Description
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function. It can be generally defined as the set of interconnected structural elements that provide framework supporting an entire structure of development. It is an important term for judging a country or region's development.
Indian Infrastructure Market Opportunities in the Railway Sector
July 2009
Table of contents
1. Executive Summary ................................................................................... 3 1.1. Background and Objectives ......................................................................... 3 1.2. The Infrastructure Development Process in India ........................................ 4 1.3. Highlights of Railway Budget - 2009/2010 ................................................... 5 1.4. Summary ...................................................................................................... 6 2. Railway Infrastructure................................................................................ 7 2.1. Redevelopment of Railway Stations ............................................................ 7 2.2. Dedicated Freight Corridor Project............................................................... 8 2.3. Metro Projects .............................................................................................. 9 2.3.1. Overview....................................................................................................... 9 2.4. Other Railway Opportunities in Brief .......................................................... 12 3. Appendices ............................................................................................... 14 3.1. Official Map of India.................................................................................... 14 3.2. India Fact Sheet ......................................................................................... 14 3.2.1. Indian Economy.......................................................................................... 14 3.3. Indian Economic Outlook ........................................................................... 15 3.4. Indian Political Update................................................................................ 16 3.5. Make up of the 15th Lok Sabha (Lower House of Parliament) .................. 18 3.6. The Eleventh Five Year Plan...................................................................... 18 3.7. Key Contacts .............................................................................................. 20 Disclaimer This publication has been prepared by Luxor Finance Pty Ltd (Luxor Finance) for the Industry Capability Network Victoria Ltd (ICN Vic). All rights reserved. All copyright in this publication and related works is owned by ICN Vic. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication), modified or in any manner communicated to any third party except with the written approval of ICN Vic. This publication is for information purposes only. While due care has been taken during the compilation of this publication to ensure that the information is accurate to the best of the knowledge and belief of the author and ICN Vic, the content is not to be construed in any manner whatsoever as a substitute for professional advice. ICN Vic and Luxor Finance neither recommends nor endorses any specified products or services that may have been mentioned in this publication and nor does it assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this publication. ICN Vic and Luxor Finance shall, in no way, be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of his publication.
1
2
1.
Executive Summary
The Indian economy has witnessed strong growth in domestic demand despite the impact of the current global financial crisis. The economy is estimated to have grown at close to 6.7 per cent in 2008 - 09 and economists expect GDP to grow by around the same pace in 2009 - 10. The eleventh five year plan which covers the period from 2007-08 to 2011-12 had placed a significant emphasis on infrastructure development as a means of improving productivity and sustaining the high growth rates the country has experienced over the past few years. The plan aims to increase infrastructure spending from 5% to around 9% of GDP by 2012 with a large portion of this investment being financed in partnership with the private sector. This represents a total investment of around US$ 494 billion over the plan 1 period . Earlier this month, the Indian Union (Federal) Minister for Roads Shri Kamal Nath announced plans for the government to invest around Rupees 100,000 crores (US$20.4 billion) this fiscal year on building around 12,000 kilometres of roads mainly through a toll-based model. The Government expects to structure the projects to appeal to foreign institutional investors and plans to encourage the establishment of specialised toll road operators. It is expected that roughly 60 % of projects will be on a toll-based revenue model, with the balance executed on either an annuity or EPC basis.
2
1.1. Background and Objectives
Given the sheer scale of this opportunity, the complexity of the market and the peculiarities of the Indian PPP process, it was deemed appropriate to provide Australian exporters with a broad overview of the market and some insight into its workings. This report has been prepared for Industry Capability Network Victoria (ICN Vic) and aims to provide. Australian exporters with a better understanding of the opportunities that may exist in the Indian Roads and Highways sector, and to enable them to focus on areas where they believe they have a comparative advantage either by way of cost, brand and/or technology. It is intended as a guide only. It is not a substitute for independent market research and due diligence that would take into account the peculiarities and economics of the specific set of circumstances that characterise a decision to enter an overseas market.
1
“Projections of Investment in Infrastructure during the Eleventh Plan” - Secretariat of the Committee on Infrastructure. 2 1 crore = 100,00, 000 or 10 million; 1 lakh = 100,000
3
1.2. The Infrastructure Development Process in India
The implementation of infrastructure projects follow a similar pattern around the world, differences, if any, occur in terms of the financing structure and the participants that lead the consortia bidding for these projects. In markets such as Australia and to some extent the US, most major projects have been put together by Financial Institutions such as fund managers or specialist infrastructure groups backed in a technical capacity by project management and construction firms. Construction firms have occasionally participated with an equity stake but it was not a requirement. This model reflected in part a strategy by local Fund Managers and Infrastructure Groups to take a lead role in asset development, generate fee income and then place excess equity holdings out into the broader market. The global financial crisis may have changed the economics of this model and it remains to be seen how the market adjusts going forward. The other mode of project development is where specialist advisory firms with the equity backing of a few major banks and private investors, pull together individual players such as banks, technical advisors, EPC contractors, etc., and work closely with the sponsoring agency (generally Government) to deliver the project. This model has been quite successful in Australia but has limited capacity to hold commercial risk post project delivery. Their unique proposition lies in their ability to deliver major projects in a professional manner and assist the sponsoring agency in conceiving and delivering a good outcome. The commercial risk is generally borne by the sponsoring agency and investors. They prefer relatively certain or guaranteed annuity type cash-flows. The process in India is different, here the consortia are generally led by infrastructure firms that are also involved in the construction or development process and the local financial institutions support the winning bidder by participating in the debt. The consortia will generally be made up of engineering and construction firms that each bring in a specific skill set and/or qualification points and each is an equity participant as well. Engineering Procurement and Construction (EPC) roles not reserved for equity participants are tendered out on a competitive basis often at the insistence of Financial Institutions supporting the project. An appetite for equity participation is an important consideration when developing a strategy to export goods or services into this market. A few Indian financial institutions such as the Infrastructure Development Finance Company (IDFC) and Infrastructure Leasing & Financial Services Ltd (IL&FS) take a lead role in PPP projects but they are still a minority. Over time we could expect other financial institutions to take on this execution and construction risk but it is more likely that large reputable infrastructure firms such as L&T, Reliance, Tata's, etc., set up their own infrastructure funds in partnership with global financial institutions to raise money for direct investment in infrastructure projects. A vast majority of projects being developed in India are on a PPP basis and the Indian Government has had a steep learning process as it deals with the various issues such as land acquisition, conflict of interest, assessment of technical and financial capability of the bidders. The Government now can pursue regulatory
4
reforms necessary to make investments in PPP projects more attractive to investors and with more robust guidelines in place it is expected to approach this challenge with fresh vigour in the coming months.
