Professional Documents
Culture Documents
Transport Sector
Submitted by:
Tanya Ahluwalia(2009A01)
Yateesh Hoblidar(2009A02)
Aakshita Chandiramani(2009A05)
Tushar Alva(2009A06)
Neha Agarwal(2009A07)
Shaleen Agrawal(2009A12)
Shreeya Bhat(2009A13)
Vikram Veer(2009A16)
Aviral Sharma(2009A35)
Aditi Sood(2009A59)
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`Annual budgetary allocation on transport
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`Annual budgetary allocation on transport
Contents
INDUSTRY OVERVIEW..................................................................................................... 4
2. Aviation ........................................................................................................................ 6
3. Railways ....................................................................................................................... 6
4. Roads ............................................................................................................................ 7
IMPACT ........................................................................................................................... 9
Projection during Eleventh Plan and the Allocation for 2010-2011 ...................................... 12
Roadways:....................................................................................................................... 12
Railways: ........................................................................................................................ 14
Shipping: ......................................................................................................................... 18
Aviation: ......................................................................................................................... 19
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`Annual budgetary allocation on transport
Prepare a detail report (with chart) on annual budgetary allocation on transport. Discuss the
different policies adopted by the central government for this particular sector since 1950-51.
Make an estimate from coming budget and justify.
INDUSTRY OVERVIEW
In India, the share of the transport sector in GDP (gross domestic product) in 1997/98 was
7.3% (1993/94 prices). Road transport and the railways account for the majority of this
contribution. Since the early 1990s, India's growing economy has witnessed a rise in demand
for transport infrastructure and services by around 10 percent a year.
Civil Aviation in India is big business and it has undergone dramatic expansion during the
decade. This fact is reiterated by the presence of numerous airlines and their expending fleet
size. There are 11 scheduled passenger operators and one cargo operator in the country with a
combined fleet size of 407 aircraft. There are also 99 non-scheduled airline operators who
have 241 aircraft in their inventory. The sector showed signs of slowdown due fluctuations in
the cost of air turbine fuel (ATF) and the global economic slowdown. To add to the woes of
the aviation sector, the national carrier is in financial doldrums and looking forward to a bail-
out from the Government.
The performance of the railways has improved during the recent years on account of better
resource management through increased wagon load, faster turnaround time and a more
rational pricing policy. But there are further efforts to be made in this sphere. The route
length has grown from 62,367 km in 1990 to only about 63,350 km now. A comparison of
these statistics with China (network currently stands at 80,750 km, with goal to add 6,000 km
of new tracks every year till 2020), shows the distance yet to be travelled by Indian Railways
Roads all over India have to be developed to facilitate better road transportation and brought
at par with international standards. The National Highway Development Programme (NHDP)
is a major thrust in this direction. The implementation of NHDP though has been faced with a
number of constraints that include delays in land acquisition and removal of structures,
shifting of utilities, law and order problem in some states and poor performance of some
contractors. The infrastructure development in the road sector also suffered largely when out
of the 60 projects for which tenders were floated during 2008, only 10 attracted bids.
Ports, as referred always, are the gateways to any country‟s economic prosperity. The
National Maritime Development Programme (NMDP) has been formulated to provide the
ports & shipping sector a much needed shot in the arm. The NMDP has resulted in
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`Annual budgetary allocation on transport
augmenting adequate capacity and modern handling facilities at ports, but operational
efficiency of these ports has a long way to go. The average turnaround time is 3.85 days
during 2008-09, compared with 10 hours in Hong Kong, undermines the competitiveness of
Indian ports.
The financing of infrastructure development has suffered due to the economic downturn. The
flow of resources to infrastructure through external commercial borrowings (ECBs) had
quadrupled from 2005-06 to 2007-08, but then came down drastically during 2008-09
(refervtable). The air transport sector witnessed slowdown in ECB flows during 2008-09. The
funds raised through public and rights issues by infrastructure sectors have shown a steep
decline. Another major issue is the inadequate availability of long-term finance (10 year plus
tenure) both equity and debt for PPP projects. Private sector will play a larger role through
PPPs in infrastructure, but bulk of the investments has to come from the government.
