Major Issue In Infrastructure Projects Delay Construction Essay

Infrastructure – While Infrastructure is recognized as a important input for economic development, there is no clear definition of substructure harmonizing to the current sage of the term in India. For policy preparation, puting of sectoral marks and monitoring undertakings, a clear apprehension of what is covered under the rubric of ‘infrastructure ‘ is necessary to guarantee consistence and comparison in the information collected and reported by assorted bureaus over clip. The National Statistical Commission headed by Dr. C. Rangarajan, attempted to place substructure based on some features.

This Note compiles definition of substructure from assorted studies / presentments of different bureaus and concludes with determination taken by the Empowered Sub-Committee of the Committee on Infrastructure on this topic in the meetings held on 11th January, 2008 and 2nd April 2008 under the chairmanship of Deputy Chairman, Planning Commission.

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Dr. C. Rangarajan Commission ‘s Notion of Infrastructure ( 2001 ) :

The Rangarajan Commission indicated six features of substructure sectors, ( a ) Natural monopoly, ( B ) High-sunk costs, ( degree Celsius ) Non-tradability of end product ( 500 ) Non- rivalness ( up to congestion bounds ) in ingestion, ( vitamin E ) Possibility of monetary value exclusion, and ( degree Fahrenheit ) Bestowing outwardnesss on society. Based on these characteristics ( except B, vitamin D, and vitamin E ) , the Commission recommended inclusion of following in substructure in the first phase:

o Railway paths, signalling system, Stationss

o Roads, Bridgess, tracks and other airdrome installations

O T & A ; D of electricity

o Telephone lines, telecommunications web

o Pipelines for H2O, petroleum oil, slurry, waterways, port installations

o Canal webs for irrigation, sanitation or sewage.

The Commission farther recommended that sing features ( B ) , ( vitamin D ) and ( vitamin E ) besides, the above list may be extended to include the undermentioned in the 2nd phase:

O Rolling stock on railroads

o Vehicles, aircrafts

o Power generating workss

o Production of rough oil, purification of H2O

o Ships and other vass.

However, the Rangarajan Commission recommended that the list of substructure activities should be finalized by the Ministry of Statistics and Programme Implementation ( MOSPI ) on the footing of the features recommended by them for designation of substructure.

Dr. Rakesh Mohan Committee Report ( 1996 ) and the Central Statistical Organisation ( CSO ) :

Dr. Rakesh Mohan Committee in “ The India Infrastructure Report ” included Electricity, gas, H2O supply, telecom, roads, industrial Parkss, railroads, ports, airdromes, urban substructure, and storage as substructure. Except industrial Parkss and urban substructure, all these sub-sectors are treated by CSO besides as substructure.

Reserve Bank of India ( RBI ) handbill on Definition of Infrastructure:

As per the RBI, a recognition installation is treated as “ substructure loaning ” to a borrower company which is engaged in developing, runing and keeping, or developing, runing and keeping any substructure installation that is a undertaking in any of the undermentioned sectors, or any infrastructure installation of a similar nature:

i. a route, including toll route, a span or a rail system ;

two. a main road undertaking including other activities being an built-in portion of the main road undertaking ;

three. a port, airdrome, inland waterway or inland port ;

four. a H2O supply undertaking, irrigation undertaking, H2O intervention system sanitation and sewage system or solid waste direction system ;

v. telecom services whether basic or cellular, including wireless paging, domestic orbiter service ( i.e. a orbiter owned and operated by an Indian company for supplying telecom service ) , web of trunking, broadband web and cyberspace services ;

six. an industrial park or particular economic zone ;

seven. coevals or coevals and distribution of power ;

eight. transmittal or distribution of power by puting a web of new transmittal or distribution lines ;

nine. building associating to undertakings affecting agro-processing and supply of inputs to agribusiness ;

x. building for saving and storage of processed agro-products perishable goods such as fruits, veggies and flowers including proving installations for quality ;

eleven. building of educational establishments and infirmaries ;

twelve. any other substructure installation of similar nature.

