Monday, June 23, 2014

“11th Five Year Plan” - A Success so far

India has one of the largest road networks in the world, consisting of- National Highways (NH), State Highways (SH), Major District Roads (MDR) and Rural Roads that include other district roads and village roads. The NH with a length of 76,818 km comprises only 2.0 per cent of the road network but carry 40 per cent of the road-based traffic. The SH and the MDRs together constitute the secondary system of road transportation which contributes significantly to the development of the rural economy and industrial growth of the country. The secondary system also carries about 40 per cent of the total road traffic, although it constitutes about 13 per cent of the total road length.

At the tertiary level are the Other District Roads (ODRs) and the Rural Roads (RRs). These, once adequately developed and maintained, hold the potential to provide rural connectivity vital for generating higher agricultural incomes and productive employment opportunities besides promoting access to economic and social services.

In recent years special efforts have been made by the central government to strengthen the National Highway and also to improve rural road connectivity. Despite this, the road network remains grossly inadequate in various respects. It is unable to handle high traffic density and high speeds at many places and has poor riding quality. It is necessary to accelerate completion of ongoing projects, including expressways besides speedy implementation of the Golden Quadrilateral (GQ) and the North-South and East-West (NS-EW) corridors and also to address the deterioration of large stretches of the NH.

Review of the Eleventh Plan

 Against the outlay of around INR 1, 92,428 crore in the Eleventh Plan for the road sector, the anticipated expenditure was INR. 1, 58,077 crore (at current prices). The phase-wise length completed under NHDP is shown below:

State Roads Progress during the Eleventh Plan

Lane wise Length of SH in 2007 (km)
Lane wise Length of SH in 2011 (km)

Total Length
2 Lane
4 Lane and above
Total Length
2 Lane
4 Lane and above

The NHDP programme will be funded primarily through PPP, a policy which had been initiated in the Eleventh Plan. For this purpose, a VGF of 40 per cent is provided in the Road Sector, including 20 per cent from the cess on petrol and diesel, which is available with the NHAI. It is proposed to continue and further strengthen the PPP construction and build BOT (Toll) roads. It is also proposed to strengthen and improve the existing framework; specifically these will be further expanded for construction of roads by the State Governments.

Some Major Initiatives in the Twelfth Plan

Based on the performance of Road network in the country, major initiatives in the Twelfth Plan Period are:
v  Earmarking of Plan funds for IRQP and strengthening/maintenance of non-tollable roads.
v  Development of capacities of NHAI, BRO and other implementing agencies.
v  Prioritisation of special links for feeder roads to important railway points, ports and areas where rail link is not possible.
v  Special focus on development of roads for Delhi– Mumbai industrial corridor.
v  States to be encouraged to develop core network for rural connectivity.
v  Providing universal connectivity in rural areas under PMGSY, launch of PMGSY-II and pilots on PPP in some selected PMGSY roads.
v  Focus on implementation of rural road projects in the LWE districts through the Integrated Action Plan (IAP).
v  Investment in R&D, green technology and design for better and safer roads

               InfralineEnergy Roads Knowledgebase Team


The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the Infraline Technologies (India) Pvt. Ltd. (organization). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.

Tuesday, June 17, 2014

Priority Sector Lending for Off-Grid Renewable Energy in India

The Renewable Energy sector still continues to be capital intensive though technological breakthroughs have been successfully bringing the costs down by significant margins compared to the position many years back. Besides this the costs of energy generation by using conventional modes too has been on increasing trend due to interplay of many factors- fuel supply costs, currency volatilities, stringent measures for environment management, community aspects and likewise. The converging trends between cost of energy generation from conventional modes and renewable has been rather remarkable. Like projects in many sectors, the project viability of Renewable projects are sensitive to numerous aspects covering policy and regulatory, energy pricing and incentives, fiscal support besides the availability of project financing and the terms thereof. Traditionally, the Banks favor lending to utility power projects of large size rather than small /moderate sized renewable projects due to their understanding of associated project risks and their mitigation.  The renewable energy space has limited access to institutional finance as the policies and regulatory elements for the sector are evolving. Appreciating such situation and the national imperative to take benefit of large endowment of renewable energy resources Government has been providing support under the framework of Priority Sector Lending. This refers to facilitated lending to those sectors which are identified to influence larger and weaker sections of population. These sectors are usually employment intensive and comprise of small and medium enterprises which have limited or no access to institutional finance. Loans disbursed by banks under priority sector lending are provided at concessional rates which are 1 to 2 percent lower than prevailing commercial lending rates. For India distributed power generation as well as its linkages with power infrastructure makes significant sense from economic and social perspectives besides providing cleaner routes for energy generation.

As per RBI guidelines the banks are mandated to have 40 percent loan exposure to sectors defined as priority sector. In practice the Banks have been struggling to achieve this target and are usually left with significant amounts of non disbursed funds at their disposal. Expanding the remit further, Reserve Bank of India (RBI), through a revised guidelines issued in July 2012, had included loans made to individuals for setting up of off-grid Renewable Energy applications for household as part of priority sector lending for banks. Additionally, MNRE under its flagship programme aimed at promoting off-grid solar applications such as irrigation pumps, home lights and solar lanterns provides 30 percent subsidy directly to solar equipment makers on such installations. This subsidy scheme has seen huge success and resulted in unanticipated rise in demand. The total installation of solar off-grid applications across the country increased to 35.09 MWp (megawatt equivalent power) in 2013-14 from 17.59 MWp a year ago. The total number of installations rose to 20 lakh by the end of 2013. Under this subsidy scheme, vendors charges consumers only 70 percent of the product price and the balance 30 percent is claimed from government.

