With private investment in infrastructure continuing to be slow, urgent government attention towards financing issues is critical, according to Ashok Jha, secretary, department of economic affairs. | |
| Delivering the annual Kinfra-2006 lecture here on infrastructure, Jha said the private sector was not willing to take risks associated with projects without some commitment on part of government. |
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| He said that addressing regulatory constraints was insufficient to attract private investment. "There is a need for 'patient' equity and long term debt," he added. |
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| Pointing out that the private sector was not able to raise resources on the strength of project revenues alone, he said government attention in these areas was a must. |
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| The India Infrastructure Report, 1996, projected an investment requirement of Rs 7,500 billion (in terms 1995-96 prices) for 2001-02 to 2005-06, while the Tenth Five Year Plan projected an investment requirement of Rs 11,08,800 crore at 2001-02 prices, he added. |
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| According to Jha, the constraints in infrastructure in India are many. They include, huge capital requirements, long gestation period, low recovery of user charges and uncertainty of laws and regulations. Further, infrastructure continues to be largely in public domain. These characteristics lead to low levels of re-investment, poor maintenance and replacement levels, poor technical efficiency and use of old and outdated management models. |
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| The Centre has been encouraging private sector to exert competitive pressure , advocating progressive levy of appropriate user charges, setting up of autonomous regulatory authorities, tariff authorities and quasi-judicial bodies, providing fiscal incentives and permitting FDI up to 100 per cent on the automatic route in several sectors , Jha said. |
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| Jha said that the novel viability gap funding (VGF) would go a long way in improving the infrastructure scenario. The VGF seeks to cover private-public partnerships (PPPs) where private sector provides services for a fee under a concession agreement. |
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| Under VGF, concession would be granted on the basis of a transparent bidding process, bidding parameter is the capital grant sought and the bidder is assured of a stable environment through a concession agreement. |
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| The eligible sectors would be transportation, tourism, urban infrastructure, energy, he said. Any other sector could be considered with prior approval. |
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| VGF would ensure funding of 20per cent of the project cost, he said. "An additional 20 per cent can be given by the sponsoring authority." VGF up to Rs 100 crore for each project would be sanctioned by an empowered institution constituted in this regard. |
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| Proposals up to Rs 200 crore would be sanctioned by Empowered Committee, and amounts exceeding Rs 200 crore would be sanctioned with the approval of the finance minister, Jha pointed out. |
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| Jha said that the state government departments were requested to set financial targets of private investment through PPPs and monitor and review the same periodically as 'Plan outside of Plan'. He said that some of the state governments responded to the request. |
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