2013-04-09_Srei Investment Brochure Lowres 29-03-13.pdf


2013-04-09_Srei Investment Brochure Lowres 29-03-13.pdf

Opportunities in infrastructure investments in India 2013

Hemant Kanoria

Chairman & Managing Director

Srei Infrastructure Finance Ltd

From a macro and micro

perspective, the Indian infrastructure

is a “bang-on” investment

destination for any overseas

company seeking high and long

term returns. The key, however, is to

identify and work with the right local


Sunil Kanoria

Vice Chairman

Srei Infrastructure Finance Ltd

The global crisis, as many call it, has

affected industry, trade and investments

across sectors and economies. Yet,

India’s infrastructure sector has

recorded high growth and continues to

show a positive outlook despite some

regulatory challenges. India is definitely

“the new land of opportunity” for

potential investments.




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Email: corporate@srei.com

For further information please contact:

Dhruv Bhalla (Vice President)

Corporate Strategy & Planning

Email: dhruv.bhalla@srei.com



Evolution of

the Indian



Overview of


in India



The Unseen


Opportunities in

Roads & Highways 19

Opportunities in the

Power Sector 31

Opportunities in

Ports 43

Opportunities in

Railways 49

Opportunities in the

Aviation Sector 59

Opportunities in the

Telecom Sector 67

Opportunities in the

Mining Sector 73



India has been on a robust growth

momentum since the onset of the

last decade, and is now positioned

among the largest economies of the

world, ranking ninth in terms of GDP

and third in terms of purchasing

power parity (PPP). The growth of

infrastructure is a critical prerequisite

for the sustainable

development of a country, thus the

ongoing economic reforms along

with increased investment allocation

attach high priority to these sectors.

In recent years, various initiatives by

the Government have led to an

average growth of 5.8 percent in

infrastructure during the 11th Five

Year Plan (FY07‐FY12), as well as

significant development in physical

infrastructure such as Electricity,

Railways, Roads, Ports, Airports,

Irrigation, and Urban and Rural Water

Supply and Sanitation. However,

India lags behind its counterparts of

the BRIC countries, such as Brazil and

China, in the quality and efficiency of

infrastructure services provided. In

order to step up development to

optimum standards and sustain this

surging growth, the Government has

introduced structural reforms to

encourage private participation and

competition in infrastructure services

and investments to the tune of USD

1 trillion, which has been envisaged

for infrastructure development as per

the 12th Five Year Plan (FY12‐17).

Based on the initiatives taken by the

Government to promote

investments in Infrastructure, we

would like readers to understand the

various opportunities available

through public private participations

across each of the sectors

highlighted in the sections ahead.

This thematic report also perceives

the constraints of the paradigm of

the Government, as well as reflects

the collaborative efforts of

academics, research and industry.


1. Evolution of

the Indian Economy

The robustness of the Indian economy is based on its

strong fundamentals of domestic demand, the rising

middle class, favourable savings rate and its emergence as

an economic powerhouse is something unparalleled in the

world economy. The journey of the country from a debtridden

colonial economy to one of the worldʼs fastest

growing economies is nothing short of a remarkable story

of economic transformation in which infrastructure played

a major role, both as a challenge as well as a growth driver.


The initial years ‐ Setting the stage for


Indiaʼs economic policy in the initial years was

determined by its experience in colonial exploitation

and a socialist philosophy. It was guided by the belief

of “import substitution” which means that the

country would rely more on internal markets than on

international trade. These necessities focused on

increased food production and developing basic and

heavy industries in India. The infrastructure

investments in India were too centered on the

guiding principles of its five year plans, which

narrowed its horizon in the overall eye of the global

economy. However, eventually ‐ the thrust on food

production ensured increased investments in

irrigation facilities, whereas to scale‐up the basic and

heavy industries the Government had to rapidly

divert its attention to developing roads, power and

other core infrastructure services.

The result of such passive interest in infrastructure

was imminent. While in the US, UK and other

developed economies, infrastructure was already

owned and managed by private players, in India it

was left at the hands of the public sector. Thus

infrastructure investment remained low and the

economic growth stagnated around 3.5 percent from

the 1950s‐1980s. It was during the same period when

countries like Indonesia, Korea and Thailand achieved

an impressive growth rate of close to 10 percent,

pushing India to the lower end of the spectrum after

Bangladesh. Reform measures in the public sector

and infrastructure investments were few of the key

areas identified as immediate priorities for the

economic development of the country.


Approval of Foreign Direct Investment (FDI) and

Foreign Institutional Investors (FII) in many sectors

Shifting thrust from import substitution to export

promotion, thereby gradually transforming into an

open economy

By 2000, India had witnessed noticeable reduction in

state control of the economy and increased financial

liberalization. Today India is one of the leading

emerging economies of the world recording one of

the highest growth rates in the mid‐2000s and is one

of the fastest growing economies in the world, with a

highly credible growth of over 200 times in per capita

income from 1947 to 2011 1 .

The major attributes to this remarkable achievement are:

Increase in consumer base

Growth in the skilled labor force

Growth in the manufacturing sector due to rising

education levels and engineering skills

Massive influx of FDI and FII

Indiaʼs Rise in Global Economy

The economic liberalization of India in 1990s enabled

the country to break the bureaucratic shackles to a

large extent and presented a completely different

picture while the nation adopted a free market

economy with the following major reforms:

Eradication of License Raj

Reducing tariffs and interest rates

Removing public monopolies, thereby preventing

stagnation and making room for healthy


GDP In INR Billion

Figure 1.1 shows how the economy of India responded

swiftly and positively to the reform measures initiated

by the Government. From being virtually stagnant until

the late 80ʼs, GDP increased exponentially over the last

two decades making India one of the fastest growing

economies in the world. Much of this was attributed to

the liberalization of the Government with respect to

reforms in the Infrastructure sector.

Figure 1.1. GDP Growth Rate


Pre-liberalization Era

Post Liberalization


















1950-51 1970-71 1990-91 2010-11

GDP at Market Prices Population (Crore)

Source: Reserve Bank of India; Handbook of Statistics on Indian Economy

Population In Million


Reserve Bank of India; Handbook of Statistics on Indian Economy

http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Handbook%20of%20Statistics%20on%20Indian%20 Economy


The 11th Five Year Plan (2007‐12) saw

Indiaʼs GDP (at factor cost) grow by 48

percent from `35.64 trillion (USD 641

billion) in 2007 to `54.38 trillion (USD

978 billion) in 2012 at an outstanding

average of 8 percent per annum.

Going by this trend, India is expected

to cross the `200 trillion (USD 4 trillion)

mark by 2015.

It is noteworthy that during this

period, all the major components of

GDP such as industry, agriculture and

services increased significantly. A

major part of the increase has been

attributed to the services sector which

is considered as the major driving

force behind Indiaʼs economic growth.

Sectoral Analysis:

1) Industry and Manufacturing

sector: Industry accounts for 26

percent of the GDP and employs 14

percent of the total workforce. 2

India ranks 12th in the world in

terms of nominal factory output.

The industrial sector underwent

rapid modifications post 1991.

Some of the reforms included the

removal of import restrictions to

encourage foreign competition,

disinvestment in certain PSUs,

schemes to attract Foreign Direct

Investments (FDIs), competitive

prices of products made possible by

curtailing costs etc.

2) Services: This sector provides

employment to around 34 percent

of the work force. It has the largest

share in GDP, accounting for 56

percent in 2007. IT, Telecom and

BPOs are among the fastest


Source: CIA, The World Factbook, https://www.cia.gov/library/publications/the‐world‐factbook/geos/in.html#Econ


growing sectors, contributing to nearly 25 percent

of the countryʼs exports. The growth of the IT and

BPO sector can be attributed to availability of smart,

educated and highly skilled workers in India, with

wage requirements being much lower than the

western countries.

3) Agriculture: India is the second largest producer

in farm output employing over 52 percent of

workforce. Despite a marked decline in its share in

GDP, agriculture is still the largest economic

sector. India is largely an agrarian economy and

introduction of High Yield Variety (HYV) seeds

through the Green Revolution has resulted in

geometric leaps in per capita food production

over the years. India is the largest producer of milk,

jute and pulses and the second largest producer

of rice, wheat and cotton.

The graph below (Figure 1.2) indicates how each

of the sectors has contributed towards the growth

of the economy during the 11th Five Year Plan.

Figure 1.2 Growth Rates and Sectoral Composition of Real

Gross Domestic Product

12 10

















2007-08 2008-09 2009-10 2010-11* 2011-12#

1. Agriculture & Allied Activities 2. Industry

3. Services 4. Gross Domestic Product at factor cost

Source: Reserve Bank of India, Handbook of Statistics of Indian Economy 3


Reserve Bank of India, Handbook of Statistics of Indian Economy (http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/00HB130912LF.pdf)


The Growth Drivers

A plethora of renewable resources, complemented

by a strong industrial base and abundance in the

supply of skilled labor has given India a big push in its

growth path. Despite being plagued by perceived

threat of inflation and corruption, the Indian growth

curve has experienced a steep upsurge. The

Government has been extremely proactive in

opening up the infrastructure through some of the

initiatives listed below.

1) Encouraging Foreign Investments: The Indian

Government has been determined to encourage

foreign participation to fuel economic growth

with their continuous efforts to imbibe

investments in all major sectors. Being the third

largest economy in terms of purchasing power parity

(PPP), India has been always a preferred investment

destination for FDI. Indiaʼs recently liberalized FDI

policy allowing for 100 percent FDI in major sectors

has given the much needed facelift to the Indian

economy, which has been battling a perceived

negative sentiments on foreign participation.

Foreign Institutional Investors (FII) have been

playing a major role in the Indian capital market

since the implementation of New Economic

Reforms in 1991. Indian stock market currently

imbibes `2, 52,233.10 crores (USD 45 billion)

worth of FII investment each year with the

registration of 1662 FIIs 4 .

Table 1. 1. FDI and FII inflows

S. No. Financial Year Amount of FDI equity inflows Investment by FIIʼs Foreign


institutional investors Fund

In ` Crores In USD million (net) (in terms of USD million)

1. 2008‐09 1,42,829 31,396 (‐) 15,017

2. 2009‐10 1,23,120 25,834 29,048

3. 2010‐11 88,520 19,427 29,422

4. 2011‐12 (April‐Feb. 2012) 1,33,181 28,403 17,365

TOTAL 4,87,650 1,05,060 60,818

Source: Factsheet on Foreign Direct Investment, the Department of Industrial Policy & Promotion



“Role of FII in India”, Mishra & Das http://mpra.ub.uni‐muenchen.de/30457/1/Article_1_.pdf


An influx of a number of FIIʼs has resulted in the rapid

growth of the Indian equity market (at all the major

stock exchanges). Today, Indiaʼs equity market is one

of the largest in the world with FIIʼs contributing to as

much as 30 percent of the capitalization of BSE and


There are also a plethora of reforms that have been

initiated to boost investments across various sectors.

Allowing FDI in multi‐brand retail of up to


Provision of Advance Pricing Agreement to be


Relaxing restrictions on FIIs post 2005

Reducing Tax rates for foreign firms

Single Window System in most states for granting

approval for setting up industrial units

Incentives in the form of capital and interest

subsidies, reduced power tariff and relaxation of

stringent rules

2) Topographic Advantage: India is located right at

the centre of South Asia and linked strategically to

the Western world as well as the Middle East and

the South by sea and land routes. This has

provided a massive boost to foreign trade,

Figure 1.3. Indiaʼs location and trade routes

Black Sea

Red Sea











Bay of







Persian Gulf















infrastructure and engineering focused. This has

resulted in a major boost for the economy, and is

expected to increase in the coming years with

more youth entering the work force.

4) Expansion of consumer Base: There has been a

major change in the overall trend of consumer

spending, resulting in a major change in the

demand or good and services in the country. The

emphasis has now shifted from price

consideration to design, quality, trendiness and

brand recognition. This shift of demand to

moderate and extreme luxury goods has opened

the doors to international brands into India at

reasonable prices. Buoyed by rising household

income, ripening of a new generation and other

socio economic forces, consumer spending in

India is likely to expand to 3.6 times from USD 991

billion in 2010 to USD 3.6 trillion in 2020 according

to The Boston Consulting Group and The

Confederation of Indian Industry (CII) 5 .

Shailesh Pathak


Srei Infrastructure Finance Ltd

facilitating easy exodus of export goods and

import of foreign goods.

3) Demographics: India has a competitive advantage

over most of the emerging economies due to its

large working population and young work force. In

addition, the education system provides highly

skilled and technical education that is highly

'Many large international investors want to

deploy capital into Indian infrastructure in

yield-type cash flow generating infrastructure

assets, whether the risk is much lower than

equity, but the return is much higher than

OECD debt. We at Srei are putting together

a bespoke product for such pension and

endowment funds, and other patient





2. Overview of

Infrastructure in India

”It is said that every Rupee invested in the infrastructure sector creates 10 times its worth in


Indiaʼs infrastructure sector continues to be one of the key

drivers of the nationʼs growth. An extremely large

population coupled with the urgent need for economic

growth are putting infrastructure on pressure for rapid

modernization and enlargement. Therefore, development

of adequate and quality infrastructure is a necessary, if not

compulsory, condition to maintain growth.


Welcoming the 12th Five Year Plan, with an

impressive USD 1 trillion dollars of investments, India

is opening a new chapter in infrastructure

development which promises to open more avenues

for innovative planning, projects, policies and


The infrastructure sector is not only the backbone of

an economy, but also plays a vital role in shaping the

countryʼs social and cultural fabric. It contributes

significantly to the growth of the overall gross

domestic product (GDP), while creating opportunities

for employment and investment.

Changes in world economy indicate a global shift in

economic strength towards emerging markets, a trend

that is favorable to India. The advanced economiesʼ

share of global GDP is projected to decrease from 65

percent to 51 percent, while the emerging economies

share is projected to increase from 35 percent to about

49 percent (Table 2.1). India is well poised to become

one of the leaders among these emerging economies,

with the potential to become the third largest GDP in

the world in two decades 1 . Infrastructure investment is

critical to capitalizing on the potential and sustaining

rapid growth in the coming decades.

Table 2.1 ‐ Structure of Global GDP (in current USD Trillion)

2000 2011 2016 2020 2025

World GDP 32.2 68.7 90.5 110.5 140.5

Advanced Economies 25.7 44.4 53.3 61.1 71.7

(79.7%) (64.6%) (58.9%) (55.3%) (51.1%)

Developing and Emerging 6.5 24.3 37.2 49.4 68.8

(20.3%) (35.4%) (41.1%) (44.7%) (48.9%)

of which India 0.5 1.9 3.6 5.8 10.0

(1.5%) (2.8%) (4.0%) (5.2%) (7.1%)

Source: The World Economic Outlook database of the International Monetary Fund. The figures up to 2016 are projections by the IMF. The projections for India

beyond 2016 have been made by the DPPP Division of the Planning Commission.


Planning Commission Approach Paper for the 12th Five Year Plan, 2011, Page 13


Population Pressures on the Infrastructure

Figure 2.1 – Cities in emerging economies

Fastest-growing populations, annual average increase, ‘000 1995-2010 2010 -25 forecast

0 100 200 300 400 500 600 700

Delhi (India)

Dhaka (Bangladesh)

Kinshasa (Congo)

Mumbai (India)

Karachi (Pakistan)

Lagos (Nigeria)

Kolkata (India)

Shanghai (China)

Manila (Philippines)

Lahore (Pakistan)

Dar es Salaam (Tanzania)

Ho Chi Minh City (Vietnam)

Khartoum (Sudan)

Nairobi (Kenya)

Beijing (China)

2010 population,m
















India, already highly populated,

with 17.5 percent of the world's

population, is projected to be the

world's most populous country by

2025 2 .

As presented on Figure 2.1, New

Delhi will reach 22.2 million citizens

by 2025, followed by Mumbai who

will reach 20 million and Kolkata

15.6 million. This puts even more

pressure on the faster progress of

infrastructure development.

