Infrastructure Energy, Transport and Communications

Executive Summary

Vision 2029-Sector papers


Adequate supply of quality infrastructure services is widely recognised as critical in delivering growth, reducing poverty and addressing broader development goals. The double impact of Infrastructure on the society as a multiplier for economic activity and as a stimulator for social equality makes investing into infrastructure a high priority. Focusing and building on its infrastructure is crucial for Andhra Pradesh to realize its ambitious dream of double digit growth of GSDP.

This paper contains overview, issues, vision and broad strategies for three infrastructure sectors – Transportation, Energy and Communications. Chapters dedicated to each of these sectors contain current status of the sector, ongoing initiatives of the government and key challenges faced by the sector. These chapters further flow to describe the vision formulated based on opportunities and challenges specifically for transportation, energy and communication infrastructure. Certain strategies and suitable projects suggested are included into these chapters.

ENERGY

Power Sector of Andhra Pradesh pioneered reforms during 1998-2004, unbundling APSEB into APGENCO, APTRANSCO and DISCOMS. Significant investments were made in capacity addition, strengthening T&D networks and bringing down AT&C losses. This resulted in the performance of Andhra Pradesh electrical utilities being ranked amongst the best in the country. In 2003, the performance ratings carried out by CRISIL and ICRA on the behalf of Power Ministry ranked AP No. 1 among all Indian States and revealed that AP is the only state that scored a distinction with 57.03%. In the period 2004-2014, the pace of capacity addition in the electricity sector in the state could not match the growing demand and the sector performance was significantly compromised.

As of March 2015, AP’s total capacity installed is 9,421.58 MW; out of which private player share is 31%. An additional 17% of installed capacity is from central generating stations and the remaining 52% is owned by APGENCO and its subsidiaries. The renewable installed capacity comprising of biomass, waste to energy, wind and solar is 1692 MW (18%), and state owned Hydel generation capacity is 1672 MW (18%). The remaining 64% of installed capacity is from conventional sources.

Erstwhile Andhra Pradesh had a PCEC of 1121 kWh in 2012 which had undergone reduction to 1087 kWh in 2014, due to lack of capacity addition. Post bifurcation, the residual AP has a PCEC of 973 units (FY2014-15), due to loss of highly urbanized Hyderabad area. Industries (only 2% of consumers) form the major consumption share. The consumer segment with least revenue realization is Agriculture consumers.

The major issues and challenges faced by the sector are listed as follows:

  • Increasing difficulty in addition of low-cost of generation capacity
  • Significant difference between Actual Cost of Supply (ACS) and Aggregate Realization of Revenue (ARR) for APDISCOMS
  • High AT&C losses in comparison to global standards
  • Large energy demand forecasted for 2029
  • Need to significantly boost renewable energy share
  • Institutional capacity of power utilities not being at par with global standards

Based on the understanding of the sector, a vision to aspire for has been drafted. In line with the vision, it has been proposed that growth of power sector must be guided along the principles of enabling or ensuring accessibility, availability, affordability of power for everyone, accountability of service, focus on renewable energy and energy efficiency in the system. The following are the five strategic areas the state will lay emphasis on.

  • High Seat for Smart Energy, i.e. Technologically advanced energy
  • Focus on Sustainability
  • Priority for Efficiency
  • Rapid Capacity Addition
  • Leveraging Private Participation

To resolve existing issues and alleviate challenges faced by the power sector, three strategic programs are proposed, in addition to the broad strategies suggested above. Each of these programs has several recommendations and initiative suggestions to draw the road map for the sector and successfully realize the vision. The programs are listed below:

a) Rapid Capacity Addition Program (RCAP)

b) Power Utilities Empowerment Program (PUEP)

c) Smart Energy Reforms Program (SERP)

VISION TARGETS:

  • Electrification of all rural households (5.84 lakh) either by access to grid or by DDG (Decentralized Distributed Generation) by 2018-19, in alignment with PFA Initiative Targets.
  • Maintain constant zero energy deficits, by keeping up the capacity addition and procurement of power with the pace of growing demand.
  • T&D loss level of 6% is adopted as the target for 2029 for both APEPDCL and APSPDCL. Power for All Initiative aims to reach 12% by 2019 and additional 0.6% reduction per year is needed for the next 10 years
  • Reach a 30% renewable energy share of the total energy capacity by 2029

