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Policy Support by Government to the Telecom Sector

National Telecom Policy, 2012

Mobile Application Market in India

Telecommunication Sector

The substantial progress made in telecommunications since the early 1990s is a success story. The number of telephone lines has grown by 25-30 per cent each year throughout the 1990s.

The telecommunication sector witnessed revolutionary change in the recent years and the Indian Telecom network is now the second largest in the World after China. From only 76 million subscribers in 2004, the number has increased to more than 1200 million in 2016. The increased has been entirely due to spectacular increase in wireless connections or mobile phones. The number of mobile connections rose from 35 million in 2004 to 1150 million in 2016. Tele density an important indicator of telecom penetration increased from 7 percent in 2004 to 93 percent in 2016.

Telecommunication Reforms

1. Reform in the telecommunications sector began in 1992-93 with the opening of value added services to the private sector. Subsequently, after intensive deliberation within the Government and outside, the National Telecom Policy (NTP 1994) announced the opening of basic telecom services to competition, and the initiation of cellular mobile services.
2. Private initiative was to complement public sector efforts to raise additional resources through increased internal generation and the adoption of innovative means like leasing, deferred payments, build-operate transfer, and the like.
3. The NTP 1994 also envisaged the provision of a public telephone becoming available for every 500 persons in urban areas and at least one in every village.
4. The method employed for inducing the private sector into both basic and cellular services was through the auction of licence fees, consistent with what has been followed by many other countries. The consequence was that the auction process elicited excessively high bids, even from bidders who had no previous history of substantive telecom experience, or even any other experience. Once the licences had been awarded, and operations had begun, inevitable complaints arose about the licence fees being too high and uneconomic.
5. Since various developments had taken place in the telecom sector and new issues had arisen, a New Telecom Policy (NTP 1999) was announced. The issues that had arisen during this period related to:

• Perception of the original licence fee bids having been excessive
• Inadequate competition resulting from the existence of only two operators in each circle
• Continuing changes in technology
• The emergence of India as a significant player in the IT industry

1. Under the NTP 1999, a package for migration from fixed licence fee to revenue sharing was offered in July 1999 to the existing cellular and basic service providers.
2. The MTNL was allowed as a third operator to provide cellular services to promote competition. Government opened national long-distance services to private operators without any restriction on the number of operators and with moderate entry fees.
3. International Long Distance Services were then opened in 2001, also with no limit on the number of operators and moderate entry fees. Both are subject to licence fees being paid as revenue sharing. Thus significant competition was introduced in the Indian telecom market starting in 2000-2001.
4. The consequence has been dramatic: cellular mobile tariffs have fallen by about 90 per cent since 1999, and long distance tariffs, both domestic and international, fell by 75 per cent between 2000 and the end of 2012.
5. Corresponding organisational changes also took place during 2000-01. The two service providing departments of the telecom sector were corporatised, viz., Department of Telecom Services (DTS) and Department of Telecom Operations (DTO).
6. A new public sector company ‘Bharat Sanchar Nigam Limited’ (BSNL) was given all service providing functions of these two departments with effect from October 2000. A fourth cellular operator in all the circles was permitted.
7. With the introduction of effective competition in the cellular mobile services sector, the Telecom Regulatory Authority of India (TRAI) made cellular mobile tariffs free from regulation while reserving the right to intervene in the case of any malpractice such as the offer of predatory tariffs.

Telecommunication in India: Recent Developments

The Telecom Market Segments

Telecom subscriber base expansion

Wireless Subscription dominates the Indian Markets

Market Share of Wireless Service Providers

Fixed Line/Land Line Segment

Internet Subscription is on the Rise

Announcement Made in Railway Budget

Dedicated Freight Corridor

DFC Objectives

Dedicated Freight Corridor: Projections

Modernisation of Railways

Policy Support by the Government

Automobile Freight Train Operator Scheme 2013:

