Introduction to

Infrastructure
Managment
Agenda

What is infrastructure?

Types of infrastructure

The role of infrastructure

The infrastructure crisis

What is Infrastructure?

There is no single definition for the term “infrastructure”. It is a term used in

a variety of disciplines

The “Merriam Webster” Dictionary defines infrastructure as “The

underlying foundation or basic framework (as of a system or
organization)”

“The physical components of interrelated systems providing commodities

and services essential to enable, sustain, or enhance societal living
conditions”
What is
Infrastructure?
Examples of
Infrastructure are the infrastructure include
basic systems that transportation facilities,
undergird the structure telecommunications
of the economy. networks, and water
supplies.

Large scale
infrastructure is usually
produced by the public As an investment,
sector or publicly infrastructure tends to be
regulated monopolies, less volatile than some
but at smaller scales other asset classes and is
infrastructure can often sometimes sought as an
be produced by private investment.
firms or through local
collective action.
Economic
Survey
definition of
Infrastructure
Ministry of Construction
Statistics and Electricity generation, transmission and distribution
Programme Gas generation and distribution through pipes
Implementation Water works and supply
Non-conventional energy generation and distribution
Railway tracks, signalling system and stations
Roads and bridges, runways and other airport facilities
Telephone lines and telecommunication network
Pipelines for water, crude oil, oil etc
Waterways
Port facilities
Canal networks and irrigation
Sanitation and Sewerage
Types of
Infrastructure Physical Infrastructure : Airports, Roads,
Electricity etc.

Social Infrastructure : Schools, Hospitals etc.

Institutional Banking system, tax

collection mechanism,
Infrastructure : legal system etc.

Industrial Infrastructure Industrial Parks,

Special Economic
– Zones etc.
Attributes of
Infrastructure
→

→
Categories of Public Infrastructure Projects

Public infrastructure projects are planned for the following four broad
categories:
• The development of new projects or the provision of additional
capacity or capability of an existing project
• The rehabilitation, reconditioning, and/or reconstruction of existing
facility without changing the capacity of capability of the facility
• The routine maintenance and operation of municipal infrastructure
systems
• Projects that modify the operations and management of an existing
facility to improve its efficiency, extend its useful life, introduce
alternative strategies, or incorporate new technologies to maximize
the operational capacity of the facility.
Infrastructure planning steps

Problem identification
Establishment of goals
and objectives- broad and analysis- data Formulation of
collections, demand- Solution identification
policies , long-run alternatives and
supply analysis, use of and impact assessment analysis
plans etc resources

Recommendations-
Operation and
priorities and schedule Decisions Implementation Management
of implementation
The Role of Infrastructure
→

→
Infrastructure and Global Competitiveness
Competitiveness and Income
Infrastructure Index
Infrastructure, Economic Economic Poverty

Growth and poverty Growth Reduction

reduction
Transportation Faster access to More reliable access to
destinations, markets so that fresher
increase in goods can be sold at
productivity lower wastage levels

Water and Sanitation Incentives for Improved health,

construction of reduction in
facilities, infrastructure health related
and residential spending,
infrastructure, which in potential increase
turn promote economic in income
growth savings

Telecommunications Improved access and Increased access to

transfer of data, leading to information leading to
reduced travel times and improved ability to make
increases in productivity decisions on issues like
selling price of produce
etc

Energy Reliable and abundant 24 hour electricity

power enables setting up increase the duration of
of industries and the productive working
residences that create day, thereby
jobs, manufacture augmenting income,
products and promote increasing agricultural
economic growth yields etc.
The Infrastructure Crisis

■ Despite the importance of infrastructure for economic and social well-being,

we are faced with several problems
■ Infrastructure in developed countries is old, unreliable, inefficient and in
need of replacement.
□ The USA is embarking on a major plan relating to infrastructure spending
■ In developing countries, infrastructure is often not available
□ Large portions of urban and rural populations in developing countries have
inadequate access to water and sanitation
□ Power supply is non-existent or unreliable and people are faced with frequent
power-cuts
□ Quality of road infrastructure is often bad, leading to long travel times and
increased vehicle maintenance costs. Width of roads is also often a constraining
factor leading to traffic jams and blocks.
□ Several of these problems currently hold true for many areas in India as well.
■ This is therefore a golden opportunity for engineers with technical as well as
managerial and policy level knowledge of these issues, since there is a
huge demand for such people to enter the workforce and solve the worlds
infrastructure inadequacies.
Why do we have so many problems with infrastructure?