ROADS

The total road network in the state was 46,440 Km as on 31-5-2014. Of this, the National Highways constitute 4,302 Km (9%), the State Highways constitute 7,255 Km (16%) and Major District Roads constitute 19,783 Km (43%) and Rural Roads 15,100 Km (32%). The current state of road infrastructure of the state is not at par with Indian & global standards and is affecting the holistic development of AP. AP in comparison to other states show the following results:

  • 68% of the AP roads are single lane and this is very high in comparison to industrial states. Maharashtra, Gujarat & Karnataka has 34%, 46% and 42% single lane road respectively
  • The network density of AP is around 83 km per 100 sq. km whereas Tamil Nadu, the leader in terms of network density has density of 177 km per 100 sq. km
  • Andhra Pradesh has witnessed around 43,482 accidents in year 2013. This is around 120 accidents per day and is considered to be quite high
  • 65% of the AP roads are paved were as the national average is 54%. As far as peer states are concerned, Maharashtra, Gujarat and Tamil Nadu are performing better than AP

Some of the important key issues and challenges which the road sector would be facing for meeting the aspirational targets are:>

  • Land acquisition
  • Delays in implementation of projects
  • Delays due to awarding project contract.
  • Contract Management
  • Poor operational & maintenance
  • Road Safety
  • Lack of private sector participation
  • Lack of access to funds
  • Lack of Institutional capability

Some of the broad strategies suggested include:

• Increasing accessibility & service delivery through Greenfield development:
  • Coverage Improvement Program
  • Developing ring roads around 1 million plus cities
  • Port road connectivity improvement program
  • Intelligent express way corridor development
  • Industrial corridor project
  • Beach Corridor

• Capacity increase through strengthening existing infrastructure to improve service delivery

• Zero tolerance initiative for road accidents

• Efficient institution for infrastructure development

• Road capacity addition plan


In addition to the above strategies, there are some current initiatives undertaken by the AP govt, which include:

  • Visakhapatnam - Chennai Industrial Corridor
  • Chennai – Bangalore Industrial Corridor
  • Beach corridor project
  • Modified annuity financing scheme for national highway development
  • AP road sector project – World Bank Aided Project

VISION TARGETS

Outcome Indicator FY 2014 FY 2019 FY 2023 FY 2029 Remarks
Improving network coverage (Km to be constructed) - 10,513 km 5,254 km 8,435 km Addition of 24,202 km of road by end of FY 2029
Ratio of four lane or above road to total road length (%age) 4% 6% 8% -- By end of FY 2029 total road length of 10%- 1,52,444 km would be made by GoAP
Percentage number of villages connected with road 89% 100% 100% 100% 89% connected as per PMGSY data
Ensuring road surface index to appropriate level < 2000 mm /km -- Good Good Good No dedicated Study carried out
Accident per 1000 registered vehicle 3.7 Reduction by 30% of FY 2014 Reduction by 50% of FY 2019 Reduction by 50% of FY 2023 Reduce to minimum as far as possible
Percentage of paved road to total road length 65% 100% 100% 100% Construction of all -weather roads
 


Inland Water Transport

India has around 14,500 km. of navigable inland waterways, out of which 5,200 km. (36%) comprise major rivers and 485 km. (3%) canals, which are conducive to the movement of mechanized vessels.

India’s national waterways come under the purview of the Central Government, while the state governments regulate the country’s other waterways. The Inland Waterways Authority of India (IWAI) is responsible for development and regulation of inland waterways for shipping and navigation. The IWAI undertakes projects for development and maintenance of IWT infrastructure on national waterways through grants received from the Ministry of Shipping (MoS).

In order to give a boost to interstate movement of various products a canal system was planned in the late 19th century. The canal system running between Kakinada in the state of Andhra Pradesh to Markanam in the state of Tamilnadu near Puducherry was looked upon as one of the greatest link in the total area linking Kakinada Port with Chennai Port. In this canal waterway, the major commodities used to be transported were rice, salt, sand, forest products, paddy, pulse, building materials etc. by country crafts of 30 to 40 tonnes capacity. Around 880 km of NW 4 passes through AP and 200 km passes through Tamil Nadu.

