1 / 16

INNOVATING WITH INFRASTUCTURE

INNOVATING WITH INFRASTUCTURE. “DEMAND SIDE” INSIGHTS FROM FIRM RESPONSES. SUMILA GULYANI NOVEMBER 2006. Key variables in infrastructure reform. Restructure. Invest. Institutions & governance. Demand. Supply. Technology. Development practitioners’ view.

lisahicks
Download Presentation

INNOVATING WITH INFRASTUCTURE

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. INNOVATING WITH INFRASTUCTURE “DEMAND SIDE”INSIGHTS FROM FIRM RESPONSES SUMILA GULYANI NOVEMBER 2006

  2. Key variables in infrastructure reform Restructure Invest Institutions & governance Demand Supply Technology

  3. Development practitioners’ view “infrastructure raises productivity …” India Infrastructure Report “the adequacy of infrastructure helps determine one country’s success and another’s failures . . . (and) good infrastructure raises productivity and lowers production costs” World Bank Paradox?: Industrial successes without infrastructure And little support in the literature

  4. Research Questions & Methodology • How does inadequate infrastructure affect the costs and competitiveness of firms? • How do firms respond? Indian Auto Industry (31 firms) Major Case Study: Maruti

  5. Power Problems: Firm-level Perspective • Chronic shortage (Cause: Demand >> Supply) • Hard to get a connection • Frequent power cuts • Power quality problem (Cause: D>S, poor infrastr) • Voltage fluctuations • Frequency fluctuations • Impacts: loss of production; machines shut down, material losses, product quality variations Solution: Self generate

  6. Maruti’s innovative power solution Critique against self-generation Maruti Case Low-cost & hi-quality US$0.08/unit High Cost Polluting fuels Use gas- a clean fuel Idle capacity High plant load factor: 70%

  7. Maruti’s Power Sharing Arrangements 90-91 91-92 92-93 (GT-1) 93-94 94-95 95-96 96-97 97-98 (GT-2) (GT-3) MWH 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 HSEB Suppliers Maruti-own

  8. Maruti’s Mini-Electric Utility • Transmission and Distribution • Dedicated underground 11 kv cables • Dedicated 66 kv transmission line • Billings and Collections • 100% Collection • Tariffs Ensure Cost Recovery • Supplier firms ($ 0.09) cross-subsidize HSEB ($0.04)

  9. Why? Supply-chain effects • Disruptions in supplier production affect assembly operations • Time & material losses at supplier create costs for assembler • Variations in quality are problematic • The “inventories solution” is expensive How important is the supply chain?

  10. Cost structure & the supply-chain

  11. CONCLUSIONS

  12. Conclusions • Adverse impacts of poor infrastructure: • production and quality suffer at the plant • cascade through industrial supply-chains • external diseconomies are more debilitating • Firms respond:Some devise innovative solutions • Ability to respond has increased • Technological revolution • Institutional innovations • Response=f (technology, impact) +management/vision But, still, cannot solve the problem entirely Crucial to understand demand

  13. The Framework: Power sharing Understanding Demand for Infrastructure Impact Response Direct & External costs & benefits Self-generation with sharing Demand for public infra With lean production external diseconomies • -Scale economies (-) • -Tech vendors (+) • -New/special contracts (+) Supply-side

  14. Expands the options for users & govt GENERATION TRANSMISSION DISTRIBUTION USERS SUPPLY DEMAND

  15. Practical Implications • Need for Govt action persists • Roles: • Traditional: Investor, Planner and Regulator • Non-traditional: enabler, deal-maker, partner • Govt can and should: • leverage user interest and investments • Work with a broader set of possible solutions • Industrial targeting: alternatives • New Integrated Industrial Parks (Mohan report, 1996) • Vs. Focus on existing industrial districts • Franchises for “infrastructure districts”

More Related