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					                                                                                         India
                                                                                        Infrastructure
                                                                                        Update
      Vol. 8 No. 4 April-May, 2005                 •      Produced by J. Sagar Associates               •    For private circulation only


 POWER

   Reliance plans 12,000 Mw plant in Orissa                                                            generation in the coming months. The KPTCL authorities
                                                                                                       admit to transmission losses of 10 per cent but the FKCCI
Reliance Energy Ltd has proposed to set up a 12,000 Mw                                                 claims it to be more. This includes power theft being detected
thermal power plant at a cost of Rs 48,000 crore at Hirma in                                           constantly. The Government is spending Rs. 2,300 crores on
the Jharsuguda district of Orissa.                                                                     providing power in Bangalore.
Reliance Energy's Executive Vice-Chairman Satish Seth today
made a presentation before Chief Minister Naveen Patnaik at
the state secretariat here in this regard. Reliance Energy has                                         Karnataka to add 6,000 MW of power in 11th
proposed to put up the power plant in phases. In the first                                                                plan
phase, the company intends to set up six units of 660 Mw
each at a cost of approximately Rs 18,000 crore. Sources                                               Karnataka has committed itself to adding 6,000 MW additional
close to the development said the presentation was a revival                                           capacity in the 11th plan of which 2,400 MW will come from
of the company's old proposal to set up a 4000 Mw power                                                state projects and the balance from private power producers
plant at Hirma. The earlier proposal was submitted to the                                              and central power generation systems.
state government in the mid-1990s. The company had then                                                This was decided at a meeting of southern power ministers,
tied up with Hong Kong-based Consolidated Electric Power                                               chaired by Union Power Minister P M Sayeed. Mr Sayeed
Asia Ltd (CEPA) to set up the venture. Reliance Energy is                                              said Andhra Pradesh had agreed to increase capacity by 9,000
present in Orissa through its three electricity distribution firms                                     MW, of which 4,600 MW would come from state government
_ Nesco, Wesco and South _ following its acquisition of BSES.                                          projects. Tamil Nadu, which initially committed itself to an
Reliance Energy's entry into power generation in the state                                             increase of 1,000 MW, later agreed to 2,000 MW addition.
will bring synergy to its operations in Orissa.                                                        Kerala had agreed upon an additional generation of 1,000
                                                                                                       MW and the Union Territory of Pondicherry 200 MW. Since
                                                                                                       Pondy was centrally administered, the projects would be
       Bangalore Needs 300 Mw More power                                                               funded from Central allocations.
The Federation of Karnataka Chambers of Commerce and
Industry (FKCCI) has estimated that Bangalore needs 300
MW of additional power. About 60 per cent of the state's                                               State To Add 2, 000 MW in Next Plan Period
electricity comes from hydel stations and the rest from other                                          Tamil Nadu has "responded positively" to the suggestion of
sources, mainly thermal. The decrease in the storage if water                                          the Union Ministry of Power that it add an additional 2,000
in the reservoirs, especially during summer, has resulted in                                           MW during the 11th Five Year Plan. Tamil Nadu, which plans
the increase of thermal power consumption. Hydel power                                                 to add one-fourth of the estimated 4,000 MW new capacity
supply will improve to an extent with the onset of monsoon.                                            during 2007-2012, has agreed to double its capacity after the
During 2004-05, the availability was 6,671 MW and the                                                  ministry pointed to its likely growth-oriented demand, said
shortage was 1,172 MW, while in 2005-06, the shortage came                                             Union Minister of Power P.M. Sayeed. The central generating
down. The availability now is 7,237 MW and the shortage is                                             stations would meet the remaining 2,000 MW.
only 971 MW. The monsoon will determine the status of power
                                                                                                       TN, AP, Karnataka Plan Joint Venture For 3,
 Inside                                                                                                             000-mw Project
Power ............................................................................................ 1   In a unique experiment, the power utilities of Tamil Nadu,
Oil & Gas ....................................................................................... 3    Andhra Pradesh and Karnataka are planning a joint venture
                                                                                                       to set up a 3,000-MW gas-based power project on a cost-
Roads & Rails .............................................................................. 4         sharing formula in one of the States. This will be the first time
                                                                                                       that states are getting together to jointly promote and execute
Telecom ........................................................................................ 5
                                                                                                       a project of this scale, which could cost about Rs 12,000
Ports & Airports ............................................................................. 6       crore. A high-level steering group, comprising secretary-level
                                                                                                       officials from the three states and representatives from the
Urban Infrastructure ..................................................................... 8

                                                                                                       1
                                                              India
 POWER
                                                              Infrastructure
                                                              Update