The 1028 km long water way is envisaged to be developed in two phases and each phase has two stages. The phase I is estimated to be INR 1515 crore and phase II is estimated to be around 1008 crore. So the total cost of developing 1028 km water way is estimated to be around INR 2,523 crore. The total cost would be mobilized by GoI.

PORTS

AP has the advantage of being endowed with the second longest sea coast in the country. At present, one major and 5 non-major ports are operational and they provide a strong potential for the state to become India’s gateway port to Asian and South East Asian region. AP is ranked third behind Gujarat and Maharashtra in terms of cargo handling, and handles around 12% of India’s total port traffic

AP ports have an installed handling capacity of 173 MTPA, which is 9% of India’s total port capacity. In FY 2014, the ports of AP handled around 117 MTPA of cargo which translates to capacity utilization of 67%. Port Traffic is primarily driven by non-major ports. As on date, non-major ports handle around 50% of the cargo traffic. The traffic at non–major port has grown at a CAGR of 7.66% in last five year (FY 2009 to 2014).

AP ports predominantly handled bulk traffic and in year 2013-14, the ports handled around 71% of dry and liquid bulk cargo and only 4% containerized cargo. Also there are only two ports in Andhra Pradesh (Visakhapatnam and Krishnapatnam) which have dedicated berth for handling containerized cargo.

Some of the critical bottlenecks which AP ports are facing are as discussed:

  • Capacity utilization
  • Operational issue
  • Average parcel size handled at ports
  • High average TRT of container vessels
  • Regulatory issues

Some of the important key issues and challenges which the road sector would be facing for meeting the aspirational targets are as listed out:

  • Huge dependence over primary hinterland
  • Imbalance between import and export
  • Lacking in hinterland development
  • Draft and operational inefficiency
  • Hinterland Connectivity
  • Last mile connectivity
  • Poor containerized traffic
  • Absence of maritime board or dedicated authority
  • Lack of access to funds
  • Land acquisition

Broad Strategies:

The sector development is strategized to be developed through four pronged approach. These four stage approach is formulated based on the guiding principles discussed in the vision framework. This approach will address all the sector issues. The broad strategic initiatives are as discussed in subsequent sub sections.

Current Initiatives by the Govt. of AP:

Sagarmala program for port led development

Government of India has developed holistic maritime development program called “ Sagarmala”. This is a strategic, customer-oriented initiative of the Government of India to evolve a model of port-led development, whereby India’s long coastline will become the gateway of its prosperity.

Port-led development

Development of port-based industrial parks, and promotion of captive industries and ancillary facilities to constitute the third component (This includes ship repairing, ship-building clusters, ship-breaking industries, bunkering facilities, container freight stations, dry ports and warehousing facilities.) Systematic development of these facilities around ports is expected to power economic growth in the Coastal Economic Region (CER).

Policy and programs from State Government

GoAP is emphasizing port led industrial development and is developing maritime policy for developing new Greenfield non major ports. The broad conceptual contour for port policy development is as listed below:

  • Promoting port led industrial development through catalyzing large scale manufacturing industries
  • To improve private sector participation through bringing transparency and competitive bidding process
  • Sustainable utilization of sensitive coastline and coastal land resources, keeping in view future requirements and national security considerations
  • Thrust on developing non major ports and envisions to develop new greenfield ports through private sector participation

VISION TARGETS:

Outcome Indicator Existing- FY 2014 FY 2019 FY 2023 FY 2029 Remarks
Total traffic to be handled by ports (MTPA) 141 230 308 551 Cumulative traffic
Capacity utilization (Traffic to capacity ratio) 75% 70% 70% 70% Constructing new berths and taking performance improvement measures to improve cargo handling capacity
Draft availability 15-16 17 17 19 Most of non – major ports in AP already have a draft of 16.0 meters and to handle future larger capacity vessels they need to increase their depth to 19.0m
Avg. vessel TRT 3.5 – 5.8 2.0 1.0 1.0 Vessel TRT of bulk vessels like coal is less than 1.0-1.2 days in Gangavaram and krishnapatnam
% age cargo evacuated through IWT and coastal 0.5-1% 2% 3% - 30% of the cargo is moved through roads and is primarily due to inadequate connecting infrastructure
 

