The infrastructure industry of India is critical to its economy, and the government has placed a high focus on creating legislation that would ensure that the country’s world-class infrastructure is built on time. Power, bridges, dams, highways, airports, logistics, and urban infrastructure development are all part of the sector. Since 2012, there has been a steady transition from a strictly regulated economy to a more flexible economy in which private firms, particularly overseas investors, play an increasingly important role. The PM Gati Shakti National Master-Plan was announced in the Union Budget 2022-23, a programme focused on the expansion and growth of roads, railroads, airports, ports, mass transportation, waterways, and logistics infrastructure. This blog post elaborates on the legislations that govern the infrastructure sector, as well as the Indian government’s recent regulations. The authors have also attempted to describe the challenges that the Sector encounters, which impede Infrastructure growth.
Human evolution is an assortment of various developments, and infrastructural advancement plays a majorly significant role among these. Mr. Rajaneesh Dasgupta, the Trustee & Director General of the Association of Infrastructure Industry (India)noted that one can never undermine the importance of infrastructural growth as it governs the way people live and invest, and therefore, it is important to ensure that infrastructure development remains ongoing and does not reach a standstill at any given point of time.
In the 21st Century, the development of a legal architecture for particular sectors is synonymous with developing one of the bases of such sectors, and the same holds true for the development of infrastructure sector as well. In elementary terms and for the purposes of this article, legal architecture refers to a framework of schemes, plans and legislations, and their implementation that ensures regulation, operations and development of the various aspects of a sector, leading to overall reform in the planning and structure of the particular sector.
For the last decade, In India, major reforms have been implemented in the infrastructure sector with the goal of achieving planned and consistent development. The infrastructure sector, consisting of various sub-sectors, is governed by specific schemes, governmental plans and legislations (statutes, rules, regulations etc.) for these sub-sectors.
Infrastructure under the Focus of the Indian Government
The development of infrastructure in the country became a primary focus for the Government of India from the Twelfth Five-Year Plan (2012-2017). Since 2012, there has been a gradual transition from a controlled to an open market economy, with private players, including foreign investors, playing an increasingly important role.
The Union Budget 2022-23 introduced the PM Gati Shakti National Master-Plan, a programme driven by the expansion and growth of roads, railways, airports, ports, mass transport, waterways, and logistics infrastructure. The projects pertaining to the aforesaid sub-sectors in the National Infrastructure Pipeline have been planned to be aligned withPM Gati Shakti framework. It has to be noted that the modes and means of private participation in the infrastructure sector is also a key-discussion of the Gati Shakti Master-Plan.
Seeping Focus through Legislations: Law and Infrastructure India
While the Five-Year Plans and annual budgets cover the “planning” aspect of the infrastructure sector, it is the legislations that form the “structure” of the sector. The planning and structure combined together form the legal architecture of the infrastructure sector in India. The term “infrastructure” may not be statutorily included in various legislations, however, the laws providing for the architecture of roads, railways, highways, power-distribution, airports, etc. fall under the sub-category of infrastructure laws in India.
Legislation and Regulation-
At a macro or union level, the term ‘road infrastructure’ denotes the building and operation of National Highways, which are governed underthe National Highways Act, 1956, andNational Highways Authority of India Act, 1988. The National Highways Act, 1956 was enacted with the goal of designating some highways as National highways and dealing with related issues. While, the National Highways Authority of India (“NHAI”) was established by the NHAI Act of 1988 and it has been entrusted with the National Highways Development Project. The aforesaid acts, along-with their subsequent rules and notifications, lay down provisions forbuilding, maintaining and managing the National Highways of the country.
Section 5 of the National Highways Act states that it is the obligation of the Central Government to develop and maintain all national highways in working order; however, the Central Government may direct, by notification in the Official Gazette, that any function related to the development or maintenance of any national highway shall, subject to such conditions, if any, as may be specified in the notification, also be exercisable by the Government of the State.
It is noteworthy thatSection 8A of the National Highways Act directly provides for the power of the central government to enter into agreements for the development and maintenance of national highways, thus, indicating the very intent of the lawmakers to encourage private participation in road infrastructure development. Thereby, the government also ensures that various incentives are provided to the private players, especially foreign investors, in the road infrastructure sector; these incentives include but are not limited to Fiscal incentives like duty-free imports, corporate tax holidays for a certain number of years of commissioning the highway project, exemption on profits of financing institutions, exemption on long-term capital gains of investors, concession period etc.
Furthermore, in order to ensure the protection of the infrastructure of the national highways, Section 8B of the National Highways Act defines the scope of punishment for mischief by injury to national highway.
