Economic Survey: Trend of PSU investment in roads and railways to continue

Demand for steel to get a boost with higher roads, rail spend

Public sector investments in roads and railways attract the most focus of capital expenditure in recent years according to the Economic Survey 2021-22. This trend is likely to continue with emphasis on the National Rail Plan.

"The next 10 years will see a very high level of capital expenditure (CAPEX) in the railway sector as capacity growth has to be accelerated such that by 2030 it is ahead of demand," the Economic Survey said.

"Up to 2014, capex on railway was barely Rs 45,980 crore per annum and consequently the railway was characterized by high levels of inefficiency and highly congested routes unable to meet the growing demand. Post 2014, a conscious effort was made to improve the railway sector by substantially increasing the capex. The capex outlay for 2021-22 is Rs 2,15,000 crore (Rs 2.15 trillion), which is more than five times the 2014 level," the survey said, adding that the capex will increase further in coming years.

According to the survey, the focus of capital expenditure from April to November 2021 has been directed towards infrastructure-intensive sectors like roads and highways, railways, and housing and urban affairs. In addition, the Centre has also put in place several incentives to boost the capital expenditure by the States.

The survey highlights that an average of 1,835 track km per year of new track length has been added through new-line and multi-tracking projects during 2014-2021 as compared to the average of 720 track km per day during 2009-14.

Similarly in roads, there has been a consistent increase in the construction of National Highways and roads since 2013-14 with 13,327 kms of roads constructed in 2020-21 as compared to 10,237 km in 2019-20, indicating an increase of 30.2 per cent over the previous year. In 2021-22 (till September), 3,824 km of road network were constructed.

"The extent of road construction per day increased substantially in 2020-21 to 36.5 km per day from 28 km per day in 2019-20, a rise by 30.4 per cent as compared to the previous year. The significant upturn in road construction in 2020-21 is due to the increase in public expenditure by 29.5 per cent as compared to the previous year," the survey said.

This heavy spent on roads and railways is also going to support steel production. "With economic recovery, the global demand for steel is slated to increase this year and the next. The steel industry is expected to face increase in demand in the next financial year also. This is mainly on account of the Government of India's focus on infrastructure development including roads, railways and defence production. The Performance Linked Incentive (PLI) Scheme for specialty steel is well timed to provide the necessary incentive towards investment in value added steel-a step in the direction to increase its production for internal consumption as well as exports," the survey said.

On the whole, the National Infrastructure Pipeline (NIP) has envisaged a project infrastructure investment of Rs 111 trillion during fiscal 2020 to 2025. The NIP task force report has estimated that about 15-17 per cent of this outlay is to be met through innovative and alternative initiatives such as asset monetisation through the National Monetisation Pipeline (NMP) and others.

According to the survey, the NMP estimates aggregate monetisation potential of Rs 6 trillion through core assets of the centre, over a four-year period, from fiscal 2022 to 2025. "The top-5 sectors which capture around 83 per cent of the aggregate pipeline value include: Roads (27 per cent) followed by Railways (25 per cent), Power (15 per cent), oil & gas pipelines (8 per cent) and Telecom (6 per cent). Around 15 per cent of assets with an indicative value of Rs 0.88 lakh crore are envisaged to be rolled out in the current financial year (2021-22)," the survey said.

Emphasis sectors for Capital Expenditure (April to November 2021)

Sector	Capital expenditure
Roads	Rs 73907 crores
Railways	Rs 65157 crores
Housing and Urban Affairs	Rs 16891 crores