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India needs a mind-boggling $1 trillion, or Rs 50,00,000 crore, investment in infrastructure development during the 12th plan period of 2010-17. And, if one were to go by what ministers at a two-day infrastructure summit in the capital on Tuesday said, half of the money must come from the private sector. In the on-going 11th plan, infrastructure investment will be worth $500 billion.
To meet this requirement, prime minister
Manmohan Singh has asked planning commission deputy chairman Montek
Singh Ahluwalia and finance minister Pranab Mukherjee to draw up an action plan involving all stakeholders, including private companies.
“The 11th plan had estimated that we would need to invest over Rs 20,00,000 crore ($500 billion) in infrastructure. This was more than double the realised investment during the 10th plan. The plan also recognised that such a large investment could not be funded with public resources alone,” Singh told the conference.
He pointed to inadequate revenue streams as the key factor making core sector projects unattractive to private companies. “The central government has dealt with this problem by offering a capital subsidy which is competitively determined through the bidding process. Since the subsidy is only a portion of the total capital cost, government resources effectively leverage a larger volume of private resources. This viability gap funding arrangement can be accessed by state governments as well,” he said.
While Singh’s emphasis on infrastructure had more to do with a projected 10 per cent economic growth, key infrastructure ministries like roads and highways, railways, power, shipping and ports focused more on investment flows from the private companies.
Power minister Sushil Kumar Shinde said that about 60 per cent of capacity addition in the power sector would be in the private sector. Therefore, his ministry would ensure that there were no procedural hurdles for them. “Participation of private players is critical not just to stimulate the infrastructure development process but also to improve quality. We have had a good response from private companies in past few years and the reason is a better legal regulatory framework,” he said.
As per planning commission’s analysis, private players have increased their exposure in core areas in 11th plan. Their total investment was Rs 20,54,205 crore, against Rs 9,06,074 crore in the previous plan.
The road sector has seen a surge in the private sector’s interest. Thanks to changes in the model concession agreement and other bidding requirements, highway projects have become more lucrative.
“Though there still are constraints such as environment clearance and land acquisition, things have improved a lot in the recent past. We would continue to make more changes to attract more companies,” Brahm Dutt, road secretary, said.
For the Indian aviation industry, expected to be the fifth largest in the world, growth would not be possible without infrastructure support. “The real test for Indian aviation sector is in creating more facilities. The government’s policy to allow 100 per cent foreign direct investment in Greenfield airports was a key factor that was attracting huge investments,” aviation minister Praful Patel said. The government has approved 12 new greenfield airports.
Even in ports and shipping, 276 projects worth Rs 55,800 crore have been identified. These projects mainly include new berths, new channels, roads and rail connectivity. “We have already completed 50 projects worth Rs 5,700 crore; another 69 projects worth Rs 16,306 crore are under consideration. We are trying to push private investment in these projects,” G K Vasan, shipping minister, said.
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