Central Electricity Authority , PTC India Ltd and the Ministry          performance and financial imprudence. This came on the
of Power, has started ground work on the project. The States            heels of the release of the third ICRA-Crisil Power Sector
are likely to form a special purpose vehicle to execute the             Rating report. The minister said that the Union Government
project. The project is likely to come up either in Andhra              had sanctioned close to Rs 195 billion to the states to cover
Pradesh or in coastal Tamil Nadu, depending on the fuel                 previous losses; of this more than Rs 55 billion had already
source. Although the proposal is in the initial stages, two             been released.
sites have been proposed. The power station could be set up
                                                                        The ICRA-Crisil report has commended the faster release of
either in the Kakinada region in Andhra Pradesh, if gas is to
                                                                        subsidies to the SEBs by the state governments, and the
be sourced from the Krishna-Godavari basin, or in north of
                                                                        strong transition support. It has rated Andhra Pradesh, Gujarat
Chennai, if the project is to be run on imported fuel, which will
                                                                        and Delhi as the best in performance.
be brought in using the Ennore Port facility, officials said.
PTC India Ltd has been entrusted with the task of arranging
for the fuel linkages, officials involved in the exercise said.
                                                                                Rs 600 billion for power projects
                                                                        The Union Power Ministry announced that 11 independent
         NTPC to add 500 mw in Farakka                                  power projects, slated to produce 4000 mw on commissioning,
                                                                        have reached financial closure and another 11 independent
The National Thermal Power Corporation (NTPC) has firmed
                                                                        power projects for 11,000 mw are in various stages of planning.
up plans to set up another 500 Megawatt (MW) unit at Farakka
                                                                        The total investment for these projects is Rs 600 billion. In
at an investment of Rs 2,000 crore. "Around 30 per cent of
                                                                        the past 11 months there has been a 6.2 percent growth in
the project cost would be funded through equity while the
                                                                        power generation, as compared to 3.2 percent and 3.5 percent
rest 70 per cent would be from borrowings," said CP Jain,
                                                                        in the preceding two years. The government has targeted
NTPC chairman and managing director. He recently signed a
                                                                        37,000-mw generation by the end of the Tenth Five-Year Plan.
memorandum of understanding (MoU) with the West Bengal
State Electricity Board. It involved implementation of the 90
mw Rammam Stage-III hydel project, estimated at Rs 450
crore, that would now be implemented by NTPC subsidiary                        Gas, coal shortage lead to power
NTPC Hydro Ltd. Around 85 per cent of the power from this                            generation cutbacks
plant would be sold at Rs 2.1 per unit in the first year. The
                                                                        The Union Power Ministry announced that 2,000-mw power
new 500 mw project would be commissioned in the 11th Five
                                                                        generation was lost to the country in 2004 because of gas
Year plan and was expected to start generation by 2011, but
                                                                        and coal shortages. Coal-fired power generation plants ran at
construction would start by 2007.
                                                                        68 percent capacity, while gas-fueled plants ran at between
                                                                        58 percent and 95 percent capacity during the year.
     Plan panel recommends joint projects                               Without this shortfall in power generation, the sector would
                                                                        have seen a growth of 8.5 percent instead of 6.2 percent, the
The Planning Commission has recommended that the National               ministry statement said. However, it added that India would
Thermal Power Corporation (NTPC), the biggest power                     achieve its Tenth Plan target to add another 41,110-mw power
generator in the country, and other central power companies             generation capacity. About 37,000-mw capacity has already
? the National Hydro Electric Power Corporation and North               been either commissioned or under execution or awarded for
Eastern Electric Power Corporation ? should undertake new               the Tenth Plan period.
investments jointly with either state utilities or private sector
companies. NTPC, which accounts for over 20 percent of the
installed capacity and which generated almost 30 percent of             PFC to earmark Rs 6 billion for transmission
the power in the country last year, is participating in two power
generation joint ventures, one with Steel Authority of India Ltd                        projects
and one with Tamil Nadu Electricity Board.                              The Power Finance Corporation announced the decision to
In its mid-term appraisal of the Tenth Five-Year Plan, the              earmark Rs 6 billion for investment in transmission projects
Planning Commission has pointed out that state electricity              in 2005-06. However, it added that it is yet to identify the
boards do not have adequate investment resources to meet                states it would focus on for such investment and has begun
the demands of the distribution sector.                                 an exercise to evaluate the transmission capacities of all
                                                                        states.
The appraisal document says that existing aggregate
technical and commercial (AT&C) losses are currently an                 Meanwhile, the Union Power Ministry said that it is consulting
average 40 percent, leaving the state bodies unable to pay              with the Law Ministry on the demand of some states for an
even for current purchases, leave alone surpluses that can              extension on the Jun 10, 2005 deadline for completing the
be invested in improving distribution.                                  unbundling and restructuring of State Electricity Boards
                                                                        (SEBs).
Meanwhile, Union Minister for Power P M Sayeed heavily
criticized the State Electricity Boards (SEBs) for poor

                                                                    2
                                                              India
 OIL & GAS
                                                             Infrastructure
                                                             Update



