Empowering Gati Shakti - The Transport & Logistics Platform

Done right , the smart platform for infrastructure planning and execution could lead to tremendous productivity benefits.

Shyam Ponappa   |   November 2, 2022 

The National Master Plan for logistics development on a digital platform, Gati Shakti (Speed and Strength), was introduced in October 2021. It is a much-needed initiative to introduce effective management systems in coordinating relevant ministries for all aspects of transportation and logistics. It establishes digitised institutional processes for comprehensive, integrated project planning and execution, to assist ministries and infrastructure sectors in achieving results. The aims are more efficient outcomes at reduced cost and time. Done correctly, this will result in tremendous productivity benefits at a low cost and with better environmental impact.

A primary purpose of Gati Shakti is prioritisation for growth. Based on limited lay access (more on this later), an element that needs attention is telecommunications reform. The need is for inexpensive, higher capacity/intensity connectivity, by enabling spectrum usage for wireless and shared networks at lower capital investment with better utilisation. The platform’s effectiveness depends on this.

Gati Shakti is based on the recommendations of the National Transport Development Policy Committee1 in January 2014. Government agencies such as the railways, roads and highways, shipping, aviation, power, telecom, and so on reportedly use this for integrated planning and execution. During the past year, ministries responsible for fertiliser, coal, ports and the like reportedly identified nearly 200 “infrastructure gaps” in first-mile or last-mile logistics. An inter-ministerial expert panel monitors and recommends corrective action. Presumably, this will be tracked through the digitised database and portal, which also has geographic positioning capabilities.

Prioritisation And Policy Changes More Essential Than Capital 

As observed in an earlier column, a World Bank study across many countries validates the importance of telecommunications (and electricity) for growth.2 A report published by the Asian Development Bank Institute confirms that for India and China, internet and mobile density contribute to their high rate of growth.3

Apart from these findings from past data, telecommunications and digitisation are now essential to most aspects of living. Most importantly, telecommunications and the internet need major policy changes on network sharing and reduced taxes. These are needed even more than capital, to accelerate network coverage and delivery. Examples of changes required include permitting high-speed wireless without loading discretionary costs, such as up-front auctions, high costs for wireless links, and onerous procedures. Policy changes can reduce pricing and sticky process/procedures for operators and, ultimately, users and society as a whole. Until this is done, users are either deprived of services because they are simply not there, or constrained by erratic and low-quality services, or burdened with high charges. The impact is in many areas as indicated below:

- Environmental care & climate mitigation: Effective broadband coverage and shared networks significantly improve both.

- Education and work life reach: Extending broadband coverage to the many millions living in rural or distant areas is one obvious need. This is also true for the many urban users who endure poor services, beyond the privileged, relatively few who have fibre or reliable high-speed wireless. Undoubtedly, a whole gamut of content and methods will need to evolve to enable effective learning for less educated users, as will ways to mitigate costs to provide access. But it is probably the only way crucial services can reach so many quickly, channel our population productively and pre-empt their degeneration into disruptive problem creators. This will open education to many more boys and girls, and employment opportunities to men and women.

-  Similar benefits are feasible in areas such as e-commerce, distributed healthcare, government services, in small and medium manufacturing and services enterprises for work process support systems, and entertainment.

Temples to Metaphysics and Physics

In the 1890s, Acharya Jagadish Chandra Bose (Sir Jagadis Chandra Bose) demonstrated wireless technology at 60 GHz (V-band),4 but his pioneering work languished in India. Meanwhile, countries such as the USA, the UK and others, including China, have exploited this technology for high-speed gigabit wireless in their networks in place of fibre.

Much time and public resources are devoted to overt religiosity in India. Whereas Bose, scientist extraordinaire, in his inaugural address dedicated the Bose Institute in Kolkata in 1917 as not merely a laboratory but a temple. Adding Paramahansa Yogananda’s “keen interest in evidence that India can play a leading part in physics, and not metaphysics alone”, we would do well to apply more physics and science—as in using wireless technology in our networks, and having more temples to science, systems, and other practical disciplines.

