Transport Sectors. In the Major Ports, 276 projects have been identified for inclusion in the Programme. These projects, to be taken up over a period upto 2011-12 will be implemented in phases. Out of these, about Rs.34, 505 crores are expected from private sector mainly in commercially viable projects like development and operation of berths, terminals, etc. Public funds will be principally used for creation of common user infrastructure facilities. The objective is to upgrade and modernize the port infrastructure in India which will enable it to benchmark its performance against global standards. Some projects included in the Programme have already been completed whereas a number of projects are under implementation.

Major Projects

Some of the important projects which have been successfully completed are:• Development of additional

link road from port junction to the industrial by pass road at a Cost of Rs.114.00 crore at Vishakhapatnam;

• Crude Oil Handling for Kochi Refineries Ltd. at Cochin Port with total cost of Rs.743.60




YOJANA July 2009 15

crore resulting in capacity addition of 7.50 MT;

• Redevelopment of Bulk Terminal into Container Terminal at JN Port, Nhava Sheva with a cost of Rs.1078.00 crore , resulting in a capacity addition of 15.60 MT;

• Construction of 12th Cargo Berth & setting up of state-of-art -Container Terminal through BOT at 11th &12th Cargo Berth at a Cost of Rs.446.77 crore at Kandla, with a capacity addition of 7.20 MT;

• Setting up of marine terminal by M/s. VOTL at Vadinar for M/s.Essar Oil Ltd. At a cost of Rs.750.00 crore and capacity addition 12.00 MT;

• Development of a Marine Liquid Terminal to handle LPG, POL, Chemicals and other liquids at Ennore Port – Cost Rs.200.00 crore; Capacity 3 MT;

Some of the important projects in progress are:• Deepening of channel to handle

1, 25,000 DWT vessels - Cost Rs.253.36 crore and 4 laning of road from Chandikhole to Paradip NH-5A – Cost Rs.442.00 crore at Paradip Port.

• Development of a Coal Terminal to handle coal for users other than TNEB – Cost Rs.300.00 crore; Capacity 8 MT and Development of an Iron Ore Terminal – Cost Rs.350.00 crore; Capacity 12 MT at Ennore Ports Ltd.

• Dredging the Dock Basin and Channel – Cost Rs.538 crore at Tuticorin Port.

• I n t e r n a t i o n a l C o n t a i n e r Transhipment Terminal (ICTT) – Cost Rs.2118.00 crore; Capacity 12.50 MT at Cochin Port.

• Construction of two off-shore container terminal. Development of two container berths of total quay length of 700 mtrs. and related upgradation for handling vessels of 6000 TEUs capacity. – Cost Rs.1228.00 crore; Capacity 9.6 MT at Mumbai Port

Challenges

The tremendous growth in EXIM trade will put an enormous pressure on the port infrastructure. To ensure that the Indian exports remain competitive, it is essential that the transaction costs are reduced. The efficiency at the Ports is being improved through a judicious use of information technology by implementing web based electronic data interchange at all Major Ports between various stake holders such as shipping lines/agents, banks, customs, etc. with matching backend computerisation in the Ports and discontinuance of manual exchange of documents, modernisation of equipments, training for Port employees and modern management practices

The main problems being faced in port operations relate to congestion at the berths, lack of proper storage facilities and the problem of draught due to which the modern large size vessels find it difficult to call at the Indian ports. Despite having adequate capacity and modern handling facilities, the average turnaround time was 3.85 days during 2008-09, compared with 10 hours in Hong Kong; this undermines the competitiveness of Indian Ports. Since ports are not adequately linked to the hinterland the evacuation of cargo is slow leading to congestion. To this end, all port trusts have set up groups

with representatives from NHAI, the railways and State Governments to prepare comprehensive plans aimed at improving road-rail connectivity of ports. The NHAI has taken up port connectivity as major component of NHDP. An efficient multi-modal system, which uses the most efficient mode of transport from origin to destination, is a prerequisite for the smooth functioning of any port. It involves coordinating rail and road networks to ensure good connectivity between ports and the hinterland. While capital dredging in Major Ports is being undertaken to increase the draught availability in the entrance/approach channels it is still a major issue impacting the passage of large size vessels. Recognizing the criticality of having adequate draught at the seaports, several projects have been identified in the NMDP for “Deepening of channels for improvement in draughts”.

Ports security is an area of deep concern for the government as well as the Port Trusts. In view of the terrorist activities in Mumbai last year, several steps have also been taken to improve the security along the coastline. The Ports have been directed to install VTMS devices and all maritime states have been directed to re-visit their security plans and set up Marine police stations and take other measures to maintain an effective round the clock surveillance of the Ports.

With all such initiatives being taken for development of ports and for improving their efficiency it is hoped that the port sector would be able to meet the challenges of the international traffic demand and match world class standards. q

(E-mail : [email protected] )




16 YOJANA July 2009

Mizoram’s potential in carbon trading

Mizoram has been identified as a state having huge potential in carbon trading, thanks to its vast forest reserve. The Mizoram Industries Department has teamed up with Electronic Test and Development Centre (ETDC), Union government, Guwahati and Mumbai-based Intrux System

Pvt. Ltd. to calculate carbon footprint in Mizoram.

Mizoram has a huge potential for carbon trading. Currently, the ETDC will calculate the carbon footprint in Mizoram. This will determine their Participation in the carbon trading.

Carbon footprint is the total set of GHG (greenhouse gas) emissions caused directly and indirectly by an individual, organisation, event or product, Mizoram manages to be the greenest state in India despite the large-scale deforestation through the jhum cultivation. With 88.34 per cent forest covered area, against the national average of 33 per cent, Mizoram has the largest forest in India. Of the 88.63 per cent forest, as much as 58.72 per cent is open forest.

Carbon credits are awarded to countries or groups that have reduced their green house gases below their emission quota, Carbon credits can be traded in the international market at their current market price. In India Orissa, has already earned revenues from carbon trading while in the Northeast, Mizoram is the first state to take such initiatives.

The Carbon credit system was ratified in conjunction with the Kyoto Protocol. Its goal is to stop the increase of carbon dioxide emissions. For example, if an environmentalist group plants enough trees to reduce emissions by one tonne, it will be awarded a credit. If a steel producer has an emissions quota of 10 tonnes, but expects to produce 11 tonnes, it could purchase this carbon credit from the environmental group. q

(Courtesy : The Sentinel)

North east diary

Self-help groups enabling women to earn in Tripura

Women members elected to the village council in Tripura have taken a

lead in paving the way for a large number of poor women to become self-reliant. This has been made possible by these enterprising women representatives by setting up Self-Help Groups (SHGs), which generate allied productive vocations for the poor families.’

One such self-help group consists of 11 women and right from making incense sticks and

packaging to marketing is being done all by women. Another 200 women work under them and have become self employed and earn for their families by making incense sticks which are made out of raw natural materials available locally.

Although the Self Help Groups exist only at the village level, the fact is that these women members of the village councils have played a stellar role in empowerment of women and

also in poverty alleviation at the grass roots.

Apart from creating varied vocations, the Self-Help Groups have also been active in other spheres such as education, drinking water and community health programmes. The self-help Groups have also been instrumental in the construction of link roads in the villages including building culverts across streams and other rivulets. q

(Courtesy : The Sentinel)




YOJANA July 2009 17

National Highways : The Path Ahead

iNfraSTruCTurE

N F R A S T R U C T U R E D E V E L O P M E N T i s absolutely critical for India’s economic growth and for sustainable development.

Building world class infrastructure is a pre-condition for attaining a sustained growth of 7% to 8% per annum, which is needed to improve the quality of life of the citizens. Road connectivity holds the key to infrastructural development, especially for a country of such vast proportions as India. The share of road in total traffic is growing everyday. The rapid expansion and strengthening of the road network, therefore, is imperative, both to provide for present and future traffic and for improved accessibility to the hinterland. In addition, road transport needs to be regulated for better energy efficiency, lesser

I

The author is General Manager (Environment & Press Relations), National Highways Authority of India

Successful completion of

such mega projects would require pro-

active support of various

Central/State Government

Departments and other stakeholders

V K Sharma

pollution and enhanced road safety.

At about 3.3 million kilometers, India has the second largest road network in the world. Of this, the highway network accounts for about 2 %, with a total length of 66,754 km, but carries about 40% of the total traffic. At present, 14% of national highways are 4 or 6 lane, about 59% two-lane and 27% single lane. The existing network has inadequate capacity to handle high traffic density in many places and suffers from poor riding quality.

The Central Government is responsible for development and maintenance of the national highways system. The National Highways Authority of India (NHAI), set up under the Ministry of Shipping, Road Transport & Highways has been vested with

TakiNg STOCk




18 YOJANA July 2009

special powers for taking up the highway development program with certain investment decisions, acquisition of land and speedy implementation of the projects. NHAI’s endeavour is to meet the nation’s need for providing and maintaining national highways network to global standards and to meet the expectations of users in the most cost and time effective manner.

National Highways Development Programme

The Government of India has chalked out a massive investment plan in the road sector, under the National Highways Development Programme (NHDP). An investment of over Rs. 2,20,000/- crore has been planned for extensive up gradation of the national highways network till 2015. The projects under Phase-I & Phase-II of NHDP, and their current status is as follows:

Golden Quadrilateral, i.e., National Highways connecting four metropolitan cities - Delhi, Mumbai, Chennai & Kolkata, having a length of 5846 km. Four laning of about 98% (5,724) km has been completed and work is going on in the remaining length.

North-South & East-West Corridor which comprises 4-laning of 7300 km of national highways connecting North-South corridor from Srinagar to Kanniakumari with Cochin-Salem spur and East-West corridor from Silchar to

Porbandar. Under this project, four laning of 3,541 km length has been completed and 2,810 km length is under implementation. Work for 791 km length is yet to be awarded.

Port connectivity, 380 km length of national highways to be upgraded to 4-lane for improving connectivity to 10 major ports of the country to NHDP. So far, work on 206 km has been completed, 168 km is under implementation and 6 km of length is to be awarded.

Out of 962 km of other National Highways, so far 800 km has been completed, 142 km is under implementation and balance length of 13 km is to be awarded.

NHDP Phase-III

It comprises of widening of existing National Highways to 4/6 lane standard for a length of about 12,109 km, having high traffic density, connecting important tourist locations, economically important areas, state capitals on BOT basis. Four-laning of 827 km has already been completed. 1,920 km is under implementation and 9,362 km remains to be awarded.

In next 5-6 years the government proposes to carry forward the National Highways Development Project through various phases. These include :

NHDP Phase IV. under which there are plans for 2-laning of 20,000 Km of the national highways, with

paved shoulders. This is being implemented by the Deptt. of Road Transport & Highways.

NHDP Phase V. for 6-laning of 6500 km of existing 4 lane highways. This constitutes about 5,700 km of the Golden Quadrilateral and 800 km of other NHs with high density of traffic which are otherwise important for tourist or economic reasons. The project would be implemented on DBFO basis. Out of 6,500 km, 123 km has already been completed. 911 km is under implementation and 5,466 km is to be awarded.

NHDP Phase VI. This phase envisages development of 1,000 km of expressways connecting important commercial and industrial townships through Public Private Partnership. Four stretches have been identified - 400 km long Vadodara-Mumbai section would be taken up in the first stage, 66 km long Delhi-Meerut Expressway, 334 km long Bangalore-Chennai Expressway and 277 km long Kolkata-Dhanbad Expressway. All these expressways would be on a new alignment and are scheduled for completion by Dec 2015.

NHDP Phase VII. It envisages construction of Ring Roads, Flyovers and Bypasses in several important cities for proper regulation and movement of traffic.

PPP in Highway Development

While the first two phases of NHDP were largely EPC




YOJANA July 2009 19

contracts, public funded, most of the future projects under NHDP would be through public-private partnership (PPP) model. PPP in highway development seeks to tap the resources, expertise and professionalism of private sector for public development under a framework attractive to both parties. The framework enables a private entrepreneur to secure reasonable returns at manageable risk, assures the user of adequate service quality, at an affordable cost, and facilitates the Government in procuring value for public money.

The cess on petrol/diesel for road users, dedication of the cess to a central road fund, the decision to involve the private sector are some of the factors helping the sector. The reliance on the private sector increased due to an expansion in the project scope of the NHDP and the inadequacy of funds to implement the expansion. Such a reliance has also necessitated some policy and regulatory changes in the last few years. Well defined, standardized, transparent and quick processes have been put in place in order to foster greater confidence in the private sector. The current policy framework has all the ingredients required to ensure a competitive road development industry. Some of the key recent initiatives taken by Government of India include:

Standard bidding documents: The request for qualification and

request for proposal have been finalised and are in use by the NHAI since December 2007.

The new model concession agreement, which provides for the revenue sharing mechanism, was introduced in January 2007. It has now been accepted by all parties as fair and has helped to balance the risk and obligations between the government and the private parties.

The approval of the Toll Rules 2008, is expected to further increase private sector participation. The rule is likely to increase the viability of privately funded projects.

Shift from BOT to DBFO- The NHAI has shifted from the Build-Operate –Transfer model for awarding projects to the Design-Build-Finance-Operate model for projects under NHDP. This model allows the concessionaire to design the project and removes the risk of changes in project scope resulting in time and cost overruns.

