Infrastructure 2
Infrastructure 2
Defination:
Infrastructure is the set of physical and organizational structures (e.g. roads, water supplies,
hospitals) needed for the operation of an enterprise or the society as a whole.
It comes from the French word ‘Infra’, which means below. This shows the literal significance of
infrastructure which forms the basis of all enterprises in modern society.
Infrastructure Deficit is the condition of a society which does not have enough infrastructure to
facilitate its population’s aspirations. Certain areas and sectors in India witness a deficit of
critical infrastructure.
Classification of Infrastructures:
• Based on Ownership:
• Public infrastructure: is owned by the government. These are non-exclusive
goods (i.e. which are open to all for utilization) which help the enterprises and
society to function. For example, National Highways.
• Private infrastructure: is owned by private entities. These are exclusive goods
which are privately utilized by an enterprise for its own economic growth. They
may or may not benefit society directly. Forexample, Google’s data storage
centres.
• Based on Tangibility:
• Hard Infrastructure: Physical systems needed to run an economy, such as
transportation systems, energy, communication lines etc.
• Soft Infrastructure: These represent the institutions and processes which are
necessary to run the economy. For example, financial institutions, civic agencies
etc.
• Based on Use:
• Physical infrastructure: includes all the facilities and structures that directly
improve the economic activity (i.e. production and distribution). For example,
electricity distribution network.
• Social infrastructure: includes all the services that lead to human resource
development, such as schools, colleges and hospitals etc.
Importance of Infrastructure:
• Improves productivity of labour:
• especially the social infrastructure, leads to better health and skill levels for the
workforce. Even access to physical infrastructure such as public transport eases
mobility and saves effort.
• Eases Mobility:
• From enhancing access to the markets to reducing the wastage of perishable
items like vegetables, easy mobility helps all sectors of the economy.
• Market development:
• Deeper inroads into far-flung areas expand the markets as well as the financial
capacity of the population therein.
• Attracts Investment:
• Infrastructure is an investment-intensive sector. The annuity models developed
over the years for the various types of projects create a regular channel of
income. This helps attract investment from financial institutions and the general
public.
• Attracts foreign exchange:
• Foreign financial institutions (FIIs) often find developing markets like India more
profitable in terms of return on investment.
• Employment Generation:
• Investment in infrastructure creates construction-related jobs and maintenance-
related jobs as well as facilitates businesses in their operations, creating
opportunities for local entrepreneurs.
• Penetration of Technology:
• Each infrastructural project facilitates the skilling of thousands of workers, who
can help in the penetration of the technology further in the future. For example,
the success of the Delhi Metro Project made it easier for Metro rail technology to
penetrate dozens of cities across India.
• Promotes Growth:
• Infrastructure has a multiplier effect on the economy. It creates jobs, business
opportunities, returns on investment etc., thus affecting all sectors of the
economy. For this reason, during the recession phase in the economy, the
government stresses Infrastructure creation to boost growth.
In fact, better infrastructure is often synonymous with development. Developed countries are
those which have better infrastructure and, therefore, a better quality of life.
Roads
Context
Road infrastructure in India has been an important driver of economic development and social
inclusion. In the recent three decades, the emphasis of various governments has been on
improving the road infrastructure in India. Increase of total road-length and improvement
of road-quality are the two pillars of improved road infrastructure. Adoption of various
organisational and technological innovations have helped India in improving the road
infrastructure. India now has the second-longest road length in the world after USA.
What is the progress of India in improvement of road Infrastructure over decades?
India has tremendously improved its road infrastructure over decades. Since, India now has the
second largest road length in the world, it is pertinent to look at the progress over decades.
Year Road Length Observation
1951 4 lakh Km
In the 40 Years between 1991 and 1951, India added 19 lakh km of roads.
1991 23 lakh Km
However between 1991 and 2019, India added 40 lakh Km of road. India has
2019 63 lakh Km
made rapid progress during this period in road infrastructure.
Also, the table mentioned below shows the present six fold classification of Indian roads and
their compounded annual growth rate (CAGR) in percentage terms since 1991.
