CE-751 Urban Transportation Systems Planning

Assignment No. 03

Rational Allocation of Funds in Five Year Plan for Transportation

Date of submission : 02/09/2013

Submitted by: Dheeraj Vijay Sawant 133040004

Table of Contents
3.1. 3.2. Introduction .................................................................................................................... 1 Major challenges ............................................................................................................ 1 Rapid Expansion and Investment ........................................................................... 1 Low transport efficiency......................................................................................... 1 Distortion in the overall transport movement of goods .......................................... 2 Environmental considerations ................................................................................ 2 Safety ...................................................................................................................... 2 Integrated regulatory regime .................................................................................. 3

3.2.1. 3.2.2. 3.2.3. 3.2.4. 3.2.5. 3.2.6. 3.3.

Investments in Indian Railways ..................................................................................... 3 Review of Eleventh Plan ........................................................................................ 3 Twelfth Five Year Plan Projections........................................................................ 3 Financing ................................................................................................................ 4

3.3.1. 3.3.2. 3.3.3. 3.4.

Investments in Road ....................................................................................................... 5 Review of Eleventh Plan ........................................................................................ 5 Twelfth Five Year Plan projections ........................................................................ 6 Outlay for 12th Five Year Plan................................................................................ 6

3.4.1. 3.4.2. 3.4.3. 3.5.

Investment in Shipping .................................................................................................. 6 Review of Eleventh Plan ........................................................................................ 7 Projections for 12th Five Year plan ......................................................................... 7

3.5.1. 3.5.2. 3.6.

Investment in Ports ........................................................................................................ 7 Review of 11th Five Year Plan................................................................................ 8 Twelfth Five Year Plan Projection ......................................................................... 8 Outlay and Strategies .............................................................................................. 8

3.6.1. 3.6.2. 3.6.3.

3.7.

Investment in Civil Aviation .......................................................................................... 9 Review of 11th Five Year Plan................................................................................ 9 Outlay and Projections............................................................................................ 9

3.7.1. 3.7.2. 3.8.

References .................................................................................................................... 10

Table of Tables
Table 1 CO2 Emissions from Various Transport Modes.......................................................... 2 Table 2 : Passenger Traffic Projections .................................................................................... 4 Table 3 Freight Traffic Projections ........................................................................................... 4 Table 4 : Targets for 12th Five Year Plan................................................................................. 6 Table 5 : Tonnage Target and Investment for Plan................................................................... 7 Table 6 : Growth Projections for the Twelfth Five Year Plan ................................................ 10 Table 7 Investment Requirements during the Twelfth Plan ................................................... 10

Assignment No. 03

Rational Allocation of Funds in Five Year Plan for Transportation

3.1. Introduction
Over the last few decades, the population explosion has heavily overburdened the infrastructure. The existing infrastructure has long ago reached its capacity. Also, since 1992 when the Indian economy was opened to foreign companies, the import-export of goods increased manifold bringing forth the shortcomings of the transportation facilities present. The standard of living of the people has also gone up with the growth of the economy and this results into expectation of better facilities. But transportation requires large initial investment, the main reason why it is not up to the mark till today in India.

3.2. Major challenges

3.2.1. Rapid Expansion and Investment
Capacity needs are expected to double every decade in medium term. It will consequently require large step-up in investments for capacity creation. The congestion and shortage of capacity is exhibited in all transport sectors. In spite of expansion of ports capacity to more than a billion metric tonne by the end of the Eleventh Plan, a number of major ports have very high dwell time and are running at more than 90 per cent capacity. Of Indias National Highways, less than one-third are two- or four-lane. Over the next 20 years, the demand for transport (both domestic and import) of major commodities like ores, petroleum etc. could well increase by a factor of four to six which would require investment in rail capacity and other modes.

3.2.2. Low transport efficiency

The cost of rail and coastal shipping in the country is higher than many economies. Even the road costs and transit time across different modes are large. Partly, it is because the average 1

speeds of movement of all the modes: Rail, Road, Coastal Ships is lower than those in more efficient economies. The average speed of freight trains is 25 km per hour which is nearly half that of the U.S. The other nature of inefficiencies relate to poor handling equipments at the ports, inadequate rail infrastructure, absence of modern technologies in several areas and high handling costs resulting from a variety of factors including thefts.

