Unit 4

Decision-Making for Infrastructure Development

 Implementation Issues and policy frameworks
❑ Implementation issues
➢ Physical Infrastructure:
✓ Land acquisition: One of the biggest challenges in building infrastructure is acquiring land, as it often involves
resettlement of people and compensation issues
✓ Funding: Govt. may not have sufficient resources and private investment may be limited due to economic and
regulatory hurdles
✓ Lack of Technology: India faces challenges in terms of the availability of technology and expertise necessary for
complex infrastructure projects
✓ Community opposition: Communities may oppose an investment in an infrastructure project
✓ Regulatory changes: Asset-specific regulations may change during the project cycle
✓ Contract breaches: Contract terms may be breached during the project cycle
➢ Social Infrastructure:
✓ Inadequate Human Resources: Shortage of skilled workers, engineers, and managers
✓ Lack of Public Support: Social infrastructure projects, such as healthcare and education, require public support
and buy-in, which can be difficult to secure in a complex political environment
✓ Inadequate Planning and Implementation: Poor planning and implementation can result in substandard
facilities and a lack of sustainability, ultimately reducing the impact of the infrastructure push
➢ Digital Infrastructure:
✓ Digital Divide: Limited access to technology and the internet in rural areas
✓ Cybersecurity Concerns: Concerns about cybersecurity and privacy, making it necessary to have strong
regulations and infrastructure in place
✓ Lack of standardization: The lack of standardization and coordination among different players in the digital
infrastructure sector can create problems for users and limit the potential for growth and innovation
What should be the Way Forward?
➢ Investment in social infrastructure: Investment in social infrastructure can lead to a more productive and
proficient workforce, reduced mortality, and wasting, increased social mobility and a higher quality of life.
These factors contribute to a stronger and more inclusive economy and holistic development
➢ Increased Public-Private Partnerships (PPPs): The government can partner with the private sector to
finance, design, construct, and operate infrastructure projects
➢ Improved Project Planning and Implementation: The government can streamline project planning and
implementation processes to ensure that projects are completed on time and within budget
➢ Implementation of Innovative Financing Solutions: The government can explore innovative financing
solutions, such as infrastructure bonds, to mobilize additional funds for infrastructure development
➢ Encouraging Foreign Direct Investment (FDI): The government can ease regulations and create a favorable
environment for foreign direct investment in infrastructure development
➢ Building Human Capital: The government can focus on building human capital in the form of skilled labor
and technical expertise to support infrastructure development. Some ways to build human capital to
support infrastructure development:
✓ Investing in workforce development programs that provide job training, and apprenticeships
✓ Providing access to quality education and training programs
✓ Supporting research and innovation in infrastructure-related fields
✓ Fostering partnerships between the public and private sectors to encourage investment in human capital
development
✓ Schemes to build human capital and support infrastructure development include: Skill India, National Skill
Development Corporation (NSDC), Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
➢ Effective Regulation: The government can establish and enforce effective regulations to ensure the quality
and safety of infrastructure projects. Some ways regulations can help:
✓ Regulations can set standards for the quality of materials and workmanship
✓ Regulations can also specify safety requirements, such as fire safety, evacuation plans, and accessibility
standards, which must be met to ensure the safety of the public and the workers involved in the project
✓ Independent inspection and testing which will help to identify any issues or problems that need to be
addressed before the infrastructure is put into use

❑ Policy frameworks
• Organizations build a robust upstream policy and institutional framework for delivering sustainable
infrastructure. Such a framework should include growth strategies, well-articulated investment plans,
comprehensive infrastructure plans, project prioritization framework, and procurement policies
• Despite the cruciality of scaling up financing, equal attention is required to ensure the quality of infrastructure
investments given their large economic, social, and environmental impacts
• Getting infrastructure investments right is challenging because of their inherent characteristics. Infrastructure
investments are long-term and require large upfront investments, but generate cash flows after many years
• They are subject to high risks, especially in the initial phases. Infrastructure investments are typically complex,
involving many parties. This makes infrastructure investments vulnerable to policy and political risks and
requires appropriate regulations, since there are often natural monopolies such as in transport, water, and
power distribution
