India’s transport sector is large and diverse; it caters to the needs of 1.1 billion people. In 2007, the sector contributed about 5.5 percent to the nation’s GDP, with road transportation contributing the lion’s share.
Good physical connectivity in the urban and rural areas is essential for economic growth. Since the early 1990s, India's growing economy has witnessed a rise in demand for transport infrastructure and services.
However, the sector has not been able to keep pace with rising demand and is proving to be a drag on the economy. Major improvements in the sector are therefore required to support the country's continued economic growth and to reduce poverty.
Roads. Roads are the dominant mode of transportation in India today. They carry almost 85 percent of the country’s passenger traffic and more than 60 percent of its freight. The density of India’s highway network -- at 0.66 km of roads per square kilometer of land – is similar to that of the United States (0.65) and much greater than China's (0.16) or Brazil's (0.20). However, most roads in India are narrow and congested with poor surface quality, and 33 percent of India’s villages do not have access to all-weather roads.
Rural Roads-A Lifeline for Villages in India: Connecting Hinterland to Social Services and markets
Railways. Indian Railways is one of the largest railways under the single management. It carried some 19.8 million passengers and 2.4 million tonnes of freight a day in year 2009 and is one of the world’s largest employer. The railways play a leading role in carrying passengers and cargo across India’s vast territory. However, most of its major corridors have capacity constraint requiring capacity enhancement plans.
Ports. India has 13 major and 199 minor and intermediate ports along its more than 7500 km long coastline. India’s seaborne foreign trade being 95% by volume and 67% by value, the ports play a very significant role in improving foreign trade in a growing economy. These ports serve the country’s growing foreign trade in petroleum products, iron ore, and coal, as well as the increasing movement of containers. Indian ports handled cargo of 850 million tonnes and about 9.0 million TEU container traffic in year 2010. Over the last decade, the average annual growth rate of port cargo volume has been about 10%.. The future potential for port sector, particularly container ports is huge considering that the container traffic is projected to grow to 40 million TEU by 2025. Inland water transportation also remains largely undeveloped despite India's 14,000 kilometers of navigable rivers and canals.
Aviation. India has 128 airports, including 15 international airports. Indian airports handled 142 million passengers in 2010-11 and 1.6 million tonnes of cargo in year 2009-10. The CAGR for the domestic passenger and freight growth over the last decade has been 14.2% and 7.8% respectively. The dramatic increase in air traffic for both passengers and cargo in recent years has placed a heavy strain on the country's major airports. Passenger traffic is projected to grow more than 15% annually over 2011-13 and it is estimated that the aviation industry, currently 9th largest in the World, will require 30 billion USD investment in the next 15 years to keep pace with the growing demand.
Urban Transport. India is experiencing rapid urbanization with the present urbanization levels at 30% translating to a population of roughly 340 million living in urban areas. The number of million plus cities is presently at 42 and the urban economy accountd for roughly 60% of the GDP. Motorisation rates in India are in double digits as in most developing economies. Only about 20 cities out of 87 cities with a population in excess of 500,000 and state capitals have any kind of organized transport and only 3-4 cities could lay claim to a mass rapid transit system. The share of public transport in cities with population sizes over 4 million has declined from 69% to 38% between 1994 to 2007. Accident and fatality rates are one of the highest in the world affecting primarily the poor and vulnerable without their own means of transport.
Transport infrastructure in India is better developed in the southern and southwestern parts of the country.
The major challenges facing the sector are:
• India’s roads are congested and of poor quality. Lane capacity is low – majority of national highways are two lanes or less. A quarter of all India's highways are congested. Many roads are of poor quality and road maintenance remains under-funded. This leads to the deterioration of roads and high transport costs for users.
• Rural areas have poor access. Roads are significant for the development of the rural areas - home to almost 70 percent of India's population. Although the rural road network is extensive, some 33 percent of India’s villages do not have access to all-weather roads and remain cut off during the monsoon season. The problem is more acute in India's northern and northeastern states which are poorly linked to the country’s major economic centers.
• The railways are facing severe capacity constraints. All the country’s high-density rail corridors face severe capacity constraints. Also, freight transportation costs by rail are much higher than in most countries as freight tariffs in India have been kept high to subsidize passenger traffic.
• Urban centers are severely congested. In Mumbai, Delhi and other metropolitan centers, roads are often severely congested during the rush hours. The dramatic growth in vehicle ownership during the past decade - has reduced rush hour speeds especially in the central areas of major cities.
• Ports are congested and inefficient. The average annual growth of cargo volume in the ports in the last decade was close to 10%, However, capacity utilization in some of the major ports remain as low as 58-60% Both bulk and containerized traffic is expected to grow at a much faster pace in future and by some estimate the container traffic is projected to grow to about 4.5 times of the current volume by 2025. India's ports need to significantly ramp up their capacity and efficiency to meet this surging demand.
• Airport infrastructure is strained. . Air traffic has been growing rapidly leading to severe strain on infrastructure at major airports, especially in the Delhi and Mumbai airports which account for more than 40 percent of nation’s air traffic.
Key Government Strategies
India’s Eleventh Five Year Plan identifies various deficits in transport sector which include inadequate roads/highways, old technology, saturated routes and slow speed on railways, inadequate berths and rail/road connectivity at ports and inadequate runways, aircraft handling capacity, parking space and terminal building at airports. Government aims to modernize, expand, and integrate the country's transport services. It also seeks to mobilize resources for this purpose and to gradually shift the role of government from that of a producer to an enabler. In recent years, the Government has made substantial efforts to tackle the sector’s shortcomings and to reform its transport institutions. These include:
• Increasing public funding for transportation in its Five Year Plans.
