Problems relating to Trade and Investment on India
26. Others |
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Issue |
Issue details |
Requests |
Reference |
| (1) Shortage of Electric Power Supply | - Blackouts are extremely frequent. - The basic infrastructure such as power supply continues to require overhauls. Chronic power shortage, abrupt blackout, unstable power voltage, etc. affect the use of electric appliances. |
- It is requested that GOI: -- gives guidance for improvement, and -- overhauls the environment for investment. - It is requested that GOI expedites overhauling the basic infrastructure. |
- National Electric Policy |
| (Action) - Since 1995, GOI has introduced the 5-year tax-exemption measures for investment into the infrastructures under the BOT/BOOT terms. - GOI has authorised 100% private FDI on construction of electric power generation, power transmission and distribution system, road, and port for permission through the Automatic Route. - The Central Government has decided to authorise electric power generation enterprises to sell directly to SEZ enterprises to assure an uninterrupted supply of electric power at appropriate prices. Each State is required to grant access by the electric power enterprises ("EPE's") to the transmission and distribution lines in exchange for the payment of the Wheeling Charge. - Ministry of Power requires each State to grant a free hand to EPE's for establishment of the SEZ exclusive power stations. - The Examination Report of TPRB, WTO ended in June 2002, points out that in services, significant reforms have been pursued since the previous Review, 4 years ago especially in telecommunications, financial services and, to some extent, in infrastructure services, such as power and transport. However, the infrastructure services remain the major barrier for the Indian economy and, in particular, electricity power remains in short supply. The charges of telecommunication services have been substantially reduced, benefiting the other sectors in their cost reductions. - Enterprises investing in infrastructure of various sectors are entitled to 10-year income tax exemption, provided, however, those, as regards investment in the communication sector, enterprises are entitled to 5-year tax exemption and thereafter for 5-years, 30% reduction in income tax. - On 15 December 2006, Japan and India signed "Joint Statement Towards Japan-India Strategic and Global Partnership" and announced "Japan-India Special Economic Partnership Initiative ("SEPI")". - On 22 December 2006, GOI issued Circular No.25 on "Foreign investment in Infrastructure Companies in Securities Markets," allowing foreign investment through the Indian Securities Market. - The power consumption per capita in India in 2005 of 480kWh was lower than the average of all African countries of 563kWh. In India, the average shortage of electric power in 2007 was 9.8%, while during the peak hours, the average shortage was 16.6%. - In May 2007, Indian Prime Minister Manmohan SINGH said: "Investment to the tune of 6 trillion rupees is estimated in the Eleventh 5-Year-Plan for expansion of electric power supply capacity, since only half of the planned increment of 41 million kilowatts was achieved during the Tenth 5-Year-Plan." According to the Ministry of Finance, Haldia Power Generation Project that requires about US$440 billion investment in the next five years will use up one-third of investment in infrastructure development. - Shortage or undeveloped infrastructure such as water service, road, communication, waste and night-soil disposal is getting aggravated in Delhi in the rapidly growing economy. In various spots within the metropolitan area a number of crossover constructions are underway. Delhi metro that has started its service since 2002 under Japan's ODA has been steadily expanding its business area. Hopefully, it is contributing to improvement in the traffic infrastructure. (Digested from the web page of Delhi JCCI). - On 22 October 2008, "Joint Statement on the Advancement of the Strategic and Global Partnership between Japan and India" was released, whereby "The two Prime Ministers reaffirmed their commitment to the realization of the Western corridor of the Dedicated Freight corridor (DFC) project...with the Japanese ODA Loan ...the first phase is currently estimated to be approximately 450 billion yen". Further, as regards Delhi-Mumbai Industrial Corridor Project (DMIC), Japan Bank for International Cooperation (JBIC) confirmed both the joint establishment of a project development fund with India Infrastructure Finance Company Ltd. (IIFCL), and the 5 early bird projects that includes