Source-Yojana
Observations on Present Road Infrastructure in India
*Rural roads constitute over 70% of the road infrastructure in India
*The CAGR of NH has been the highest since 1991 followed by rural roads.
*Many SH have been reclassified as NH for upgradation.
What are the various steps undertaken for improvement of Road Infrastructure in India?
Improvement of Road Infrastructure has been achieved by the following organisational and
technological innovations, which have been taken over decades-
Organisational Innovations
• Delinking Road Development and Direct Employment- Until 1991 (liberalisation), the
road development was connected with direct labour employment. The Nagpur
Plan (1943-1963), Bombay Plan (1961-1981) and the Lucknow Plan (1981-2001), focused
on using the road development projects as a means of direct employment generation.
However post liberalisation, there has been increase in the use of capital-intensive high-
tech road making equipments. This led to increase in both quantity and quality of roads
in India.
• Creation of National Highways Authority of India (NHAI)- In February
1995, NHAI became operational to directly drive the development of National Highways
(NH). Prior to the formation of NHAI, the NH development and maintenance was the
responsibility of the states with funding from the centre. There was lowing carrying
capacity of NHs (2% of NHs carried 40% of the traffic). However after NHAI formation,
NH length have registered the largest compounded annual growth Rate (CAGR) since
1991.
• Creation of State-level Road Development Corporations- With the creation of NHAI,
many states also brought changes in their organisational structure for road
development. They de linked the state expressway projects from their Public Works
Department (PWD). Maharashtra was the first state to set up the Maharashtra State
Road Development Corporation Limited (MSRDCL). Uttar Pradesh (UP) is developing its
expressways through these corporations.
• National Highways Development Project (NHDP)- NHDP was started in 1998. NHDP
consequently grew to seven phases involving a total length of 49,260 km. In 2018, most
of the NHDP has been completed and the remaining works were subsumed under the
larger Bharatmala Pariyojana.
• New Focussed organisations apart from NHAI- Apart from NHAI, new organisations
have been created for better focus on road development. National Highways and
Infrastructure Development Corporation Limited (NHIDCL) was incorporated in 2014, to
carry out road development projects in the border areas. National Highways Logistics
Management Limited (NHLML) was set up in 2020 for the first/last mile port connectivity
projects.
• Focus on Rural Roads through Pradhan Mantri Gram Sadak Yojana
(PMGSY)- PMGSY has been one of the most successful projects in India. The success of
PMGSY has also encouraged projects like the Mukhya Mantri Gram Sadak Yojana
(MMGSY) in many states. The reasons for success of PMGSY are– selection of Villages on
objective criteria, independent agencies like World Bank doing the over sight and
housing the project under Ministry of Rural Development (demand side) rather than
MoRTH (supply side). Because of interventions like PMGSY, rural roads today constitute
over 70% of the road infrastructure of the country.
• Public-Private Partnerships (PPP) and Viability Gap Funding (VGF)- PPP investments
were increased through the introduction of financial/project models like the Viability
Gap Funding (VGF). These models were introduced to reduce the financial risks of
private players in road development.
• Evolution of the Model Concession Agreement (MCA)- The first MCA for the road sector
was brought in 2000. It has evolved over time for better allocation of risk between the
PPP player and the development authorities.
• New Contracting models and Asset Monetisation- Apart from the Classical tendering
through the Engineering,Procurement and Construction (EPC) or the Build, Operate and
Transfer (BOT), several new contracting models have emerged. Hybrid Annuity
Model (HAM) and Toll, Operate and Transfer (TOT) are being used extensively for road
development. The Infrastructure Investment Trusts (InVITs) have been operationalised to
enable asset monetisation of built roads.
Technological Innovations
• Introduction of new Road Making Technologies- With the roll out of the NHDP, the
import of the road-making equipment was brought under the open general licence to
ease their procurement process. Further, steps have been taken for enhanced
Technology Transfer in the road making equipments. New and environmentally
sustainable materials like fly ash, steel slag etc. are being used in road development.
• Introduction of Electronic Toll Collection (ETC)- Electronic Toll Collection (ETC) has been
introduced to reduce the toll collection time and traffic congestions at the toll Plazas.
• Hybrid Annuity Model (HAM)