Govt Asks Adb To Survey Telecom Sector

The Bank has also expressed interest in taking up an equity stake in the proposed Infrastructure Development Finance Corporation, if it is offered such a holding. This was disclosed to Business Standard by V V Desai, director and chief economist of the ADBs Economic & Development Resource Center. Asked whether the crucial issue of the structure of the regulatory authority would be recommended by ADB, Desai said the subject would form part of the report.

He said $300 million would be offered to Industrial Credit & Investment Corp of India, Industrial Finance Corp of India and Infrastructure Leasing & Financial Services against a Government of India counter-guarantee, for further on-lending to private sector companies.

 

The only condition we have imposed that the fund should be utilised in financing indfrastructure projects, Desai said. The loan will carry an interest rate of around 6.7 per cent.

The ADB offers financial institutions a free limit upto $5 million, beyond which it monitors the end-use.

Besides lending to public financial institutions against government guarantees, the apex bank has also been offering loans directly to Indian corporates and picking up stakes in companies. While ADBs loan exposure to companies amount to $135 million, it has equity investments worth $ 80 million in Indian companies.

Commenting on the power sector, Desai said that to ensure a full recovery for power companies, a 25 per cent to 30 per cent aggregate tariff rise is inevitable.

It should be kept in mind that the number of consumers currently pay only 10 to 15 per cent of the aggregate supply cost, especially in the agricultural sector, he said adding that unless state electricity boards are financially viable, private producers cannot have confidence on the state utilities.

Speaking in the first technical session of the ICRA-organised seminar on Industry and government interaction on infrastructure development and financing Desai said that the immediate task before the Indian government in particular, and governments in general, was to establish public acceptability of private sector management of infrastructure, as well as credibility of its own policies in this regard.

Desai pointed out an interesting case recently in the United States which was in sharp contrast to that of the Enron imrboglio in Maharashtra in India. In Washington state, a private sector managed project was scrapped and following that a new law has been introduced whereby a decision on all private sector infrastructure projects have to go through public referendum process before being awarded.

According to Desai, the operation of private and public entity side by side in a non-competitive sector requires fair and objective regulation. Regulating private monopolies in infrastructure services is enormously complex, he cautioned.