Government Plan and Budget-
It has been presented in the Union-Budget 2022-2023 that National Highways Network are to be expanded by 25,000 Km in 2022-23, and therefore, Rs 20,000 Crores are planned to be mobilised forNational Highways Network expansion.
Policies and Schemes-
The government proposedpolicies to increase road safety, such as mandated sleep detection sensors in commercial cars and fixed driving hours for commercial truck drivers.
The government announced aplan to install charging stations every 40 to 60 kilometres on national highways to improve roadside services; 700 e-vehicle charging stations are expected to be installed by 2023, covering 35,000 to 40,000 kilometres of national highways.
Union Minister Nitin Gadkariannounced that the government has approved four road development projects totalling Rs 4,518.04 crore, including two motorways under the Bharatmala initiative.
The projects approved concern the construction, widening, and improvement of national highways in Assam, Telangana, Karnataka, and Andhra Pradesh.
Legislation and Regulation-
The power/energy sector in India, since the year 2003, is governed primarily by theElectricity Act, 2003 and its subsequent rules and notifications. The Electricity Act unifies the laws governing the generation, transmission, distribution, trading, and use of electricity, as well as general measures promoting the development of the electricity industry, promoting competition, protecting consumers’ interests, and ensuring the supply of electricity to all areas, rationalising electricity tariffs, ensuring transparent subsidies policies, and promotingefficient and environmentally friendly policies.
Section 3 of the Electricity Act provides for the Central Government to prepare National Electricity Policy and Plan, in consultation with the State Governments, and the said policies and plans are to be notified every five years.
The term “infrastructure” has been used underSection 6 of the Electricity Act, that stipulates that the Central Government and any concerned State Government shall work together to provide access to electricity to all areas, including villages and hamlets, through rural electricity infrastructure and household electrification.
The Electricity Act delegated regulatory functions to the Central Electricity Regulatory Commission, State Electricity Regulatory Commission, Joint Commission, Appellate Tribunal, and other monitoring agencies and agencies for governing operational aspects of the electricity system. Private participation in electrical energy transmission, distribution, and trading has been permitted, subject to obtaining a licence from the appropriate Electricity Regulatory Commission.
Government Plan and Budget-
In order to develop the infrastructure of the power sector along the lines of the present need of environmental protection, the Union Budget 2022-23 has highlighted additional allocation of Rs. 19,500 Crores for Production Linked Incentive for manufacture of high efficiency solar modules in order to meet the target of280 GW of installed solar power by 2030. Moreover, States have been allowed a fiscal deficit of 4% of Gross State Domestic Product (“GDSP”),of which 0.5% will be tied to power sector reforms.
Policies and Schemes-
Electrification in the country is rising primarily to initiatives such as theDeen Dayal Upadhyay Gram Jyoti Yojana (“DDUGJY”), the Ujwal DISCOM Assurance Yojana (“UDAY”), and the Integrated Power Development Scheme (“IPDS”)
Energy Efficiency Services Limited (“EESL”) announced in November 2021 that it will expand its Building Energy Efficiency Programme (“BEEP”) incollaboration with private sector energy service firms.
The Government of India initiated thePradhan Mantri Sahaj Bijli Har Ghar Yojana, or “Saubhagya,” with the goal of achieving universal household electrification.
Legislation and Regulation-
Railways are the primary means of urban-rural transport in India, in part due to their affordability.The Railways Act, 1989 consolidates laws relating to railways in India. The Railways Act covers nearly all aspects of development of the railway infrastructure in the country, including land acquisition for railway projects, construction and maintenance of such projects, opening of railways and protection of railway infrastructure from accidental or intentional damages.
While as of 2022, the railways are majorly under the control of the state, however, for the promotion of private participation for infrastructural development, certain railway components such as construction and maintenance of railbeds, bridges and tunnels, have been delicensed.
Government Plan and Budget-
Under Union Budget 2022-23, 2000 Km of railway network has been planned to be brought under “Kavach”, an indigenous technology and capacity augmentation in 2022-23. Moreover, 400 new generation trains called the “Vande-Bharat Trains” are to be manufactured during the next three years. As a move to enhance not only the railway infrastructure, but also the logistical infrastructure, the government has presented that100 Cargo terminals for multimodal logistics will be developed in the next three years.
Policies and Schemes-
To promote green railways, the Indian Railways Organisation of Alternative Fuels (“IROAF”) invited proposals in August 2021 for trains based onhydrogen fuel cells for the Indian Railways Network.