For raising external commercial adoptions financess, the RBI has defined substructure to include

( I ) Power,

( two ) Telecommunication,

( three ) Railways,

( four ) Road including Bridgess,

( V ) Sea port and airdrome,

( six ) Industrial Parkss and

( seven ) Urban substructure ( H2O supply, sanitation and sewerage undertakings ) vide their handbill dated 2nd July, 2007.

Insurance Regulatory and Development Authority ( IRDA ) :

The IRDA vide their presentment dated 14th July 2000, sing Registration of Indian Insurance Companies Regulation, 2000 stipulates that every insurance company in the concern of life insurance shall put and at all clip maintain invested non less than 15 % of his controlled financess in Infrastructure and Social sector. Besides, those insurance companies who are in the concern of General Insurance ( i.e. non-life insurance ) are required to put and at all clip maintain invested non less than 10 % of their controlled financess in Infrastructure and Social sector. For this intent, IRDA defines substructure to include route, main road, Bridgess, airdrome, port, railways including BOLT, route conveyance system, H2O supply undertaking, H2O intervention system, solid waste direction system, irrigation undertaking, industrial Parkss, sanitation and sewage system, generation-transmission-distribution of power, telecom, undertaking for lodging, or any other public installation as may be notified in the official gazette.

Income Tax Department:

For an substructure company, Section 80-IA of the Income Tax allows tax write-off of 100 % net income from its income during initial 5 old ages of operation and so 30 % tax write-off of net income from income during another 5 old ages. For this purpose substructure covers electricity, H2O supply, sewage, telecom, roads & A ; Bridgess, ports, airdromes, railroads, irrigation, storage ( at ports ) and industrial parks/SEZ.

World Bank:

The World Bank treats power, H2O supply, sewage, communicating, roads & A ; Bridgess, ports, airdromes, railroads, lodging, urban services, oil/ gas production and excavation sectors as substructure.

Economic Survey:

The Economic Survey considers power, urban services, telecommunications, stations, roads, ports, civil air power, and railroads under substructure sector.

Decision of the Empowered Sub-Committee of the Committee on Infrastructure on definition of substructure:

The Empowered Sub-Committee of the Committee on Infrastructure in its meetings held on 11th January, 2008 and 2nd April 2008 under the chairmanship of Deputy Chairman, Planning Commission discussed the capable affair. There was consensus on including the followers in the wide definition of substructure:

( I ) Electricity ( including coevals, transmittal and distribution ) and R & A ; M of power Stationss,

( two ) Non-Conventional Energy ( including air current energy and solar energy ) ,

( three ) Water supply and sanitation ( including solid waste direction, drainage and sewage ) and street lighting,

( four ) Telecommunications,

( V ) Road & A ; Bridgess,

( six ) Ports,

( seven ) Inland waterways,

( eight ) Airports,

( nine ) Railways ( including turn overing stock and mass theodolite system ) ,

( ten ) Irrigation ( including watershed development ) ,

( eleven ) Storage,

( twelve ) Oil and gas grapevine webs.

A Comparative Table on definition of Infrastructure sector and determination of the Empowered Sub-Committee of Committee on Infrastructure ( CoI ) is given below –

Mega undertakings ( chiefly substructure ) receive a ample investing ( ~10 % ) of the gross fixed capital formation in India. Environmental clearances and land acquisitions have been the two major grounds for holds in the undertakings. However, there has been a steady addition in the proportion of undertakings running on agenda and a crisp diminution in the proportion of undertakings with cost overproductions. These achievements have been achieved due to better funding, undertaking direction, and reform in the regulative models related to environmental and land acquisition facets.