Source: Credit Suisse http://www.economist.com/blogs/graphicdetail/2012/04/focus‐4


US Census Bureau, Demographic Internet Staff. "United States Census Bureau ‐ International Data Base (IDB)". Census.gov. Retrieved 2011‐09‐24.


Regulatory Framework

The Planning Commission has initiated several

policies in order to develop structures that maximize

the role of public‐private partnerships (PPPs) ensuring

the timely creation of world‐class infrastructure.

These policies include 3 :

Cabinet Committee on infrastructure (CCI):

Instituted in 2009, the CCI focuses on financial,

legal and institutional measures required to

enhance investment across all infrastructure

sectors. In addition, it reviews and approves

policies and projects.

Public Private Partnership (PPP) Framework: The

Government has drafted a National PPP policy in

order to lessen some of the risks and inefficiencies

in development and implementation of projects. It

addresses principles, process, enabling

frameworks (financing, land, stakeholder

communication), institutional and governance

mechanisms. The policy also includes:

standardization of contractual documents, defines


The Secretariat for Infrastructure, Planning Commission “Private Participation in Infrastructure” Page 5 and 6


thereby expanding access to capital.

India Infrastructure Finance Company Limited

the risks, liabilities and performance standards,

waives charges for foreign and private investment,

establishment of the Public Private Partnership

Appraisal Committee (PPPAC) to streamline

approval at the Central level, launching of an

online database for PPP projects that serves as a

virtual clearinghouse of all PPP projects designed

to be accessible based on location, sector, type

(BOT, BOOST, LDOT etc), domestic/foreign

investment and type of investment instrument.

Tax Exemption: The Government has incentivized

private sector participation by tax exemption and

duty‐free imports on road‐building equipment

and machinery. Also, eligible infrastructure

projects can avail 100 percent tax exemption for

upto 10 years.

Viability Gap Funding (VGF): In order to enhance

the financial viability of projects that do not pass

the standard thresholds of financial returns, the

Central Government provides up to 40 percent of

capital costs in grant assistance to PPP projects

(IIFCL): It is a non banking financial company, a

wholly owned subsidiary of the Government of

India. The company provides upto 20 percent of

long term financial assistance to infrastructure

projects carried out by public sector companies,

private sector companies under public‐private

partnership and private sector company's projects

whose services are to be regulated or setup in

arrangement with State Government, Central

Government or a public sector undertaking. In

addition, the Government has authorized IIFCL to

raise additional capital through tax‐free bonds,

especially for roads, highways and ports.

Foreign Direct Investment and Infrastructure

Development – Indian infrastructure sector is

becoming an attractive investment area for FDI.

Table 2.2 clearly indicates the Foreign Direct

Investment mechanism towards each

infrastructure sector.

Table 2.2 – Foreign Direct Investments in India

Sector Foreign Direct Investment

Roads 100% FDI allowed in road projects

Ports 100% FDI allowed in port projects

100% FDI allowed for green‐field


Airports For existing airports government

approval needed for FDI beyond 74%

49% FDI by foreign airline operators

allowed in domestic airlines

Up to 74% FDI allowed for telecom

service providers


100% FDI allowed for telecom

equipment manufacturers

Source: infrastructure.gov.in


Infrastructure Debt Funds ‐ The Infrastructure

Debt Fund (IDFs) instrument was proposed by the

Ministry of Finance in the Union Budget of

2011‐12 to facilitate steady inflow of long‐term

debt for funding infrastructure projects. The IDFs

are expected to encourage Insurance and Pension

Funds to invest more as well as provide long‐term

low cost debt for infrastructure projects. In its

initial concept report, the Government proposed

setting up IDFʼs for USD 11 billion through PPP

expecting it to bridge the emerging gap in the

total debt requirement in infrastructure funding 4 .

So far 3 funds have been already launched and 3

more are awaiting regulatory approval.


India Infrastructure Debt Fund: A Concept Paper , Gajendra Haldea http://infrastructure.gov.in/pdf/iidf‐aconcept‐paper190410.pdf, Page 1


Key Challenges

Despite favorable macro economic fundamentals,

the execution and policy issues pose serious

challenges to investments in the infrastructure space.

The policy paralysis and lack of transparency in

regulatory mechanisms in the recent past have

adversely affected investor sentiment resulting in a

slowdown in project execution across the various

verticals of infrastructure. Even though this

environment is changing, it will take considerable

efforts from the Government to boost the overall

sector keeping various macroeconomic conditions in

mind, such as the slump in the international financial

sector, inflation and competing economies that are

more price conscious.

Figure 2.2 – Reasons for lingering infrastructure





Source: Infrawindow, Reports Statistics, July 2012






decision, 6


cl, 5

Approval, 6

Unviable, 5

Since 2010, approximately 140 projects in the

infrastructure space were detained, abandoned or

put off for implementation. About 52 projects in 2011

and 2012 were turned unviable due to the poor

economic growth, in comparison to year 2010 where

only 16 projects were detained or abandoned.

Reason can be found in the economic environment

which has weakened investorʼs confidence as well as

land acquisition issues. Lack of fuel linkages have

impeded at least six major power projects to take off 5 .

Insufficiency of User Charges ‐ Large part of the

infrastructure sector in India (like irrigation, water

supply, urban sanitation, and state road transport) is

struggling to be commercialized for various reasons,

such as, regulatory, political and legal constraints.

Therefore, the Government is not being able to set

sufficient user charges on these services, which

negatively affect the servicing of infrastructure loans.

Legal and Procedural Issues ‐ Problems related to

infrastructure development range from those related

to land acquisition for various infrastructure projects

to several other issues such as environmental and

other legal clearances, often resulting in increased

procedural delays. The State Governmentsʼ support in

maintenance of law and order, land acquisition and

obtaining environmental clearances are necessary for

the projects undertaken by the Central Government

or the private sector.

Delays in Implementation of projects ‐ Delays in the

Government and regulatory decision‐making have

caused several road, railway, port and other

infrastructure projects to fall behind schedule.

Availability of Financing – According to a Standard &

Poorʼs report, India needs to reform policies

concerning project execution and long‐term funding

to overcome its infrastructure challenges 6 . Innovative

schemes to attract large scale financing are one of

the most important challenges in infrastructure

development. It is really important to bring big‐ticket

long‐term investors like strategic investors,


Infrawindow, Reports Statistics, July 2012, Web site: http://www.infrawindow.com/reports‐statistics/three‐major‐reasons‐for‐stalling‐infra‐projects_96/


Infrastructure to hit India growth:S&P, "The Financial Express, 2011.


Private Equity Funds, Pension Funds, and Sovereign

Funds as 50 percent of the projected investment is

estimated to come from the private sector as per the

12th Five Year Plan. Hence, financing infrastructure will

pose a big challenge in the coming years and it will

require innovative ideas and new models of financing.

Investment Opportunities

12th Five Year Plan ‐ The Planning Commission has

defined infrastructure development as a key priority

in the 12th Five Year Plan (2012‐2017), with projected

investments of USD 1 trillion in the next five years. Of

the total targeted investment, private sector is

expected to invest almost USD 500 billion ‐ with

around USD 350 billion through debt and USD 150

billion of equity 7 .

Dhruv Bhalla

Vice President

Srei Infrastructure Finance Ltd

Srei as a conglomerate

is constantly looking at

investment opportunities

across the globe. Our

presence at strategic locations act as centers of

excellence to provide domain knowledge on

specific regions, with an aim to help us achieve

our goals towards becoming a global holistic

infrastructure player

Table 2.3 Projected Investment in Infrastructure: 12th Five Year Plan

(at 2006‐07 prices, exchange 11th Plan 12th Plan

rate at ` 40)

Sectors ` crore Share ` crore Share

(USD billion) (%) (USD billion) (%)

Electricity (incl. NCE) 6,58,630 (165) 32.1 1,257,604 (314) 30.7

Roads and Bridges 2 78 658 (70) 13.6 490,272 (123) 12

Telecommunication 3,45,134 (86) 16.8 1,011,692 (253) 24.7

Railways (incl. MRTS) 2,00,802 (50) 9.8 296,393 (74) 7.2

Irrigation (incl. Watershed) 2,46,234 (62) 12 398,642 (100) 9.7

Water Supply & Sanitation 1,11,689 (28) 5.4 185,244 (46) 4.5

Ports 40,647 (10) 2 105,034 (26) 2.6

Airports 36,138 (9) 1.8 66,277 (17) 1.6

Storage 8,966 (2), ( ) 0.4 25,736 (6) 0.6

Oil & Gas Pipelines 1,27,306 (32) 6.2 262,345 (66) 6.4

Total 20,54,205 (514) 100 4,099,239 (1025) 100

However, as per some estimates, Indiaʼs ambitious target to invest USD 1 trillion to boost its infrastructure over

the next five years may fall short by at least 20 percent, due to slowing economic growth and failure to meet

investment targets in the sector in the 11th Five Year Plan.


Planning Commission, Government of India


3. Opportunities in

Roads & Highways


Investments in transport infrastructure has both short‐term

and long‐term economic benefits. Without a well

functioning transportation system, the economy of a country

cannot progress. Roads and Highways are considered the

most critical component of this transportation system and in

the Asian countries, roads are considered to be more

productive capital investments than other forms of capital 1 .

Figure 3.1 : India's NH/Expressway network 2


Under Implementation

To Be Awarded





Wagha Border














PRADESH Gorakhpur






Shikohabad Lucknow



Kanpur Ayodhya


Fatehpur Allahabad



Radhanpur Palanpur Uadipur









Ahmadabad Bhopal






















Gonde MP/AH Border







































Andaman and






N ico bar Island




India is no exception to that, so in the past few years,

India has substantially invested in creating its road

network to commensurate the need of its searing

economic growth.

Today, India has the second largest road network in

the world with 4.2 million km of road length that

includes about 72,000 km of National Highways/

expressways. Figure 3.1 shows India's vast road

network including its network of National Highways,

which is often termed as the Golden Quadrilateral.

Even today, roads continue to be the most cost

effective and preferred modes of transportation for

both, passengers as well as freight movement.

Although India has better road coverage i.e. 0.66 km

of highway per square kilometer of land than many

other countries such as United States (0.65) and

much greater than China's (0.16) or Brazil's (0.20) 3 , key

issues such as safety, road congestion, poor surface


Asian Development Bank, Economics working paper series, Infrastructure's role in sustaining Asia's Growth by D. H. Brooks and E. C. Go, Page 16


(http://www.iadb.org/intal/intalcdi/PE/2012/11041.pdf) NHAI.org (http://www.nhai.org/nhdpmain.htm)


World Bank (http://data.worldbank.org/indicator/IS.ROD.DNST.K2?display=graph)


The Growth Drivers

Growth In Traffic – In the past few years, India has

seen remarkable growth in automobile industry

adding immense pressure to the existing road

network in the country. During the period 2006 to

2011, the number of passenger vehicles grew at a

CAGR of 17.8 percent to 2.5 million vehicles and

commercial vehicles grew at 16.3 percent to 0.6

million vehicles 5 .

quality, and rural access continue to pose a challenge

for the sector. In the absence of adequate rail and air

transport systems in several parts of India, road

transport remains the only link connecting majority of

people living in remote villages to urban cities.

Moreover, the urban cities in India continue to

dominate economic development in terms of

employment, technology, and healthcare, hence the

road network connecting the rural to urban areas

serves as one of the critical factors to overall


Roads and Highways contribute significantly to the

GDP of India, both directly and indirectly. In 2009‐10,

the sector emerged as the dominant segment in

India with a share of 4.7 percent in Indiaʼs GDP 4 . The

indirect contribution, though difficult to measure,

also plays a significant role as it provides the basic

framework necessary for other businesses to grow.

Other than the logistic support to distribution

channels for businesses, road connectivity also plays a

great role in terms of penetration to new markets for

business expansion.

Development of a sophisticated road network for

freight movement is the next big challenge and

growth driver for the Government of India. About 65

percent of freight movement in our country takes

place through a disproportionate usage of the

existing road network. Major changes are being

implemented by the Government and Ministry of

Transportation to ensure maximum usage of the

larger golden quadrilateral ensuring revenue

collection. Figure 3.2 shows the lane distribution of

national highway system.

Figure 3.2 Lane distribution in National Highway System

25% 21%


Source: MORTH Annual Report 2011‐12 6

Single Lane/



Double Lane

Four Lane/

Six Lane/

Eight Lane

Policy Initiatives: In order to upgrade the existing

road infrastructure, the Government of India has

taken several policy initiatives and set up agencies to

monitor and implement various road development

schemes. For example, the National Highways

Development Authority has been set up to oversee

highways development in India, while the Pradhan

Mantri Gram Sadak Yojna (PMGSY) is a special road

development scheme to build and upgrade the rural


MORTH Annual Report 2011‐12, (http://morth.nic.in/showfile.asp?lid=820), Page 21


IBEF, Roads: November 2011, (http://www.ibef.org/download/Roads50112.pdf), Page 18


MORTH Annual Report 2011‐12, (http://morth.nic.in/showfile.asp?lid=820), Page 4


oad network across the country. The role

and objective of such agencies and

schemes have been briefly explained


National Highways Development Project

(NHDP): Under the authority of NHAI,

National Highway Development Project

(NHDP) was one of the largest road

projects initiated in India to promote high

quality national highway and expressway

network that connected several tier I and

tier II cities across India. Widening of

national highway network was another

main objective of NHDP. This initiative was

taken up in 1998 and the project is likely to

be completed by the end of 2015 through

a series of phases (I‐VII).

Special Accelerated Road Development

Program for the North‐Eastern Region

(SARDP‐NE): SARDP‐NE was set up to

provide road connectivity in the northeast

region covering a total length of 10,141km.

This program will be implemented under

Phases A & B along with a special package

under Arunachal Pradesh Package of

Roads & Highways (APPRH).

Phase A consists of improving 4099 km

of roads, consisting of 2041 km of NHs

and 2058 km of state road at an

estimated cost of `21,769 crore (USD

3,915 mn)

Phase B will be covering 2 laning of

1285 km of NHs and 2 laning

improvement of 2438 km of State

Roads. Phase B has been approved only

for DPR preparation and investment

decision is yet to be taken by the



Similarly, Arunachal Pradesh Package of Roads &

Highways (APPRH) covers 1472 km of NHs and

847 km of state roads 7 .

Pradhan Mantri Gram Sadak Yojna (PMGSY): Despite

majority of Indiaʼs population living in rural areas,

poor rural connectivity has been one of the

weaknesses of the Indian road network. Over the

years, the Government of India has recognized the

importance of rural connectivity and delegated

efforts to improve the situation. In December 2000,

GOI launched the PMGSY scheme with primary

objective to provide all‐weather access to

unconnected habitations. PMGSY is a 100 percent

Centrally Sponsored Scheme and 50 percent of the

Cess on High Speed Diesel (HSD) is earmarked for this

Program 8 .

Bharat Nirman ‐ Further, in order to facilitate the rural

road development, the GOI included rural road

development as one of the objectives under the

Bharat Nirman programme for providing connectivity

to unconnected habitations and up‐gradation of rural

areas. The scheme aims at constructing 146,185 km of

new roads, connecting 66,802 habitations and upgrading

194,132 km of existing inlay routes with a

total projected investment of USD 10 billion

respectively 9 .