Road Safety

NHAI is designing roads with international standards with great emphasis on enhanced safety features. Provisions for flyovers, bypasses, Railway Over/Under Bridges, etc. are made with an eye on enhancing road safety. In the Detailed Project Reports (DPRs), provisions are also made for overhead signs, cautionary/regulatory/informatory retro-reflective signboards, cat eyes,

delineators, crash barriers and median railings. For safety of road users during construction stage, provisions are made for safety features such as advance traffic warning signals, retro-reflective signs and reflective lights at hazardous locations. Once the construction work is over, highways are maintained through long-term and short-term Operation and Maintenance (O&M) contracts which have inbuil t safety provisions to ensure the safety of road users. At present about 4310 km of National Highways are being maintained through Operation and Maintenance contracts.

Several initiatives have been taken to ensure safe and comfortable journey on completed corridors of National Highways. They include thermoplastic road marking on carriageway, crash barriers at the location of high embankment and curves, railing at the central median/service road in urban areas to prevent crossing of pedestrian/cyclists and shrubs/plantations in the central median to improve aesthetics along with mitigating the glare of light of vehicles coming from opposite direction. In addition, there is provision of well-equipped ambulance with requisite paramedical staff and necessary medical equipments for every 50 km of completed stretch to provide immediate help to accident victims and taking them to nearest trauma care centre or hospital. Also tow-




20 YOJANA July 2009

away vehicle facility is available on all completed stretches for towing away the broken down or damaged vehicles from the carriageway so that such vehicles do not cause any safety hazard to the road users. Route patrol vehicles on 24 hours basis are provided for every 50 km length of completed corridors to assist the road users and continuous surveillance of highway assets. Each patrol vehicle is equipped with adequate sign boards, traffic cones, fire extinguishers, gas cutters, hydraulic jack , first aid kit and communication equipment.

With a view to making road journey safer, comfortable and convenient and to reduce the fatigue in a long distance driving, NHAI has initiated a drive to develop comprehensive wayside amenities like provisions for

refuelling, refreshment, rest and relaxation, separate places for parking of cars, buses and trucks, workshop for repairs of vehicles, telephones small shopping centers etc.

Challenges

One of the most important challenges is timely completion of the projects. The projects under NHDP are spread in almost all states of the country. NHAI is required to hand over encumbrance free site to the contractor as per the contract agreement for timely execution of the projects. NHAI is also required to co-ordinate with the Central Deptt. on the issues related to defence land, ROB clearance, wild life clearance etc. For expeditious and timely pre-construction activities such as land acquisition, forest &

environmental clearance, utility shifting etc., NHAI is largely dependent on the State Govts. Simultaneously, the projects also suffer due to the law and order situation in some states. Once the construction of the project is complete, Operation & Maintenance of the highway, incident management , asset management and safety of the highway assets/furniture is another challenge. Good highways need good and responsible driving habits. Lack of adherence to the traffic rules may prove to be disastrous for the road users. Therefore, successful completion of such mega projects would require pro-active support of various Central/State Govt. Departments and other stakeholders. q

(E-mail [email protected])

GROWTH IN THE INFRASTRuCTuRE SECTOR

Riding on the back of 6.7 per cent gross domestic product (GDP) growth and sign of economic

recovery in the economy, the growth rate of core industries including cement, finished steel, coal and electricity, nearly doubled to 4.3 per cent during April, the first month of the current fiscal.

The news of robust growth in the core sectors and could signal the revival of the economy that has been on the downslide for the last few months. With indications of the economic gloom blowing away, the output of six core sectors, which has over 26 per cent

Growth rate of cement,

steel, coal and

electricity nearly

doubled in April

weight in the Index of Industrial Production (IIP), rose by 4.3 per cent during the month under review as compared to 2.3 per cent in April 2008.

The output of cement during April went up by 11.7 per cent as compared to 6.9 per cent. Finished steel output recorded a 1.6 per cent growth against a drop of 0.6 per cent in April 2008.

Coal production registered a growth rate of 13.2 per cent as compared to 10.4 per cent. Similarly, electricity generation increased by 6 per cent against 1.4 cent. q

(Courtesy : The Hindu)




YOJANA July 2009 21

Market-Based Financing of Urban Infrastructure

iNfraSTruCTurE

A P I D URBANIzATION has increased the demand for urban infrastructure in India. Since public

funds for these services are inadequate, Urban Local Bodies have to look for alternative sources for financing their infrastructure needs. Accessing capital markets has emerged as viable options for ULBs to finance urban infrastructure. Several urban local bodies and utility organizations have issued bonds and have so far mobilized over Rs.12,000 million through taxable bonds, tax-free bonds and pooled financing. The JNNURM, a flagship urban investment program of Government of India encourages ULBs to link the projects with market-based financing. The market access is important innovation in the financing of urban infrastructure in the country.

In 2001, about 286 million persons were living in urban areas of India and it was the second

R

The author is Director, National Institute of Urban Affairs (NIUA)

A market-based approach to financing urban

infrastructure linked with JNNURM

will further strengthen ULBs and help achieve

the decentralization objective of the

74th Constitutional Amendment

Chetan Vaidya

largest urban population in the world. The proportion of urban population was 27.8% in the year 2001 and the decadal growth of urban population was 31.2% in 1991-2001.

The urban population is expected to rise to around 38 percent by 2026. It is clear that urbanization is inevitable. India needs to improve its urban infrastructure and governance to improve productivity and create jobs for the poor. Rapid urbanization has increased the demand for urban services. The Eleventh Five Year Plan of India (2007-2012), has estimated that total fund requirement for implementation of the Plan target in respect to urban water supply, sewerage and sanitation, drainage and solid waste management is Rs. 12,702 billion. Financial resources from all public sources, however, fall far short of the urban sector’s estimated investment requirements. Since public funds for these services are inadequate, ULBs

aVENuES




22 YOJANA July 2009

have to look for alternative sources for financing their infrastructure costs. Market-based financing has emerged as a viable alternative to finance infrastructure investments.

M a r k e t - B a s e d F i n a n c i n g System

Since 1994, the Indo-US Financial Institution Reform and Expansion (FIRE-D) project is working with national, state and local governments in India to develop a market-based bond market. Several ULBs and utility organizations have issued bonds that so far have mobilized over Rs.12,249 million through taxable bonds, tax-free bonds and pooled financing (Table 1).

Table 1: Municipal Bonds in India

S. No.

Type of Bond

Amount (Rs. in Million)

1. T a x a b l e bonds

4,450

2. T a x - f r e e bonds

6,495

3. P o o l e d finance

1,304

TOTAL 12,249

Credit Rating

In 1995, the Credit Rating Information Services of India Limited (CRISIL) to develop a methodology for carrying out municipal credit ratings based on careful study of ULBs in India and international experience. Ahmedabad was the first city where this methodology was applied in India. In February 1996, Ahmedabad received a rating from CRISIL for a bond offering. This was the first rating received by a municipal bond offering in India. The municipal credit rating

system has come to be regarded by India’s private financial community as a solid indicator of a city’s performance and competitiveness. In the last 12 years, all major rating agencies – CARE, FITCH, ICRA and CRISIL - have provided ratings for municipal and municipal enterprise bond offerings. Under JNNURM, about 52 cities have been credit rated and out of them about 42 have received investment grade rating.

Taxable Municipal Bonds

The Government of India, recognizing infrastructure’s key role in the process of economic development, set up the Expert Group on the Commercialization of Infrastructure, often known as the Rakesh Mohan Committee, in 1994. The FIRE-D project worked closely with this Committee to provide international experience on tax-free municipal bonds. The Committee recommended private sector participation in urban infrastructure development and accessing capital markets through issuing municipal bonds.

The Ahmedabad Municipal Corporation (AMC) was the first ULB to access the capital market in January 1998. It issued Rs.1,000 million in bonds to partially finance a Rs.4,390 million water supply and sewerage project. This was a remarkable achievement since it was the first municipal bond issued in India without a state guarantee and represented the first step towards a fully market-based system of local government finance. The AMC had previously instituted significant fiscal and management reforms, including improved tax collection, computerization of its accounting

system, strengthening of AMC’s workforce and financial management, and development of a comprehensive capital improvement program. Due to these measures, AMC was able to turn around its financial position from a cash deficit municipal corporation to achieve a closing cash surplus of Rs.2,140 million by March 1999. These reforms laid the necessary groundwork for AMC’s bond issue and the successful implementation of the water supply and sewerage project.

The debt market in India for municipal securities has grown considerably since the issuance of Ahmedabad bonds. Since 1998, other cities that have accessed the capital markets through municipal bonds without state government guarantee include Nashik, Nagpur, Ludhiana, and Madurai. In most cases, bond proceeds have been used to fund water and sewerage schemes or road projects. India’s ci ty governments have thus mobilized about Rs.4,450 million from the domestic capital market through taxable municipal bonds.

Tax-Free Municipal Bonds

To boost the municipal bond market, the Government of India decided to provide tax-free status to municipal bonds. During his budget speech of 1999-2000, the Finance Minister announced the Government of India's intention to permit ULBs to issue tax-free municipal bonds. The Government of India issued guidelines for issue of tax-free municipal bonds in February 2001. These guidelines stipulate eligible issuers, use of funds, essential pre-conditions, maturing period, buy-back, nature of issue and tax benefits, ceiling amount for a




YOJANA July 2009 23

project, compulsory credit rating, and external monitoring of the tax-free municipal bond. Tax-free status provided an incentive to local governments to improve their fiscal management sufficient to meet the demands of the investment community..

Ahmedabad was the first municipal corporation in India to issue tax-free municipal bonds for water and sewerage projects. In April 2002, AMC issued a tax-free 10-year bond with an annual interest rate of 9.00 percent. The bond issue amount was Rs.1,000 million. The Municipal Corporation of Hyderabad also issued a tax-free municipal bond in May 2002 for Rs.825 million. The MCH thus became the second city to issue tax-free municipal bonds. The money raised by MCH through municipal bonds was used for providing urban infrastructure in the city especially in slums. The tenure of the bond was seven years with a rate of interest of 8.50 percent.

Pooled Financing

Only financially strong, large municipal corporations are in a position to directly access capital markets. Most small and medium ULBs are not able to directly access capital markets on the strength of their own balance sheets. Also, the cost of the transaction is another barrier. In the United States and elsewhere, small local bodies pool their resources and jointly access the capital market. Based on this model, the Governments of Tamil Nadu and Karnataka issued municipal bonds by pooling municipalities.

In 2003, the Tamil Nadu Urban Development Fund issued a bond

by pooling 14 municipalities for commercially viable water and sewerage infrastructure projects. A special purpose vehicle, the Water and Sanitation Pooled Fund (WSPF), was set up to issue the municipal bonds. The WSPF structured a Rs.304 million bond issue whose proceeds financed small water and sanitation projects in the 14 small ULBs. The Trust vehicle enabled the local bodies to participate in the capital market without increasing the contingent liabilities of the state and to channelize private financial resources into infrastructure investments. This was the first municipal pooled issue. It had a fifteen-year maturity and an annual interest rate of 9.20 percent. USAID provided a backup guarantee of 50 percent of the bond’s principal through the Development Credit Authority (DCA) mechanism. The proceeds helped ULBs to refinance their loans at lower interest rates, connect periphery areas to new water supply schemes, and provide underground drainage and solid waste management schemes. The issue demonstrated a successful model of pooled financing in India.

Subsequently, the Government of Karnataka used the concept of pooled financing to raise debt f rom investors for the G r e a t e r B a n g a l o r e Wa t e r Supply and Sewerage Project (GBWASP). This project covers eight municipal towns around Bangalore and has a total project cost of Rs.6,000 million. These eight municipal towns were merged wi th the Bangalore Municipal Corporation. A debt fund called the Karnataka Water

and Sanitat ion Pooled Fund (KWSPF) was established under the Indian Trust Act to access the capital market by issuing a bond on behalf of the participating ULBs. The KWSPF was created as the intermediary between the local municipalities and the capital market. The KWSPF borrowed from the market and on-lends to the ULBs at terms determined by the KWSPF. During June 2005, the KWSPF successfully floated Rs.1,000 million tax-free municipal bonds at an annual interest rate of 5.95 percent. USAID under its DCA program provided a guarantee of up to 50 percent of the principal amount of market borrowing. It is felt that the tax-free status of the bonds and the DCA guarantee lowered the interest rate by about 1.5-2.0 percent per year compared to similar credit enhancement structures and helped to extend the bond’s tenure to 15 years.

The success of the pooled finance model as demonstrated in the States of Tamil Nadu and Karnataka subsequently led the Government of India to create a central fund that enables capital investments to be pooled under one state borrowing umbrella. The objective is to provide a cost-effective and efficient approach for smaller- and medium-sized ULBs and to reduce the cost of borrowing. FIRE-D project supported GoI’s MOUD in formulating the Pooled Finance Development Fund (PFDF) Guidelines to help small- and medium-sized ULBs access market funds for their infrastructure projects and to encourage municipalities undertake fiscal, financial and institutional reforms required to




24 YOJANA July 2009

create efficient and equitable urban centers.

Linkages with JNNuRM

The Government of India has attempted to meet the challenge of inadequate urban infrastructure through a flagship program, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). States and ULBs accessing the JNNURM must complete a total of 22 reforms, some mandatory and some optional, during the seven-year period (2005-12). The mandatory and optional reforms of states/ULBs under the JNNURM include decentralization of urban governance and empowering urban local bodies, introduction of improved accounting systems, improved revenue base, reform of rent control acts, delivery of services to poor, etc. The JNNURM encourages ULBs to access market-based financing and PPP for urban infrastructure projects that are funded by the Mission. The Nagpur Municipal Corporation issued a Rs.212 million municipal bond in March 2007 to fund a WSS project under JNNURM.

