Draft Report of the High Level Group on Services Sector

Improving Physical Infrastructure

The quality of physical infrastructure and infrastructural services is crucial for the competitiveness of the services sector, although the inter se importance of individual elements of infrastructure differs from sub-sector to sub-sector. Telecommunications, power, roads, railways, ports, airports are all important for the efficiency of the services sector. The telecommunications sector in India stands apart as it can be said to have reached world standards. However, there are serious shortcomings in all other areas resulting in high logistics cost for service enterprises.

The power situation in the country has remained bad with deficiencies in both quality and quantity of electricity supplies. Supplies have been increasing but they have been outstripped by demand with the result that shortfall between peak demand and availability has increased in the past few years. Maintaining captive power generation units increases the costs of hotels, hospitals, retail outlets, banks and IT and ITES establishments.

A massive National Highways Development Programme is in the process of implementation but the stretches not taken up for development are in a state of disrepair. The State highways are being maintained well in some States but in others their condition is deplorable. For efficiency and for cutting down the logistic costs the entire road network needs to be maintained in good condition. The traffic conditions on the Golden Quadrilateral, which has been taken up for six-laning will also be well short of world standards because of the mix of motorized and non-motorised roads and also because of the fact that they pass through inhabited areas, and ribbon development, which interferes with traffic flows, is a widely prevalent phenomenon. Another big impediment is the stoppage of vehicles at the check-posts at inter-state borders by commercial taxes, transport, forest and police officials even if the vehicles are merely transiting through the States. The cumulative result of all this is that even if the road surface is good and has adequate width, vehicles move at a slow speed. On the average Indian trucks are used for 60,000 to 100,000 kms a year, which is less than a quarter of those in the developed countries.

Indian Railways have been performing well in recent years and the involvement of private operators for the transportation of containers has increased the efficiency of movement of goods by train. However, the goods trains are still being slowed down by congestion in saturated corridors like Delhi-Mumbai. The Dedicated Freight Corridors on the Western and Eastern routes have been on the anvil for the last two years but there has been no perceptible progress in their implementation.

There has been slippage in the average pre-berthing time taken by ships in the ports because of congestion, but no new major contract has been awarded for construction of berths in recent months. In the airports there is an ambitious programme assigned to the Airports Authority, but for the present the congestion in the major airports of Mumbai and Delhi has increased. While two green field airports at Bangalore and Hyderabad are nearing completion there are serious shortcomings in their connectivity with the city. While constructing green field airports or modernizing existing airports attention needs to be given to put in place road and rail connectivity before the new or modernized facility becomes operational. It should not be that the benefit of modern facilities in the newly commissioned airports is nullified by the time taken to reach the city from the airport or vice versa. If the airport is at a distance from the city center it is important that the passengers have the option to travel by fast means such as express trains between the airport and city center. The services sector also needs reasonably good urban infrastructure, water supply, drainage, sewerage, solid waste management, and the development of planned housing. Urban transportation infrastructure is equally important for enabling smooth movement within the city. All cities must have an integrated traffic and transportation plan, the implementation of which should be monitored by a Unified Metropolitan Transport Authority, as envisaged in the National Urban Transport Policy. In large cities a major requirement is provision of mass rapid transit systems, connecting various parts of the cities including the railway stations and airports. The competitiveness of the services sector is affected if too much time of the worker is taken in commuting between residence and the workplace. With congestion in the existing cities new townships need to be developed.

The infrastructure deficiencies outlined above would need to be addressed with greater urgency if the services sector in the country is to measure up to world standards.