Under this program, about 4.41 lakh km roads to

benefit 1.14 lakh habitations have been cleared up to

January 2012. So far about `88,931 crore (USD 16

billion) has been spent and 3,41,257 km road length

has been completed, connecting over 82,019

habitations. Work on road length of about 98,399 km

is under construction 10 . In 2012‐13ʼs budget,

allocation for PMGSY has been increased by 20

percent to USD 4.8 billion. 11

7 8

MORTH Annual Report 2011, (http://morth.nic.in/showfile.asp?lid=820), Page 3 Pradhan Mantri Gram Sadak Yojana (http://pmgsy.nic.in/pmg31.asp#1)

9 10

Bharat Nirman Programme, (http://www.bharatnirman.gov.in/download.pdf), Page 9 &10 Economic survey, Page 265




Key Challenges

India's road infrastructure has grown considerably in

last few years. Yet, there remains great scope of

improvement to meet the demands of economic

growth. Although Government has plans to meet

these requirements through Five Year Plans, there

exists a significant difference between the target and

actual construction. In past, several of the awarded

projects were delayed preventing the government to

reach the 20 km per day construction target. In FY

2011‐12 the Indian Road Ministry constructed roads

at an average rate of only 10.39 km per day 12 . The

delays faced in these projects can be attributed to

following issues:

Land Acquisitions ‐ These issues vary across

different states and locations within states. The

Government provides remuneration for the

acquired land, however the awarded

remuneration often fails to match the market price

and this difference leads to litigations and

negotiations, leading to delays in acquisition

process. However significant progress can be seen

in this area. The Government has setup special

land acquisition units to accelerate acquisition

process and as a result 9000 Ha of land was

acquired in year 2010 against 3120 Ha of land

acquisition in 2009 13 .

Environment and Forest Clearance ‐ Considerable

delays have been observed to get the clearance

from forest and environment departments.

However, with several feasibility studies awarded

for future projects, the Government is trying to

streamline the clearance process as much as

possible. Further, the Ministry of Environment and

Forest is in process of streamlining the clearance

process and creating standard procedures with

online support.

Shifting of utilities ‐ Shifting of utilities hold up

the construction work causing delays. However,

with new detection technology and increasing

assistance between different agencies, industry is

finding ways to reduce the delays.

Poor performance by some contractors ‐ Several

of the contractors are unable to maintain the


MORTH report and Indian Infrastructure Report by Business monitor International


Annual report to the people on infrastructure by Planning commission govt. of India, New Delhi


equired performance to complete the projects in

time. However, as several joint ventures between

Indian companies and multi‐national corporations

enter the construction industry, professional

training and advance planning has increased and

as a result, industry is improving its performance.

Rural road network ‐ sustainability through

unpredictable rains and landslides in hilly areas

continues to be a critical problem for building all

weather roads in rural areas. However, growing

development and population in rural areas is

allowing government justify higher investment in

rural areas to deploy advance techniques to build

all weather roads.

serious traffic congestion issues at toll centers and

need to implement latest technologies to resolve

such congestions. However recently India has

seen some development in this area with the toll

center on NH5 using radio frequency

identification for electronic toll collection.

Bidding strategies ‐ NHAI's e ‐tendering and e‐

procurement has helped create a transparent

project bidding and award system. With prequalification

process in place NHAI bidding was a

big success where for some of the projects more

than 100 firms have been registered for prequalification.

However, as more number of firms

compete for same projects, this sector is leaning

towards hyper competition and that is affecting

the baseline of these firms. Fortunately with time

companies have realized the risks associated with

the “aggressive bidding” and last year NHAI

observed reduction in aggressive bidding

compared to past years.

Technology ‐ As the sector is growing at alarming

rate, Indian road contractors need to adopt latest

technologies in order to keep up with the growth.

Although, through several JVs with multinational

companies or large Indian contractors, road

construction sector is deploying latest

technologies to achieve high speed construction.

This sector has long way ahead to reach its

maximum potential. Furthermore, with increasing

toll‐ways under BOT projects, this sector is facing


Private Participation in the Roads Sector

Historically, India has been utilizing Government

funding to build the necessary infrastructure. As the

necessity of infrastructure and its direct relation with

the development could not be ignored, India has

undertaken extensive expansion plans in road and

bridge infrastructure through several projects with

the assistance of the private sector to invest in road

infrastructure through PPP models .

Since India started using PPP investment model the

common forms of PPP models that have been widely

used in India for road infrastructure investments are:

Build, Operate and Transfer (Toll) model on Design

Build Finance Operate Transfer (DBFOT) basis

Build, Operate and Transfer (Annuity) Mode on

DBFOT basis

Special Purpose Vehicle (SPV) for Port Connectivity


Furthermore, in the draft policy released for

comments in 2012 for PPP investments, GOI has

supported following models 14 :

User‐Fee Based BOT models

Annuity Based BOT models

Performance Based Management/ Maintenance


Modified Design‐Build (Turnkey) Contracts

In the year 2011, NHDP awarded projects worth more

than USD 6.4 billion through PPP model. Several of

these projects were worth more than 200 million and

maximum value of the project awarded was around

USD 1 billion 15 . As GOI plans to attract significant

investment though PPP in road infrastructure, it has

taken concrete steps to ensure transparency and

structured framework to address the concerns of





Source http://www.pppinindia.com and exchange rate used for USD 1 = ` 50


and development of skilled manpower. Some of the

main players, who have already bagged some of the

big projects, in this sector are

Reliance Energy

Srei Infrastructure Finance Ltd.

L&T inter‐state Road Corridor Limited

Jaiprakash Associates Ltd (JAL)

Lanco Infratech

DS Construction

Madhucon Projects

IRB Infrastructure Ltd.

IL&FS Transportation Network Ltd.

Other than investments through PPP models, GOI

funds several other projects of NHDP through other

resources such as the World Bank, Asian

Development Bank (ADB) and Japan Bank for

International Cooperation (JBIC). Since 2005, ADB had

funded about 1700 km of national highways in NHDP

phase I & II 16 . Whereas, World Bank has invested in

about 547 km roads in similar projects across rural

India. These organizations not only invest in India but

also monitor the progress of the projects. Their strict

and methodical budgetary and engineering

monitoring helps avoiding unnecessary delays and

consequently improves the utilization of funds. On

the similar lines GOI has plans to set up a two tier

system including project monitoring and

performance review system to ensure timely

completion of road projects 17 .

International players:

Many of the international players have successfully

entered the Indian road infrastructure market through

various forms of partnerships. Some of them bid for

projects through the involvement of donor agencies,

specifically projects that are funded by organizations

such as the World Bank or ADB. The various

international companies to join the league are Berhad

(Malaysia), Deutsche Bank, Emirates Trading Agency

(Dubai), the Isolux Corsan Group (Spain), Italthai

(Thailand), Baelim (Korea), Dyckerhoff (Russia),

Widmann AG (Germany), IJM Corporation, SDN and

Road Builders (Malaysia), Kajima and Taisei (Japan) 18 .

National players:

Considering the current and future investment in the

road sector, several of the national players have

already invested heavily in construction, technology








Regulatory Framework

Over the past few years, the Government has

introduced various investment policies and

incentives in order to increase private participation

and maintain the attractiveness of road construction

for investments. Some of these are 19 :

100 percent FDI for certain projects such as

support services to road, assistance to services

such as cargo handling related to road transport,

maintenance and operations of roads and bridges,

and construction of BOT projects including tolling

10 year tax break under Section 80 IA of IT act

100 percent tax exemption for five years and 30

percent relief for next five years, which may be

availed in 20 years

Land acquisition and ROW responsibility taken up

by the Government agencies

Creating separate identity of road construction by

declaring it as a industry

NHAI / GOI to provide capital grant up to 40

percent of project cost to enhance viability on a

case to case basis




Concession period allowed up to 30 years

Duty free import of specified modern high quality

equipment for highways

Speedy and transparent process through MCA

and policy framework

Increased FII limit in infrastructure corporate

bonds from USD 5 billion to USD 25 billion is also a

step in the right direction 20

Investment Opportunities

Considering the importance of road infrastructure,

the Government has been focused on channeling

investments into the sector to bring India at par with

other emerging economies. During FY11, USD 3.2

billion was spent on highways and USD 2.5 billion on

rural roads 21 . Under India's 12th Five Year Plan, the

Road Transport Ministry is planning to release USD

120 billion worth of road‐widening projects with a

total length of 55,000 km 22 . Further, considering

India's current growth, the large pipeline of projects is

expected grow and will require the Ministry of Roads,

Transport and Highways to reach its ambitious target

of constructing more than 20 km of roads per day

throughout the Five Year Plan.

Over next five years the road sector would provide an

opportunity of USD 51 billion for construction of state

and national highways 23 . In 2012‐13, GOI has made

budgetary provisions for about 8,800 km of national

highway and allocation for Road and Highway

transport Ministry has been increased to about USD 5

billion 24 . Table 3.1 shows the status of NHDP project's

progress until October 2012. As seen in the table,

about 17,800 km of national highway work, including

phase VI, is yet to be awarded and since NHDP plans

to fund these projects through a public private

partnership, these projects provide a great

opportunity for private sector investment.


IBEF presentation, (http://www.ibef.org/download/Roads‐261112.pdf), Page 23


IBEF presentation, (http://www.ibef.org/download/Roads50112.pdf), Page 25




IBEF presentation on roads,

(http://www.ibef.org/download/Roads‐261112.pdf), Page 31




Table 3.1: Status of NHDP projects ‐ Phase I to VII as of October 2012 25


NHDP Project Status (In Kms) Ph. I & II Phase III Phase IV Phase V Phase VI Phase VII Total

Total Length (Km.) 7,142 12,109 14,799 6,500 1000 700 47,096

Already 4/6Laned (Km.) 6,041 4,362 18 1,197 ‐ 18 17,480

Under Implementation (Km.) 734 5,974 3,653 2,883 ‐ 23 13,268

Contracts Under Implementation (No.) 61 92 25 28 ‐ 2 216

Balance length for award (Km.) 367 1,773 11,128 2,420 1000 659 16,347

Table 3.2: Non‐NHDP projects status in 2011 26

Category 2010‐11

Target Achv.* Remaining

Missing Link (km) 2 0.1 2

Widening to 2‐lanes (km) 1117 1042 75

Strengthening (km) 1213 1016 197

Improvement of Riding Quality (km) 2307 2026 281

Widening to 4‐lanes (km) 137 99 38

Bypasses (No.) 15 3 12

Bridges /ROBs (No.) 187 103 84

Overall, GOI continues to focus on road infrastructure development and plans to award about 12,700 kmof

national highway work though NHAI in the coming years, paving way for greater private sector participation at

a global scale 27 .

Bajrang Choudhary

CEO - Infrastructure Project Development

Srei Infrastructure Finance Ltd

The roads sector in India poses an exciting opportunity for International

players given the large investments envisaged as part of the 12th Planning

Commission. A lot of investment opportunities is available at attractive

valuation in both greenfield and brownfield operating assets. The Indian road

sector today is a culmination of global experts having an array of services at

various levels.




Annual report to the people on infrastructure by Planning Commission Government of India, New Delhi


IBEF presentation on roads (http://www.ibef.org/download/Roads50112.pdf)


4. Opportunities in the

Power Sector


Power sector in India has witnessed a major

transformation over the last two decades. India is the

worldʼs fifth largest producer of electricity with an

installed generation capacity of approximately 206,456

Mega Watts (MW), almost 200 percent more than its

installed capacity of 69065 MW in March 1992 1 .


Such a remarkable growth in the sector is largely

attributed to the reforms in the early 90ʼs such as the

formulation of Electricity Act 2003 coupled with

increased private sector participation.

However, in spite of such a massive addition in

generation capacity over the last few years, India has

managed to reach merely 21.5 percent of Chinaʼs and

18.5 percent of USAʼs installed capacity.

Figure 4.1 Country wise installed capacity (GW)










189 225 284




Russia Japan China United


Source: The U.S. Energy Information Administration (EIA); http://www.eia.gov/countries/

The growth in the power sector is essential for the

overall economic development of the country. India

has so far struggled to maintain the demand versus

supply during the time we faced an increased pace in

industrial and commercial activities resulting in a high

need for power. The stark demand supply gap is

evident in the charts below, which shows the energy

shortage in the country ranging from 8 percent to 17

percent between years 1997‐98 to year 2011‐12.

Figure. 4.2 Energy shortage and Peak shortage








13.8 16.6 11.9 12.7 9.8

















Peak Shortage (%) Energy Shortage (%)

Source: Annual Report 2011‐12 (Page 12); Ministry of Power, India


Central Electricity Authority : http://www.cea.nic.in/reports/monthly/executive_rep/apr12/7.pdf


While the Government made sincere efforts in

making power available to widely distributed

geographical boundaries, the per capita

consumption of electric power still remains very low

compared to the world average as shown in figure

4.3. It is apparent that Indiaʼs per capita consumption

is among the lowest when compared to other

developed and developing economies. It is

approximately 25 percent of China, which has a

comparable population size.

Figure 4.3 Per Capita Consumption of Electricity


18000 16766 13515





7585 7175 6192 6122


2066 2040



United States




Source: IEA, World Energy Statistic, 2008








However, such constraints are not only specific to

India. Infact, most of the developing countries face

the similar crisis in availability of power to boost

economic growth.


The Power industry in India is often defined by high

growth, successive reforms and increasing private

sector participation. The generation has grown at

CAGR of 5.38 percent from 1998 to 2012 2 . The all

India installed power generation capacity as on July

30, 2012 is 206456 MW, of which the break is:

Thermal ‐ 137386 MW, Nuclear ‐ 4780 MW,

Hydro – 39291 MW and Renewable – 24998 MW.

About 57 percent of current generation capacity is

coal based and the same is likely to continue for the

foreseeable future.


Figure 4.4 Generation Mix


Energy Sources 12%

Thermal 67%


Nuclear 2%

In 2011, per capita consumption of power is 814

kwh, which indicates the apparent failure of the

Governmentʼs ambitious target of 'Power to all by

2012' under the National Electricity Policy 3 . The

latent/unmet demand exhibited by the low per

capita consumption will further exert pressure for

capacity addition. Accordingly CEA has calculated

energy requirement (MkWh) for 12th & 13th Plan

based on the on draft 18th Electric Power Survey

(EPS) as per the tables below 4 :

Table 4.1A 18th Electric Power Survey (EPS)

GDP Growth GDP Energy Energy

Rates Electricity require‐ require‐

Elasticity ment ment

(Mkwh) (Mkwh)

2016‐17 2016‐17

Actual Energy 0.80 1321972 1877313

requirement 0.90/0.8 in 1403414 1992611

(upto 2009‐10) 12 th /13 th

with 9%


Growth rate 0.95 1445689 2187300

1.09/0.9 in 1489028 2205577

12 th /13 th


Actual Energy requirement 1319069 1858999

(uptp 2009‐10) with actual

Growth rates

18th EPS* 1354874 1904861

Table 4.1B CAGR for Terminal Year

Terminal Year

Required CAGR for

Terminal Year Target


Terminal Year 12th Plan‐ 2017 9.10%

Terminal Year 13th Plan‐ 2022 8.07%

Source: 18th Electric Power Survey (EPS), National Electricity Plan,

CEA, January 2012


2012 data has been taken from CEA letter # CEA/OPM/PPI/6/1/2011 Dated 13.04.2012 3

National Electricity Plan, CEA, January 2012, Page 1


National Electricity Plan, CEA, January 2012


The high CAGR indicates opportunities for investment in the sector with high growth and moderate returns

with risk protection. The entire value chain of the power sector i.e. Generation, Transmission, Distribution, and

trading will require investment.

The EIA projections for increase in installed capacity, as shown in table below, indicates a growth rate of 3.2

percent till 2035, which endorses the sustainable growth momentum of the sector in the near future.

