Infrastructure in India

The Index of Eight core industries—crude oil, petroleum refinery products, coal, electricity, cement, steel, fertilizers and natural gas—having a combined weight of 37.90 per cent in the Index of Industrial Production (IIP) stood at 140.54 in October 2011, according to data released by the Union Ministry of Commerce and Industry. The infrastructure sector accounts for 26.7 per cent of India's industrial output.

The Planning Commission has projected that investment in infrastructure would almost double at US$ 1,025 billion in the 12th Plan, compared to US$ 514 billion in the 11th Plan. Of the US$ 1,025 billion, 50 per cent is expected to come from private sector, whose investment has been 36 per cent in the 11th Plan.

According to investment banking company Goldman Sachs, India's infrastructure sector will require US$ 1.7 trillion investment in the next 10-years. With a view to streamlining and simplifying the appraisal and approval process for public private partnership (PPP) projects, a Public Private Partnership Appraisal Committee (PPPAC) has been constituted under the chairmanship of Secretary, Department of Economic Affairs and Secretaries of Planning Commission, Department of Expenditure, Department of Legal Affairs and the concerned Administrative Department as its members. The project proposals are appraised by the Planning Commission and approved by the PPPAC.

PPPAC met on September 14, 2011 and granted approval to 20 projects including 10 projects each of Ministry of Home Affairs and Ministry of Road Transport & Highways. The estimated project cost of the approved twenty projects is INR 14,538.1 crore. In the current year, total 42 projects have been granted approval so far with a Total Project Cost (TPC) of INR 35,227.14 crore.

Further, India needs to spend US$ 1.2 trillion by 2030 to meet the projected demand of its cities, according to a McKinsey Global Institute Report.

Global private equity (PE) funds looking for high return on investments are going to target Indian infrastructure companies in the coming years, says a report by research agency Preqin. As per the study, India is attracting the highest number of unlisted, closed-end funds that focus on a single country, making it the most preferred choice among emerging markets. India is expected to require around US$ 1 trillion worth of infrastructure investment over the next five years

Infrastructure PE funds investing in India can choose from sub-sectors such as power, telecom, roads and ports. The Preqin report says 74 per cent of India-focused funds will invest in greenfield projects, 84 per cent in brownfield assets, and 42 per cent will buy out the stakes of other PE funds.

• FDI up to 100 per cent under the automatic route is permitted in exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products, actual trading and marketing of petroleum products, petroleum product pipelines, natural gas/LNG pipelines, market study and formulation and Petroleum refining in the private sector. This will be subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies
• FDI up to 49 per cent is permitted under the Government route in petroleum refining by the Public Sector Undertakings (PSU). This should not involve any divestment or dilution of domestic equity in the existing PSUs
• FDI up to 100 per cent under the automatic route is allowed both in setting up new and in established industrial parks

Source: Consolidated FDI Policy, Department of Industrial Policy & Promotion (DIPP)