preparation of infrastructure in the neighbourhood of Delhi. - Eleventh Five Year Plan (2007-2012) envisages expenditure of about USD500 billion for investment into infrastructure, an increase from 5.4% to 9.3% in GDP ratio. - Planning Commission (India) pointed out the grave problems such as unstable and costly power supply and insufficient logistics infrastructure such as road, harbour and airport. Furthermore, it added the need for investment into infrastructure to the tune of 20.3 trillion Rupee (about USD 500 billion) in order to achieve 9% growth in annual average in the 11th 5-Year Plan (2007-2011). - The power shortage at peak hours in India reached 15.3% of the total power demand in 2009, while the loss in power distribution reached 26% in 2007. The situation is serious. While the total power generation capacity has increased by 50% in 2009 compared to 2001, the construction project for increasing the power supply facilities lags behind, namely, it has completed only 66% of the scheduled capacity. - On 26 February 2010, Finance Minister Pranab Mukherjee announced the Union Budget 2010/11 at the Lok Sabha. He will expend 173,522 crore Rs, corresponding to 46% of the budgeted total expenditure. - On 26 February 2010, Finance Minister Pranab Mukherjee announced the Union Budget 2010/11 at the Lok Sabha. By affording it "the project import status", he will apply the 5% basic tariff rate to the monorail under the city transport plan. - On 23 March 2010, Finance Minister Pranab Mukherjee announced at the Lok Sabha his approval of the private enterprises' issuance of long-term bond for procurement of fund directed to investment in the infrastructure, as a part of the government plan to promote fund creation for investment into the infrastructure department. GOI will grant the same preferential treatment to the private long term loan as is given to the infrastructure bond issued by the government. - In December 2011 upon Premier Noda's visit to India, based upon the concept of starting the Delhi Mumbai Industrial Corridor (DMIC), it was mutually agreed to start the Japan-India DMIC facility of USD 9 billion (under Yen Credit of Yen 450 billion), with each country contributing 50% of the cost of constructing the DMIC facility, in order to improve local infrastructure in DMIC region in its early stages. () DMIC is a Japan-India Joint Local Area Development Concept to lay Dedicated Freight Railway between Delhi and Mumbai, while developing infrastructure by mainly private investment in the vicinity, including industrial zone, distribution base, power generation, road port facilities, dwelling and commercial facilities. - On 19 November 2012, Japan Ministry of Economy, Trade and Industry (METI) and Indian Ministry of Commerce and Industry (MCI) formally agreed on the list of possible business sectors (19-sectors in all, related to railway, power generation, water environment and IT), based on the USD 4.5 billion contribution from Japan) out of the total DMIC fund facility of USD 9 billion. - The balance between demand and supply in India in electric power volume, by shortage rate (shortage divided by demand), is on the way toward improvement: From 8% or so in 2011-2012 to 4.2% in 2013, 5.1% (estimate) in 2014. In major states where entry by Japanese affiliated enterprises has made a fair progress, the shortage rates are quite low: Gujarat nearly zero, Rajasthan (0.3%), Haryana (0.6%), Maharashtra (2.1%). On the other hand, the power shortage is conspicuous in the Southern India, where the shortage rates are far above the national average: Uttar Pradesh (14.0%), Karnataka (9.5%), Andhra Pradesh (6.9%), and Tamil Nadu (5.9%). |
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| (2) Inadequate Logistics Infrastructure | - The congestions in the port facilities get in the way of timely completing customs clearance of import cargoes. - Pending overhaul of the basic infrastructure such as roads. Delayed preparation of the drainage facilities on the public road causes traffic congestions by each rainfall, as the road gets submerged in water. - There were several cases of parts damage to the machine during transport as the vibration from the poor pavement on the road surface got transmitted to the machines. In another case, the container without air suspension during transport hit the trees on the sidewalk, damaging the machine cover. |
- It is requested that GOI: -- improves the congestions under its direction, and -- overhauls the environment for attracting foreign investment. - It is requested that GOI overhauls the basic infrastructure. - It is requested that GOI takes step to overhauls the infrastructure, and to promote diffusion of air-suspended vehicles. |