1.3. Highlights of Railway Budget - 2009/2010
Railway Minister Mamata Banerjee presented the 15th Railway Budget for 2009/2010 3 in Parliament on July 03 2009 . The budget provided for a significant boost in infrastructure spending on new stations, security systems, new rolling stock particularly in the area of cold chain logistic, the commercialisation of Railway owned land along newly developed corridors and the overall reliance on PPP to finance these projects. She laid great emphasis on what is clearly the Railway’s most ambitious project the Eastern and Western dedicated Freight Corridors and proposed feasibility studies for more such projects between the East and the South to form part of the new “Diamond Rail Corridors” project. Key highlights are listed below for reference: • Development of Railway Stations: o Fifty railway stations to be developed to have world-class facilities: These include CST Mumbai, Nagpur, Pune, Howrah, Sealdah, Varanasi, New Delhi, Lucknow, Jaipur, Kanpur, Chennai Central, Thiruvananthapuram Central, Secunderabad, Bangalore, Byappanahalli, Ahmedabad, Bhopal, Habibganj, Agra Central, Chandigarh, Kolkata, New Jalpaiguri, Puri and Kochi. o 49 stations have been identified for development of Multi-functional Complexes (MFC’s): These include: Alipurduar, Allahabad, Anandpur Sahib, Banspani, Bikaner, Bilaspur, Cuttack, Darjeeling, Dehradun, Digha, Durg, Ernakulum, Gandhidham, Ganga Sagar, Ghatsila, Gwalior, Hajur Sahib, Hubli, Hyderabad, Indore, Jabalpur, Jammu Tawi, Jasidih, Jhansi, Jodhpur, Kanyakumari, Kathgodam, Katra, Khajuraho, Madurai, Manmad, Mysore, Nanded, Nasik, Palakkad, Parasnath, Raebareily, Raipur, Rajgir, Rameshwaram, Ranchi, Shirdi, Silchar, Tarapith, Tiruchirapalli, Udaipur, Ujjain, Vadodara and Visakhapatnam. o Another 375 stations around the country branded as “Adarsh Stations” (Sanskrit word for “Ideal”) to have improved basic amenities • Safety and Security o Safety measures such as timely track renewal (target track renewal around 3,500 km during 2009/10) modernisation of signals, use of safety equipment such as digital ultrasonic flaw detection machines and wheel impact load detectors etc.] o Integrated Security Scheme: Around 140 stations around the country have been identified as vulnerable or sensitive stations and the Railway will develop an integrated security scheme to include improved electronic surveillance systems as well as deployment of additional Railway Protection Force (RPF) personnel.
3
See http://www.indianrailways.gov.in/ for a full transcript of the budget speech and highlights
5
• Diamond Rail Corridors o Dedicated Freight Corridor project re-branded and expanded as the Diamond Rail Corridor project with pre-feasibility studies being conducted for other trunk routes - North~South, East~West, East~South and Southern (Chennai to Goa) Corridors. The project also envisages an extension of the Eastern Corridor and the establishment of an expert panel to develop a robust business plan for the project. o Foundation laid for development of the “Eastern Industrial Corridor” alongside the Eastern Freight Corridor. The budget proposes the productive use of Railway land banks and fresh investment in the production and assembly of rolling stock and the development of a rail based industrial cluster in the region. • A new modern coach factory to manufacture 500 EMU/MEMU coaches per annum to be set up either joint venture or PPP mode • Logistics (including cold chain) - Special trains to run from production centers to consumer centers for perishable food products including the use of temperature controlled coaches and cargo holding centers. Private ownership of special purpose rolling stock for commodities and private operation of freight terminals to be encouraged. Mega logistic hubs being planned alongside the Eastern and Western corridors • Other important Initiatives o Setting up of an expert committee headed by a respected communications expert, Sam Pitroda to suggest innovations to use the optic fibre cable network of the Railways to take information technology access to remote areas. o Creation of the Northeast Rail Development Fund under consideration to champion national projects in the N.E. Region. o Proposal to set up a 1000 MW power plant with the Ministry of Power o Numerous new stations, upgrade of onboard amenities, expenditure on training facilities for Railway Medical staff, Staff Housingetc.
1.4. Summary
The resounding victory by the incumbent United Progressive Alliance (UPA) Government led by Dr Manmohan Singh has far reaching implications for the Indian Infrastructure Sector. Over the past few years, the Government was constrained by an ideological conflict, due to the support it received from the Left Front to form Government in a very fractured Parliament. The victory in May this year hands the Government a clear mandate to continue with the structural and regulatory reforms it needs to make in order push through key infrastructure projects. The new Minister for Railways is Smt. Mamata Banerjee. She is the founder of the All India Trinamool Congress Party (the grass roots Congress party) the primary opposition to the Communist Government in the State of West Bengal. She is well regarded for her ability to get things done in a difficult environment and has vowed to focus on execution of key Railway projects in the current term.
6
Significant opportunities exist for Australian firms to be involved at all levels, from participation in development of the initial Master Plans for the project sponsors, to taking part in individual bids. However, the market structure and PPP process in India is complex and competitive. Australian exporters need to focus on areas where they bring in a comparative advantage. Companies need to understand the intricacies of the bid process and the nature of the risks they assume before committing equity and resources to large projects. ICN (Vic) and Luxor Finance can assist you in this area by providing you with a better understanding of market dynamics and with details on the project bid process. This process is still evolving as the Government prosecutes regulatory reform to make it easier for global firms to participate in these projects either and to ensure access to appropriate debt and equity financing.
2.
Railway Infrastructure
• Twenty-six railway stations had previously been identified for redevelopment to global standards. They are - Agra, Ahmedabad, Amritsar, Anand Vihar (Delhi), Bangalore, Bhopal, Bhubaneshwar, Bijwasan (Delhi), Chandigarh, Chennai, Gaya, Guwahati, Jaipur, Kanpur, Kolkata Howrah, Lucknow, Mathura, Mumbai CST, Nagpur, New Delhi, Patna, Pune, Secunderabad, Thiruvananthapuram, Tirupati and Varanasi. Four stations identified as “pilot projects” - New Delhi, Patna, Mumbai and Secunderabad. Another 24 stations were added in the recent budget – See details in section 1.3 • PPP - New Delhi, Mumbai, Secunderabad and most stations where adjoining railway land can be leveraged to raise funding. Railway funding for important stations where sufficient land is not available or not economically feasible. • Project size to range from US$ 3 billion for premier stations to US$ 1 billion for smaller stations. Current Status New Delhi Station - The following consortia are believed to have submitted documents in response to the Railways Request for Qualification (RFQ). 1. Grandi Stationi (Italy) / TRIF Infrastructure 2. Nishok Realty (Birla Group)/TIFSA Technologies (Italy) / Posmar Inversions (Italy) / Yeoman Infrastructure (India) / Parnesh Real Estate 3. China Rail / KMC Constructions 4. Deutsche Bahn / Tulip Realty ( Reliance) / DB Realty 5. GVK Developmental Projects / Leighton Contractors India Pvt Ltd 6. L&T / Transco Pvt Ltd 7. Metro Polina Milinix Spa / DLF / ABW Infrastructure India Ltd 8. SAV Spa / Morgan Stanley Infrastructure / VNR Infrastructure Group The Railway Board is expected to announce a short list of six consortia that will participate in the technical and financial bidding process. The project has received good support, in principle, from local institutions both by way of equity as well as debt raising.
2.1. Redevelopment of Railway Stations
7
Patna Station - Architects Aedas Group appointed in March 2008, Master plan & Feasibility report in progress. Financial and legal consultants yet to be appointed. The bidding process expected to begin in late 2009 / early 2010 Mumbai Chatrapati Shivaji Terminus (CST) - This station, formerly known as the Victoria Terminus, is a grand building that houses the headquarters of the Central Railway. AREP a subsidiary of French company SNCF has been appointed to conduct the architectural and feasibility study for the redesign of the terminus as a world class station. It will be implemented on a PPP basis. As the story goes, when the station was constructed in 1888, plans for the Mumbai CST and that of Flinders Street in Melbourne got mixed up at the designers office in London. As a result, the station originally intended for Melbourne is the Mumbai CST (formerly Victoria Terminus) and the Mumbai Railway Station now sits at Flinders Street.