Wagon investment scheme

Participative models for rail connectivity and capacity augmented projects

Key modernisation initiatives

1. Introduced ‘Operation 5 minutes’ scheme for passengers travelling unreserved, which provides the passengers the time to purchase tickets within 5 minutes
2. Installing Bio–toilets by 2016. So far (till October 2016), Indian Railways have installed more 49,000 Bio–toilets in passenger coaches, extension of built-in dustbin facility has been approved for non-AC coaches. Setting up of 5-year safety plan
3. Introducing 24/7 All – India helpline number through which passengers could address their problems on a real – time basis. Toll free number, 138 has been launched as 24/7 All-India helpline number and availability of Toll – free number, 182, for security related complaints
4. Moving towards paperless ticketing and charting by development of multi–lingual E–ticketing portal. In the coming years, SMS on mobiles would be taken as proof instead of tickets promoting paperless tickets throughout India.
5. Train protection warning system and train collision avoidance system have been installed on selective routes
6. Setting up a new department that would ensure the railway stations and trains are kept clean. Improving North-East and J&K connectivity.
7. In an initiative to decarbonize rail transport, Indian Railways will be collaborating with various public-sector enterprises to speed up the process of electrification of railway tracks
8. As of June 2017, the Indian Railways is preparing to acquire 25 E5 Shinkasen series bullet trains from Japan for an estimated cost of US$743.71 million. The high speed corridor will have urinals, western style toilets with hot water and washing closet seat facility, separate washrooms for men and women equipped with triple mirrors for make-up and many other facilities.

1. Infrastructure Sector in India: Definitions; Growth and Infrastructure Linkage
2. Infrastructure Development in India
3. Infrastructure Sector in India: Growth Drivers; Government Policy Initiatives
4. Road Transport in India
5. Civil Aviation Sector in India
6. Railways Sector in India
7. Recent Initiatives by the Railways
8. Telecommunication Sector in India
9. Notable Initiatives of Indian Telecom Sector
10. Port Sector in India
11. Energy and Power Sector
12. Government Policy Support for the Energy Sector

Civil Aviation Sector in India

In India, a beginning in the air transport was made in the year 1920, when the government first decided to prepare air routes between Mumbai and Kolkata. The civil aviation work actually started in in 1924-25, but the progress was slow until the outbreak of the second World War.

Hindustan Aeronautics Limited: The Hindustan Aircraft (now Hindustan Aeronautics Limited), was founded in 1940.  It was started at Bangalore (now Bengaluru) as a repair, overhauling and assemblage depot, has now grown into an important manufacturing plant. It has designed and manufactured trainer air-crafts. It belongs to the aerospace and defence industry. It is managed by Ministry of Defence.

Civil Aviation Recent Developments: A Snapshot

India is the 9th largest civil aviation market in the world, In FY17, domestic passenger traffic witnessed a growth rate of 21.5 per cent

In FY17, airports in India witnessed a domestic passenger traffic of about 205 million people.

Investments worth US$ 6 billion are expected in the country’s airport sector in 5 years

India’s civil aviation market is set to become the world’s 3rd* largest by 2020 and expected to be the largest by 2030

Growth Potential & Drivers of Indian Aviation Industry

Airport Authority of India

Airports & Airstrips in India

Major Airline Operator in India

Private Sector Participation in Airport Development

Until 2013, AAI was the only major player involved in developing and upgrading airports in India.

Post liberalisation, private sector participation in the sector has been increasing.

Private sector investment increased to US$9.3 billion during the 12th Five Year Plan from US$ 5.5 billion in the previous plan.

1. Recourse to the Public Private Partnership (PPP) model has boosted private sector investments in airports
2. PPP route for five international airports (Delhi, Mumbai, Cochin, Hyderabad, Bengaluru) most noteworthy
3. In Union Budget 2017, Government of India has decided to develop select airports in tier 2 cities under PPP model in order to attract investments from private players.
4. Increasing share of private sector in equity component of major airports:

• 74 per cent private shareholding in IGI Airport (Delhi) – owned majorly by GMR (54 per cent), Fraport AG (10 per cent), Eraman Malaysia (10 per cent); rest of the shares owned by AAI
• 74 per cent private shareholding in CSI Airport (Mumbai) – owned majorly by GVK (50.5 per cent), Bid Services Division (Mauritius) Ltd. (13.5 per cent), ACSA Global (10 per cent); rest of the shares owned by AAI
• 74 per cent private shareholding in RGI Airport (Hyderabad) – owned majorly by GMR (63 per cent), Malaysia Airports Holdings Berhad (11 per cent); rest of the shares owned by Government of India (13 per cent) and Government of Andhra Pradesh (13 per cent)
• 74 per cent shareholding in Kempagowda International Airport (Bengaluru) – owned majorly by Siemens Project Ventures, Germany (40 per cent), Unique (Flughafen Zurich AG) Zurich Airport, Switzerland (17 per cent), L&T, India (17 per cent); rest of the shares owned by AAI (13 per cent) and KSIIDC, which is an agency owned by the state of Karnataka, India (13 per cent).