Table 4.2 EIA Projections for increase in Installed Capacity

History Projections Growth


2008 2015 2020 2025 2030 2035

United States 1,009 1,075 1,085 1,119 1,170 1,221 0.7

Russia 224 227 235 242 258 277 0.8

China 797 1,118 1,313 1,492 1,666 1,817 3.1

India 177 240 290 332 371 411 3.2

Brazil 104 122 144 172 205 242 3.2

Total OECD 2,495 2,684 2,798 2,917 3,047 3,181 0.9

Total Non‐OECD 2,128 2,628 2,998 3,352 3,722 4,091 2.5

Total world 4,623 5,312 5,796 6,269 6,769 7,272 1.7


Renewable Energy

The country has significant potential of generation

from renewable energy sources. The technology

evolution and fiscal incentives have promoted the

growth in the Indian renewable energy sector. The

key policies are:

National Action Plan for Climate Change

(NAPCC): NAPCC targets to increase the share

of renewable energy in the total generation

capacity of the country. The Plan has set the

minimum renewable energy purchase

obligation (RPO) target at 5 percent of the total

energy procurement in 2009‐10, with a

1 percent year‐on‐year (y‐o‐y) increase for the

next 10 years.

Renewable Energy Purchase Obligation (RPO):

State level RPO regulations have been put in

place by SERCs in most of the states. The RPO

regulations are required to be met by

obligated entities (DISCOMS, group captives

and open access customers) by purchasing

renewable energy either by entering into PPAs

with renewable energy assets and/or by

purchasing renewable energy certificates


The Installed capacity as on 31st December, 2011

from renewable energy sources is 20,162 MW 5 .The

majority of the capacity is in the private sector. The

Total Renewable Installed capacity comprises

14104.62 MW from Wind, 3120.83 MW from Small

Hydro Plants, 2787.63 MW from Biomass Power &

Biomass Gasifiers and 149.16 MW from Solar

power & Urban & Industrial waste.

India ranks fifth in the world in terms of installed

capacity of wind turbine power with 14104.62 MW

installed capacity, and plans to generate 22,000

MW of solar power by 2022 6 . The fossil fuel will

have finite life and will always suffer from rising

prices. Solar and wind energy offers great

potential for a sustainable energy solution.


National Electricity Plan, CEA, January 2012, Page 12




Transmission & Distribution (T &D)

A strong transmission capability is necessary for

growth of the power sector. A T&D system comprises

transmission lines, substations, switching stations,

transformers and distribution lines.

The thermal capacity is concentrated in the Eastern

region and hydro capacity is concentrated in the

Northern and North‐Eastern regions. On the demand

side, demand is concentrated in the Western region.

An integrated power transmission grid helps to even

out supply‐demand mismatches.

The scope for improvement and the need of

efficiency has led the Government to take serious

steps to meet the emerging demand in the

transmission and distribution area. The Electricity Act

2003 further stressed on the importance of power

transmission and distribution, laying the ground work

for the Central Government in setting up various

schemes for efficient distribution of power.

In the central sector, the Central Transmission Utility

(CTU), known as the Power Grid Corporation of India

Ltd (PGCIL), is responsible for national and regional

transmission planning, while the state sectors have

separate State Transmission Utilities (STU).

The Central Transmission Utility (CTU) is the nodal

agency for providing medium term (3 months to 3

years) and long term (12 to 25 years) access that are

typically required by a generating station or a trader

on its behalf.

Private sector participation is negligible in

transmission and there is only one Public‐Private

Partnership project, the Tata Transmission Project.

Four private companies have been granted licenses

for developing transmission projects. While three

companies have entered in joint ventures with PGCIL,

one company is a private company that has been

awarded independently.

The development in the transmission system was

carried out in coordination with the growth in

generation capacity. HVDC and HVDC bi‐pole

transmission were set up back‐to‐back in 1989 and in

1990 respectively.


Figure 4.5 All India AT & C (percent)


34.78 34.33 33.02






30.62 29.45 27.74 27.15

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Source: Central Electricity Authority

The AT&C losses have come down from about 35

percent in 2004 to 27 ‐ 30 percent of supply. The

improving AT&C losses will benefit the entire value

chain and enable better price realization.


The Electricity Act, 2003 (EA 2003) has laid down the

foundation for power trading recognizing it as an

integral component of the power sector within India.

As on 31st March 2011, CERC (Central Electricity

Regulatory Commission) had awarded trading

licenses to 48 applicants for inter‐state trading in

electricity 7 . Of these, 10 licensees have surrendered

their license 8 . There are around 38 companies with

power trading licenses and only about five or six are

active. Besides PTC India, these include NTPC Vidyut

Vyapar Nigam, National Energy Trading and Services,

Tata Power Trading Company and Reliance Energy


CERC (Central Electricity Regulatory Commission)

regulate and monitor the two exchanges, namely the

IEX and PXIL. The Commission in 2009 has granted inprinciple

approval for National Power Exchange Ltd

(NPEX) for setting up and operating a Power


Table 4.3 Power Trading in India

Year 2010‐11 Power Traded Volume of Short Term Electricity Trade Total Generation

Billion Units 15.52 81.56 809.45

Percentage 1.92 10.08 100.00

Source: CERC Annual Report 2011


CERC Annual Report 2010‐2011, (http://www.cercind.gov.in/2011/Annual_Report/annual_report_2010_11_ENGLISH_new.pdf), Page 33


CERC Annual Report 2010‐2011, (http://www.cercind.gov.in/2011/Annual_Report/annual_report_2010_11_ENGLISH_new.pdf), Page 33


Power trading enables the optimization of

imbalanced disposition of resources. It is also the

fastest growing segment of the power sector. More

than 81 billion units of electricity are traded annually 9 .

Even though share of the power exchange trading is

1.92 percent of total electricity generation, it shadows

various international trading platforms and has room

for immense growth 10 .

The effective introduction of mandatory Open Access

for consumers with a load of 1 MW and above will

boost trading volume. The introduction of new

products such as structure derivative on exchanges

will also increase the options for buyers and sellers.

Investment Opportunities

The power sector is the main stay of the Indian

sustainable economic growth. The importance of

power sector will continue to increase as the Indian

economy prepares for 8 ‐ 9 percent growth.

a) Generation

The 12th Five Year Plan (2012‐17) envisages an

addition of 100,000 MW generation capacity of

which 40 percent is to be allocated to the private

sector. The Ultra Mega Power Projects (UMPP),

each with a capacity of 4000 MW or above, are

being developed with the aim of meeting this

huge demand and reducing the prevailing power

deficit in the country. Each UMPP entails an

investment of USD 3‐4 billion and have a single

window clearance through the Power Finance

Corporation (PFC).

developers. The Odisha & Chhattisgarh UMPPs are

currently under active consideration for award

by PFC.

The remaining UMPPs are expected to be

awarded during the 12th Five Year Plan. The site

for the Tamilnadu UMP has been finalised at

Cheyyur with the captive port at Panaiyur whereas

the secong UMPP in Andhra Pradesh will be

coming up at Nayunipalli Village in Prakasham

District. The sites in the States of Jharkhand,

Tamilnadu and Gujarat for their second UMMPPs

are being examined.

b) Transmission & Distribution

The installed inter‐regional power transfer

capacity as on November 30, 2011 was 23,800

MW 11 . Globally, every dollar invested in generation

requires an equal amount investment in T&D. With

massive investment growth in generation, a

parallel investment in a strong transmission and

distribution network is inevitable. India has added

a massive 97,625 MW/MVA substation transformer

capacity in the 11th Five Year Plan up to 2011.

Out of the sixteen UMPPs identified so far, PFC

floated twelve SPVs as its wholly owned

subsidiaries for the development of UMPPs.

During the 11th Five Year Plan, bids were invited

for six UMPPs out of which PFC has already

awarded four UMPPs ‐ Sasan in Madhya Pradesh,

Mundra in Gujrat, Krishnapatnam in Andhra

Pradesh and Tilaiya in Jharkhand to the identifed


CERC Annual Report 2010‐2011, (http://www.cercind.gov.in/2011/Annual_Report/annual_report_2010_11_ENGLISH_new.pdf), Page 34


CERC Annual Report 2010‐2011, (http://www.cercind.gov.in/2011/Annual_Report/annual_report_2010_11_ENGLISH_new.pdf), Page 34


Annual Report 2011, Ministry of Power


A total of nine High Capacity Power

Transmission Corridors have been

finalized for meeting the requirement

of IPPs coming up in Chhattisgarh,

Odisha, Madhya Pradesh, Sikkim,

Jharkhand, Tamil Nadu and Andhra

Pradesh at an estimated cost of

` 58,000 crore (USD 10 billion) 12 .

Key Challenges for the Indian

Power Sector

One of the major reasons of

continuous power shortages is Indiaʼs

poor record in achieving the planned

generation capacities. The annual

average capacity addition during the

last decade is merely around 7000 MW

per year. Capacity addition of 200 GW

is required during 2012‐2022 i.e. annual

capacity addition of 20 GW as against

the annual capacity addition of 12.4

GW per year during the 11th plan 13 .

1. After the Tariff Policy, 2006 Case I

Figure 4.6 Growth in Transmission & Distribution









Source: Electricity Planning Report, CEA










6th 7th 8th 9th 10th 11th

Transformer Growth (MVA/MW)

Transmission Line (ckm)




and II bidding has become the

dominant route for long term

Power Purchase Agreements

(PPAs) with State Electricity Board

(SEBs)/Power Utility companies for

the private generators. This has

resulted into competitive prices.

2. Uncertainty on fuel supply security

has hit the sector growth. There

has been no allocation of coal

blocks for the power sector post

2010. The rising coal prices of

imported Indonesian coal due to

transfer pricing issues have hit the

growth of power sector.


Ministry of Power, Annual Report 2011


National Electricity Plan, CEA, January 2012


3. The inability of Coal India Limited (CIL) to meet the

demand of the power sector is putting pressure

on the cost of power production.

Regulatory Framework

100 percent FDI has been permitted in generation,

transmission and distribution for the sector, except

nuclear power, making foreign participation a less

cumbersome process.

Some other key policy initiatives that fuelled the

power sector growth have been summarized below:

The Electricity Act, 2003 – Open Access allowed in

generation, transmission and distribution paved

the way for greater private sector participation

The Electricity Act, 2007 – As per the act, captive

units no longer require a license to supply power

to any user and specified strict action against

unauthorised usage of power.

Reorganization of State Electricity Board (SEBs) –

Government has initiated the process of

reorganization of SEBs and form a large number of

independent entities (generating companies,

transmission licensees and distribution licensees)

in each State, and consequently a very large

number of such intra‐State entities in each region.

The Grid Code provides that the operation of all

entities within the state would be coordinated

by the concerned State Load Despatch Centre

(SLDC), who in turn would coordinate with

Regional Load Despatch Centre (RLDC) on real

time basis. Giving a major fillip to the power sector

in September 2012, the Government approved

the restructuring of `1.9 lakh crore debt of State

Electricity Boards to turnaround the near‐bankrupt

power distribution companies 14 .

The budget for 2012 has also provided the

following incentives for power sector.

The Government has proposed to allow External

Commercial Borrowings (ʻECBʼ) for part financing

of rupee debts in the power sector, and also

reduced tax withholding rates on interest on ECB

from 20 percent to 5 percent.

Additionally to boost funding, the power sector

has been allowed to raise `10,000 crores (USD 180

million) from Infrastructure Tax Free Bonds.




Private Sector Participation

The Government has recently stressed on increased

private sector investment in the power sector. As a

result in 2012, the private sector has achieved 27.75

percent share in the installed generation capacity.

The increasing participation has been caused mainly

by the regulatory framework and the need of funds

by the Government for the implementation of

massive capacity addition through large scale

projects. The license free generation and distribution

of power in rural areas and open access up to 1 MW

have been some of the key reforms in the sector.

Figure 4.7 Private & Public Share in Generation (MW)





Source: CEA Monthly Capacity Report, June 2012


Planning Commission of India







Power is clearly the focus area of the Government,

projecting an investment of USD 314 billion over the

12th Five Year Plan in Generation, Distribution and

Transmission of the power sector 15 . Such a massive

capacity expansion plan and overhaul of the

distribution and transmission sector is expected to

encourage global power companies to participate

not only in generation but also investments in power

utility companies. There is also scope for

technological import in developing grid networks in

India following a recent grid collapse in August 2011.

There has been significant demand for SMART Grid

technology in India to improve the efficiency,

reliability, economics, and sustainability of the

production and distribution of electricity across the


Thus, the overall growth momentum in the power

sector is likely to continue in the foreseeable future,

and has a lot to gain from a global investment


India today offers one of the

highest growth opportunities for

private developers in power sector

as the demand for electricity is still

enormous and continues to grow

steadily. Despite its complexity and

regulatory challenges, the entry of

several global players is expected

to change the dynamics of the

Indian power industry in coming



5. Opportunities in



Ports play an integral role in the growth of our

economy with almost 95 percent of the volume and

70 percent of the value of India's international trade

being routed through maritime transport 1 . The

coastline of India measures over 7500 km in length and

is dotted with more than 200 ports 2 . Its strategic

position makes it compulsory for most cargo ships

navigating between East Asia and America, Europe and

Africa, to pass through the Indian territorial waters.

The Department of Shipping holds the portfolio for

taking decisions relevant to shipping and ports,

which include ship building/repair, national

waterways, inland water transport and ports.

With the economic reforms of 1991 and opening of

investments in India, exports and imports have

witnessed remarkable growth. The increase in foreign

trade since 2007 can be ascertained from the chart

below. Ports have played a vital role in this overall

economic development.

There are two basic categories of ports within the

country‐ namely Major Ports and Non‐ Major Ports.

The Major Ports are a total of 13 in number and

Non‐Major Ports about 200, out of which an

estimated one‐third of the Non‐Major Ports are

currently operational 3 .

The percentage of exports that contributed to GDP

has increased by nearly 4.5 percent since 2007 to

12.85 percent of GDP in 2012. At the same time the

imports have grown YOY.

Cargo Traffic at India's major ports during financial

year 2011 was 570.3 million tonnes (MT), which was

1.59 percent more than the cargo traffic of the same

period last year 4 .

Table 5.1 Trade Performance: Growth in Value, Volume, Unit Values & Terms of Trade

(Annual per cent change)




Rupee USD Unit Rupee USD Unit

terms terms Volume Value terms terms Volume Value Net Income

2001‐02 2.7 ‐1.6 0.8 1 6.2 1.7 4 2.8 ‐2.1 ‐1.3

2002‐03 22.1 20.3 19 2.9 21.2 19.4 5.8 14.3 ‐9.8 7.4

200304 15 21.1 7.3 7.5 20.8 27.3 17.4 3.1 3.6 11.2

2004‐05 27.9 30.8 11.2 14.9 39.5 42.7 17.2 18.9 ‐3.5 7.3

2005‐06 21.6 23.4 15.1 6.1 31.8 33.8 16 14 ‐6 8.2

2006‐07 25.3 22.6 10.2 13.7 27.3 24.5 9.8 15.1 ‐1.3 8.8

2007‐08 14.7 29 7.9 5.1 20.4 35.5 14.1 1.9 2.6 10.7

2008‐09 28.2 13.6 9 16.9 35.8 20.7 20.2 13.8 2.5 11.7

2009‐10 0.6 ‐3.5 ‐1.1 1 ‐0.8 ‐5 9.9 ‐10 12.3 11.1

2010‐11 35.1 40.5 43.2 ‐5.1 23.4 28.2 10.1 11.2 ‐14.3 22.7

2011‐12* 28.7 23.5 _ _ 34.8 29.4 _ _ _ _

Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S), Kolkata

Note: 2011‐12 (April‐January).

Volume and unit value index of exports and imports are with new base (1999‐2000=100)

1 2

http://www.oifc.in/sectors/infrastructure/ports. Article‐ Ports in India, Paragraph 1. http://www.ibef.org/download/Ports50112.pdf, Slide 3

3 4

http://www.ibef.org/download/Ports50112.pdf, Slide 5 Port wise traffic in India ‐ http://shipping.nic.in/writereaddata/l892s/7yearsTRAFFIC‐79318523.pdf


According to Mr. G.K. Vasan, Union Shipping

Minister, it is expected to grow at a CAGR of about

8 percent from 561 million tonnes (MT) in 2009‐10 to

1,215 MT by 2019‐20 5 . At the same time the traffic at

non‐major ports is expected to grow at a growth

rate of 16 per cent from the present level of 289 MT

to 1,270 MT. At present minor ports handle 26

percent of the total traffic. The key cargoʼs that are

expected to drive growth are coal, crude oil,

fertilizers and steel products.