3.2.3. Distortion in the overall transport movement of goods

A study conducted by RITES indicates that there is a discernible gap between the way in which the traffic is actually moving today and the way in which it should move. A comparative assessment of the impact arising out of the two different scenarios of modal mix, that is, Actual and Optimal (applying break-even distances based on resource cost) on the transport system during the base year (200708) in terms of flows, cost and throughput reveals that there is a significant scope for modal switch from Road to Rail in the case of miscellaneous/other commodities up to the extent of 78 per cent.

3.2.4. Environmental considerations

Table 1 : CO2 Emissions from Various Transport Modes

Freight Transport (gm/tkm) Road Rail Shipping 160 29 31

Passenger Transport (gm/pkm) Passenger Cars Rail Airways 175 75 229

3.2.5. Safety
Safety is a major area of concern especially in the road transport. Over 1.3 lakh people are known to die annually in road accidents alone and heir number is rising. This is about 10 per cent of the world figure, though Indias share in number of vehicles in the world is only 1 per cent. The World Health Organisation has forecasted road traffic injuries to rise and become the fifth leading cause of death by 2030. Safety levels in railways are also in need of urgent improvement 2

3.2.6. Integrated regulatory regime

There is a near absence of an integrated regulatory regime for overseeing tariff setting, cost of operations, anti-competitive practices and accountability to consumers. There is a division of power between the Central Government and the State Governments. Some areas are reserved exclusively for Central Governance, while there are a few sectors that are subject to joint governance. An examination of the existing laws, policies and regulations indicate that they are a result of an ad hoc approach, which is exacerbated by the overlapping power of the Central and State Governments. The regulatory framework in different sectors has been developed without proper coordination among the sectors which needs to be changed.

3.3. Investments in Indian Railways

Indian Railways is the fourth largest railway network in the world in terms of route kilometers. As on 31 March 2011, it has a total route length of 64,460 km of which 21,034 km is electrified. The total track length is 1,13,994 km of which 1,02,680 km is broad gauge, 8,561 km is meter gauge and 2,753 km is narrow gauge. Considering the requirements of the economy and size of the country, the expansion of the railway network has been inadequate. Indian Railways have added 11,864 km of new lines since independence.

3.3.1. Review of Eleventh Plan

The Eleventh Plan period has seen steady deterioration in Railways financ ial position (Table 15.2) which is in sharp contrast with the Tenth Plan performance when the Railways had achieved a remarkable turnaround in financial performance. The Revenue (gross traffic receipts) have gone up by 7.7 per cent (CAGR) during the period 200708 to 201112 whereas the Total Working Expenses has gone up by 12.6 per cent (CAGR) during the same period leading to decline in the net revenue which has shown a negative growth rate of 17.9 per cent (CAGR) during the above period.

3.3.2. Twelfth Five Year Plan Projections

The Twelfth Plan aims at faster, more inclusive and sustainable growth. This will require continued work in several areas and a change in strategy in others. The expanding requirements of the economy will need much faster expansion of the freight network along 3

with its ability to carry larger freight per wagon, improve efficiency of the Rail system to deliver it faster and expand the network. There will also be need to improve the share of the Railways in the overall national freight market. With increasing incomes, passenger traffic will increase but plan for expansion must factor in the fact that demand will be for better quality services for which passengers will be willing to pay. Table 2 : Passenger Traffic Projections Projected Passengers Originating (Million) Year No. 2013-13 2013-14 2014-15 2015-16 2016-17 4545 4855 5186 5540 5917 Suburban Ratio 51.25 51.07 50.89 50.71 50.53 Non-Suburban Total No. 4323 4651 5009 5385 5793 Ratio 48.75 48.93 49.11 4929 49.47 8868 9506 10191 10925 11710

Table 3 : Freight Traffic Projections Loading MT(million) CAGR NTKM(billion) CAGR Lead 665 664 690 737 2012-13 1038 2013-14 1119 2014-15 1206 7.8% 795 7.7% 663 661 660 857 927 2015-16 1300 2016-17 1400

3.3.3. Financing
The Plan will require large investments to achieve its objectives. The estimated resources required are
Rs.

5,19,221 crore including GBS of

Rs.