■ This particular question and ways in which to solve it will

the focus of this entire course. It is therefore impossible
to answer this question right away. Before we conclude
this session, we list out a few of the causes for the failure
to provide adequate infrastructure
□ Lack of funds
□ Lack of implementation and management capabilities
□ Corruption, bureaucracy and unfair competition
□ Land acquisition issues involving dealing with displaced people
and special interest groups
Case Study 1:
The Delhi Airport Metro Express Project
Key Project
Parameters
Estimated Project Cost: Hours of operation: 5:30 am
US$1.26 billion. to 11:30 pm.

Frequency of Service: Every

20 minutes, with the
potential to increase services Fare: INR 100 per trip.
to every 10 minutes.

Required completion:
October 2010 (in time for the
Delhi Commonwealth
Games).
Project Packaging
Airport line built by PPP mode in which a
DMRC proposed to undertake all the civil
private concessionaire would be
responsible for building the line and works itself, including the viaduct, the
tunnels and the stations
operating it for a period of 35 years.

Viability Gap Funding : DMRC therefore

DMRC suspected that the proposed invited potential concessionaires to bid
based on the amount of additional capital
private concession would not be financially
viable on a “stand alone” basis, as the subsidy they would require from
government in order to make the
capital cost of the operating systems was concession viable. The concession would
estimated to be INR 15,380 million
(approximately US$ 300 million). be awarded to the bidder who requested
the least amount of viability gap funding
from the government..

The private concessionaire would be

responsible for financing only the
operating systems— primarily the track,
signals, power distribution system and
rolling stock—and for paying operating
expenses.
Patronage Forecasts

The passenger counts

revealed that the airport
was busy around the clock.
DMRC’s forecast for the
DMRC forecast that around DMRC’s forecast was based airport express also seemed
46,000 people would use the on hourly counts of consistent with the
airport express each day passengers at the airport experiences of Tokyo and
soon after the project was terminals and surveys of the major cities of Europe,
commissioned in 2010, and departing and arriving air which showed that public
that ridership would grow passengers who were asked transportation could
to 86,000 per day in the where in Delhi their trip capture 28 to 62 per cent
next 10 years. began or would end.
other airline passengers,
with half or a bit more
typically arriving by bus
and the rest by rail.
Tender Process

• Procurement of Concessionaire was based on a two stage competitive bid. Criteria for eligibility included, in
addition to a financial profile of bidding consortia, technical criteria as follows:

– The bidders were required to have prior experience of developing or operating and maintaining rail based urban transport system or as a major
equipment supplier for a rail based urban transport system
– The bidders were required to have prior experience installing systems including testing and commissioning for rail systems, signalling equipment or
rolling stock in the last ten years.

• Delhi Airport Metro Express Private Limited (DAMEPL) – an SPV formed between Reliance Infrastructure Ltd.
of India and Construcciones y Auxiliar de Ferrocarriles, S.A. (CAF) of Spain was awarded the contract in
January 2008, on the basis of their highest quote for annual concession fees to be paid to DMRC.

• Reliance Infrastructure Ltd. held a 95 per cent stake in DAMEPL, with the remaining 5 percent held by the
Spanish firm. Debt was arranged by the lead banker Axis Bank along with India Infrastructure Finance and eight
other banks. The debt to equity ratio was 70:30.

• As a concessionaire, DAMEPL was expected to recover its investment through fare box collection,
advertisements, leases of commercial space built along the rail infrastructure, and from vending machines and
retail outlets.

• DAMEPL agreed to pay DMRC concession fees of $10.53m at an exchange rate of Rs48.41 per dollar every
year, and also share 1 to 5% of the gross revenues with DMRC for 15 years.
Construction

• The project was the first in India to use ballast-less high speed track technology. This would allow trainsto
travel at a speed of 135 km per hour.

• The project was to be completed in 30 months with commissioning scheduled for 31 July 2010, before the
Commonwealth Games. Reliance Infrastructure appointed a world renowned consultant from Hong Kong,
MTR Group, as the engineering and project management consultants for the project.

• Construction of the project took longer than expected. DMRC gave a one month extension to a 31 August
2010 deadline for the commencement of operations, as there was delay on the part of DMRC in handing
over the stations. The line was denied a statutory safety clearance after a two-day inspection in the last
week of September 2010. The inspector found that false ceilings, emergency staircases and exit points,
ticket counters, electrification work, software and signalling were incomplete.