Constraints for Municipal Bonds

Supply-side Constraints are:

• Institutional investors with long-term funds face regulatory constraints on purchasing municipal bonds:

• Institutional investors such as the insurance companies are constrained because of restrictions imposed by the investment guidelines of the Insurance Regulatory Development Authority (IRDA).

• C o m m e r c i a l b a n k s , governed by the RBI’s asset and liability management (ALM) requirements, prefer to lend over the short- to medium-term as their assets and liabilities are short- to medium-term in nature.

• Fur ther, banks cannot take exposures to ULB financing in bonds/structured instruments due to “mark-to-market” requirements. Lending by banks in the form of loans is not subject to such requirements.

• Since there is lack of credit enhancement, hedging tools for investors to mitigate credit risk, and limited reliability of credit information, investors perceive municipal bonds to be risky.

• The fixed cap on tax-free interest from municipal bonds does not respond to market conditions. Municipal bonds become unattractive when market rates exceed the cap.

• Given the poorly developed government securities market, municipal bonds are relatively illiquid investments for lack of exi t opportuni t ies for institutional investors. Further, there is an inefficient clearing and settlement mechanism.

Demand side constraints are:

• There are too few creditworthy issuers seeking bond financing.

• There are too few financially viable projects seeking bond financing.

• There is a lack of intermediation support to help issuers achieve

bond structures that respond to investor needs while providing the issuer with the longest possible tenor, lowest possible interest rate, and lowest possible cost of issuance.

• T h e r e a r e a v a r i e t y o f “administrative and managerial” constraints that inhibit and discourage potential issuers of municipal bonds. Though, the reforms initiated by the Ministry of Urban Development shall help change the situation. Presently, here is divergence of opinion on the optimal debt equity ratio for ULBs. Therefore, the rating agencies must communicate the optimal debt equity ratio for projects by ULBs.

• There is need for further clarity on how the Government of India will operationalize the sanctioning mechanism for Tax-Free Pooled Finance Development bonds.

• There is need for further clarity on how will the RBI approved credit rating agency carry out the surveillance throughout the tenor of the Tax Free Pooled Finance Development Bonds.

• Out the surveillance throughout the tenor of the Tax Free Pooled Finance Development Bonds.

The funding and reform agendas of the JNNURM and the PFDF will help to address the demand-side constraints on the use of municipal bonds. Other supply-side constraints can only be addressed by the institutions responsible for the regulation and development of India’s financial markets. Therefore a Working Session is to reach consensus to




YOJANA July 2009 25

address the key supply-side constraints that impede further development of India’s long-term municipal bond market. Recommendations to the responsible institutions regarding the supply-side constraints are:

• Expand the range of “approved investments” for insurance and pension organizations to include municipal bonds of investment grade or higher. General Purpose bonds may also be included in the list of ‘infrastructure’ category.

• Municipal bonds to be classified under ‘hold to maturity’ category rather than in ‘marked-to market’ category.

• Specify municipal bonds under the ‘priority sector’ category for investment/lending purposes.

• Provision of “bond insurance” as credit enhancement may be explored as a security against default by municipal bodies.

• Review the 8% cap on interest rate for tax-free municipal bonds and prescribe a benchmark market rate linked to State Bank of India-Prime Lending Rate rather than an absolute percentage.

• Provide investment opportunity in municipal bonds to individual/retail investors, CBDT to include municipal bonds in the list of eligible investments/subscriptions for the purpose of claiming deduction under section 80C of the Income Tax Act, 1961.

• Include municipal bonds in the list of eligible investments for Employee Provident Fund Organization.

Great progress has been made in developing the policy and legal framework for local governments to access the capital market to finance urban infrastructure. However to routinely access capital markets, ULBs will have to have the capacity to develop commercially viable projects. The most critical factor for obtaining market finance will be a healthy municipal revenue base. A market-based approach to financing urban infrastructure linked with JNNURM will further strengthen ULBs and help achieve the decentralization objective of the 74th Constitutional Amendment. q

(E-mail:[email protected]) YE

-7/0

9/07




26 YOJANA July 2009

CABINET MINISTERS1. Dr. Manmohan Singh Prime Minister and also in-charge of the Ministries/Departments not specifically

allocated to the charge of any Minister viz.: (i) Ministry of Personnel, Public Grievances & Pensions; (ii) Ministry of Planning; (iii) Department of Atomic Energy; (iv) Department of Space; (v) Ministry of Culture; and2. Shri Pranab Mukherjee Minister of Finance. 3. Shri Sharad Pawar Minister of Agriculture and Minister of Consumer Affairs, Food & Public

Distribution.4. Shri A.K. Antony Minister of Defence.5. Shri P. Chidambaram Minister of Home Affairs.6. Km. Mamata Banerjee Minister of Railways.7. Shri S.M. Krishna Minister of External Affairs.8. Shri Virbhadra Singh Minister of Steel9. Shri Vilasrao Deshmukh Minister of Heavy Industries and Public Enterprises10. Shri Ghulam Nabi Azad Minister of Health and Family Welfare11. Shri Sushilkumar Shinde Minister of Power12. Shri M. Veerappa Moily Minister of Law and Justice13. Dr. Farooq Abdullah Minister of New and Renewable Energy14. Shri S. Jaipal Reddy Minister of Urban Development15. Shri Kamal Nath Minister of Road Transport and Highways16. Shri Vayalar Ravi Minister of Overseas Indian Affairs17. Shri Dayanidhi Maran Minister of Textiles18. Shri A. Raja Minister of Communications and Information Technology19. Shri Murli Deora Minister of Petroleum and Natural Gas20. Smt. Ambika Soni Minister of Information and Broadcasting21. Shri Mallikarjun Kharge Minister of Labour and Employment22. Shri Kapil Sibal Minister of Human Resource Development23. Shri B.K. Handique Minister of Mines and Minister of Development of North Eastern Region24. Shri Anand Sharma Minister of Commerce and Industry25. Shri C.P. Joshi Minister of Rural Development and Minister of Panchayati Raj26. Kumari Selja Minister of Housing and Urban Poverty Alleviation and Minister of Tourism27. Shri Subodh Kant Sahay Minister of Food Processing Industries28. Dr. M.S. Gill Minister of Youth Affairs and Sports29. Shri G.K. Vasan Minister of Shipping30. Shri Pawan Kumar Bansal Minister for Parliamentary Affairs and Minister for Water Resources31. Shri Mukul Wasnik Minister of Social Justice and Empowerment32. Shri Kantilal Bhuria Minister of Tribal Affairs33. Shri M.K. Alagiri Minister of Chemicals and Fertilizers MINISTERS OF STATE (INDEPENDENT CHARGE)1. Shri Praful Patel Minister of State (Independent Charge) of the Ministry of Civil Aviation2. Shri Prithviraj Chavan Minister of State (Independent Charge) of the Ministry of Science and Technology;

Minister of State (Independent Charge) of the Ministry of Earth Sciences; Minister of State in the Prime Minister’s Office; Minister of State in the Ministry of Personnel,

LIST OF COuNCIL OF MINISTERS




YOJANA July 2009 27

Public Grievances and Pensions; and Minister of State in the Ministry of Parliamentary Affairs

3. Shri Shriprakash Jaiswal Minister of State (Independent Charge) of the Ministry of Coal and Minister of State (Independent Charge) of the Ministry of Statistics and Programme Implementation.

4. Shri Salman Khursheed Minister of State (Independent Charge) of the Ministry of Corporate Affairs and Minister of State (Independent Charge) of the Ministry of Minority Affairs

5. Shri Dinsha J. Patel Minister of State (Independent Charge) of the Ministry of Micro, Small and Medium Enterprises

6. Smt. Krishna Tirath Minister of State (Independent Charge) of the Ministry of Women and Child Development

7. Shri Jairam Ramesh Minister of State (Independent Charge) of the Ministry of Environment and Forests MINISTERS OF STATE 1. Shri Srikant Jena Minister of State in the Ministry of Chemicals and Fertilizers2. Shri E. Ahammed Minister of State in the Ministry of Railways3. Shri Mullappally Ramachandran Minister of State in the Ministry of Home Affairs4. Shri V. Narayanasamy Minister of State in the Ministry of Planning and Minister of State in the Ministry of

Parliamentary Affairs5. Shri Jyotiraditya Madhavrao Scindia Minister of State in the Ministry of Commerce and Industry6. Smt. D. Purandeswari Minister of State in the Ministry of Human Resource Development7. Shri K.H. Muniappa Minister of State in the Ministry of Railways8. Shri Ajay Maken Minister of State in the Ministry of Home Affairs9. Smt. Panabaka Lakshmi Minister of State in the Ministry of Textiles10. Shri Namo Narain Meena Minister of State in the Ministry of Finance11. Shri M.M. Pallam Raju Minister of State in the Ministry of Defence12. Shri Saugata Ray Minister of State in the Ministry of Urban Development13. Shri S.S. Palanimanickam Minister of State in the Ministry of Finance14. Shri Jitin Prasada Minister of State in the Ministry of Petroleum and Natural Gas15. Shri A. Sai Prathap Minister of State in the Ministry of Steel16. Smt. Preneet Kaur Minister of State in the Ministry of External Affairs17. Shri Gurudas Kamat Minister of State in the Ministry of Communications and Information Technology18. Shri Harish Rawat Minister of State in the Ministry of Labour and Employment19. Prof. K.V. Thomas Minister of State in the Ministry of Agriculture and Minister of State in the Ministry

of Consumer Affairs, Food and Public Distribution20. Shri Bharatsinh Solanki Minister of State in the Ministry of Power21. Shri Mahadev S. Khandela Minister of State in the Ministry of Road Transport and Highways22. Shri Dinesh Trivedi Minister of State in the Ministry of Health and Family Welfare23. Shri Sisir Adhikari Minister of State in the Ministry of Rural Development24. Shri Sultan Ahmed Minister of State in the Ministry of Tourism25. Shri Mukul Roy Minister of State in the Ministry of Shipping26. Shri Choudhury Mohan Jatua Minister of State in the Ministry of Information and Broadcasting27. Shri D. Napoleon Minister of State in the Ministry of Social Justice and Empowerment28. Dr. S. Jagathrakshakan Minister of State in the Ministry of Information and Broadcasting29. Shri S. Gandhiselvan Minister of State in the Ministry of Health and Family Welfare30. Shri Tusharbhai Chaudhary Minister of State in the Ministry of Tribal Affairs31. Shri Sachin Pilot Minister of State in the Ministry of Communications and Information Technology32. Shri Arun Yadav Minister of State in the Ministry of Heavy Industries and Public Enterprises33. Shri Pratik Prakashbapu Patil Minister of State in Ministry of Youth Affairs and Sports34. Shri R.P.N. Singh Minister of State in the Ministry of Road Transport and Highways35. Shri Shashi Tharoor Minister of State in the Ministry of External Affairs36. Shri Vincent Pala Minister of State in the Ministry of Water Resources37. Shri Pradeep Jain Minister of State in the Ministry of Rural Development38. Ms. Agatha Sangma Minister of State in the Ministry of Rural Development q




28 YOJANA July 2009

Sustaining Urban Infrastructure

iNfraSTruCTurE

HE NUMBER of people living in India’s urban areas is rising rapidly. The country’s urban population, which was 109 million in 1971, has

grown to over 300 million at present (2009). Growth of urban population without concomitant investment in infrastructure exerts tremendous pressure on systems such as water supply, sewerage and drainage. Increasing quantities of uncollected solid waste poses serious threat to the health of citizens. Vanishing urban spaces such as parks and open areas lead to urban congestion and the ever-growing traffic on city roads creates daily traffic snarls. Lack of maintenance of existing infrastructure further adds to the pressure on civic services. According to the Eleventh Plan document, in 2001, 50.3% of the urban households had no piped water within their premises and 44% of them were devoid of sanitation facilities. The challenge is to address the infrastructure deficit by mobilising public as well as private sources of funds.

T

The author is Professor, National Institute of Urban Affairs, New Delhi.

JNNURM, therefore, provides a unique opportunity to cities to not only

get substantial funds for urban infrastructure

development but to transform cities and

make them better places to live

Usha P Raghupathi

Urban areas make a significant contribution to the economy of the country. According to the 11th Five Year Plan document (Vol 3, Chapter 11) the urban sector contributes about 62%–63% of the GDP and this is expected to increase to 75% by 2021. It further states that “Indian cities will be the locus and engine of economic growth over the next two decades, and the realization of an ambitious goal of 9%–10% growth in GDP depends fundamentally on making Indian cities much more livable, inclusive, bankable, and competitive”. There is an urgent need to ensure that good quality water supply, sanitation, solid waste management, roads and public transportation are in place to support this growth. The efficiency with which the cities are managed will determine the rate of the country’s economic growth.

The Government of India has, in the past, provided funds for infrastructure through various schemes and programmes, but it was increasingly being realized that without bringing about reforms

rEfOrmS




YOJANA July 2009 29

in the urban sectors, such funding will not be sustainable. Since the 1990s, the Government has initiated several reforms aimed at strengthening urban local bodies (ULBs), which are the bodies mainly responsible for provision of civic infrastructure.

Reforms in the urban Sector in India

T h e 7 4 t h C o n s t i t u t i o n Amendment Act, 1992 was a major s t ep to decen t ra l i ze urban governance and provide c o n s t i t u t i o n a l s t a t u s t o ULBs. This reform aimed at improving governance through decentralization. This and other reforms initiated by the Government since 1990s mainly dealt with the restructuring and redefining the role of the ULBs. Further push to reforms came with the realization that the traditional ways of funding infrastructure projects through plan and budgetary allocations is not sufficient to finance the requirement for infrastructure investment. The ULBs have to find ways of mobilizing funds from other sources such as accessing capital markets. This would necessitate credit rating of ULBs and the financial instruments they issue. Reforms are essential to improve the credit worthiness of ULBs.

