Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, airports, roads and urban infrastructure development. In 2016, India jumped 19 places in World Bank’s Logistics Performance Index (LPI) 2016, to rank 35th amongst 160 countries.
India’s national highway network is expected to cover 50,000 kilometres by 2019, with around 20,000 km of works scheduled for completion in the next couple of years, according to the Ministry of Road Transport and Highways. The Government of India is devising a plan to provide wifi facility to 550,000 villages by March 2019 for an estimated cost of Rs 3,700 crore (US$ 577.88 million).Globally, India and Japan have joined hands for infrastructure development in India’s north-eastern states and are also setting up an India-Japan Coordination Forum for Development of North East to undertake strategic infrastructure projects in the northeast.
Since Infrastructure sector directly affects the economy of a country. It is of immense importance to address the major issues of the industry on a multi-stakeholder collaborative platform to examine infrastructure development challenges and discuss the road ahead. 6th edition of ET Infra focus summit is an initiative towards highlighting such issues and discuss the solutions from experts from multiple sectors and areas of expertise. To address the economic gaps and changes in old policy framework is the need of the hour. Future infrastructure projects will also need to be proactive in their design to incorporate new emerging technology and connectivity.
In the last 5 successful years of The ET Infra Focus, we have tried to focus on sector’s major issues individually. In this year’s edition, the conference will provide a high-level, multi-stakeholder platform to Govt Officials, Infrastructure Companies, EPC Companies, Project Management Companies, Construction Companies, Banks and Construction Equipment Companies to discuss on wide range of issues and challenges they face. The mission of this conference is to examine the probable solutions to these issues and to highlight the new opportunities and discuss the way forward. This year, the Summit aspires to sum up the major hurdles in the infrastructure sector with a special focus on the economic gaps and steps required to mitigate the same. With this year’s discussion, Economic Times attempts to contribute towards the fast improvisation of Indian Infrastructure in the coming years.
The last few years have been “mixed” for infrastructure development in India. While the government has launched several ambitious programmes and backed them with budgetary outlays, the private sector has been not as willing or not as able to invest. While new sources of funding like pension funds are finally emerging, the commercial banks have become reluctant (with good reason). While the foreign investors have shown keenness to invest in India, the domestic players have been shy. While there has been considerable progress in sectors like roads and railways, there has been little movement in water and not enough in the power sector. While new mid-size EPC players have entered the ring, many of the pioneering big-scale developers are out of the game or holding stressed assets. While this central government, like its predecessors, has pushed hard for rational policies, many state governments have resisted or not followed through. And so it goes. While there are new (and old) opportunities, there are also new (and old) challenges.
The Economic Times Global Infra Platform intends to bring decision makers, influencers, policy makers, technology providers and all other stakeholders under one roof to address these needs of nation on a continuum. The summit will provide opportunities for the stakeholders to meet policy makers, understand the needs and demands of nations, the opportunities that lie ahead and scope of new businesses. On a broader perspective, the initiative will truly provide a knowledge sharing platform for to share the hindrances and to discuss the probable solutions and opportunities which will be beneficial for both Public and Private sector organizations.
Key Topics of Discussion:
- Delays in Project Implementation Schedules
- Issues for fair contract administration (conditions and operations of contract) (2nd session)
- Foreign Investor Perspective
- PPP model and Issues
- Government initiatives on Policy Frame work (1st session)
- Status of infrastructure in rural area
- Stressed Asset Resolution + Arbitration experience with infrastructure projects (3rd session)
- Digital Transformation
- Alternative Sources of Financing
- Need for Automation: Emerging Technologies (4th session, same as digital transformation)
- Port Infrastructure
- Inclusive session : Future of Infrastructure
- Logistics and Transportation
- Industry Overview: Urban Infrastructure
- Government and policymakers
- Infrastructure Companies
- Financial advisory firms
- EPC Companies
- Project Management Companies
- Construction Companies
- Construction Equipment Companies
- Engineering Companies
- PE Funds
- PPP Model – Entire thing gets loaded in the PPP. Metro city fares need to be addressed.
- Delivery Schedules go as per the political will, unrealistic timelines, should be linked with policies of MoUD.
- Land Clearances is a major problem.
- The process of securing and acquiring land is a long process, projects get stuck because the permission from the government takes time.
- Bank Guarantees and ICC URDG Guidelines: This topic can be included which is most relevant in the present context. The issue of unconditional bank guarantees (BG)obtained by Project owners and their encashment are causing financial strain on companies. Deliberations on International guidelines as referred above on these issues are the need of the hour.
- Issues in Contract: This can be renamed as “Issues in Contract administration” or “Issues for fair contract administration”. The onesided contract terms by Project Owners/Employers/Government Departments with contract terms on exceptional matters etc. reserving rights under contract etc. are deterrent and cause of concern for industry on which many representations and deliberations made.
- Arbitration experience with Infra Projects: This is most relevant. As per CIDC (construction industry development council) report, the value of pending litigations in construction industry is to the tune of Rs.50,000 Crores presently which is hampering the growth of Industry. Arbitration intended as an Alternative Dispute Resolution (ADR) mechanism has not served its intended purpose. Numerous cases are getting dragged in arbitrations violating the spirit of ADR. After Arbitration amendment Act (2015) was enacted, further amendments are on anvil by way of Arbitration amendment Bill 2018 which is on anvil.
- Delivery Schedules: This can be renamed as “Delays in Project Implementation Schedules” to stress the delays in project implementation which is most relevant . More than 84% projects under implementation are undergoing time over run which eventually resulting in cost overruns.
- Transparency in the contract – Free toll on DND does not give a good signal.
- Arbitration – We should have experts. Grievance handling mechanism should be strengthened.
- New technology should be involved.
- FDI will only come if other issues are resolved. FDI will not come in land.
- Huge additional investments in the infrastructure– Nurturing of capable contractor to undertake the good size contracts/projects, like Rs 1000 Cr. would be necessary.
- Conditions of contracts- They typically are one sided with single point of safeguarding Employer’s interest. This passes on the risk to the contractor. There is capacity of the contractor to gamble the risk, beyond the same, Contract shy away from bidding itself!, Means to balance the risk is to follow international practices and FIDIC document as conditions of contract without altering
- Operation of Contract- There is got to be a difference in PPP / EPC and item rate contract execution and requirements of Employer approvals. What is use EPC if Design is given by Employer!
- Concept of engaging appointing Engineer-The Engineer is an independent entity to execute the contract impartially. He is supposed to operate contract without taking sides. This is being compromised by 1) nominating employer personnel as Engineer
2) Selected through L1 method without due consideration to his capacity to execute large size project vis a vis his experience or his available resources. International practice calls for appointing based on his qualification and experience, cost being secondary to appointment.
Liquidity Crunch – Non-availability of Bank guarantees.Impediments on execution of projectsResolution of NPA’sRevival of PPP’sTime for increased focus on water sector.Creation of UMTA- as per the latest metroReview of Urban Metro projects.
Smartification of Indian Infrastructure is very important which may include:Automated traffic managementCalculated load on the roadsTechnique to know if any bridge is going to collapseBlockchainDrones to maintain roadsSmart Communication Network and Telecom InfrastructureSmart TransportRevival of PPP’s – Most Important factorTOT, Asset RecyclingYou can focus on initiatives by North East.Contract NegotiatioLike in IT, can we have model RSP in Infra?Arbitration is important