2.2. Dedicated Freight Corridor Project
Overview Construction of Dedicated Freight Corridors linking Delhi to Mumbai (Western Corridor) and Ludhiana to Son Nagar (Eastern Corridor). The rail infrastructure will be funded by equity from the railways and loans from agencies such as the World Bank, ADB and the Japanese International Co-operation Agency (JICA), while the logistic parks are proposed to be developed on a Public Private Partnership basis.
The Western Corridor comprises 1483 km of a double line diesel track from the Jawarharlal Nehru Port Terminal (JNPT) in Mumbai to Dadri (near New Delhi) and linking into the Eastern Corridor line. Traffic on the western corridor is mainly by way of containers from Mumbai and Kandla ports destined for Northern Central India. It is proposed to set up Logistic Parks at: • Mumbai Area - particularly near Kalyan-Ulhasnagar or at Vashi-Belapur in Navi Mumbai • Vapi in Southern Gujarat • Gandhidham in the Kutch region of Gujarat
8
• Jaipur area in Rajasthan • North Central Region near Delhi The Eastern Corridor involves construction of a double line electrified traction corridor from Son Nagar on the East Central Railway to Kurja on the North Central Railway approx. 820 km and a single electrified line from Khurja to Ludhiana - approx. 412 km. Logistic parks are proposed at: • Kanpur in Uttar Pradesh and • Ludhiana in Punjab Project Cost and Financing: The total construction cost of the Dedicated Freight corridor is estimated to be approximately US 7.2 billion with a debt gearing of 2:1. The Railways will bring in the equity and debt funding will come from the World Bank, ADB and JICA. The World Bank has given its “in principle” approval for a loan of up to US$ 2.3 billion for the 730 km section between Mughalsarai and Khurja and the ADB has expressed an interest in financing up to US$ 1.4 billion for the 430 km stretch between Khurja and Ludhiana. Both these sections are on the Eastern Corridor. JICA has already committed a loan of up to US$ 3.5 billion to fund the 920 km section between Rewari and Vadodara on the Western Corridor but would require that at least 30% of the equipment be sourced out of Japan. The propriety of such a conditional deal has been questioned by some of the government departments. There is adequate cushion in debt commitments to absorb potential cost increases over the execution period. Significant tenders awarded recently by DFC
2.3. Metro Projects
2.3.1. Overview
Chennai Metro Rail Limited - Phase 1: The Union Government approved the Chennai Metro Rail Project on January 28, 2009. The project is expected to cost around US$ 2.9 billion and is to be financed as follows:
9
The first phase involves construction of two corridors with a combined length of 45 km, of which 24 km will be underground and the balance elevated. Corridor 1, with a length of 23 km (14.3 km underground and 8.8 km elevated), will run from Washermanpet to the Airport via Anna Salai. Corridor 2, with a length of 22 km (9.7 km underground and 12.3 km elevated), will run from Chennai Central to St Thomas Mount. The project is scheduled for completion by 2014-15 and will be implemented by Chennai Metro Rail Limited a SPV with joint equity participation from the Central and State Governments The Railways have awarded a US$ 30 million technical consultancy contract for the design and supervision of the US$ 3 billion project to a consortium of five companies called Egis Rail India. The consortium is led by French transport infrastructure projects company Egis projects and US based Aecom Technology. The same consortium also won the US$ 20 million technical consultancy contract for the Kolkata. Tender documents for “Part Design and Construction of the Elevated Viaduct” on Corridor 2 have been posted on the website for Chennai Metro Rail http://www.chennaimetrorail.gov.in. Kolkata Metro Rail Project: The Kolkata Metro Rail Project was approved by the Central Government in June 2008 and provides a rail link between Howrah and Salt Lake in Kolkata. The total length of the project is around 13.77 km with 8 km underground.
10
The total project cost is estimated at around US$ 910 million and is proposed to be financed as follows:
The project is being implemented through the Kolkota Metro Rail Corporation (KMRC) a joint State and Central Government owned entity and is expected to be commissioned by late 2014. A number of open tenders raised by the KMRC and they can be accessed from the “Tender” section on following web site - http://www.kmrc.in. Hyderabad Metro Rail Project: The Hyderabad Metro Rail Project was awarded on a BOT basis to a consortium led by Maytas Infrastructure, an affiliate of the Satyam Group. This US$ 2.3 billion was the first to be awarded on a PPP basis. There is some concern that the consortium may not be able to raise financing for the project given its financial woes. If financial close does not occur within the stipulated time and the State government does not grant the consortium an extension, we could see the project reopened to tender and executed under a model similar to that of the Chennai Metro Rail project.
11
2.4. Other Railway Opportunities in Brief
• Bangalore Airport Rail Link - The Karnataka State Industrial Investment and Development Corporation (KSIIDC) is in the process of accepting Requests for Qualification (RFQ) from consortia wishing to bid for the development of a 34 km high speed rail link from the city centre to the airport. The project is estimated to cost around US$ 1.14 billion and will be executed on a PPP basis. The government recently relaxed minimum equity participation by “strategic partners” from 26% to 10% in recognition of the changed economic conditions. More information on the project is available at - http://www.ksiidc.com/hsrl.html. • Proposed development of 100 budget hotels with private participation near railway stations • Plans to set up infrastructure facilities such as freight nodal points, container park and a coaching complex at Paradeep, to cater to the proposed “Petroleum Chemical and Petroleum Investment Region” (PCPIR). • Plans to open the marketing, operation and maintenance of the luxury train segment to private players. UK travel firm Cox and Kings seen as a front runner here. • Southern Railway is planning an investment of around US$ 120 million to improve port connectivity in places like Mangalore, Chennai, Cochin , etc.
12
• The Railway Board has approved the implementation of “Integrated Security Systems” at important railway stations under a BOOT model as well as outright purchase model with an annual maintenance contract consisting of the following broad areas: o CCTV systems o Electronic access control o Personal and baggage screening systems o Explosive detection and disposal systems • The Railways is planning to set up an international management institute to cater for the demand for specialist railway managers. The “International Railway Strategic Management Institute” will be set up in New Delhi in collaboration with the International Union of Railways (UIC) headquartered in France. • Bangalore Metro Project have a few open tenders that might be of interest and can be accessed at - http://www.bmrc.co.in
13
3.
Appendices
3.1. Official Map of India4
3.2. India Fact Sheet
3.2.1. Indian Economy
India's diverse economy comprises of conventional village farming as well as modern agriculture, a wide range of modern industries, a large number of services and handicrafts also. Services are the chief source of economic growth, accounting for more than half of India's output with less than one-third of its labour force. The economy has registered an average growth rate of more than 7 per cent since 1997, reducing poverty by about 10 per cent. India achieved 8.5 per cent GDP growth in 2006, and again in 2007, considerably augmenting its gross production. India's chief strength comes from its large numbers of well-educated, skilled people, adept in the English language, helping India to become a major exporter of software services and software workers.
4
This is the map published by the Government of India and may include regions disputed by China and Pakistan.