    IOC net dips 30%, but payout at 100%                               to Rs 1,277 crore. Earnings per share have fallen from Rs
                                                                       56.2 to Rs 37.7. Sales income for the quarter is up 12% to
IOC, which created corporate history by crossing the Rs                Rs 16,500 crore. Net sales for the year were up 16% to Rs
1,50,000-crore turnover mark in FY05, ended the year with a            60,122 crore. Higher product prices have accounted for the
30.2% dip in profits. The sharp drop in profit to Rs 4,891 crore       bulk of increased sales. Retail sales were up 2.2% to 19.6m
from Rs 7,005 crore last year, is primarily due to higher              tonnes. HPCL expanded its retail network aggressively in
subsidies on LPG and kerosene and lower earnings on sales              FY05 putting up over 1,100 new petrol pumps. The profitability
of petrol and diesel. The company posted a turnover of Rs              for the year have been pushed up by adding discounts up to
1,50,677 crore in FY05, up by 15.7% than Rs 1,30,203 crore             Rs 1,278 crore from ONGC and Gail and an inventory gain of
of the previous fiscal. The IOC board declared a final dividend        Rs 550 crore. Last year, the discount from upstream was Rs
of 100% (Rs 10 per share). The company had declared an                 690 crore while the company had incurred a loss of Rs 100
interim dividend of 45% last year. The reduced profits come            crore on inventory. Lower margins on diesel and petrol and
at a time when the oil refining and marketing major has                higher losses on LPG and kerosene accounted for the drop
recorded the highest earnings on its refinery operations. IOC          in the profit. For the year FY05, retail margins on diesel and
has recorded an average gross refining margin of $6.2 per              petrol were Rs 0.65/litre and Rs 1.15/litre respectively, against
barrel in '04-05 as against a refining margin of $5.3 per barrel       Rs 1.35/litre and Rs 1.6/litre last year. The loss on LPG
last fiscal. Major ongoing/planned projects include the Rs             worked out to Rs 81/cylinder (post subsidy) while the loss on
5,104-crore Paraxylene/PTA unit at Panipat (October '05                kerosene was Rs 5.24/litre. So far in FY06, the retail margins
completion), Rs 2,504 crore in clean fuel projects at Mathura,         on diesel and petrol have been negative.
Haldia and Koyali refineries (May '05-June '06 commissioning),
Rs 1,023 crore on pipelines (July '05-December '05
commissioning) and Rs 305 crore conversion of the Kandla-
Panipat section of the Kandla-Bhatinda product pipeline to             BG-ONGC-RIL consortium to invest more in
crude pipeline by October '05.                                                       Tapti field
                                                                       The joint venture between British Gas, ONGC and Reliance
                                                                       responsible for developing the Tapti-Panna-Mukta fields
                    Gas supplies cut                                   announced that it would invest an additional US$500 million
Gas supplies along the Hazira-Bijapur-Jagdishpur (HBJ)                 in the project to expand operations at the Tapti gas field. The
pipeline have been reduced by more than 1.55 mmscmd,                   investment in the Tapti field is for setting up a single platform
impacting power plants in Delhi, Haryana, Uttar Pradesh and            to drill eight new wells in order to raise gas production. With
Rajasthan. This follows GAIL’s reduced off-take from the Tapti-        this, the total investment in the project would be US$900
Panna-Mukta fields and consequent supply cuts.                         million.
GAIL had earlier asked the National Thermal Power                      The consortium expects gas production from this field to go
Corporation (NTPC) to pay a higher price for additional gas            up to 450 million metric standard cubic feet per day (mmscfd)
supplies, given the hike in gas price by the British Gas-ONGC-         from the current production of 250 mmscfd.
Reliance consortium operating the Panna-Mukta-Tapti fields.            This comes at a time when the consortium is looking to sell the
The Union Power Ministry, however, contested the GAIL offer            gas directly after the government recently allowed it to sell a
on grounds that the Gas Linkage Committee had ordered                  part of the gas production, totaling about 5 mmscmd, directly to
allocation of subsidized gas to NTPC in 1990.                          consumers, stipulating that the balance of around 6 mmscmd is
The consortium has subsequently cut production from the                to be sold to the Gas Authority of India Ltd (GAIL).
Tapti-Panna-Mukta fields.                                              However, GAIL is reportedly lifting only a third of the allocation,
Meanwhile, Gujarat State Petroleum Corporation (GSPC) has              forcing a cut in production. The value of the loss in production
agreed to pay GAIL an additional Re 0.25 per scm regassified-          is estimated at a minimum US$300,000 a day, of which the
LNG (R-LNG) for volumes in excess of 1 mmtpa.                          government bears 60%.


