National Infrastructure Pipeline (NIP): Features, Benefits, Challenges
The National Infrastructure Pipeline (NIP) was published in December last year by the Department of Economic Affairs. It provides wide-ranging information about India’s infrastructure investment requirements until 2025 in terms of individual sectors and projects. It aims to improve India’s infrastructure and address the current unemployment crisis. It is a comprehensive strategy to revitalise India’s economic growth by including new projects like housing, safe drinking water, access to clean and affordable energy, healthcare, educational institutes, railway stations, airports, bus terminals, metro, logistics and warehousing, irrigation projects, etc. In short, it sets a humongous task for the centre and state governments for the next five years to improve the country’s infrastructure and ease people’s lives. Therefore, cooperation between the centre, state and private sector and reforms of the existing laws is a need of the hour to achieve the ambitious targets set under the NIP.
What is the National Infrastructure Pipeline (NIP)?
- National Infrastructure Pipeline is the Central Government’s investment plan that aims to enhance the infrastructure in select sectors for a period of five years from 2020 to 2025.
- The Finance Minister announced Rs.103 lakh crore ($1.4 trillion) for NIP to spend in the infrastructure sector over a five-year period.
- This plan may help India reach a $5 trillion economy by2025.
- Furthermore, it is estimated that India would need to spend $4.5 trillion on infrastructure by 2030 to sustain its growth rate.
- The NIP aims to make it happen efficiently.
What are the benefits of NIP?
- For the Economy: A well-planned National Infrastructure Pipeline will enable more infrastructure projects, business growth, job creation, and inclusive growth. Investment in infrastructure is a good strategy to overcome the current slowdown as it helps reactivate it and increases demand in other sectors, leading to an increase in fund flow to these sectors besides creating valuable assets.
- For the Government: Well-developed infrastructure improves the productivity of the economy, leading to the creation of additional fiscal space for improving the revenue base of the government and ensures the quality of expenditure focus in productive areas.
- For Developers: It gives a better view of projects that are being undertaken, provides time to be better prepared for project bidding, and reduces aggressive bids or project delivery failures. It will also improve access to sources of financial resources due to increased infrastructure confidence.
- For Banks/financial institutions: NIP will increase investors’ confidence as identified projects are likely to be more prepared and are less likely to suffer stress due to active monitoring of the projects. This reduces the probability of NPAs.
Why do we need better infrastructure in the future?
India’s infrastructure needs an overhaul. This is because:
- Urbanisation: 42% of the population is going to live in urban areas in 2030. Currently, only 31% are living in urban India.
- Increasing working-age population: It is estimated that India will have a 1.03 billion workforce in 2030.
- Urban contribution to employment will be 41% of the total in 2030.
- A shift towards a service-ba
- sed economy: The share of agriculture will decrease to 8% from the current 15%.
- Climate change: The number and intensity of disasters are prone to increase given the high impact of climate change. Providing for disaster resilience through improved infrastructure is a need of the hour.
What are the key components of the report of Task Force on National Infrastructure Pipeline?
The Task Force on National Infrastructure Pipeline chaired by Secretary, Department of Economic Affairs, Ministry of Finance had submitted a detailed report on the infrastructure plan. The main function of the task force was to identify the technical feasibility and economic viability of infrastructure projects that are going to be initiated in fiscals 2020 to 2025. The report proposed certain goals, strategies, and standards under its Infrastructure Vision 2025. The components are as follows:
Affordable and clean energy:
- Ensuring 24X7 power supply
- Promotion of renewable energy and environment-friendly fuel for transportation to reduce environmental pollution.
- 100% population coverage for telecom and high-quality broadband services for the socio-economic empowerment of all citizens.
- Promotion of digital payments and e-governance infrastructure for delivery of banking and public services.
- World-class education institutes for teaching and research.
- Meeting Gross Enrolment Ratio target of 35% by 2025 as per the Draft National Education Policy, 2019.
Convenient and effective transportation and logistics:
- Roads: Improved road connectivity to remotest areas and trunk connectivity through expressways, economic corridors, strategic areas, and tourist destinations.
- Railways: world-class stations and fully integrated rail network with inter-modal connectivity to remote regions. Prevent accidents from ever taking place.
- Airports: Promote regional and international connectivity to achieve passenger and cargo traffic envisioned by National Civil Aviation Policy, 2016. Ensure air connectivity to all Tier-II cities and majority Tier III cities.
