Committee to define Infrastructure

Context: The finance ministry has tasked a high-level committee under Bibek Debroy, chairman of the Economic Advisory Council to PM, to undertake a comprehensive assessment of the characteristics or parameters defining infrastructure and its financing framework.

Infrastructure refers to basic physical and structural facilities, which are essential for an economy to function. There is no universally accepted definition of infrastructure. National Statistical Commission headed by C. Rangarajan identified six characteristics of infrastructure sector.

Characteristics of Infrastructure:

  1. Natural Monopoly: A natural monopoly typically has high fixed costs meaning that it is impractical to have more than one firm competing to provide same good or services. 

E.g., Electricity transmission lines, Gas pipelines. 

  1. High Sunk Costs: Sunk cost refers to the money that has already been spent and cannot be recovered even when the firm goes out of business. Typically, infrastructure projects incur high sunk costs. 
  2. Non-tradability of output: Non tradable outputs are those which are produced and sold at the same location and cannot be transported to other location. Generally, the infrastructure outputs are consumed at the place they are produced and are non-tradeable. E.g., Fly over. 
  3. Non-rivalness in consumption: non-rivalness implies that the cost of providing a good or service to an additional individual is zero. That means consumption of an individual does not affect the consumption of others. 
  4. Price exclusion: Price exclusion means that the enjoyment of benefits is contingent on payment of user charges. 
  5. Externalities: The benefits of Infrastructure projects go beyond the immediate provision of services for which they are built, which are not directly measured.

E.g., A gas pipeline contributes not only provides access to energy but also results in environmental and social benefits. 

Based on the above features, Harmonized Master List of Infrastructure sub-sectors is updated from time to time. The latest updated list is as follows.

Harmonized master list of Infrastructure sub-sectors:

Category Infrastructure sub-sectors
Transport and LogisticsRoads and bridgesPortsShipyardsInland WaterwaysAirportRailway track including electrical & signalling system, tunnels, viaducts, bridgesRailway rolling stock along with workshop and associated maintenance facilitiesRailway terminal infrastructure including stations and adjoining commercial infrastructureUrban Public Transport (except rolling stock in case of urban road transport)Logistics InfrastructureBulk Material Transportation Pipelines
EnergyElectricity GenerationElectricity TransmissionElectricity DistributionOil/Gas/Liquefied Natural Gas (LNG) storage facility
Water & SanitationSolid Waste ManagementWater treatment plantsSewage collection, treatment and disposal systemIrrigation (dams, channels, embankments, etc.)Storm Water Drainage System
CommunicationTelecommunication (fixed network)Telecommunication towers Telecommunication & Telecom Services
Social and commercial infrastructure Education Institutions (capital stock)Sports InfrastructureHospitals (capital stock)Tourism infrastructure Common infrastructure for Industrial ParksPost-harvest storage infrastructureTerminal marketsSoil-testing laboratoriesCold Chain9Affordable Housing10Affordable Rental Housing ComplexExhibition-cum-Convention Centre

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