14
•
GDP at factor Cost ( constant prices - 1999/2000) in 2008-09 : US$ 660.16 billion (est.) GDP at Factor Cost (current prices) in 2008-09 : US$ 982.83 billion (est.) Industrial Production Growth Rate : 8.7 per cent 2007-08 (est.) Per capita Income (at current prices) in 2008-09 : US$ 750.13 (est.) GDP - composition by sector: o Agriculture: 18.5 per cent o Industry: 22 per cent o Services: 56 per cent Labour force: 523.5 million (2008 est.) Investment (gross fixed): 39 per cent of GDP (2008 est.) Industrial production growth rate: 8.9 per cent (2007-08 est.) Exports: US$ 150.8 billion f.o.b. (2007 est.) Exports commodities: mineral fuels, petroleum products, textile goods, gems and jewellery, engineering goods, chemicals, leather products Exports partners: US 13%, UAE 8.1 %, China 6.64 %, UK 4.1 %, Australia 0.75% - (2007/8) Currency (code): Indian rupee (INR) Exchange rates: Indian rupees per US dollar - 1 USD = 50.69 INR (March 2009) Fiscal year: 1 April - 31 March
• • • •
• • • • •
•
• •
•
3.3. Indian Economic Outlook
Despite the global slow down, the Indian economy continues to grow at a modest rate of around 6.7 per cent powered by a strong growth in domestic demand. The 2009 2010 growth estimate of around 6.5 percent factors growth rates of 2.8 - 3 per cent in Agriculture, 5 - 5.5 per cent in Manufacturing and 7.5 - 8 per cent in the Services sector. The outlook remains positive with a number of leading indicators such as increase in hiring, freight movement at major ports, production figures from key manufacturing sectors such as steel and cement, suggest a bottoming out of the recent downturn. Investor sentiment improved during the first half of 2009 as Foreign Institutional Investors (FIIs) turned net buyers. Direct investment inflows have also remained strong and official estimates have been revised upwards to US$ 40 billion against realised flows of US$ 33 billion in 2008.
15
India’s foreign exchange reserves stood at US$ 256 billion for the week ended May 8, 2009, according to figures released by the Reserve Bank of India. While data over the past few months indicate a bottoming of the downturn, some leading economists have remained cautious in their approach. They have urged the government to capitalise on its recent electoral victory and push forward the “second round of economic reforms”. The Indian Council for Research on International Economic Relations (ICRIER) is an autonomous, policy oriented, not-for-profit economic policy think tank founded in 1981 by a group of eminent economists including the current Prime Minister Dr Manmohan Singh. In a working paper published in March 2009 on the Indian Economic Outlook , it suggests: “India has to substantially relax its ‘permit and approval’ system by carrying out procedural reforms which will raise the investment climate for both domestic and foreign investment. It should reform its education system at school and university level, It should carry out reforms in agriculture in its various stages; from input to marketing. The government should press hard in changing policies and procedures to build world class infrastructure of power, roads, ports, airports, urban infrastructure, water and sanitation. India ranks very low among countries on regulatory environment with regard to enforcement of contracts, payment of taxes, business closure, licensing, property registration and setting up of business (World Bank 2008). Reforms in these areas would be much more effective than just packages of monetary and fiscal stimuli to restore investor and consumer confidence” The report also underscores the need for India to raise its share of world export markets by maintaining a focus on the services sector which has been so successful in recent years, but reinvigorate the push for labour intensive manufactured exports such as textiles and garments that have been losing ground in recent years. Labour market reform as well as development of vocational skills are seen as key to this process.
5
3.4. Indian Political Update
The world’s largest democracy concluded a month long poll process on May 16, 2009, to elect its 15th Lok Sabha (or Lower House) as well as State Assemblies in the States of Andhra Pradesh, Orrisa and Sikkim. The United Progressive Alliance (UPA) a coalition of parties led by the Indian National Congress (INC) Party were voted back into power with a resounding mandate for economic reform securing 262 seats in the 545 member lower house. They have also received unconditional support from the Samajwadi Party (SP – 23 seats), the Rashtriya Janata Dal (4) and other minor parties. The Bahujan Samaj Party (BSP - 21) led by Ms Mayawati has also pledged its support for the UPA but will not participate in the Government. A more detailed account of the composition of the 15 th Lok Sabha is provided in Appendix 1.
5
Indian Economic Outlook 2008-09 and 2009-10 - Working Paper No 234 by Rajiv Kumar, Matthew Joseph, Dony Alex, Pankaj Vashisht and Debosree Banerjee - March 2009 http://www.icrier.org/publication/WorkingPaper234.pdf
16
In the State elections, the INC recorded a strong victory in Andhra Pradesh (Hyderabad) securing 158 out of a possible 294 seats. Orissa was retained by the Biju Janata Dal, while in Sikkim the Sikkim Democratic Front registered a clean sweep winning all 32 state assembly seats and the lone Lok Sabha seat. The UPA is led by Italian born Sonia Gandhi but she has backed Dr Manmohan Singh as Prime Minister. Her son Rahul Gandhi, the leader of the Youth Congress has chosen to spend the next five years building the party at a grass root level. Dr Manmohan Singh, an economist by profession is a graduate of the Punjab University, the University of Cambridge and the University of Oxford. During his tenure as Finance Minister under the then Prime Minister Narasimha Rao, he was widely credited for initiating economic reform in India. The UPA believe that the resounding victory provides them with a strong mandate to continue with the current focus on infrastructure development. A stronger position for the coalition will make it easier for them to get projects approved as they do not need the support of the Left front. Key cabinet members are:
17
3.5. Make up of the 15th Lok Sabha (Lower House of Parliament)
3.6. The Eleventh Five Year Plan
India is a planned economy and budgetary outlays are influenced by a five year planning process managed by the Planning Commission and a “Think Tank” of experts nominated on to individual subcommittees. While some regard this process as a relic of the socialist roots of the country, others marvel at how this process has been modified by successive reformist governments to provide a framework for long term sustainable growth. The current plan period is the Eleventh Five Year Plan that started in 2007-08 and will run through to 2010 - 2012. It recognised the need for an increase in spending on
18
infrastructure to remove what it saw as major constraints to sustainable growth. Infrastructure spending is projected to rise from around 5 per cent of GDP to 9 per cent by the year 20126. This represents a total investment of around 494 billion over the plan period. A large proportion of the investment is projected to come from the private sector as outlined in the table below: The investment in infrastructure is part of an ambitious plan to improve the movement of freight and passengers across the country and is expected to provide a boost to productivity in the medium term. Standard shipping times between capital cities in India are unacceptably high due to overburdened and poorly maintained road, rail and port infrastructure. This results in high rates of spoilage particularly in the agricultural sector. The current emphasis on infrastructure development is aimed at alleviating some of these constraints on the economy. Public transport has also been targeted for development with large outlays planned for redevelopment of Airports and Railway Stations, and Metro projects. Investments in Power Generation and Telecommunications have also been planned. Table 2 shows the sector wise projections of investment spending:
6
“Projections of Investment in Infrastructure during the Eleventh Plan” - Secretariat of the Committee on Infrastructure.
19
3.7. Key Contacts
For further details on any of these and other opportunities please contact:
Industry Capability Networks (Victoria) Limited
Michael Fairbairn International Program Manager Direct: (613) 9864 6744 Mobile: (61) (0) 405 098 915 Phone: (613) 9866 6155 E-Mail: [email protected] Web: www.icnvic.org.au
Department of Business and Innovation
Nigel Harper Manager, Export Development - Middle East & India Industry and Trade Phone: (613) 9651 9003 E-Mail: [email protected] Web: www.diird.vic.gov.au Margaret Brett Project Manager – Export Clusters (Building and Construction) Export Development Phone: (613) 9651 9460 E-Mail: [email protected] Web: www.diird.vic.gov.au
Luxor Finance Pty Ltd
Walter da Gama Director Phone: (613) 9503 4492 Mobile: (61) (0) 410 322 371 E-Mail: [email protected]
Equity (%) Sub-Debt (%) Senior
20
doc_739895501.pdf
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function. It can be generally defined as the set of interconnected structural elements that provide framework supporting an entire structure of development. It is an important term for judging a country or region's development.