- Ports: Ports and waterway infrastructure focused on reducing logistics time and cost for foreign and domestic trade as per Sagarmala National Perspective Plan, 2016. There are around 12 major ports in India. The total capacity of the ports is 2 billion tons. As per the report, the ports’ capacity should be increased to 2.5 billion tons.
- Metro connectivity: Provide urban mobility through MRTS and bus connectivity within 800 meters to home in more than 50 cities. Also, ensure high standards of living for citizens by providing metro connectivity in at least 25 cities.
Universal housing and water supply:
- In India, around 25% of urban households have drinking water on their premises.
- This should be increased to 100%. India ranks 120th in water quality index and 70% of the water in the country is contaminated.
- Also, around 18% of rural households receive piped water supply under Jal Jeevan Mission.
- Reduce the slum population.
- Housing for all by 2022 (PMAY).
- Water management
Doubling Farmer’s income:
- Increase irrigation and micro-irrigation coverage
- Achieve integrated agro-logistics system from farmers to consumers. This means improving storage, processing and packing, transportation of the agriculture produce. It also includes developing marketing and digital infrastructure.
Disaster-resilient public infrastructure:
- Designing public infrastructure to make them resilient to natural and manmade disasters.
Health and well-being:
- Providing improved healthcare facilities and ensuring the electronic health records of all the patients.
- Improving accessibility to primary, secondary and tertiary healthcare facilities across India by meeting objectives of National Health Policy, 2017.
- Medical and paramedical education infrastructure to meet the manpower needs by 2020 and community health volunteers by 2025 in accordance with Indian Public Health Standards (IPHS) norms.
Sustainable and smart cities:
- Wastewater collection, treatment/recycling to national standards in all towns across India.
- Smart city infrastructure for mobility, entertainment, business, safety, and resilience.
Technology for the public good:
- Use data generated by infrastructure services in enhancing quality, safety and operation efficiency and maintenance of infrastructure services.
- Leverage technology to enhance cost efficiency, access, durability, and public infrastructure projects.
- The inter-ministerial task force had also given recommendations on required changes to several key sectoral policies and other reform initiatives by the Centre and state governments.
- This includes developing a robust bond market for infrastructure companies, speedy resolution of infrastructure disputes, optimal risk sharing trough better and balanced public-private partnership contracts and just enforcement of contracts.
This vision will assist India to achieve its Sustainable Development Goals. It will also assist the country to meet the requirement of current fast-paced urbanisation.
What does the recent economic survey say about the NIP?
- According to the economic survey 2019-20, funding of the Rs.103 lakh crore National Infrastructure Pipeline “would be a challenge”.
- However, the survey also pointed out its potential to create jobs, improve ease of living and provide equitable infrastructure access to make growth more inclusive.
- According to the survey, a bunch of well-prepared projects would attract investment from Central and State governments, Urban Local Bodies, Banks and Financial Institutions, private investors, both local and foreign.
What is the global trend in infrastructure spending?
- According to the Global Infrastructure Outlook, 2017 published by Oxford Economics, the estimated global infrastructure investment requirement is $94 trillion between 2016 and 2040.
- Of this, around half of it is required in Asia alone (primarily by China, India, and Japan), with roads and electricity sub-sectors constituting around 67% of these investment needs, followed by the telecommunication, railways and water sub-sectors.
- Another study has estimated that while the demand for infrastructure is growing at about $4 trillion per annum, the supply of infrastructure is growing at only $2.7 trillion each year, leading to a deficiency to about $11.5 trillion on a per annum basis.
What are the challenges while implementing the NIP?
The challenges that the government would face while implementing NIP include:
- Fund constraints for large projects as the size of the proposed investment is big when compared to the previous six years’ completed investment in the infrastructure sector. Centre and states invested Rs.51 lakh crore during the previous six years. Here, realising Rs.103 trillion in the next five years will be a huge task given the precarious financial situation of the governments.
- Lengthy procedures in land acquisition and payment of compensation
- Environmental concerns while implementing the infrastructure.
- Time and cost overruns due to delays in project implementation and procedural delays and lesser growth rate than expected.
- Risks during project implementation due to stalled or languishing projects or shortfall in funds for maintenance.
What does Budget 2020 say about the NIP?
- Prior to the budget, about Rs.22,000 crore was already provided, as support to the NIP.
- During the recent budget, the Finance Minister announced the funding plan for NIP, which comprises of infrastructure investment opportunities worth Rs.103 lakh crore involving 6,500 projects to improve ease of living.
