Why Indian Infrastructure not soaring?

Recently published McKinsey Report on Indian Infrastructure in India states that the bottlenecks in awarding and executing Infrastructure projects in India could result into a huge loss up to $ 200 billion in Gross Domestic product in the next nine years (i.e. by 2017)

In the previous post “Boost Infrastructure to boost Indian Logistics” we had written that the agencies are not being able to execute the infrastructure project within the timeline. Reasons may vary but one thing can be said for sure that the lack of participation of the private players in the Infra projects planned by the government is one of the main reasons for the bottlenecks in implementation. McKinsey states that the major reason for this bottleneck is ‘problems with the land acquisitions’ but there are many areas where land acquisitions not required but the problem remains the same.

Government should be willing to reinforce Public-Private-Partnership model so as to give infra a boost particularly in the implementation part. However, in the budget 2009-2010, the Finance Minister Mr Pranab Mukharjee has stated that the Government would need to increase the investment and attract private investment in the sector. This should be up to 9 percent of the Indian GDP. He has also said that for the removal of the bottlenecks for speedy implementation of infrastructure projects to ensure that sufficient funds are made available for this sector, the government would try to attract private players for the implementation of the wide range of infrastructure sector like airports, ports, roads and even in railways through public private partnerships (PPP).

Lack of Investment in the sector is also a major concern. A study by a private agency published in January this year stated that the liquidity crunch and global financial crisis has dampened fresh investment announcements by domestic business leaders in the sector, as about $500 billion is required for financing infrastructure projects during the 11th Plan period. Although the finance minister has said that ensuring better finances, the Government has decided that IIFCL will refinance 60% of commercial bank loans for PPP projects in critical sectors, there is a growing need of strong participation of private players for the investment in Indian Infrastructure sector.

The sector is the base of many businesses and it needs to be improved by a collaborative approach by the government, private infrastructure companies, and Investment organizations.

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Boost Infrastructure to boost Indian Logistics

The state of Logistics Infrastructure is very pathetic and needs to be improved by creating a sophisticated mechanism

In a seminar organized by Confederation of Indian Industry (CII), Mr. Ajay Shankar, Secretary, DIPP, Ministry of Commerce and Industry said that bringing down the logistics cost of 13% of the GDP now to a globally competitive 8% of GDP is itself the biggest challenge before the country. But he was focussed to warehousing sector when he said that bringing down logistics cost is creating business opportunity in logistics sector where warehousing is the key verticals. He missed the major issue which is very much responsible for the 13 percent logistics cost. Yes! The infrastructure.

There is a lot more to do for the enhancement of the condition of Indian Logistics Infrastructure which has been the biggest obstacle and been hindering the growth of the sector. For the last couple of years, however, the government has planned well to work on the betterment of the Logistics Infra but the agencies like NHDP failed to achieve the timeline. PPP model of the government worked well in some instances particularly in container operations of railways in the first phase of the bid when 15 private operators got license to run the trains. These operators invested a huge amount of money into the infrastructure setup. But the model in other sectors is still awaiting positive responses from the government and the private players.

Ok, Other side! Government’s dedication towards the improvement of rural infrastructure is somehow fruitful to the sector. Now the rural-urban linkage has been enhanced and the product is reading to end user with satisfactory time. Still some rural parts of the country are awaiting development in the condition of transportation and storage. These areas need to be looked upon immediately.

Everyone is aware of the pathetic condition of ports. JNPT is overcrowded. Other ports are too small to handle large volumes. The condition gets worsened when monsoon comes. Building new ports is taking time. Need to say more?

There must be a combined approach to address the issue. Not only the government but the private players can also play crucial role in improving the condition of the Indian logistic infrastructure. PPP model would certainly work. But an imperative mechanism is required to get the plans executed in a sophisticated manner...

Cheers!!
log4scm : All about Indian Logistics and Supply Chain

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Time for SCM companies to go rural

Thanks to the budget presented by the finance ministry, the rural sector is going to see tremendous growth in the months to come and thereby create opportunities for Supply Chain Companies

The rural demand for the urban products and rural production (particularly agriculture and allied sectors) are going to witness good growth in near future due the support of the finance ministry for the rural sector. According to the budget, Indian Agriculture Sector which was growing with merely 1.5 percent will achieve 4 percent growth rate. Moreover, governement's commitment to boost up indian rural infrastructure will somehow add value to it.

Focus on delivery mechanisms and streamlining of fiscal framework and the increased investment in NREGA and JNNURM by emphasizing both on much-needed macro infrastructural development and the basic alleviation of the common man, with a focus on inclusive growth will positively impact a large number of consumers and this should give a strong boost to rural demand. Increased outlay on social infrastructure and reduction in tax burden on individuals is likely to result into increase in disposable income, which should, in turn, positively impact the demand for the consumer electronics, FMCG and others sectors.

Well, the status of rural supply chain and public distribution system is very weak. Due to lack of storage facilities, almost 25 per cent of the (agricultural) produce is wasted. This is estimated at even 30-40 per cent for many agri-commodities; in such a scenario, there is clearly an urgent need for focused efforts. Expert Committee on Strengthening and Development of Agricultural Marketing have pegged the investment requirement in the sector at Rs 5,400 crore for dry storage and Rs 27,000 crore for cold storages. The storage capacity in the country against production of vegetables and fruits stands at 12 per cent, against the international average of 50 per cent.

However, with enhanced rural infrastructure this could be one of the potential business for the supply chain companies including warehousing companies and others. Sensing this opportunity, some companies including Shree Shubham Logistics, Adani Logistics, etc. have started their operations for the rural parts of the countries. Now time has come to look at Rural India.

Cheers!!
log4scm: All about Indian Logistics and Supply Chain

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