Jalan Bullish On Foreign Investment Scenario In Infrastructure

The countrys quest to attract foreign investment in infrastructure is poised to advance now that the government has set a clear policy, according to Planning Commission member-secretary Bimal Jalan.

The policy framework is clear and the directions are clear, said Jalan. Foreign investors should get down to specifics now. The government is fully committed, he said. As a result of policy details worked out in recent months, a number of power, road and port projects should advance in the next few months, Jalan said.

Although India began opening up its infrastructure sector to private and foreign investors as part of the economic reforms programme launched in 1991, legal and policy changes to undo decades of socialist rules have taken time, officials say.

 

While the country needs investments worth $80 billion in power projects, only three projects, together involving less than $1.25 billion, have got off the ground. Jalan said the stage was now set for more.

The investment needed in the roads sector is estimated at Rs 95,000 crore by 2006. In January this year, the government set out detailed guidelines for private investment in roads.

In ports, the government expects investments worth $2 billion over the next five years. Detailed investment guidelines were issued last October. Jalan said impediments to private investment in infrastructure projects were linked to operational or administrative issues like land acquisition, feasibility, service charges, approach roads and labour. One must not undermine administrative issues, Jalan said. All the linkages are important.

But the government had already cleared lingering doubts on some aspects and was determined to tackle any other issue that might arise to pave the way for foreign investors, he added.

In power projects, the government had already cleared doubts on power generation companies risks regarding fuel linkage, and ironed out questions on financial guarantees, Jalan said.

Power minister Y K Alagh said last week that the government was working out an alternative to the central guarantees offered to private investors for electricity they would sell to state utilities. The system has come under fire from the World Bank.

Alagh said the government would announce a new power policy after the monsoon session of Parliament, scheduled to start in the third week of July.

Jalan said reform of financially weak state electricity boards (SEBs) remained unfinished, but there was no longer any policy reason to discourage foreign investors in the power sector. Last year, state chief ministers agreed to move towards economically viable power tariffs to improve the finances of the SEBs.

This was considered necessary to impress foreign investors who were not satisfied with the governments offer of fast approvals, a five-year tax holiday and a 16 per cent return on equity.