Last week, the government relaunched the Bharatmala Pariyojana (BMP)—an initiative to add 35,000km of new highways (subsuming existing plans to add 10,000km of national highways) with an outlay of Rs5.35 trillion over the next five years—to raise investments in infrastructure, and boost economic growth. An additional Rs1.57 trillion is set to be used in existing projects. Thus, overall the Union government is set to spend around Rs6.92 trillion on roads over the next five years.
The road-building initiative was sorely needed but it does not represent acceleration in road-building, and is unlikely to provide a big boost to the capital expenditure cycle.
According to data from the Centre for Monitoring Indian Economy (CMIE), newly started road projects in the last five years (i.e., between 2012-13 and 2016-17) amounted to Rs6.55 trillion. Of this, Rs4.35 trillion was spent by the centre, which tends to focus mainly on national highways, with other roads being under the jurisdiction of states. Hence, the outlay on highways envisaged over the next five years, i.e. Rs6.92 trillion, does not appear to be a big jump, especially after accounting for inflation.
Even when viewed in terms of road length, the proposals do not amount to a significant increase. The central government aims to build around 35,000km of new highways over the next five years; 24,800km under Bharatmala, and the rest under the existing NHDP program. This is not too ambitious a target given that around 27,000km of national highways were added in the last five years.
On top of that, the risk that even this not-so-ambitious target will be missed remains, given that actual road construction has typically been behind target.
As a note by UBS Securities India Pvt. Ltd pointed out, highway award activity stagnated in the last fiscal year, and the Bharatmala initiative does not change that.
“The government’s new Bharatmala programme doesn’t change that picture (of stagnation) – it was needed because existing program awards were ending,” a team of UBS analysts wrote in the recently published note.
While the initiative will lead to new awards of road contracts, it will still be a small fraction of the investments the Indian economy needs over the next five years even if the government happens to beat its past record, and meet all targets. To illustrate, the entire proposed spending on highways over the next five years—Rs6.92 trillion—only amounts to 17% of overall investment spending (gross fixed capital formation or GFCF) in the single year 2016-17. Even after adding the proposed Rs88,185 crore spending on rural roads in the next three years, the total capex plans of the road sector in coming years amounts to Rs7.8 trillion or only 19% of GFCF in 2016-17.
While it is true that investments in roads now constitute a big part of infrastructure-related capital expenditure, the trend actually reflects subdued capex activity by private firms.
Analysis of CMIE data showed that while public spending on infra projects has indeed risen over the past couple of years, overall growth in infra spending still remains muted largely because of lack of infra investments by the private sector owing to legacy problems. The boom years of high private participation in the 2000s were followed by a spike in stressed assets, leading to a pile-up of bad debt and lowered lending to the sector.
The government’s other big plan announced last week—recapitalization of state-owned banks—may partly ease such constraints in the years ahead, if it is implemented well. However, it is worth keeping in mind that funding constraints are not the only hurdles infra projects face.
Many such projects are stuck because of lack of clearances even as the extent of projects stuck because of land acquisition problems seems to have declined.
Receive Daily Updates
Recent Posts
Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.
Globally, around 80% of wastewater flows back into the ecosystem without being treated or reused, according to the United Nations.
This can pose a significant environmental and health threat.
In the absence of cost-effective, sustainable, disruptive water management solutions, about 70% of sewage is discharged untreated into India’s water bodies.
A staggering 21% of diseases are caused by contaminated water in India, according to the World Bank, and one in five children die before their fifth birthday because of poor sanitation and hygiene conditions, according to Startup India.
As we confront these public health challenges emerging out of environmental concerns, expanding the scope of public health/environmental engineering science becomes pivotal.
For India to achieve its sustainable development goals of clean water and sanitation and to address the growing demands for water consumption and preservation of both surface water bodies and groundwater resources, it is essential to find and implement innovative ways of treating wastewater.
It is in this context why the specialised cadre of public health engineers, also known as sanitation engineers or environmental engineers, is best suited to provide the growing urban and rural water supply and to manage solid waste and wastewater.
Traditionally, engineering and public health have been understood as different fields.
Currently in India, civil engineering incorporates a course or two on environmental engineering for students to learn about wastewater management as a part of their pre-service and in-service training.
Most often, civil engineers do not have adequate skills to address public health problems. And public health professionals do not have adequate engineering skills.
India aims to supply 55 litres of water per person per day by 2024 under its Jal Jeevan Mission to install functional household tap connections.
The goal of reaching every rural household with functional tap water can be achieved in a sustainable and resilient manner only if the cadre of public health engineers is expanded and strengthened.
In India, public health engineering is executed by the Public Works Department or by health officials.
This differs from international trends. To manage a wastewater treatment plant in Europe, for example, a candidate must specialise in wastewater engineering.
Furthermore, public health engineering should be developed as an interdisciplinary field. Engineers can significantly contribute to public health in defining what is possible, identifying limitations, and shaping workable solutions with a problem-solving approach.
Similarly, public health professionals can contribute to engineering through well-researched understanding of health issues, measured risks and how course correction can be initiated.
Once both meet, a public health engineer can identify a health risk, work on developing concrete solutions such as new health and safety practices or specialised equipment, in order to correct the safety concern..
There is no doubt that the majority of diseases are water-related, transmitted through consumption of contaminated water, vectors breeding in stagnated water, or lack of adequate quantity of good quality water for proper personal hygiene.
Diseases cannot be contained unless we provide good quality and adequate quantity of water. Most of the world’s diseases can be prevented by considering this.
Training our young minds towards creating sustainable water management systems would be the first step.
Currently, institutions like the Indian Institute of Technology, Madras (IIT-M) are considering initiating public health engineering as a separate discipline.
To leverage this opportunity even further, India needs to scale up in the same direction.