As part of the Railways’efforts to modernise its network, the Ministry declared that all non-AC sleeper coaches will be replaced by AC coaches for trains travelling at speeds greater than 130 kilometres per hour.
Indian Railways is alsoconsidering the following revenue-generating options: a) changing the coach mix in order to promote more profitable AC coach travel; b) generating additional revenue streams by monetising traffic on its digital ticketing IRCTC; and c) disinvesting in IRCTC.
The Indian Railways hasopted to electrify Broad Gauge (“BG”) rail lines in a mission mode, with the project expected to be completed by 2023-24.
Indian Railwaysannounced a plan to build 500 multi-modal cargo terminals under the ‘PM GatiShakti’ initiative in October 2021, with a budget of Rs. 50,000 crore (US$ 6.68 billion) spread over four to five years. The government intends to use this plan to combine various modes of transportation to ensure the smooth flow of parcels and large freight (e.g., coal and steel).
In January 2021,Hyundai Motor India Ltd. (“HMIL“) announced that it had exported 125 automobiles to Nepal via Indian Railways. The company’s first export is said to be environmentally friendly. With this action, the corporation hopes to reduce its carbon footprint by 20,260 tonnes.
Railways is leading India’s battle against climate change, and it is making great progress toward its ambitious goal of being a net zero carbon emissions organisation by 2030, as well as reaching India’sIntended Nationally Determined Contributions (“INDC”) targets.
Legislation and Regulation-
The laws relating to development of airports and aircrafts in India are differentiated mainly due to active and major participation of private players in the sector. The government issued the Airport Infrastructure Policy in 1997, which called for the preparation of detailed master plans for the development and upgradation of all selected airports by the operating agency in accordance with the International Civil Aviation Organization’s standards and recommended practises. TheAirports Authority of India Act, 1994, theAircraft Act, 1934, and theAircraft Rules, 1937 govern airports.
As per the Airports Authority of India Act, theCentral Government is in-charge of forming the Airports Authority of India (“AAI”), which is responsible for ensuring construction, maintenance and management of the airport infrastructures. As per Section 12 of the Act, AAI may plan, develop, construct and maintain runways, taxiways, aprons and terminals and ancillary buildings atthe airports and civil enclaves; and also, establish airports, or assist in the establishment of private airports by rendering such technical, financial or other assistance which the Central Governmentmay consider necessary for such purpose.
Government Plan and Budget-
Airport infrastructure was not a highlight in the Union-Budget 2022-23, however, the Union Budget for Fiscal Year 2021-22 was announced came with several positive measures for the airport infrastructure sector in India especially asset monetisation and disinvestment to mobilise resources for new infrastructure development of the airports in India.
Policies and Schemes-
To make flying more cheap for the common man, the Government of India launched theUde Desh Ka Aam Naagrik (“UDAN”) regional connectivity scheme. Under the first phase of UDAN 4.0, the government designated 24 routes in Assam in February 2021. Following the launch of the ‘Azadi Ka Amrit Mahotsav (India@75)‘ by the Government of India, the Ministry of Civil Aviation (MoCA) proposed 392 routes under the UDAN 4.1 bidding process in March 2021.
Mr. Jyotiraditya M. Scindia, Union Minister of Civil Aviation, virtually launched the first direct flight between Shillong and Dibrugarh under theRegional Connectivity Initiative – Ude Desh Ka Aam Naagrik (“RCS-UDAN“) scheme in October 2021.
JetSetGo, a private aircraft company, proposes tolaunch a carbon management programme in September 2021 with the goal of becoming carbon neutral by 2024.
In April 2020, the government launched the‘Lifeline Udan‘ flights to transport critical medical cargo to remote areas of the country in support of India’s fight against COVID-19. Under this scheme, approximately 600 flights flew over 5 lakh kilometres and transported people.
Challenges hindering Growth of Infrastructure Sector
The Infrastructure sector has myriad of challenges, and it frequently finds itself in a situation of crisis as it tries to cover investment gaps, promote sustainable growth, and fulfil its vital role in the energy transition. This section deals with the challenges the Infrastructure sector faces.
The availability of labour, as well as the quality of that labour, are crucial to a project’s success. Although emerging markets appear to have an abundance of labour, educated construction labour may be difficult to come by and retain. Due to a lack of both building and managerial experience of the labourers, fully funded, viable infrastructure projects have been stalled indefinitely. Emphasis should be given on developingskills of these labourers.
Public Private Partnerships or PPPs thrive in a stable regulatory environment, which certain emerging countries may lack. Land acquisition is particularly difficult. Delays in obtaining ground permissions and resource rights processes often results in cost overruns, putting the PPP’s integrity at jeopardy.
