KPMG report: Catalysing the National Infrastructure Pipeline – Project India

KPMG releases a report titled, ‘Catalysing the National Infrastructure Pipeline – Project India’, which highlights how India can achieve the National Infrastructure Pipeline (NIP) task force’s investment target. The report proposes actions and policy recommendations to mitigate the impact of COVID-19 on India’s Infrastructure Vision 2025. Noting that the COVID-19 crisis has necessitated creative solutions to bridge the investment gaps in infrastructure, the report suggests that the government should revise its project priorities under NIP and focus on ensuring effective domestic resource utilisation, gaining outcome-focused financing support from international financial institutions and harnessing capital from private stakeholders.

Arun Kumar, Chairman and CEO, KPMG in India said, “As India faces one of its most challenging times since Independence, infrastructure spending can help spur economic activity and the involuntarily unemployed through job creation. Given the magnitude of the COVID-19 pandemic and consequent pressure on resources, it is imperative that stakeholders reassess the priority of sectors and projects outlined in Infrastructure Vision 2025. Typically, infrastructure projects are characterised by high capital intensity and long gestation periods, often leading to a funding gap. Public investment is key to filling this gap. A prerequisite to this is an enabling governance and policy framework that fosters business growth and investor confidence while rethinking innovative investment and funding models to encourage private sector participation.”

Speaking about the report, Elias George, Partner and Head – Infrastructure, Government and Healthcare (IGH), KPMG in India said, “The disruptions caused by COVID-19 have highlighted the criticality of fundamentally rethinking many aspects of human endeavour. Investments in infrastructure have a multilayered spill-over impact on the economy, affecting overall growth as well as the prospects of businesses and individuals. This report examines India’s infrastructure needs driven by rapid urbanisation and the impact of COVID-19 on India’s Infrastructure Vision 2025 and its goals. It also highlights key steps for mitigating adverse impacts, in addition to identifying the building blocks of success.”

Key highlights from the report:
India needs policy and regulatory reforms to support infrastructure investments across sectors such as healthcare, transport and logistics, digital infrastructure, energy, agriculture and irrigation, education and skilling, urban and rural infrastructure, digital infrastructure, and disaster resilience.
  1. Healthcare: Expanding health protection coverage, strengthening primary healthcare network and increased adoption of digital technologies would be key enablers for achieving the NIP vision for the healthcare sector. Building blocks of success:
    • Policy/regulations: Universal health protection by expanding ‘Ayushman Bharat’ to every citizen through exhaustive health screening and management
    • Funding/financing: State governments can induct a private firm to develop or manage healthcare units; investments to be recovered via availability-based payments
    • Data /technology: Developing an integrated e-health system under the National Digital Health Blue Print
  2. Transportation and logistics: Investment and technological adoption in transportation and logistics infrastructure would lead to higher convenience, affordability, last-mile connectivity and better urban space design for pedestrians and vehicles. Roads and railways are expected to account for a major share of the investments even post COVID-19. As stakeholders explore newer ways to integrate technology into airport operations, the business models of future airports would evolve for the better.
    • Roads:
    • Building blocks of success:
      • Policy/regulations: Encourage PPP model through incentives – enhanced tax exemptions, enhancing grant portions, and enabling other revenue sources such as advertising
      • Institutions (Capacity): Evaluating new age mobility through multi-modal integration and sustainable travel solutions such as walking and cycling tracks
    • Railways:
    • Building blocks of success:
      • Policy/regulations: Move regulatory responsibility of tariff fixation, consumer protection from the government to an independent regulator
      • Funding/financing: Providing viability gap funding(VGF) or grants for PPPs and undertaking asset monetisation
    • Airports: For the aviation sector, returning to pre COVID-19 levels may take almost 18-24 months and the demand may increase in a phased manner. Also redrafting economic regulatory guidelines to support business recovery and facilitate new private investments will be key
  3. Energy: Investments in strengthening distribution and the sub-transmission grid along with discom modernisation and their digital support will be critical.COVID-19 has created uncertainty in power demand and has put additional financial pressure on distribution.

    Building blocks of success:
    • Policy/ regulations: Enactment of Electricity Amendment Bill 2020 and National Renewable Energy Policy will be crucial
    • Data/technology: Leverage IoT for increased efficiency
  4. Agriculture and irrigation: COVID-19 has emphasised the importance of the sector from both production and consumption perspectives making room for flexibility in regulatory environment.

    Building blocks to success:
    • Policy/ regulations: Regulatory framework for partnerships with private e-commerce players
    • Data/ technology: Convert e-NAM from a tech solution to completely digital transactional platform
  5. Education and Skilling: Building blocks of success:

    • Policy/regulations: Accelerate adoption and implementation of National Education Policy 2020 and develop a digital policy covering cyber security across sectors including education to strengthen digital infrastructure
    • Institutions (Capacity): Add R&D centers within public universities to ensure pipeline of talent and address demand from returning postgraduate, doctoral and expats students in wake of COVID-19
    • Data/technology: Strengthen and incentivise broadband connectivity for education and enhance device ownership for students for widespread adoption of remote learning with greater impetus on digital skills
  6. Urban and Rural infrastructure: The main priority would be to assess finance access for capital projects and prioritise their implementation. Building blocks of success:

    • Policy/regulations: Standardise procurement and financial management across states and cities
    • Data/ technology: 100 per cent GIS-enabled city transactions and satellite technology internet of things
  7. Digital infrastructure: Policy makers, telcos, OEMs and B2B consumers should work in tandem to ensure uninterrupted access to digital services. Building blocks of success:

    • Policy/regulations: Assign the work of creating, maintaining and utilising the BharatNet network to a single entity in the PPP Model through private sector partner (PSPs) for faster implementation.
    • Institutions (Capacity): Creation of collaborative institutional framework for common right of way (RoW) rules, anti-trust resolution mechanism, standardisation of costs and timelines, competition related concerns
  8. Disaster Resilience: Building blocks of success:
  • Policy/ regulations: Integrate disaster risk management into development policies and processes
  • Institutions (Capacity): Ensure district and local bodies are administratively and financially empowered to effectively implement national and state decisions under the DM Act
The Way forward:
  • Prioritise infrastructure and allied activities to kick-start the economy
  • More focus on sustainable and resilient infrastructure
  • Focus will be on building smart and cost-effective infrastructure, driven by Industry 4.0 solutions
  • Fiscal stimulus to help projects facing liquidity constraints
  • Collaboration in public health to be pivotal in international diplomatic relations
Download full report
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