In the union budget 2002-03, the Central Government announced two fiscal incentives to accelerate the reform process: 1) The Urban Reforms Incentive Fund (URIF); and 2) The City Challenge Fund (CCF). Both URIF and CCF had an initial allocation of Rs. 500 cr. each. Both these were set up to provide reform linked assistance to states and have been subsumed under JNNURM. Other reforms have emphasized public-private partnerships as a means

of financing and managing urban services.

Jawaharlal Nehru National urban Renewal Mission (JNNuRM)

In response to the investment requirements of the urban sector in the country, the Government of India launched the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) on 3rd December 2005. The Mission has a provision of Rs.50,000 crores for investment in urban infrastructure for 63 mission cities, which will be made available as reform linked Central assistance over a period of seven years beginning from 2005-06. Along with JNNURM, a parallel funding arrangement has been made for the other cities and towns of the country under UIDSSMT (Urban Infrastructure for the Development of Small and Medium Towns and IHSDP(Integrated Housing and Slum Development Programme). The difference between JNNURM and the other infrastructure funding initiatives of the Government in the past is the linking of reforms to funding. JNNURM seeks to incentivize policy and institutional reforms, leading to improved service delivery and governance in the Mission cities. The emphasis on reforms is to ensure improvement in urban governance so that the urban local bodies (ULBs) become financially sound and self-sustaining and deliver services efficiently.

Each c i ty seeking funds under JNNURM has to sign a Memorandum of Agreement (MoA) which is a tripartite agreement between the ULB/parastatal, the State Government and the Central Government. The MoA lists 23 reforms and the states/ ULBs have to indicate a time schedule within which each of the reforms will be

achieved during the seven-year period of the Mission.

There are two sets of reforms under JNNURM - mandatory and optional. Both sets of reforms are compulsory. Optional reforms only provide an option to the states and ULBs to select any two reforms in any given year.

The reforms under JNNURM are as follows:

Mandatory Reforms

At the Level of ULBs and Parastatal Agencies

• Adoption of modern double entry accrual-based system of accounting in ULBs and parastatal agencies.

• Introduction of of e-governance using IT applications, such GIS and MIS for various services provided by ULBs and parastatal agencies.

• Reform of property tax with GIS – the collection efficiency to reach at least 85 per cent.

• Levy of reasonable user charges by ULBs and parastatals with the objective that the full operation and maintenance cost is collected.

• Internal earmarking of funds, within ULB’s budgets, for basic services to the urban poor.

• Provision of basic services to the urban poor including security of tenure at affordable prices, improved housing, water supply and sanitation.

At the Level of States

• Imp lemen ta t i on o f 74 th Constitutional Amendment Act.

• Repeal of Urban Land Ceiling and Regulation Act (ULCRA).




30 YOJANA July 2009

• Reform of Rent Control Laws.

• Rationalisation of Stamp Duty to bring it down to no more than 5 per cent

• Enactment of the Publ ic Disclosure Law to release q u a r t e r l y p e r f o r m a n c e information to all stakeholders.

• Enactment of the Community P a r t i c i p a t i o n L a w t o ins t i tu t iona l i se c i t i zen’s participation in urban areas.

• Associating ULBs with “city planning function”.

Optional Reforms (common to States, ULBs and Parastatal Agencies)

• Revis ion of byelaws to streamline the approval process for construction of buildings, development of site etc.

• Simplification of legal and procedural frameworks for convers ion of land f rom agricultural to non-agricultural purposes.

• Introduction of Property Title Certification System in ULBs.

• Earmarking at least 20-25 per cent of developed land in all housing projects (both public and private agencies) for EWS and LIG category.

• Introduction of computerised process of registration of land and property.

• Revision of byelaws to make rain-water harvesting mandatory in all buildings

• B y e l a w s f o r r e u s e o f wastewater.

• Administrative reforms

• Structural reforms.

• Encouraging PPP.

R e f o r m s a r e c e n t r a l t o JNNURM and the fund ing available under it is an incentive to change. Reforms are crucial for sustainability of investments in the long run. The reform package when viewed as a whole is expected to transform ULBs, their finances and the way they function. The infrastructure created under JNNURM and the implementation of reforms is also expected to transform the urban areas. Reforms in Rent Control laws, repeal of ULCRA, reduction in stamp duty, property titling and revision of bye-laws has the potential to change the land and housing market dramatically.

Bringing reforms in property taxation will substantially increase the revenue generating potential of this tax and improve the quality of services in cities. Another reform, which would have long lasting effect on sustainability of infrastructure, through maintenance, and lead to improvement in the quality of services is the levy of user charges to recover operation and maintenance cost of service provision.. The Public Disclosure L a w a n d t h e C o m m u n i t y Participation Law together can make the ULBs accountable by bringing transparency in ULB’s functioning and by building community pressure groups to demand accountability. Making rainwater harvesting compulsory in buildings and encouraging recycling of wastewater will go a long way in easing the critical water situation in urban areas. Earmarking of funds for the urban poor in ULB budgets and earmarking 20-25% of developed land in all the housing projects for the economically weaker sections will address the acute shortage of housing and access

to basic services for this strata of society. Encouraging public-private partnerships in urban infrastructure provision as well as in management will not only bring in the much required funds from the private sector but will also bring in efficiency in management of services.

What will reforms achieve?

The reforms under JNNURM aim to achieve the following:

• Transparency and accountability in urban governance

• Inclusive planning and universal access to basic services

• Making ULBs financially sustainable and improving their revenue base

• Sustaining infrastructure by providing for operation and maintenance expenditure

• Encouraging public-private partnerships and bringing private investment into urban infrastructure and services

• Using information technology for improving governance

• Enhancing capacity of municipal governments to govern and deliver services

• I m p r o v i n g t h e u s e a n d availability of water resources

• Making ULBs efficient and effective

JNNURM, therefore, provides a unique opportunity to cities to not only get substantial funds for urban infrastructure development but to transform cities and make them better places to live. Reform is the key to such transformation. q





YOJANA July 2009 31

A 'Dropout’ Innovator

ShOdh yaTra

N 1958, in a small village Babapur in district Amreli, all the efforts of engineers to start a new water pumping machine had failed. On the

insistence of a villager, a 12-year old boy from amongst the curious villagers, was allowed to tinker with the machine and to everyone’s surprise, he made it work! This boy, Ravjibhai Savaliya grew up to be known as a ‘maverick innovator’ in Gujarat. Always concerned with finding solutions to social problems, Late Ravjibhai showed signs of Creativity from an early age. As a small boy, he often stared at the new electronic toys in the village exhibitions and thought of making them himself one day. He brought recognition to his school, Sarvodaya, by participating in various Science fairs. But then, there came a time when his family could not afford his school fee of 50 paisa. Ravjibhai had to leave his studies. However, his teachers Gunubhai Purohit and Hasuben, recognizing his aptitude towards science and his potential to innovate, sent him to Mumbai to do a vocational course at ITI.

In 1966 he returned to Babapur with the dream of setting up

I

The story of his achievements and failures in

market place and his deep human values remind

us of the need to see grassroots innovators not

just as tinkerers/mechanics but

also as philosophers

a laboratory, which he did, in due course of time, so that his mechanical innovations could minimize hardships of the villagers. He often explained the working of the farm and water machineries to the folks around and fired their imagination. Unfortunately he had to leave his village due to the lack of proper facilities and his susceptibility to water borne infections there.

After shifting to Ahmedabad in 1968, he stayed with his cousin, Ramjibhai Nakrani. After getting cured of his illness, Ravjibhai started earning Rs 60 per month by working as an assistant in an electric supply store. The flame of scientific spirit could not be smothered for long and soon he set up a workshop along with his cousin. They carried on with the experiments that he had abandoned in the village. Joyfully dealing with the vicissitudes of experimental life, the cousins became the best of friends!

In 1971, after getting married to Triveniben, Ravjibhai started an electrical shop. His wife became a symbol of strength in the new

Diamond Tawa




32 YOJANA July 2009

chain of struggles. The electrical shop had to be closed as there was not much profit. Ravjibhai innovated his first ‘social-appliance’ Chaas Valona Yantra (Buttermilk Churning Machine) in 1972. The response to his first innovation was an outright rejection. Triveniben Savaliya narrated this story with tears, how those were the most difficult days. Ravjibhai had drained all his resources and had huge loans to be repaid. He had asked his wife to pack the bags to return to the village. But his uncle encouraged them to stay back. He sold his ancestral land to help Ravjibhai start anew.

Later, the Buttermilk Churning Machine was improved upon and in 1974 he developed a commercially suitable design. But selling an electrical gadget to replace the age old wooden butter churner was tougher than all his previous struggles. The traditional churner was integral to the cultural set up of the state. All types of stories preceded its sales. People said that women could die of electrocution; some said that buttermilk from it was poisonous.

Pa t i ence and cons i s t en t communication with the villagers started bearing results. Triveniben shared an incident of how once there was an order of 15 machines from a village near Surat and all the money that Ravjibhai had, went into manufacturing those

machines. There was not enough money to even hire a tempo to go to the village. He along with his cousin Babubhai hitched a lift in a tempo that was going in the same direction, to deliver the machines. With no money they were dropped outside the village. They carried the machines on their head and walked through two feet deep silt to sell them.

With determination, integrity and commitment, Ravjibhai made some money and restarted his workshop. The buttermilk churning machine soon became a household object. In 1977, the Savaliya Research Centre was started. This gave the impetus to his vision of rendering social service. He always tried to find the scientific answers to the daily chores and problems. And all his thoughts led to a single question, “Will this be useful for the society?”

A Social Innovator

Ravjibhai was an innovator for the working class and all his innovations were aimed at reducing drudgery. These were centered on the problems faced by the villagers and hard working people. Through sheer self-learning he built his knowledge base of renewable energy - wind, water, aerodynamics and pressure. Energy conservation was also his passion and a frequent trigger for innovation. His innovations are as follows:

I. Butter Milk Churning Machine (1974) - It reduced three hours of churning buttermilk by hands to just 20 minutes of work for women. In the history of thousands of years, the rural women who would sleep late doing household chores and get up early to churn the butter, got freedom from tiring, strenuous hours.

II. Wheat Thresher (1974-76) - This thresher reportedly saved 80 percent energy as compared to the old models.

III. Foot Pump (1984) - Looking at the problem faced by the people in filling the air in the tyres, Ravjibhai innovated a foot pump. With its help even a child can pump air in the tyres of the tractors. He was awarded by the then President of India, Giani zail Singh for this innovation.

IV. Electrical Furnace Type Wood Based Crematorium (1991) - This furnace saved wood significantly. Gujarat Energy Development Association (GEDA) subsidized it and it is now widely used. Crematorium designed by him has sufficient air flow for better aeration from all three sides (bottom and two side walls) so that there is proper burning of wood.

V. Water Harvesting Methods (1998) – To recharge the ground water, Ravjibhai developed low cost techniques for water harvesting. He got a tank of one lakh liter capacity built for the same purpose in his house.

VI. Electrical Burner (1999) -Using this, the diamond industry has been saving power worth Rs. 12 crore every year.

VII. Diamond Polishing Lathe (2001) - Used in diamond industry, this lathe replaced old machines, and saved energy up to 90 megawatt, equal to a small power station.

VIII. Artificial Rain (2003) – He conducted artificial rain experiments in Kutch, Saurashtra and Mumbai. In his “Cloud Seeding” experiment he sprinkled

Foot Pump




YOJANA July 2009 33

the Silver Iodide (AgI3) on the burning coal. Instead of copying expensive experiments of Israel, he devised the economical method of dispersing the silver iodide on the coal.

IX. Agate Grinding Mill (2006) - This machine has helped thousands of workers who used to suffer with fatal silicosis disease in the Agate (akik - a type of chalcedonic quartz that has irregular or curved bands of color.) industry, in the Khambat region of Gujarat, famous for the gems industry. While polishing the gems, the workers used to inhale the dust of the stones, causing silicosis and death in a few months. The Agate Grinding Mill has a vacuum pump that pulls the dust in the opposite direction.

X. Ribbed Tawa (Griddle) (2007) The Indian traditional iron tawas are very poor in thermal efficiency and also cause wastage of fuel. The tawa innovated by

Ravjibhai saves energy through a ribbed bottom. The surface area increases and the cooking is also done evenly.

XI. Permanent Magnet Direct Current (PMDC) Motor – A brushless motor, as its name suggests, is a motor without brushes, slip rings or mechanical commutater, such as are required in conventional D.C. motors. Outer Rotor Brushless P.M.D.C. looms motor is believed to have high efficiency, which minimizes the electricity bills, besides bringing down the fabric cost. It gives much higher torque than other devices, which is a prior requirement for power loom. It does not heat up much and hence the need for lubrication, replacement of ball bearings, windings, and maintenance cost, etc., is reduced. The outer rotor also works as cooling fan.

Domestic floor mill (1990), oil free compressor (2005), battery bicycle, water generated engine, wind mill, etc., are all the

other translations of his social innovations.

