Performance of Core Industries and Infrastructure Services shows a Mixed Trend in 2013-14; Survey Calls for enhanced Infrastructure Investment, Improving Productivity and Removing Procedural Bottlenecks

Major sector-wise performance of core industries and infrastructure services during 2013-14 shows a mixed trend. While the growth in production of power and fertilizers was comparatively higher than in 2012-13, coal, steel, cement, and refinery production posted comparatively lower growth. The Economic Survey 2013-14 tabled in the Parliament today by the Finance Minister Shri Arun Jaitley mentions that crude oil and natural gas production declined during 2013-14. Among infrastructure services, growth in freight traffic by railways and cargo handled by major ports and the civil aviation sector (except import cargo) has been comparatively higher during 2013-14. In the road sector the National Highways Authority of India (NHAI) posted negative growth of 33 per cent during 2013-14 as compared to the 26.5 per cent growth during 2012-13, says the Survey.

Concerning energy production, the Survey mentions that even though the domestic production of energy is projected to increase, import dependence will continue to be high, particularly for crude oil where nearly 78 per cent of the demand will have to be met from imports by the end of the twelfth Plan.

As per the Survey, the growth in power generation during 2013-14 (April-March) was 6.0 per cent, as compared to 4.0 per cent during April 2012 to March 2013. The capacity-addition target for the Twelfth Plan period is estimated at 88,537 MW. Against this target, 38,583 MW capacity has been added till April 2014, which constitutes 43.6 per cent of the target envisaged in the Twelfth Plan. The individual targets achieved by the centre, states, and private sectors during this period are 30.5 per cent, 47. 2 per cent, and 49.7 per cent respectively, says the Survey.

Regarding the performance of the coal sector in the first two years of the Twelfth Plan, the Survey states that it has been subdued with domestic production at 556 MT in 2012-13 and 566 MT in 2013-14. Overall domestic demand for coal during these two years was in the range of 715-720 MT. Demand was mainly driven by the power generation sector, whereas demand in the iron and steel and cement sectors had moderate growth rates. To fill the gap between domestic demand and supply, the country imported about 146 MT during 2012-13 and about 169 MT of coal during April-January 2013-14 (provisional), the Survey adds. The Survey notes that in India the overall long term demand for coal is closely linked to the performance of the main end-use sectors i.e., thermal power, iron and steel and cement. Sharp deceleration in the production of natural gas in the past two-three years has further increased the energy sector’s dependence on coal.

In the Road sector, the Survey states that a total length of 21,787 km of national highways has been completed till March 2014 under various phases of the NHDP. In spite of several constraints due to the economic downturn, the NHAI constructed 2844 km length in 2012-13, its highest ever annual achievement. During 2013-14 a total of 1901 km of road construction was completed, adds the Survey.

Regarding telecom sector, the Survey mentions that it has registered phenomenal growth during the past few years and has become the second largest telephone network in the world, next only to China. The Survey observes that a series of reform measures by the government, innovations in the wireless technology, and active participation by the private sector played an important role in the growth of this sector. The Survey suggests that policy for better spectrum management through trading and sharing needs to be looked into so as to bring down the cost of spectrum.

Recognising the need for streamlining environmental clearances of infrastructure projects, the Survey states “ There is need for better and more effective coordination amongst various central ministries/ institutions regarding integration of environmental concerns at the inception / planning stage of a project. The Survey further notes that rapid economic growth in recent years has put enormous pressure on existing infrastructure , particularly in transport, energy and communications. It observes unless it is significantly improved, infrastructure will continue to be a bottleneck for growth and an obstacle to poverty reduction.

Giving details of financing infrastructure, the Survey states that the latest available data on gross deployment of bank credit to major infrastructure sectors shows that the rate of growth of bank credit moderated from an average of 44.8 per cent in 2011-12 to 17.7 per cent in 2013-14. Power sector had an over 50 per cent share in total credit flow to infrastructure. Both in terms of share in total credit to infrastructure and rate of growth, the telecom sector witnessed consecutive decline in the last three years. The government has put in place a liberal FDI policy, under which FDI up to 100 per cent is permitted under the automatic route in most sectors/activities. As a result, total FDI inflows into major infrastructure sectors registered a growth of 22.8 per cent in 2013-14 as compared to the contraction of 60.9 per cent during 2012-13, the Survey adds.

From the infrastructure development perspective, the Survey states that while important issues like delays in regulatory approvals, problems in land acquisition & rehabilitation, environmental clearances, etc. need immediate attention, time overruns in the implementation of projects continue to be one of the main reasons for underachievement in many of the infrastructure sectors.

In order to accelerate coal production in the short term, the Survey suggests the need to focus on building critical feeder railways routes for coal for evacuation and movement of coal. Clearing pending environment and forest clearances and rehabilitation issues that have stalled coal production by private captive blocks and Coal India Limited (CIL) subsidiaries also need to be accorded top priority. The CIL encompasses the whole gamut of identification of coal reserves and detailed exploration followed by design and implementation and optimizing operations for coal extraction in its mines. The process of restructuring CIL needs to be pushed through swiftly to boost coal production, the Survey adds.

Long-term finance for infrastructure projects , the Survey says, one of the issues that need to be addressed in the context of the limitation of banks to finance such projects. Infrastructure projects, given their long pay-back period, require long-term financing in order to be sustainable and cost effective. A robust and transparent issuance and trading process, uniform stamp duty across states and a well-devised credit enhancement mechanism are some of the issues which need immediate attention for development of the fixed instrument market in India, the Survey adds.