That the government is bent on giving a boost to infrastructure is highlighted in the recent Budget by the setting up a National Investment and Infrastructure Fund, which would channel an annual flow of Rs 20,000crore into the sector to fund road, port and airport projects. According to finance minister Arun Jaitley this will “enable the trust to raise debt and, in turn, invest in equity in infrastructure finance companies such as IRFC and NBHB”. Apparently, investment in infrastructure is expected to go up by Rs 70,000crore in 2015-16 over 2014-15 from Central funds and resources from Central public sector enterprises.
A study by industry body PHDCCI and Crisil released recently found that India would need at least Rs 26lakh crore investments in infrastructure over the next five years. Meanwhile, there are reports that the government is seriously considering implementation of various infra projects that are in the pipeline and some new ones that need immediate attention.
Of the projected investment of $1trillion or Rs 60lakh crore during the 12th Plan period, power and roadways alone account for one-third or around $330billion. The previous UPA government initiated most of the projects though recently special emphasis and funds have been given for Ganga clean-up and river interlinking while creation of smart cities is also on the agenda. In addition, there is a $250billion offensive with renewables accounting for $ 1000 billion to create one lakh MW of solar power and 60,000MW of wind capacities.
Apart from all this, the government has an ambitious plan to build road, rail corridors across the country, and connect with neighbours through a transport grid. Similar plans have been laid out for ports and airports besides energy grids and mining and energy projects. It is generally agreed that the country is facing a liquidity crisis, somewhat comparable to the one in 2008. No major corporate house, except a very few, has huge amount of resources to invest even though business confidence has greatly improved in the last 7-8 months.
This apart, there are plans to give emphasis to the roads sector and around 189 highways projects, involving a cost of Rs 180,000crore, which are stuck due to various problems, would be taken up shortly. Both road and rail connectivity is vital for the economy and, apart from Highways State governments have to be helped in construction of rural roads. In the coming year (2015-16), around 1llakh km of new roads are said to be planned apart from completing 1lakh km of highways already under construction.
At a time when there is lot of talk of tackling rural poverty effectively, it goes without saying that as rural connectivity is vital, only then can the livelihood situation and overall development of the sector improve. Facilitating movement of men and materials through different modes of transport, mainly surface transport would change the face of villages. Farmers would find it easier to take their products to the market on time thereby increasing their earnings, as well as school/college enrolments and attendance would go up.
The other crucial sector is power and rural electrification is a crying need of the hour as, according to a UN report, 76million households have been living without electricity! As per available records, the Government plans to add 88,000MW capacity during the Plan period. However, previous performance has not been quite encouraging as the country added only 50,000MW during 2007-2012 against the target of 78,000MW. The obvious reasons for this are manifold but principally centre on problems relating to land acquisition, delay in environmental clearance and the unwillingness for proper rehabilitation of evictees.
Though steps to boost up green power, specially solar power, have been effective in the country and the costs have also come down considerably in recent years, the overall dismal state of the availability of power remains a cause for concern. The problem is compounded by the drain on State government finances due to losses by electricity companies, the poor investment in the power sector and the dismal health of distribution companies. All these are well known. It is necessary that proper steps be taken to make these companies viable so that they may go in for expansion.
In view of the resource constraints, the Government has been exploring various methods to develop infrastructure. India recently proposed that the G-20 group be used as a platform to attract financing for the infrastructure sector from other pension funds. Global companies, which are looking at attractive investment options that promise a stable and healthy return, would be attracted to invest.
In fact, the G-20 at the meeting in Brisbane agreed to set up a Global Infrastructure Hub with a five-year mandate. It is expected to contribute to finance infra projects through collaboration with development banks and other international agencies apart from knowledge sharing and networking between governments.
There are several large investors such as pension funds in Australia, Japan and Canada, which are on the lookout for investment options. Australia is reported to have around $2 trillion in pension funds and would be keen to invest in robust infrastructure projects in the country.
If funding comes from abroad, there would be a need to set up an investment arm that can undertake the work of investing in various projects. One may mention the India Railway Finance Corporation (IRFC), could be drafted in to use its expertise on this vital issue. Experts feel if this happens, investors would also be assured of returns and safety of investments.
Indeed, investments in all forms have to increase to create infrastructure assets, some of which can then be given to the private sector for operation and maintenance in a revenue sharing basis. For the private sector to come up with investments, obviously it would be necessary to increase the lending capacity of the banking sector.
It is well-known that India has consistently been slipping down the global infrastructure rankings, which warrants immediate attention. The Global Competitiveness Report 2014-15 of the World Economic Forum showed that the country slipped two places to 87th rank in overall infrastructure. The present Government is, no doubt, concerned and the present Budget has demonstrated its intention of providing maximum possible resources to gear up infrastructure development. Added to this, there is also concern to overcome the delays and cost overruns and the results would be keenly awaited.
Experts believe that 60 to 70 per cent of the $1 trillion investment should materialize by the end of the 12th Plan period. However, to make this happen, what is imperative at present is to ensure that the Government comes forward to make land, natural resources and other necessary clearances available to those corporate houses who are involved in big infrastructure projects. For its own projects, even in the best of situation, funds are the biggest constraint and the present government should gear up its monitoring mechanism to achieve higher productivity so that there is no unnecessary delay in meeting the target dates for completion. – INFA
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