The budgetary allocation for infrastructure ministries such as civil aviation, telecom,
shipping, road transport, railways and related areas like drinking water and urban
development has been increased to Rs 61,099 crore; up from Rs 48,866 crore in the previous
year. Apart from direct spending, infrastructure will also get a boost through some of the
indirect measures announced in the Budget. To this end the following measures in this regard
were announced in the Budget:
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`Annual budgetary allocation on transport
1. Infrastructure Development
The India Infrastructure Finance Company Limited (IIFCL) was earlier set-up as a special
purpose vehicle for providing long term financial assistance to infrastructure projects. The
budget intends to provide greater flexibility to IIFCL to aggressively fulfil its mandate. IIFCL
will develop, in consultation with banks, a “takeout financing” scheme to facilitate
incremental lending to the infrastructure sector. Takeout financing is an accepted
international practice of releasing long term funds for financing infrastructure projects. It
consists of a few banks joining hands as a consortium and taking over the loan portfolio in
turns. It can be used to effectively address the asset liability mismatch of commercial banks
arising out of financing infrastructure projects and also to free up capital for financing new
projects. IIFCL will refinance 60% of commercial bank loans for Public Private Partnership
(PPP) projects in critical sectors over the next fifteen to eighteen months and along with
banks support infrastructure projects involving a total investment of Rs. 1000 billion.
2. Aviation
The budgetary allocation to the Ministry of Civil Aviation for the 2009-10 is Rs. 887 crore.
The growth in budgetary allocation for the ministry is down to just 3.6% in 2009-10 from
nearly 20% in the earlier year. The Government has made no allocation for any budgetary
support for NACIL. The breakup of the numbers for 2009-10 shows that bulk of the
allocation (Rs 620 crore of the Rs 887 crore) is towards subsidy for operations of Haj
charters. The budget focuses on airport infrastructure development. The budgetary allocations
to the aviation sector include:
The Government has increased the target of internal and extra budgetary resources (IEBR -
money from loans or through reinvestment of profits) which will be raised by PSUs under the
Ministry of Civil Aviation by over 63.5%, from Rs 7,320 crore in the revised estimates of
2008-09 to Rs 11,975 crore in 2009-10. The money will be used mostly to fund the aircraft
acquisition programme of the NACIL and also AAI for expansion of airports in Kolkata and
Chennai, among others. In the Budget documents, the IEBR target sanctioned for NACIL has
been doubled from Rs 4,136.9 crore in 2008-09 to Rs 8,165.6 crore in 2009-10. The IEBR for
Airports Authority of India has been increased substantially from Rs 2,567.2 crore in 2008-09
to Rs 3,145.8 crore in 2009-10.
3. Railways
The Railway Budget for 2009-10 has been on expected lines. There is no increase in fares
and freight. The passenger segment has been given importance with a slew of measures to
please the common man. These range from monetary concessions to better travel facilities
with respect to ticketing, food and environment. The second most important infrastructure
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ministry in terms of Budget allocation was the rail ministry. The budget allocation for
Railways increased from Rs.10,800 crore in Interim B.E. 2009-10 to Rs.15,800 crore in B.E.
2009-10.
4. Roads
The budgetary allocation for the Ministry of Road Transport and Highways has been
increased from Rs. 18,217 crore in 2008-09 (revised) to Rs. 21,635 crore in 2009-10. The
overall allocation for National Highway Authority of India (NHAI) has been increased from
Rs 11,051 crore in the previous year to Rs 13,646 crore in the current year. The IEBR target
for NHAI has been increased by 35% in 2009-10 as compared to the previous year.
The allocation during the current year to National Highways Authority of India (NHAI) for
the National Highways Development Programme (NHDP) has being stepped up by 23% over
the 2008-09 (BE). This will provide the necessary impetus to the road sector. The highest
budget allocation in the infrastructure sector was for ministry of road transport which got
about a third of the Budget allocated for the main infrastructure ministries. The budget
highlights the following provisions for the road sector:-
NHAI can use increased allocation to provide VGF to the private developers
Allocations under Pradhan Mantri Gram Sadak Yojana (PMGSY) increased by 59%
over B.E. 2008-09 to Rs.12,000 crore in B.E. 2009-10.
NHAI will also be provided Rs 8,578 crore from the Central Road Fund.
In addition, the Govt has also provided for a grant of Rs 1,988 crore to the states. This
will be funded from the Central Road Fund.
Rs. 1,062.50 crore have been allocated towards maintenance of national highways.
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IMPACT
State Highway Operation and Protection Program (SHOPP) is the state‟s ongoing
four-year program of projects to repair and rehabilitate the state‟s highways and to
improve the system‟s safety. The SHOPP is funded from the State Highway Account,
which receives funding from the state‟s 18 cents per gallon gas tax and from truck
weight fees.
Since 2001–02, transportation funds have been used to help balance the state‟s budget.
Because the decisions to do so are made annually, depending upon the state‟s overall budget
requirements, it is difficult to predict from year to year (1) how much transportation money
will be redirected to help the General Fund and (2) the funding source from which the money
would be redirected. As a result, it is not possible to determine which programs and projects
would be affected until after budgetary decisions are made. The resulting instability and
unpredictability of funding delays project progress, complicates efforts to plan for future
projects, and creates inefficiencies in the department.
Transportation Loans Increase Instability and Will Delay Projects. In the current year,
$231 million was loaned from SHA and other accounts to help balance the state‟s budget.