Indian Infrastructure Market Opportunities in the Railway Sector
July 2009
Table of contents
1. Executive Summary ................................................................................... 3 1.1. Background and Objectives ......................................................................... 3 1.2. The Infrastructure Development Process in India ........................................ 4 1.3. Highlights of Railway Budget - 2009/2010 ................................................... 5 1.4. Summary ...................................................................................................... 6 2. Railway Infrastructure................................................................................ 7 2.1. Redevelopment of Railway Stations ............................................................ 7 2.2. Dedicated Freight Corridor Project............................................................... 8 2.3. Metro Projects .............................................................................................. 9 2.3.1. Overview....................................................................................................... 9 2.4. Other Railway Opportunities in Brief .......................................................... 12 3. Appendices ............................................................................................... 14 3.1. Official Map of India.................................................................................... 14 3.2. India Fact Sheet ......................................................................................... 14 3.2.1. Indian Economy.......................................................................................... 14 3.3. Indian Economic Outlook ........................................................................... 15 3.4. Indian Political Update................................................................................ 16 3.5. Make up of the 15th Lok Sabha (Lower House of Parliament) .................. 18 3.6. The Eleventh Five Year Plan...................................................................... 18 3.7. Key Contacts .............................................................................................. 20 Disclaimer This publication has been prepared by Luxor Finance Pty Ltd (Luxor Finance) for the Industry Capability Network Victoria Ltd (ICN Vic). All rights reserved. All copyright in this publication and related works is owned by ICN Vic. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication), modified or in any manner communicated to any third party except with the written approval of ICN Vic. This publication is for information purposes only. While due care has been taken during the compilation of this publication to ensure that the information is accurate to the best of the knowledge and belief of the author and ICN Vic, the content is not to be construed in any manner whatsoever as a substitute for professional advice. ICN Vic and Luxor Finance neither recommends nor endorses any specified products or services that may have been mentioned in this publication and nor does it assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this publication. ICN Vic and Luxor Finance shall, in no way, be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of his publication.
1
2
1.
Executive Summary
The Indian economy has witnessed strong growth in domestic demand despite the impact of the current global financial crisis. The economy is estimated to have grown at close to 6.7 per cent in 2008 - 09 and economists expect GDP to grow by around the same pace in 2009 - 10. The eleventh five year plan which covers the period from 2007-08 to 2011-12 had placed a significant emphasis on infrastructure development as a means of improving productivity and sustaining the high growth rates the country has experienced over the past few years. The plan aims to increase infrastructure spending from 5% to around 9% of GDP by 2012 with a large portion of this investment being financed in partnership with the private sector. This represents a total investment of around US$ 494 billion over the plan 1 period . Earlier this month, the Indian Union (Federal) Minister for Roads Shri Kamal Nath announced plans for the government to invest around Rupees 100,000 crores (US$20.4 billion) this fiscal year on building around 12,000 kilometres of roads mainly through a toll-based model. The Government expects to structure the projects to appeal to foreign institutional investors and plans to encourage the establishment of specialised toll road operators. It is expected that roughly 60 % of projects will be on a toll-based revenue model, with the balance executed on either an annuity or EPC basis.
2
1.1. Background and Objectives
Given the sheer scale of this opportunity, the complexity of the market and the peculiarities of the Indian PPP process, it was deemed appropriate to provide Australian exporters with a broad overview of the market and some insight into its workings. This report has been prepared for Industry Capability Network Victoria (ICN Vic) and aims to provide. Australian exporters with a better understanding of the opportunities that may exist in the Indian Roads and Highways sector, and to enable them to focus on areas where they believe they have a comparative advantage either by way of cost, brand and/or technology. It is intended as a guide only. It is not a substitute for independent market research and due diligence that would take into account the peculiarities and economics of the specific set of circumstances that characterise a decision to enter an overseas market.
1
“Projections of Investment in Infrastructure during the Eleventh Plan” - Secretariat of the Committee on Infrastructure. 2 1 crore = 100,00, 000 or 10 million; 1 lakh = 100,000
3
1.2. The Infrastructure Development Process in India
The implementation of infrastructure projects follow a similar pattern around the world, differences, if any, occur in terms of the financing structure and the participants that lead the consortia bidding for these projects. In markets such as Australia and to some extent the US, most major projects have been put together by Financial Institutions such as fund managers or specialist infrastructure groups backed in a technical capacity by project management and construction firms. Construction firms have occasionally participated with an equity stake but it was not a requirement. This model reflected in part a strategy by local Fund Managers and Infrastructure Groups to take a lead role in asset development, generate fee income and then place excess equity holdings out into the broader market. The global financial crisis may have changed the economics of this model and it remains to be seen how the market adjusts going forward. The other mode of project development is where specialist advisory firms with the equity backing of a few major banks and private investors, pull together individual players such as banks, technical advisors, EPC contractors, etc., and work closely with the sponsoring agency (generally Government) to deliver the project. This model has been quite successful in Australia but has limited capacity to hold commercial risk post project delivery. Their unique proposition lies in their ability to deliver major projects in a professional manner and assist the sponsoring agency in conceiving and delivering a good outcome. The commercial risk is generally borne by the sponsoring agency and investors. They prefer relatively certain or guaranteed annuity type cash-flows. The process in India is different, here the consortia are generally led by infrastructure firms that are also involved in the construction or development process and the local financial institutions support the winning bidder by participating in the debt. The consortia will generally be made up of engineering and construction firms that each bring in a specific skill set and/or qualification points and each is an equity participant as well. Engineering Procurement and Construction (EPC) roles not reserved for equity participants are tendered out on a competitive basis often at the insistence of Financial Institutions supporting the project. An appetite for equity participation is an important consideration when developing a strategy to export goods or services into this market. A few Indian financial institutions such as the Infrastructure Development Finance Company (IDFC) and Infrastructure Leasing & Financial Services Ltd (IL&FS) take a lead role in PPP projects but they are still a minority. Over time we could expect other financial institutions to take on this execution and construction risk but it is more likely that large reputable infrastructure firms such as L&T, Reliance, Tata's, etc., set up their own infrastructure funds in partnership with global financial institutions to raise money for direct investment in infrastructure projects. A vast majority of projects being developed in India are on a PPP basis and the Indian Government has had a steep learning process as it deals with the various issues such as land acquisition, conflict of interest, assessment of technical and financial capability of the bidders. The Government now can pursue regulatory
4
reforms necessary to make investments in PPP projects more attractive to investors and with more robust guidelines in place it is expected to approach this challenge with fresh vigour in the coming months.