 

AIRPORTS

Andhra Pradesh has six operational airports and five of them are operated by Airport Authority of India and the remaining one is operated by a private spiritual trust. The airports of residual state of AP handled around 1.4 million passengers in year 2013-14. This is merely 0.9% of India’s air passenger traffic. Earlier, Hyderabad was considered to be a hub airport for the united AP, and it used to handle around 80% of united AP’s passenger and freight traffic.

Currently, Visakhapatnam is the important airport of the state and also the only international airport of the state. It handles around 70% of AP’s air passenger traffic. Pan India, the Visakhapatnam airport ranks 26th in commercial operations. Other important airports of the state are Tirupati, Vijayawada and Rajahmundry. As far as cargo traffic is concerned, the state handled only 1800 ton of freight traffic and it is negligible when compared with leading air cargo airports operational in India.

Some of the key challenges include:

  • Absence of airport infrastructure.
  • Land acquisition
  • Lack of access to funds
  • Reluctance of airline service operators to commence operations from AP
  • Institutional development

Broad Strategies:

After examining and prioritizing the issues identified through the current state assessment, there are three broad themes that are emerging for the current strategy plan:

  • Improving connectivity
  • Strengthening existing and developing Greenfield infrastructure to improve service delivery
  • Institution development: Setting up of Autonomous Body for sector development – AP Airport Development Company (APADC)

 

Current Initiatives by GoAP include:

Civil Aviation Policy: The draft civil aviation policy of the state envisages becoming the preferred destination for investors/developers in the aviation sector by 2022. This policy aims to set out the objectives of the state in developing aviation sector and its related supporting infrastructure. It also provides an enabling framework for facilitating Public Private Partnerships (PPPs) in the development and operation of such infrastructure. Some of the salient features of the policy are:

GoAP is extending following benefits for aviation sector development :

  • 100% exemption on stamp duty for land purchased or leased for developing and upgrading airports
  • 100% reimbursement on electricity duty
  • 100% reimbursement from property tax
  • Provision of security and firefighting services at no cost
  • 20% capital grant for setting up of Aerospace Research & Development facilities
  • 1% VAT on aviation turbine fuel

Projects proposed by GoAP: GoAP is planning to develop Seven (7) additional airports in PPP mode in a phased manner. Following key airports will be developed – Greenfield International Airport at Bhogapuram near Visakhapatnam will be developed under PPP. Other airports will be no-frills low cost airports.

VISION TARGETS:

Outcome Indicator Existing- FY 2014 FY 2019 FY 2023 FY 2029 Remarks
Per capita air passenger trip improvement 0.3 0.04 0.05 0.10 It is arrived based on present growth passenger traffic and also assumes that in coming years the income level would increase. This would drive the number of passenger trips to increase
Share of air passenger traffic in AP to all India traffic 1% 2% 7% 10% -
Share of Air cargo from AP airport to all India traffic 0.1% 2% 5% 7% --
Number of international airports 1 1 2 3

Currently

Vishakhapatnam is the only airport. By 2029 Vijayawada and Tirupati would be converted to international airport

 


RAILWAYS

Rail network is been maintained and operated by South Central Railway Zone (SCR) and this zone covers united AP and few districts of Maharashtra, Madhya Pradesh, Karnataka and parts of Tamil Nadu. SCR maintains around 5743 km of rail network and out of which AP has a rail network of 2660 km. In terms of rail density, AP has 27 km of rail route per 1000 square km and is higher than the national average of 20 km per 1000 square km. Secondary data published by SCR suggests that only 40% of the tracks in AP are electrified and major trunk railway routes or segments are operating at an operational efficiency of 90%.