 HPCL net slips 33% on lower fuel margins,                                  Videocon to buy into Sudan oil fields
           higher LPG subsidy                                          The Videocon Group plans to acquire up to 76% share in one
                                                                       or more oil fields in Sudan. The initial investment is estimated
Lower margins on diesel and petrol and increased subsidy
                                                                       to be around US$100 million. Videocon International has
on LPG and kerosene have resulted in a 33% drop in the
                                                                       already signed a memorandum of understanding (MoU) on
profit of oil marketing major HPCL. Numbers for the fourth
                                                                       mutual co-operation with the Khartoum State of the Republic
quarter are comparatively better because of high margins in
                                                                       of Sudan for investing and developing projects in the oil sector.
January '05. But for discounts from the upstream players and
inventory gains, the company would have incurred a loss during         Videocon International is also planning to look for similar
the year. HPCL's net profit for the quarter ending March '05 is        arrangements in other oil-rich destinations such as the former
down 5.2% to Rs 500 crore and the yearly profit is down 33%            Soviet Union, West Asia and Africa.

                                                                   3
                                                             India
 ROADS & RAILS
                                                             Infrastructure
                                                             Update



                                                                       fares, utilisation of the capacity and introduction of new train
   441-km Roads Linking Tourism spots In                               services revealed that almost 60 per cent of the passengers
     Kerala Need Sprucing Up: Natpac                                   travelled to distances less than 150 kms and of these 86 per
THE National Transportation Planning and Research Centre               cent passengers went in ordinary second class, the CAG
(Natpac), an autonomous body under the State Government,               stated. Out of a total of 69.38 crore passengers, who travelled
has identified 441-km stretch of roads networking tourism              between distance category of 1-150 kms in second class
centres in the State as being in need of urgent improvement.           ordinary trains during 2002-03, audit assessed that 20.92
The roads have been prioritised for improvement based on               crores passengers travelled in distance slabs for which fares
the prevailing condition, tourism potential and hierarchy of           were reduced resulting in fall in revenue amounting to Rs 24
the connecting road, says Dr T. Elangovan, Director, Natpac,           crores, the report said.
who piloted a study in this context. The cost estimates in
each case have also been worked out, adding up to an
aggregate Rs 190 crore in all. The study necessitated an                     Railways to go parallel with Golden
assessment of the present condition of the roads and the                           Quadrilateral network
tourist potential of each spot. The type of improvements
required for each road in terms of resurfacing, geometric              Indian Railways plans to build a double-line dedicated freight
improvements, strengthening and widening were also                     corridor along the Golden Quadrilateral road network. Along
catalogued.                                                            with constructing diagonals, this would cost an estimated Rs
                                                                       600 billion and is expected to be completed over the next
                                                                       seven years.
 Roads To Tribal Hamlets At Rs. 6.29 Crores                            The project will be implemented with large-scale private sector
                                                                       participation, with the Rail Vikas Nigam (RVNL) acting as
Road works at a cost of Rs. 6.29 crores, under the Prime               nodal agency.
Minister's Rural Roads scheme, are being undertaken for the
benefit of remote tribal hamlets and villages in Yercaud and           Indian Railways is also considering operating freight trains
Kalrayan hills in the district. Five roads are being laid in           with 100-150 wagons and allow double-stacking container
Kalrayan hills while two others are being laid in Yercaud. These       trains of about 12,000 tons each, along the proposed corridor.
projects will go a long way in improving the standard of living        The existing infrastructure handles about 4,000 tons.
of tribals, who have been waiting for this occasion for long.          RVNL has already been authorized to form special purpose
                                                                       vehicles (SPVs) for implementing financially viable railway
                                                                       projects including augmentation of capacity along Golden
      Railways Plans 150-kmph Trial Runs                               Quadrilateral and port connectivity.
Journeys between Delhi and Chennai, and Delhi and Howrah
will become shorter and more comfortable once the Railways
increases the speed of superfast trains to 150 km per hour                Orissa seeks Central help for roads, rail
(kmph). Trial runs will soon be conducted on the Delhi-Agra                              projects
route, Minister of State for Railways R. Velu said in the Rajya
Sabha on Friday. Besides testing the track, the Railways               The Orissa Government has asked the Union Government for
would strengthen the bridges before introducing high-speed             immediate assistance in developing specific stretches of roads
trains on the two routes. Speeding up of the Shatabdi Express          and railways for providing support to the steel, aluminum and
on the New Delhi-Agra line was not put on hold. The Ministry           petrochemical industries coming up in the state. The state is
was contemplating increasing the maximum speed of the train            considering developing 41 steel projects, including six mega
in the sector to 150 km. The track and signalling system was           projects, three aluminum projects and one petrochemical
enough. But the Chief Commissioner of Railway Safety had               project. Improved highways are needed to provide better
not yet cleared the running of this train.                             linkage between mining areas and Paradip port as well as
                                                                       the coal and steel belts.
                                                                       In a presentation to the Planning Commission, the Orissa
       Railways suffers loss of Rs 702 cr                              Government said that with over 7,000 trucks plying daily on
                                                                       major link roads running through the state, these need to be
The railways has suffered a massive loss of Rs 702 crores              upgraded technically and expanded to four- and six-lane
owing to non-revision of fares of second class ordinary                highways on a fast-track basis.
passengers during the years 2001 to 2003. “Financial impact
in terms of loss of earnings due to non-revision of second             Orissa has also asked the Union Government to provide at
class ordinary passenger fares was assessed at Rs 702 crores           least Rs 10 billion over and above the allocated railway budget
in respect of passengers who travelled in the distance slabs           for the state in the next three to four years to help develop its
of 1-150 kms during the years 2001-02 and 2002-03,” the                railway infrastructure. This would involve introducing
Comptroller and Auditor General said in its report.A review of         electrification to existing routes and building dedicated rail
the efforts made by the railways in rationalisation of passenger       infrastructure for the steel plants and the port.