India has just enabled restricted use of 60 GHz, although devices were available abroad for years. If government permits telcos to use 60 and 70-80 GHz “mmWave” technology for pay-for-use backhaul with no loading of extraneous costs (auctions, extra taxes), there would be enormous service and cost benefits in India, as in San Francisco and London (see the device maps in the charts for one supplier).

 

V-Band and E-Band Devices in San Francisco and London for One Vendor (2017)

Figure 3: Siklu radios in San Francisco, CA, according to FCC database

Source: https://go.siklu.com/blog/custom-blog/the-evolution-of-mmwave-2 

Figure 5: Siklu radios in London, UK, according to OFCOM database

Source: https://go.siklu.com/blog/custom-blog/the-evolution-of-mmwave-2 

Changes are also needed to institutionalise easier access to spectrum for authorised institutions and researchers, so that India’s research and development for commercial and defence is freed of arbitrary, self-imposed constraints and delays.

Public access to the Gati Shakti portal, limited for security reasons, was allowed from October 2022. A cursory look at the portal does not disclose project details on sectors. It may be more amenable to authorised users; to a lay user, it appears to be a repository of reports that does not cater to meaningful queries or logical searches. Adding such capabilities would make it more informative and useful, although this will need to be balanced with security.

The essential points are that improving living conditions requires enabling and applying technology and know-how. Attention to scientific and domain applications to deal with ground realities will help improve our state of infrastructure for productivity and ease of living. Prioritising digitisation and telecommunications will help correct losing out on growth and associated living conditions because of inappropriate policies, and genuinely add both Gati and Shakti to our efforts.

 

 

 Shyam (no space) Ponappa at gmail dot com

  

1: India Transport Report

Moving India To 2032

Vol I - Executive Summary

National Transport Development Policy Committee, January 31, 2014

Rakesh Mohan et al

Summary Recommendations: http://www.aitd.net.in/NTDPC/rep_ntdpc_v1.pdf

 

2: How Much Does Physical Infrastructure Contribute to Economic Growth?

An Empirical Analysis

Govinda Timilsina, David I. Stern, Debasish K. Das

World Bank Group, Development Economics

December 2021

https://openknowledge.worldbank.org/handle/10986/36780

 

3: Digitalization and Economic Performance of Two Fast-Growing Asian Economies: India and The People's Republic of China

Dukhabandhu Sahoo, Suryakanta Nayak, and Jayanti Behera

ADB Institute Working Paper Series

No. 1243

March 2021

https://www.adb.org/publications/digitalization-economic-performance-fast-growing-asian-economies-india-prc

 

4: Jagadis Chandra Bose: Millimetre Wave Research in the Nineteenth Century

Darrel T. Emerson

National Radio Astronomy Observatory

949 N. Cherry Avenue, Building 65

Tucson, Arizona 85721

1998

https://www.cv.nrao.edu/~demerson/bose/emerson_delhi.pdf

Extractive Charges on Spectrum & Petroleum

Are government levies on these critical inputs beneficial or detrimental?

Shyam Ponappa  |  

March 6, 2014

A spectrum auction last month ended with over Rs 61,000 crore (about $10 billion) bid for the 900 MHz and 1800 MHz bands. Everyone seems upbeat: the government at high bids, and operators at staking out spectrum so that they can continue offering their services. The public at large seems enthused. Is there reason for good cheer? Consider some of the outcomes and the likely consequences.

Outcomes

• Dominant operators, namely, Bharti Airtel, Vodafone and Idea, have won enough spectrum to continue building their businesses. So has a new potential contender, Reliance Jio.
   
• Winners must pay the amounts they've bid, in addition to making further investments in networks. Their financial compulsion will be to increase prices to amortise a payment of nearly Rs 18,300 crore, followed by the remainder to be paid in 10 annual instalments after a two-year moratorium. Competition will provide a countervailing effect against price hikes. The annual payment by all operators after two years will amount to about Rs 4,400 crore. To put this in perspective, Bharti's profits for FY 2013 were around Rs 5,000 crore and Idea's around Rs 800 crore.

