Development Watch – June ’22 Week #4
Cover Image Source: Financial Express (Green Hydrogen Fuel Car Toyota Mirai)
Rs. 80,000 Cr Business Opportunity for Construction Companies from Metro Projects
For the next five years, domestic metro rail projects will provide business opportunities worth Rs. 80,000 Crores to construction companies. The existing operational metro rail network in India stands at 746 km in 15 cities. Another 7 cities have under-implementation metro projects of about 640 km. Additional 1,400 km of metro rail projects are in approval/proposal stages. In the next 5 years, metro rail network will witness 2.7 times of expansion.
For elevated metros, per kilometre development costs between Rs. 280-320 crores. Costs are higher in case of underground metros. Civil works accounts for 35-45% of the overall project costs. This in turn can create sizeable opportunities for construction companies.
Air Passengers to reach 83% of Pre-Pandemic Levels
As per International Air Transport Association, air passengers will reach 83% of pre-2020 levels. Airlines have lost nearly $200 billion dollars worldwide in the last two years. Aviation industry’s return to profit is probable in 2023. The global association IATA represents 290 airlines, accounting for over 80% of air traffic worldwide. IATA’s annual global meet is taking place in Doha, Qatar this year. Shifted from China due to ongoing pandemic in the country.
While In India, aviation fuel attracts highest levels of taxes in the world. India has also imposed upper and lower bands on air fares levied by carriers. Indian airlines that were beginning to recover from Covid 19 losses are now facing price increases in jet fuel. This has forced them to raise prices, which is impacting demand. State run oil refiners in May increased fuel prices by 16% in May this year.
Delhi, the first Airport to run entirely on Hydro and Solar Power
Delhi airport has signed a long-term power purchase agreement with a Himachal-based hydropower producing company for the supply of hydroelectricity till 2036. Delhi’s IGI Airport is now the first airport in India to run on hydro and solar power. 6% of electricity requirement is met from on-site solar power plants, placed on the airside and roofs of cargo terminals. Remaining 94% demand is met through hydropower, starting June 1, 2022. This helps in reduction of 200,000 tonnes of CO2 emissions each year.
IRB Infra achieves financial closure for Expressway Project in UP
A consortium of lenders extended financial support of Rs. 2,659 Crores for 6-lane expressway between Badaun and Meerut in Uttar Pradesh. The 6-lane expressway is expandable to 8 lanes and has a length of 129.7 km. The project concession period is for 30 years with traffic link extension provision of 6 years, including 3 years construction period. The company will start construction in full swing in August-September and has started mobilizing resources. Total cost of project is Rs. 6,538 Crores.
Indian Railways bidding rules may factor in Social, Development impact
There has been a radical shift in bidding norms from financial return-based assessment of bids to a more comprehensive approach. The new Modified Economic Internal Rate of Return (MEIRR) will enable railways to gauge economic, social, and developmental aspects of a project. This will allow Indian Railways to take up more projects in far-flung or low-density areas. for instance, new passenger rail projects such as Regional Rapid Transit System (RRTS) in NCR seem to have poor financial viability but a strong positive impact on the people and surrounding areas. MEIRR can be worked out at project, zonal and national levels. Similar frameworks are used in countries like UK and Australia.
These approaches really on conversion of financial cost to economic cost by excluding taxes, subsidies and interest payments, among other factors. The economic approach will assess benefits derived by comparing user benefits in “with project” and “without project” scenarios. It will account for savings of travel time, vehicle operating costs, improvement in safety, pollution reduction and reduced road stress. Savings in fuel and developing road infrastructure will also be a parameter for assessment.
India’s first Green Hydrogen Fueling Station to be set up in Ladakh
NTPC has awarded the project of India’s first green hydrogen fueling station in Leh, Ladakh, to Amara Raja Power Systems. To start with, NTPC plans to introduce 5 hydrogen fuel cell buses in the region. The project will be set up at an altitude of 3,600 m having a temperature variation of -14 degrees C to + 20 degrees C. A part of National Hydrogen Energy Mission, this would be a precursor to large scale green hydrogen mobility and storage projects across India. Green hydrogen will be produced by splitting water into hydrogen and oxygen using electrolysis process. The electrolysis process will be powered by electricity generated by renewable energy resources.
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