                                                                   4
                                                               India
 TELECOM
                                                               Infrastructure
                                                               Update



  '3G by 2005, spectrum policy in 3 months'                              March 31, '05. This has resulted in its total subscriber base
                                                                         in the city dropping to 23.1 lakh from 24 lakh. The loss of
India will launch 3G (third generation) services by the end of           landlines is due to the return or surrender of phones and
this year and the spectrum policy will be finalised within three         disconnection of service by the company on non-payment of
months, according to communications minister Dayanidhi                   bills. However, the net addition to MTNL's subscriber base
Maran.Trai has finalised recommendations for the policy on               was about 2.3 lakh for '04-05. This includes net addition of
spectrum - a range of radio frequency waves that carry voice             2.9 lakh GSM subscribers and 40,000 CDMA subscribers,
and data to and from your mobiles. Now, cellular operators               and net loss of 90,000 landline subscribers. "There is demand
and the government have to thrash them out. The policy will              for landline connections. We see about 15,000 new additions
be crucial for the future growth of cellular telephony, especially       per month,'' said Kuldeep Goyal, executive director, MTNL,
India's entry into 3G services, which enable high speed                  Mumbai. Of the total Rs 1,867 crore investment of the company
download of data and video clips on mobiles, and are already             across Mumbai and Delhi, about Rs 866 crore has been
operational in over 50 countries.''I have asked WPC (Wireless            earmarked for Mumbai. The balance Rs 200 crore has been
Planning Commission) to have discussions with the operators              set aside for overseas investments. In Mumbai, about Rs 287.7
and get their feed back on this and the policy should be out in          crore will be invested in switching equipment, Rs 214.1 crore
two or three months,'' said Maran. He said that most of the              in transmission media, Rs 136.4 crore in CDMA and Rs 64
recommendations were out of the terms of reference that were             crore in GSM facilities.
given by the government to Trai. Trai ran into controversy for
saying that 3G should be viewed as a continuation of 2/2.5/
2.75G services like GPRS and EDGE and telecom firms                      Nokia chairman sees promising India growth
should get more spectrum in the IMT 2000 (2GHz) band for
free. Tata chief Ratan Tata has offered to pay Rs 1,500 crore            Jorma Ollila, chairman of Nokia, the world's largest mobile
for 3G spectrum for his CDMA-based Tata Teleservices. This               phone manufacturer that churns out about 40 new models a
has kicked off a heated debate that if the government gives              year forecast that this year 740 million cellphones will be
out 3G spectrum for free, it would be accused of losing public           sold. ''A lion's share of that growth will come from emerging
money.                                                                   markets like India, China, Russia and Brazil.'' He said
                                                                         replacement demand in these countries is expected to be
                                                                         high and very soon more than half the phones sold in India
    India likely to miss bus on 250m phone                               would have colour screens, up from about 42% now.Beyond
                                                                         that, like other developed markets, advanced features will drive
                   users by '08                                          the growth. ''Globally, video sharing/video streaming, music
As India greets yet another World Telecom Day, telecom                   and e-mail will be the most important developments over the
minister Dayanidhi Maran's target of achieving 250m telecom              next five years, where consumers will see the real benefit
subscribers by '08 increasingly appears to be a mirage, rather           from 3G,'' said Ollila.
than a vision. Industry observers are sceptical of meeting the
minister's target within the given period. The scepticism is
based on hard numbers. The current total subscriber base is                CAG seeks probe into insurance for WLL
about 100.15m, of which mobile users accounted for 53.65m                                services
as of April '05. To reach a target of 250m within the next 36
months, India needs to add 5.5-6m subscribers per month.                 Insuring mobile phones used for WLL services of Reliance
Currently, India adds less than 2m subscribers per month,                Industries and Tata Teleservices by the National Insurance
except for the addition of 2.03m users during April '05. Industry        Company (NIC) and the Oriental Insurance Company have
officials are not sure whether the remaining month-on-month              come under attack from the Comptroller and Auditor General
customer target of 3m will be met in the next three years.               (CAG). The CAG has said that NIC has run up claims of Rs
Going by the current trend, the growth in the telecom                    253 crore against a premium income of only Rs 89 crore,
subscriber base depends solely on mobile telephony. The                  while Oriental Insurance Company, will have to shell out Rs
mobile subscriber base has exceeded the fixed line base of               33.45 crore in claims. It has asked for a thorough investigation
46m. The teledensity of the country as of April '05 stands at            of the matter by the finance ministry, with "appropriate
9.26m. The 55% year-on-year growth in the mobile subscriber              departmental and legal action". The report, tabled in parliament
base over the March '04 numbers of 33.6m makes India one                 today, adds that NIC did not take adequate re-insurance cover
of the fastest-growing countries in the world. As growth rates           to minimise its losses, even though its exposure reached Rs
in the saturated urban markets slows down, the rural market              5,500 crore for insuring the mobile phones. The losses relate
is being touted as the new engine of growth.                             to the insurance cover given to the two telecom companies,
                                                                         when they had rolled out their WLL plans in '02. But the CAG
                                                                         report says the two public sector insurance companies, faced
 MTNL loses 90k landline subscribers in '05                              heavy losses, as the risks were underwritten "without careful
                                                                         evaluation of the risk involved and other technical aspects."
Mahanagar Telephone Nigam (MTNL) has reported a loss of
90,000 landline subscribers in Mumbai during the fiscal ended

