India has witnessed an absolute metamorphosis over the last decade. Sprawling cities, flourishing businesses, higher standard of living are all indicators of unprecedented growth, globalisation, urbanisation, expansion and diversification. Infrastructure modernisation and development is said to be the key driver of all the growth and economic activity. The Indian infrastructure sector is at an inflection point and there are immense opportunities for the private sector. Although the sector is booming, there are hindrances in the smooth development of world-class infrastructure.
The highways sector received much required fillip when the government announced National Highway Development Programme and its first two phases-Golden Quadrilateral and North South-East West Corridor. These projects were funded by National Highways Authority of India. For the subsequent phases, i.e. III, IV & V, the government decided to involve the private sector by promulgating the BOT model. Under this model risks would be allocated to those parties that were best equipped to manage them. The private sector had to its credit the capability of delivering quality services to the public. Here, the private sector stood to benefit, as the PPP model would generate reasonable long-term revenue and profits for them. This model also allowed the government to allocate and use its funds in other focus areas of development.
One of the key factors acting as a deterrent to growth is paucity of funds. This holds true especially in the case of large scale, complex projects, as in case of hydro power projects, which have long gestation periods. The Government needs to consider introducing mechanisms/ instruments that allow efficient long-term funding of projects. In addition, limits on external commercial borrowings for such infrastructure projects should be removed.

Construction equipment
With the rapid growth in the industry, there is still a mismatch of supply and demand in terms of construction equipment. Delays in deliveries of equipment result in delayed mobilisation and completion of projects. Further, prices of construction equipment have steadily increased over the past few years, partly due to the high demand, and partly due to increase in input costs. A large portion of construction machinery deployed in projects is imported. The import duties levied on construction equipment are increasing the cost of construction. Exemptions are available in some projects funded by external agencies such as the Asian Development Bank and World Bank. However, this exemption is not available in other projects including PPP projects. To sustain
the growth in the construction sector, import duty on construction equipment and material such as bitumen, steel and cement should be removed especially in PPP projects.
One of the pressing needs is adequate compensation for increased prices of certain materials such as steel, cement, bitumen and diesel. Most construction contracts rely on indices for price escalation in these materials, and the indices are not fully reflective of the price rise, especially in cases of extraordinary increases in short periods of time. Further, in BOT projects it is left to the entrepreneur to estimate the price escalation during the implementation period of the project. However, it is not possible to factor in such extraordinary increase in prices at the time of tendering for the projects.
There should be a mechanism to ensure planned and expeditious implementation of infrastructure projects. Currently, there is a large gap between the time of announcement of projects and their award. Also, there are periods of furious activity in awarding a large number of projects followed by a long period without projects being awarded. It is essential to phase the projects in a continuous manner in order to optimise the scale up of resources in the infrastructure sector in India.
As this is just the beginning of the infrastructure boom in the country, the industry needs to prepare for execution needs. With the ramp up in manpower and other resources, Indian companies will be in a position to cash in on opportunities both domestically and internationally. Unless adequately addressed, shortage of skilled manpower will be the single most important hindrance to aggressive infrastructure development.
Newer trends in road projects such as six-eight laning of highways, large-scale and more complex projects in power sector, metro rails, monorails and high capacity bus systems mark the eagerness of our country to take its infrastructure to another level. A concerted effort is required from the government to make world-class infrastructure a reality in India. Alternative funding for projects, favorable policies and increased incentives for PPP projects would encourage the private sector to work in tandem with the government.