In March 2017, by selling off 2 offshore bonds, GMR plans to raise US$250-300 million for refinancing their debt. In June 2017, GMR announced plans to refinance loans and divest assets in road and power sectors to cut debt so as to invest up to Rs. 7,400 (US$ 1.15 billion) crore to expand Delhi and Hyderabad airports.

Successful PPP Model Airports in India

Presently India has 5 PPP airports each at Mumbai, Delhi, Cochin, Hyderabad and Bengaluru, which together handle over 55 per cent of country’s air traffic.

Government of India has approved 15 greenfield PPP projects which are expected to increase the air traffic in India. These projects would be setup in Goa, Navi Mumbai, Maharashtra, Bijapur, Gulbarga, Karnataka, Kerala, West Bengal, Madhya Pradesh, Sikkim, Puducherry and Uttar Pradesh.

Government Initiatives in Civil Aviation Sector

Road Transport in India

Classifications of Roads

Roads are mainly classified into following Categories:

Road Network in India

Importance of Road Transport

Road Development in India

The major initiative undertaken by the government for the development of road sector are:

• The National Highway Development Project (NHDP).
• Pradhan Mantri Bharat Jodo Pariyojana (PMBJP): linking of major cities to National Highways.
• Pradhan Mantri Gram Sadak Yojana (PMGSY): Construction of Rural roads.

National Highway Development Project

NHDP deal with the development of high quality highways. NHDP is the largest highway project undertaken in the country. It has been implemented by the National Highway Authority of India (NHAI).

Initially, The National Highway Development Project (NHDP) consists of two major components:

The “Golden Quadrilateral”: The Golden Quadrilateral” project will connect the four major metropolitan cities (Delhi. Mumbai, Chennai & Kolkata) with 4-6 lane highways, with a total length of about 5,850 km.

The “North South – East West” projects: The “North South – East West” project will connect the Northern most point of the country to the Southernmost, and similarly from East to West, with a total length of about 7,300 km

The NHDP was expected to cost Rs 540 billion, when started in 1998. The financing pattern of this project indicates that private sector participation in the form of investment amounts to only Rs 40 billion (7.4 per cent of the total).

Over the course of the project, institutions like the World Bank, Asian Development Bank (ADB) and Japanese Bank for International Cooperation (JBIC) are expected to finance about Rs 200 billion; another Rs 200 billion of investment would be financed from the cess.

NHDP consists of following Phases:

1. Phase 1 and Phase 2: The phase envisages construction of 4 & 6 lane highways of about 14000 KMs. The two phases comprise construction of “Golden Quadrilateral” and North South (Sri Nagar to KanyaKumari) – East West (Silichair to Porbandar) Projects.
2. Phase 3: The phase consists of construction of 4-6 lane National highways of 12100 KMs connecting state capitals, tourist places, industrial centres.
3. Phase 4: The phase involved upgradation and strengthening of 20000 KMs of single/two lane national highways.
4. Phase 5: The phase involved construction of 6 lane national highways of 6500 KMs.
5. Phase 6 & 7: The phase 6 & 7, involved construction of 1000 KMs of expressways and construction of 700 KMs of ring roads of major towns and bypasses and other elevated roads, tunnels, underpasses on national highways respectively.

Problems of the Road Sector

Road Sector in India Recent Developments

Expansion of Roadways:

Road Development Program for North East Region

The Special Accelerated Road Development Programme for the North-Eastern region (SARDP-NE) is aimed at developing road connectivity between remote areas in the North East with state capitals and district headquarters

SARDP-NE is vested with the development of double-/four-lane national highways of about 7,530 kms and double-laning improving about 2,611 kms of state roads, as on FY16

Implementation of the road development programme would facilitate connectivity of 88 district headquarters in North Eastern states to the nearest National Highways

The project would be undertaken in following 3 phases:

Policy Initiatives by the Government

Growth Drivers for Infrastructure Sector in India

Recent Government Initiatives

Construction Sector

Affordable Housing Scheme

Infrastructure Development in North Eastern States

Metro Rail and Mono Rails

Mono Rail

Infrastructure Development in India

Historical Timeline

Infrastructure Sector: Recent Developments

FDI Flows in the Infrastructure Sector

Infrastructure Projects Completed during 12^th Five-Year Plan

Expansion of Roads: Recent Trends

Revenue growth of Indian Railways

Power Generation Capacity

• Installed capacity increased steadily over the years, posting a CAGR of 10.57 per cent in FY09–17 and stood at 326.84 (GW).
• As of June 2017, energy generation from conventional sources stood at 307.7 billion units (BU).