1.3. Highlights of Railway Budget - 2009/2010
Railway Minister Mamata Banerjee presented the 15th Railway Budget for 2009/2010 3 in Parliament on July 03 2009 . The budget provided for a significant boost in infrastructure spending on new stations, security systems, new rolling stock particularly in the area of cold chain logistic, the commercialisation of Railway owned land along newly developed corridors and the overall reliance on PPP to finance these projects. She laid great emphasis on what is clearly the Railway’s most ambitious project the Eastern and Western dedicated Freight Corridors and proposed feasibility studies for more such projects between the East and the South to form part of the new “Diamond Rail Corridors” project. Key highlights are listed below for reference: • Development of Railway Stations: o Fifty railway stations to be developed to have world-class facilities: These include CST Mumbai, Nagpur, Pune, Howrah, Sealdah, Varanasi, New Delhi, Lucknow, Jaipur, Kanpur, Chennai Central, Thiruvananthapuram Central, Secunderabad, Bangalore, Byappanahalli, Ahmedabad, Bhopal, Habibganj, Agra Central, Chandigarh, Kolkata, New Jalpaiguri, Puri and Kochi. o 49 stations have been identified for development of Multi-functional Complexes (MFC’s): These include: Alipurduar, Allahabad, Anandpur Sahib, Banspani, Bikaner, Bilaspur, Cuttack, Darjeeling, Dehradun, Digha, Durg, Ernakulum, Gandhidham, Ganga Sagar, Ghatsila, Gwalior, Hajur Sahib, Hubli, Hyderabad, Indore, Jabalpur, Jammu Tawi, Jasidih, Jhansi, Jodhpur, Kanyakumari, Kathgodam, Katra, Khajuraho, Madurai, Manmad, Mysore, Nanded, Nasik, Palakkad, Parasnath, Raebareily, Raipur, Rajgir, Rameshwaram, Ranchi, Shirdi, Silchar, Tarapith, Tiruchirapalli, Udaipur, Ujjain, Vadodara and Visakhapatnam. o Another 375 stations around the country branded as “Adarsh Stations” (Sanskrit word for “Ideal”) to have improved basic amenities • Safety and Security o Safety measures such as timely track renewal (target track renewal around 3,500 km during 2009/10) modernisation of signals, use of safety equipment such as digital ultrasonic flaw detection machines and wheel impact load detectors etc.] o Integrated Security Scheme: Around 140 stations around the country have been identified as vulnerable or sensitive stations and the Railway will develop an integrated security scheme to include improved electronic surveillance systems as well as deployment of additional Railway Protection Force (RPF) personnel.
3
See http://www.indianrailways.gov.in/ for a full transcript of the budget speech and highlights
5
• Diamond Rail Corridors o Dedicated Freight Corridor project re-branded and expanded as the Diamond Rail Corridor project with pre-feasibility studies being conducted for other trunk routes - North~South, East~West, East~South and Southern (Chennai to Goa) Corridors. The project also envisages an extension of the Eastern Corridor and the establishment of an expert panel to develop a robust business plan for the project. o Foundation laid for development of the “Eastern Industrial Corridor” alongside the Eastern Freight Corridor. The budget proposes the productive use of Railway land banks and fresh investment in the production and assembly of rolling stock and the development of a rail based industrial cluster in the region. • A new modern coach factory to manufacture 500 EMU/MEMU coaches per annum to be set up either joint venture or PPP mode • Logistics (including cold chain) - Special trains to run from production centers to consumer centers for perishable food products including the use of temperature controlled coaches and cargo holding centers. Private ownership of special purpose rolling stock for commodities and private operation of freight terminals to be encouraged. Mega logistic hubs being planned alongside the Eastern and Western corridors • Other important Initiatives o Setting up of an expert committee headed by a respected communications expert, Sam Pitroda to suggest innovations to use the optic fibre cable network of the Railways to take information technology access to remote areas. o Creation of the Northeast Rail Development Fund under consideration to champion national projects in the N.E. Region. o Proposal to set up a 1000 MW power plant with the Ministry of Power o Numerous new stations, upgrade of onboard amenities, expenditure on training facilities for Railway Medical staff, Staff Housingetc.
1.4. Summary
The resounding victory by the incumbent United Progressive Alliance (UPA) Government led by Dr Manmohan Singh has far reaching implications for the Indian Infrastructure Sector. Over the past few years, the Government was constrained by an ideological conflict, due to the support it received from the Left Front to form Government in a very fractured Parliament. The victory in May this year hands the Government a clear mandate to continue with the structural and regulatory reforms it needs to make in order push through key infrastructure projects. The new Minister for Railways is Smt. Mamata Banerjee. She is the founder of the All India Trinamool Congress Party (the grass roots Congress party) the primary opposition to the Communist Government in the State of West Bengal. She is well regarded for her ability to get things done in a difficult environment and has vowed to focus on execution of key Railway projects in the current term.
6
Significant opportunities exist for Australian firms to be involved at all levels, from participation in development of the initial Master Plans for the project sponsors, to taking part in individual bids. However, the market structure and PPP process in India is complex and competitive. Australian exporters need to focus on areas where they bring in a comparative advantage. Companies need to understand the intricacies of the bid process and the nature of the risks they assume before committing equity and resources to large projects. ICN (Vic) and Luxor Finance can assist you in this area by providing you with a better understanding of market dynamics and with details on the project bid process. This process is still evolving as the Government prosecutes regulatory reform to make it easier for global firms to participate in these projects either and to ensure access to appropriate debt and equity financing.
2.
Railway Infrastructure
• Twenty-six railway stations had previously been identified for redevelopment to global standards. They are - Agra, Ahmedabad, Amritsar, Anand Vihar (Delhi), Bangalore, Bhopal, Bhubaneshwar, Bijwasan (Delhi), Chandigarh, Chennai, Gaya, Guwahati, Jaipur, Kanpur, Kolkata Howrah, Lucknow, Mathura, Mumbai CST, Nagpur, New Delhi, Patna, Pune, Secunderabad, Thiruvananthapuram, Tirupati and Varanasi. Four stations identified as “pilot projects” - New Delhi, Patna, Mumbai and Secunderabad. Another 24 stations were added in the recent budget – See details in section 1.3 • PPP - New Delhi, Mumbai, Secunderabad and most stations where adjoining railway land can be leveraged to raise funding. Railway funding for important stations where sufficient land is not available or not economically feasible. • Project size to range from US$ 3 billion for premier stations to US$ 1 billion for smaller stations. Current Status New Delhi Station - The following consortia are believed to have submitted documents in response to the Railways Request for Qualification (RFQ). 1. Grandi Stationi (Italy) / TRIF Infrastructure 2. Nishok Realty (Birla Group)/TIFSA Technologies (Italy) / Posmar Inversions (Italy) / Yeoman Infrastructure (India) / Parnesh Real Estate 3. China Rail / KMC Constructions 4. Deutsche Bahn / Tulip Realty ( Reliance) / DB Realty 5. GVK Developmental Projects / Leighton Contractors India Pvt Ltd 6. L&T / Transco Pvt Ltd 7. Metro Polina Milinix Spa / DLF / ABW Infrastructure India Ltd 8. SAV Spa / Morgan Stanley Infrastructure / VNR Infrastructure Group The Railway Board is expected to announce a short list of six consortia that will participate in the technical and financial bidding process. The project has received good support, in principle, from local institutions both by way of equity as well as debt raising.
2.1. Redevelopment of Railway Stations
7
Patna Station - Architects Aedas Group appointed in March 2008, Master plan & Feasibility report in progress. Financial and legal consultants yet to be appointed. The bidding process expected to begin in late 2009 / early 2010 Mumbai Chatrapati Shivaji Terminus (CST) - This station, formerly known as the Victoria Terminus, is a grand building that houses the headquarters of the Central Railway. AREP a subsidiary of French company SNCF has been appointed to conduct the architectural and feasibility study for the redesign of the terminus as a world class station. It will be implemented on a PPP basis. As the story goes, when the station was constructed in 1888, plans for the Mumbai CST and that of Flinders Street in Melbourne got mixed up at the designers office in London. As a result, the station originally intended for Melbourne is the Mumbai CST (formerly Victoria Terminus) and the Mumbai Railway Station now sits at Flinders Street.