A Philanthropic Rationalist

Ravjibhai used to call himself “a mere matric fail”. But as his family narrates, he was always studying, finding solutions and innovating. Einstein and Thomas Edison were his idols. Making the students aware of the world of science used to be his priority. He visited schools to give lectures and spot financially weak, but intelligent students and helped them. Garnering knowledge and spreading it were the most important endeavors of his life. His wife tells how he would get up in the middle of the night and call up his 11-year old grandson to answer his query, after a whole day of searching in the Science encyclopedias. Once there was a loud, thunderous sound in the skies in Saurashtra. People connected it to some divine intervention; scientists took time to decipher it. It was Ravjibhai who connected that sound to the supersonic jets that had just been introduced.

Ravjibhai used to call himself Eklavya, the epical Mahabharata hero who pursued training in archery, in spite of lack of resources and rendered his most important art to his teacher as obeisance. This modern Eklavya gave to the society much more than he received. His last wish to construct a ‘Science Temple’ still remains a dream. His son Vinay Savaliya told that the concept of Science Temple was to attract millions of people, who would visit temples, not Science Museums. He wanted to keep at least 1000 prototypes of his inspiration. q

(Email :[email protected]/ www.nifindia.org )

Ribbed Tava (Griddle)




34 YOJANA July 2009

Irrigation in India

iNfraSTruCTurE

NDIA HAS been expanding its irrigation infrastructure ever since the beginning of the era of planned development though the pace of such expansion has been rather

unsteady. The emphasis laid on the promotion of irrigation as a means of boosting agricultural production in the first few five-year plans somehow got diluted subsequently, especially after the worries about food insufficiency were over. Annual budgetary allocations by states for irrigation either declined, or stagnated in some cases, in real terms, resulting in deceleration in the rate of growth of irrigation infrastructure. This trend is now sought to be reversed.

The country’s total irrigation potential from all available sources of water, earlier believed to be about 113.5 million hectares, is now reckoned at 139.89 million hectares. Of this, about 58 million hectares of irrigation potential can be created through the major and medium irrigation projects which are taken up largely through public investment, and as much as about

I

The author is a veteran agricultural journalist currently working as Consulting Editor of the Business Standard.

The flagship programme

Bharat Nirman resulted in actual

creation of irrigation capacity

of 1.68 million hectares in 2005-06

and another 1.94 million hectares

in 2006-07

Surinder Sud

81 million hectares through minor irrigation projects where the bulk of the investment comes from the private sources.

Till now, the country has managed to create a substantial infrastructure of various kinds of dams, barrages, canal networks and is like to put in place a total capacity to store about 200 billion cubic metres of water which can be used for irrigation and various other purposes, including production of hydro power.

The actual irrigation potential created till now has risen from 22.6 million hectares in 1950-51 to around 102.8 million hectares. Of this, about 42.4 million hectares of irrigation potential has been created through major and medium irrigation projects and over 60.4 million hectares through minor irrigation projects. Thus, around 73.5 per cent of the total exploitable irrigation potential has actually been harnessed.

However, a sizable part of the created potential remains unutilized or underutilized for various reasons, the most significant of which

ChallENgES




YOJANA July 2009 35

are inadequate down-the-line water conveyance system in the irrigation command areas and poor maintenance and operation of irrigation works.

Official estimates put the actual utilisation of the created irrigation potential at around 87.2 million hectares – 34.4 million hectares in the major and medium irrigation sector and 52.8 million hectares in the minor irrigation sector. This means that less than 85 per cent of the irrigation potential created through heavy investment is actually been gainfully utilised; the rest is lying idle.

Indeed, the deceleration in the expansion of irrigation infrastructure, especially since the 1980s, has been a matter of real concern. The rate of increase in gross irrigated area dropped from over 2 million hectares a year earlier to below 0.5 million hectares a year by the late 1980s and early 1990s. This slowdown in the creation of fresh irrigation capacity was, in fact, acknowledged by the government in the Economic Survey 2007-08 which said: “The pace of creation of additional irrigation potential came down sharply from an average of about 3 per cent per annum during 1950-51 to 1989-90 to 1.2 per cent, 1.7 per cent and 1.8 per cent per annum, respectively, during the eighth, ninth and tenth five-year plan periods.”

A similar deceleration was witnessed in the rate of utilisation of created irrigation potential, though there has been some improvement on this front in the 9th and 10th plans. Capturing these trends, the Economic Survey 2007-08 said: “The rate of growth of utilisation of the potential created declined to 1 per cent per annum during the 9th plan period and improved to 1.5 per cent per annum during the 10th plan period. The average rate of utilisation remained lower than the average annual addition to the

irrigation potential resulting in the cumulative utilisation witnessing continuous erosion. This not only amounts to an inefficient utilisation of funds, but also a foregone income from irrigated lands.”

It is, therefore, clear that the gap in the creation and actual gainful utilisation of the irrigation potential has steadily been rising rather than narrowing, thus turning part of this massive investment unproductive. Concern was expressed over this trend by even the National Development Council’s (NDC) sub-committee on agriculture and related issues in its report submitted in May 2007. It said: “Utilisation of irrigation potential created over the different plan periods through major and medium projects shows a decreasing trend. The utilisation gap (6.04 million hectares) at the end of the IX plan is of the order of 16.30 per cent which is a matter of concern as the cost of creation of irrigation potential through major and medium projects is of the order of Rs 1.2 lakh per hectare during the IX plan and thus an amount of Rs 72,000 crore remains blocked.”

However, the capacity utilisation has been relatively better in the minor irrigation works (all Ground Water and Surface Water Schemes having a Cultural Command Area (CCA) of up to 2,000 hectares). Such works are taken up mostly by individuals and cooperatives of the farmers, with the help of institutional finance and through own savings. Till the beginning of the 6th plan, the utilisation of the created potential (estimated at about 30 million hectares) was almost 100 per cent. Subsequently, however, it began slipping but the lag was seldom as large as in the case of the major and medium irrigation projects. Till the end of the 9th plan, a total irrigation capacity of 56.9 million hectares had been created and over 49 million hectares of it

was actually utilised as well.

Resource crunch has, indeed, been the bane of the irrigation sector. Water being a state subject and the fiscal health of most states being often far from satisfactory, the state governments have usually been unable to allocate as much funds for irrigation as are needed for timely completion of the projects under implementation and the smooth maintenance and operation of those already commissioned.

In recent years, the irrigation sector has been adversely affected by environmental issues as well as those concerning the rehabilitation of displaced populations. The controversies over these issues, accompanied often by prolonged agitat ions and l i t igat ion by environment activists and voluntary organisations, have negatively affected the implementation of various projects, delaying them for years, sometimes even decades. This results in substantial escalation in cost, further slowing down project implementation.

Numerous river valley projects, including multi-purpose and irrigation projects, have been lingering on for years, spilling over from one plan to another. As many as 171 major projects, 259 medium projects and 72 extension, renovation and modernisation schemes were reported to have spilled over from the 8th plan to the 9th plan. Of these, five projects were pending since the 1st plan, seven projects from the 2nd plan, 12 projects from the 3rd plan, 18 from the 4th plan and 20 from the 8th plan. The spillover cost of these pending projects was estimated at a whopping Rs 75,690 crores (Economic Survey 2005-06).

To expedite completion of the on-going irrigation projects, especially those which have been lagging behind schedule for want




36 YOJANA July 2009

of adequate funds, the government launched and Accelerated Irrigation Benefit Programme (AIBP) from 1996-97. Under this scheme, the Centre extends financial assistance to the states to facilitate the completion of the long pending projects on which substantial work has already been done. The norms of providing such assistance, which used to be entirely in the form of a loan from the Union government to the state government in the beginning, were modified in 2004-05 to make part of it as grant and the rest as loan.

Under the AIBP, a total sum of Rs 24,867.40 crores was provided to the states as Central grant and loans for the completion of infrastructure of 229 major and medium irrigation projects and as many as 6,205 minor irrigation schemes using surface water till January 2008. This has facilitated completion of 91 major and medium projects and 4,605 minor projects. An addition sum of Rs 3,127.5 crores was released by the Centre for the AIBP in 2008-09.

Apart from this, another national project for ‘repair, renovation and restoration of water bodies’ was launched by the government in 2005 to rehabilitate the irrigation infrastructure that has gone into disuse for lack of maintenance. Its cost, estimated at around Rs 300 crores, was stipulated to be shared by the Centre and the states in the ratio of 3:1. This scheme was meant to renovate water bodies having cultivated command area of up to 2000 hectares in 26 districts of 15 states. The Centre had released Rs 179.3 crores as its share of expenditure under the scheme up to November 2007 to facilitate the repair of 1,098 water bodies.

Significantly, irrigation was made one of the six components of the government’s flagship programme Bharat Nirman in 2004. The objective was to create irrigation potential of 10 million hectares in four years (2005-06 to 2008-09). Of this, an additional irrigation potential of 4.2 million hectares was proposed to be created by completing the identified irrigation projects which were at the last stages of construction. Another 1 million hectare capacity was mooted to be created through extension, renovation and modernisation of existing schemes and also by introducing more efficient water management practices. The remaining target was to be achieved through measures such as expanding and expediting on-going minor irrigation projects and tapping the available groundwater for irrigation in the areas where this source had not been adequately exploited. This programme resulted in actual creation of irrigation capacity of 1.68 million hectares in 2005-06 and another 1.94 million hectares in 2006-07. q

(E-mail : [email protected]) YE

-7/0

9/03




YOJANA July 2009 37

dO yOu kNOw?

Google, Yahoo, Khoj, Lycos … all internet users make extensive use of these and

other such search engines. At the click of a mouse, you have the latest information available on virtually anything and everything you want to know. What exactly are these search engines and how do they work ?

What are internet search engines?

An internet or web search engine is a tool that helps you to search for information on the World Wide Web. These are special web sites that use automatic tools called spiders or robots to index web pages of registered sites, looking for and identifying keywords. Users can search the index created by typing in keywords to specify their interest. The Hits or the results of the search may consist of web pages, images, information and other types of files.

Web Crawler that came in 1994 was the first full text crawler based search engine.

How do search engines work ?A search engine works in

three stages. Stage one or Web Crawling involves an automated web browser or crawler (often referred to as a spider), “crawling” through every available web link and accessing the data available in various websites/ files/databases. The second stage involves analyses of the information and its Indexing. The indexing program identifies the text, links, and other content in the page and stores it in the search engine database's files. Words may be picked up from titles, headings or other fields for this indexing. Some engines, like Google, may store all or part of

WHAT ARE INTERNET SEARCH ENGINES?

the pages they encounter, while others like AltaVista store every word from each page they find. In the third stage of Searching, the user enters a query in the form of keywords. The search engine matches this query with its indexed pages and provides a list of best matching web pages according to the requirement of the searcher.

How did the search engines develop ?

Before web searches became possible, there was a time when all web servers would be listed on a central server. As the numbers of web servers increased, it was not possible to list them all. The earliest search tools of early 1990s (Archie, Jughead and Veronica) involved downloading of the directory listings of all the files located on File Transfer Protocol) sites, and creating a searchable database of file names. Probably the first web robot was the World Wide Web Wanderer which came in 1993. Another search engine, the Aliweb came in 1993. It was not based on a web robot, but depended on web administrators to notify the existence of index files in particular formats. Jump Station released in 1993 was the first web search that combined the three stages of web crawling, indexing and searching as we know today, but its search was limited to titles and headings. Now there are a host of search engines available, like Google, Yahoo, Live Search, Exalead Altavista, Lycos, GoPubMed (for medical subjects), Guruji, Khoj (India specific)

How can a website / page be made available for search by a search engine ?

Linking of pages is very important in the search operations. The web spiders"crawl" the

web, finding pages for potential inclusion by following the links in the pages they already have in their database. If a web page is never linked from any other page, search engine spiders cannot find it. So in order to make a page available for search by a search engine, it needs to be linked to other pages. Alternatively, somebody will have to submit its URL for inclusion. All major search engines offer ways to do this.

How relevant are the search results ?

When a user enters a query/ keyword, the search engine may find millions of sites where the said keywords appear. The usefulness of a search engine depends on how effectively it sorts out the hits and Ranks them so that the most important and relevant sources / web sites get listed first. The basis for such ranking may vary between engines, and also over time, but the search engine that best understands the need of its users is obviously the most useful.

What is a Metasearch Engine ?A meta-search engine is a

search tool that allows you to search several search engines simultaneously. Your are required to enter your query only once – the meta search engine then sends it across to various search engines and aggregates the results into a single list or displays them according to their source. Metasearch engines operate on the premise that the Web is too large for any one search engine to index it all and that more comprehensive search results can be obtained by combining the results from several search engines. q

(Compiled by Vivekanand Jain)




38 YOJANA July 2009

LECTRICITY IS a critical infrastructure for socio-economic development of the country. The level of per capita electricity

supply is a good indicator of the level of economic development. Although per capita consumption of electricity in India has increased over the years from 16 units in 1947 to 665 units in 2006-07, it is far below that in other developed and developing countries, being about 1/4th of world average, 1/14th of OECD countries and 1/3rd of China .

The installed generation capacity in India has increased from 1362 MW in December, 1947 to 147965 MW in March 2009, representing compounded annual growth rate of about 8%. However, the growth has not been sufficient to meet the increasing demand in the country and substantial peak and energy shortages to the extent of 12% and 11% respectively prevailed in the country during the year 2008-09.

The National Electricity Policy notified in 2005 under provisions of the Electricity Act, aims to fulfil the increasing demand for electricity. The main objectives of the policy are to supply reliable and quality power at reasonable rates, make electricity available to all household within the next five years, power to all by 2012, per capita availability to over 1000 units by 2012, minimum lifeline consumption of 1 unit per household per day by 2012 and protection of consumer Interest.