Broad Strategies:

• Strengthening existing railway network

• Greenfield rail infrastructure development

     a) Dedicated Freight Corridor

     b) High speed rail connectivity

VISION TARGETS:

Outcome Indicator Existing- FY 2014 FY 2019 FY 2023 FY 2029 Remarks
Electrification of Railway line 40%   55% 70% -
Development of high speed rail line 0 - 250 250 Hyd – Chennai (625 km) Vizag – Bangalore (1000 km)
Development of DFC 0 - 250 250 VCIC- 800km & CBIC-550km
 

 

LOGISTICS

A coastline of 974 km length gives AP access to global trading routes through its ports, which can serve vast stretch of Southern and Central Indian hinterland. Some of the key issues which are affecting the logistic sectors are as listed below:

  • Currently in AP, 60% of the long haul (above 500 km) industrial freight is moved through road, an expensive mode of transport. In developed countries, long haul freight movement is generally carried out through rail or inland water ways. Road based transport is only preferred for last mile connectivity. So there is an urgent need of developing an integrated multi modal logistic hub for sustainable freight movement
  • 68% of the AP roads are single lane and 60% of freight movement is dependent on road infrastructure. So it is very imperative to have a robust network for freight movement for efficient and speedier movement of cargo
  • High logistic cost is also a prime concern. As per GoI, the cost of exporting twenty feet container (TEU) from AP is estimated to be around USD 1000 whereas from Tamil Nadu the same is estimated to be around USD 650

Based on the understanding carried out from sector assessment, vision has been drafted. In alignment to the vision, it is proposed that the transport sector shall be developed with the principles of ensuring accessibility, safe, affordable. Apart from this the vision aspires to develop a robust and capable institution for developing and maintaining infrastructure. To achieve these vision objectives, three strategic programs for interventions have been identified. Each of these strategic programs has development projects. The three umbrella programs are:

  • Increasing accessibility & service delivery through Greenfield development
  • Capacity increase through strengthening existing infrastructure to improve service delivery
  • Efficient institution for infrastructure development

Some of the key issues and challenges in this sector are as discussed below:

  • Transport infrastructure
  • High logistic cost
  • Fragmented market
  • Absence of 3PL logistic operators
  • Land availability
  • Lack of trained manpower

Broad Strategies:

  • Developing freight village: Freight village (FV) are a defined area within which all activities relating to transport, logistics and the distribution of goods, both for national and international transit, are carried out by various operators.
  • Integration and developing Hub and Spoke model: For efficient operation, all FVs / logistic hubs/MMLP etc. should be well connected to transport infrastructure.
  • Efficient institutional structure for sector development: Setting up of Autonomous Body for sector development which would look after:
    • a) Promoting green logistic concept and tying up with global logistic service providers for dissemination of good practices
    • b) Facilitate setting up of logistic skill development institute
    • c) Assistance in improving private sector participation

Current Initiatives by the government include:

• New agriculture warehousing policy

State government is working on a new agriculture warehousing policy that will seek to incentivise private players. This policy is envisages of developing 50 million ton of additional warehousing capacity in the next three to four years through private sector participation.

• New list of projects announced by private sector

  • a) Developing Vijayawada as logistic hub
  • b) Concor is planning to develop three logistic parks in three locations of AP. logistic parks are being planned at Krishnapatnam, Kakinada and Machilipatnam in AP

Communication

According to the latest population and housing census carried out in India in 2011, 63 per cent of households had a telephone (up from 9 per cent ten years earlier). In addition, there were significant differences between urban and rural areas, with 82 per cent of Indian urban households having access to a telephone compared with 54 per cent of rural households.

Internet connectivity per 100 populations for AP is 21.6%, and lags behind other developed states of the country. Top five states in terms of internet subscriptions are Maharashtra (23.21 million), Tamil Nadu (21.01 million), Andhra Pradesh (18.83 million), Gujarat (17.15 million) and Karnataka (16.56 million). In terms of mobile penetration, AP is at 78.8% mark, and ranks lower than states of Tamil Nadu, Himachal Pradesh, Punjab, Gujarat and Karnataka.

India’s overall mobile phone penetration figures continue to grow at fast pace, and an increasing number of Indians are also getting online via mobile devices. According to the TRAI and ITU, the total mobile phone subscriber base was 930 million by the end of 2014, including about 388 million in rural areas, an increase of 248 million subscribers compared to 2010. Access to the internet through mobile phones has risen as well, apparently due to a series of inexpensive rate plans introduced in early 2010 and the long-awaited rollout of 3G services early in 2011.