                                                                     5
                                                                India
 PORTS & AIRPORTS
                                                                Infrastructure
                                                                Update



   Indian airports hit the runway to growth                               management to bring in more technological advancement for
                                                                          providing upgraded aeronautical services. Plans are afoot to
Riding on improved air connectivity and rising passenger                  network all radars of major airports to augment the monitoring
numbers, Indian airports handled an all time high of 59.3m                mechanism of the surveillance of the air space management.
passengers in 2005. The figure represents a 21.7% growth                  As part of this exercise, the AAI is actively examining a
over the 48.7m passengers handled in the previous year. The               proposal to reduce the present five Flight Information Regions
huge growth places Indian airports among the fastest-growing              to two or three by introducing technological upgradation to
in the world, next only to China, where a few airports have               help provide integrated aeronautical services.
reported higher growth. The data is for the 126 airports
managed by the Airports Authority of India, including 11
international airports and 89 domestic ones. Mumbai's                           Ports need Rs 50,000 cr investment
Chhatrapati Shivaji Airport was the top performer, handling
15.7m passengers, an 18% growth over the year ended March                 The Committee on Infrastructure headed by Prime Minister
'04. Delhi airport grew faster at 23%, handling 12.8m                     Manmohan Singh said 12 major ports in the country would
passengers. Chennai came in at a distant third with 5.6m                  need about Rs 50,000 crore of investment by 2012. Briefing
passengers, while Bangalore handled 4.1m passengers during                the media, Gajendra Haldea, adviser to the deputy chairman
the period. Commenting on growth in passenger traffic, DP                 of the Planning Commission, said, while Rs 5,000 crore would
Singh, additional general manager, AAI, said, "The growth                 be generated internally, the rest would come through public-
was robust and is expected to continue through this year."                private participation. He said the option of imposing a levy on
                                                                          cargo was also being explored to raise funds. Haldea also
                                                                          said any new berth being set up would be through public-
   Banks team up with bidders for airports                                private partnership. Private parties, he said, would be invited
                                                                          for projects on existing berths. Moreover, private parties would
For the first time in the history of project financing in the             be allowed to invest in the Own-Your-Wagon system, where
country, companies and banks are entering into exclusive                  participants get preference in allocation of rakes.
arrangements. All companies that are bidding for airport
privatisation projects want banks to enter into exclusive "tie-
ups" with them and commit funds. This means once a bank                              4 more ports to be developed
strikes a deal with a company, it will not be able to finance
others for similar projects. Banks are willing to sign such               The Andhra Pradesh government has initiated steps to develop
agreements with bidders as there is fierce competition among              four more ports in the state as part of its plan to build maritime
them to grab the Rs 10,000 crore lending opportunity. Bharti,             economy along the 1,000 km-long seacoast. These ports
Reliance, Larsen & Toubro, real estate giant DLF, Piramal                 include Bheemunipatnam in Visakhapatnam district,
and the GMR Group, which is building the Hyderabad                        Machilipatnam in Krishna district, Nizampatnam in Guntur
international airport, have bid for the privatisation of the Mumbai       district and Vodarev u in Prakasam district. W hile
and the Delhi airports.                                                   Machilipatnam is an intermediate port, the other three are
                                                                          minor ports. Earlier, the government entrusted the development
                                                                          of Kakinada, Krishnapatnam and Gangavaram ports to private
 Airports Authority To Upgrade Four Metro                                 players. The state government is keen to develop all the ports
                                                                          on the lines of Gujarat, which has a strong maritime base
                  Airports                                                with 41 ports including one major and 11 intermediate ports.
The Airports Authority of India (AAI) is making efforts to make           It has also decided to set up a maritime board similar to that
the four major metro international airports capable of handling           in Gujarat for the development of port-based economy along
the 500-seater plus Airbus-380 jets. "We are working on this              the seacoast
urgent requirement made by various overseas airline operators
which are already having their air links to many of the Indian
airports," said K. Ramalingam, AAI chairman. The AAI is fully              PSUs, govt depts owe Rs 1,133 cr to ports
aware of the global operators' requirements to handle the super
-
jumbos both on ground and in air. Exclusive parking bays are              Government departments and PSUs owe Rs 741 crore, Rs
being created for the Airbus-380s. "AAI has received written              275 crore and Rs 117 crore to Kolkata Port, Mumbai Port and
requests from various foreign carriers, especially those having           Jawaharlal Nehru Port Trust (JNPT) respectively, in dues.
a large presence at Indian airports such as Singapore Airlines,           Though port authorities say that such dues are common,
Emirates Airlines and Lufthansa, have approached the AAI,"                shipping, road transport and highways minister TR Baalu
he said. Special attention is being paid to strengthening the             informed the Lok Sabha recently that in certain cases legal
taxi track and apron area and making adequate provision to                proceedings were also initiated to recover the dues. Mr Baalu
cater to the long wingspan of the largest passenger jetliner.             said that both private companies and government departments
The actual operations to India will start in 2006. The AAI has            owe huge sums to major ports. Private companies owe Rs
initiated a study with the assistance of an international expert          604 crore to Mumbai Port as dues. Their outstandings to
aviation consultant on restructuring the present airspace                 JNPT and Kolkata port are Rs 138 crore and Rs 89 crore


