The Hindu Business Line : `Infrastructure gap affecting GDP growth'

Towards success
States urged to encourage PPP model in more sectors
Special emphasis on urban infrastructure to sustain reforms.
Sectors identified include solid waste management, power, urban water supplies and mass rapid transport system.
Greater adoption of PPP model would ensure good quality infrastructure.

New Delhi , May 20

The Finance Minister, Mr P. Chidambaram, on Saturday said that the infrastructure gap in the country was holding back economic growth by 1.5-2 per cent every year.

Inaugurating a conference of Chief Secretaries on Public Private Partnership in Infrastructure, Mr Chidambaram said that there was a clear infrastructure gap in the country and that this gap was costing 1.5-2 per cent GDP growth every year.

"Time has come to take the message to all States and encourage them to adopt public-private-partnership (PPP) model. The time has come for us to make this model a success," he said, after launching a Web site of the Prime Minister's committee on infrastructure.

The Finance Minister urged the States to encourage PPP model in more sectors, with special emphasis on urban infrastructure. He said that emphasis on urban infrastructure was important to sustain reforms.

Mr Chidambaram identified solid waste management, power, urban water supplies and mass rapid transport system as some of the areas where PPP model could be encouraged.

Stating that only some States have actively promoted PPP, Mr Chidambaram highlighted that greater adoption of PPP by all States would ensure good quality infrastructure.

`Revolving door' policy

He also said that the country should not have a "revolving door" for policies and there has to be stability in policies.

He added that the committee on infrastructure, chaired by the Prime Minister, could guide the States that policy decisions must be clear, efficient and impart stability to that sector.

"I have mentioned at the risk of offending a few that we cannot have a revolving door policy. It is best to adhere to a decision that has been taken after due consultation even if one later finds any issues. Nothing is a greater bad advertisement than an incomplete PPP project," Mr Chidambaram said.

On viability gap funding (VGF), he said that States must accelerate the process of financial closure on those projects for which in-principle approval for VGF has been granted.

This would enable grant of final approval and disbursal of funds, he added. In-principle approval for VGF has so far been given for seven projects.

Admitting that there are constraints in getting long-tenor debt, Mr Chidambaram pointed out that India Infrastructure Finance Company Ltd (IIFCL) would help address this gap.

"IIFCL has written to States inviting proposals. The company can fund up to Rs 10,000 crore. However, there is no limit on such funds if there are bankable projects. IIFCL can raise more funds on the strength of government guarantee," he said.

Airports revamp

On airports, the Finance Minister said that the restructuring and modernisation of the Chennai and Kolkata airports would be done on a similar manner as that of Delhi and Mumbai under the PPP model, but after consultation with the concerned state governments.

The Deputy Chairman of the Planning Commission, Dr Montek Singh Ahluwalia, said that public-private partnerships should not be seen as public partnerships and private projects. They should be rather viewed as private partnerships and public projects, he said.

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