Key Issues & Challenges:

  • Low internet penetration: Internet connectivity per 100 populations for AP is 21.6%, which still lags behind other states of the country. Top five states in terms of internet subscriptions are Maharashtra (23.21 million), Tamil Nadu (21.01 million), Andhra Pradesh (18.83 million), Gujarat (17.15 million) and Karnataka (16.56 million).
  • Low mobile penetration : Mobile penetration in AP is 78.8% which is still less than many other states such as Tamil Nadu, Himachal Pradesh, Punjab, Gujarat, Karnataka, etc.
  • Digital divide: There is substantial divide in terms of wireless tele-density. Figure 28 below presents the picture of rural vs urban tele-density for Andhra Pradesh. The TRAI figures are for the combined AP and separate data for Andhra Pradesh is not available at TRAI. However, it represents the digital divide that exists between rural and urban AP. While the tele-density for urban area is 162% for rural AP it is a mere 46%. The low level of tele-density in rural area is a major challenge in implementing various e-governance initiatives. The service delivery mechanism of the government by using wireless platforms faces a stumbling block as rural population would not be able to avail these services.

Broad Strategies:

► Andhra Pradesh State Fiber Grid Corporation (APSFGC)

The Government of Andhra Pradesh is deeply aligned with the National vision of a Digital India and eager to make Andhra Pradesh one of the first states to embrace and deliver this vision to the people of Andhra Pradesh. It is planned to establish Fibre Grid up to the village level so as to spur economic development and to provide Integrated Services to the Citizens. The objective is that every household should have access to video capable broadband at an affordable tariff.

The Government of Andhra Pradesh has declared an ambitious vision to make available at least a 15 to 20 Mbps broadband connection to all homes in Andhra Pradesh at an affordable price of around Rs 150 /month. This vision also includes an on-demand availability of 100 Mbps to 1Gbps connection to every business that wants to accelerate its business using the internet and e-Commerce.

► National Fibre Optic Network

At present OFC (Optical Fibre Cable) connectivity is available in all State Capitals, Districts, HQs and upto the Block Level. There is a plan to connect all the 2,50,000 Gram panchayats in the country. This will be done by utilizing existing fibres of PSUs (BSNL, Railtel and Power Grid) and laying incremental fibre to connect to Gram Panchayats wherever necessary. Dark fibre network thus created will be lit by appropriate technology thus creating sufficient bandwidth at the Gram Panchayats. This will be called the National Optical Fibre Network (NOFN). Thus connectivity gap between Gram Panchayats and Blocks will be filled.

Investment requirement

The total infrastructure investment ascertained after considering all the strategic interventions suggest that the state would require is around INR 13.10 lakh crore by FY 2029. Table below discusses the investment requirement in transport and energy sector. This investment excludes sectors like water, communication and urban infrastructure.

Consolidated sector wise investment (INR Crore)
Sector GoI GoAP Private Total Investment
Energy 89,952 2,03,700 4,51,313 7,44,966
Road 62,123 98,611 1,98,780 3,59,514
Port 8,678 4,159 70,350 83,188
Airport 2,650 250 7,300 10,200
Railways 41,253 - 4,584 45,837
Storage 9,672 16,119 38,686 64,477
IWT 2,523 234 - 2,757
Total 2,16,851 3,23,074 7,71,013 13,10,939

 

Along with huge investment requirement, GoAP would also require to mobilize land and significant numbers of workforce for developing and operating the huge infrastructure asset. Based on cursory assessment, for infrastructure development, by FY 2029 GoAP would be mobilizing around 0.39 million acres of land and would create a job for 40 lakhs people.

Land and workforce requirement in transport and energy sector
Sector Land Requirement by FY 2029 (In acres) Workforce Requirement by FY 2029 (In lakhs)
Energy (Power) 1,24,216 1.82
Road 2,07,617 30.20
Port 14,628 6.66
Airport 12,050 0.42
Railways 28,457 0.45
Storage 4,092 1.20
IWT 500 Considered in Port sector
Total 3,91,560 40.74

 

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