• This perpetuates the approach of operators paying first for the right to use spectrum, then dividing available spectrum for their mutually exclusive use. The corollary is that unless operators choose to share some of their infrastructure, as some do for mobile towers, each operator must invest in its own infrastructure. In the absence of voluntary infrastructure sharing to the extent permissible, multiple investments are needed to build parallel networks. This is comparable to railways or transportation companies setting up multiple countrywide railroad and road networks, each for their own exclusive use. The result is a very capital-intensive approach requiring much more investment, while not being sufficiently remunerative.

Consequences

• To the extent that there are front-loaded government charges, operators have less capital for network investments.
   
• Resource constraints result in service deprivation in low-potential areas, as is prevalent now. In other words, urban areas may be well served, but not less densely populated rural areas where the majority reside. It is for the same reason that metro cities are better served by airlines or transportation services: the profit potential is higher.
   
• The lack of amenities in rural areas means there is continuing demographic pressure to migrate to cities. The overwhelming societal need for the provision-of-urban-amenities-in-rural-areas ("PURA") is entirely sidelined. Yet, these are the amenities people need most for economic empowerment, productivity and better living conditions.

Contrast this with Sweden's approach to broadband, for instance. Sweden is a pioneer in the use of 700 MHz for broadband. A loosely translated quote from Sweden's information technology minister reads: "A hundred years ago, it was the ability to build good railways, good roads and good physical infrastructure that laid the foundation for jobs and growth. Today it is also about fast enough build-out of good mobile telephony."1

Another instance of constructive intervention, and that too in a developed metropolis, is the London Enterprise Panel's approach, because London's broadband is considered insufficiently competitive. Funds "will be invested where the market is failing (particularly where this is proving a barrier to business growth)".2

In India, the efficient 700 MHz and 800 MHz bands have not yet been assigned except for limited 800 MHz spectrum for CDMA. These bands are most effective for broadband in rural and semi-urban areas. However, auctions and high reserve prices militate against their effective deployment at low cost, thwarting an apparent remedy for our deficient coverage. Also, GSM operators have just bid aggressively in the recent auction to survive, and are loaded with debt. Only the financially strong Reliance Jio, which has not bid as much, can offer high bids. Vodafone may also be able to do so. So, one problem is reduced bidding capacity, but a bigger problem is reduced investment capacity: the higher they bid, the less likely they are to provide countrywide broadband quickly at reasonable prices.

Petroleum Levies


Petroleum levies comprise another range of high government charges on critical inputs. In 2006, the taxes on petrol amounted to 52 per cent of the retail price, and on diesel, 30.4 per cent with Rs 45 to the dollar, (Delhi price: Rs 45/litre when Brent crude was $65/barrel). Tax collections now amount to around 30 per cent for petrol and 18 per cent for diesel, with Brent crude at around $110/barrel, and petrol in Delhi at Rs 74/litre. While the percentages collected are lower, the amounts collected are about 70 per cent higher than in 2006 because of the increase in the price of crude oil at a time when the economy is slumping.


There is a rationale for collecting reasonable charges to cover construction and maintenance, environmental impact mitigation and waste disposal (clean-up), and to provide incentives. But it's time our governments stopped being extractive, and rationalised charges based on objectives and policies in the public interest. Governments and politicians should be addressing these, instead of doles and giveaways. The aim should be to maximise life-cycle benefits, which can be optimised by reducing short-term capture in favour of longer-term accruals from growth, and from policies designed to deploy productive infrastructure including applying the principle of common carrier access.

---

shyam nospace ponappa at gmail dot com


1: "Digital TV [700 MHz band] will now provide frequencies for cell phones", writes IT Minister Anna-Karin Hatt - Dagens Nyheter, February 27, 2014: http://www.dn.se/debatt/digital-tv-far-nu-lamna-frekvenser-till-mobilerna/

2: London Enterprise Panel - 2014-2020 European Structural & Investment Funds Strategy for London, January 2014: https://www.london.gov.uk/sites/default/files/London LEP ESIF Strategy 2014-20 (1).pdf


Questions and Answers

What should the government do?  How should spectrum be handled?

What the centre/states should do:

a) Mandatory common carrier access, i.e., open access to shared networks, with payment depending on extent of use.  Active infrastructure sharing.

b) This means that (i) networks are shared in their entirety, and (ii) spectrum, which is part of a network, is also shared.