The credence of a user fee and development of alternate beginnings of gross have helped pull larger investings in mega undertakings. With increasing private sector engagement, holds due to project direction are expected to cut down. The alterations in the regulative model on environmental and land acquisition issues are moves in the right way. However, methods used for appraisals related to environmental impact and land acquisition are still manual, doing the whole procedure clip devouring. Technology could be a good instrument in cut downing the clip required for these appraisals every bit good as in conveying transparence in the system. Decentralization with capacity edifice at the province degree would besides assist in the long tally in cut downing these holds.

Environmental Issues

Initially, Torahs were enacted for environmental concerns related to H2O, air, noise etc, as and when they became countries of concern. Later, an incorporate jurisprudence was passed by the authorities.

As the figure of undertakings and private investings increased, bureaucratic holds became a concern. Laws were modified to get the better of these holds. Between 1980 and 1998, nine Acts, Bills, and Amendments related to environment were enacted. These included the Forest Conservation Act 1980, the Environment Protection Act 1986, the National Environment Appellate Authority Act 1997, and the Coastal Regulation Zone presentment 1991.

The Environment Protection Act ( EPA ) 1986 came into being shortly after the Bhopal gas calamity. It became an umbrella statute law, and attempted to seal the bing spreads in the jurisprudence. It empowered the cardinal authorities to take steps to protect and better the quality of the environment, by puting criterions for emanations and discharges, by modulating the location of industries, and by protecting public wellness and public assistance ( EPA, 1986 ) .

The demand for the Environmental Impact Assessment ( EIA ) was officially recognized at the Earth Summit held at Rio de Janeiro in 1992. In India, the EIA Notification was enacted in 1994, with the EPA as its legislative foundation ( MoEF, 2008 ) . The Act has been amended in 1997, 2006, and 2007. The procedure of acquiring the clearances as per the EIA Act is illustrated in below figure.

Thirty-two classs of developmental undertakings require EIA blessing. In add-on, all developmental undertakings, whether or non mentioned in the agenda, and if located in an environmentally delicate part, must obtain clearance from Ministry of Environment and Forest ( MoEF ) , a cardinal authorities entity set up in 1985. Prior to this clearance, they must besides obtain clearance from the State Pollution Control Board ( SPCB ) . If the location involves forestland, a No Objection Certificate ( NOC ) shall be obtained from the State Forest Department ( SFD ) . Both SPCB and SFD are the province entities working in the geographical part where the undertaking exists.

Over the old ages, ordinances have been simplified with an purpose to cut down the entire clip required for the blessing procedure. The simplifications include cut downing the figure of interfacing bureaus and blessings, and leting parallel activities for clearances. As per the EPA Amendment Act 2007, environmental clearance for undertaking proposals were to be granted normally within the mandated clip frame of 120 yearss from the day of the month of reception of complete information from the undertaking governments. The undertaking clearances had been delayed due to non-submission of the needed information. Some of the stairss taken to hasten the procedure included ( Wildlife Protection Society, 2008 ) :

“ A clip bound of 90 yearss for finishing assessments, 30 yearss for pass oning the determination, and 60 yearss for finishing the public hearing by SPCB was fixed.

“ The investing bound for a undertaking necessitating MoEF clearance was raised from Rs 500 million ( $ US 10 billion ) to Rs 1000 million ( $ US 20 billion ) for new undertakings.

“ The demand of public hearing for Small Scale Industries located in industrial areas/estates. These include broadening and strengthening of main roads, offshore geographic expedition activities beyond 10 kilometers ( 6 myocardial infarction ) from the nearest home ground, mining undertakings of major minerals with rental upped 49 estates ( 20 hectares ) , modernisation of bing irrigation undertakings and units to be located in Export Processing Zone ( EPZ ) and Particular Economic Zone ( SEZ ) .

“ The demand of the EIA study for grapevine undertakings was dispensed with.

“ NOC/consent to set up was non insisted upon at the clip of reception of the application for environmental clearance.

“ Authority was delegated to the province authoritiess for allowing environmental clearance for certain classs of thermic power undertakings.

