India’s infrastructure challenges

Author: Mahendra Ved, New Delhi

The United Nation’s State of the World Cities Report 2012/2013 has ranked Delhi, the Indian capital, 58 and Mumbai, the commercial capital, at 52 out of 95 cities, way below Beijing, Shanghai or any other world-class city.

More than anything else, the rankings reflect India’s poor infrastructure.

Roads in Kolkata and Mumbai constitute 5 per cent and 11 per cent respectively of total urban land, compared to 20–30 per cent in most US cities. Hit the road, and the eerie feeling of being an unsafe pedestrian takes over. With rapid urbanisation, roads are made to feel narrow even as they are widened due to an influx of vehicles. Car sales dropped last quarter, at a time when automakers are launching new models. And this is happening even as India battles rising fuel costs, at home and globally, its woes compounded by diplomatic difficulties of having to reduce supplies from a sanction-hit Iran. Poor public transport systems, which carry only around one-fifth of commuters, make matters worse. With a 19 per cent drop in domestic air travel by large companies, aviation too is facing challenges. The benefits of foreign investment in aviation, the upper limit on which was recently raised to 49 per cent, are still far away.

There are contradictions galore. India began building roads in 4000 BC, and had a road network of over 4,320,000 kilometres in 2011, the world’s third largest. India has 0.66 kilometres of roads per square kilometre of land, which makes the quantitative density of its road network similar to the United States (0.65) and higher than Brazil (0.20) or China (0.16). India’s roads range from modern highways to unpaved roads, and are improving in quality quickly. But because its population is so large, India has less than 4 kilometres of road for every 1000 people.

New industries and urbanisation mean India’s power consumption is increasing. But millions went without energy when parts of the nation’s power grid collapsed — mercifully briefly — in August. Along with China, India is one of the world’s most energy-starved countries. On this point, there is a small but significant silver lining. After years of investment and effort, and despite months of street protests that occasionally turned violent, India’s first nuclear power plant at Kudankulam in Tamil Nadu is close to coming on line and will begin producing power next month. There are many remaining obstacles, but India could soon begin meeting a significant part of its energy needs through nuclear energy.

A study by the Federation of Indian Chambers of Commerce and Industry and research firm Ernst and Young has concluded that poor infrastructure is precluding investment. It calls for forward-looking project preparation and a sound process for land acquisition, which has stalled key infrastructure and energy projects. It found 78 projects that had been delayed in the road and transport sector, with 47 in the power sector and 31 in the oil and gas sector.

The study showed that railways were lagging far behind in infrastructure development, as only 1750 kilometres of new lines were added from 2006–11. In the same period China added 4000 kilometres, as well as a high-speed network of around 10,000 kilometres. The report also emphasised growing difficulties in handling port traffic. The 13 major ports in India, as well as its 60 operational non-major ports, are responsible for 70 per cent of India’s external trade by value, and 95 per cent by volume. Port traffic has increased at a compound annual growth rate of 8.1 per cent, up to 84.6 million tonnes, with an average utilisation of 90 per cent, as compared to the international average of 70 per cent.

Another recommendation of the report was a strengthening of national highways. India’s national highways carry around 40 per cent of road traffic, but constitute only 1.7 per cent of the road network. Of the country’s national highways, only 24 per cent are four-lane and meet the standards required. The report also found that infrastructure facilities like roads, railways and ports have under-achieved their investment targets in the Eleventh Five-Year Plan by 11 per cent, 23 per cent and 54 per cent respectively.

After months of hesitation, and despite significant opposition, Prime Minister Manmohan Singh’s government has taken a risk and opened foreign direct investment in multi-brand retail. The government’s unique selling proposition, with which it hopes to win over those opposing the move, is the promise that foreign retailers will invest in infrastructure. India is woefully short of warehousing and cold storage facilities, as a result of which about 40 per cent of home-grown fruits, vegetables and food grain perish before they get to market. This adds to inflationary trends.

Beginning this year, for the next five years, India plans to spend US$1 trillion on transport. For roads, ports, airports and energy, there is a long way to go.

Mahendra Ved is a New Delhi-based writer and columnist.