'Bureaucratic efficiency must for PPP success in infra financing'

Bureaucratic efficiency and adequacy of returns have been identified as the major factors for the success of a PPP model of infrastructure financing, as per a study conducted by some Reserve Bank of India's (RBI) officials.

Concluding that the private sector has to complement the government's efforts in funding infrastructure development in India, the study said the flow of private investments into the sector depends on a host of factors.

"The success of such (PPP) models would require facilitating factors such as bureaucratic efficiency, adequacy of returns, efficient market mechanisms, information access, to name a few," the study noted.

The RBI staff study, titled, 'Infrastructure Financing: Global Pattern and the Indian Experience', which examined practices in infrastructure financing in some select countries, vouched for the Public Private Partnership (PPP) model.

"The PPP mode of infrastructure financing comes out as the most viable and desirable model... The model is likely to be a success, provided a transparent risk and revenue sharing approach is followed," it added.

China spends 20 per cent of its GDP on infrastructure development and this is substantially higher in comparison to India, which spends just about 6 per cent of its GDP on provision of physical infrastructure.

"Although there is a robust growth in the PPP investments in the road sector, the forthcoming investments in other sectors such as power, irrigation and ports are relatively meagre," the study highlighted.

For the 11th Plan (2007-12), the government has estimated the expenditure requirement on infrastructure at $514 billion in order to maintain the GDP growth rate of 9 per cent annually.

For the 12th Plan ending 2017, the funding need for infrastructure has been estimated at $1 trillion.

"Infrastructure financing needs cannot be met by the government alone and hence, the case for private sector participation is strong for meeting the challenge," it said.

Further, the study said banks must keep track of asset- liability mismatches arising due to infrastructure financing, adding that appraisal and monitoring mechanisms for the financed projects need to be tightened.

It also suggested finding innovative means to channelise resources of post-office deposits and pension funds into infrastructure financing and introducing land reforms for paving the way for success of these projects.