Land Acquisition Issues

The land acquisition policy has experienced less figure of alterations in the Act. The predominating Torahs related to set down acquisition are:

( I ) Land Acquisition Act of 1894,

( two ) The National Highways Act of 1956,

( three ) National Policy on Resettlement and Rehabilitation for Project-Affected Families of 2003, and

( four ) State authorities policies ( few province authoritiess have particular policies ) .

The Land Acquisition Act of 1894 sceptered province authoritiess to get land for any public intent undertaking. It provides three methods for geting at the value of land, which were:

( I ) authorities approved rates,

( two ) capitalized value of mean one-year income from the land, and

( three ) Prevalent market rate based on the land minutess informations. The procedure

of land acquisition under this Act is illustrated below.

As the figure shows, much depended on the District Collector ‘s satisfaction.

The National Highways Act of 1956 had commissariats for geting land through a competent authorization ( a individual authorized by the cardinal authorities by presentment in the official gazette ) . Under the Act, publication of the purpose of the authorities to get land, studies, hearings of expostulations, and the declaration of acquisition were to be completed within a twelvemonth. This Act reduced the clip frame significantly. This Act included commissariats for compensation to merely the rubric holders based on the market value of the land, extra payments for trees, harvests, houses, or other immoveable belongingss, and payments for harm due to break uping of land, abode, or topographic point of concern.

The National Policy on Resettlement and Rehabilitation for Project-Affected Families of 2003 provided extra compensation to project-affected households, over and above the commissariats of the Land Acquisition Act. It recognized the multipurpose usage of land by both rubric holders and non-title holders of the land. State Torahs varied in footings of their compensation bundle and the definition of undertaking affected people to some extent.

Poor compensation and undervalued market monetary value of land have led to many differences by the affected population. The undervaluation was every bit high as four to ten times, due to both regulative arbitrage ( authorities has to supply clearance for land usage alteration ) and information dissymmetry ( title holders may be hard to place due to hapless record maintaining ) . As of November 2008, the cardinal authorities was sing the alteration of the prevailing Land Acquisition Act by modifying the definition of “ public intent, ” increasing the compensation bundle, enforcing limitations on non-used land, and simplifying the procedure of difference declaration.

Brief Overview of Railway Land

Railway land has been defi ned under the Railways ( Amendment ) Act, 2005, as ‘any land in which a Government Railway has any right, rubric or involvement ‘ and

includes all lands within the fencings or other boundary Markss bespeaking the bounds of the land appurtenant to a railway.1 Over the old ages, Indian Railways ( IR ) has been geting land for its operation of trains. Harmonizing to the latest available information, IR had 4.3 lakh hectares of land as on 1 April 2006. Some of this land has been provided by the province authoritiess free of cost or on nominal charges and the remainder acquired in exchange for market-determined compensation.

Legal Commissariats for Land Acquisition By IR

For land acquisition, IR follows the processs laid down in the legal commissariats of the Land Acquisition Act ( LAA ) 1894. Actions such as publication of Preliminary Notice under Sec. 4 ( 1 ) of the LAA, 1894, declaration under Sec. 6 ( 1 ) , award question, passing of concluding award, expense of payment, etc. are done by the competent authorization of the province authorities. Th vitamin E assessed approximative land acquisition cost including solatium and involvement, etc. As per statutory commissariats is deposited in progress with the State Government by IR. Although IR has by and large used LAA, 1894 for acquisition, it is possible for IR to straight negociate with the landholders.

Sec. 11 of the Railways Act, 1989 has signifi cant deductions for the institutional constructions under which the private sector can put in a railroad undertaking, which

inter alia involves acquisition of land. Th is subdivision and its deductions need to be understood before we outline the instance surveies.