To achieve the mission of ‘Power for All’ by 2012, development of Ultra Mega Power Projects (UMPPs) has been identified as a major thrust area. UMPPs are very large sized, approximately 4000 MW, integrated power projects with dedicated captive coal blocks for pithead projects and use of imported coal for coastal projects. Nine UMPPs have been identified (four at pithead and five at coastal locations) by the Central Electricity Authority (CEA) in consultation

Ultra Mega Power Projects

iNfraSTruCTurE

The author is Director (Cost), Ministry of Finance, New Delhi.

Thus setting up of UMPPs is a step in the right direction

to improve the power situation

and help the power sector to

achieve the mission of ‘Affordable Power to All’

Umesh Kumar Shukla

POwEr fOr all

E




YOJANA July 2009 39

with the States. Table below gives a snapshot of the UMPPs.

as its 100% owned subsidiaries, for each of the UMPPs. Boards

Bidding (ICB), preparation of Rapid Environment Impact Assessment

Table 1: Status of Proposed uMPPs

uMPP Power Procurer States Company MW

Project Cost (Rs.

Billion)

Tariff(Rs./ kWh) Status

Pithead uMPPsSasan,Madhya Pradesh

Delhi, Haryana, UP, Rajasthan, Punjab, MP and Uttarakhand

Reliance Power

3960(6x660)

200 1.20 PPA signed. Commissioning expected in 11th /12th Plan.

Tilaiyadam, Jharkhand

Delhi, Punjab, UP, MP, Haryana, Rajasthan, Gujarat, Maharashtra, Bihar and Jharkhand

Reliance Power

4000(5x800)


Akaltara, Chhattisgarh

- - 4000(5x800)

150 - Held up for land and water issues.

Sundergarh, Orissa - - 4000(5x800)

160 - Coal block allocated, Land under evaluation

Coastal uMPPsMundra,Gujarat

Gujarat, Maharashtra, Rajasthan, Punjab and Haryana

Tata Power 4000(5x800)

160 2.26 PPA signed. Commissioning expected in 11th /12th Plan

Krishnapatnam,Madhya Pradesh

Andhra Pradesh, Karnataka, MP and Tamil Nadu

Reliance Power

4000(5x800)


Girye,Maharashtra

Maharashtra, MP, Rajasthan, Karnataka and Chhattisgarh

- 4000(5x800)

160 - Land issues stalled the project.

Tadri,Karnataka

Maharashtra, Kerala, Rajasthan, Tamil Nadu, and Karnataka

- 4000(5x800)


Cheyyur,Tamil Nadu

- - 4000(5x800)


Total 35960 1500Source: Power Finance Corporation Limited website

Regarding tariffs, the Section 63 of the Electricity Act provides that the Electricity Regulatory Commissions can adopt tariffs on the basis of transparent, two stage bidding.

Operational Framework of uMPPs

Power Finance Corporation (PFC) is the nodal agency for initial work. PFC has set up separate Special Purpose Vehicles (SPVs),

of SPVs are chaired by a Director of PFC; their other members are PFC officials, and representatives of the distribution companies of major power procuring states. After selection of the project developer, SPVs are transferred to the selected bidders. SPVs are responsible for a number of activities on behalf of the procurers which include appointment of consultants for preparation of Project Report and for International Competitive

Report, finalisation of tender documents in consultation with states and carrying out tendering process and award of project, acquisition of land, obtaining coal blocks for pit-head projects, getting clearance for water allocation for pithead projects, approval for use of sea water for coastal locations, obtaining clearance from State Pollution Control Board for the project and coal mines followed by environment and forest clearances




40 YOJANA July 2009

from the Central Government, obtaining geological reports/ other related data for the coal blocks, tie up the off-take/ sale of power

Apart from this the Ministry of Power and the power procuring states are playing a crucial role for the development of UMPPs by coordinating between various concerned Ministries/ agencies of the central government and with various state governments and their agencies in the areas of coal and water linkage, environment and forest clearances, allocation of power from UMPPs, facilitating PPA, proper payment security mechanisms and in implementation of rehabilitation and resettlement plans, providing authorization to PFC/SPVs to carry out bidding process on behalf of distribution utilities, participating in various committees for undertaking the competitive bidding process, etc.

Analysis of uMPPs Framework

Characteristics and Structure

UMPPs are very large projects of about 4000 MW, each requiring an investment of approximately Rs.150-200 billion. The project is awarded on the basis of International Competitive Bidding (ICB) based on levelized tariff for 25 years. The projects are either being set up at coastal sites to have the benefits of shipyards in importing coal or near the pithead for easy access to the coal. UMPPs are structured on BOO basis.

Special Purpose Vehicle

SPVs have been incorporated under the Companies Act, 1956 as a wholly owned subsidiary of PFC for each of the UMPP. After the bid evaluation by the Expert Committee and its acceptance by the Apex Evaluation Committee,

100% of equity shares of SPV are transferred to the successful bidder by PFC after payment of an amount for acquiring shares and taking over its assets and liabilities.

Concession

Government of India has granted various tax exemptions for UMPPs such as full exemption from central excise duty to goods procured for setting up UMPPs, deemed export benefits for supplies to Mega Power Projects etc.

Contractual Framework

After acquisition of SPVs formed for UMPP, share purchase agreement, escrow agreement, hypothecation agreement, and port service agreements are signed between with the bankers, procurers and project developer.

Lower Emission Level

Rather than continuing with sub-critical technology, UMPP would utilise supercritical technology, which would result in lower emission levels and higher fuel-to-electricity conversion efficiency as shown in the following Table:

Performance Guarantee

PPA of UMPPs provides for payment of performance guarantee and liquidated damages by the project company, if certain activities are

not completed within the specified time. For example PPA of Mundra UMPP provides for payment of performance guarantee of Rs.3000 million by the seller in case of non-performance, within the stipulated time, for certain activities such as award of EPC contract for boiler, turbine and generator, completion of financing agreements/ financial closure, possession of land and payment of price to state government authority, providing irrevocable letter acknowledging the rights provided to the lenders, execution of fuel supply agreement etc. In case of non-fulfilment of these conditions, the seller would be liable to furnish additional weekly performance guarantee of Rs.150 million. If seller or procurers elect to terminate the agreement due to non-fulfilment of these activities, the seller would be liable to pay to the procurers Rs.4000 million as liquidated damages to be recovered by invoking the performance guarantee. The agreement also provides payment of liquidated damages to the procurers, if the unit is not commissioned by scheduled date.

Risk Mitigation

Some of the risks mitigation used in UMPPs are:

Fuel Risk

As per PPA of UMPPs at coastal sites, the dollar price of

Table 2: Emission Levels in uMPPParameter Sulphur

Dioxide (SO2)(in TPD)

Nitrogen Oxide(NOx)

(in mg/Nm3)

Suspended Particulate

Matter (SPM)(mg/Nm3)

Indian Emission limit 700 No Applicable Standard

100

World Bank Norm 450 750 50Expected UMPP emission 400 687.6 50TPD = Ton per day, mg/Nm3= milligram per normal cubic meter

Source: Asian Development Bank (2007)




YOJANA July 2009 41

coal would be indexed to multiple international coal price indices. To meet the requirement of coal for power generation and mitigate the fuel supply risk, Tata Power has acquired 30% equity stakes in two major Indonesian thermal coal producers and Reliance Power has acquired three coal mines in Indonesia. Reliance Power and Tata Power are considering a foray into shipping business to mitigate fuel transport risk and to cut the transport cost

Payment Risk

To mitigate the payment risk, PPA provides for adequate payment security to the project company by letter of credit and escrow mechanism. For example PPA of Mundra UMPP provides that procurers would provide to the seller a monthly unconditional, revolving and irrevocable letter of credit for a term of twelve months renewed annually for an amount equal to 1.1 times the estimated average monthly billing based on normative availability for the first contract year and for each subsequent year, equal to 1.1 times the average monthly tariff payments of the previous contract year plus estimated average monthly billing during the current year based on normative availability. PPA further provides for operation of default escrow account in favour of seller. Failure to realize payment through payment security mechanism would entitle project company to sell up to 25% of the contracted power to other parties without losing claim on the capacity charges due from the procurer

Demand Risks

Take or pay contract specifies that in the event, the project’s output is not taken; payment

must be made whether or not the output is deliverable. The demand r isk in UMPPs has been controlled by take or pay provision in PPA providing for minimum off-take guarantee of 65% of the total contracted capacity( Article 1.1 of PPA for Mundra UMPP)

Foreign Exchange Risks

While UMPPs would earn the revenue in Indian currency through sale of electricity to distribution companies, it would require payment in fore ign currency for EPC contracts to foreign suppliers. Tata Power has tied up loan from multilateral funding agencies like IFC and ADP requ i r ing payment o f principal amount of loan and interest payment. This tie-up of foreign loan would manage the requirement of foreign currency for payment to foreign suppliers/ contractor. Reliance Power has raised the equity to finance the UMPPs to avoid the foreign currency risk arising out of foreign currency loan.

Political Risks

Political risks refer to the possibility that political decisions or events in a particular country would cause foreign investors either to lose money or fail to capture their expected returns. In some of the UMPPs, the ADB/ IFC are providing part of the loan/ equity to finance the project. The support provided by the Central and State Governments reduces the uncertainty in the minds of these institutions, which reduces the political risks. Force major clauses are provided in PPAs to

take care of events outside the control of the parties. (Article 12 of PPA for Mundra UMPP)

Total installed electricity generation capacity addition since independence has been 146603 MW out of which 77377 MW was from coal. Nine UMPPs would add thermal capacity addition of 35960 MW in next 5-7 years, which is 25% of total capacity addition and 46% of capacity addition from coal in last 61 yrs. The levelised tariff of UMPP ranges from Rs.1.20-2,33, which is much lower than present generation tariff of around Rs.3-4 per kWh and unscheduled interchange (UI) charges of Rs.10/KWh. UI for a generating station is equal to its actual generation minus scheduled generation. UI for a beneficiary is equal to its total actual drawl minus total scheduled drawl. UI Charges are worked out for each 15 minute time block based on the average frequency of the time block and applicable rates at that frequency. The maximum UI charges of Rs.10.00/kWh are applicable, when average frequency of time block is below 49.02 Hz

The levellised tariff of UMPPs is based on escalable and non-escalable tariff quoted in the bids, which are denominated in Rupee and US$ based on the base exchange rate and inflation rate. Even after considering the inflation and appreciation of US$, the tariff of UMPPs would still be lower than Rs.3/kWh and remain affordable. Thus setting up of UMPPs is a step in the right direction to improve the power situation and help the power sector to tide over energy and peak shortages to achieve the mission of ‘Affordable Power to All’. q

(Email : [email protected])




42 YOJANA July 2009

Watershed for Integrated Rural Development

bEST PraCTiCES

N INDIA millions of rural poor and marginal farmers rely on degraded land and tainted water resources. Often they struggle to manage with a diverse

array of agro-climatic conditions, various production and market risks. Claims are being made that watershed management would ensure supply of water to every field, remove hunger and poverty from underdeveloped rural areas, provide green cover over denuded areas, improve crop productivity, bring in more rains and improve environment. Over the past three decades, our country has bluntly addressed these challenges and made major investments in the area of watershed management through an appropriate mix of technical innovations, participatory approaches and an enabling policy environment. There is certainly evidence of positive impacts in terms of improved soil and water conservation and agricultural productivity in normal rainfall years in regions that have been ignored in the conventional green-revolution- based rural development.

IThere is a need is to convert weaknesses

into strengths and threats into opportunities by involving people

in all management aspects related to conservation

measures

Soubhagya Ranjan Padhi Biswajita Padhy

Watershed is a hydrological unit where runoff empties through a single point. It is an area from which all water drains to a common point, making it an attractive unit for technical efforts to manage water and soil resources for production and conservation. The literal meaning of watershed is a “geo-hydrological unit draining at a common point by a system of streams”. Watershed is regarded as “Natural hydrologic entity that covers a specific area from which the rainfall runoff flows to a defined drain, channel, stream or river at any particular point”.

Malakarbandha village is situated in Koraput district of Orissa. Potangi block of Koraput was selected on priority basis for an integrated and holistic watershed management with the objective to set up an equitable, productive and sustainable people development unit. The Malkarbandha watershed was earmarked as priority-I as per Orissa Remote Sensing Application Centre (ORSAC) in Potangi block. The project was designed and executed as a government programme with financial assistance from central government under Employment A s s u r a n c e S c h e m e ( E A S )

The authors are Faculty in Sociology and Faculty in Economics, Aeronautics College, Sunabeda, Koraput, Orissa respectively.




YOJANA July 2009 43

programme. It had been selected during 1998-99 and envisaged measures for 470 hectares of land with an estimated cost of Rs.17.25 lakhs in a span of four years. But real development activities were started during the month of May, 2000. Since then, the project has effectively managed to strengthen, up-grade and consume the natural resources base in a sustainable manner through engineering methods and catalyzing direct community action besides stabilizing the fragile rural economy.

Success Stories of Malkarbandha Watershed

Prior to the intervention of watershed programme, the villagers were growing Finger-millet and Niger during monsoon and to a small extent Paddy in sub-merged lands. Vegetable growing was insufficient even for domestic consumption need. With the construction of field channel a large extent of land were put into assured irrigation through out the year. The villagers were taught and mobilized to adopt vegetable growing for economic up gradation. Most of the soils in the watershed area are red non-calcareous sandy loam, which are prone to

erosion. Before the intervention of watershed programme, inadequate management of land caused inexorable soil erosion in the area. Forest areas were also rapidly deteriorating because of massive forest destruction. However, after the intervention of watershed, various soil conservation measures and plantation work are being carried out in the watershed areas. Due to lack of awareness, the villagers were not interested in creating forest; rather they were cutting the trees for fuel and fodder. But now, watershed development programme has motivated them immensely to take up new plantation.