2.2. Dedicated Freight Corridor Project
Overview Construction of Dedicated Freight Corridors linking Delhi to Mumbai (Western Corridor) and Ludhiana to Son Nagar (Eastern Corridor). The rail infrastructure will be funded by equity from the railways and loans from agencies such as the World Bank, ADB and the Japanese International Co-operation Agency (JICA), while the logistic parks are proposed to be developed on a Public Private Partnership basis.
The Western Corridor comprises 1483 km of a double line diesel track from the Jawarharlal Nehru Port Terminal (JNPT) in Mumbai to Dadri (near New Delhi) and linking into the Eastern Corridor line. Traffic on the western corridor is mainly by way of containers from Mumbai and Kandla ports destined for Northern Central India. It is proposed to set up Logistic Parks at: • Mumbai Area - particularly near Kalyan-Ulhasnagar or at Vashi-Belapur in Navi Mumbai • Vapi in Southern Gujarat • Gandhidham in the Kutch region of Gujarat
8
• Jaipur area in Rajasthan • North Central Region near Delhi The Eastern Corridor involves construction of a double line electrified traction corridor from Son Nagar on the East Central Railway to Kurja on the North Central Railway approx. 820 km and a single electrified line from Khurja to Ludhiana - approx. 412 km. Logistic parks are proposed at: • Kanpur in Uttar Pradesh and • Ludhiana in Punjab Project Cost and Financing: The total construction cost of the Dedicated Freight corridor is estimated to be approximately US 7.2 billion with a debt gearing of 2:1. The Railways will bring in the equity and debt funding will come from the World Bank, ADB and JICA. The World Bank has given its “in principle” approval for a loan of up to US$ 2.3 billion for the 730 km section between Mughalsarai and Khurja and the ADB has expressed an interest in financing up to US$ 1.4 billion for the 430 km stretch between Khurja and Ludhiana. Both these sections are on the Eastern Corridor. JICA has already committed a loan of up to US$ 3.5 billion to fund the 920 km section between Rewari and Vadodara on the Western Corridor but would require that at least 30% of the equipment be sourced out of Japan. The propriety of such a conditional deal has been questioned by some of the government departments. There is adequate cushion in debt commitments to absorb potential cost increases over the execution period. Significant tenders awarded recently by DFC
2.3. Metro Projects
2.3.1. Overview
Chennai Metro Rail Limited - Phase 1: The Union Government approved the Chennai Metro Rail Project on January 28, 2009. The project is expected to cost around US$ 2.9 billion and is to be financed as follows:
9
The first phase involves construction of two corridors with a combined length of 45 km, of which 24 km will be underground and the balance elevated. Corridor 1, with a length of 23 km (14.3 km underground and 8.8 km elevated), will run from Washermanpet to the Airport via Anna Salai. Corridor 2, with a length of 22 km (9.7 km underground and 12.3 km elevated), will run from Chennai Central to St Thomas Mount. The project is scheduled for completion by 2014-15 and will be implemented by Chennai Metro Rail Limited a SPV with joint equity participation from the Central and State Governments The Railways have awarded a US$ 30 million technical consultancy contract for the design and supervision of the US$ 3 billion project to a consortium of five companies called Egis Rail India. The consortium is led by French transport infrastructure projects company Egis projects and US based Aecom Technology. The same consortium also won the US$ 20 million technical consultancy contract for the Kolkata. Tender documents for “Part Design and Construction of the Elevated Viaduct” on Corridor 2 have been posted on the website for Chennai Metro Rail http://www.chennaimetrorail.gov.in. Kolkata Metro Rail Project: The Kolkata Metro Rail Project was approved by the Central Government in June 2008 and provides a rail link between Howrah and Salt Lake in Kolkata. The total length of the project is around 13.77 km with 8 km underground.
10
The total project cost is estimated at around US$ 910 million and is proposed to be financed as follows:
The project is being implemented through the Kolkota Metro Rail Corporation (KMRC) a joint State and Central Government owned entity and is expected to be commissioned by late 2014. A number of open tenders raised by the KMRC and they can be accessed from the “Tender” section on following web site - http://www.kmrc.in. Hyderabad Metro Rail Project: The Hyderabad Metro Rail Project was awarded on a BOT basis to a consortium led by Maytas Infrastructure, an affiliate of the Satyam Group. This US$ 2.3 billion was the first to be awarded on a PPP basis. There is some concern that the consortium may not be able to raise financing for the project given its financial woes. If financial close does not occur within the stipulated time and the State government does not grant the consortium an extension, we could see the project reopened to tender and executed under a model similar to that of the Chennai Metro Rail project.
11
2.4. Other Railway Opportunities in Brief
• Bangalore Airport Rail Link - The Karnataka State Industrial Investment and Development Corporation (KSIIDC) is in the process of accepting Requests for Qualification (RFQ) from consortia wishing to bid for the development of a 34 km high speed rail link from the city centre to the airport. The project is estimated to cost around US$ 1.14 billion and will be executed on a PPP basis. The government recently relaxed minimum equity participation by “strategic partners” from 26% to 10% in recognition of the changed economic conditions. More information on the project is available at - http://www.ksiidc.com/hsrl.html. • Proposed development of 100 budget hotels with private participation near railway stations • Plans to set up infrastructure facilities such as freight nodal points, container park and a coaching complex at Paradeep, to cater to the proposed “Petroleum Chemical and Petroleum Investment Region” (PCPIR). • Plans to open the marketing, operation and maintenance of the luxury train segment to private players. UK travel firm Cox and Kings seen as a front runner here. • Southern Railway is planning an investment of around US$ 120 million to improve port connectivity in places like Mangalore, Chennai, Cochin , etc.
12
• The Railway Board has approved the implementation of “Integrated Security Systems” at important railway stations under a BOOT model as well as outright purchase model with an annual maintenance contract consisting of the following broad areas: o CCTV systems o Electronic access control o Personal and baggage screening systems o Explosive detection and disposal systems • The Railways is planning to set up an international management institute to cater for the demand for specialist railway managers. The “International Railway Strategic Management Institute” will be set up in New Delhi in collaboration with the International Union of Railways (UIC) headquartered in France. • Bangalore Metro Project have a few open tenders that might be of interest and can be accessed at - http://www.bmrc.co.in
13
3.
Appendices
3.1. Official Map of India4
3.2. India Fact Sheet
3.2.1. Indian Economy
India's diverse economy comprises of conventional village farming as well as modern agriculture, a wide range of modern industries, a large number of services and handicrafts also. Services are the chief source of economic growth, accounting for more than half of India's output with less than one-third of its labour force. The economy has registered an average growth rate of more than 7 per cent since 1997, reducing poverty by about 10 per cent. India achieved 8.5 per cent GDP growth in 2006, and again in 2007, considerably augmenting its gross production. India's chief strength comes from its large numbers of well-educated, skilled people, adept in the English language, helping India to become a major exporter of software services and software workers.
4
This is the map published by the Government of India and may include regions disputed by China and Pakistan.
