Private capex in key infra sectors not 'to the extent desired': Eco Survey

The 2023-24 Economic Survey has flagged underwhelming private capital expenditure in key infrastructure sectors, stating that the level of capex from industry has not been “to the extent desired.”

Between FY19 and FY23, the central and state governments contributed 49 per cent and 29 per cent, respectively, to total investments. The private sector’s contribution was a mere 22 per cent.

“For India to continue down the path of building quality infrastructure, a higher level of private sector financing and resource mobilisation from new sources will be crucial. Facilitating this would not only require policy and institutional support from the central government, but state and local governments would also have to play an equally important role,” the Survey said in the segment on the way forward for infrastructure growth.

International experience shows how initiatives at the sub-national level can facilitate resource mobilisation for infrastructure development, the report noted. “Examples include pooled financing mechanisms for municipal projects, specialised municipal intermediaries, asset recycling programs, tax increment financing and land sales and development rights among other innovative approaches. Each of the measures witnessed broad-based implementation, succeeding in mobilising finances for critical infrastructure projects,” it said.

The government also noted that new, industry-friendly modes of infrastructure development such as hybrid annuity model (HAM) have been introduced, but their application has only been limited to sectors like roads and water.

The Centre said that lumpy capital investment, long payback period, and difficulty in mobilising large equity and debt at affordable cost are bottlenecks hindering private sector investments.

Project structuring issues related to risk estimation, allocation and mitigation, delays in getting clearances and land acquisition, lack of an independent regulator for infrastructural sectors, contractual issues, and inadequate arrangements for dispute resolution and arbitration, leading to prolonged litigation, were also factors pointed out by the Survey.