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Infrastructure Development - The Crucial Need of India

 
By : Dr. Anand Wadadekar on 23 March 2013 E-mail Comments     Print Print  Report Abuse
 



A formal harmonized list for as to what comes under ‘Infrastructure’ was released in March 2012 by the Cabinet Committee on Infrastructure (CCI) to include 5 main sectors (Transport, Energy, Water sanitation, Communication and Social & Commercial Infrastructure) and 29 sub-sectors. This may be treated as the first positive and long awaited step to give ‘Infrastructure’ a formal definition and map the scope of infrastructure towards achieving the 12th Five Year Plan (2012-2017) target of $1 trillion in infrastructure.

 

Prime Minister’s mandate to his Cabinet that ‘Infrastructure target to be met at any cost’ and further the setting up of Cabinet Committee on Investments (CCI) headed by the Prime Minister to expedite approvals and clearances are indeed very forward looking initiatives taken by the Government, which speak about the realization of the seriousness towards the infrastructure development.

 

The Union Budget 2013-2014 by P Chidambaram takes forward the Infrastructure development promises by the Government and as envisaged in the 12th Five Year Plan. Incentives and allocations have been proposed across almost all the sub sectors of Infrastructure (Roads, Energy, Ports & Shipping, Housing and Transportation). Some very positive proposals are financing of waste-to-energy projects through PPP mode, encouragement to Infrastructure Debt Funds, Rs 14,873 crore for JNNURM for urban transportation in 2013-14 against Rs 7,880 crore in the current fiscal, extension of tax holiday for power plants to March 2014, generation-based incentives for wind energy projects, low cost finance for viable renewable energy projects, constitution of ‘Regulatory Authority for Roads Sector’ for faster clearances and approvals for road / highway projects.

 

Incorporation of first IDF in the form of an NBFC - the $2-billion fund, India InfraDebt Limited, promoted by ICICI Bank, Bank of Baroda, Citibank and LIC is a step towards meeting the finance needs for infrastructure projects.

 

Public-Private-Partnership (PPP) is been looked at as a very definitive and path breaking model for the infrastructure development in the nation. Adequate support has also been extended in the current budget and previous budgets for encouraging PPP in Infrastructure.

 

However among all those positives, many negative aspects plaque the real development of infrastructure in the country.

 

Problem of Land Acquisition and law to regulate the same

 

Land acquisition remains the politically sensitive issue. An amended law to remove the anomalies in land acquisition procedure & compensation is a much required and long overdue aspect which the Government needs to settle. Provisions to remove the chances of corruption at very approval stages need to be tackled more effectively.

 

Bureaucratic hindrances, political bottlenecks, delays in approvals and clearances

 

Reserve Bank of India is very much right in saying ‘No’ to ‘priority lending’ status to infrastructure for the very fact that finance or financing of infrastructure project is not a problem or hindrance. The real hindrance is the political unwillingness, regulatory & bureaucratic hindrances which result in undue delay in sanctions, approvals, licenses and clearances.

 

Automatic approval route and reduction in frequency of renewing of licenses need to be adopted and implemented, which will also reduce chances of corruption.

 

Low investments from retail investors in Infrastructure

 

Though investment schemes like Tax-free Infrastructure Bonds, Infrastructure Mutual Fund are existent in the market today, retail investors are keeping away from them. The reason being, their fear of uncertainty of projects resulting into low-to-negative return on investments, lack of required government support for projects, etc. And all this due to project completion delays, increasing costs, long gestation period, etc.

 

A right investment atmosphere can help in attracting retail investors to infrastructure.

 

At industry level, shortage of project management talent

 

There is huge shortage of project management professionals to see through the timely completion of the projects coupled with cost effectiveness. Coming into existence of training institutes & education programmes to create infrastructure project management professionals & planners is the need of the hour to manage the exponential infrastructural growth and development in the country.

 

Some other remedies:

 

Possible remedies like 100% Foreign Direct Investments (FDI) in Infrastructure can be looked at as an option for bringing in long term investments and technology. A formal announcement towards this will be a great boost-up for infrastructure industry.

 

Tax holidays should be extended to every infrastructure project to make them more viable.

 

Removal of these problems faced by the infrastructure industry will go a long way to create positive business environment, which the industry is currently lacking in.

 

--- Infrastructure is truly the SunRise sector of India; however it is not rising to the level it should be due to the clouds of uncertainty. Indian Infrastructure is very much an attractive avenue for investors — what we need is speedy clearances, well-defined policies and above all a solid political will to ensure the infrastructure development in the country.

 

Anand A Wadadekar

Economist & Professor

Pune, Maharashtra

Source : Own ,
Views: 5377

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