14
•
GDP at factor Cost ( constant prices - 1999/2000) in 2008-09 : US$ 660.16 billion (est.) GDP at Factor Cost (current prices) in 2008-09 : US$ 982.83 billion (est.) Industrial Production Growth Rate : 8.7 per cent 2007-08 (est.) Per capita Income (at current prices) in 2008-09 : US$ 750.13 (est.) GDP - composition by sector: o Agriculture: 18.5 per cent o Industry: 22 per cent o Services: 56 per cent Labour force: 523.5 million (2008 est.) Investment (gross fixed): 39 per cent of GDP (2008 est.) Industrial production growth rate: 8.9 per cent (2007-08 est.) Exports: US$ 150.8 billion f.o.b. (2007 est.) Exports commodities: mineral fuels, petroleum products, textile goods, gems and jewellery, engineering goods, chemicals, leather products Exports partners: US 13%, UAE 8.1 %, China 6.64 %, UK 4.1 %, Australia 0.75% - (2007/8) Currency (code): Indian rupee (INR) Exchange rates: Indian rupees per US dollar - 1 USD = 50.69 INR (March 2009) Fiscal year: 1 April - 31 March
• • • •
• • • • •
•
• •
•
3.3. Indian Economic Outlook
Despite the global slow down, the Indian economy continues to grow at a modest rate of around 6.7 per cent powered by a strong growth in domestic demand. The 2009 2010 growth estimate of around 6.5 percent factors growth rates of 2.8 - 3 per cent in Agriculture, 5 - 5.5 per cent in Manufacturing and 7.5 - 8 per cent in the Services sector. The outlook remains positive with a number of leading indicators such as increase in hiring, freight movement at major ports, production figures from key manufacturing sectors such as steel and cement, suggest a bottoming out of the recent downturn. Investor sentiment improved during the first half of 2009 as Foreign Institutional Investors (FIIs) turned net buyers. Direct investment inflows have also remained strong and official estimates have been revised upwards to US$ 40 billion against realised flows of US$ 33 billion in 2008.
15
India’s foreign exchange reserves stood at US$ 256 billion for the week ended May 8, 2009, according to figures released by the Reserve Bank of India. While data over the past few months indicate a bottoming of the downturn, some leading economists have remained cautious in their approach. They have urged the government to capitalise on its recent electoral victory and push forward the “second round of economic reforms”. The Indian Council for Research on International Economic Relations (ICRIER) is an autonomous, policy oriented, not-for-profit economic policy think tank founded in 1981 by a group of eminent economists including the current Prime Minister Dr Manmohan Singh. In a working paper published in March 2009 on the Indian Economic Outlook , it suggests: “India has to substantially relax its ‘permit and approval’ system by carrying out procedural reforms which will raise the investment climate for both domestic and foreign investment. It should reform its education system at school and university level, It should carry out reforms in agriculture in its various stages; from input to marketing. The government should press hard in changing policies and procedures to build world class infrastructure of power, roads, ports, airports, urban infrastructure, water and sanitation. India ranks very low among countries on regulatory environment with regard to enforcement of contracts, payment of taxes, business closure, licensing, property registration and setting up of business (World Bank 2008). Reforms in these areas would be much more effective than just packages of monetary and fiscal stimuli to restore investor and consumer confidence” The report also underscores the need for India to raise its share of world export markets by maintaining a focus on the services sector which has been so successful in recent years, but reinvigorate the push for labour intensive manufactured exports such as textiles and garments that have been losing ground in recent years. Labour market reform as well as development of vocational skills are seen as key to this process.
5
3.4. Indian Political Update
The world’s largest democracy concluded a month long poll process on May 16, 2009, to elect its 15th Lok Sabha (or Lower House) as well as State Assemblies in the States of Andhra Pradesh, Orrisa and Sikkim. The United Progressive Alliance (UPA) a coalition of parties led by the Indian National Congress (INC) Party were voted back into power with a resounding mandate for economic reform securing 262 seats in the 545 member lower house. They have also received unconditional support from the Samajwadi Party (SP – 23 seats), the Rashtriya Janata Dal (4) and other minor parties. The Bahujan Samaj Party (BSP - 21) led by Ms Mayawati has also pledged its support for the UPA but will not participate in the Government. A more detailed account of the composition of the 15 th Lok Sabha is provided in Appendix 1.
5
Indian Economic Outlook 2008-09 and 2009-10 - Working Paper No 234 by Rajiv Kumar, Matthew Joseph, Dony Alex, Pankaj Vashisht and Debosree Banerjee - March 2009 http://www.icrier.org/publication/WorkingPaper234.pdf
16
In the State elections, the INC recorded a strong victory in Andhra Pradesh (Hyderabad) securing 158 out of a possible 294 seats. Orissa was retained by the Biju Janata Dal, while in Sikkim the Sikkim Democratic Front registered a clean sweep winning all 32 state assembly seats and the lone Lok Sabha seat. The UPA is led by Italian born Sonia Gandhi but she has backed Dr Manmohan Singh as Prime Minister. Her son Rahul Gandhi, the leader of the Youth Congress has chosen to spend the next five years building the party at a grass root level. Dr Manmohan Singh, an economist by profession is a graduate of the Punjab University, the University of Cambridge and the University of Oxford. During his tenure as Finance Minister under the then Prime Minister Narasimha Rao, he was widely credited for initiating economic reform in India. The UPA believe that the resounding victory provides them with a strong mandate to continue with the current focus on infrastructure development. A stronger position for the coalition will make it easier for them to get projects approved as they do not need the support of the Left front. Key cabinet members are:
17
3.5. Make up of the 15th Lok Sabha (Lower House of Parliament)
3.6. The Eleventh Five Year Plan
India is a planned economy and budgetary outlays are influenced by a five year planning process managed by the Planning Commission and a “Think Tank” of experts nominated on to individual subcommittees. While some regard this process as a relic of the socialist roots of the country, others marvel at how this process has been modified by successive reformist governments to provide a framework for long term sustainable growth. The current plan period is the Eleventh Five Year Plan that started in 2007-08 and will run through to 2010 - 2012. It recognised the need for an increase in spending on
18
infrastructure to remove what it saw as major constraints to sustainable growth. Infrastructure spending is projected to rise from around 5 per cent of GDP to 9 per cent by the year 20126. This represents a total investment of around 494 billion over the plan period. A large proportion of the investment is projected to come from the private sector as outlined in the table below: The investment in infrastructure is part of an ambitious plan to improve the movement of freight and passengers across the country and is expected to provide a boost to productivity in the medium term. Standard shipping times between capital cities in India are unacceptably high due to overburdened and poorly maintained road, rail and port infrastructure. This results in high rates of spoilage particularly in the agricultural sector. The current emphasis on infrastructure development is aimed at alleviating some of these constraints on the economy. Public transport has also been targeted for development with large outlays planned for redevelopment of Airports and Railway Stations, and Metro projects. Investments in Power Generation and Telecommunications have also been planned. Table 2 shows the sector wise projections of investment spending:
6
“Projections of Investment in Infrastructure during the Eleventh Plan” - Secretariat of the Committee on Infrastructure.
19
3.7. Key Contacts
For further details on any of these and other opportunities please contact:
Industry Capability Networks (Victoria) Limited
Michael Fairbairn International Program Manager Direct: (613) 9864 6744 Mobile: (61) (0) 405 098 915 Phone: (613) 9866 6155 E-Mail: [email protected] Web: www.icnvic.org.au
Department of Business and Innovation
Nigel Harper Manager, Export Development - Middle East & India Industry and Trade Phone: (613) 9651 9003 E-Mail: [email protected] Web: www.diird.vic.gov.au Margaret Brett Project Manager – Export Clusters (Building and Construction) Export Development Phone: (613) 9651 9460 E-Mail: [email protected] Web: www.diird.vic.gov.au
Luxor Finance Pty Ltd
Walter da Gama Director Phone: (613) 9503 4492 Mobile: (61) (0) 410 322 371 E-Mail: [email protected]
Equity (%) Sub-Debt (%) Senior
20
doc_739895501.pdf