Sec. 11 provinces that,

aˆ¦Notwithstanding anything contained in any other jurisprudence for the clip being inforce, but capable to the commissariats of this Act and the commissariats of any jurisprudence for the acquisition of land for a public intent or for companies, and topic besides, in the instance of a nongovernment railroad, to the commissariats of any contract between the non-government railroad and the Cardinal Government, a railroad disposal may, for the intents of building or keeping a railway-

( a ) brand or concept in upon, across, under or over any land, or any street, hills, vales, roads, railroad, ropewaies, or any rivers, canals, Brookss, watercourses or other Waterss, or any drains, water-pipes, gas-pipes, oil-pipes, cloacas, electric supply lines, or telegraph lines, such impermanent or lasting inclined-planes, Bridgess, tunnels, culverts, embankments, aqua canals, roads, lines of railroads, transitions, conduits, drains, wharfs, film editings and fencings, in return Wellss, tubing Wellss, dikes, river preparation, and protection plants as it thinks proper ;

( B ) do all other Acts of the Apostless necessary for doing, keeping, changing or mending and utilizing the railroad.

Therefore, Sec. 11 of the Railways Act, 1989 provides the authorization to IR to put to death plants for proviso of railroad lines and related installings. The importance of Sec. 11 is in enabling better entree to right of manner and land and enables faster and more assured execution of undertakings. It overrides all other Torahs including environment Torahs, local province Torahs, and municipal Torahs and thereby reduces the clearances required. Without entree to such a proviso, a railroad undertaking may non be feasible.

However, the authorization provided under Sec. 11 is available with greater certainty to Government Railways. Since ‘railway ‘ is defined to intend a railroad or any part of a railroad, for the public passenger car of riders or goods, a railroad that is non to be used for public passenger car of goods or riders will non fall within the above mentioned definition under the Railways Act. Therefore, it

would non be eligible for the benefit of Sec. 11, which acts as a major deterrence for wholly confined nongovernment railroads.

A non-government railroad can hold entree to Sec. 11, but capable to the commissariats of a contract with the Cardinal Government. Since there is no model regulating contracts between the Government of India and nongovernment railroad, the latter would be wholly exposed to executive discretion.2 There is, hence, an implicit in practical encouragement to authorities railroads within the legal model.

As per the present commissariats of the Railways Act, 1989, the most suited railroad undertakings ( albeit in a limited mode ) for private investing will be authorities railroad undertakings ( that is, undertakings in which Government of India owns portion of the undertaking ) . Hence, most rail-port connectivity undertakings affecting private investing are being executed through the particular purpose vehicle ( SPV ) path ( where the Cardinal Government is a spouse ) as it so enables the private spouse to utilize the commissariats of Sec. 11 of the Railways Act, 1989.

Case Study: Haridaspur-Paradip New Line Project

The Haridaspur-Paradip New Line Project is an 82 kilometer long port connectivity undertaking under the National Rail Vikas Yojana ( NRVY ) . It is meant to supply railroad connectivity to the iron-ore mines in Banspani country of Orissa to Paradip port, to enable export of iron-ore from India. The undertaking is being implemented by Rail Vikas Nigam Ltd ( RVNL ) through a project-specific SPV called Haridaspur-Paradip Railway Company Limited ( HPRCL ) .The landed cost of the undertaking is about Rs 1,000 crore and it is targeted to be completed by March 2010. For this undertaking, land is being acquired by East Coast Railway ( a Zonal Railway and portion of the IR ) on behalf of HPRCL, but the cost of land acquisition is being wholly borne by the SPV. As per the Concession understanding signed between Ministry of Railways and HPRCL, all the new land

acquired by East Coast Railway on behalf of HPRCL will be given to the SPV at a entire license fee of Re 1 per annum for the period of the grant. The rubric of the land will, nevertheless, remain in the name of East Coast Railway and the SPV will manus back the ownership of the land when the grant period ends or is terminated.

Such an agreement has been devised to use the commissariats of the Railways Act, 1989 for acquisition of land for the undertaking. As already mentioned above, it is much easier to get land for a authorities railroad than for a non-government railroad. Under this agreement, land is being acquired for East Coast Railway and non for the SPV, which hence, makes the acquisition of land a simpler procedure.