Performance of Eight Core Infrastructure Sector

Infrastructure Sector

Definitions:

Infrastructure is a key driver of the overall development of Indian economy. Infrastructure sector focuses on major infrastructure sectors such as power, roads and bridges, dams and urban infrastructure.

“Infrastructure is generally understood as the basic building blocks required for an economy to function efficiently”.

The National Statistical Commission headed by Dr. C. Rangarajan, attempted to identify infrastructure based on some characteristics. The Rangarajan Commission indicated six characteristics of infrastructure sectors:

Based on these features (except b, d, and e), the Commission recommended inclusion of following in infrastructure in the first stage:

Dr. Rakesh Mohan Committee in “The India Infrastructure Report” included:

The World Bank treats power, water supply, sewerage, communication, roads & bridges, ports, airports, railways, housing, urban services, oil/ gas production and mining sectors as infrastructure.

The Economic Survey considers power, urban services, telecommunications, posts, roads, ports, civil aviation, and railways under infrastructure sector.

Why do Infrastructure Matter for Growth & Development?

There is, indeed, a plethora of anecdotal and more technical evidence that suggests development of infrastructure can lead to growth and development of an economy.

The argument is particularly true for the developing countries which lack adequate infrastructure facilities. Intuitively, it should make sense to assume that the more developed a country is, the higher its infrastructure facilities and hence the lower the return from additional investment in roads, railways, ports etc. However, the less developed a country is, the more likely the infrastructure is to matter, because the returns from the Infrastructure development will be much more than the cost of the projects.

Example: A massive road-building exercise in a poorly developed state can offer a one-time boost production activity and productivity of workers in the state.

Infrastructure Sectors & Growth

Any modern textbook on industrial economics or industrial organization will point out that for industries that enjoy network externalities (positive spill over effects/benefits to other sectors/industries), the social rate of return has to be higher than the private rate of return in these projects—assuming that the regulation does not allow the network externality to be turned into a private rent. In other words, their impact on GDP and its growth should be high. This explains for instance why the growth impact of the telecoms sector so often come out to be high. But for specific countries or regions, this could also be true for transport or electricity.

In general, however, all infrastructure subsectors can be good examples of sectors in which such network externalities can matter. This section reviews the main lessons available on each subsector on the growth impact of each infrastructure subsector.

Energy Sector

The importance of energy sector especially electricity in promoting growth and development via human development and physical development is well known. The single most reason obstructing the growth of the industrial sector in general and manufacturing in particular in India is deficiency of continuous power supply (electricity/electrification) to run factories.

Various studies have found out that, there exist a positive impact on energy infrastructure on the growth of an economy. Therefore, investing in the energy sector may be the safest bet to achieve a high growth. This should not be a surprise, energy is indeed an input into any of the other infrastructure subsectors—for instance, water for irrigation purpose is often pumped through the electric pumps.

Telecommunication

The impact of telecommunication on the growth is found to be maximum. The availability of fixed line phones and mobile phone penetration have effectively transformed the Indian economy and has given boost to Businesses like BPOs and KPOs (Knowledge Processing Outsourcing).

The recent growing research on the importance of the access to internet to increase competition in the private and public sector and from increasing competition to the higher social return and growth of industries is well documented.

Transport

For developing countries like India, the estimated growth effects of transport investments have been very strong. This has been a common finding in research over the last 20 years or so. This is not surprising since the transport facilities in India are weak. The main impact of improved transportation facilities on the development has to come from quality, from addressing bottlenecks or from capturing new network or suprational effects which have not been internalized in older designs of the transport networks.

In fact, studies have found, that for most of the developing countries, the construction of Roads, Railways, Highways, Airports and Sea Ports have contributed positively towards increasing growth.

For instance, roads are needed in Africa, if Africa wanted to match the growth rate of the rest of the world. Construction of Roads & Highways are essential to reduce differences across regions in India. Ports are needed in India, if India, wants to increase its exports and become a major player in the Global Economy.