These funds are required to be repaid by June 30, 2011. This means that some projects that
rely on SHA money, mainly highway repair projects, will not progress in 2008–09 as
originally scheduled in the SHOPP. Instead, these projects will be pushed out to later years.
A positive move is that the dedicated freight corridor on the Ludhiana – Kolkata route would
be inaugurated. Also, work on the Delhi – Mumbai stretch has started. This will smoothen the
freight traffic movement and reduce the congestion of the operative lines and also bring in
time efficiency in the freight business.
The rail freight sector is expected to get a boost, with the railways deciding to introduce new
high-capacity wagons. This will help augment the business of the customers since they will
be able to transport more than what they did earlier.
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`Annual budgetary allocation on transport
Speaking on the impact on the Road Freight sector there may not be any immediate impact,
however, the end customer will benefit with better coordination between the Rail-Road
freight sectors. This way the Rail & Road collectively can enhance productivity and
efficiency of the Indian Logistics sector.
For the aviation sector the Budget 2009 emphasized on revamping of airports and this is seen
through modernisation of Delhi and Mumbai airport, to name a few. Further, new airports are
also being set up in various cities across the country (Greater Noida, Hyderabad etc.). Other
than this the aviation sector had its own setbacks either due to the ATF crisis or Airline
workers/pilot strikes.
The govt. is planning to increase the investment in infrastructure to more than 9% of GDP by
2014. Funding to railways has been increased to 15800 crores and that to National Highways
Authority of India (NHAI) for the National Highways Development Programme (NHDP) is
being stepped up by 23 per cent over the 2008-09 (BE).
A much needed thrust given to the infrastructure sector definitely speaks about the govt.‟s
intent to expedite the „inclusive growth‟ process taking both the urban and rural India under
its umbrella. But mere announcement of multiple projects does not suffice; their
implementation has been a chronic problem for India. However the finance minister has
urged his colleagues in the central and state governments to “remove policy, regulatory and
institutional bottlenecks for speedy implementation of infrastructure projects.” The steps
announced should help the real estate sector recover which was hit hard during the downturn
in the past fiscal year. The exemptions on goods manufactured on site will give a further push
to the construction industry.
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Roadways:
The elasticity of tonne kilometres by road transport with respect to GDP is found to
be a little above unity (1.1). Using an elasticity of 1.1 of BTKM (Billion
Tonne Kilometres) with respect to GDP, four alternative scenarios for BTKM over the
Eleventh Five Year Plan have been projected, for alternative GDP growth rates of 7,
8, 8.5 and 9 per cent as given in the Approach Paper to Eleventh Plan. The
projected BTKM made by the Sub Group for alternative growth scenario may be
seen in table below
Eleventh Five Year Plan Projections for Freight (2007-08 to 2011-12)
Projections
Year BTKMs (BTKMs)
2005-06 706*
2006-07 768#
(Assumption of GDP target rate of growth)
11th Plan 7% 8% 8.5% 9%
2007-08 827 835 840 844
2008-09 891 909 918 927
2009-10 959 989 1004 1019
2010-11 1033 1076 1098 1120
2011-12 1113 1171 1200 1231
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The Committee on Infrastructure headed by the Hon’ble Prime Minister has proposed a
massive National Highways Development Programme from (2007-2012) which envisages
the following:
NHDP Phase-IV: Under this, selected stretches of about 20,000 km of NHs are envisaged to
be improved to 2-lane standards with paved shoulders. The programme is yet to be
approved by the Govt.
NHDP Phase-VII: This proposed programme envisages construction of ring roads, flyovers
and by-passes on selected stretches on National Highways for an estimated cost of about
Rs 16,680 crore. The programme is yet to be approved by the Govt.
All the above mentioned projects will be financed through various sources of
funds like cess, loan assistance from the World Bank and ADB, borrowings by NHAI,
estimated surplus amount available from the users fee as well as the share of private
sector. Various sources of funding to finance these projects have been finalised and the
financing plan implementation by the year 2015 by has been approved. The requirement
of funds during the 11th Plan (2007-2012) for implementation of NHDP has been worked
out. The total amount required during this period is about Rs. 1,73,501 crore. The
projected availability of fund from various sources during eleventh Plan period ( 2007-
2012) are as below:
1 Cess 36,589
2 External Assistance 4,454
3 Borrowings by NHAI 41,615
4 Surplus from the user fee 3,108
5 Share of private sector 87,735
TOTAL 1,73,501
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Development of the National Highways with the Border Roads Organizations (BRO)
The total length of National Highways entrusted with the Border Roads
Organization (BRO) at present is about 5,512 km passing thorugh the States / UTs of
Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Himachal Pradesh, Jammu &
Kashmir, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Uttarakhand, West Bengal and Andaman & Nicobar Islands.
