• Definition of Infrastructure
o A commission chaired by Dr. C Rangarajan RBI in 2001 attempted to define
infrastructure in accordance with six characteristics- natural monopoly, high
sunk costs, non-tradability of output, non-rivalry in consumption (which
implies benefit of public good can be extended to additional consumers
without any change in additional cost), possibility of price exclusion and
bestowing externalities on society. However, these characteristics were not
considered absolute.
o Income Tax Department- Considers companies dealing with electricity, water
supply, sewage, telecom, roads and highways, ports, railways, airports,
irrigation, storage (at ports), and industrial parks or SEZs as infrastructure
companies. Special Tax benefits are also given to these sectors like fertilizers,
hospitals, and educational institutions.
o The world bank (world development report)-
▪ Public utilities- power, telecom, piped water supply sanitation, solid
waste collection and disposal and piped gas.
▪ Public works- roads, major dam and canal works for irrigation and
drainage.
▪ Other transport sectors- urban and interurban railways, urban
transport, water ways and airports.
▪ Infrastructure is an umbrella term for many activities referred to as
“social overhead capital” by such development economists as Paul
Rosenstein-Rodan, Ragner Nurkse and Albert Hischman.
▪ Neighter term is precisely defined, but the encompass activities that
share technical features (such as economies of scale) and economic
features (such as spillovers from users to nonusers).
o Read Notion of Infrastructure sent by sir*
o Niti Ayog- For all the definitions* enclosed pdf (INFRASTRUCTURE
DEFINITIONS)
o There is no single definition for Infra. This term is used in a variety of
disciplines.
o The “Meriam Webster” defines infra as the underlying foundation of basic
framework. (As of a system or organization)
o The fundamental facilities and systems serving a country, city or area such as
transportation communication, power, water and sanitation, schools and heath
institutions etc. can be called as infrastructure.
• Objectives of Infrastructure
o Important 3 folds of infra.
o Facilitate economic development- It is said that infrastructure of a country or
an area is directly responsible and plays a direct role in the economic
development of the area or the country. Say or instance a country with better
road and rail infrastructure will be able to transport the goods and people
from one place to another in less time, therefore saving on labour, money.
On the other hand, a country or an area with better education infrastructure
will be able to impart good quality education to its young generation which in
turn would directly be responsible for the country or that area’s growth in
future.
o Develop equity and social integration- Infrastructure also plays a very
important role in developing equity in the area for instance road and telecom
networks are used by both rich and poor, such that none is prohibited to use
them, neither is there any discrimination on the usage of such facilities
between the rich and the poor. Also that all communities, backgrounds get
equal share of infrastructure facilities. None is discriminated.
o Resource development and protection to environment- Infrastructure also
plays a very important role in propelling development without harming the
environment and the surroundings instead safeguarding them by the use of
the latest technologies. For example- if not or the sewage treatment plants
and water treatment plants, we would have been dumping the untreated
harmful liquid waste directly into the rivers and other water bodies polluting
them and disturbing the ecosystem and drinking the same unsafe water
putting our own selves to the risk of getting infected to chronic water borne
diseases or disorders.
• Attributes of Infrastructure
o Services for the functioning of an organization or society
o Available to a large group of people
o Economic and social equity
o Based upon which society and its activities rest
• Characteristics of Infrastructure
o Crucial input for economic development
o Infrastructure is necessary to ensure the consistency and comparability for
future.
o The National Statistical Commission headed by Dr. C Rangarajan(2001)
attempted to identify infrastructure based on characteristics of its services
▪ Natural Monopoly
▪ High Risk Costs
▪ Non- rivalness in consumption (0 marginal cost)
▪ In general non tradability of output
▪ Possibility of price exclusion
▪ Bestowing externalities to society
• Types of Infrastructure
o Function Based
▪ Basic/Physical Infrastructure (Roads, Electricity)
▪ Social Infrastructure (Amenities)
▪ Other/ Advanced (Physical) Infrastructure
o Development Based
▪ Regional
▪ Urban
▪ Rural
▪ Infra for Natural Resources exploration & preservation
• Types of Infrastructure (Physical Infrastructure)
o Transportation Infrastructure- Roads, Bridges, Airports, Ports, Waterways.
o Water & Sanitation- Water Supply System, Sewerage Systems, etc.
o Energy Infra.- Dams, Powerplants, etc.
o Telecommunication Infra
o Other Advance Infra
• Challenges in Infrastructure Development
o Land (availability and acquisition issues)
o Environment Concerns
o Delaying in regulatory and legal clearances
o Funding Constraints
o Capacity of Public and Private Players
o Skilled or employable Human resources
o Political Willingness & Preferences
o Public Participation & Users redressal
o Adopting Innovations & Forecasting development trends
• Classification of Urban Infrastructure
o Basic/ Physical Infrastructure- Physical infrastructure refers to the basic physical
structures required for an economy to function and survive. Facilities which offer
us convenient and safe living on daily basis such as water supply, storm water
drainage, solid waste management, road networks, etc.
o Social Infrastructure- Social Infrastructure refers to the institutions that directly or
indirectly tend to improve the social status and wellbeing of the population it serves.