                                                                      6
                                                                 India
 PORTS & AIRPORTS
                                                                 Infrastructure
                                                                 Update



respectively. Mr Baalu said port authorities constantly make               for major port trusts as well as private terminal operators in
efforts to recover such dues from government departments                   tune with the Capital Asset Pricing Model, while factoring in
as well as private companies.                                              the normative cost of each component of port operations.
                                                                           Currently, this is fixed at 15% per annum.
                                                                           Foreign carriers request upgraded infrastructure for A-380s.
    Government may review metro airport                                    The AAI has received written requests from foreign carriers
           modernization plans                                             asking that airport infrastructure be strengthened to allow
                                                                           handling of Airbus-380 jets. This would involve strengthening
The Parliamentary Standing Committee on Transport, Tourism                 of taxi tracks and aprons, revamping airspace management
and Culture has asked the Union Government to review the                   as well as baggage and passenger handling facilities.
plans for modernizing the Delhi and Mumbai airports, on the
grounds that the metro airport upgrade plans may compromise                Among the foreign carriers that have made such a request
the development and maintenance of other airports. The                     are Singapore Airlines, Emirates Airlines and Lufthansa.
committee observed that a significant portion of the profits
generated from the two metro airports are used for the
development needs as well as the operational costs of other                        Hamburg to invest in Indian ports
airports.
                                                                           Germany's city-state of Hamburg is looking for investment
However, the proposed modernization of the two metro airports              opportunities in Indian ports to improve direct sea traffic
is already underway with the Union Government receiving                    between it and India. On a recent visit to India, Hamburg
expressions of interest (EoIs) and short-listing nine                      Minister of Economic and Labor Affairs Senator Gunnar Uldall
consortiums of bidders that had pre-qualified. The bidding                 announced the opening of its representative office in Mumbai
consortiums have been asked to submit their technical and                  and met with the port authorities along with German investment
financial bids within 12 weeks. These include consortiums                  companies to check the feasibility of investing in India. Uldall
led, respectively, by L&T, Aeroports de Paris, GMR, GVK,                   also signed a Memorandum of Understanding with the Indo
Reliance Airport Developers, D.S. Construction Ltd, Essel                  German Export Promotion Project (IGEP) for exploring
TAV, Videocon and the DLF and Bharti groups (which, after                  business prospects and investments in airports and ports
having initially submitted independent EoIs, recently                      development as well as the food, pharmaceutical and logistics
announced they would submit a joint bid).                                  sectors.
The committee has also suggested that the Ministry for Civil
Aviation should reconsider the alternative proposal submitted
by the Airports Authority of India (AAI) Employees’ Joint Forum               West coast ports to handle cruise liners
for the modernization of the two metro airports.                                               soon
The Union Government, however, has said that it hopes to                   Mormugao Port Trust (MPT) in Goa has started discussions
identify the joint venture partners for the modernization by               with a cruise company to operate two vessels a week for a
August and begin work on the restructuring by the year-end.                Mumbai-Goa-Lakshwadeep cruise. The port is planning to
It also plans to start the process for upgrading five other airports       construct an international cruise liner terminal within the next
during the current year and finalize plans for upgrading between           three years. Three infrastructure firms have been shortlisted
10 and 25 other airports to meet global standards within the               for the Rs 1.85-billion project and the contract is to be finalized
next two months.                                                           by July.
                                                                           The Union Government has reportedly directed the port trusts
                                                                           at Mumbai, Goa, Mangalore, Kochi, and Tuticorin and Chennai
        Regulator to decide port charges                                   to explore the potential for developing a cruise circuit for
The Union Government announced revised guidelines for                      domestic tourists.
regulation of tariff at major ports. As per the new norms, all
major ports and private terminal operators will have to seek
clearance within strict time-lines from the Tariff Authority for                     Kakinada port sets an example
Major Ports (TAMP) for any tariff revision or review proposal.
                                                                           Kakinada Sea Ports Ltd (KSPL) has registered gross revenue
The clearance will have to be sought at least three months
                                                                           of Rs 420 million in the financial ended March 31, 2005, as
prior to the date by which the new rate, facility or service is
                                                                           cargo volumes grew from 1.5 million metric tons in 1999-2000
sought to come into effect. New tariffs are to be effective for
                                                                           to 5.6 million metric tons in 2003-04 to 10.4 million metric
three years.
                                                                           tons in 2004-05. The port is expected to boost its cargo
The guidelines also provide a framework to phase out cross-                handling performance to 12.5 million metric tons in 2005-06.
subsidization. The government is also close to finalizing norms            The port has registered a record manual loading of 31,501
for tariffs, based on a port-wise cost plus return on capital              metric tonnes of iron ore in 22.5 hours and has also reduced
employed approach, which will impose the same pre-tax rate                 the pre-berthing waiting time and the vessel turnaround time
                                                                           to just 0.30 minutes in 2003-04.
                                                                       7
                                                                       India
 URBAN
                                                                       Infrastructure
                                                                       Update



