The Indian government has announced it is setting up an INR 500 billion ($11 billion) debt fund to address the country’s poor transport infrastructure, including the building of ports, roads and bridges.
The news will be welcome to carmakers and their logistics providers in the country, where poor infrastructure contributes to logistics costs that represent around twice of much cost relative to GDP as in the United States or Europe.
With conservative estimates that the demand for passenger cars will double in the next five years, the endemic problems with transport infrastructure in India is a significant risk to growth. Half of India’s roads are still not properly surfaced and many are single lane routes, often reducing average trucks speeds to 20km/h. Added to this are prolific road tolls and state taxes.
In terms of road improvements the debt fund will prioritise the highway link from north to south and east to west in the country, as well as constructing a quadrilateral route to link the major cities of Delhi, Mumbai, Kolkata and Chennai.
Beginning in 2012 the government plans to double its target for infrastructure spending to $1 trillion over a five-year period.
According to Renault India, this latest move is part of a series of welcome initiatives from the central and state governments designed to upgrade old and create new infrastructure to enable growth in the Indian economy.
“Specific to Renault, the speed with which the government of Tamil Nadu state worked to facilitate the setting up of our manufacturing facility has been quite remarkable,” Renault India spokesman Ashish Sinharoy told Automotive Logistics News.
“The Chief Minister’s office has been extremely supportive of our plans and many of the promises made to us and the industry, such as good access roads from our manufacturing facility to ports and to the city, are already in place or are in the process of being completed,” he said.
Renault, along with its Alliance partner Nissan, inaugurated the new Chennai plant in Tamil Nadu in March this year.
The first vehicle to be produced at the plant will be the new Nissan Micra, a global sub-compact. The Micra, which is the also first vehicle derived from the new V-platform, is destined for the Indian market as well as for export to more than 100 countries in Europe, the Middle East and Africa.
Talking about the logistics and transport support for the facility, Sinharoy said: “These facilities will not only make it easy for us to use Ennore Port for our export shipments, but will improve efficiencies and drive down the cost of transporting our cars within the vast Indian market itself.
He added: “Of course, it goes without saying that there is a lot more to be done, but the drive that we have seen in Government for the last five to eight years, gives us immense confidence for the future.”