• Having missed the Commonwealth Games deadline, DMRC required the payment of compensation of Rs
37.5 lakh per day from 31 September 2010, which was doubled to Rs 75 lakh per day from 15 October
2010.
Commencement of Operations
and Actual Patronage
• Operations commenced on 23 February 2011, with four of the six stations
operational. However, as of April 2011, only four trains were in operation.

• Passenger volumes on the line fell far short of the estimated target. In the initial 18
months, DAMEPL carried about 6.8 million passengers, an average of 11,111.1
passengers in a day. (Forecast : 46,000)

• Only 30 per cent of the line’s passengers accessed the airport. There were anecdotal
reports that people found the line inaccessible and unsafe at nights. Connectivity
from the stations was also reported to be poor, with good access to only one of the
three airport terminals.

• Patronage was also affected by the decision to close the line at 11:30 p.m. Delhi
airport has many flights (particularly international services) taking off and landing
late at night and in the early hours of the morning.
Problem in Civil Structure

• On 8 July 2012, services were suspended as a result of faults being identified in the civil
structure. Bearings between the pillars and girders in the elevated section of the structure were
found to be defective. An initial inspection revealed that, out of 2,100 bearings, nearly 230
needed correction.
• The Government initially claimed that services would resume in two months, after the
necessary repairs.
• Before the suspension of services, patronage had risen to around 14,000 to 17,000 passengers
per day. At the time, Reliance Infrastructure admitted that the line was not making profits, but
they claimed the suspension of services was purely linked to safety and they would continue
to run the line once the problems were resolved.
• Less than two weeks later, it was reported that the defects were more serious than previously
thought. According to a joint inspection team consisting of representatives of both parties, not
only did 25% of the bearings need to be repaired, but some girders were been found to have
cracked.
• Thousands of track clips, on which the rails rest, were also found to be broken. Unlike the
girders and bearings (which formed part of DMRC’s civil works), the track clips had been
installed by DAMEPL as part of their role in constructing the operating systems.
• The line re-opened on 23 January 2013. Trains were initially restricted to travelling at 50
kilometres per hour. The speed was gradually raised to 70 kilometres per hour. After the
resumption, the patronage was around 10,000 passengers per day.

• In August 2012, Reliance Infrastructure transferred 65 per cent of its stake in DAMEPL to
associate companies of the Anil Dhirubhia Ambani Group.

• It was reported that DMRC officials feared Reliance Infrastructure was trying to exit the
partnership or reduce its liability. DMRC officials issued notices to DAMEPL demanding an
explanation why Reliance Infrastructure did not consult them before diluting its stake. DMRC
considered this a violation of the concession agreement. The concession agreement stated that
the concessionaire can restructure equity only two years after the commencement of the
agreement. Reliance Infrastructure maintained that it did not violate the agreement as the PPP
was signed in March 2008.
• By late September 2012, DMRC and DAMEPL were reported to be “locked in an
acrimonious blame game”.

• Under the PPP contract, if DAMEPL found any problem in the project within the first 12
months, it was required to inform DMRC. According to DMRC, DAMEPL did not approach
DMRC in the first year of operation, nor did it carry out a rigorous inspection.

• DAMEPL, in turn, claimed that it had repeatedly expressed concern over passengers’ safety
but DMRC insisted that the trains could run at slow speed.

• DMRC also claimed that DAMEPL started talking about the defects in the civil structure
when the DMRC refused to defer payment of the concession fees, despite DAMEPL’s
mounting revenue losses. In April 2012, DAMEPL had conveyed to DMRC that its cash flow
was badly affected and needed support from the public sector partner.

• DAMEPL also demanded compensation from DMRC for the lost earnings for being unable to
operate the airport express line during the Commonwealth Games, on the basis that this was
due to delays by DMRC in completion and handing over of the civil works.
• In October 2012, DAMEPL served a termination notice, which was rejected by DMRC. The
matter went to arbitration. A senior DAMEPL official said, "It was breach by DMRC as the
defects debilitated the line for us completely."

• Reliance Infrastructure also claimed that DMRC was liable to pay DAMEPL a termination
payment equal to 130 percent of the project equity and 100 percent of the project debt, as the
termination has arisen owing to a default by DMRC.

• DMRC has proposed that the debt be repaid by both the Government of India and Delhi
government. The urban development ministry rejected this, arguing that the contract was
between DMRC and DAMPEL. A ministry official was reported to say that responsibility lay
with DMRC, as its projections of patronage had been inaccurate.

• As problems mounted and became irreconcilable, DAMEPL’s principal sponsor, Reliance

Infrastructure, bailed out. DMRC took over the operations of the line with effect from 1 July
2013.