The Growth Drivers

During the year 2011‐12, the total capacity of Indiaʼs

ports stood at 1,247.45 million tonnes (MT) 6 . The

cargo traffic in India is growing at a very fast pace,

and in order to fulfill this logistical requirement, the

capacity of the countryʼs ports will have to nearly

double to 2,302 million tonnes (MT) in the next five

years, as per the projections of the Planning

Commission 7 .

An ambitious target of around 3200 MT port capacity

has been targeted for 2020 8 . It is expected that more

than 50 percent of this contribution shall be

achieved through non‐major ports. The Ministry of

Shipping (MOS) has launched the perspective 2020,

which shall replace and take forward the existing

maritime development plan , and the clear focus of

the MOS is not just to build ports, but to bring about

ports which are equivalent to the best international

ports in terms of performance and also to promote

coastal shipping 9 .

The Ports sector has been granted a sum of ` 400

crore (USD 72.33 million) in the Budget year 2012‐13

which will further accelerate the growth in the

sector 10 . The Annual Budget has also allowed ports to

access low‐cost funds from overseas and benefit from

the cut in interest payable on external commercial

borrowings (ECBs) from 20 percent to 5 percent

from 2012.




http://www.oifc.in/sectors/infrastructure/ports. Article‐ Ports in India, Paragraph 4


http://www.oifc.in/sectors/infrastructure/ports, Article‐ Ports in India, Paragraph 2. 8





http://www.ibef.in/artdispview.aspx?in=53&art_id=32158&cat_id=814&page= 2.

Government Initiatives, Paragraph 1.


Key Challenges

1) Management of high risk of project execution ‐

Given the size of the capital expenditure outlay

and the gestation period till the build‐up of

adequate cargo volumes, the profitability, return

indicators, and free cash flows of these large

projects are vulnerable to being subdued over the

medium term. As a result, their financial profiles

are exposed to various risks, including

construction risks, risks of time and cost overruns,

as well as market and commercial risks (adequacy

of traffic vis‐à‐vis the incremental capacity).

2) Enduring the impact of temporary overcapacity

in container terminals‐ With capacity expansion

being sporadic in nature and the evolution in

traffic volumes time taking, it is likely that the

container handling capacity would face a

temporary surplus in the medium term as new

projects get commissioned.

3) Regulatory risk and systemic issues ‐ Terminal

operators could be compelled to adhere to

specific performance standards, or pay penalty in

case of inadequacy on empowerment of the new

regulations imposed by the Major Port Regulatory

Authority (MPRA), which is expected to replace

Tariff Authority for Major Ports (TAMP).

Regulatory Framework

In order to upgrade the Indian ports with state of the

art technology and facilities, the Government has

allowed Foreign Direct Investment (FDI) of up to 100

percent under the automatic route for construction

and maintenance of ports and harbours. On the

taxation front, a 10‐year tax holiday has been granted

to enterprises engaged in the business of developing,

maintaining and operating ports, inland waterways

and inland ports. To improve connectivity, the Special

Economic Zones (SEZs) are being developed in close

proximity to several ports, thereby providing strategic

advantage to industries within these zones.


The Maritime Agenda 2010‐2020, projects to develop

the capacity of the Indian Ports to 3,200 MT, the port

sector under the new plan would invest USD 66

billion, of which the majority would be from private

investors. The Ministry of Shipping envisages that the

private sector would handle 50 percent of the

nation's cargo by 2015.

A Model Concession Agreement has also been

finalized which attempts to bring in uniformity to

the agreements to be signed by the Major Ports

with the various private operators as


Private Sector Participation

The proposed investments in major ports stands at

USD 21.9 billion, of which 67 percent is expected to

come from the private sector, and balance is to be

funded from internal sources and the Government

budget support. The opening up of the PPP mode

not only allows funding to be made easy, but at the

same time helps provide state of the art technology

along with best practices, which help in increasing

efficiency by reducing construction and cargo

handling time (once the facility is in place).

The Government of India has allowed Foreign Direct

Investment upto 100 percent under the automatic

route for construction and maintenance of ports and

harbors. The states have also identified projects for

the development of non‐major ports at an estimated

cost of USD 34 billion for creation of additional

capacity. It is expected that the private sector will

finance most of the projects (approx 95 percent)

through Public Private Participation or Build Own

Transfer or Build Own Operate & Transfer models. The

balance 5 percent requirement shall be contributed

by State Governments through Internal Resources or

Gross budgetary Support.

To encourage private sector participation, the

Department of Shipping 11 –

Has put Request for Qualification (RFQ) & Request

for Proposals (RFPʼs) in place, which ensures

transparent participation and project award.


Maritime Agenda: 2010 ‐ 2020, (http://shipping.nic.in/showfile.php?lid=261), Page 21


percentage of revenue share out of the operation of

the facility. The tariff fixation is carried out by Tariff

Authority for Major Ports (TAMP) which is an

independent Regulatory Body. At present the tariffs

are fixed upfront, which act as a ceiling before a

project is bid out on a revenue sharing basis as

explained above. The private operators are free to

charge below the ceiling.

Going forward, the following are a few areas for

private participation in the ports sector 12 –

1. Leasing out port assets

2. Construction/operation of facilities as mentioned


a. Container Terminals

b. Cargo Berths

c. Warehouses, container freight stations,

storage facilities

d. Material Handling equipment

e. Setting up captive power plants

f. Ship repair facilities

3. Leasing of equipment for port handling

4. Leasing of floating crafts

5. Captive facilities for port based industries

6. Pilotages

In the financial year 2010‐11, nine Public Private

Partnership (PPP) projects had been awarded at an

estimated cost of USD 671 million which will lead to a

capacity increase of 51.76 MT in the port sector,

comprising of construction of berths and terminals,

as well as the mechanization of existing berths.

The process of bidding allows the project to be

awarded to the bidder which offers the highest

Naveen Bansal

Head, Special Projects

Srei Infrastructure Finance Ltd

India is blessed by being

surrounded by water

bodies, making ports

essential to the growth of its economy. We

expect tremendous foreign participation in the

coming years, in order to bring this sector to

global standards


Maritime Agenda: 2010 ‐ 2020, (http://shipping.nic.in/showfile.php?lid=261), Page 21


6. Opportunities in



The Indian Railways (IR), a state‐owned enterprise, is

operated by the Government of India through the Ministry

of Railways. The Indian Rail network is the third largest in

the world, operating 19,000 trains per day, comprising

12,000 passenger trains and 7,000 freight trains 1 . It operates

22 million passengers every day and 923 million tons of

freight each year 2 .


Figure 6.1 Revenue breakup by segment (FY10)





Source: India Brand Equity Foundation, Railways Report, 2011

Almost 74 percent of revenue in this sector comes

from the movement of freight, while the remaining

comes from the passenger traffic (Figure 6.1). Growth

in revenues is expected to come from both sectors,

due to demand for price increase. Current state of IR

gives a huge scope for improvement in many areas

such as safety, speed, freight capacity, new

locomotives and modernization of the rolling stock

etc. Modernizing Indian Railways requires a strong

generational change with bold vision, clarity and

various new initiatives.

The Growth Drivers

Growth in revenue is expected to come from a

fundamental increase in demand in freight and

passenger traffic. Given the growth in Indiaʼs

population, increased demand for connectivity and

transportation of both resources and passengers, and

the perceived cost advantage of railways, the Ministry

of Railways has concentrated on increasing capacity

in both passenger and freight segments.

Growth of freight traffic ‐ The freight traffic

amounted to 969.78 million tonnes in fiscal year

2011‐12 registering a growth rate of 5.24 percent over

the previous year. Growth is expected to continue in

the medium term based on increased demand

especially due to commodity transportation 3 .

Figure 6.2 Growth in Freight Traffic (millions tn / CAGR 8.4%)

Million Tonnes









CAGR 8.4%Forecast CAGR 6.5%

2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E

Source: IBEF industry analysis Railways




Government of India, Planning Commission, An Approach to the 12th Five Year Plan,

Page 41




Figure 6.3 Growth in Passenger Traffic (Billions / CAGR 7.5%)











FY 06

Passengers (billion)

CAGR 7.5%

FY 07 FY 08 FY 09 FY 10 FY 11

Source: IBEF industry analysis Railways

a CAGR of 7.5 percent. This growth is largely attributed

to the increased demand in mass urban transportation

and also Governmentsʼ thrust in improving the

connectivity between urban and rural areas 4 .

Increasing Private Sector Participation – There has

been an increased private sector participation in

recent years in the development and maintenance of

tracks, fixed assets like wagons, coaches, bridges,

stations and telecommunication. The Railways

Ministry has further proposed development of fifty

world class stations in a PPP mode with a view on

long term enhancement of rail infrastructure.

Rising demand for urban transport ‐ Several new

projects have been sanctioned and being undertaken

including metro rail projects, construction of

dedicated freight corridors, modernization of metro

stations, manufacturing of new rolling stock, wagons

etc. Nevertheless, faster increase in urban population

compared to rural is leading to increased demand for

urban‐rural connectivity, hence increased demand for

rural services.

The passenger traffic has already grown from 5.7

billion in 2006 to approximately 8 billion in 2011‐12 at


India Brand Equity Foundation, Railways Report 2011, Page 9


Key Challenges

Challenges faced in the 11th Five Year

Plan can be applied to 12th Five Year

Plan, as many of the issues within the

sector have not changed much. Some

of these are as follows:

To sustain and increase its market

shares in the face of increasing

competition from other modes of

transportation like Roads & Airlines.

To improve profitability of the

passenger business.

Expansion of the network and

terminals to keep pace with the

growing demand of traffic.

Resource mobilization and project

implementation capabilities to

handle the large shelf of sanctioned


Implementation of major projects

like Dedicated Freight Traffic (DFC)

project, new rolling stock

manufacturing facilities, world‐class

stations, etc.

Innovative financing for socially

desirable but economically unviable


Resource mobilization and project

implementation through PPP mode.

Technology up‐gradation.

Investment Opportunities ‐

Railways and Vision 2020

By adopting Vision 2020, the Indian

Railways have set themselves

ambitious targets for the expansion

and modernization of the railway


network in India. Vision 2020 sets the roadmap for

Indian Railways to meet quality and capacity targets to

improve the overall profitability of the sector, as well as

enhance the services to benefit the citizens of the

country. The overall objective of the Vision document

is to increase capacity for meeting growth demands in

both, passenger and freight segment and also

enhancing the Indian Railways' contribution to the

national goal of achieving double‐digit GDP growth

rate on a sustainable basis. The Vision document

proposes to add 25,000 km of New Lines by 2020,

supported by government funding and a major

increase in Public Private Partnerships (PPPs) 5 .

Table 6.1 Vision 2020 Railways Target

Short‐term Long‐term

Vision 2020 targets (2010‐12) (2012‐20)

Doubling (km) 1,000 11,000

Gauge conversion (km) 2,500 9,500

New line (km) 1,000 24,000

Electrification (km) 2,000 12,000

Wagons 33,909 255,227

Diesel locomotives 690 4,644

Electric locomotives 555 3,726

Passenger coaches 6,912 43,968

World‐class stations 12 38

High‐speed corridors (km) 2,000

Source: Ministry of Railways

Regulatory Framework

The Union Railway Budget for 2012‐13, highlights the

following initiatives by the Government 6 :

Highest ever plan outlay of ` 60,100 crore (USD

11.72 billion).

Setting up the Railway Safety Authority as a

statutory regulatory body.

Setting up a Dedicated Freight Corridor (DFC):

DFCCIL, a special purpose vehicle, was set up

for implementing the DFC project, under the

administrative control of the Ministry of


Plan is to construct dedicated freight lines

along the eastern and western parts of India.

Total length: 3,287 kilometers; total cost: USD

10.3 billion. Construction has started with the

project scheduled for completion in FY17.

725 km of new lines, 700 km doubling, 800 km

gauge conversion and 1,100 km of electrification is

targeted in 2012‐13.

31 projects covering a length of more than 5,000

km in 10 States, being executed with contribution

from State Governments.


India Vision 2020 ‐ of Planning Commission


The Union Railway Budget for 2012‐13, Highlights of the Railway Budget 2012‐2013


Indian Railway Station Development Corporation to

be set up to redevelop stations through PPP mode

– this should give opportunities to the private

sector in development of Stations. Logistics

Corporation to be set up for development &

management of existing railway goods sheds and

multi‐modal logistics parks.

Private investment schemes for Wagon leasing,

Private Freight Terminals, Container train

operations, Rail connectivity projects being made

more attractive to PPP partners.

Several new rail based factories and initiatives to

be setup including new wagon and rail coach

factories, manufacturing centers of traction

alternators, propulsion systems etc.

Several Green Initiatives including new windmill

plants, green energy stations, solar lighting,

bio‐diesel and bio‐toilets initiatives are being



Public Private Participation (PPP)

Private investments in the railways through the public

private partnership has been recommended at

` 224,029 crores / USD 41 billion (about 28 percent of

Railways five year funding requirement), which will be

spread across capacity augmentation and

modernization. In budget year 2012, PPP investments

are estimated to be to the tune of ` 1050 crores / USD

190 million. In order to achieve this goal, the

Government has taken various initiatives and

introduced some attractive schemes which are as

follows 7 :

Metro Schemes:

Following the success of Delhi Metro, several

similar initiatives are being taken to build a

robust metro network in major cities across the

country. As of 31 March 2010, the total cost

incurred on metro projects in Delhi NCR and

other cities such as Bengaluru, Chennai,

Mumbai and Kolkata was USD 14.7 billion and

the opportunities have been spread for the

private sector through the PPP mode.

Apart from these metropolitan projects, tier 2

cities such as Jaipur, Lucknow, Ludhiana and

Kanpur are also on the agenda for metro

projects, thus leading to immense opportunity

for investment.

Wagon Investment Scheme

Indian Railways launched the Wagon

Investment Scheme in 2005 to offer freight

rebates and supply a guaranteed number of

rakes for a period of 7 – 15 years for different

types of wagons.

The Ministry of Railways has proposed to set

up five wagon factories under the JV/ PPP

mode and plans to procure 18,000 wagons

during FY12.

Process has been simplified of certifying and

accepting the new wagon designs and

protecting the intellectual property rights of

the companies. Wagon manufacturers will

now also be able to import technology from

abroad to bring modern designs into the

Indian Railways. This policy will facilitate

continuous upgradation in wagon technology.


Executive summary, Working Group report for 12th Five Year Plan – Railway sector


The policy allows for four models – (a) Cost

Sharing‐Freight Rebate, (b) Full Contribution‐

Apportioned Earnings, (c) Special Purpose

Vehicle (SPV), and (d) Private Line.

R2CI (Railwaysʼ Policy for Connectivity to Coal

and Iron Ore Mines) Policy

New policy initiated to improve rail

connectivity to coal and iron ore mines.

It offers the developer involved in the

construction of the line to levy a surcharge on

the freight over a period of 10‐25 years.

Dedicated Freight Corridor

Dedicated Freight Corridor of India (DFCCIL), a

special purpose vehicle, was set up for

implementing the DFC project under the

administrative control of the Ministry of


The plan is to construct dedicated freight lines

along the eastern and western parts of India.

Total length: 3,287 kilometres; total cost:

USD10.3 billion.

Construction has started with the project

scheduled for completion in FY17.

Dedicated Freight Corridor Corporation of

India (DFCCIL) has signed an agreement with

the Japan International Cooperation Agency

for its upcoming western corridor project at an

investment of ` 4,23,000 crore (USD 94.03

billion). The project involves building of nine

large industrial zones, high‐speed freight line,

three ports, six airports, a six‐lane intersectionfree

expressway connecting Mumbai with

Delhi and a 4,000‐MW power plant.