- The NIP includes greenfield and brownfield projects costing more than Rs100 crore each.
- Out of the projects included in the pipeline, 43% are under implementation, 33% are at concept stage and 19% are under development.
- The infrastructure projects are implemented across 18 states and UTs.
- Energy, roads, urban development, and railways constitute 70% of the projected capital expenditure in India.
- 25 lakh crore worth energy projects have been lined up, around Rs.20 lakh crore in roads and nearly Rs.14 lakh crore in railway projects are to be worked for the period of 2020-25.
- With a continued focus on urban infrastructure, schemes like Smart Cities Mission, PMAY and Atal Mission for Rejuvenation and Urban Transformation will need an investment of Rs.16 lakh crores until 2025.
- Employment: During the budget, the high emphasis was given on the aim to increase employment opportunity in construction, operation and maintenance of infrastructure and the National Skill Development Agency will give special thrust to infrastructure-focused skill development opportunities.
- Transportation: As for the transportation (involving roads, railways, ports, and airports) is at about Rs.35.7 lakh crore – of which about Rs.4.9 lakh cores and Rs.6.7 lakh crores were projected for FY20 and FY21.
- The government also envisages increasing revenue through infrastructure development. For instance, more Tejas-type trains will increase the revenue for the tourism sector.
- For ports, the government is considering corporatizing at least one major port and subsequently listing it on the stock exchanges.
- Air traffic: The government aims to develop more than 100 airports by 2024 to support the UDAN scheme and it is expected that the air fleet number will increase to 1,200 from the present 600.
- Energy Sector: For the energy sector, about 22,000 crores is allocated for this sector in 2020-21.
- Expenditure: The centre and the state will invest an equal share of 38% each in the capital expenditure and private participation has been set at 22%. By 2025, the government expects private participation to increase by 30%. To encourage higher private participation, the government plans to reform PPP-based contracts, ensure enforcement of contracts and improve the dispute resolution process.
What can be the way forward?
- National Infrastructure Pipeline is a commendable effort, simply for its breadth of coverage.
- The task force, through its report, had linked India’s need for hard and soft infrastructure to its economic and social progress, including the sustainable development goal. This is a creditable endeavour.
- With respect to infrastructure, the government aims to address pressing concerns regarding the lack of investment therein.
- Increased emphasis on attracting investments is a need of the hour.
- Special focus given to increasing the country’s renewable energy source, alleviating the present financial condition of DISCOMs and proposal to provide around Rs.1.70 trillion for the transportation sector to improve its capacity and efficiency is a step in the right direction.
- However, issues like prolonged dispute resolution, land acquisition, and approvals, and contract enforcement needs to be reformed in a way that would enable an increase in the investment in these sectors.
- The Finance Minister had mentioned amendments to the Indian Contract Act, 1872 to strengthen contract enforcement. How this affects government entities breaking the promises on contracts with private entities remains to be seen.
- Apart from boosting investments, the steps towards capacity buildings as well as increased expenditures show the government’s seriousness in addressing the worrying unemployment numbers.
- The contracts between the government and private sectors should be enforced strictly with transparency and accountability of both sides.
- India also needs to invigorate bonds and credit markets to ensure financing to prevent infrastructure from suffering.
- Asset monetisation needs to be fortified through innovative measures.
- The NIP brings about an overarching vision to infrastructure development in the country. However, the success depends on numerous factors like administrative reforms, financial stability, judicial reforms and intervention, and general governance reforms.
- The state governments should give their complete support to the central government in achieving the NIP targets. Currently, cooperative federalism is a huge challenge due to politics.
- Cooperation between the states and centre should be prioritised while dealing with issues like land acquisition and environmental clearance as it causes delays and high costs.
- For the power sector, higher priority should be given to reforms before any capacity additions. This is because the absence of reforms in this sector leads to uncertainty of 24% of the NIP implementation.
- Overall, the key ministries will have to keep step with this ambition and demonstrate sweeping as well as reforming mindset to make NIP successful.
The National infrastructure pipeline is an ambitious strategy set by the Central Government. For this to be achieved, reforms to the existing laws are vital to make investments in the NIP more attractive. This along with cooperation among the states and the centre will ensure improved infrastructure and NIP achievement within 2025.
What is NIP? What are hindrances that the government is going to face while undertaking this ambitious endeavour and discuss the steps the government should take to address them? (250 words)