1,94,221 crore, IEBR of

Rs.2,25,000

crore and private sector investment of `1,00,000 crore. 4

As on date, the Indian Railways have a large shelf of on-going projects whose completion would require about Rs. 2,25,000 crore. The magnitude of the task is huge and any neglect of the same is bound to lead to severe capacity limitations adversely affecting the competitiveness and growth of the Indian Railways. It is estimated that the Indian Railways would not be able to generate sufficient funds internally, through borrowings and from budgetary support for meeting the investment requirements of the Twelfth Five Year Plan. The shortfall would be met through private investments in PPP projects. Additional investment from private sector is also expected through their investments in manufacturing facilities created as a consequence of partnerships with IR. Together it is expected that investments of about Rs.1 lakh crore would be made by the private sector during the Twelfth Five Year Plan on traffic facilities, other electrical works; workshops including PSUs, passenger amenities; investment in PSUs/JVs/SPVs, and so on.

3.4. Investments in Road

India has one of the largest road networks in the world, consisting of (i) national highways (NHs), (ii) state highways (SHs), (iii) major district roads (MDRs) and (iv) rural roads (RRs) that include other district roads and village roads. The NHs with a length of 76,818 km comprises only 2.0 per cent of the road network but carry 40 per cent of the roadbased traffic. The SHs and the MDRs together constitute the secondary system of road transportation which contribute significantly to the development of the rural economy and industrial growth of the country. The secondary system also carries about 40 per cent of the total road traffic, although it constitutes about 13 per cent of the total road length. At the tertiary level are the Other District Roads (ODRs) and the Rural Roads (RRs).

3.4.1. Review of Eleventh Plan

Against an outlay of Rs. 1,92,428 crore in the Eleventh Plan for the road sector, the anticipated expenditure was Rs. 1,58,077 crore (at current prices). NHDP saw the completion of 10,609 kms of roads during the 11th Five year plan. During the Eleventh Plan, total private-sector investment on NHDP has been `62,629 crore against a target of `86,792.00 crore, which is a substantial jump over the achievement in the Tenth Plan of Rs. 11,032 crore (201112 prices) Appropriate policy and regulatory framework for the PPPs, including 5

institutional mechanisms are put in place such as the Model Concession Agreement (MCA) for BOT projects.

3.4.2. Twelfth Five Year Plan projections

Table 4 : Targets for 12th Five Year Plan

State Highways Kms 2-laning 4-laning Strengthening IRQP 30000 5000 41500 50000 % of existing lengths 30 8 25 30

Major District Roads Kms 20000 1000 66500 80000 % of existing lengths 8.5 4 25 30

3.4.3. Outlay for 12th Five Year Plan

The Twelfth Plan budgetary support for Central Sector Roads is addition, the sector is expected to generate IEBR amounting to sector investment of
Rs. Rs. Rs.

1,44,769 crore. In

64,834 crore and private-

2,14,186 crore during this period. The Twelfth Plan budgetary

support for Rural Roads (PMGSY) is Rs. 1,26,491 crore.

3.5. Investment in Shipping

There has been a consistent decline in the share of Indian ships in the carriage of Indias overseas trade from 31.5 per cent in 19992000 to 13.7 per cent in 200405 and further to 7.95 per cent in 201011. There is a need for policy intervention to arrest this declining trend. Indian shipping fleet is characterised by the predominance of oil tankers and bulk carriers. While as on 31.03.12, oil tankers account for 63.76 per cent of the Deadweight Tonnage (DWT), bulk carriers account for 28.77 per cent, with all other vessel types such as liner vessels, OSVs and so on accounting for a mere 7.47 per cent.

3.5.1. Review of Eleventh Plan

An outlay of `15,026 crore, including IEBR of Rs. 13,135 crore was provided in the Eleventh Plan for the Shipping sector. Against this, expenditure was Rs. 9,788.39 crore, accounting for 65.00 per cent of the total outlay.

3.5.2. Projections for 12th Five Year plan

Table 5 : Tonnage Target and Investment for Plan Tonnage Target Scenario 1 Scenario 2 Scenario 3 11.2-12.4 m GT 11.2-26.6 m GT 11.2-53.3 m GT Investment (Rs. Crores) 2500 32000 80000

Some important strategies for this plan are: Increase in tonnage to meet the growing requirements of the Indian Trade and Commerce. Fiscal regime rationalization and cargo support to expand Indian flag vessels. Maritime Human Resource Development for larger utilization of Indian technical personnel in national and international shipping. Expansion of Coastal shipping and policies to promote infrastructure and economic operations. Development of strategies for expansion of multimodal transport.

