1. INTRODUCTION
The Ministry of Finance has recently mandated a high-level committee led by Mr. Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister of India, to redefine the scope of activities and sub-sectors to be classified under the infrastructure sector. The high-level committee has been called to action for undertaking a comprehensive evaluation of the parameters for defining infrastructure and highlight various segments which are crucial for the economic development, and which urgently require the financial augmentation due for critical infrastructure sectors. Experts believe that this re-evaluation of the sectoral classification is being done in light of the economic, social, and technological changes in the economy over the last few years.
2. CONUNDRUM OF DEFINITIONS
Despite infrastructure being recognised as a crucial cog in the machinery of the economy, the Indian legal framework still does not have a uniform definition of infrastructure or the sectors which comprise the category of infrastructure. Throughout various stages of economic development the Union Government of India appointed different committee of experts to classify various activities comprising the infrastructure sector. Some of the prominent committees and their attempts at classifying infrastructure are as follows:
2.1. Dr Rakesh Mohan Committee (1996)
The earliest attempt to provide a comprehensive definition of infrastructure was by Dr Rakesh Mohan Committee in the "India Infrastructure Report" in 19961 , wherein they classified electricity, gas, water supply, telecom, roads, industrial parks, railways, ports, airports, urban infrastructure, and storage as infrastructure. However, this definition does not comprehensively cover the entire spectrum as it did not include oil exploration, pipelines, or irrigation systems, and the classification was devoid of any basic understanding about the fundamental characteristics of infrastructure sector.
2.2. Rangarajan Commission (2001)
With the liberalisation of economy and further growth opportunities beckoning at the doors of the nation, the lacunae in the classification of Dr Rakesh Mohan Committee were recognised by the Union Government which constituted a special commission under Dr C Rangarajan in 2001 ("Rangarajan Commission"). The Rangarajan Commission made a list of indicators or characteristics2 of sectors which are to be classified under the larger umbrella of infrastructure, these six indicators are: (a) natural monopoly (b) high sunk costs (c) non tradability of outputs (d) non-rivalness (up to congestion limits) in consumption, (e) possibility of price exclusion; and (f) bestowing externalities on society.
Based on these features, (except (b), (d), and (e) listed above), the Rangarajan Commission recommended inclusion of the following sectors:
(i) railway tracks, signalling system, stations;
(ii) roads, bridges, runways, and other airport facilities;
(iii) transmission and distribution of electricity;
(iv) telephone lines, telecommunications network;
(v) pipelines for water, crude oil, slurry, waterways, port facilities; and
(vi) canal networks for irrigation, sanitation, or sewerage.
Based on the characteristics laid down in (b), (d) and (e) listed above, the Commission further recommended the following sectors to be included as well
(i) rolling stock on railways;
(ii) vehicles, aircraft;
(iii) power generating plants;
(iv) production of crude oil, purification of water; and
(v) ships and other vessels.
However, the above classification is also seen by many experts as incomplete as various facets of social infrastructure like schools, colleges, hospitals were not included. Further, with designated industrial areas like special economic zones, Export Oriented Units (EOUs) being promoted by the government, the classification by the Rangarajan Committee did not prove useful for policy formulation in the long r
2.3. Cabinet Committee on Infrastructure and the Harmonized Master List on Infrastructure
In 2009, a new policy mechanism was set up by a special cabinet committee under the chairmanship of Dr Manmohan Singh the erstwhile Prime Minister. This committee, namely the Cabinet Committee on Infrastructure ("CCI") was mandated to formulate policies and monitor implementation of programmes across various infrastructure sectors. With this objective, the CCI felt it was imperative to first clearly define 'infrastructure' to have a steady base for the collection of data and its comparison in the future. The CCI then with the Ministry of Finance went on to draw an indicative set of indicators by augmenting the initial broad framework laid down by the Rangarajan Commission.
The initial list of sectors given by Rangarajan Commission was thus further added by three more indicators i.e. (a) sector's importance to the scheme of economic development; (b) their ability to contribute to human capital; and (c) specific circumstances under which they developed in India. Based on this framework it prepared a master list of identified infrastructure sub-sectors classified under five broad categories of transport, energy, water and sanitation, communication, and social and commercial infrastructure. This list was named as the Harmonized Master List on Infrastructure3 ("Master List"). The Master List was open to all the concerned agencies responsible for supporting infrastructure policies. Each agency was authorised to modify the Master List by providing the reasoning for the said inclusion or deletion based on the six indicators provided by the CCI. Thus, a permanent mechanism for the revision of the Master List was also set up under the Secretary, Department of Revenue, Chief Economic Adviser, and representatives from Reserve Bank of India ("RBI"), Securities Exchange Board of India, Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority and Secretary of the concerned Administrative Ministry/ Department as members. The Master List is the current mechanism for the categorisation of infrastructure sub-sectors, with the latest addition being made for data centres and energy storage systems4.
3. ADVANTAGES OF INFRASTRUCTURE STATUS
Being classified as an infrastructure sub-sector opens companies for various forms of financial assistance. Recently the finance minister announced a massive infrastructure financing initiative titled National Infrastructure Pipeline5 with an outlay of over INR 111 lakh crores to be invested from 2020-2025. Furthermore, the existing legal framework for availing debt and equity investments has provided for separate provisions and relaxations for entities engaged in the infrastructure segment. The various advantages which an entity can avail upon being granted infrastructure status are provided hereinbelow:
- Access to foreign debt capital through external
commercial borrowings: Entities engaged in the sub-sectors
classified under the Master List are eligible for certain
relaxations when they avail debt from external sources under the
External Commercial Borrowing ("ECB")
framework of the RBI. The ECB framework also provide that entities
engaged in the infrastructure sector who have availed rupee term
loans domestically can avail ECB for the repayment of such loans
under one time settlement arrangement with the borrowers.
