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The expressway to growth - Views on News from Equitymaster
 
 
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  • Sep 10, 2009

    The expressway to growth

    As per a leading business daily, the Union road transport and highways ministry plans to build more than 17,000 kilometer (km) long network of expressways by the year 2022. The ministry proposes to build about 5,000 kms of road on an annuity basis and 12,000 kms on a public-private partnership (PPP) basis, with the permission to levy toll. Stretches of roads expected to handle traffic volume less than 5,000 passenger car units (PCUs) should fall under the annuity basis, while those above 25,000 PCUs should fall under a toll basis. The cost of building 100 kms of four-lane expressways is about Rs 18 bn. The cost of the associated civil work is about Rs 14 bn. The cost of building 100 kms of six-lane expressways is about 26 bn, with associated civil work of about Rs 20 bn.

    Important to note that India's Union minister for roads Mr. Kamal Nath has said that Indian road projects require about Rs 2,000 bn over the next three years for which his ministry is considering innovative financing instruments. Construction of roads had a direct impact on several sectors like capital goods, cement, and steel. Not to mention the beneficial impact on employment. Moreover, better infrastructure encourages economic activity. In our opinion, surface transport is finally receiving the importance it deserves. It may be recalled that immediately after the election results became clear, the next question that occupied media space was, who gets which ministry. Rightly so. Management matters not only in business, but also in governance.

    Air travelers pay for the Jet Strike
    No matter who gets agitated in India, we can rest assured that the common man will pay the price. As per a leading business daily, airfares have soared as pilots of Jet Airways continue their strike. The pilots have taken mass sick leave in protest against the sacking of two pilots. So far, the talks between the management and the pilots have not borne any fruit.

    Other airlines have pitched in to pick up the passengers of Jet Airways, but that has not stopped airfares from shooting up. As usual, the common man has no option but to grin and bear the inconvenience. We have mentioned earlier that aviation is arguably among the most difficult industries from the owner's perspective. It suffers from disadvantages in both input costs and pricing power. The highly capital intensive nature of operations and vagaries of crude oil prices make costs hard to control. The presence of many competitors and commoditisation of tickets due to travel portals exert a great deal of pressure on ticket prices. Little wonder then, that bad news continues to pour out from the Indian civil aviation sector.

     

     

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