India has a large and fairly well developed infrastructure framework extending to all parts of the country. However, certain areas like power, telecommunications, transport etc. need further expansion and modernization. And, the public sector alone can no longer fully finance the requirements.

The six core and infrastructure industries, viz., electricity, crude oil, petroleum refinery products, coal, steel and cement, having a weight of 26.7 per cent in overall Index of Industrial Production (IIP) achieved 6.8 per cent during 2000-01. Several fiscal incentives were announced by the government for boosting investment in infrastructure projects. Ten-year tax holiday offered to projects in core sectors like roads, highways, waterways, water supply, sanitation and solid waste management systems can now be availed of during the initial 20 years. Projects in airports, ports, inland ports, industrial parks and generation and distribution of power can now avail of 10-year tax holidays during the initial 15 years. The facility of five-year tax holiday available to the telecommunication sector till 31 March, 2000 was reintroduced for units commencing their operations on or before 31 March, 2003. The concessions were extended to internet service providers and broadband networks. Tax incentives were made available to investors providing long-term finance to enterprises engaged in infrastructure. The Electricity Bill 2001 and the Communication Convergence Bill 2001 were introduced in Parliament.

Power: The generation of power has increased impressively in recent years. In 1990-91, India generated 6.6 billion kilowatt hour of electricity; in 1995-96 the figure was 380.1 billion kilowatt hour. The installed capacity, which was 1400 MW at Independence in 1947, has crossed 83,288 MW. The policy of inviting private sector has been well received; about 140 offers that can generate over 60,000 MW of power have came in.

Coal: Coal is the primary source for power generation in India. The country has huge reserves of coal, approximately 197 billion tonnes. A sufficient amount of lignite (brown coal used in thermal power stations) is also available.

India produced about 270 million tonnes of coal in 1995-96. The government now welcomes private investment in the coal sector, allowing companies to operate captive mines.

Petroleum and Natural Gas: The recent exploration and production activities in the country have led to a dramatic increase in the output of oil. The country currently produces 35 million tonnes of crude oil, two-thirds of which is from offshore areas, and imports another 27 million tonnes. Refinery production in terms of crude throughput of the existing refineries is about 54 million tonnes.

Natural gas production has also increased substantially in recent years, with the country producing over 22,000 million cubic metres. Natural gas is rapidly becoming an important source of energy and feedstock for major industries. By the end of the Eighth Five-Year Plan, production was likely to reach 30 billion cubic metres.

Railways: With a total route length of 63,000 km and a fleet of 7,000 passenger and 4,000 goods trains, the Indian Railways is the second largest network in the world. It carries more than 4,000 million passengers per year and transports over 382 million tonnes of freight every year. It is well equipped to meet its demands for locomotives, coaches and other components. Lately, the Railways have launched a massive gauge-conversion drive as about a third of the track is metre or narrow gauge. With improvement in tracks, plans are afoot to introduce faster trains. Very soon, certain prestigious long-distance trains will be running at 160 km per hour. The Railways have also started a scheme to privatise several services that will include maintenance of railway stations, meals, drinking water and cleaning of trains.

Road Transport: The roadways have grown rapidly in independent India. Ranging from the cross-country link of the national highways to the roads in the deepest interiors, the country has a road network of 2.1 million km. India also manufactures most of its motorised vehicles: cars, jeeps, trucks, vans, buses and a wide range of two-wheelers of various capacities. While Indian scooters have established a good foreign market, the car industry is also looking up with several foreign companies setting up plants in India.

Shipping: The natural advantage of a vast coastline requires India to use sea transport for the bulk of cargo transport. Following the policy of liberalisation, the Indian shipping industry, major ports, as also national highways and water transport have been thrown open to the private sector.

Shipping activity is buoyant and the number of ships registered under the Indian flag has reached 471. The average age of the shipping fleet in India is 13 years, compared to 17 years of the international shipping fleet. India is also among the few countries that offer fair and free competition to all shipping companies for obtaining cargo. There is no cargo reservation policy in India.

Aviation: India has an aviation infrastructure which caters to every aspect of this industry. Hindustan Aeronautics Limited (HAL) is India's gigantic aeronautical organisation and one of the major aerospace complexes in the world.

India's international carrier, Air-India, is well known for its quality service spanning the world. Within the country, five international airports and more than 88 other airports are linked by Indian Airlines. Vayudoot, an intermediate feeder airline, already links more than 80 stations with its fleet of turbo prop aircraft and it plans to build and expand its network to over 140 airports in the far-flung and remote areas of the country. Pawan Hans, a helicopter service, provides services in difficult terrains.

The Government has adopted a liberal civil aviation policy with a view to improving domestic services. Many private airlines are already operating in the country.

