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Services Sector India

Services Sector India

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Published by: 198anupam on Dec 21, 2009
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10/22/2011

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India is according the highest priority to bringing its transport infrastructure to a standard which will
support the rapid growth of the Indian economy. All sectors – road, rail, ports, and aviation – are in
need of massive upgrades and modernisation. Prime Minister Singh indicated in October 2006 that the

country needed investment in infrastructure to the tune of US$320 billion over the coming 5–10 years.

In transport as well as water, sewerage and tourism projects, the government is enlisting private sector
involvement in a major way through Public Private Partnerships. Aside from supplementing scarce

government fnances, foreign investment is bringing management, engineering and design skills.

1

Most private insurance companies are joint ventures between Indian and foreign partners.

Opportunities for Australian Services Providers in India

PAGE 55

Roads

At least US$50–60 billion investment is required over the coming fve years to improve road
infrastructure (Indian Investment Commission 2006a). Private sector investment is being sought,
under build-operate-transfer (BOT) arrangements, to assist with the implementation of the National

Highways Development Project. Several incentives are available to encourage private sector, including
foreign investor, participation. These include up to 100 per cent foreign equity; subsidies of up to

40 per cent of project cost to make projects viable; 100 per cent tax exemption in any consecutive
ten years out of 20 after project commissioning, and the right to retain tolls (Indian Department of
Road Transport and Highways 2006). A number of foreign players, including SMEC (Box 4.1), have

already secured contracts associated with the construction and upgrading of sections of the national
highways network.2

Airports and air services

The government is considering private investment in a further 25 city airports, in addition to leasing

out India’s four major international airports at Delhi, Mumbai, Chennai and Kolkata to private operators
and building new international airports in Bangalore and Hyderabad with private sector participation

(see Chapter 2). Altogether, over US$15 billion is expected to be invested in airport development
over the coming fve years (Indian Investment Commission 2006a).

These projects are likely to generate fow-on opportunities in aviation transport services such as
baggage handling, air traffc control, fre services and navigational technologies. Australia’s capabilities

are recognised as world class in many of these areas. Airservices Australia has already had some

success (see Chapter 4), and a number of other Australian companies are also interested in securing

business in the air transport sector.

Several new, low-cost airlines have commenced operations in the past few years in response to

rapidly growing demand from India’s burgeoning middle class (see Chapter 2). Yet India has limited

skilled resources in a number of aviation services required by these and established airlines, who
are streamlining cost structures. The aviation industry is consequently seeking outside assistance for
a range of services, such as international standards compliance, manual design and management,
compliance documentation, training, aviation security, ground handling and safety systems
development. Melbourne consultancy, Aviation Compliance Solutions, has already begun assisting

India’s aviation industry in this regard (see Chapter 4).

Ports

The National Maritime Development Programme, announced in December 2005, envisages investment
of Rs558 billion (US$12.7 billion) on ports sector projects through to 2011–12. Private sector investment
in constructing, managing and operating berths and terminals is expected to account for two-thirds
of overall investment in the Programme (Indian Press Information Bureau 2005a).

2

See www.nhai.org.

INDIA’S SERVICES SECTOR UNLOCKING OPPORTUNITY

PAGE 56

Many multinationals and domestic players have been involved in new port development; they have

also taken over and are operating existing port facilities. P&O Ports, for example, operates Mumbai’s
new port, Nhava Sheva, the new deep water container port at Mundra, and the Chennai Container
Terminal. Private sector participation has generally been in the form of a build-operate-transfer (BOT)

model, with assets reverting to the port after the concession period. Up to 100 per cent foreign equity
under the automatic route is permitted in projects involving construction and maintenance of ports

and harbours. Ten-year tax holidays also apply.

Environmental infrastructure and services

India also recognises the need to improve its environmental infrastructure, in areas such as waste

treatment and water purifcation, but has only limited funding and management capacity. It is also
yet to develop comprehensive R&D, design and technology capabilities in environmental services.

Since the 1990s, municipalities have encouraged private participation in infrastructure environmental
services, and foreign investment and joint ventures with foreign partners have been increasing

(Sawhney and Chanda 2004; Box 3.1).

box 3.1: sinclair Knight merz

Australian engineering consulting frm, Sinclair Knight Merz, was the managing contractor for

the Bangalore Water Supply and Environmental Sanitation Master Plan Project. The project
aimed to improve local capacity for the delivery of water supply, sewerage and environmental
sanitation services to Bangalore. Particular emphasis was placed on assisting the urban poor
and other vulnerable groups.

Sinclair Knight Merz has also been engaged to carry out the civil, structural, mechanical and
electrical engineering, and project management for the development of a large temple in the
state of West Bengal.

Sourced from www.skmconsulting.com, accessed May 2006

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