For example, health, education infra, community spaces, public transport systems
etc.
o Other/ Advance Infrastructure- Facilities such as highways, railways, airports,
power transmission and distribution systems, etc.
o Services-
▪ Operation, maintenance and management of utility facilitation upto
end user.
▪ Affordable pricing, capacity building of operators, etc.
• Infrastructure Planning
o Objective
▪ Economic & Efficient functioning of systems.
▪ Recurring Operational Trouble in Min Expenditure.
▪ Opportunity for the potential expansion in future.
▪ Access to max masses with min resources.
o Features
▪ Accessibility- can be accessed by the population
▪ Quantity- based on the volumes or requirement
▪ Coverage- Covers vast expanses of area- geographical coverage
▪ Quality- Based on the purpose of use
▪ Reliability- Public services that can be trusted and relied upon,
▪ Economy- Should be affordable and viable.
▪ Socio Political aspects- external factors affecting the process.
o Process
▪ Urban Infrastructure Planning is a tool or improving a city’s living
conditions.
• Broad, on ground analysis of various sectors
• A long term visions
• Near term project prioritizing
• Management & Financial capacity evaluation
▪ Short term and long-term projects should be based on local economic
& development pattern.
• Urban Surface Transport/ Road System
o Transport- Activity- means to carry something or someone from one place to
another. The action of transport is defined as a particular movement of an organism or
thing from one point to another.
o Transportation- Process- the movement of goods and persons from place to place
and the various means by which such movement is accomplished.
o Latin Term- trans- across, portare- to carry
• Functions of Transport
o Convenient, Speedy and safe movement.
o Opportunity of growth to individuals, & community
o Creates place utility & time utility
o Maintain & promote the economic momentum.
o Offers social upliftment & increases interactions.
o Provide opportunity of cultural & political growth.
• Means of Transport
o Based on Medium
▪ Land Transport
▪ Water Transport
▪ Air Transport
o Based on Modes
▪ Private
▪ Government Operated Public
▪ Private Operated Public
o Based on Mechanism
▪ Motorised
▪ Non- Motorised
• Basic Terminologies
o Traffic (Volume of vehicles on road)
o Transit (ability to shift)
o Network (Path of movement)
o Mobility (Capacity to move)
o Accessibility (Opportunity to access)
o Connectivity (Offer to connect)
o Nodes (Junctions of major roads)
o Joints (Connecting points in network)
o Modes (type of vehicle based on purpose)
NOTION OF INFRASTRUCTURE (Ministry of Statistics and Plan Implementation)
Infrastructure is understood as an important input for industrial and overall economic development.
While this is certainly true, there is no clear definition of infrastructure according to the current
usage of the term in India. The Economic Survey does not define the term, but still devotes an entire
chapter to this. While the Report of the Committee on Infrastructure made a significant contribution
towards examining this sector, it did not offer a clear-cut definition of infrastructure nor did indicate
crucial characteristics that serve to differentiate an Infrastructure Sector from other Sectors.
• Current Status
o As stated above, there exists neither a clear-cut definition nor a listing of the crucial
characteristics of infrastructure in the Indian data sources. The Economic Survey,
while it includes an entire chapter on Infrastructure (see Chapter 9, Economic Survey
2000-2001) does not indicate why the industries listed therein are to be treated
differently from other industries. In fact, there is sufficient reason to believe that
some of the sectors listed in the relevant chapter of the Economic Survey do not
have the crucial characteristics as per the current theoretical understanding of the
concept.
o As per the Economic Survey, the following sectors constitute infrastructure
(Economic Survey 2000-2001, p. 171):
▪ Power: Electricity generation.
▪ Coal production.
▪ Petroleum production: crude oil and refinery throughput.
▪ Cement production.
▪ Railways: Revenue-earning goods traffic and passenger kilometres.
▪ Ports: Cargo handled at major ports.
▪ Civil Aviation: Cargo and passengers handled at Airports Authority of India
(AAI) airports.