• Launching the ambitious National Highway Development Program which has seven phases and is expected to be completed by 2012. It includes improved connectivity between Delhi, Mumbai, Chennai and Kolkata, popularly called the Golden Quadrilateral, in the first phase, North- South and East- West corridors in phase two, four laning of more than 12,000 km in phase three, two laning of 20,000km and six laning of 6,500 km respectively in phase four and five, development of 1,000km of expressway in phase six and other important highway projects in phase seven. Total expected investment is INR 2.2 trillion.
• Accelerated Road Development Program for the North East Region to provide road connectivity to all State capitals and district headquarters in the North East region.
• Financing the development and maintenance of roads by creating a Central Road Fund (CRF) through an earmarked tax on diesel and petrol.
• Operationalising the National Highway Authority of India (NHAI) to act as an infrastructure procurer and not just provider.
• Improving rural access by launching the Pradhan Mantri Gram Sadak Yojana (Prime Minister’s Rural Roads Program).
• Reducing the congestion on rail corridors along the highly trafficked Golden Quadrilateral and improving port connectivity by launching the National Rail Vikas Yojana (National Railway Development Program).
• The development of two Dedicated Freight Corridors from Mumbai to Delhi and Ludhiana to Dankuni.
• Improving urban transport under Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
• Upgrading infrastructure and connectivity in the country's twelve major ports by initiating the National Maritime Development Program (NMDP).
• Privatization and expansion of the Mumbai and New Delhi Airports and development of new international airports at Hyderabad and Bangalore.
• Enhancing sector capacity and improving efficiencies through clear policy directive for greater private sector participation. Large parts of the NHDP and NMDP are to be executed through public private partnerships (PPP).
World Bank Support
The World Bank has been a major investor in the transport sector in India. At present, it has ten projects in transport portfolio which include seven state road projects and one each for national highway, rural road and urban transport with total loan commitments for the transport sector in India as in June 2011 is US$5.9 billion spread over 14 project. The main activities include:
• National Highway Development Project: The World Bank is financing highway construction on the Lucknow-Muzaffarpur corridors. The Bank is also financing a technical assistance loan to improve the operational processes and systems of National Highway Authority of India including developing a comprehensive ERP system. Through these engagements, comprehensive improvements in road safety management and work zone safety practices have also been undertaken.
• Rural Roads Program: The program provides for the provision of all weather roads to villages in seven r states – Uttar Pradesh, Jharkhand, Rajasthan, Punjab, Uttarakhand, Meghalaya and Himachal Pradesh. Over the next five years, the two rural road operations would finance construction and upgradation of 24,200 km of new all weather rural roads connecting about 8,200 habitations. The second rural roads project uses a unique design and provides broad-based support for PMGSY. The project has adopted a result based methodology and focus on getting those results rather than individual transactions leading to those results. Bank funds will be disbursed against achievements of agreed results formulated as a series of disbursement link indicators.
• State Roads Projects: State Highways are being upgraded in the states of Andhra Pradesh, Mizoram, Tamil Nadu, Punjab, Himachal Pradesh, Orissa and Karnataka. Besides improving the capacity of the core road network in the project states, these projects aim to improve the overall capacity of the transport sector agencies including preparation of long term financing and asset management strategies and the road safety management capabilities.
• Mumbai Urban Transport Project 2A: The project aims to improve transportation in the Mumbai Metropolitan Region by building upon the progress made under the first Mumbai Urban Transport Project and further increase the capacity of the suburban rail system within the Mumbai Metropolitan area on the existing infrastructure network.
• Sustainable Urban Transport Project: The project supports improving the usage of environment friendly transport modes through piloting of demonstration projects in select cities with a focus on priority to public transport and non motorized transport. The project also supports capacity building for developing and implementing sustainable urban transport systems.
• Eastern Dedicated Freight Corridor Project: The World Bank is financing, in the first phase, the 343 km Khurja to Kanpur section of total 1,800 km Eastern Dedicated Freight Corridor (Ludhiana - Delhi-Mughal Sarai). The World Bank may finance a total of around 1,100 km of the Eastern Dedicated Freight Corridor in three phases. It will also help develop the institutional capacity of the Dedicated Freight Corridor Corporation (DFCCIL) to build and maintain the DFC's infrastructure network.
• In addition to the above, the Bank is involved in the preparation of various analytical works (AAA) in the transport sector in India. These include:
• Public Private Partnership: The Bank is actively contributing to strengthening the PPP policy framework in the transport sector through its ongoing dialogue with and knowledge management support to GOI, various states and urban local bodies. Bank is also supporting transaction advisory services for structuring highway PPP program in Tamil Nadu, AP and Orissa and financing part of the Karnataka highway PPP program including providing direct construction cash support for the modified annuity contracts.
• India Port Sector Study: The purpose of the effort is to review the demand-supply situation with respect to the port sector, identify physical, financial and policy constraints to sector development and suggest mitigation measures for the same.
• Indian Road Construction Industry Study: Given the large development programs being launched to support the rapidly growing economy, the supply side constraints in terms of the construction industry capacity are a serious cause of concern. The study reviews these limitations and suggests mitigation measures. This study has produced two outputs titled "Indian Road Construction Industry: Ready for Growth?" and "Indian Road Construction Industry - Capacity Issues, Constraints and Recommendations".
While the Bank will continue to support the upgrading and development of roads and highways in the country, it plans to scale up its involvement in railways and urban transportation.