R3i (Railwaysʼ Infrastructure for Industry

Initiative) Policy

Aimed at attracting private sector participation

in rail connectivity projects in order to create

additional rail transport capacity.

The policy has two models – Capital Cost

Model, and the SPV Model. While the Capital

Cost Model is relevant when there are two

players, the SPV Model is tended for a situation

where there are a large number of players.

Figure 6.4 PPPs in Railways

Loco-coach units,

Rs 3,000 cr

Logistics Parks,

Rs 3,000 cr

Poet connectivity,

Rs 5,000 cr

Energy Projects,

Rs 6,000 cr

Redev of stations,

Rs 10,000 cr

DFC (Sonnagar-


Rs 10,022 cr

Pvt Freight Terminals,

Rs 2,815cr

Potential PPPs in Railways

Hi-speed corridor

Mum-A bad,

Rs 20,000cr

Elevated Rail


Rs 20,000 cr

The Indian Railways has identified 9 projects which

can attract private investments under PPP mode

during the 12th Five Year Plan. With the estimated

worth of around ` 80,000 crore (USD 14,388

million). 4 projects namely Elevated Rail Corridor

between Churchgate‐Virar in Mumbai, High Speed

Corridors between Mumbai and Ahmedabad),

Redevelopment of stations and Dedicated Freight

Corridor between Sonenagar and Dankuni will

together entail an investment of around ` 60,000

crore (USD 10,791 million) 8 .




The table below captures some of the major upcoming projects in Railways that would help it become one of

the largest developed rail networks in the world and a catalyst for the socio‐economic growth of the country.

Table 6.2 Upcoming Railways PPP Projects

Sl. No. Project Total Cost Time Investment

in ` frame expected in next

Crores (years) 5 years (through Cost to

(USD mn) PPP) Goverment

1. High Speed Corridor 50,000 10 20,000 Vialablity Gap‐upto

Mumbai‐Ahmedabad (8,993) (3,597) 20% of cost

2. Elevated Rail Corridor in 20,000 5 20,000 Vialablity Gap‐upto

Mumbai suburban (3,597) (3,597) 20% of cost

3. Redevelopment of station and

Logistic Parks

4. Wagon leasing. Private freight 5,000 5 5,000

terminals and other freight schemes (899) (899)

5. Dedicated freight corridors

6. Loco and coach manufacturing units 6,000 5‐6 5,000 Equity share of

(1,079) (899) about ` 300 crores

(USD 54 mn) &

assured off‐ take of

products for 10 years

7. a) Renewable energy 1,000 5 1,000 assured of‐take

projects (Solar, wind, etc.) (180) (180)

b) Energy saving projects 1,000 (180) 1,000 (180)

c) Captive power generation 4,000 (719) 4,000 (719)

Total 97,000 56,000

(17,446) (10,072)


7. Opportunities in the

Aviation Sector


The growth journey of the Indian Aviation sector started

with the liberalizaion in the mid nineties, resulting in a

growth as private service airlines entered the sector. In

2010, Indian aviation grew around 13.6 percent, among

the highest in the world 1 . This growth trend is expected to

continue as per the Indian Ministry of Civil Aviationʼs Vision

2020 – estimating an annual growth rate of around 15

percent over the next five years 2 .

Despite such a progressive

outlook, the Indian aviation

sector is likely to face some

challenges going forward,

keeping in mind the environment

of slowing GDP growth, increased

fuel prices, slump in passenger

growth and a highly competetive

market. In the current year, the

passenger growth is estimated to

further slow down to just under

10 percent. At the same time, the

nationʼs full service carriers

continue to suffer under the

burden of approximately USD 16

billion in debt 3 .

Table 7.1 ‐ Projected

Global Ranking of Indian

aviation by airport traffic

2012 2017



USA 1552 USA 1790

CHINA 497* CHINA 792*

UK 282 INDIA 327

SPAIN 251 UK 324







Source: CAPA proprietary model,

Airport Council International

Table 7.2 Market Share of Leading Indian Airlines


Flight Occupancy

Share (%) Rate (%)

26.3 (combined) 72.1 (Jet)

73.9 (Jet Lite)

18.8 75.9

18.7 73.2

17.4 72.8

13.4 66

5.3 65

Source: Directorate General of Civil Avation (Aug 2011)


RNCOS Indian Aerospace Industry Analysis, 2011, Page 2


Ministry of Civil Aviation Vision 2020


Center for Aviation CAPA, Article: Growth to slow in 2012 but long‐term growth of around 15% expected over next five years


The Growth Drivers

Growing demand ‐ According to the “India Airport

Market Assessment”, rise in per capita income is

making air travel more affordable for Indian travellers.

Indiaʼs fast growing tourism industry will also add fuel

to the market, improving its future outlook 4 . As

presented in Table 7.1, it is anticipated that by

FY 17, Indian airports (including domestic and

international) will handle close to 327 million

passengers (in FY 11 passenger traffic stood at

143.4 million).

Increasing Investments – There has been a steady

rise in private sector investment in the aviation

industry driving large scale modernization and

greenfield projects across airports in tier II and tier III

cities. Planning commission has almost doubled the

investment allocation for the aviation sector to USD

17 billion as per the 12th Five Year Plan as compared

to USD 9 billion in the 11th Five Year Plan.

Policy Support – The Government has increased their

focus on infrastructure, creating policies which will

support and increase the liberalization of the sector

such as an Open Sky Policy and FDI encouragement,

which are just some of the actions changing the

outlook of Indian aviation.

Increase in Passenger Volume

According to forecasts as per the 12th Five Year Plan

domestic passenger traffic is estimated to grow at an

average annual rate of around 14.5 percent between

2012 and 2017. Domestic passenger volume is

expected to touch 209 million by FY 17 from 106

million in FY 11. Similarly, international passenger

traffic is estimated to grow at an average annual rate

of 9.6 percent during the 12th Five Year Plan period,

to reach 60 million passengers by FY 17 from 38

million in FY 11. Overall, total traffic is expected to

jump to 269 million passengers by FY 17. Passenger

terminal capacity is expected to touch 370 million

across all airports as per the investment plans of the

operators 5 .

Figure 7.1 ‐ Passenger Traffic at Airports (In Mln)

















Domestic International Total

FY 07 FY 11 FY 17 (Forecast)

Source: Planning Commission Working Group Paper, Civil Aviation for the

12th Five Year Plan (2012‐17)


India Airport Market Assessment


Planning Commission Work Group, 12th Five Year Plan (2012‐17) for Civil Aviation Sector, Page 19


Increase in Cargo Volume

Cargo growth will necessitate investment in

specialized cargo terminal and equipments.

Independent investments suggest an additional

requirement of 30 functional airports by 2017 and

about 180 functional airports in the next 10 years 6 . The

Sub‐Group has projected that the domestic cargo

traffic would grow at an average annual rate of around

14.5 percent in the next five years to touch around

1.68 million tonnes by FY 17 from 0.85 million in FY 11.

Similarly, international cargo is estimated to grow at an

average annual rate of 12.1 percent during the 12th

Plan period to reach 2.65 million tonnes by FY 17 from

1.50 million in FY 11. Overall, total cargo traffic is

expected to jump to 4.33 million tonnes by FY 17 7 .

Figure 7.2 ‐ Cargo Traffic at Airports (ʻ000 tn)
















FY 07






Key challenges in the Aviation Sector


International Total

FY 11 FY 17 (Forecast)

Source: Planning Commission Working Group Paper, Civil Aviation for the

12th Five Year Plan (2012‐17)

Despite favorable demographics, the Indian carriers

have failed to translate the demand for air travel into

profits. For the year ended March 2012, 5 out of the 6

major airlines in India were incurring massive losses 8 .

India still remains significantly underpenetrated in the

civil aviation sector ‐ at present there are only 0.52

departures per 1,000 people in India and less than 2

percent of Indians travel by air each year. However, this

in itself offers a huge opportunity for the sector in a

country with a population of 1.2 billion and a rising

and upwardly mobile middle class 9 . The city wise

traffic breakup presented in Figure 7.3 shows that the

highest traffic comes from New Delhi Airport, which is

closely followed by Mumbai. With increased economic

activities across other metro cities, it is expected that

the rest of the country would see an equal traffic

throughput in the coming years.

However, India still remains underdeveloped in

aviation infrastructure, as it needs an overhaul to

match the increased traffic demand. The top five

airports account for approximately 65 percent of all

Indian air traffic. The lack of infrastructure has a direct

impact on the ability of the Indian airlines to

implement the success factors of the low cost carriers.

6 7

Planning Commission Work Group, 12th Five Year Plan (2012‐17) for Civil Aviation Sector, Page 12 Planning Commission Work Group, 12th Five Year Plan (2012‐17) for Civil Aviation

Sector, Page 20 8 9

Article: "Kingfisher Air Q3 loss widens, fuel costs mount". February 16, 2012. Bravia Capital Reports, The Current State of Indian Aviation: What Indian airlines need to

do to get back in the black, 2012 http://network.airfinancejournal.com/Post/The‐Current‐State‐of‐Indian‐Aviation‐What‐Indian‐airlines‐need‐to‐do‐to‐get‐back/6669/True


Cost Drivers ‐ Apart from higher fuel costs, further

factors like higher taxes, higher airport charges

(e.g. at Delhi airport) are likely to impact the

airlines. Owing to rising fuel prices, Kingfisher had

to dissolve Kingfisher Red (its low cost carrier) and

the Indian government had to bail out Air India.

Cargo industry challenges ‐ Bottlenecks in terms

of inadequate infrastructure and land for cargo

handling with highly concentrated air traffic

leading to tier 2 and tier 3 cities are being ignored.

Blockages with regards to linking road and

railways to the cargo and influencing the

movement of cargo are also inadequate leading

to poor movement of cargo through airports.

The lack of airports is one of the significant factors

leading to intense price competition for the Indian


Growth concerns ‐ If low GDP growth estimates

sustain over a long term, the aviation sector will

face similar growth concerns as well. Further,

macroeconomic factors like rising fuel prices,

lower currency valuation are also adversely

impacting airlines.

Regulatory uncertainty in PPP investments ‐

Policy paralysis, lack of political consensus in taking

the reform measures, lack of transparency in PPP

investments and instances of hostile approach

towards investors have heightened business risks

and adversely impacted investor appetite.

Amid such uncertainties surrounding the industry,

the silver lining is the proactive steps being

undertaken by the Government in bailing out the

private and public players who are in troubled waters.

While, Air India and Jet Airways have been the

biggest beneficiaries of the Governmentʼs proindustry

stand, recent reform measures in relaxing

FDI norms could be termed as a major confidence

building measure to revive investor appetite.

Figure 7.3 ‐ Total Passenger Number







Source: CAPA














Investment Opportinities

Considering the sustained growth in aviation demand and an urgent requirement for aviation infrastructure, there

is a substantial scale of investment required. These investments give rise to different opportunities in many

projects, some of which are captured in Table 7.3 10 :

Table 7.3 ‐ Projects in Pipeline and Under Implementation

S.No. Projects in Pipeline State Project Cost in

`crore (USD mn)

Ministry of Civil Aviation

1 Mopa Airport, Goa Central NI*

2 Navi Mumbai International Airport Central 9,970 (1,793)

3 Sindhudurg Airport, Maharashtra Central 307 (55)

4 Bijapur Airport Karnataka Central 24 (4)

5 Gulbarga Airport, Karnataka Central 14 (3)

6 Hassan Airport, Karnataka Central NI*

7 Simoga Airport, Karnataka Central 39 (7)

8 Kannur International Airport Central 1,130 (203)

9 Durgapur International Airport, West Bengal Central 280 (50)

10 Dabra Airport, Gwalior, Madhya Pradesh Central 193 (35)

11 Pakyong Airport, Sikkim Central 309 (56)

12 Paladi Ramsinghpur Airport, Rajasthan Central 121 (22)

13 Kushinagar International Airport, Uttar Pradesh Central NI*

14 Karaikal Airport, Pudduchery Central NI*

15 Green Airports at Nellore, Ongole,Tadepallygudem, Kurnool, Andhra NI*

Kothagudem, Ramagundam and Nizamabad (7 Airports)


16 Ahmedabad ‐ Dholera International Airport Gujarat 2,500 (450)

17 Kannur Air Port Kerala 930 (167)

18 Airstrips at Raichur, Chikkamangalore, Gadag & Bagalkot Karnataka 145 (26)

19 Jharsuguda Airport Orissa 90 (16)

20 Aerospace Park Tamil Nadu NI*

21 Kushinagar International Airport & Budhist Circuit Uttar Pradesh 600 (108)

22 Dr.Bhim Rao Ambedkar International Airport Uttar Pradesh NI*

23 Taj International Aviation Hub Uttar Pradesh NI*

Total (23 Projects) 16,652 (2,995)


The Secretariat for Infrastructure, PPP Projects Database (as on March 31, 2011 ) http://infrastructure.gov.in/pppprojects/index.php#aa

* Not Indicated


S.No. Projects Under Implementation State Project Cost in

`crore (USD mn)

Ministry of Civil Aviation

1 IGI Airport at New Delhi Central 12,857 (2,312)

2 CSI Airport at Mumbai Central 10,453 (1,880)

3 Greenfield Airport at Mopa Goa 3,000 (540)

4 Dwarka Air port Project Gujarat 500 (90)

5 Gulbarga Minor Airport Karnataka 80 (14)

6 Shimoga Minor Airport Karnataka 80 (14)

7 Construction of Hasan Airport Karnataka 690 (124)

8 Construction of new greenfield Airport at Bellary Karnataka 141 (25)

9 Development of Minor Airport at Bijapur Karnataka 80 (14)

Total (9 Projects) 27,881 (5,015)

Fourteen Greenfield PPP airports have been proposed

in the 12th Five Year Plan . Other than the proposed

Navi Mumbai airport, the rest are in non‐metro

locations, where even though the initial traffic is

expected to be quite low, the long term projections

reveal a high growth trend given the increased

spending of the emerging middle class population 11 .

existing airports, Government approvals are

required for foreign investments above 74 percent.

Regulatory Framework

Relaxation of rules for External Commercial

Borrowing (ECB) by the Union Ministry of Finance in

Budget 2012‐13 for the aviation sector came as a

life saver to many ailing airlines. The external

borrowing under this provision would have a

ceiling of USD 1 billion for the sector, where the

cap for individual airline companies has been fixed

at USD 300 million.

Proposal for formation of a Civil Aviation Aerospace

Promotion Advisory Council by the Ministry for Civil

Aviation, will accommodate members from various

regulatory agencies and the aerospace industry to

monitor the sector and its activities.

100 percent FDI allowed for greenfield airports; for


Ministry of Civil Aviation, Government of India, Approach Paper on Economic Regulation of Airports in India, March 2012, Page 3



49 percent FDI by foreign airline operators allowed

in domestic airlines. Therefore, now global airlines

may invest up to 49 percent in the aviation sector.

As per the previous guidelines, only foreign entities

other than airlines were allowed to own, directly or

indirectly, an equity stake of up to 49 percent in

Indian carriers. This move is likely to benefit the

scheduled airline operators such as Jet Airways,

Indigo, Spice Jet, Kingfisher, Jet Lite, Go Air, Air India

etc., to raise much needed capital enabling a

healthy recapitalization.

Public Private Partnership

The introduction of private participation into the

operations of airports has led to a breakthrough in the

Indian Aviation sector. India is witnessing significant

interest from both domestic as well as foreign

investors following the policy initiatives taken by the

Government of India to promote Public Private

Partnerships (PPPs) in building and operating airports.