▪ Roads: Length of roads and length of National Highways; and
▪ Telecommunications: New telephone connections approved (direct
exchange lines).
o Besides the Economic Survey, the Index of Industrial Production (IIP) also includes
some of the above-mentioned infrastructure sub-sectors. Statistical information on
these is available and frequently a subset of the IIP is labeled as the index of
infrastructure activity. However, even in this case there is no clear-cut rationale for
treating these sectors as infrastructure. Hence, the current status in India regarding
this sector consists of an inadequate conceptualisation of the characteristics of the
Infrastructure Sector.
• Proposed Change in Notion of Infrastructure
o The standpoint taken by the Commission is that the notion of infrastructure that is
used in the reporting of data in India is not theoretically sound. The proposed
methodology will mark a clean break with past practice with respect to reporting of
infrastructure data. The reporting of data in India, so far, seems to equate basic
industry with infrastructure; besides what is basic and non-basic industry seems like
a relic from the planning era. The approach proposed here, in the first instance,
seeks to theoretically set out what constitutes infrastructure and then identifies
specific facilities, which provide infrastructure services.
• What is Infrastructure?
o Infrastructure activities, such as power, transport, telecommunications, provision of
water, and sanitation and safe disposal of waste, are central to the activities of the
household and to economic production. Without any of these either economic
production will suffer, or the quality of life will deteriorate. One could thus view
these activities as essential inputs to the economic system.
o Many infrastructure activities have the characteristics that they are not use-specific
or user-specific: the same telephone system may be used in numerous productive
activities, either (a) simultaneously if sufficient capacity is available, or (b)
sequentially if there is crowding or congestion.
o Infrastructure generally consists of long-lived engineered structures and may be one
of the following:
▪ Public utility: power, piped gas, telecommunications, water supply, etc.
▪ Public works: major dam and canal works for irrigation, roads.
▪ Other transport sectors such as railways, ports, waterways.
• Natural Monopoly Character of Infrastructure
o The most general economic characteristic of modern infrastructure is the supply of
services through a networked delivery system designed to serve a multitude of
users. This is especially true for piped water, electric power, telecommunications,
sewerage, and rail services. As these examples show, the delivery system in each
case is dedicated: water pipes cannot be used for any other purpose except to carry
water. Investment in such delivery systems is said to be sunk, i.e. the investment
may not be converted to other uses.
o The scope for competitive supply of infrastructure also varies greatly across sectors,
within sectors and between technologies. Many infrastructure facilities are
characterised by declining costs, leading to what is known as a natural monopoly
situation. It is important to remember that natural monopoly arises out of
technological factors and not due to policy.
o It may also be pointed out that the services of infrastructure will be non-tradable. To
give an example: should there be insufficient demand for electricity in place A, its
supply may be diverted to place B; however, one will not be able to do that for the
transmission system that brings electricity to place A. Hence the transmission
system is non-tradable even though electric power itself may be tradable.
• Public Goods Character of Infrastructure
o The demand for infrastructure services arises from both industry and individuals.
However, since it is not possible to create infrastructure facilities in an incremental
fashion – investments are lumpy – such facilities have to be built complete for a
particular size. Hence, in the initial stage supply will be greater than the demand for
such facilities while the reverse may occur over a period of time.
o This characteristic of infrastructure services that is generally, supply greater than
demand, indicates that consumption of its services is non-rival. Such non-rival is a
characteristic of "public goods". The characteristic of non-rival implies zero marginal
cost of providing benefits of a public good (infrastructure in this case) to an
additional consumer. In this sense infrastructure creates external benefits or
positive externalities. However, infrastructure services have one characteristic that
is absent in the case of pure public goods namely, price exclusion, whereby
enjoyment of benefits is contingent on payment of charges. Price exclusion is a
characteristic of "private goods". Thus infrastructure services share characteristics of
both public and private goods. In the case of pure public goods there is complete
failure of the market: since use cannot be monitored, no price can be charged for
the good and no private individual will be willing to provide such goods. Since this
characteristic of a public good is not to be found in infrastructure, it need not
necessarily be provided by the Government. However, given its technological
characteristic, i.e. being a natural monopoly, its provision will have to be regulated.
• Representation of Infrastructure in National Accounts
o From the national accounts point of view, infrastructure would form part of the
capital stock of the nation. However, in the year it is created the infrastructure
facility would be part of production for that accounting period. Where the
production spills over numerous periods it may be necessary to recognise that
output is being produced continuously and record it as “work-in-progress”. This
would be in keeping with the recommendations of SNA 1993 (see United Nations:
System of National Accounts 1993, p. 127).
o Once the infrastructure is completed, its contribution is in terms of the services it
provides by its usage. Thus the output of transportation would be measured by the
value of the amount receivable for transporting goods and persons. The volume of
transport services would be measured by indicators such as tonne-kilometres or
passenger-kilometres (see United Nations: System of National Accounts 1993,
p.136).
o Essentially, what this approach to infrastructure does is to separate the
infrastructure facility from the service provided by the facility. For some areas of
infrastructure this is not a problem since the owner of the facility and provider of
services flowing from the facility is one and the same entity. For example, railways
own the infrastructure facility – tracks, signaling system, etc. – and operate services
on it for passengers and freight. However, in the case of roads the situation will be
different. For a long time the facility was provided by the Government, though now
there is private provision as well. However, services on roads are provided by
different entities, both public and private.
