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The market(as per Government of India, Committee on Infrastructure)

  • Investments in infrastructure have been expanding at a rapid pace. According to the planning commission, USD 507 billion of investment is proposed for the XIth plan period (2007-12).
  • An estimated 25 percent of the overall expenditure is to be made by private sector as compared to 18 percent in the Xth plan.
  • In some areas like the ports and airports the amount financed through the Public Private Partnership (PPP) model exceeds 60 percent of the required funds.
  • The total requirement of debt by the public and private sector is likely to be USD 240 billion.

Opportunities(as per BNP Paribas, SSKI, Government of India, Committee on Infrastructure):

Public private partnership

  • Over past three to four years, the government has been promoting PPP projects, whereby it plays the role of a regulator and the private participator invests in the build out of infrastructure. The constraints in budgetary allocation towards infrastructure projects have enhanced the need for private participation.

Electricity

  • Large generation opportunities exist; Close to 15000 – 20000 MW required to be added every year, a large step up from the current pace of capacity addition(as per IBEF, Power, September 2009).
  • The target announced by the Government for 2012 includes interregional capacity of 37,000 MW and target installed capacity over 200,000 MW. By the end of the Xth Plan 17000 MW of inter regional capacity was achieved and the installed capacity as on March 31, 2010 is 159,398 MW(as per IBEF, Power, September 2009, CEA).

Oil and gas

  • India remains a vastly unexplored territory by far, with only a small percentage of its sedimentary basins under exploration and development. The Government accordingly introduced the New Exploration Licensing Policy (NELP), with an aim of encouraging private sector participation in the oil and gas sector. The recent rounds of NELP have proved attractive in gaining the interest of Indian private sector and foreign players.
  • India offers significant potential for investment in the refining sector. The country is poised to emerge as a major refining hub, with considerable capacity additions being planned over the next few years. Its favourable location, close to the oil-producing regions of the Middle East renders it an advantage.

Roads – Target for XIth plan(as per Investment Commission of India)

  • The Government plans to spend USD 10 billion per annum on road development in the next few years.
  • Investment opportunities exist in a range of projects being tendered by National Highway Authority of India (NHAI) for implementing the remaining phases of the National Highway Development Project (NHDP).

The target for XIth Plan which is currently underway is as follows

  • The ambitious 7-phase NHDP is India’s largest road project ever. Phase II, III, and IV are under implementation. Key sub projects under this include; the Golden Quadrilateral and the North-South & East-West Corridors.
  • A program for 6-laning of about 6,500 km of National Highways is also underway.

Ports

  • Opportunities in setting up terminals, greenfield and brownfield.
  • Capacity addition and modernization of major and minor ports in India; new capacity planned in the XIth plan; 485 Million Metric Tonnes (MMT) in major ports and 345 MMT in minor ports(as per Planning Commission – XIth Plan).
  • Rapid growth in traffic at minor ports is signaling investment requirements.

Defence

  • India’s defence spending has grown manifold since the country announced its first defence budget in 1950, to approx. USD 30.5 billion (INR 1,420 billion) in 2009-10. Of this, approximately 40 percent relates to capital expenditure which is currently driven by equipment modernisation programmes in each of the three services. India currently procures approximately 70 percent of it equipment needs from abroad, but Government’s aim is to reverse this balance and manufacture 70 percent or more of its defence equipment needs in India thereby creates a huge opportunity(as per Finance Budget 2009-10).

Education(as per IDFC –SSKI , Indian Education – Long way from Graduation, 16 January 2009, Netscribes, K12 market in India 2010, March 2010, KPMG, Special Education Zones, 2009)

  • Indian Education Sector (IES) is by far the largest capitalized space in India with USD 30 billion of government spend (3.7% of GDP; at global average), and a large network of ~1 million schools and 18,000 higher education institutes.
  • Valued at USD 50 billion in 2008, it is expected to grow at a 12% CAGR to USD 80 billion by 2012.
  • K12,(Kindergarten to 12th Grade) is the largest segment (USD 20 billion) within IES, and is expected to grow to USD 33 billion by 2012 (14% CAGR) on the back of world’s largest school-aged population.
  • Higher Education (HE) –The HE segment consists of graduation (targeting population between 18-21 years) and post graduation (>22 years) courses, offered after completion of K12 studies.

– The Indian Government aims to increase tertiary gross enrolment ratio to 15 percent by 2012 and then to 30% from the current levels of 12 percent.

– It is estimated that India would need at least 800 more universities and another 35,000 colleges in the next 10 years to boost HE and achieve Gross Enrollment Ratio (GER) targets(as per Times of India, ‘800 varsities, 35,000 colleges needed in next 10 years: Sibal’ March 24 2010).

– Foreign Education Bill if passed would open doors for foreign players in Higher education thereby creating an opportunity for establishing campuses in India.

Airports

  • Airports need to develop alternative revenue streams. Indian airport operators have huge scope to develop airport enabled activities and increase their non-aeronautical revenues like their global counterparts(as per Ministry of Civil Aviation, Airports Infrastructure: The Business Opportunities).
  • Significant opportunity exists in the area of airport development modernization; 35 non-metro airports to be modernized / developed and several greenfield projects to be constructed.
  • Upgrading of air traffic management facilities.

Railways

  • Construction of dedicated freight corridors between Mumbai-Delhi and Ludhiana- Kolkata have been planned.
  • New rail – 8132 kms and gauge conversion of 7148 by end of XIth Plan11.

Shipping

  • According to International Maritime Organization (IMO), singlehull oil tankers over 25 years old will not be permitted to operate from 2010 onwards, while those less than 25 years old will be prohibited from operation unless the country of ownership registration, the country of loading and the country of unloading have all granted permission. Thus, this offers huge opportunity for the ship building industry. Besides, the phasing out of the old ships would provide an opportunity for the ship breaking industry(as per Above Sea Level, Dolat Capital, 19th April, 2010).
  • Liquefied Natural Gas (LNG) is to be imported to harness India’s power and fertiliser projects. This plan involves huge volume of business for the shipping industry amounting to several billion dollars(Challenges and opportunities for India’s shipping industry, shippingbiz360, 21st October, 2009).
  • According to the Planning Commission, USD 19.6 billion will be invested in the ports sector during the Eleventh Plan (2007-2012). Furthermore, the government has announced that it will award 21 port expansion projects worth USD 3.13 billion under the PPP mode in 2010-11.Thus, there is a huge opportunity for private sector to invest through the PPP route(as per IBEF).
  • Inland Waterways today accounts for a meager 0.15 percent of the total domestic transport today, compared to 14 percent in the US and 46 percnet in the Netherlands. Due to the gradual increase in cargo movement through inland waterways, India is developing inland waterways which provides good opportunity to inland water transport and coastal shipping(as per Shipping report by Anagram, Press, Inland Waterways Authority).

Others

  • Irrigation projects in rural India, safe drinking water, warehousing and gas grids.

Industry Snapshot

Investments Xth Plan (2002-2007) USD 220 bn
Investments XIth Plan (2007-2012) USD 507 bn
Growth Rate 125 percent
Select foreign players in India Widmann AG, Dyckerhoff, Mitsubishi Corporation, Siemens, Alstom, Itochu, Toshiba, Kawasaki, Terry Farrell and Partners, Von Gerkan, Marg und Partner, Aedas Ltd., Hellmuth, etc.

Source: Government of India, Committee on Infrastructure

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