It will immediately consolidate the networks, reduce redundant investments, and optimize carrying capacity/throughput.  This also implies reduced carbon footprint, and more capital available for extending coverage and services (instead of being sunk in right-to-use purposes).

In the case of electricity, the logic is:

‘Because a single high-capacity line minimizes both capital costs and losses to electrical resistance per unit of power carried, transmission and distribution are natural monopolies.’

http://www.econlib.org/library/Enc1/ElectricUtilityRegulation.html

A similar rationale applies to communications networks and services, allowing for multiple players for competition.

c) How should spectrum be handled?  Given over to the national network of networks administration on a pay-for-use basis.  Is this a ‘gift’ to telecom companies?  Only in the same way that government-acquired land given to highway authorities, ports, airports, industrial areas, and so on, are gifts to them.  There needs to be clarity on what constitutes infrastructure, and I’m of the firm opinion, I think without bias, that telecom/broadband networks are part of essential infrastructure. 

d) Then the question arises: what about windfall profits, or excessive profits. 

i. There should be no windfall profits because there are no arbitrage profits available, as any legitimate user can access the network on payment.

ii. In the event there are unforeseen windfalls, they can be recovered through the mechanism of windfall profits taxes [which should be allowed for], and the level of profits can and need to be regulated, whether by appointed regulators or elected public utility commissions.

e) All spectrum – including 600 Hz, 700 MHz, 800 MHz – should be rationalized and used in the public interest, including Defence.

f) Where states come in: right-of–way charges need to be rationalized.  Public services need incentives designed into their functioning and delivery, including schools, colleges, not just government services.

India's Sorry Spectrum Story

How not to do ICT for development

Shyam Ponappa /  June 3, 2010

The network of roads is mostly public property. What if the government decided to make more money from our use of this property? Made users pay for these public assets, whether the roads are there, or yet to be built? Demanded up-front fees for a fixed-term right, followed by annual fees marked-to-market to reflect “fair market value”...

All roads would be expensive, and few people would be able to afford their use. Imagine what it would do to plans to build new roads. Imagine how much you would have to pay for road use, how usage would drop, the sheer inconvenience, and the impediments to productivity.

This is not happening to the majority of our roads, but it is to communications, especially broadband. With some differences, this is what spectrum fees are about. The major difference is that spectrum fees are levied on operators, not end users (the equivalent for roads would be fees from government agencies/road operators).

For instance, Bharti and Vodafone paid Rs 12,300 crore and Rs 11,600 crore respectively up front for 3G spectrum. This is one reason why India won’t get widespread broadband networks in a hurry, nor reasonably priced services. The investment in spectrum fees and networks is so high that operators will probably offer limited, high-margin products. They will focus on high-traffic routes and ignore the rest, serving 50-100 million, instead of a billion: exactly the opposite of what we need.

The spectrum story

This approach to spectrum management is an object lesson in how not to use information and communications technology (ICT) for development. Each operator is assigned a sliver of spectrum exclusively . The resulting “scarce spectrum” predicament demonstrates why this approach is entirely unsuitable for optimising net benefits. Optimisation requires making trade-offs between technology, economics and commercial interests for development and the common good.

The situation is aggravated by three additional factors:

• Too many operators in a franchise area (12-16 in India, as against an international average of three to five), resulting in limited capacity and high capital costs.
  
  
• Limited availability of spectrum for commercial use, because of the extent assigned to the government, defence and the public sector.
  
  
• The government’s periodic efforts to extract as much revenue as possible from spectrum: an exploitative approach, instead of nurturing capacity to generate fair tax returns over the long term. Even in advanced economies, high auction bids have been disastrous.

Consequences 

• The average spectrum available per user is of the order of 5.5 MHz in India, compared to an international average of about 22 MHz.

Delhi and Mumbai have cell sites that are less than 100 metres apart, compared with around 200 metres in Istanbul, 300 metres in Munich, and 350 metres in Berlin. Decreased inter-cell distances increase interference, thus restricting capacity. If each operator has more spectrum, traffic-handling capacity increases at a lower cost. Improving technical efficiency at the cost of economic efficiency loses out on capacity at low cost. Cellular operators in India are forced to extract greater spectrum efficiency (see Figure 1), which sounds good until you factor in the increased costs and opportunity losses.