One of the major objectives of this watershed project is to provide employment to the needy job seekers in the project area. The economic condition of the labour forces in the watershed area was extremely poor. These landless or marginal farmers depended heavily on wage labour. After implementation of watershed project, 14234 man-days (approximately) have been generated. Out of this SC/ST people have availed 10727 man-days. Women availed 5694 man-days and landless availed 12241 man-days. Community’s participation is essential for the success of any

programme. In Malakarbandh watershed development programme, as per the common guidelines, the people’s participation in developmental activities has been given highest importance. One of the facts observed in the watershed area is that the people’s participation through formation of SHG is good. 70% of the people are organized into SHGs.

N o n - F a r m A c t i v i t i e s f o r sustainable livelihood

As Watershed Development Programme is an integrated approach towards sustainable development of rural poor, non-farm activities like fishery, duckery, pisiculture, goatery, etc., are also encouraged in the project.

Women empowerment has been given highest importance in this Watershed Development Programme. Women have been taken as member in watershed committee, which is the decision making body in the watershed. Further, they have brought into the mainstream of income generation through SHG groups. The SHG groups are earning income by engaging themselves in different activities like duckery/ fishery, vegetable cultivation, broom binding etc., which has synergetic effect for the economic development of the households.

Establishment of nursery is another important achievement of this watershed. A Nursery has been developed in Malkarbandha village. In the Nursery along with fuel and fodder, saplings of fruit bearing vegetable, Neem and other species have been raised. An amount of Rs. 0.45 lakh has been spent towards intensifying of Nursery with an objective that it can provide ample saplings through out the year for mass plantation in the area.

Improvement in the Overall quality of Life

Wa t e r s h e d p r o j e c t h a s improved the overall quality of

Banana plantation by the villagers




44 YOJANA July 2009

life of the rural people through employment generation activities l ike Mushroom cul t ivat ion, Goatery, Poultry, Duckery and Vegetable cultivation, which has provided additional benefit to the villagers besides ensuring

them food security on a sustained basis. At present many other development activities through watershed are also going on in this village for the holistic development. One “Grain Bank” has formed in the village to

address the need of the vulnerable sections. They are storing mostly paddy and finger millet in the grain bank during the harvest season and use the same during the lean season.

Although sustainable livelihood is the major concern of this watershed project, its efforts have also led to substantial increase in the production of food grains, expansion of plantation areas, spreading out forest coverage, effective management of natural resources and empowerment of weaker sections of the area. However there is a need to convert weaknesses into strengths and threats into opportunities by involving people in all management aspects related to conservation measures and repair of structures in post watershed development period. The government is looking forward to create conducive environment for providing optimum benefit to all stakeholders of this project in future. q


A Field Channel of Malkarbandha Watershed

Priority Areas for Government

l Universalize secondary education.l Eradicate all urban slums in 5 yrs.l 50% reservation for women in panchayats and urban local bodies.l Add 13,000MW power each year.l Broadband coverage to reach every panchayat in 3years, 40% rural teledensity in 5 years.l Enact Communal Violence Prevention Bill for special action against communal violence.l Unique ID card for all citizens in 3yrs.l 500 million skilled people by 2022.l FDI flows to be in banking and insurance. PSU banks to be recapitalized and regulator for pension

sector.l Reach banks, schools and credit to minorities. Wakf reforms.l Enlarge NREGA, converge other programmes, consolidate flagship programmesl National Counter-terrorism Centre to be set up to counter Naxalites and Insurgents.l Police reforms for participation of citizenry, community policing

(Courtesy : Newspapers)




YOJANA July 2009 45

Airports Sector Taking Off

iNfraSTruCTurE

OST INDEPENDENCE, the Directorate General of Civil Aviation (DGCA) came to inherit most aerodromes in the country,

barring a few reserved for military aviation under control of the Indian Air Force. Civil aviation in those days meant a few small or medium sized piston engine aircrafts with minimum navigation and landing aids. The war torn airports that DGCA had inherited left immense scope for improvement.

As India advanced along the growth path in the decades that followed, the demand for air as a means of transport grew, and upgradation of aviation infrastructure became imminent. This saw the carving out of an International Airports Authority of India (IAAI) from the erstwhile DGCA in 1972 through an Act of the Parliament, with the mandate to develop four international airports at Delhi, Bombay, Madras and Calcutta, as per standards laid down

P

The author is Adviser (PR), Airports Authority of India, New Delhi.

The growth in investment as also

the inauguration of a record number of terminals in the

recent past can rightfully raise one’s hopes regarding the

future of airport infrastructure in

the country

Gp Capt. D C Mehta

by The International Civil Aviation Organization (ICAO). Another Act in 1985 saw the formation of the National Airports Authority(NAA), with the responsibility to maintain and develop all other civil airports in the country. IAAI and NAA were later merged in 1994, to form the Airports Authority of India (AAI), which is the mainstay of civil aviation in the country today.

As in other sectors in the Indian economy, Public Private Partnership (PPP) has also been experimented with in the aviation sector. The Cochin International Airport Limited was the first private airport to come up in the year 2000. The Greenfield airports at Hyderabad and Bengaluru, and the Delhi and Mumbai airports followed were taken up thereafter.

Infrastructure at Airports

The infrastructure at an airport has many constituents. Some, like the terminal buildings and cargo complexes, runways, aprons and

grOwTh PlaNS




46 YOJANA July 2009

taxiways are obviously visible. Others, like the Communication, Navigation and Surveillance (CNS) infrastructure or the Air Traffic Management (ATM) , may not be as visible, but are of critical importance nonetheless.

Functions of AAI

AAI is responsible for the construction and management of airport infrastructure, which includes planning, designing, deve lop ing , ope ra t ing and maintaining passenger/cargo terminals, and operational areas like runways, aprons and taxiways. It is also responsible for Air Traffic Management and Communication, Navigation and Surveillance infrastructure, that is, the control and management of the Indian airspace and air traffic over a total area of 2.8 million Nautical Miles (NM), over both land and sea and planning , providing, operating and maintaining communication, navigational and surveillance aids.

AAI manages 124 airports in the country, of which there are 12 international airports, 81 domestic airports, 8 custom airports, 23 civil enclaves. In addition to this it also provides CNS and ATM services in the privatized airports at Delhi, Mumbai, Bangalore, Hyderabad and Cochin. AAI provides air navigation infrastructure and air traffic services in the designated airspace.

Infrastructure Development

In order to meet the demands arising out of a rapidly increasing air traffic, a scientific, “ gate to gate” approach has been adopted, so as to ensure safety, regularity and efficiency through strategic

planning and programming of various capacity constraints.

Passenger and Cargo Terminals

For development under this head, 35 non-metro and 23 other airports have been identified, and work is being taken up under two phases. The identified non metro airports where the work has been completed include Amritsar, Aurangabad, Agra, Dehradun, Jaipur, Nagpur, Trichy , Udaipur, and Vishakhapatman. Work is at various stages in the non-metro airports of Ahmedabad, Agatti, Agartala, Baroda, Bhopal, Bhubaneswar, Chandigarh, Coimbatore, Dimapur, Goa ( Dabolim), Guwahati, Imphal, Indore, Jammu, Khajuraho, Lucknow, Madurai, Mangalore, Patna, Portblair, Pune, Rajkot, Ranchi, Raipur, Trivandrum, and Varanasi.

Among airports other than non-metro, work has been completed in Dibrugarh, Srinagar, Calicut, Kullu, Surat, Hubli, Belgaon, Cooch Behar, Akola, Gondia and Pant Nagar. Work remains to be completed in Rajahmundry, Vijayawada, Mysore, Jodhpur, Cuddapah, Shillong, Tezu, Jaisalmer, Puducherry, Leh, Jorhat and Bhavnagar. Cargo terminals too demand continuous monitoring for appropriate upgrades. Accordingly all efforts are being made to improve our cargo-handling capabilities. In keeping with the modern times, Kolkata airport has been provided with a full-fledged, modern cargo handling facility equipped with ASRS (Automatic Storage Retrieval Storage). Similar plans in respect of cargo modernization at the upcoming terminal building at Chennai airport are on the anvil.

Electronic Data Exchange (EDI) has been introduced at all the metro

airports. As regards increasing capacity at major airports, we already have surplus capacity at Kolkata, and on completion of Phase-III, we would have ensured surplus capacity at Chennai too.

CNS ATM

The AAI has been entrusted with the responsibility of providing CNS/ATM services that extend beyond the territorial limits of the country. There have always been efforts to modernize on this front in order to keep pace with the ever changing technology. AAI is gradually shifting from ground based CNS to satellite-based CNS. The development of GPS-aided Geo Augmented Navigation System (GAGAN) is part of this plan. Accordingly, an outlay of more than Rs.1,700 crore for CNS/ATM has been earmarked during the Eleventh Plan period. For the year 2008-09, it is about Rs.380/- crore, which is more than five times the outlay for 2006-07.

The road map to develop CNS/ATM infrastructure has been drawn up. This includes implementation of GAGAN, which is being jointly developed by the AAI and the Indian Space Research Organisation. The demonstration has been successful. Once fully developed, the overall capability of the GAGAN system would include the equatorial ionosphere spatial and temporal variability.

GAGAN will be capable of meeting the International Civil Aviation Organization’s GNSS (Global Navigation Satellite System) SARPs (Standards and Recommended Practices) and it is scheduled to be in operation by 2011/12.




YOJANA July 2009 47

Other in i t ia t ives include integration of 11 Area Control Centres into four or two main enroute control centres, networking of radars, networking of VHF (very high frequency) and HF, establishment of integrated ATS (air traffic service) automation system, and Advanced Surface Movement Guidance and Control System (ASMGCS).

As part of the Performance-based Navigation (PBN) programme of the AAI, RNAV (area navigation) and RNAV Procedures (RNP) have since been implemented at Delhi, Mumbai and Ahmedabad airports.

For a better comprehension of the challenges involved in developing airport infrastructure to meet the

aspirations of the increasing air travelling population, we should take a look at the quantum increase in the number of passengers. This can be gauged from the overall passenger handling capacity of AAI airports. During the year 2003-04 it was 71.4 million and in 2008-09 it rose to 101.2 million. It is on the anvil to further increase the capacity to 178.3 million once the ongoing projects are commissioned by 2010. It would indeed be apt for one to visualise the magnitude of resources required, be it men, material or finance. It may be prudent to restrict ourselves for the time being to the finance aspect only and highlight that the envisaged capital outlay for the 11th Five Year Plan (XI

Plan) is Rs.124,340 million, which in fact is 300% more than the 10th Five Year Plan. During the period 2004-09, AAI has undertaken projects valuing more than Rs.100 million each at 51 airports. Further, during the same period, expenditure on Communication, Navigation and Surveillance Equipment was to the tune of Rs.8000 million.

The growth in investment as also the inauguration of a record number of terminals in the country in the recent past during the months of February & March, can rightfully raise one’s hopes regarding the future of airports infrastructure in the country. q

(E-mail : [email protected] & [email protected]

Telecom Sector : Ringing in a new Era

The telecom sector in India has shown tremendous growth in the last few years.

The Indian Telecommunications network with 430 mil l ion connections (as on March 2009) is the third largest in the world. The sector is growing at a speed of 46-50% during the recent years Following are some of the milestones achieved and targets set :

Expansion of Network

Number of telephones : from 54.63 million on 31.03.2003 to 429.72 million on 31.03.2009.

Wireless subscribers : from 13.3 million on 31.03.2003 to 391.76 million on 31.03.2009.

Fixed line subscribers: from 41.33 million on 31.03.2003 to 37.96 million on 31.03.2009.

Broadband subscribers : from 0.18 million to 6.22 million during the last 5 years.

3G & Broadband Wireless Services (BWA)

The government has decided to auction 3G & BWA spectrum. Allotment of spectrum has been planned through simultaneously ascending e-auction process by a specialized agency. New players would also be able to bid thus leading to technology innovation, more competition, faster roll out and ultimately greater choice for customers at competitive tariffs. The 3G will allow telecom companies to offer additional value added services. BWA will become a predominant platform for broadband roll out services. It is also an effective tool for undertaking social initiatives of the Government such as e-educat ion, te lemedicine, e-health and e-Governance.

B S N L & M T N L h a v e already launched their 3G services. q

Tele density : 36.98 % - Rural – 15.11 %, Urban 88.84 %

The government has set a target for providing mobile coverage to 90 % geographical area and setting up 500 million connections by the year 2010

Rural Telephony

The fixed and WLL connections in rural areas reached 123.51million in March 2009. 85% of the villages in India have been covered by the Village Public Telephones (VPTs). This is in addition to more than 3 lakh PCOs in villages and 2772 Mobile Gramin Sanchar Sewak Scheme (GSS) – a mobile Public Call Office (PCO) service- in 12043 villages. Internet service is being provided by Sanchar Dhabas (Internet Kiosks) in more than 3500 Block Headquarters out of the total 6337 Blocks in the country. The target of 80 million rural connections by 2010 has already been met during year 2008 itself.




48 YOJANA July 2009

Health Infrastructure in Rural India

iNfraSTruCTurE

N F R A S T R U C T U R E ASSETS are the physical structures and networks used to provide essential services to a society.

