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New Delhi, 4
March 2015
Infrastructure
Development
RESOURCES,
EFFICIENCY CRITICAL
By
Dhurjati Mukherjee
That the Government is bent on
giving a boost to infrastructure is highlighted in the recent Budget by setting
up a National
Investment and Infrastructure Fund, which would channel an annual flow of
Rs 20,000 crores into the sector to fund road, port and airport projects.
According to Finance Minister Arun Jaitley this will “enable the trust to raise
debt and, in turn, invest in equity in infrastructure finance companies such as
IRFC and NBHB”. Apparently, investment in infrastructure is expected to go up
by Rs 70,000 crores in 2015-16 over 2014-15 from Central funds and resources
from Central public sector enterprises.
A study by industry body PHDCCI and
Crisil released recently found that India would need at least Rs 26
lakh crore investments in infrastructure over the next five years. Meanwhile,
there are reports that the Government is seriously considering implementation
of various infra projects that are in the pipeline and some new ones that need
immediate attention.
Of the projected investment of $1
trillion or Rs 60 lakh crore during the 12th Plan period, power and
roadways alone account for one-third or around $ 330 billion. The previous UPA Government
initiated most of the projects though recently special emphasis and funds have
been given for Ganga clean-up and river interlinking while creation of smart
cities is also on the agenda. In addition, there is a $250 billion offensive
with renewables accounting for $ 1000 billion to create one lakh MW of solar
power and 60,000 MW of wind capacities.
Apart from all this, the Government
has an ambitious plan to build road, rail corridors across the country, and
connect with neighbours through a transport grid. Similar plans have been laid
out for ports and airports besides energy grids and mining and energy projects.
It is generally agreed that the
country is facing a liquidity crisis, somewhat comparable to the one in 2008. No
major corporate house, except a very few, has huge amount of resources to
invest even though business confidence has greatly improved in the last 7-8
months.
This apart, there are plans to give
emphasis to the roads sector and around 189 highways projects, involving
a cost of Rs 180,000 crores, which are stuck due to various problems, would be
taken up shortly. Both road and rail connectivity is vital for the economy and,
apart from Highways
State governments have to
be helped in construction of rural roads. In the coming year (2015-16), around
1l lakh km of new roads are said to be planned apart from completing 1 lakh km
of highways already under construction.
At a time when there is lot of talk
of tackling rural poverty effectively, it goes without saying that as rural
connectivity is vital, only then can the livelihood situation and overall
development of the sector improve. Facilitating movement of men and materials
through different modes of transport, mainly surface transport would change the
face of villages. Farmers would find it easier to take their products to the
market on time thereby increasing their earnings, as well as school/college
enrolments and attendance would go up.
The other crucial sector is power
and rural electrification is a crying need of the hour as, according to a UN
report, 76 million households have been living without electricity! As
per available records, the Government plans to add 88,000 MW capacity during
the Plan period. However, previous performance has not been quite encouraging
as the country added only 50,000 MW during 2007-2012 against the target of
78,000 MW. The obvious reasons for this are manifold but principally centre on
problems relating to land acquisition, delay in environmental clearance and the
unwillingness for proper rehabilitation of evictees.
Though steps to boost up green
power, specially solar power, have been effective in the country and the costs
have also come down considerably in recent years, the overall dismal state of
the availability of power remains a cause for concern. The problem is
compounded by the drain on State government finances due to losses by
electricity companies, the poor investment in the power sector and the dismal health
of distribution companies. All these are well known. It is necessary that
proper steps be taken to make these companies viable so that they may go in for
expansion.
In view of the resource constraints,
the Government has been exploring various methods to develop infrastructure. India recently
proposed that the G-20 group be used as a platform to attract financing for the
infrastructure sector from other pension funds. Global companies, which are
looking at attractive investment options that promise a stable and healthy return,
would be attracted to invest.
In fact, the G-20 at the meeting in Brisbane agreed to set up
a Global
Infrastructure Hub with a five-year mandate. It is expected to
contribute to finance infra projects through collaboration with development
banks and other international agencies apart from knowledge sharing and
networking between governments.
There are several large investors
such as pension funds in Australia,
Japan and Canada, which
are on the lookout for investment options. Australia is reported to have
around $2 trillion in pension funds and would be keen to invest in robust
infrastructure projects in the country.
If funding comes from abroad, there
would be a need to set up an investment arm that can undertake the work of
investing in various projects. One may mention the India Railway Finance
Corporation (IRFC), could be drafted in to use its expertise on this vital
issue. Experts feel if this happens, investors would also be assured of returns
and safety of investments.
Indeed, investments in all forms
have to increase to create infrastructure assets, some of which can then be
given to the private sector for operation and maintenance in a revenue sharing
basis. For the private sector to come up with investments, obviously it would
be necessary to increase the lending capacity of the banking sector.
It is well-known that India has
consistently been slipping down the global infrastructure rankings which warrant
immediate attention. The Global Competitiveness Report 2014-15 of the World Economic
Forum showed that the country slipped two places to 87th rank in
overall infrastructure. The present Government is, no doubt, concerned and the
present Budget has demonstrated its intention of providing maximum possible
resources to gear up infrastructure development. Added to this, there is also
concern to overcome the delays and cost overruns and the results would be
keenly awaited.
Experts believe that 60 to 70 per cent of the $1 trillion investment
should materialize by the end of the 12th Plan period. However, to make this
happen, what is imperative at present is to ensure that the Government comes
forward to make land, natural resources and other necessary clearances
available to those corporate houses who are involved in big infrastructure projects.
For its own projects, even in the best of situation, funds are the biggest
constraint and the present Government should gear up its monitoring mechanism to achieve
higher productivity so that there is no unnecessary delay in meeting the target
dates for completion. ---INFA
(Copyright, India News and Feature Alliance)
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