The legal framework within which the infrastructure sectors operate has been illustrated, in brief, hereunder:

1. Power

• India has taken radical steps towards the restructuring of its Power Sector. The whole legal framework governing this sector has undergone change with the passing of the Electricity Act, 2003 on June 10, 2003. The new Act replaced the Indian Electricity Act, 1910, Electricity (Supply) Act, 1948 and Electricity Regulatory Commission Act, 1998.
• Private participation has been allowed in Generating Companies and Captive Generating Plants without license. However, activities concerning transmission, distribution and trading of electricity is allowed subject to obtaining license from the acceptable Electricity Regulatory Commission. The License might be procured subject to fulfilment of certain terms and conditions and is valid for 25 years.
• The regulatory functions are delegated to Central Electricity Regulatory Commission, State Electricity Regulatory Commission, Joint Commission and Appellate Tribunal constituted under this Act. There also are monitoring agencies and agencies for governing operational aspects of electricity system.
• 100% Foreign Direct Investment (FDI) is permitted for hydroelectric power plants, coal/lignite based thermal power plants and oil/gas based thermal power plants projects.

2. Airports

• The Government’s Policy on Airport Infrastructure, 1997 contemplates preparation of detailed master plans for the infrastructure and upgradation of all airports by the operating agency in conformation with the standards and recommended practices of the International Civil Aviation Organization. Greenfield Airports projects could also be permitted within the public or private sector or as a venture without the prior approval of the Government. However just in case of other categories of airports regulated by private operators, the approval of Director General of Civil Aviation (DGCA) is required.
• The policy recognizes the importance of personal participation for a sustained development of airport infrastructure. It seeks to realise it by way of corporatisation of the airports with an aim to divest the government holding within the future. The airports might be owned by the Central/State Governments, Public Sector Units, Urban Local bodies, private companies and individuals or through ventures. The management of airports or parts of airports might be on BOT, BOLT, BOO, LDO, joint venture, management contract or wrap around addition basis.
• Establishment of personal airports and leasing out of airports to non-public entities is now permitted subject to prior approval of Central Government. FDI in joint ventures concerning airport infrastructure is permitted up to 74% under automatic route and up to 100% with prior approval. The equity participation could even be made by foreign airport authorities.
• Airports are governed by “Airports Authority of India Act, 1994” , the “Aircraft Act, 1934” and therefore the Aircraft Rules, 1937. The above legislations allow private participation through issuance of license for an airport aside from owned by the Central Government and formation of venture with the AAI.

3. Roads

• National Highways are governed by the “National Highways Act 1956” and therefore the “National Highways Authority of India Act, 1988” . The functions concerning development, maintenance and management of National Highways are administered by National Highways Authority of India.
• FDI up to 100% is permitted in construction and maintenance of roads, highways, toll roads, vehicular tunnels, rail beds, non-vehicular bridges, non-vehicular tunnels, pipelines, ropeways and runways.
• Fiscal incentives include duty free imports, 10 years of corporate tax holiday within 20 years of commissioning the project, exemption on profits of financing institutions, exemption on future capital gains of investors, concession period up to 30 years and toll rates indexed to wholesale Price Level.

4. Water

• The Government of India has massive plans to utilize its large rivers for providing less costly, pollution free and comparatively more efficient method of transportation of water. The National Water Policy, 2002 encourages private sector participation in planning, development and management of water resources projects for diverse uses, wherever feasible.

5. Railways

• Railway transport is roofed within the list of industries reserved for the General Public and is therefore not exempted from industrial licensing requirements. However, several railway components are delicensed. FDI within the railway sector has been allowed with sectoral caps. FDI up to 51% is permitted for manufacture of railway containers utilized in container traffic.

6. Ports

• Both the Central and State Governments have taken several incentives to encourage private investment during this sector through open competitive bidding.
• Ports are governed by “Major Ports Trusts Act, 1963” and amendments thereof. Tax holiday for first 5 years followed by 30% rebate on the earnings within the next 5 years could also be availed within 12 years of the commissioning of the Project.

7. Oil and Natural Gas

• Bio degradable gas is projected to be a critical component of India’s energy market within the near future. In refining sector 100% FDI is allowed under the automated route within the private sector. However, FDI up to 26% is permitted where the venture is with public sector undertaking.
• Disinvestment of state holding within the Oil Sector has further enhanced the scope within the sector.

8. Telecom Sector

• The New Telecom Policy of the Government has brought a revolution within the telecom industry.
• The reforms backed by an outsized statistics of projects continue to verify that infrastructure sector is presently booming in India. An outstanding growth has been projected making it an opportune time to take a positioning d
uring this sector. The process of economic liberalization has entered into third and most critical phase. There could hardly be scope for doubt, when entire nations has started swearing by the economic development in India.
• The Leader is laying foundation; everybody eligible is cordially invited to hitch. The spiritual leader of the nations is evolving itself, this point economically; undeterred faith shall be rewarded, this point with attainment of “economic nirvana”.


1. The Airports Authority of India Act 1994, IndiaCode
2. The Aircraft Act 1934, Legislative Department of India
3. The National Highway Act 1956, IndiaCode
4. The National Highways Authority Act 1988, Legislative Department of India
5. The Major Ports Act 1963, Legislative Department of India

About the Author:-

This Article has been written by Aryan Sinha, 5th Year law (BBA+LLB(H) student at Galgotias University, Greater Noida.

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