Home / BLOG / India needs 'Well-Defined' infrastructure

I was discussing the SC verdict on the RIL Vs RNRL case with somebody. "But you don't track the oil & gas sector do you?," he asked me. "Well, the oil & gas sector is very much part of the overall infrastructure industry in the country," I replied. "Oh, is it? I thought oil & gas was out of the purview of infrastructure," he said. I wasn't really surprised. While we all agree that infrastructure development is essential for India's economic progress, there are differences about what constitutes infrastructure and what doesn't. Even the Planning Commission (Secretariat for Infrastructure) acknowledges that "there is no clear definition of infrastructure according to the current usage of the term in India." It would be interesting to note how various 'authorities' in India have defined infrastructure.

Here is Dr C Rangarajan Commission's Notion of Infrastructure (2001): The Commission indicated six characteristics of infrastructure sectors, (a) Natural monopoly, (b) High-sunk costs, (c) Non-tradability of output (d) Non-rivalness (up to congestion limits) in consumption, (e) Possibility of price exclusion, and (f) Bestowing externalities on society.

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Based on these features (except b, d and e), the Commission recommended inclusion of following in infrastructure in the first stage:
• Railway tracks, signalling system, stations
• Roads, bridges, runways and other airport facilities
• T&D of electricity
• Telephone lines, telecommunications network
• Pipelines for water, crude oil, slurry, waterways, port facilities
• Canal networks for irrigation, sanitation or sewerage.

The Commission further recommended that considering characteristics (b), (d) and (e) also, the above list may be extended to include the following in the second stage:
• Rolling stock on railways
• Vehicles, aircrafts
• Power generating plants
• Production of crude oil, purification of water
• Ships and other vessels.

The Commitee headed by Dr Rakesh Mohan (1996) in 'The India Infrastructure Report' included Electricity, gas, water supply, telecom, roads, industrial parks, railways, ports, airports, urban infrastructure, and storage as infrastructure.

Except industrial parks and urban infrastructure, all these sub-sectors are treated Central Statistical Organisation (CSO) also as infrastructure.

As per the RBI, a credit facility is treated as 'infrastructure lending' to a borrower company which is engaged in developing, operating and maintaining, or developing, operating and maintaining any infrastructure facility that is a project in any of the following sectors, or any infrastructure facility of a similar nature;
i) a road, including toll road, a bridge or a rail system;
ii) a highway project including other activities being an integral part of the highway project;
iii) a port, airport, inland waterway or inland port;
iv) a water supply project, irrigation project, water treatment system, sanitation and sewerage system or solid waste management system;
v) telecommunication services whether basic or cellular, including radio paging, domestic satellite service (i.e. a satellite owned and operated by an Indian company for providing telecommunication service), network of trunking, broadband network and internet services;
vi) an industrial park or special economic zone;
vii) generation or generation and distribution of power;
viii) transmission or distribution of power by laying a network of new transmission or distribution lines;
ix) construction relating to projects involving agro-processing and supply of inputs to agriculture;
x) construction for preservation and storage of processed agro-products, perishable goods such as fruits, vegetables and flowers including testing facilities for quality;
xi) construction of educational institutions and hospitals;
xii) any other infrastructure facility of similar nature.

Further, for raising external commercial borrowings funds, the RBI has defined infrastructure to include (i) power, (ii) telecommunication, (iii) railways, (iv) road including bridges, (v) sea port and airport, (vi) industrial parks and (vii) urban infrastructure (water supply, sanitation and sewage projects) vide their circular dated 2nd July, 2007.

In the next post, we will see some more definitions from authorities such as IRDA, Income Tax Department, Economic Survey of India and the Empowered Sub-Committee of the Committee on Infrastructure.

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