These tangible assets, and the businesses set up to manage them, can be viewed as the backbone of an economy.

Broadly speaking, infrastructure can be split into two categories – economic, such as transport, utilities and communications, which can be provided efficiently by private agents, and social, which consists of assets and services like health and education, which have strong positive externalities and are either provided free or subsidised.

Hea l th i s a v i t a l soc ia l infrastructure for any society, as it directly affects the well being of its people. Primary health is an important element of health infrastructure.

India’s achievements in the field of health leave much to be

I

The autor is currently pursuing, MBA,University of Lucknow.

Making policies and putting

programmes in place is indeed a

welcome step, but in order to ensure that the desired results are achieved, each

one of us has to play our role

Urmilesh Singh

desired. Despite improvements in maternal, infant child mortality and morbidity rates over the years, the burden of disease among the Indian population remains high. Gastrointestinal diseases, malaria and TB are taking huge tolls on the population, and there is the growing spectre of HIV/AIDS to be reckoned with. This is despite an extensive primary healthcare infrastructure provided by the government, that operates in three tiers of Sub Centres, Primary Health Centres (PHC) and Community Health Centres (CHC). The number of SCc /PHCs/CHCs have all grown over the years. As compared to the 6th Plan Period when there were 84376, 9115 and 761 SC, PHCs and CHCs respectively, there are 145272, 22370 and 4045 SCs, PHCs and CHCs as in March 2007. Yet, the health infrastructure continues to remain inadequate in terms of coverage of the population, especially in rural areas, and grossly underutilized because of the dismal

STudENT SPEakS




YOJANA July 2009 49

quality of healthcare being provided. In most public health centres, drugs and equipments are missing or in short supply, there is shortage of staff and the system is characterized by endemic absenteeism on the part of medical personnel.

Under the three-tier primary health service, each Sub Centre is required to cover a population of 5000 in a plain area, and has one Female Health Worker/Auxiliary Nurse Midwife and one Male Health Worker. Thus, just two persons are expected to provide primary healthcare to a population of 5000. Each PHC, that acts as a referral unit for six SC, is supposed to be manned by one medical officer and 14 paramedical and other staff, and 4-6 beds for patients. A CHC on the other hand, serves as a referral point for 4 PHCs and is supposed to be manned by four specialists- surgeon, physician, gynaecologist, paediatrician, and supported by 21 paramedical staff. It is required to have 30 indoor beds, operation theatre, lab and X-ray facilities.

Ground realities show that most health centres do not have the required number of personnel, medicines and other basic facilities required for them to run smoothly. In terms of personnel, according to statistics of the Ministry of Health and Family Welfare, there is a shortfall of 12.6 % in the deployment of ANMs and 55.4 % in case of Male Health Workers at SCs, and 7.8 % in case of doctors at PHCs. About 4.7 % SCs run without either an ANM or a Male Health Worker. In case of PHCs, 5.3 % run without doctors, 41 %

without lab technicians and 17 % without pharmacists. Same is the case with CHCs, where there is a huge shortage of 64.8 % in the deployment of specialists like surgeons, physicians, gynaecologists and paediatricians.

The situation is further worsened by large scale absenteeism and lack of efficiency among the health providers at these centres, and the lack of uninterrupted and adequate supply of essential drugs. Absenteeism and lack of efficiency result from a system of non-accountability, lack of punitive pressures and ineffective monitoring or periodic evaluation of the skills and performance of the health providers.

As a result, most people in India, even the poor, choose expensive healthcare services provided by the largely unregulated private sector. Not only do the poor face the double burden of poverty and ill-health, the financial burden of ill health can push even the non-poor into poverty. People’s perceptions of ‘free’ care is that of it being of low quality, and therefore, even the available infrastructure is grossly underutilized. Even the private sector, which provides most of the health services in India, is largely unregulated and there is no gate-keeping on the standards of clinical practices adopted. Healthcare requires not only physical infrastructure and equipment, but also skilled and specialized human capital in the form of medical training and qualifications. Given the asymmetry of information between a doctor and his/her patient, low quality

of medical consultancy not only lowers the efficacy of the health system, but can endanger people’s health.

There i s a grea t dea l of variation in the performance of different states with regard to health care infrastructure. Health transition has three components: demographic, which involves lowering of mortality and fertility rates and an aging population; epidemiological wherein the pattern of diseases prevalent in the population changes from communicable diseases to non-communicable diseases such as the chronic diseases of adulthood; and social whereby people develop better ability to self-manage their health and have better knowledge and expectations from the health system. While Kerala, Maharashtra and Tamil Nadu have advanced greatly along the health transition trajectory, the densely populated states of Orissa, West Bengal, Bihar, Rajasthan, Madhya Pradesh and Uttar Pradesh are still in the early part, with the other states falling in between.

The rural healthcare structure is extremely rigid making it unable to respond effectively to local realities and needs. For instance, the number of auxiliary nurse midwives (ANMs) per primary healthcare center (PHC) is the same throughout the country despite the fact that some states have twice the fertility level of others. Moreover, political interference in the location of health facilities often results in an irrational distribution of PHCs and sub-centers. Government health departments are focused




50 YOJANA July 2009

on implementing government norms, paying salaries, ensuring the minimum facilities are available rather than measuring health system performance or health outcomes. Further, the public health system is managed and overseen by District Health Officers. Although they are qualified doctors, they have barely any training in public health management. Strengthening the capacity for public health management at the district and taluk level is crucial for improving public sector performance. Also, there is lack of accountability, which stems from the fact that there is no formal feedback mechanism.

In India, public spending on health is less than one percent of its GDP, which is grossly inadequate. In the year 2003-04, the per capita spending on health came to about Rs 120/-, which is much lower than the level recommended for low income countries. Public investment in health, and in particular in primary healthcare needs to be much higher to achieve health targets, to reduce poverty and to raise the rate of economic growth.

Of la te , the government has taken some positive steps towards improving the health infrastructure and services in the country. Since the Seventh Plan Period, the allocation for health is continuously on the rise, and the government has committed itself to raise public spending on health to two% of GDP. In order to address the inefficiencies and inadequacies of health infrastructure and services in rural areas, the government has

launched the National Rural Health Mission (NRHM)

National Rural Health Mission (NRHM)

The National Rural Health Mission (NRHM) was launched by the Government of India in April 2005. It seeks to provide effective healthcare to rural population throughout the country with special focus on 18 states, which have weak public health indicators and/or weak infrastructure. The NRHM will raise approximately 2.5 lakh village-based ‘Accredited Social Health Activists’ (ASHA) who will act as a link between the health centres and the villagers. One ASHA is to be raised from every village, or cluster of villages, across eighteen states. The ASHA will be trained to advise village populations abou t s an i t a t i on , hyg iene , contraception, and immunization to provide primary medical care for diarrhoea, minor injuries, and fevers; and to escort patients to medical centers. Other components of the programme include a village health plan prepared through a local team headed by the Health & Sanitation Committee of the Panchayat; strengthening of the rural hospital for effective curative care and made measurable and accountable to the community through Indian Public Health Standards, effective integration of health concerns with determinants of health like sanitation & hygiene, nutrition, and safe drinking water through a District Plan for Health, strengthening sub-centre through an untied fund to enable local planning and action and more Multi Purpose Workers (MPWs), strengthening existing PHCs and

CHCs, and provision of 30-50 bedded CHC per lakh population for improved curative care to a normative standard (Indian Public Health Standards), integrating vertical Health and Family Welfare programmes at National,State, Block, and Dis t r ic t levels , technical support to National, State and District Health Missions, for Public Health Management, strengthening capacities for data collection, assessment and review for evidence based planning, monitoring and supervision, formulation of transparent policies for deployment and career development of human resources for health.

The goals of the NRHM include reduction in Infant Mortality Rate (IMR) and Maternal Mortality Ratio (MMR); Universal access to integrated comprehensive public health services; Child health, Water, Sanitation and Hygiene; Prevention and control of communicable and non-communicable diseases, including locally endemic diseases; Population stabilization, gender, and demographic balance; Revitalization of local health traditions and main-stream Ayurvedic, Yoga, Unani, Siddha, and Homeopathy Systems of Health (AYUSH); Promotion of healthy lifestyles.

Making policies and putting programmes in place is indeed a welcome step, but in order to ensure that the desired results are achieved, each one of us have to play our role either as doctors, ANMs, political leaders, medical personnel, or a general human being. q

(Email : [email protected]) [email protected])




YOJANA July 2009 51

bOOk rEViEw

TITLE : NEW FORMS OF uRBAN GOVERNANCE IN INDIA: SHIFTS, MODELS, NETWORKS AND CONTESTATIONS

Author : I.S.A. BAuD & J. DE WITPrice : Rs.850/-Page : 402ISBN : 978-81-7829-905-1

Publisher : Sage Publications, New Delhi, 2008

R B A N I z A T I O N O F F E R S b o t h opportunities as well as difficulties for local governments.

Large scale migration of people seeking work has changed the face of cities as informal settlements with high-density habitations have become prominent across many cities. There has been a steady rise in the number of local and international non-governmental organizations (NGOs) working in various domains of governance, such as poverty, environment, citizen participation and corruption.

Recent debates on changing relationship between the State, Private sector and Civil Society have focused on the reducing role of the State and the increasing importance of the market in providing goods and services to citizens, and the shifting importance of different levels of government, with the role of the national government being reduced vis-à-vis that of local government on the one hand and international governing institutions on the other.

This book is the outcome of a research programme exploring

u the nature of present day urban governance in Indian mega-cities, decentralization, financial, management and partnership in urban environmental services carried by a team of Indian and Dutch researcher. The contribution in this volume dealt with specific aspects of new forms of urban governance in Indian mega-cities, with the social transformation to which they lead in the backdrop of a national economy opening up to outside influence, especially deal with two major process: the movement to bring the government closer to citizens through decentralization and the movement out from government by which the government works with the private sector, civil society groups and local participation in providing services to its citizens.

The edited book under review consists of thirteen scholarly articles including edited article by Baud and Wit attempts to provide wide perception of scope and significance of governance, d e c e n t r a l i z a t i o n , p e o p l e ’s participation, management, policies and role of intermediaries, new forms of governance, contestations and cooperation in urban governance and intervention of the Judiciary.

Urbanization and Social Transformation




52 YOJANA July 2009

The edited book is an excellent informative compilation, having twelve chapters divided into three parts and contributed by eminent Indian and foreign scholars are worth reading.

The edited book starts with excellent overview of urbanization with its pro and cons and tried to explore the nature of present day urban governance in Indian mega-cities as a result of both globalization and internal t ransformation processes. It also attempts to analyze whether new forms of governance for improved services delivery and innovative methods of urban financing had positive implications for the poor and vulnerable sections in Indian cities.

Part I of the edited volume focuses on decentralization which explained the models and instruments in urban decentralization and highlighted the urban governance in India especially in the case of Mumbai. The section also revealed the role of decentralization in Indian cities in which the author assessed the performance of ward committees, especially an inter-city perspective of the committees in West Bengal through institutionalizing people’s participation in urban governance.

Part II of the volume discusses the multi-holder arrangements in public services which described the accountability and performance in multi-stakeholder arrangement for providing specific services such as sanitation or underground sewerage systems via urban environmental management and analyzed two contrasting cases which are used to bring about factors influencing the effectiveness of such arrangements.

The section also described its administrative setup, public policies, planning process, land policy, conflicting issues, slums, NGOs, middle income group networks, lobbies and interest groups, the intermediate level of administration, role of Judiciary, political network etc. in Delhi. It is also explained about new management tools for Mumbai’s solid waste management (SWM) programme, advanced locality management (ALM) programme, slum adoption programme and highway sweeping programme. The section also seeks to highlight key to urban governance in global world, the role of governance and partnership, housing realities of the poor and rehabilitation for the poorer of Mumbai.

The section has made a good efforts to answer that how urban reforms are redefining actors in the city? With providing an in-depth analysis of the various initiatives aimed at implementing new forms of urban governance in capital of Andhra Pradesh and the various state actors such as municipal reforms, property tax reforms, privatizing social waste management services, poverty alleviation and non-state actors like civil society organizations (NGOs) and corporate sector is influencing the planning and development process.

Part III of the edited volume, contestations and urban governance in which the authors seeks to describe the new forms of contestations and cooperation in Indian urban governance. The section tried to present that how in multi-stakeholder arrangement (MSA) the State shifts its responsibility

of provision of infrastructure to various actors who considered it an erosion of their space when entry and exit conditions are open and unregulated. It also analyzed the institutional contestation in urban infrastructure provision in urban India that has been created by the State through the 74th Constitutional Amendment Act. By analyzing various case studies such as Kolkata, Kerala and Delhi resulted that how various forms of cooperation and/or contestation are emerging in urban India.

The section analyzed that evolving role of the judiciary through court judgments shows the contradictions that emerged between the agendas of different players on the scene of urban governance. The chapter also discovered that recent court judgments contributions to reinforcing the perception of slum dwellers as squatters, culprits of the failure of housing policy and urban development. Finally it gives a brief history of Mumbai that how industrialization has been taken place in the city and it emerged as a major economic centre.

The edited volume is a welcome edition and a good source of information on different major cities of India to the limited literature available in the area of new forms of urban governance in which India is still lagging behind. It will be a rich source of information for students and academicians, NGOs, policy makers, corporate and consultancy organizations for better understanding of various urban, economic, development and local issues of governance. q

Krishna Dev [email protected]


