Being a student of Infrastructure Management, I was always convinced about the importance of Infrastructure in economic development and growth of any country. What intrigued me the most was the question “How do we define Infrastructure?”
After grappling for some time, I found the answer during a lecture of Infrastructure development taken by Dr. Astha Agarwalla (Economist and Professor at Adani Institute of Infrastructure Management) about the characteristics of Infrastructure sectors.
In the lecture, Prof. Agarwalla shared with us the Harmonized list of Infrastructure sub-sectors, as given by Government of India.
During the class discussion, I got concerned about the status of power generated with the help of roof-top solar panels and supplied to grid.
In order to appreciate the concern, it will be helpful if I start out with little understanding behind the concept of the infrastructure characteristics. As per the guidelines provided by Press Information Bureau, Government of India, Cabinet Committee on Infrastructure about the characteristics are,
Natural monopoly – A natural monopoly asset is one where the barriers to entry are high; often so high that it is not efficient to have competing service providers.
High sunk costs and asset specificity – High sunk cost can be defined as the investment in an asset which can not be recovered; asset specificity can be defined as an asset that can be used for specific purpose only.
Non-tradability of output – As per this characteristic, the final output is not tradable in nature.
Non-rival-ness in consumption – Consumption of one individual will not affect the consumption of others.
Possibility of price exclusion – According to this, producer of any service or good can exclude the end user if the price is not paid.
Presence of externalities – An infrastructure project can create positive or negative impact on the environment/society.
Hence, all of these characteristics shall be applicable on sector to make it eligible for enlisting in to the list of Infrastructure sub-sector.
The Concern: Why “Electricity generation” as a whole is a part of energy category of infrastructure sector, as generation of electricity through solar rooftop system is purely tradable in nature which is point number 3 in above listed characteristics!
Press Information Bureau, Government of India, Ministry of New and Renewable Energy in their recent press release stated about their future vision pertaining to Solar rooftop generation i.e. 40GW of grid connected rooftop solar capacity by 2022.
Now government shall clarify its view on whether electricity generation through solar rooftop generation is under infrastructure sub-sector or not!
In the lecture, Prof. Agarwalla shared with us the Harmonized list of Infrastructure sub-sectors, as given by Government of India.
During the class discussion, I got concerned about the status of power generated with the help of roof-top solar panels and supplied to grid.
In order to appreciate the concern, it will be helpful if I start out with little understanding behind the concept of the infrastructure characteristics. As per the guidelines provided by Press Information Bureau, Government of India, Cabinet Committee on Infrastructure about the characteristics are,
Natural monopoly – A natural monopoly asset is one where the barriers to entry are high; often so high that it is not efficient to have competing service providers.
High sunk costs and asset specificity – High sunk cost can be defined as the investment in an asset which can not be recovered; asset specificity can be defined as an asset that can be used for specific purpose only.
Non-tradability of output – As per this characteristic, the final output is not tradable in nature.
Non-rival-ness in consumption – Consumption of one individual will not affect the consumption of others.
Possibility of price exclusion – According to this, producer of any service or good can exclude the end user if the price is not paid.
Presence of externalities – An infrastructure project can create positive or negative impact on the environment/society.
Hence, all of these characteristics shall be applicable on sector to make it eligible for enlisting in to the list of Infrastructure sub-sector.
The Concern: Why “Electricity generation” as a whole is a part of energy category of infrastructure sector, as generation of electricity through solar rooftop system is purely tradable in nature which is point number 3 in above listed characteristics!
Press Information Bureau, Government of India, Ministry of New and Renewable Energy in their recent press release stated about their future vision pertaining to Solar rooftop generation i.e. 40GW of grid connected rooftop solar capacity by 2022.
Now government shall clarify its view on whether electricity generation through solar rooftop generation is under infrastructure sub-sector or not!
If government think of removing the characteristic filter of non-tradability nature of infrastructure sub-sector then areas like Real-estate will be consider under infrastructure sub-sector. If that happens, government schemes of pushing infrastructure development will aid in real-estate sector as well. The benefits such as, if government releases funds or launches any scheme for the growth of all infrastructure sector then the benefits of the same will be reaped by the real-estate sector as well.
E.g. Real-estate being in one of the most affected sectors to the common man, who utilizes his /her entire life for creating own shelter, the government scheme for boosting real-estate sector might lure someone with fraudulent intentions and at the end common man would have to suffer. Hence government would never want to hatch the egg of bird called “black money”.
There might be other sectors as well which might get enlisted in the infrastructure sub-sector because of this removal of non-tradability characteristic or government shall look for the easy way out by updating the master list of infrastructure sectors by stating “Electricity generation except solar rooftop generation”
References:
Press Information Bureau Government of India Cabinet Committee on Infrastructure, 01.03.2012, http://pib.nic.in/newsite/PrintRelease.aspx?relid=80634
Press Information Bureau, Government of India, Ministry of New and Renewable Energy, 19.07.2018, http://pib.nic.in/newsite/PrintRelease.aspx?relid=180728
http://mospi.nic.in/sites/default/files/reports_and_publication/cso_research_and_publication_unit/Infrastructure_Statistics/infra_stat_2010/VII-Introduction.pdf