• Distinction between Physical and Social Infrastructure
o Even though Social Infrastructure is not considered here, it will be appropriate to
extend the notion of infrastructure proposed here to the Social Sector as well. Thus,
a hospital or a school would constitute the infrastructure facility, which will provide
services in the form of health care and education over a period of time. However,
one will have to be careful not to attribute all the characteristics of infrastructure
listed above to the Social Sector. For instance, it cannot be argued that a hospital
facility is a natural monopoly even though a substantial amount of sunk costs may
be involved. Further, as far as bestowing externalities is concerned, this is more
likely to be true for basic health care, possibly preventive health care, while
externalities may diminish in the case of higher-end health and possibly curative
health care.
• Conclusions and Recommendations
o The discussion regarding the exact characteristics leads to the conclusion that the existing
notion of infrastructure that is followed in statistical reporting in the country is not in
keeping with the theoretical notion of infrastructure. Based on the characteristics of
infrastructure discussed above a list of infrastructure activities is being proposed for
implementation.
• A Proposed List of Infrastructure Services
o For the identification of an infrastructure service the following characteristics are
pertinent:
▪ Natural monopoly.
▪ High-sunk costs or asset specificity.
▪ Non-tradability of output.
▪ non-rival (up to congestion limits) in consumption.
▪ Possibility of price exclusion; and
▪ Bestowing externalities on society.
o If all six characteristics are considered simultaneously, then the following areas will
constitute infrastructure:
▪ Railway tracks, signalling system, stations
▪ Roads, bridges
▪ Runaways and other airport facilities
▪ Transmission and distribution of electricity
▪ Telephone lines, telecommunications network
▪ Pipelines for water, crude oil, slurry, etc.
▪ Waterways, port facilities
▪ Canal networks for irrigation
▪ Sanitation or sewerage.
o Initially, the above-listed infrastructure facilities may be taken up for data collection.
Thereafter, considering characteristics (b) (High-sunk costs or asset specificity), (d)
(non-rival in consumption), and (e) (Possibility of price exclusion) only, the above list
of infrastructure facilities may be extended to include the following in an extended
list closely corresponding with existing notions of infrastructure:
▪ Rolling stock on railways
▪ Vehicles
▪ Aircrafts
▪ Power generating plants
▪ Production of crude oil, purification of water
▪ Ships and other vessels.
o Data collection on the above activities should be commenced immediately. It may
be pointed out that data on many of the activities listed above will not have to be
collected de novo. Such data are already being collected by statistical agencies.
However, data are available only in a dispersed fashion. Data on all infrastructure
activities should be compiled together and be published in one document. Thus
even though railway data or power sector data are published by the respective
sectors, these must be published in a document, which may be called, Annual
Infrastructure Statistics, even if it involves duplication. This will improve the
accessibility of such data to policy makers and other data users.
o The Commission recommends the following:
▪ The list of infrastructure activities should be finalised by the Ministry of
Statistics and Programme Implementation (MoS&PI) on the basis of the
characteristics recommended for identification of infrastructure.
▪ Data gaps have been identified for many infrastructures sub-sectors. Steps
to bridge this gap should be taken by the respective authorities namely,
Railway Board (Railways); Ministry of Road Transport and Highways (Roads);
Director General, Civil Aviation (Airways); Ministry of Shipping (Waterways);
Department of Telecommunications (Telecommunications); Central
Electricity Authority (Electricity); National Sample Survey Organisation,
National Buildings Organisation, and Office of the Registrar General and
Census Commissioner (Housing Services); Department of Post (Postal
Services); Ministry of Urban Development and Poverty Alleviation (Urban
Infrastructure); Ministry of Rural Development (Rural Infrastructure);
Planning Commission (Energy Sector excluding Electricity); and MoS&PI
(Infrastructure Indices).
▪ A mechanism to collect reliable data on the infrastructure activities should
be evolved immediately by the respective authorities in consultation with
the MoS&PI.
▪ Considering that Infrastructure Statistics are generated in different sub-
sectors, for the benefit of the users, data on all infrastructure activities
should be published in one document by the MoS&PI so as to improve the
accessibility of such data to policy-makers and other data users.