• Development Finance Institutions (DFIs) such as the multilateral development banks and national and sub-
regional development banks are thus essential for helping to steer private sector financing into infrastructure
• Some policy frameworks and implementation issues in infrastructure development:
➢ Infrastructure Governance Framework- This framework from the World Bank focuses on the lifecycle of
an infrastructure project, including selection, design, procurement, and implementation. It also considers
cross-cutting issues such as integrity, transparency, and social, environmental, and climate-change risks
➢ Capability Development Program- This program from NITI Aayog aims to train and equip stakeholders in
infrastructure projects with project management skills and techniques
➢ Policy Framework on Infrastructure Development- This framework from the OECD(Organization for
Economic Cooperation and Development) is part of a High-Level Approach to enhance and integrate
OECD work on infrastructure
An upstream policy and institutional framework to deliver on sustainable infrastructure
 Infrastructure Governance Assessment Framework (InfraGov)
• Ensuring accessible, cost-effective, and sustainable infrastructure services is essential in eradicating
poverty and building shared prosperity. Yet, numerous governments encounter difficulties in delivering
these services to their citizens, primarily due to governance issues rather than financial constraints. On
average, nations lose approximately one-third of their infrastructure expenditures due to inefficiencies,
with low-income countries experiencing losses exceeding 50%
• To address these governance challenges surrounding infrastructure development and enhance the
efficiency of infrastructure investments, the World Bank has introduced the Infrastructure Governance
Assessment Framework, known as InfraGov. This framework aims to assist countries in optimizing their
infrastructure investments and achieving better outcomes
• The framework provides an overview of the governance that leads to quality infrastructure and offers
resources and methodologies for conducting such an assessment. The aim is to provide actionable
recommendations that result in concrete policy changes
• The InfraGov framework assesses three major areas of infrastructure governance:
✓ The lifecycle of an infrastructure project, focusing on the selection, design, procurement, and
implementation of investment projects
✓ The second identifies key cross-cutting issues for good infrastructure, including integrity, transparency, and
consideration of social, environmental, and climate change risks and opportunities
✓ The third area concerns how infrastructure services are provided to consumers. It encompasses market
structure and competition, the regulatory framework for addressing natural monopoly activities, and
corporate governance and governance arrangements around State Owned Enterprises
• It offers an analytical framework that helps uncover governance issues affecting the provision of
infrastructure assets and services. The aim is to provide problem-driven actionable recommendations that
result in concrete policy changes
• The upstream planning approach, encompassing spatial planning, offers multiple benefits, including the
potential to accelerate the project review and approval process, reduce the risks of conflict and litigation,
and facilitate offset design and implementation
• By saving time and money, upstream planning can de-risk infrastructure investments and increase project
value while improving outcomes for the preservation of natural capital and ecosystem services
• Many countries have infrastructure plans, but the quality of the plans varies greatly. Project pipelines or
guidelines for the appraisal of infrastructure projects are missing in many infrastructure plans
• SOURCE is a global platform for national and sub-national governments to help prepare their infrastructure
projects. It enables all the stakeholders including Multilateral Development Banks(MDBs), Development
Finance Institutions (DFIs), investors, consultancy, contractors, and lenders to work together under the
common goal of bridging project preparation and development requirements of the public and private
sectors
 Capability Development Program

• Projects are temporary, often unique, and typically infrequent, the capabilities needed to deliver
infrastructure services effectively are difficult to build
• This aims to deepen understanding of:
(1) the capabilities that public and private sector organizations need to deliver infrastructure
projects effectively that maximize benefits for local communities
(2) how such capabilities can be enhanced and shared to reduce risks and costs
• The Capability Development Program by NITI Aayog is a training program for government officials and
other stakeholders in Indian infrastructure projects
• The program aims to help them develop the skills, tools, and techniques needed to implement and adopt
key project management skills
• The program includes:
✓ Capsule training: Focused, module-based training for government officials and PSU officials
✓ Duration: The program is typically conducted for up to six months after the launch of an initiative, but
may be extended based on need
 Policy Framework on Infrastructure Development
• The (Organization for Economic Cooperation and Development) OECD's policy frameworks and