Pipelines: Oil and natural gas pipelines form an important transportation network in the country. The country completed recently, on schedule, one of its most ambitious projects, the 1,700 km Hazira-Bijaipur-Jagdishpur pipeline. Costing nearly Rs. 17 billion, the pipeline transports liquid gas from the South Bassein offshore field off Mumbai to Jagdishpur and Aonla, deep in the mainland in Uttar Pradesh. Besides, India has nearly 7,000 km of pipeline mainly for the transportation of crude oil and its products.

Telecommunications: With rapid advances in technology, India now uses digital technology in telecommunications, which derives advantage from its ability to interface with computers. The present strategy focuses on a balanced growth of the network, rapid modernisation, a quantum jump in key technologies, increased productivity, and innovations in organisation and management. Moving towards self-reliance, besides establishing indigenous R&D in digital technology, India has established manufacturing capabilities in both the Government and private sectors.

The private sector is expected to play a major role in the future growth of telephone services in India after the opening of the economy. The recent growth in telecommunications has also been impressive. Till September 1996, the number of telephone connections had reached 126.1 lakh (12.6 million). Soon every village panchayat will have a telephone. By 1997, cellular services in most major urban areas were functional, and telephone connections were available on demand. India is linked to most parts of the world by e-mail and the Internet.

he 1998-99 Budget announced by the BJP government has given a major thrust to infrastructure development, particularly in energy and power, transport and communications, by stepping up public expenditure in these sectors. This increased government spending on infrastructure is expected to boost India's sluggish economy. The lack of a clear policy frame work for private sector participation has hampered the badly-needed infrastructure development, particularly in telecommunications, power, roads and ports. The public sector, which led the investment in infrastructure development until recently, has reduced its investments considerably, due primarily to its poor fiscal position.

IDFC:

The Infrastructure Development Finance Corporation (IDFC), established in 1997, is a specialized financial institution, set up to provide credit enhancement to infrastructure projects, and to extend long term loans and guarantees that existing institutions may not be able to provide. IDFC provides loans and guarantees worth dols 17million to five projects.

The Asian Development Bank and the International Finance Corporation are shareholders in the IDFC. A comprehensive funding package for infrastructure projects has been developed by the IDFC and the Power Finance Corporation (PFC). At the state level, the PFC is primarily focussed on public sector projects, while the IDFC concentrates on the private sector. In the recent budget, the government proposed giving IDFC incentives and benefits available to other public financial institutions.

Finance Minister P. Chidambaram proposed in the federal budget major spending on big-ticket infrastructure items like highways, metro rail networks, ports, airports, power and telecommunications.

"The importance of infrastructure for rapid economic development cannot be overstated. The most glaring deficit in India is the infrastructure deficit," Chidambaram told Parliament.

"The thrust on India's infrastructure is pragmatic," said Indraneil Borkakoty, vice president of ICICI Securities. "It will boost employment, investment and growth."

"Road building across India will ... provide employment and boost the bottomlines of cement, steel and brick manufacturing firms," Sunil Munjal, head of the Confederation of Indian Industry, said.

India's economy is powering ahead, with the government forecasting growth of 6.9 pct in the year to March 31 2005, making it the second-fastest expanding economy after China.

But improving India's potholed highways, congested ports and erratic telecommunications and blackout-plagued power service, is vital to drawing foreign investment and bolstering the economy further, economists say.

The government has said it needs to spend 150 bln usd over the next five years to develop world-class infrastructure -- 75 bln usd in the power sector, 25 bln usd in telecommunications and 50 bln usd in airports, seaports and roads.

In his budget for the year to March 2006, Chidambaram gave no overall figure on the amount of infrastructure spending for the coming year.

But he reeled off a series of projects worth 6.2 bln usd covering highways, electricity and telecommunications.

Fearful of widening the government's already stubbornly high fiscal deficit, Chidambaram said that the government will dip into India's brimming foreign exchange reserves, now running at a record 133 bln usd, to fund other big infrastructure projects.

"There are large infrastructure projects that are financially viable but have difficulties in raising resources," said Chidambaram.

He said these projects will be funded by a new "special financial vehicle" that would tap India's foreign exchange reserves. He did not say how much he would take from the foreign exchange reserves but set a cap of 2.3 bln usd or 100 bln rupees for the coming financial year.

Chidamabaram also pledged a "massive programme" to provide electricity to 125,000 villages. "I have provided 11 billion rupees for this programme," said Chidambaram.

Another 12 bln rupees has been set aside for more village public telephones and strengthening the country's telecommunications'' backbone.

A 55-bln-rupee fund also has been set up to improve congested transport facilities and power infrastructure in seven Indian cities.