3.6. Investment in Ports

Ports constitute inter-modal interface between maritime and road and rail transport. India has a coast line of around 7,517 km with 12 major ports and over 200 non-major ports along the coast line and sea islands. Almost 95 per cent by volume and 70 per cent by value of Indias global merchandise trade is carried through the sea route. In 201112 the 12 major ports handled about 60 per cent of the maritime cargo of the country. The balance 40 per cent was 7

handled by the non-major ports. Of the 12 major ports, 11 are administered by the respective Port Trusts and Ennore Port, the twelfth major port, which started functioning in February 2001, is corporatised.

3.6.1. Review of 11th Five Year Plan

An outlay of Rs. 30,323.11 crore (at 200607prices) had been approved for the port sector, comprising Rs. 3,315.00 crore as GBS and `26,574.11 crore through IEBR of which Rs. 17,684.61 crore or 59.62 percent is expected to be utilised. In addition, private sector investment of Rs. 36,868.00 crore and a public investment of Rs. 3,627.00 crores is expected in the state sector.

3.6.2. Twelfth Five Year Plan Projection

To meet the overall projected traffic of 1,758.26 million tonnes by 201617, the total capacity of the port sector is envisaged to be 2,289.04 million tonnes. The traffic forecast by the end of Twelfth Plan would be 943.06 million tonnes and 815.20 million tonnes for the major ports and non-major ports respectively with the corresponding ports capacities of 1,229.24 million tonnes and 1,059.80 million tonnes respectively.

3.6.3. Outlay and Strategies

The outlay for Shipping Sector in Twelfth Plan includes `6,960 crore as GBS and `21,990 crore as IEBR. In addition the private sector is expressed to invest nearly 1,70,000 crore in the Port Sector. Some of the major initiatives for the Ports Sector is indicated below: Re-look at MCA to promote PPP in port sector Re-look at port regulation and tariff setting by TAMP by adopting practices consistent with the Landlord Port model. Capital Dredging to increase the draft of ports to at least 14 meters in all ports by the end of the Twelfth Plan and to achieve 17 meters in subports according to the potential of trade. 8

 Investment in land infrastructure including modern cranes, silos/ warehouses, ICDs, connectivity and so on. Move towards greater flexibility for decision making by Port Trusts through greater delegation of powers. Landlord port model. Corporatisation of major ports in the long run.

3.7. Investment in Civil Aviation

The Civil Aviation services have expanded rapidly with the opening up of domestic skies to private carriers in the second half of the Tenth Plan through PPP investment in the airport infrastructure. The sector contributes significantly to development by generating employment opportunities directly and indirectly besides facilitating enhancement of productivity and efficiency in the movement of goods and services.

3.7.1. Review of 11th Five Year Plan

Against an investment target of `49,267.00 crore comprising of budgetary support and Eleventh Plan period is
Rs. Rs. Rs.

1,900.00 crore as

47,367.00 crore as IEBR, the anticipated expenditure during 44,124.00 crore comprising of IEBR of
Rs.

39,571.11 crore and

budgetary support of Rs.4,552.89 crore. Thus there would be a shortfall of Rs. 5,143.00 crore (10.44 per cent) in utilisation of the approved outlay. The anticipated utilisation under budgetary support would be 239.63 per cent and 83.54 per cent under IEBR.

3.7.2. Outlay and Projections

The Plan aims to propel India among the top five civil aviation markets in the world by providing access to safe, secure and affordable air services to everyone through an appropriate regulatory frame work and by developing world class infrastructure facilities. 9

Table 6 : Growth Projections for the Twelfth Five Year Plan Passenger/Freight 2011 2016-17 Average Annual Rate of Growth Passenger(Million) Domestic International 106 38 209 60 Cargo(MMTPA) Domestic International 0.9 1.5 1.7 2.7 12% 10% 12% 8%

Indian airports would require to meet the traffic growth projections an investment of about
Rs.

67,500 crores during the Twelfth Plan, of which around

Rs.

50,000 crore is likely to be

contributed by the Private Sector.

Table 7 Investment Requirements during the Twelfth Plan

Investor AAI Private Investments By Others(Concessionaires, Third party etc.) Total

Investment Category Airport Projects By Airport Operator

Rs. In Crore 17500 40000 10000

67500

3.8. References
1. Twelfth Five Year Plan (2012-2017) Economic Sectors.(2013) Twelfth Five Year Plan (2012-2017) Economic Sectors Available at: http://planningcommission.nic.in/plans/planrel/12thplan/pdf/vol_2.pdf (Accessed 09 August 2013)

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