While the four metro airports at Delhi, Mumbai,

Hyderabad and Bangalore are already being

developed through PPP, the continued inflow of

investment will depend on a comprehensive policy

and regulatory framework necessary for addressing

the complexities of PPP, balancing the interests of

users and investors. The transformation of rules must

be accompanied by a change in the institutional


Opening a new chapter in Indian aviation ‐ the

Ministry of Civil Aviation recently gave clearance to set

up the country's first private airport in Kerala. Such

moves are likely to encourage many more private

companies to follow a similar model for Greenfield

project development.

In addition to PPPs for development and operation of

airports, the government has initiated a programme

for upgrading airport infrastructure in the public

sector. As a part of this initiative, the Airports Authority

of India (AAI) is undertaking the redevelopment and

expansion of metro airports at Kolkata and Chennai,

and at 35 non‐metro airports across the country.

The introduction of private

participation into the operations of

airports has led to a breakthrough in

the Indian Aviation sector. India is

witnessing significant interest from

both domestic as well as foreign

investors following the policy

initiatives taken by the Government

of India to promote Public Private

Partnerships (PPPs) in building and

operating airports.

8. Opportunities in the

Telecom Sector


The Indian telecom sector goes all the way back to the 1882,

when a 50‐line manual telephone exchange (first

operational land line) was commissioned in Kolkata, just 6

years after the invention of the telephone by Alexander

Grahan Bell. Since then Indian telecom has witnessed

significant transformation. Today, India is the second largest

telecom market in the world in terms of subscribers 1 . The

telecom subscriber base stood at 944.81 million in July 2012 2 .

The Telecom Regulatory Authority of India (TRAI) has

divided the market into 22 service areas known as

"circles." The circles are divided roughly in line with the

countryʼs 29 provinces, and are divided into four

categories. Service providers require a separate license

for each circle. Metro circles (major cities*): Mumbai, New

Delhi, Kolkata. A ‐ circles (regions that include other large

cities): Andhra Pradesh, Gujarat, Karnataka, Maharashtra,

Tamil Nadu. B ‐ circles (regions with smaller urban areas

and towns): Haryana, Kerala, Madhya Pradesh, Punjab,

Rajasthan, Uttar Pradesh (East), Uttar Pradesh (West),

West Bengal. C ‐ circles (rural areas): Assam, Bihar,

Himachal Pradesh, Jammu & Kashmir, Northeast, Orissa.*

Chennai, in the southeast, was previously a separate

Metro circle, but as of March 31, 2008, it was integrated

into the Tamil Nadu A circle as a single entity. The service

providers and TRAI, however, continue to report monthly

connection numbers for Chennai separately 3 .

Figure 8.1 – Indiaʼs circles



















































The Growth Drivers

Growing demand and Tariffs reduction: The growth

in GDP has resulted in increased income, hence

increased consumer spending – a part of which is

attributed to the telecom sector. Also, high level of

competition has lead to price reduction and

increased affordability of mobile and land line calling

as well as other add on services such as GPRS etc. In

order to further expand the growth of the sector, the

government has reduced mobile phone tariffs

significantly in the recent past, bringing the cost

difference between calling through cell phones and

landlines negligible. The mobile service penetration

in the country is currently at 51 percent and is

expected to grow to 72 percent by 2016 4 .

Mobile Value Added Services (MVAS): India's current

MVAS industry has an estimated size of USD 2.7

billion. The industry derives its revenues majorly from

products such as game applications, music

downloads and other add on services, forming close

to 80 percent of VAS revenues. The estimated growth

of Indian MVAS industry is upto USD 10.8 billion by

2015, with the next wave of growth in subscriptions

expected to come from semi‐urban and rural areas 5 .

Mobile Number Portability (MNP): MNP provides

ease of switching service providers to the subscriber,

while retaining their mobile numbers. Mobile

Number Portability requests increased from 41.88

million subscribers at the end of March 2012 to 45.89

million at the end of April 2012. In the month of April

2012 alone, 4.01 million requests have been made for

MNP 6 .

Rural Telecom – As of 2012, the rural base is

accounting for nearly half the total subscribers who

will have access to communication services.

According to a report presented by the Comptroller

and Auditor General (CAG), the growth rate of

subscribers in rural areas during the period of 5 years

from 2006 – 2011 was higher at 485 percent

compared to 233 percent in urban areas 7 .


Telecom Regulatory Authority of India, Telecom Sector in India: A Decadal Profil, Year 2012, Page 5


Telecom Regulatory Authority of India, Highlights on Telecom

Subscription Data as on 30th June 2012, Page 1 3

The Telecom Regulatory Authority of India (TRAI) 4

Corporate Catalyst India, Report on Telecom Sector in India, 2012, Page 4


Corporate Catalyst India, Report on Telecom Sector in India, 2012, Page 4 6

Corporate Catalyst India, Report on Telecom Sector in India, 2012, Page 4


Comptroller and Auditor General (CAG) News Report: Rural telecom subscribers posted faster growth rate than urban users, August 31, 2012


Figure 8.2 – Indiaʼs mobile market overview



Subscriptions* - mIn


Mobile subscriptions - mIn subscribers



Bharti Airtel



Tata Tele















2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012* 934.1 mIn wireless subscribers as of June 2012

This will further boost the countryʼs GDP through

consumer spending by a large margin.

Growth of Broadband: The broadband increase in the

ranks in subscriber numbers is expected to be the

driver for the next phase of Telecommunication

growth in India. Broadband subscribers, as a

percentage of total households, are expected to

reach 41 percent by 2022 from 10 percent currently 8 .

Growth in broadband has a direct impact on our

country's GDP by creating efficiency for society,

businesses and consumers. According to a study by

the Ericsson on effects of an increased broadband

speed on GDP, a 0.3 percent GDP growth in the OECD

region is equivalent to USD 126 billion. The study also

shows that additional doubling of the speed can

produce growth in excess of 0.3 percent 9 .

Key Challenges

High Competitiveness – Telecom service providers

have been under the pressure of intense competition

from global telecom giants. With at least 7


UBS Investment Research, Global Equity research, India Mobile Sector, Year 2012, Page 5


Ericsson, Study “Need for speed”, Year 2011, Page 2


telecommunication companies in each segment and

up to 12 telecommunication companies in some

segments competing for market share, the Indian

telecom market is one of the most crowded mobile

markets globally (the average number of

telecommunication companies in most countries is

from 2 to 5). Large number of competitors is resulting

in aggressive pricing, and a decline in the industryʼs

key operating metrics: The Average Revenue per User

(ARPU) and the Average Rate per Minute (RPM). The

average ARPU in India stands at around USD 2 (March

2012) as against the estimated USD 63 for NTT

Docomo, Japan; USD 33 for Vodafone, UK; and USD

12 for China Mobile, China 10 .

The Regulatory Uncertainty – The past 2G

irregularities and the cancellation of the 2G licenses

by the Supreme Court have led to regulatory

uncertainty in the industry. Clarity is still awaited in

some key areas such as one‐time spectrum charge,

imposition of high spectrum renewal fees, reframing

of spectrum and legality of 3G roaming agreements.

Tower Industry – As of March 2012, it is estimated

that there are 358,996 telecom towers in India, with

an average occupancy ratio of 1.63x, excluding

tenancies from operators who cancelled 2G licenses 11 .

After a tremendous growth in 2010, the telecom

tower industry is now witnessing a slowdown.

Cancellation of telecom licenses in February 2012 has

once more influenced another telecom sector

segment, and is likely to lead to a loss of tenancies

across the board. Currently, some telecommunication

companies are also exploring the possibility of

divesting their equity stake in tower companies in

order to meet funding requirements.The largest

players in telecom tower industry are presented in

the Table 8.1 below

Table 8.1 ‐ Telecom Towers



Indus Towers 1,09,000

BSNL/MTNL 69,000

Relaiance Infratel 50,000

Bharti Infratel 33,000

Vion Networks 42,000

GTL Infrastructure 33,000

American Tower Corporation 10,000

Tower Vision 8,000

Others 22,000

Source: Industry data as of March, 2012


Icra Rating Feature, Telecom Sector: Trends&Outlook, Year 2012, Page 2


UBS Investment Research, Global Equity research, India Mobile Sector, Year 2012, Page 24


Rural India – Even though the rural segment is seen

as the next key growth driver for the telecom sector

in India, there are some challenges in order to

achieve that. For rural subscribers, pricing is going to

be a key driver. Another challenge is access to

extremely remote communities, with no significant


Investment Opportunities

The total investment expected during the 12th Five

Year Plan would be about ` 6,50,000 crores (USD 117

billion), out of which the Central sector investment

would be about ` 1,10,000 crores (USD 20 billion) and

investment from the private sector is estimated at

approximately ` 5,40,000 crores (USD 97 billion).

Investment Key Objectives:

One Nation, One License Policy ‐ Unified Licensing

Regime, Mobile Number Portability and Free

Roaming. It is this unified license regime across

services and telecom circles that would result in

the merging of all the telecom circles and would

enable operators to provide any service including

voice, data, video, broadband etc. Moreover,

country‐wide number portability and free roaming

would benefit the customers immensely.

Increase rural teledensity ‐ 39 percent to 60

percent by 2017 and 100 percent by 2020 12 .

To provide broadband on demand by 2015 and to

achieve 175 million and 600 million broadband

connections by 2017 and 2020 respectively at a

minimum 2 Mbps download speed 13 .

Promote domestic production of

telecommunication equipment to meet 80

percent of Indian telecom sector demand by 2020,

with a minimum value addition of 45 percent and

65 percent by the year 2017 and 2020

respectively 14 .

Regulatory Framework

The Cabinet has given its approval for the National

Telecom Policy (NTP) 2012. The Policy directs new

12 13

Icra Rating Feature, Telecom Sector: Draft National Telecom Policy 2011, Page 1 Ministry of Communications&IT, Department of Telecommunication, National Telecom


Policy 2012, Page 5 Ministry of Communications&IT, Department of Telecommunication, National Telecom Policy 2012, Page 5


initiatives, which includes free roaming, unrestricted

Net telephony and a new unified licensing regime for

operators. The policy also endorses a boost to

broadband expansion and an increase in local

manufacturing of telecom equipment.

The First Public Private Partnership in the Telecom

Sector ‐ The National Science and Technology

Entrepreneurship Development Board (NSTEDB), the

Department of Science and Technology (DST),

Government of India, Technopark and MobME

Wireless have joined forces to set up the Startup

Village ‐ Indian Telecom Innovation Hub in Kerala. The

telecom business incubator is a step to support new

product initiatives, and further turn them into

successful ventures.

Green Telephony ‐ TRAI is aiming to achieve carbon

emission reduction under which operators are

directed to achieve carbon reduction to the extent of

5 percent by 2012‐13, 12 percent by 2016‐17 and 17

percent by 2018‐19. Furthermore, at least 50 percent

of all rural towers and 20 percent of all urban towers

are to be powered by hybrid power by 2015.

FDI Policy in Telecom ‐ Foreign Direct Investment

(FDI) in the telecom sector during April‐March 2011‐

12 stood at USD 1,997 million. FDI is further limited to

74 percent in telecom services subject to the

following conditions 15 :

This is applicable in case of Basic, Cellular, Unified

Access Services, National/ International Long

Distance, V‐Sat, Public Mobile Radio Trunked


Corporate Catalyst India, Report on Telecom Sector in India, 2012, Page 6

Services (PMRTS), Global Mobile Personal

Communications Services (GMPCS) and other

value added services.

Both direct and indirect foreign investment in the

licensee company shall be counted for FDI ceiling.

Foreign Investment shall include investment by

Foreign Institutional Investors (FIIs), Non‐resident

Indians (NRIs), Foreign Currency Convertible

Bonds (FCCBs), American Depository Receipts

(ADRs), Global Depository Receipts (GDRs) and

convertible preference shares held by foreign

entities. In any case, the 'Indian' shareholding will

not be less than 26 percent.

FDI up to 49 percent is on the automatic route

and beyond that on the Government route.

FDI in the licensee company/Indian

promoters/investment companies including their

holding companies shall require approval of the

Foreign Investment Promotion Board (FIPB) if it

has a bearing on the overall ceiling of 74 percent.

While approving the investment proposals, FIPB

shall take note that investment is not coming from

countries of concern and/or unfriendly entities.

The investment approval by FIPB shall envisage

the conditionality that the Company would

adhere to license agreements.

FDI shall be subject to laws of India and not the

laws of the foreign country/countries.

Despite a sense of pessimism

surrounding the industry, Indian telecom is still

going strong as it continues to look at

innovative business solutions and explore

new avenues. Coming out of a difficult phase

of tedious regulatory mechanism and

uncertainty over the spectrum, the industry is

now all set to transform itself rapidly with the

changing needs and desires of the



9. Opportunities in the

Mining Sector


India is known to have the oldest and richest

history in the mining sector, with meteorological

evidence dating back to more than 6000 years

(around the era of the Harappan Civilization).

However it is only in the recent decades, close to

independence that mineral production was

quantified and given national/global recognition.

Over the last six decades, the total value of mineral

production has grown exponentially from a mere

USD 25 million in the 1950ʼs to an estimated USD

41.79 billion in 2011 1 .

At the time of independence, there were 1977

working mines 2 (excluding petroleum, atomic and

minor minerals), which has gone up to 3677 working

mines in the year 2011 3 .

Mining in India is regulated under the regulation of

the Mines and Minerals (Regulation and

Development) Act, 1957 which has been redrafted in

2009 4 . Under this Act, all minerals are owned by the

constituent states, but are administered by the

Central Government. Mining royalties and taxes,

although set and revised by the Central Government,

are paid directly to the individual States.

The Mining industry is administered by the Ministry of

Mines, which is responsible for geological surveys,

exploration, and administration of the Mines and

Minerals Act for all minerals except mineral fuels. India

is endowed with huge deposits of minerals which are

non‐renewable and finite in nature such as diamond,

coal, manganese, iron ore, bauxite, lead, copper, zinc,

gold and limestone. These minerals are critical raw

materials for many industries such as steel, power,

aluminum etc. Therefore, it contributes to the countryʼs

export earnings significantly giving the nationʼs

economy a competitive advantage on a global scale.

The ratio of the actualization from the mining industry

to the direct and indirect output in the economy is

measured at 2 : 4, thus making a substantial

contribution to the growth of the economy.

The Indian mineral reserves are flush with 87

valuable kinds of minerals, which include 4 fuel, 10

metallic, 47 non‐metallic, 3 atomic and 23 minor

minerals (including building and other materials) 5 .

Despite the challenges of realizing the full potential of

these abundant resources, the global position of India

in terms of production of key minerals is seen below

in Table 9.1 6 .

Historically, the mining and quarrying sector in India

has been on an upward trajectory and continues to

do so . The Index has risen 2.15 percent year‐on‐year

in February 2012 and the six minerals listed below in

table 9.2 together contributed about 95 percent of

the total value of `16,566 crore (USD 2,979) of mineral

production in February 2012 7 .

Table 9.1 ‐ Indiaʼs Mineral production ranked globally.

Mineral Global Share of Global

production (%) Rank

Chromite 17.1 2nd

Barytes 17.3 2nd

Coal &Lignite 7.9 3rd

Iron Ore 9.8 4th

Manganese Ore 6.7 5th

Steel (Crude/Liquid) 4.3 5th

Bauxite 7.3 6th

Aluminium 3.4 8th

Copper 2.8 11th

Source: Strategic Plan for Mines, Ministry of Mines, Goverment of India

Table 9.2 – Total Value of Mineral Production

(excluding atomic & minor minerals)

Value of Mineral Production ‐ Feb, 2012


Value in ` Cr (USD mn)

Coal 5,480 (986)

Petroleum (Crude) 5,406 (972)

Iron Ore 2,743 (493)

Natural Gas (utilized) 1,320 (237)

Lignite 436 (78)

Limestone 311 (56)

Source: Table prepared based on information derived from article ʻIndia

Minerals Production grows 2.15% Y‐o‐Y in February



http://www.investindia.gov.in/?q=mining‐sector, Mining‐Sector Overview, Paragraph 5 2

Challenges for the Indian Mining in 21st Century, Page 63


Link: http://mines.gov.in/ls/USQ‐3917.pdf, Annexure, Table, Page 2 4



Annual Report 2012, Ministry of Mines 6

Annual Report 2011, Ministry of Mines


Link: www.commodityonline.com, Article: India minerals production

grows 2.15%Y‐o‐Y in February, Paragraph 2


It must be noted that the contribution of the Indian

mining industry to Indiaʼs GDP is persistently low as

compared to other resource rich nations such as

Brazil, South Africa, Australia and China. The mining

sectorʼs contribution to GDP in 2010 was at meager

1.2 percent, which is significantly lower than China,

Brazil and Australia.

