News:India needs Rs 14,89,500 cr for infrastructure in 5 yrs

(PTI 06/08/2006) New Delhi - The country would need to invest a whopping Rs 14,89,500 crore within the next five years in the infrastructure sector, out of which the private sector would have to invest Rs 60,000 crore every year, according to industry body CII.

India lagged behind East and Southeast Asian economies in in infrastructure spending vis-a-vis GDP. "While China spent 10.6 per cent of GDP, India's capital expenditure on infrastructure was below 4 per cent in 2003.

The disparity was even more stark in absolute figure terms, with China spending $ 150 billion in 2003 against India's $ 21 billion," a study by CII said.

The industry body appreciated the Planning Commission's draft approach paper to the Eleventh Plan, which mooted increasing investment from the current 4.6 per cent of GDP to 7-8 per cent in the Eleventh Plan period. But it pointed out that the target of 8 per cent was still short of 10 per cent figure, which the country needed to achieve.

"There is still a need for adopting a strategy in terms of how much would the government invest in the sector and to what extent was the private sector willing to invest besides FDI in infrastructure," according to the study.

The CII said the private sector would have to invest a whopping Rs 60,000 crore every year assuming that 20 per cent of the infrastructure investment came from private funding.

The industry body stressed on evolving a roadmap between the government, states and the private sector for drawing an overall investment plan in the sector, the study suggested.

The industry body said given the deficit in the infrastructure sector and the scale of investment needed, the government has correctly identified Public Private Partnership (PPP) as the corner-stone of its policy on infrastructure development.

"PPPs not only allow access to the management and operational skills of an incentive-driven private sector, but also obtained additional funding for capital investment, which is off the government balance sheet," the study pointed out.

However, an absence of a regulatory framework and lack of transparency were key impediments in PPP. It asked the Centre, states and other sovereign sponsors to be extra-vigilant to 'selection by nomination process masquerading as transparently-awarded PPP contracts.

This may vitiate the bidding process, thereby leading to possibilities of PPP route being questioned as one of the best ways forward for the country to develop its infrastructure," the industry body cautioned.

The government needed to strengthen the movement towards the PPPs for development of India's infrastructure by investing in resource-building and imparting understanding of PPP and its formatting amongst officials in the Centre and especially the states, the study said.

CII suggested the creation of an oversight panel on PPP, which could both track the development of PPPs and also have a system of vigilance and rating for PPP projects.