The Hindu Business Line : PM favours public, pvt partnership in infrastructure

THE PRIME MINISTER, Dr Manmohan Singh, at the conference on `Building Infrastructure: Challenges & Opportunities' in the Capital on Saturday. - Kamal Narang

New Delhi , Oct. 7

Making a case for involvement of the private sector in infrastructure creation, the Prime Minister, Dr Manmohan Singh, said on Saturday that an investment of Rs 14,50,000 crore or about $320 billion would be required in the sector during the Eleventh Plan period, all of which the Government may not be in a position to provide.

Addressing a conference on `Building infrastructure: Challenges and opportunities,' Dr Singh emphasised on the need of exploring avenues for increasing investment in the sector through a combination of public investment, public-private-partnerships (PPP) and occasionally, exclusive private investments wherever feasible.

However, the Prime Minister refused to be drawn into specifics of how much of the $320-billion investment requirement would be met through foreign direct investment and how much from domestic savings.

"A bulk of the savings have been and will continue to come from domestic savings. At present it is close to 28-30 per cent and given the young age of the population the savings rate will go up. While it is difficult to predict how much FDI would be required in infrastructure, two per cent of GDP would be a safe route," Dr Singh said. For development of infrastructure, the Prime Minister was of the opinion that the PPP approach was best suited as it supplemented scarce public resources, created a more competitive environment and helped improve efficiencies while reducing costs.

"Our experience shows that competition and PPPs can help in improving infrastructure. PPPs are useful only if they assure quality supply at reasonable costs. In the future, PPP projects should be awarded on the basis of transparent competitive bidding with a standard concession agreement to the extent possible," he added.

The Prime Minister, however, said that attracting private capital through the PPP or any other route was neither easy nor automatic. Dr Singh was of the opinion that a key pre-requisite was to lay down a policy framework that assured a fair return for investors provided they attain reasonable levels of efficiency.

"Balancing all these interests is difficult, buts needs to be done. Tariffs and service quality needs to be regulated and consumer access protected. Besides, there is also need for clarity in the policy and regulatory framework that governs private participation in any area. Sanctity of contracts must be observed and dispute resolution mechanisms need to be speedy and effective," the Prime Minister added.

Turning to the investment opportunities in the infrastructure sector, the Prime Minister said it was anticipated that by 2012 an investment of Rs 2,20,000 crore would be required for the modernisation and upgradation of highways alone.

In addition, the Railways were preparing an investment programme of over Rs 3,00,000 crore of which 40 per cent is expected to come from the private sector through PPP.

Similarly, in the civil aviation sector, a financing plan for airport infrastructure had been developed which envisaged an investment of Rs 40,000 crore by 2012, while an investment of Rs 50,000 crore was envisaged in the ports sector by then, the Prime Minister said.

Govt investments

Outlining the investments being taken up by the Government in development of infrastructure, Dr Singh said that a programme for six-laning of the golden quadrilateral on a build, own, transfer basis had been approved. This was expected to cost Rs 40,000 crore of which only 15 per cent would come from budgetary support. In addition, a programme for developing 1,000 km of expressways had also been initiated

For improvements in the power sector, the Prime Minister urged the State governments to reduce transmission and distribution losses.

The Prime Minister also emphasised on the need to accelerate the pace of growth to 9-10 per cent, if a decisive impact was to be made on poverty and productive employment was to be provided to the young population.

"We need to run hard just to stay where we are. Maintaining a growth rate of eight per cent would need continual improvements in our policy regime. To raise it further would require sustained efforts to boost our agricultural and manufacturing growth. Most importantly, our growth potential will be realised only if we can ensure that our infrastructure does not become a severe handicap," the Prime Minister said.

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