RVNL had been awarded the contract for the building of this line for the full undertaking in May 2007. Due to the jobs mentioned below, the work has non progressed much. If the province authorities and IR are unable to do the site available for building, the contractor may non go on the work on the undertaking and this will be a serious reverse in footings of undertaking cost and clip overproduction.


The undertaking involves acquisition of 270 estates of authorities land and 1440 estates of private land. Acquisition of private land is being done under LAA, 1894 while authorities land is being alienated under the Orissa Government Settlement Rules. East Coast Railway has acquired land in a 70 kilometer stretch out of 82 kilometers in Kendrapada, Jajpur, and Jagatsinhpur territories. An sum of Rs 46 crore has been paid to the province authorities, which is much higher than the initial estimation of the cost of land. The balance land to be acquired is spread over the alliance at different locations. The advancement has since been slowed down on history of the undermentioned jobs, which have cropped up in the land acquisition procedure.

Executive Decisions are Inconsistent with Government Rules

The villagers are non allowing the building contractor appointed by RVNL to set about the activity of earthwork and span building on the land already acquired, both private and authorities. The ground for agitation by villagers is that in some of the small towns, the rates paid for province authorities land are 10 to 20 times higher than that for private land. For a comparative statement of monetary value ( village-wise ) of the Rayati land and authorities land is enclosed ( see Annexure Table A18.1 ) . Such a broad fluctuation in the pricing of land has resulted in bitterness among the private landholders. The villagers are demanding the same rate for compensation as is being given for authorities land. The District Collector, as per the Orissa Government Settlement Rules, should hold determined the monetary value of the authorities land on the footing of minutess made for the private land in the locality. Alternatively,

the Collector charged Railways on the footing of monetary values for homestead land or urban land alternatively of agricultural land. The determination of the Collector is non in consonant rhyme with the authorities regulations.

Unfair Demand for Compensation

In some countries, even the authorities land is in ownership of husbandmans who are raising harvest on this land without payment of any revenue enhancements or levies. They are now demanding compensation at the same degrees as those given to other title holders of private land. Since they do non hold rubric to the land, it is evidently non possible to allow them compensation. Similarly, the forest section had permitted project-related building on some forest land, which lacked tree screen. However, it is found that this land is besides being cultivated by non-title holders and they are non allowing the building without compensation.

Furthermore, the keepers of the temples located on the alliance are demanding that compensation be paid to them, although as per jurisprudence, the compensation is to be paid to the endowment committee. To short-circuit this issue, the RVNL decided to alter the alliance of the railroad line so as to avoid go throughing through the temple land.

A Case of a Single Hold-out

A edifice in small town Nanpur, viz. Pollishree Sikshya and Sanskrutik Vidyalaya near Birupa river is yet to be taken over for ownership by the railroad. The proprietor is declining to accept the compensation and endangering to register a false condemnable instance.

Poor Law and Order Situation

There are many cases where the contractor ‘s work forces are being threatened and beaten up by the locals. Several FIRs have been lodged with the constabulary. The countries badly affected are in Kendrapara territory and Jajpur territory. To screen out this issue, Principal Secretary, the Commerce & A ; Transport had convened a meeting in April 2008, which was attended by aggregator and overseer of constabulary of these territories and officers from the Railways. Unfortunately, the consequences have non been really encouraging.

Cerium Charges for Government Land

Tehsildars have levied Ce for authorities land being acquired at the rate of 75 per cent of the capitalized value, which works out to Rs 10 lakhs per acre. As a consequence of the above troubles in geting land for the undertaking, the work advancement has been slow and the revised cost of geting the land is now estimated at Rs 54.5 crore, which is manner above the original estimated cost ( as in April 2005 ) of Rs 23.7 crore. This has had an inauspicious impact on the undertaking financials. The chief lesson from this instance is that in the absence of full cooperation of the province authorities and its officials, railroad undertakings can be unduly delayed and viability affected.


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