The ministry had allocated INR 350 crore for off-grid solar projects out of the total budget outlay of INR 1,500 crore per financial year, which is proving insufficient in view of the success of this scheme and thus Government has recently announced review of this subsidy scheme.

Extension of priority sector lending benefits to off-grid renewable energy projects is a significant step and shall open up new and greater project financing possibilities for the sector in India. Such incentives are expected to provide needed support for roll out of national programs like National Solar Energy Mission and, like wise the National Wind Energy Mission expected to be announced during 2014. Under JNNSM Phase III, there is cumulative target of 1000 MW off-grid solar applications and 10 million solar lighting systems by 2013-17.

Steps are required to encourage banks to park more funds in renewable energy projects and an important step to address this would be carving out a special window for lending to renewable energy projects by banks. This can be done by defining a particular funding limit for renewable projects, and delinking this from lending limits for utility power projects.

Going forward, several other measures are required to be undertaken concurrently in order to compliment the effects of steps like priority sector funding. Awareness among consumers about off-grid renewable applications as well as financing options available needs to be raised.

                InfralineEnergy Renewable Knowledgebase Team


The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the Infraline Technologies (India) Pvt. Ltd. (organization). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.

Tuesday, June 10, 2014

Deciphering the Land Acquisition and Rehabilitation & Resettlement Act, 2013

It has been evidenced that around one-third of India’s conflicts in the last decade have been over land rights. The public concerns were growing over absence of national law to guide land acquisition process, rehabilitation & resettlement and compensation for the loss of livelihood. Although multiple amendments were made to the colonial Land Acquisition Act of 1894 over a period of time but such piecemeal approaches failed to address the concerns of the farmers whose livelihood were dependent on the land being acquired. It affected growth of industry adversely, the shift of Tata Motors’ Nano factory from West Bengal to Gujarat, being a case in point.

The Central Government felt the need to address the concerns of the farmers while facilitating the land acquisition for industrialization, infrastructure and urbanisation. On September 7, 2011, “Land Acquisition and Rehabilitation & Resettlement (LARR) Bill” was presented by Ministry of Rural Development (MoRD) to the Union Cabinet. It was then referred to the Standing Committee on Rural Development for examination. Based on their suggestions and inputs from various stakeholders, an amended version of LARR Bill was re-presented to the Union Cabinet and was cleared with a few additional amendments in December 2011. The bill was renamed “The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill 2013” to clearly reflect its objectives. It was then approved by both the houses of parliament in September 2013.

Scope of the Act

The Act aims to establish the law on land acquisition, as well as the rehabilitation and resettlement of those directly affected by the land acquisition in India. The scope of the Act includes all land acquisition whether it is done by the Central Government of India, or any State Government of India, except the state of Jammu & Kashmir.

The Act is applicable when:
  • Government acquires land for its own use, hold and control, including land for Public sector    undertakings.
  • Government acquires land with the ultimate purpose to transfer it for the use of private companies for stated public purpose.
  • Government acquires land for immediate and declared use by private companies for public purpose.

Important Provisions the Law
  •      Consent of 80 percent of the people whose land is being acquired is required for a private project. This criteria has been relaxed to 70 percent for public private partnership.
  •     Multi-cropped, irrigated land cannot be acquired unless it is for defence or emergency caused by natural calamity. The land so acquired cannot be more than 5 percent of total such land in the district, provided the compensation by alternate waste land.
  •    Compensation in rural areas would be calculated by multiplying market value, i.e. the maximum of‘minimum value as per Indian Stamp Act 1899’ or ‘average of the sale price of the land in the adjoining area for the sale deeds registered during the past three years’, by two and adding assets attached to the land or building (Building/Tree/Well/Crop) and adding a solatium of 100 percent of compensation.
  •      If land is taken for urbanisation 20 % to be reserved for affected families and given in proportion to their acquired land at a cost equal to acquisition and development.
  •       Affected families can be offered/obtain shares not more than 25 % of the compensation.
  •      The Act also proposes amenities like schools, health centres and civic infrastructure in the resettlement area.

Key Pointers on Rehabilitation & Resettlement Entitlements for Land Owners and Livelihood Losers

Land Owners and Livelihood Losers
  •     Sustenance allowance of INR 3000 per family per month for a year
  •     Compensation

o   Job for one family member (if applicable) or
o   5 lakhs per family or
o   INR 2000 for 20 yrs with escalation clause.
  • House Compensation (Monetary Value)

o   House as per Indra Awas Yojana (Rural Area)
o   House not less than 50 sqmt in plinth area (Urban Area)
  • One acre land if acquisition is for irrigation project.
  • INR 50,000 transportation allowance
  • INR 50,000 resettlement allowance

In addition to the R&R package, SC/ST families are entitled to the following additional benefits
  • 2.5 acre land or land lost by the family
  •  INR 50,000 one time financial assistance
  •  25% additional benefit if rehabilitated outside the district
  •  Preferential R&R in the same area
  •  Immediate payment of 1/3 value of compensation
  •  Free land for social gathering
  •  A development plan to be prepared for displaced families

The higher cost involved in Land Acquisition and R&R can be compensated by faster project implementation and reduction in disruptions due to protests and litigations, etc. This can be only achieved by proper implementation of proposed institutional structure which will be the key in creating a transparent and swift land acquisition process. Large investment plans and projects have been stalled due to land acquisition issues or are moving slow in anticipation of clarity on land acquisition policy. The implementation of the law is expected to expedite investment decisions and aid economic growth of the country.

                      Infraline Energy Metals & Mining Research Team


The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the Infraline Technologies (India) Pvt. Ltd. (organization). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.