recommendations for infrastructure development are intended to help countries ensure that
infrastructure is well-functioning, sustainable, and responsive to the needs of society
• The OECD’s recommendation on the Governance of Infrastructure highlights that a coherent,
predictable, and efficient regulatory framework encourages investment in public infrastructure, and
ensures the delivery of ongoing improvements in the quality of infrastructure services
• It has several policy frameworks and recommendations for infrastructure development, including:
✓ Recommendation on the Governance of Infrastructure
• This recommendation emphasizes the need for a long-term vision for infrastructure, a coherent
institutional framework, and fiscally sustainable decision-making. It also recommends strengthening
public procurement processes, engaging stakeholders, and using digital technologies and data analytics
✓ Principles for Private Sector Participation in Infrastructure
• This recommendation guides governments that want to involve the private sector in infrastructure
development. It aims to help governments attract investment and mobilize private-sector resources
✓ Analytical studies and dialogues
• The OECD helps developing and emerging economies design and implement policy responses through
analytical studies and dialogues
 Periodic Evaluation and Review
• Periodic evaluation and review is an important part of infrastructure development to ensure that projects are
on track and in line with priorities and to support the policy and regulatory environment
• Here are some ways to evaluate and review infrastructure development:
➢ Infrastructure Development Asset Assessment
• The Infrastructure Development Asset Assessment is a global ESG(Environment, Social & Governance)
benchmark and reporting framework that assesses the performance of infrastructure assets during the pre-
construction or construction phase
• It is a process where asset owners, developers, and managers report their ESG data annually
• The assessment results provide a Development Asset Benchmark Report that compares an organization's
assets to those of its peers, offers business intelligence for improvement, and engages with investors
• The assessment focuses on ESG management practices and performance and uses dynamic materiality to score
ESG issues. Dynamic materiality means that the scoring changes depending on the asset's characteristics and
the phase of development
• The Infrastructure Development Asset Assessment helps provide a full picture of performance at both the
asset and fund level
Benefits for assets
• Gain a full view of sustainability efforts during pre-construction and construction phases
• Apply relevant materiality based on sector, location, and development phase
• Use results for strategic decision-making right from the start and improve sustainability strategies throughout
an asset’s lifecycle
• Access a development asset-specific benchmark, enabling comparison with peers at the same stage of
development. Share results and asset-level data for the development phase with funds and investors
Benefits for funds
• Get a development-specific asset benchmark, with no impact from operational assets
• Apply relevant materiality to differentiate your assets by sector and development phase
• Generate a more accurate fund benchmark with scores from both respective asset assessments
• Engage investors throughout the entire lifecycle of an asset – from design to end-of-life
• Leverage an asset’s pre-operational scores for green lending opportunities
➢ Reviewing National Policy Statements
• National Policy Statements (NPSs) are government documents that are reviewed every five years to ensure
they are up-to-date and effective
• The government can require at least five-year reviews of National Policy Statements for nationally significant
infrastructure
• Introducing legal requirements for yearly reviews of National Policy Statements
• These statements should include clear tests, refer to spatial plans and set out clear timelines and standards
for consultation during pre-application. Reviews should consider the appropriateness of existing and future
technologies and thresholds
➢ Program Evaluation and Review Technique (PERT)
• This statistical tool is used in project management to analyze and represent the tasks required to complete a
project
➢ Monitoring
• This is a continuous process that involves collecting, analyzing, and using information to evaluate progress
and make decisions. Monitoring can include sample checks, reporting procedures, and establishing special
committees
➢ Linking infrastructure plans with downstream activities
• This ensures that infrastructure projects are aligned with priorities. Linking annual budgets to medium-
term plans can help ensure alignment such as preparing a pipeline of priority projects
➢ Publishing a framework of benefits
• The government can publish a framework of direct benefits for affected communities to support major
infrastructure
➢ Setting fixed budgets
• The government can set at least five year fixed budgets for capital, renewals, and maintenance
➢ Empowering regulators to facilitate strategic investment
➢ Reform public spending frameworks
➢ Incorporating new guidance
• The government can ask the Infrastructure and Projects Authority to incorporate new guidance from the
National Infrastructure Commission's Design Group