Figure 9.1 Contribution to Mining Sector to GDP in 2010









India Brazil South


Source: Strategic Plan 2011, Ministry of Mines



The Growth Drivers

The mining sector on the whole is undergoing a

major transformation over the recent years. A lot of

this is attributed to the growing demand of energy

and power. In order to meet this growing demand,

the Government has liberalized the National Mineral

Policy, thus allowing foreign participants in the

exploration of various minerals such as iron–ore,

copper, manganese, lead, chrome, zinc, sulphur, gold,

diamond, nickel and platinum.

Key Challenges

Low Exploration Spending 8

Given our mineral resources, India has been fairly

reactive in the mining space. As seen in Table 9.3,

which shows the value of exploration per sq km,

Indiaʼs expenditure on exploration is one of the

lowest in the world.

The lower exploration spending has resulted in large

unidentified resources and lower reserves for many

minerals. Indiaʼs spend on exploration projects is

approximately 0.3 percent of the global spend

(compared to 19 percent for Canada and 12 percent

for Australia) leading to a stagnant reserve base for all

mineral categories.

As majority of the Indian reserves are deep and

require advanced underground mining, there is an

urgent need for advanced exploration companies to

study and explore these reserves. This will be a huge

driver for exploration spending in India.

The Government has also made it easier for private

players to own and operate mines through a single

window system, which also acts as a nodal agency for

these companies. These various transformations have

resulted in a steady influx of companies from Canada,

US, Germany, Russia, Australia and the African

continents to explore opportunities in mining,

trading as well as mining equipment.


Strategy Paper Ministry of Mines November 2011


Table 9.3 Value of Exploration


USD /sq km

India 9

Australia 124

Canada 118

Lengthy Process of Land Acquisition

In India, almost 80 percent of the total mineral

reserves lie either in forest land, tribal areas and/or

other sensitive zones. The mining activities in these

areas often affect the environment, social fabric and

livelihood of communities. Therefore, local resistance

and land acquisition has always been a problem for

greenfield projects as well as operating projects in

such areas, and the process often increases the

gestation period (4 ‐ 8 years) thus decreasing their

overall profitability and viability.

In order to address the issue, the Government of India

has taken proactive measures by constituting a 14

member Group of Ministers to discuss and deliberate

on an industry friendly bill to address the concerns

regarding land acquisition. The proposed bill, 'The

Right to Fair Compensation, Resettlement,

Rehabilitation and Transparency in Land Acquisition

is expected to replace the The Land Acquisition Act

of 1894 and encourage industrial development while

ensuring fair prices to the land owners. Furthermore,

the implementation of Sustainable Development

Framework (SDF) is also expected to alleviate some of

the concerns of the Project Affected People (PAP)

and ease the process of land acquisition.

Slow Regulatory Approvals

Even though the Minerals Act has gone through a

transformation, the Indian mining sector is still very

far behind other markets such as Canada, Australia

and the US. The numerous approvals at the state and

national levels for Prospecting Licenses (PL), Mining

Leases (ML), consume a lot of time and valuable

resources of mining companies. It takes 5 to 8 years

(or more) to get a mining lease in India, where as it

takes about a year in Australia. The environmental

restrictions, application of the Comprehensive

Environmental Pollution Index (CEPI), and nonavailability

of forest clearances worsen the delays.

Government of India has taken policy measures such

as the National Mineral Policy 2008, Mines and

Mineral (Regulation and Development) Act 2011, for

a comprehensive overhaul of the current mining

regime in the country. The Mines and Mineral

(Regulation and Development) Act 2011, once

cleared at all levels, will address the structural issues

such as:

a. Empowerment of states for inviting bids or

applications for prospecting

b. Seamless transition from RP to PL and PL to ML

c. Transparency through competitive bidding for

PL or ML


Strategy Paper Ministry of Mines November 2011


High Taxation Rate

Mining in India is one of the most highly taxed

sectors as compared globally. The tax rate levied in

some of the leading mineral producing countries is

39 percent in Australia, 35 percent in Brazil,

28 percent in Chile, 36 percent in the Congo,

35 percent in Russia and 32 percent in China 10 .

The effective tax rate for iron‐ore in India is

43 percent, as compared to 35‐40 percent for the

major mining countries like Brazil, South Africa,

Australia, Canada etc. and is expected to rise to 55

percent on implementation of the proposed Mines

and Minerals Development and Regulation Act. This

Act will make the country the highest taxed mining

sector worldwide.

Regulatory Framework

India has progressively liberalized the mineral sector

considering the interests of the various stakeholders,

both domestic and international.

Some of the key regulatory initiatives are highlighted


FDI up to 100 percent allowed under an automatic

route for exploration and mining of minerals,

including diamond and precious stones.

Introduction of competitive bidding for allocation

of coal instead of allocation through a screening

committee route. The Ministry of Coal has released

the list of coal blocks in May 2012 that would be

available for auction.

The Government approved the new National Mineral

Policy in 2008. This Policy aims at attracting private

investment in the mineral sector, increasing

transparency and developing a sustainable

framework. The Union Cabinet has approved the

proposal to introduce the Mines and Minerals

(Development and Regulation) Bill (MMDR Bill), 2011.

The new MMDR Bill 2011, aims to introduce a better

legislative environment for attracting investment and

technology into the mining sector where State

Governments have been empowered to grant

mineral concessions and call for competitive bidding.

The key features of the Act are as follows:

States may grant direct mining concessions

through bidding based on a prospecting report

and feasibility study.

National Mining Regulatory Authority for major

minerals ‐ State Governments may set up similar

Authority at State level for minor minerals.

Imposition of a Central cess and a State cess, and

setting up of Mineral Funds at National and State

levels for capacity creation.

Profit sharing equal to royalty amount for non coal

minerals and equal to 26 percent of net profit for

coal mining companies.

Sustainable and scientific mining through

provision for a Sustainable Development


These approvals will help in developing the country's

mining sector to its full potential. The profit sharing

clause is under consideration by the Government as it

may affect certain industries negatively.


Ref The Economic Times, Article: Mining row: Chamber displays unhappiness over new MMDR bill over contribution of royalty, Paragraph 4 & 5


Investment Opportunities


The Indian minerals sector holds a huge

potential for all stakeholders, including the

Central Government, State Government,

community and the entire economy as a

whole. With the right kind of support, the

mining sector in India has the potential to be

one of the largest in the world:

Add USD 210‐250 billion to the overall

GDP by 2025, representing a growth of 10

to 12 percent per annum 11 .

Creating 2 million to 2.5 million direct jobs

by 2025, and an additional 11 million to

13 million jobs through indirect

employment opportunities created in

other sectors, thereby contributing 3

percent of Indiaʼs total employment.

The demand of Steel, Aluminum and

Copper will increase 4 to 5 times over the

next 15 years 12 .

Table 9.4 Demand for Key Minerals

2010 (Mt) 2025(Mt)

Steel 60 275

Aluminum 1.6 8.5

Copper 0.6 2.4

The high demand will offer opportunities in

iron ore, aluminum and copper mining. The

competitive bidding of coal blocks and large

number of coal blocks allocation to Coal India

Ltd. (CIL) will further accelerate the growth of

the sector. In addition to this the 12th Five

Year Plan envisages capacity addition of

100GW of power, paving a promising path

for the future.


Strategy Paper Ministry of Mines, November 2011




Mining Equipment

The huge potential of mining equipment in India can

be ascertained from the fact that India has vast

untapped reserves. According to some estimates,

India is reported to have a total mineral potential area

of 5.75 lakh sq km of which only 75,000 sq km have

been explored so far 13 . The country has coal reserves

of about 260 billion tonnes alongwith significant

reserves of iron‐ore, bauxite, lignite chromite among

others. With such a vast potential available, the

demand for sophisticated mining equipment is

expected to grow exponentially in the coming years.

Further, the progressive reforms across the mining

and quarrying sector is expected to provide much

needed thrust to the mining equipment industry

during the 12th Five Year Plan. As per the report of

the Working Group on Capital Goods & Engineering

Sector for the 12th Five Year Plan, the consumption of

Earthmoving and Mining Machinery is pegged to

grow at a CAGR of 19 percent to ` 45,232 crore (USD

8,135 million) out of which domestic manufacturing

output will be about ` 34,924 crore (USD 6,281

million). The import of earthmoving and mining

equipment is expected to reach ` 11,308 crore (USD

2,034 million), almost 53 percent higher than the total

import of ` 7395 crore in 2010‐11 14 .

Figure 9.2 shows how the industry has been on the

growth trajectory over the last few years, except in

2008 ‐ 09 when the global recession had a negative

impact on the mining equipment industry as well.

Since then, the industry has found its growth pace,

which is likely to continue in the coming years.


A Guide to Investment in Indiaʼs Mineral Sector‐ 2010; Federation of Indian Mineral Industries, Page 6


Report of the Working Group on Capital Goods & Engineering Sector for the 12th Five Year Plan; Page 36


Figure 9.2 Mining Equipment Market Size

(USD million)
















1,037 1,205 1,654 2,482 1,870 2,491 2,608 3,327














Source: Based on the Information available on the Report of the Working

Group on Capital Goods & Engineering Sector for the 12th Five Year Plan

be therefore safe to assume that the mining

equipment industry in India is in a crucial growth

phase with a rapid transformation in technology and


Keeping pace with the searing economic growth in

India, the construction and mining machinery sector

has also grown exponentially over the last few years

in order to support the rapid expansion taking place

in the infrastructure and other core sectors projects.

At present, there are nearly 20 large & global

manufacturers and nearly 200 small & medium

manufacturers of earthmoving & mining machinery

equipment present in India. The industry has

simultaneously witnessed an extensive technical

collaboration between domestic manufacturers and

global majors to bring in international level of

technology to meet the increased demand and scale

of operation. Over the years, many global majors

have entered the market either setting up their

operations locally, or through strategic domestic

partners, both technological and financial. It would

Satish Saxena

Managing Director

Swayambhu Natural Resources Private Limited

India's emergence as a major economic hub has ensured steady growth across

the BRIC nation's mining industry. As a result of India’s strong economic growth

and rising GDP, the industry is all set to witness a surging demand for minerals

such as coal within an increasingly liberalised economy. Mineral based industries

will be core part of any countries growing GDP in coming years.


10. SREI

The Unseen Hand

Infrastructure in the pre‐reform era, was largely under

the purview of the public sector and basic services

such as transportation, telecommunication, and power

were provided by government organizations that

shared a strict monopoly. Due to the lack of low cost

funding, it was extremely difficult for private

organizations to take on projects that were highly

capital intensive. Hence, even though there was

immense opportunity, very few private players could

take advantage of the predicted boom of the sector.

Amid those challenging times, Srei identified the

potential of the infrastructure sector in India, and in

1989, commenced as a leasing and hire purchase

company with a small line of credit from one of the

leading commercial banks in India.

Srei was one of the first NBFCs to respond to the

challenge for the need of large scale capital, and

began focusing on international resources to fuel

this infrastructure growth. The liberalization in early

nineties provided an access to a bevy of international

bankers and also helped garner low cost, long term

funds from foreign development financial institutions

from across the world.

Sreiʼs innovative financing methodologies, coupled

with a strong network of international financial

institutions helped it surge ahead of competition

with relative ease. While maintaining its core business

model, the company made itself more adaptable to

global lending standards to bring many leading

development financial institutions like IFC, DEG and

FMO as their strategic partners opening avenues for

more overseas participation in infrastructure.

In 2005, Srei took the Indian infrastructure story to the

international market and got listed in the London

Stock Exchange. By doing so, Srei became the first

infrastructure focused NBFC to be listed on any major

global stock exchange.


In 2008, SREI partnered with BNP Paribas Leasing

Solutions, a wholly owned subsidiary of BNP Paribas ‐

France, in order to further develop its equipment

financing business. Being the largest player in the

financing of infrastructure equipment in India and

considering its local expertise with the specialized

equipment finance skills, Srei was entrusted with the

management control for this 50:50 Joint Venture

entity. This partnership helped Srei in increasing its

market share further, and also expanding the product

line into financing of agriculture, information

technology, medical and other equipment. SREI BNP

Paribas is today a leader in the construction

equipment finance sector in India with a market share

of over 30 percent.

Subsequently, Quippo Telecom, a Srei Infrastructure

innovative initiative in pioneering the telecom tower

business in India entered into a strategic partnership

with Tata Teleservices Limited (TTSL), a Tata Group

company, for its passive telecom infrastructure

business through Viom Networks Limited which is

among the industry leaders in shared telecom tower


The strategic partnership with globally recognized

brands such as BNP Paribas and the Tata Group were

the endorsement of Sreiʼs deep sectoral knowledge,

sector expertise, managerial acumen and leadership

skill within the infrastructure space in India

As a group, Srei eventually diversified its portfolio and

expanded its operations in emerging sectors such as

power, telecom, aviation and ports while keeping its

core interest in infrastructure intact.

Hence, the journey that started with equipment

financing provided a strong foundation to position

itself as a holistic infrastructure institution.

Leveraging its rich experience and infrastructure

acumen, the company gradually expanded its

financial services business into infrastructure project

financing, infrastructure project advisory, venture

capital, investment banking, insurance broking etc.

It has also innovated new concepts in the telecom

tower business, roads, power, ports, SEZs and others.

In 2010, Srei announced the amalgamation with

Quippo Infrastructure Equipment Limited to build up

a much larger institution, better placed to capitalise

on the fast growing infrastructure opportunities on

offer. Following the amalgamation, Srei was able to

expand the spectrum of its services to high growth

verticals of Construction, Oil & Gas, Telecom and

Energy. In the same year, Srei also forayed into the

power sector through the investment in a utility ‐

Dishergarh Power Supply Corporation (DPSC), one

of Indiaʼs oldest power transmission and distribution


Sahaj e‐Village is another unique business model that

attained immense scalability in a very short time

period. Under the National e‐Governance Plan of the

Government of India, this initiative is today the largest

rural IT infrastructure initiative in India with 28,000

Common Service Centres catering to approximately

280 million people and provides various B2B, B2C, G2C

services along with e ‐ learning courses.

By adopting such organic and inorganic growth

strategies, Srei has emerged as one of the largest

holistic infrastructure institutions in India, present

across the entire value chain. Thus, what started off as

a modest initiative in 1989, gradually emerged into a

large conglomerate. Today with its headquarters in

Kolkata, the company enjoys a pan‐India presence

with almost 90 offices, staff strength of over 8000 and

consolidated assets under management of USD

10 billion.

Leveraging its scale, experience, spread, portfolio and

alliances, Srei has been constantly working as an

invisible hand driving the national economy –

financing infrastructure equipment and projects,


helping entrepreneurs and the Government with

advice and funding, building one of the largest

Telecom tower base, to servicing millions in rural


Srei, an unseen hand, has managed to position itself

as the largest equipment financing company in India,

the largest independent telecom tower company

with industry leadership tenancy of 2.4X, one of the

top five road developers and now one of the oldest

power utility companies in India with a T&D loss of

3.25 against the country average of 25 percent.

Indian infrastructure sector is

going through a significant

transformation. Investment in

infrastructure is envisaged to be

doubled to USD 1 trillion during the 12th

Five Year Plan and about half of this is

targeted to be achieved through private

sector investment


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