Figure 1: Spectrum Efficiency in Delhi & Mumbai compared with London, Singapore & Hong Kong

Source: 'An assessment of spectrum management policy in India', Plum Consulting, December 2008: David Lewin, Val Jervis, Chris Davis, Ken Pearson.

http://www.plumconsulting.co.uk/pdfs/GSMA%20spectrum%20management%20policy%20in%20India.pdf

The report from which Figure 1 is taken estimates that spectrum assignments increased to international norms would have lowered industry costs by 21 per cent (Rs 11,700 crore or $2.6 billion in 2008). This would have resulted in more extensive coverage at less cost, with greater consumer welfare.

• The result is high-cost infrastructure for operators as well as for users. Too many operators make for increased capital costs for each operator, and cumulatively for all operators — unless they use common networks. Higher efficiency requires more base stations and more advanced technology, both adding to costs. Despite this, operators are exhorted to improve their spectrum efficiency. After a detailed assessment, the report concludes:

" • The claims regarding the scale of the capacity increases possible with the use of various techniques are significantly overstated.

• In the case of adaptive multi-rate (AMR) codecs, this technique is already being deployed on a widespread basis.

• The claims wrongly assume that the capacity gains from the different techniques are additive. This is simply not true in a number of cases. For example, the gain achievable with DFCA is less if AMR has already been implemented.

• There are substantial costs associated with deploying advanced techniques — both for operators in terms of network upgrades and for end users in terms of new handsets.

• It is important to be aware that deployment of some of the techniques, such as AMR HR, leads to lower quality of service.

• The focus on spectrum optimisation techniques for 2G networks fails to take into account the fact that the efforts of the suppliers have now shifted from 2G optimisation to 3G deployment.

Those making these claims seek more intensive deployment of advanced techniques to maximise technical spectrum efficiency. But a better policy objective, as we argue (in a later section), is overall economic efficiency. From this perspective, it only makes sense to deploy advanced technologies when this is a lower cost way of increasing capacity than adding further base stations. Indeed it is against the interest of the Indian economy to deploy them if this is not the case."

The approach is counterproductive and against our interests. Advanced economies are doing the opposite, encouraging investment in broadband to improve productivity, while India’s policies actually constrain productivity.

• A third consequence is the non-availability of spectrum in the more efficient bands, eg, 700-900 MHz. This has a negative effect on last-mile roll-out and services in rural areas. Lack of coverage in the hinterland is a severe deficiency in areas that are poorly served by fixed-line networks. It only perpetuates the vicious circle of low potential in rural areas with deficient broadband and Internet access.

The curse of spectrum auctions

Two recent developments have created additional burdens. One is the 3G auction, with bids of over Rs 67,000 crore (almost $15 billion). Another is the TRAI (Telecom Regulatory Authority of India) recommendation that 2G operators with over 6.2 MHz must pay for additional spectrum at prices determined by the 3G auction, resulting in a precipitous fall in the shares of major operators (ee Figure 2).

Figure 2: Telecom Stocks After TRAI's Fees Recommended For 2G 

Why should governments be concerned when stock prices fall? For the same reasons they should want stable markets: investment and prosperity, leading to public welfare. It makes little sense to entice investment into high-potential, sunrise sectors, only to batter successful enterprises with arbitrary “taxes”. Bharti described the changes as “shocking, arbitrary and retrograde”; Vodafone called them “opaque, illogical and discriminatory”.

Like an absurd play, events have taken a surreal turn, with the Department of Telecommunications reportedly demanding spectrum fees from the Defence Department. However, no additional demands were made on companies cashing in on assigned spectrum rights that sold for windfall gains without any networks or users. This seems equally absurd.

The government needs to give up making short-term revenue killings, and instead, maximise net welfare through building productive capacity. Ubiquitous broadband is good for productivity and for the environment. As for auctions, remember that collections from revenue sharing after the New Telecom Policy 1999 (NTP ’99) far exceed the bids. Let us have the wisdom to collect those golden eggs over time, instead of eating the goose now.

                                                                       shyamponappa@gmail.com