Furthermore, the corporate and economic conditions in India are constantly changing. Similarly, the economic governance structure is always changing. Changes in government policies/measures; revisions to existing legislation or the introduction of new legislation; and the development of regulating bodies in the aforementioned sectors of Infrastructure. Hence, a weak regulatory environment may have significant effects for the private sector in the event of a default, resulting in the immediate freeze of project assets rather than debt coverage discussions.
Aside from these issues, there is a greater risk ofcorruption, geopolitical andcross-border hazards, and foreign exchange concerns.
Access to Energy for All: Electricity Rules, 2022
“Every consumer becomes a stakeholder to contribute to achieving India’s commitment of 500 GW of Non-fossil fuel by 2030,” theMinistry of Power (“MoP”) asserted in its notification of theElectricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022. The proposed rules were laid down in August 2021.
The Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022, include energy produced bywaste-to-energy facilities, and are intended to encourage the production, acquisition, and consumption of green energy. The rules also require surplus green energy to be deposited with the distribution licensee, and all obligated entities in the distribution licensee area must meet a uniform renewable purchase obligation. It has also included Green Hydrogen/Green Ammonia to fulfil its RPO.
Features of the Electricity Rules, 2022 are mentioned below:
Green Open Access
Any consumer is eligible for green open access, according to the regulations. Additionally, the cap on open access transactions for green energy has been reduced from1 MW (megawatt) to 100 kW. Small consumers will also be able to purchase green energy through open access owing to the recent rules.
Tariff for Green Energy
The appropriate commission will decide on thegreen energy tariff. To supply green energy to customers, it will include cross-subsidy fees, service charges covering distribution licensee sensible cost, and average pooled renewable energy purchase costs. Through improved dependability and prompt approval of cash flows for renewable energy providers, these rules will expedite the overall approval process for granting open access. The application process will become more standardised as a result and providecertainty to the consumers on open access charges to be levied on Green Energy Open Access which include transmission charges, wheeling charges, cross-subsidy surcharge and standby charges.
The rules provide forcap on increasing cross-subsidy surcharges and eliminate further surcharges. It would address the obstacles impeding the expansion of open access in India and encourage consumers to make environmentally friendly choices. If consumers use green energy, they will obtain certifications. The rules further state that if green energy is used to produce green hydrogen and green ammonia, cross subsidy surcharge and additional surcharge are not applicable.
Streamlined Approval Process
The Rules will help tostreamline the overall approval process for granting Open Access, including timely approval to improve renewable energy producers’ cash flow predictability. It will also make the application process more consistent. The rules also stipulate that the process for approving open access applications be transparent. The guidelines stipulate those permissions must be given within 15 days, failing which they are presumed to have been approved subject. A national portal will be used for it.
Hence, the government’s latest notification addresses problems that prevent the expansion of open access in India and encourages consumers to go green. These regulations deal with the problems that have long prevented open access from developing in India. To conclude, these regulations will guarantee everyone access to green, affordable, and sustainable energy.
The instruments enacted by the legislature, the institutions established with the authority of the enactment, and the individuals who make them work are thethree ‘I’s that can make or break infrastructure development in any country, including India. India is set to build a large stock of infrastructure in the next two decades, however, when it comes to developing and regulating infrastructure standards, India’s regime is still catching up to international best practice. Take, for example, the G7 nations’initiatives in 2021 to encourage global infrastructure investment. This regime is still lacking upon factoring in the dynamic nature of the country, such as the current andfuture population or traffic growth. Based on the overview of India’s framework for building infrastructure, and developing and implementing standards, there are certain areas of improvement that are required. Such improvements include streamlining development of standards, expanding coverage of standards, minimising gaps and overlaps of laws and governmental schemes, improving coordination among Centre, State and Private Participants, adopting suitable international standards and regulation of officers and authorities appointedunder various infrastructure laws.
About the Authors
Mr. Ankit Rajgarhia is the Principal Associate at Karanjawala & Co.
Ms. Aribba Siddique is a 3rd year student at Amity Law School, Kolkata, and is an Associate Editor at IJPIEL.
Managing Editor: Naman Anand
Editors-in-Chief: Jhalak Srivastav and Muskaan Singh
Senior Editor: Hamna Viriyam
Associate Editor: Aribba Siddique
Junior Editor: Manav Ganapathy
Preferred Method of Citation
Ankit Rajgarhia and Aribba Siddique, “The Legal Architecture of Infrastructure in India” (IJPIEL, 20 July 2022)