Infrastructure Industry

The development of a countrys infrastructure is vital to the growth of its

sectors and the overall economy. Infrastructure primarily comprises of :
Electricity
Roads
Telecommunications,
Railways,
Irrigation,
Water supply and sanitation,
Ports and airports,
Storing facilities
Oil and gas pipelines

Government Policy
The Indian government began to shift its focus to infrastructure
development, as was evident from the 10th and 11th Five Year plans.
According to experts, spending on the sector needs to increase to
more than 10 per cent of GDP by 2017 to achieve and sustain 8 to 9
per cent economic growth.

GDP Growth Rate

The Gross Domestic Product (GDP) in India expanded 4.60 percent in
the first quarter of 2014 over the same quarter of the previous year.
GDP Annual Growth Rate in India averaged 5.82 Percent

GDP Growth Rate

GDP & Infrastructure

Key Factors
1. Awarding a higher number of projects
2. Efficient implementation of tendered projects
3. Assessing the viability of PPP projects

Competition and Infrastructure

Competition principles apply across all sectors
However, certain features distinguish infrastructure sectors:
1. Natural monopoly
2. Network effects
3. Switching costs
4. Heavy capital costs

Competition and Infrastructure

Some infrastructure sectors also have individual characteristics that
affect competition, e.g in electricity:
1. Cannot be stored
2. Relatively inelastic demand
3. Demand fluctuations - within day and inter-seasonal

Competition and Infrastructure

Measures that promote competition:
Vertical separation (unbundling) of natural monopoly from
contestable parts
Horizontal separation to encourage inter se competition and
yardstick competition
Open access (essential facility doctrine)
Remove entry barriers; facilitate entry
Mitigate switching costs (number portability, bank account
portability)
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Government Initiatives
Roads
1. 7,200 km of State Roads as new national highways
2. Other road development projects in the pipeline include existing
national highways network totalling 21,271 km, which are not
covered under any programmes/schemes as of now.
Energy
1. A web-based Electrical Energy Management System, RAILSAVER, was
inaugurated by Mr Kul Bhushan, Member Electrical, Railway Board, in
April 2014. The portal will be used for tackling the challenges of global
warming and sustainability of the environment.

Government Initiatives
Port development project
1. 100 per cent FDI, under the automatic route for port development
projects.
2. A 10-year tax holiday to enterprises that are engaged in the
business of developing, maintaining and operating ports, inland
waterways and inland ports.
Foreign collaboration
1. India and Sudan have good potential for enhancing cooperation in
promoting renewable energy. India also offered assistance for
developing renewable energy resources in Sudan.

Budget 2014 : Key Expectation

Single window clearance system
Infrastructure investment trust ('IIT')
Tax holiday on brownfield infrastructure projects
Cost incurred towards construction development
Minimum Alternate Tax

Depreciation of rupee
Hit infrastructure sector projects dependent on international market
borrowings and imported equipment in a big way
20 per cent slide in the rupee since August would raise the cost of
infrastructure projects substantially
That companies importing equipment through loans taken from
international agencies would not get affected much, as the risks had
already been hedged.
Impact on infrastructure companies would be neutral on their
operating performance, as projects would largely be in India, resulting
in limited benefit from rupee depreciation

Reliance Infrastructure
Indias largest Infrastructure company with turnover (Rs.15690
crore*) market capitalization of over Rss.24450 crore
Company having presence in across the value chain of power business
Generation, Transmission, Distribution, EPC and Trading