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| (Action) - In April 2007, GOI approved the modernisation projects for Chennai Airport (Kamaraj International Airport) and Kolkata Airport (Netaji Subhash Chandra Bose International Airport). - On 4 January 2008, Indian Prime Minister Manmohan SINGH asked once again Minister Nukaga of MOF for Japan to contribute to the Delhi-Mumbai Industrial Corridor (DMIC) development project aimed at preparing the comprehensive industrial park and port facilities between Delhi and Mumbai along with the project for constructing a cargo railway. - On 17 September 2009, GOI approved the proposal to deploy the ODA fund from Japan on development of the dedicated freight corridor (DFC) project. GOJ proposed granting credit to GOI under the terms of "Special Terms for Economic Partnership (STEP)". GOI is hopeful that DFC Project will reinforce transportation capacity in the heavily congested cargo traffics, and boost exponentially the overall Indian economy and efficiency, through interlinking the vital locations, namely, production depots of raw materials, consumer centres, and major ports. DFC Project is due for completion by 2017. - Out of the 19-sectors formally agreed mutually between Japan and India on Japan side USD 4.5 billion business sector list of Delhi Mumbai Industrial Corridor (DMIC) the distribution sectors are the following: (1) Construction of railway between Ahmedabad City and Dholera (2) Construction of municipal railway connecting Delhi-Manesar Industrial Area-Nimurana Industrial Area (3) Municipal railway construction project in Pune, near Mumbai (4) Municipal railway construction project connecting Dadri-Noida-Ghaziabad near Delhi (5) Railway transport business of finished cars. - Union budget 2016 (April 2016-March 2017) released on 29 February 2016 places major emphasis on investment into infrastructure such as the road overhaul and the agricultural development, while holding tight to structuring the healthy budget. The ambitious budgetary plan envisages increase in the investment amount of INR 970 billion maximum into the road infrastructure overhaul, completing the road system network over all municipalities, towns and villages throughout the nation. As an outcome of this effort, GOI expects increased demand for steel and cement materials, increased motor vehicles, improved domestic logistics helpful to transport of perishable foods and agricultural produce, etc., as well as the general improvement in the business environment. |
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| (3) Under-developed Downstream Industries | - MFS, manufacturing finished products in India faces difficulty in increasing the local contents, due to the paucity of the downstream industries, such as electronic parts. - Scarcely few local suppliers are not capable of manufacturing high precision materials and parts that can be used for production of high-level energy saving products. - MFS has no alternative but to rely on imports to fill its needs for electronic parts, high precision machined aluminium/copper products, DC motors, etc. |
- It is requested that GOI enriches its programme for fostering and supporting the downstream local industries. - It is requested that GOI enriches its programme for fostering and supporting the downstream local industries. - It is requested that GOI enriches its programme for fostering and supporting the downstream local industries. |
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| (4) Inadequate Water Supply and Sewerage System | - Inadequate basic infrastructure such as water supply and sewerage system. Abrupt water cut off. Poor maintenance of sewerage system causes poor sanitation, leading to epidemic illnesses, etc. |
- It is requested that GOI overhauls the basic infrastructure, as soon as possible. | |
| (5) Non-payment / Delayed payment | - MFS, having experienced Nonpayment/Delayed Payment of Accounts Receivables, due in part to differences in traditions in commerce, business ethics, balance of power, etc., has switched to advance payment in its terms of sale. However, on products with short life expectancy cycles (such as manufacturing equipment for smartphone parts), the delivery terms and the prices claim the top priority, so that even if collection is completed successfully, the delay in payment severely affects the profitability of the MFS's operation. | - It is requested that GOI extends its helping hands to the less powerful SMEs by provision of information and facilitates collection of accounts receivables. | |
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