The assessed requirement of funds for improvement of National Highways with BRO
is Rs. 2,500 crore for the 11th Five Year Plan.
New National Highways
A road vision 2021 was prepared in the Ministry, which proposes a total National
Highway network of about 80,000 km by the end of the year 2021. At present, National
Highway network stands about 66590 km which requires additional declaration of about
13410 km of state roads as National Highways to achieve this target of 80,000 km. Because
of emphasis on infrastructure sector given in recent years than it was when the Vision
document was prepared it may be desirable to achieve the target in next 2 Plan years (by
2017) instead of next 3 five year plan (by 2022). The target for new addition of length in NH
network in 11th Five Year Plan would be about 7000km. For expansion of the NH network
the following factors need to be kept in view.
Estimates of Manpower Requirement during(2007- 2012)
Year Bus Goods Vehicles
Public Sector Private Sector HCV/LCV
Drivers Conduc Others Total Drivers Conduc Others Total Drivers Others Total
Tors tors
37590
2007 297992 297992 953574 1651130 825565 1651133 4127824 8552086 4276043 12828129
2008 303074 303074 363689 969838 1780041 890021 1780041 4450103 9115018 4557509 13672528
2009 308244 308244 369892 986380 1919094 959547 1919094 479736 9715005 4857503 14572508
2010 313501 313501 376201 1003204 2069030 1034515 2069030 5172576 10354486 5177243 15531729
2011 318848 318848 382618 1020314 2230722 1115361 2230722 5576804 11036060 5518030 16554090
2012 324286 324286 389144 1037717 2405090 1202545 2405090 6012726 11762497 5881249 17643746
Note: Basis of estimation-Public sector-2.5 Nos. of drivers, 2.5 Nos. of conductors and 3 Nos of other staff per bus; in case of private
sector requirement is placed at 2 nos. of drivers, 1 no of conductor and 2 nos. of other staff per bus
Railways:
Four scenarios were built based on the assumption of GDP growth rate of 8% and 10%
and rail transport elasticity of 0.72 and 0.87, with 2005-06 as the base year. Table below
summarizes the results obtained for each scenario.
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`Annual budgetary allocation on transport
Railway’s market share in the Parcels and Express Cargo is only about 1.5 per cent of
the total. Railways would plan to make a major inroad in the business and aim at
doubling of the volume and a five-fold increase in earnings (from Rs. 650 crores
currently to about Rs. 3000 crores).
Passenger traffic is subject to supply- side constraints in some cases and is also highly
sensitive to passenger fares; dips in demand are invariably associated with upward revisions
in fares. Although the growth rate of passenger traffic was only 2.17 per cent during the first
three years of Tenth plan period, there has been a substantial pick-up in growth in the latter
years .This provides an optimistic setting for the Eleventh Plan period. Three scenarios of
passenger growth have been worked out with sub-urban growth rates between 3 to 4 per cent,
non-suburban, between 7 to 8.5 per cent and overall growth rates between 5 per cent and 6
per cent. (Table below)
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Proposed Growth
Proposed Growth Rate Proposed Growth Rate Rate
Sc. 1 Sc. 2 Sc. 3 Sc. 1 Sc. 2 Sc. 3 Sc. 1 Sc. 2 Sc. 3
2007-08 3908 3920 3927 2811 2831 2830 6720 6751 6757
2008-09 4026 4049 4065 3030 3059 3071 7056 7108 7136
2009-10 4146 4183 4207 3262 3319 3332 7408 7502 7539
2010-11 4271 4321 4354 3508 3601 3615 7779 7922 7969
2011-12 4399 4463 4507 3768 3908 3922 8168 8371 8429
Compound
ed
Growth
Rate
(in
percentage
terms)
3 3.3 3.5 7.7 8.1 8.5 5 5.5 5.6
The opening up of the economy, renewed emphasis on passenger business and the increased
propensity to travel has resulted in the increase in the number of passengers. Keeping in view
these factors it is expected that there will be 3 per cent growth in suburban traffic while
overall passenger traffic (suburban and non-suburban) is expected to grow at the rate of 5 per
cent per annum.
The share of upper classes in the overall passenger traffic is less than 1 per cent and that in
the non-suburban segment slightly higher at 2 per cent. However, its share of the overall
passenger earnings is much higher at 18 per cent. It is expected that with increasing
prosperity and aspiration levels, the current trend of higher growth of upper-classes
especially AC-3 Tier would continue. Class -wise projections of growth of non-suburban
passenger traffic has been worked out on the basis of this assumption and is given in Table
below.
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The Plan will focus on reducing the cost of operations, developing attractive service
packages, and adoption of competitive pricing to safeguard share of upper class travel vis-
à-vis airlines.
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`Annual budgetary allocation on transport
Shipping:
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Aviation:
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