- Exemptions under the Companies Act, 2013: The
Companies Act, 2013 provides for certain special exemptions for
companies engaged in the infrastructure sector for example Section
55(2) of the Companies Act , 2013 read with Rule 10 of the
Companies (Share Capital and Debentures) Rules, 2014 allows
companies in the infrastructure sector to issue preference shares
for a period exceeding twenty years, but not exceeding thirty
years, subject to redemption of ten percent from the twenty first
year onwards on a proportional basis. This longer period of
redemption is provided by the lawmakers considering the long
gestation periods of infrastructure projects. An infrastructure
company has also been exempted from various conditions imposed by
Section 186 of the Companies Act, 2013 governing the loans and
investments to be made by a company.
- Availability of enhanced credit facility from domestic
financial institutions:- Infrastructure companies are
eligible to avail credit facilities for long-term at low rate of
interest due to the priority sector lending norms of the Union
Government and the RBI. Various non-banking financial institutions
working in the domain of infrastructure financing provide long term
loans for meeting capital expenditure needs of infrastructure
companies.
Thus, sectors which are included in the larger umbrella of infrastructure under the Master List are open to schemes and opportunities which cannot be availed by any other sub-sector or industry. However, the concept of infrastructure is an evolving concept as noted by the CCI, this concept cannot be rigid and has to be a fluid notion, which develops as the needs and priorities of the society shifts or modifies with time. This evolution of the society and its needs with time makes it urgent that the resources poised for investment as infrastructure are also suitably directed in the appropriate segments.
4. THE NEW NOTION OF INFRASTRUCTURE
The classical definition of infrastructure has evolved over the years in India, from the traditional concept of roads, bridges, and highways to the inclusion of social infrastructure (affordable housing, affordable renting complexes, convention centres etc.) in the Master List. This inclusion is an admission of policymakers that infrastructure and its ambit must evolve over time, to act as a fulcrum for social development.
Policymakers have time and again come to realise that it may not be in the best interest to have a hard-line definition of infrastructure as seen from the limitations in the Rangarajan Committee definition and the constant need for updating the Master List. However, owing to the need of having a steady policy framework and for monitoring the progress in the sector it's important to define the activities and subsectors to facilitate incentives and proper monitoring. A relevant example of fields of infrastructure which were unprecedented in the previous definitions are software for public welfare and climate change technologies, these fields were never considered as infrastructure. However, in today's society post the digital revolution and climate movements, the priority of the population has shifted massively. The development of digital India has made strides in the incorporation of Digital Public Goods ("DPG"), into the daily lives of citizens, like, software, data sets or artificial intelligence models which are used as public goods for the augmentation of economic development. DPG has provided us with tools like Aadhar and Unified Payments Interface (UPI), which through their integration in various services have brought forth multi-faceted developments in the field of social growth and financial inclusion.
Climate consciousness and the need to eliminate the traditional fossil fuel-based sources of energy is also shifting the way the society perceives infrastructure in the modern age. Non-conventional sources of energy are being brought into the mainstream, as the country plans to stop adding new coal power generation capacity6 in its power mix. However, renewable energy sources like solar, hydropower and wind energy are unable to compete with the traditional fossil fuel sources of energy with the current technology, consequently they need financial incentives and technological support to be commercially viable on a large scale. The Union Government has included Energy Storage Systems in the Master List and has other policies for the benefit of renewable energy developers; however, experts believe that having a separate category for sustainable technologies is required if the country needs to have uniformity in policy making and benchmarking. Furthermore, with the notification of the National Green Hydrogen Mission, a policy push on hydrogen fuel cells and manufacturing of electrolyzers may also be deliberated upon by the committee.
5. CONCLUSION
The high-level committee led by Mr. Bibek Debroy, is poised to submit its report by September 2023. Experts have opined that the earlier framework of having five categories in the Master List, may be revised to have a more indicative criterion. The committee is particularly expected to focus on the renewable sector. The main policy initiative while providing the necessary updates to the Master List should be to create a more indicative and flexible criteria instead of adoption of a hard-line closed box approach. Since infrastructure is a vital plinth for the economic growth of a country it would need to be inclusive of the future needs and priorities of the populace. There is an expectation that a newfound framework will be agile and adaptable and would provide for inclusive sustainable development factors for the society of the future.
Footnotes
1. Office Memorandum of the Planning Commission on the definition of Infrastructure, available at http://www.cspm.gov.in/ocms/pi/Defination.pdf.
2. Office Memorandum of the Planning Commission on the definition of Infrastructure, available at http://www.cspm.gov.in/ocms/pi/Defination.pdf.
3. Background of the establishment of CCI and adoption of Harmonized Master List on Infrastructure, available at https://pib.gov.in/newsite/PrintRelease.aspx?relid=80634.
4. The Harmonized Master List of Infrastructure sub-sectors (Annexure-I) (as updated on October 11, 2022), available at https://egazette.nic.in/WriteReadData/2022/239561.pdf.
5. Policy announcement for National Infrastructure Pipeline, available at https://www.pib.gov.in/PressReleasePage.aspx?PRID=1644812.
6. National Electricity Plan (NEP) (Vol-I Generation) (2022-32), available at https://cea.nic.in/wp-content/uploads/irp/2023/05/NEP_2022_32_FINAL_GAZETTE-1.pdf.
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