The Hindu Business Line : Infrastructure imperatives

In what can be described as the start of a unique public-private partnership in policymaking, two reports hold out promise for the development of key sectors that have lagged consistently and pulled back economic growth. The first is the Assocham study on infrastructure that covers, among others, the development of roads, ports, airports, and highways. The second is the set of recommendations prepared by the Ratan Tata-headed Investment Commission that deals with specific proposals in a wide range of activities, not the least of which is another major laggard sector — energy. While the Assocham study is with the Planning Commission, the Tata report is with the Finance Ministry, and if the Finance Minister, Mr P. Chidambaram's reaction is anything to go by, the Government may be just about ready to act on the proposals. Coming on the heels of the Centre's backtrack on the NLC divestment, the two reports are propitious because they complement each other by shedding light on different facets of investment in infrastructure and energy without raising the hackles of the UPA partners.

The Assocham study puts numbers to the quantum of investment that will be forthcoming, mainly via public-private partnership. In all Rs 3,20,000 crore is expected over the next six years. This is a tall order but not impossible if the policymaker is willing to hammer out the right environment for investments, both domestic and foreign. This is where the Investment Commission steps in with some investor-friendly policy suggestions for specific projects. Among others, the Finance Ministry is keenly looking at South African energy company Sasol Ltd, which plans to invest $6 billion, and is very positive about Intel that proposes to set up a semi-conductor assembly and testing plant as part of an official effort to turn India into a hardware manufacturing hub. So far, the Commission has identified $30 billion of investments worthy of support — from infrastructure to the knowledge economy.

While strictly not comparable with the Assocham report's focus on physical infrastructure, the impediments the Commission foresees are common enough — the absence of long-term policies, breach of contracts, restricted entry into PSU-dominated sectors. Some proposals are debatable and the Finance Ministry will be hard put to it to explain the fiscal sops suggested for Intel, and the SEZ road for others. Mr Chidambaram is facing the prospect of reduced revenues on account of tax exemptions that have become the most convenient incentive for the Commerce Ministry and the States. It is one thing to correct anomalies in the duty structure and quite another to gift away revenues for projects that do not have long gestation periods. The Planning Commission has promised to produce an enabling model for infrastructure that should tackle user-charges and time overruns; the Finance Ministry has to cope with the appeal for tax-breaks. But for once there is movement beyond policy rhetoric.

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