      Gurgaon to have urban development                                        has recently announced that owners of cattle found straying
                                                                               on public causeways and polluting public water bodies would
                   authority                                                   be liable to penalty. It has also ordered destruction of
Delhi’s satellite township, Gurgaon, is to have its own urban                  dilapidated and old government buildings. At the same time,
development body. The Haryana Government announced that                        old monuments are to be renovated and repaired.
it proposes to set up a body for Gurgaon along the lines of
the satellite townships that fall in Uttar Pradesh, Noida and
Greater Noida authorities, to be called the Gurgaon                              Uttar Pradesh to revamp urban transport
Development Authority (GDA). A team of senior officials of                                       systems
the state’s town and country planning department has prepared
a blueprint for the GDA; preparations for the legal requirements               The Uttar Pradesh Government announced a revamp of its
are also underway.                                                             urban transport management systems, declaring that it would
                                                                               constitute an urban city bus corporation, replacing the existing
An independent authority has become a necessity not only
                                                                               system of large municipal corporations operating urban
because of the urban growth in the township, but also with
                                                                               transport services.
the development of Gurgaon as a commercial center. The
Haryana Urban Development Authority (HUDA), an umbrella                        The proposal is to have a three-tier system, with a state-
body responsible for the development of urban estates in all                   owned urban transport corporation, a municipal transport
Haryana towns including Gurgaon, is unable to sufficiently                     corporation in small centers and a traffic department in even
deal with the demands.                                                         small centers functioning in clearly defined separate areas.
                                                                               In the current set-up, there is overlap between the operations
                                                                               of the state transport corporation and the other two
      Indu Projects focuses on south India                                     services.An umbrella organization for operators is also being
                                                                               considered. This would be a regulatory body and include
INDU Projects Ltd, the infrastructure development company                      government representatives.
that reported a Rs 1.27-billion turnover in its second year of
operations, is focusing predominantly on south India.
Positioning itself as a solutions provider to international                           Gujarat prepares to improve urban
construction majors, which are likely to enter the Indian
market following the recent liberalization of foreign direct                                      transport
investment rules for the construction sector, the company                      The Gujarat Government announced it would soon finalize a
has projects in real estate development, railways and                          master plan to make the public transport system in big cities
commercial complexes. The company has also taken up small                      more effective. The decision is a part of the urban development
hydel power projects, such as the 10-mw power generation                       programs aimed at augmenting civic facilities in the state’s
unit in Kanakapura on the outskirts of Bangalore.                              urban centers. The government is reportedly considering
The company has alliances with other important infrastructure                  upgrading existing road networks and also constructing a
development organizations such as Embassy, Unity Infra                         circular railway system. Terminals for buses and trucks would
Projects and Patel Engineering.                                                be created on the outskirts of cities. It is also considering
                                                                               making CNG mandatory for public transport in Ahmedabad
                                                                               and Surat.
    MP speeds urban development projects                                       The Gujarat State Road Transport Corporation has already
                                                                               announced a decision to withdraw its buses in cities having a
The Madhya Pradesh Government announced plans for
                                                                               population of 150,000 or more and entrust this responsibility
development of urban centers in the state, including cleaning
                                                                               to private transporters.
up roads and sanitation systems and public water bodies. It


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This Infrastructure Update is intended to provide basic and general information obtained from sources believed to be reliable. However, no representation
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